Six non-bank financial institutions (NBFI) are in severe crisis with Tk6,916.62 crore default loans due to widespread irregularities and corruptions of the concerned managements and officials, according to Bangladesh Bank.
The CAMELS Rating of the central bank, published at the end June this year, revealed that the amount is 66.96% of the total default loan of the sector.
The total default loan of the 34 non-bank financial institutions in the country is Tk10,328 crore which is 15.39% of the loans disbursed, the report read.
The six institutions include Bangladesh Industrial Finance Company (BIFC), Fareast Finance and Investment Limited, FAS Finance and Investment, First Finance Ltd, International Leasing and Financial Services, and Premier Leasing and Finance.
There are allegations that the management and officials of these NBIFs have been involved in disbursing huge amounts of loans to various fake companies with forged documents.
Bangladesh Industrial Finance Company
Bangladesh Industrial Finance Company (BIFC) is one of the six NBFIs heavily burdened with default loans. The company disbursed Tk814.04 crore as loan till June this year, of which Tk774.12 crore or more than 95% defaulted. However, Tk772 crore of the default loan is uncollectible as most of the borrower companies exist only on paper.
According to sources, several companies including Sunman Group owned by Major (retired) Abdul Mannan who is the former chairman of BIFC, are among the big defaulters of the institution.
Earlier this year, Abdul Mannan and his wife were questioned by the central bank's inquiry committee over allegations of irregularities.
BIFC Managing Director AKM Ashfaqur Rahman Chowdhury did not answer repeated phone calls yesterday.
Fareast Finance and Investment
A recent inspection of the central bank has revealed massive irregularities of Fareast Finance and Investment Ltd, a non-bank financial institution listed on the stock exchange. The company has not been able to pay any dividend to its shareholders since 2017.
Till June this year, the company disbursed Tk954.73 crore as loan. Of this, Tk475.67 crore or 49.82% is defaulted. The amount of bad or uncollectible loans is Tk171 crore. Besides, the company has a provision deficit of Tk10.60 crore.
According to the central bank's inspection, the company has disbursed loans to its affiliates and some other companies violating banking rules and forged documents. Widespread irregularities were also found in the company's audit report on expenditure and irregular loan-write-offs.
MA Khaleque, former chairman of Fareast Finance, Shantanu Saha, former managing director, Mohammad Hafizur Rahman, former deputy managing director and Md Rafiqul Islam, former independent director of the company, were involved in these irregularities, the central bank team found.
According to the central bank report, Fareast Finance lent Tk117 crore to its subsidiary Fareast Stocks and Bonds violating the prescribed loan limit.
As per Bangladesh Bank policy, no non-bank financial institution can approve a loan of more than 30% of its paid-up capital and reserves. However, subject to the approval of the central bank, there is an opportunity to increase the credit limit. But in this case, the FFIL management and board have violated the rules.
According to the BB report, Fareast Finance lent Tk5 crore to Westmont Power and Tk2 crore to SKM Trading Center without proper documents.
It also lent about Tk50 crore to three companies of notorious Proshanta Kumar Halder (PK Halder) which is now considered uncollectible.
FAS Finance and Investment Ltd
Another financial institution exploited by PK Halder is FAS Finance and Investment Limited.
Till June this year, it has disbursed Tk1,933 crore of which Tk1,723.29 crore or about 90% is default loan including Tk1,680 crore uncollectible. The company has a provision deficit of Tk305.66 crore.
There are allegations that the management committee of the institution distributed several anonymous loans. Russell Shahriar, the former managing director of the company, approved Tk700 crore with a single signature without any mortgage.
He confessed during an interrogation of the Anti-Corruption Commission (ACC) on Tk1,300 crore embezzlement of FAS Finance that PK Halder was the mastermind behind the corruption.
First Finance Ltd
First Finance Ltd has not given any cash dividend to its investors in the last seven years. The company was listed on the stock exchange in 2003 and has been in the Z category for a long time.
According to Bangladesh Bank, the company disbursed Tk882.38 crore till June this year of which the amount of defaulted loans is Tk276.79 crore. Besides, there are Tk245 crore bad or uncollectible loans. At the same time, the company has a provision deficit of Tk46.14 crore.
The total loss of the company was Tk36.35 crore till June 2021.
International Leasing and Financial Services
International Leasing is one of the red-zone NBFIs of the country with a total loan of Tk3,929 crore including a default of Tk2,900 crore which is 73.79% of the total amount. Besides, the amount of uncollectible loan is Tk2,567 crore.
The institution has disbursed most of the default loans to fake companies. On 14 November, the Anti-Corruption Commission (ACC) approved seven cases over the embezzlement of Tk320 crore from International Leasing.
According to the ACC sources, some officials of the institution and the board members directly collaborated in giving loans to its owners by making fake documents.
So far, 15 cases have been filed against the institution accusing 37 officials for irregularities.
Premier Leasing and Finance Limited
Premier Leasing has a default loan of Tk766 crore that is around 58% of the total loan disbursed by the institution.
It also has a deposit of Tk194 crore in BASIC Bank and five financial institutions which it cannot get returned for a long time.
According to the Bangladesh Bank, the institution had not followed proper lending policies in disbursing loans.
Former governor of Bangladesh Bank Dr Salehuddin Ahmed has said many NBFIs have been running with a fragile structure from the very beginning. Besides, the central bank's monitoring for NBFIs has not been as serious as seen in case of banks, he pointed out, analysing the reasons for poor performance in many non-bank financial companies. "Now the central bank has to work hard to bring this sector back in order," he said.