NBFIs lend Tk2,279cr, face Tk3,622cr defaults in a year

Infographic: TBS

Non-performing loans (NPLs) have worryingly exceeded disbursements in the 12 months leading up to March this year, as many scam-hit non-bank financial institutions (NBFIs) have been grappling with a severe fund crisis.

According to data from the central bank, NBFIs have disbursed Tk2,279 crore during the period when defaulted loans increased by Tk3,622 crore.

And the NPLs have increased by Tk1,033 crore in the January-March quarter of this year, when the amount of new loans only increased by Tk826 crore.

Bankers have stated that loans are not increasing due to various reasons, including the fund crisis faced by several financial institutions. They further mentioned that the ratio of non-performing loans (NPLs) remains low thanks to various facilities provided by the central bank.

However, they highlighted that the actual level of NPLs is higher than what is officially reported.

Bankers said loans are not increasing due to various reasons, including the fund crisis faced by several financial institutions. Still, the ratio of NPLs remains low thanks to various facilities provided by the central bank.

However, they highlighted that the actual level of NPLs is higher than what is officially reported.

They said various steps are being taken to strengthen the recovery of toxic loans. Especially, in light of the fund crunch, these institutions have intensified their efforts to recover NPLs as a means to ensure their survival.

At the end of March this year, the total loans of financial institutions stood at Tk71,265 crore, of which NPLs amounted to Tk17,854 crore, which is 25.05% of the total outstanding.

In December 2022, the amount of loans was Tk70,435 crore, of which NPLs were Tk16,821 crore, which is 23.88% of the total outstanding.

Abdul Jabbar, managing director at Aviva Finance Limited, told The Business Standard, "Loan disbursements have declined as some financial institutions are more focused on the recovery.

"In addition, some institutions have disbursed loans to areas where the likelihood of recovery is very low, resulting in regular defaults and an increase in NPLs."  

For the last three years, borrowers of financial institutions have received various facilities for loan repayment, similar to borrowers of banks.

There was a moratorium on loan repayment in 2020 and 2021 due to the Covid pandemic. Although the moratorium was withdrawn at the beginning of 2022, borrowers still received a loan repayment exemption in that year due to the Ukraine-Russia war.

The central bank again withdrew the facilities for loan repayment at the beginning of this year, but it could not hold on to this position.

Recently, the Bangladesh Bank relaxed loan repayment for businesses that took short-term demand loans from NBFIs.

The borrowers with unclassified demand loans will be allowed to repay 50% of their instalments payable for the April-June quarter of 2023.

Data from the central bank shows the deposits of financial institutions decreased by Tk54 crore in the March quarter of this year. The total deposits of financial institutions stood at Tk43,699 at the end of March.

Kyser Hamid, managing director of Bangladesh Finance Limited, told TBS recently, "Our inflation is very high, so people need more money to meet their regular expenditures. That is why the cash withdrawal pressure from this sector was high during the March quarter."

Meanwhile, defaulted loans increased by Tk11,000 crore in the January-March quarter in the banking sector.

The total default loan in the banking sector stood at Tk1,31,620 at the end of March, which was 8.80% of the total outstanding loans.