Tk1cr deposit ceiling to intensify NBFIs’ pains

The non-bank financial institutions (NBFI), already facing a liquidity crisis, might face an even harder time if the central bank sticks to the deposit ceiling mentioned in the Finance Companies Act 2023, said industry people.

An NBFI cannot take deposits of more than Tk50 lakh from an individual, which may be as high as Tk1 crore in total if the individual also deposits in a joint name, said the act passed by the parliament last week.

However, the act empowered the Bangladesh Bank to set the limit on a discretionary basis from time to time, and that is what the NBFI sector is counting on.

"We have already drawn the attention of the Bangladesh Bank and they assured us of a rational implementation of the new act," said Md Golam Sarwar Bhuiyan, chairman of Bangladesh Leasing and Finance Companies Association (BLFCA).

However, not all companies, especially the top-tier, well-performing NBFIs, are equally assured.

Amid a lack of sufficient bond financing facility, the operational limitations including the limited resources to collect small deposits, and the drying up credit line from commercial banks, NBFIs have to depend on large deposits from wealthy individuals who look for a better interest, said the CEO of one of the largest NBFIs.

"Previously, there had been no such limit in deposit collection from an individual. The banks which are competing with NBFIs for deposits still do not have any restrictions and NBFIs will have to face it," he told The Business Standard, seeking anonymity.

"What if the central bank does not increase the limit even for the most competitive NBFIs?" he said, adding that the regulations became more painful for the strong NBFIs as they care about maintaining liquidity to pay back depositors on time.  

CEO of another top-tier NBFI said, "The restriction practically is meaningless to the scam-hit NBFI's that have been failing to pay back their depositors."

Healthy NBFIs would feel the maximum pains of policy unpredictability regarding the time to time limit in deposit collection and operate in a more controlled environment, both the CEOs said.  

Several changes in the act seemed to be more stringent for NBFIs, if compared to that for banks, they added.

"We believe the government has enacted the law for betterment," said Meridian Finance Chairman Kazi M Aminul Islam who also leads the NBFI owners in the country.

His association was analysing the impacts of the new act and would communicate their points with the central bank and the government.