Liquidation of People’s Leasing risks recovery of Tk1000cr deposits

In the wake of Bangladesh Bank’s move to liquidate People’s Leasing and Financial Services Limited (PLSFSL), concern grows over recovery of Tk1000 crore of 28 banks and institutions deposited with the company.

Liquidation is the process of bringing a business to an end and distributing its assets to claimants. It usually occurs when a company is insolvent, meaning it cannot meet its payment obligation when due.

Considering fragile financial condition of the People's Leasing, the central bank has decided to shutter the non-bank financial institution’s functions permanently.

To this end, the BB has already got permission from the Finance Ministry.

Now the central bank has to take the final approval from High Court before liquidation.

If the HC court give its seal of approval, a decision will be taken on how to settle liabilities, including return of depositors’ money.

As it is a long term process, the 28 banks and financial institutions which kept deposits with the PLFSL are facing risks of not getting their money back.

The PLSFSL's Annual Report-2015 shows that 28 banks and financial institutions have deposited Tk 958.50 crore with the company.

After that it could not return money to any institution despite maturity of their funds.

The four state-owned banks - Sonali, Janata, Agrani and Rupali – have invested Tk 287 crore in the company.

Bangladesh Commerce Bank has an investment of Tk 100 crore.

Besides, other banks and institutions have kept Tk30 crore in deposit on an average.

Apart from this, Eastern Bank, Dhaka Bank, United Commercial Bank, Bangladesh Development Bank, IFIC Bank, BRAC Bank, AB Bank, The City Bank, ICB Islami Bank and Jamuna Bank have deposits with the People's Leasing.

Among the new banks who kept deposits with it are Meghna Bank, NRB Bank, NRB Commercial Bank, NRB Global bank, Midland Bank, South Bangla Agricultural and Commerce Bank and Farmers’ Bank (Padma Bank).

Apart from the banks, National Finance, National Housing, First Lease, Fareast Finance and Investment, International Leasing and GSP Finance also kept deposits with it.

According to data till September 2018, the total deposit with the PLFSL was Tk 2,086 crore.

However, they don’t have any cash to run their day-to-day activities. As a result, they cannot return the depositors’ money.

The headquarters of PLFSL - which started its journey in 1997 - is in Motijheel with two branch offices in Gulshan and Chittagong.

Of its total Tk 1,131 crore outstanding loans, 66.14 percent has turned into non-performing loans.

Owing to deterioration of its financial health, the People's Leasing listed with the Stock Exchange could not give any dividend after 2014.

Some 67.84 percent of its total share is with general shareholders, 23.21 percent with sponsors and directors, 8.76 percent with institutions and 0.19 percent with foreign investors.