The non-bank financial institution (NBFI) industry, which had been going through de-growth in deposits since December last year – following the liquidation of People's Leasing and Finance Limited – continued to suffer from deposit losses amid the novel coronavirus pandemic.
The sector lost Tk380 crore in deposits in the April-June quarter of this year as depositors went on a withdrawal spree in the wake of the pandemic as well as the lowering of the interest rate on deposits.
Total deposits in the NBFI industry were worth Tk43,264 crore at the end of June, down from Tk43,644 crore in March, according to the Bangladesh Bank data released on Monday.
The size of total loan book also declined slightly by Tk61 crore in the period, as lending activities were almost suspended due to Covid-19. The total loan portfolio of the NBFI industry stood at Tk69,511 crore at the end of the first half of this year.
The sector had been witnessing a declining trend in deposits since December last year as both banking and NBFI industries experienced huge withdrawal pressure – following the central bank's announcement People's Leasing would be liquidated.
On 26 June last year, the government directed the central bank to liquidate People's Leasing, causing massive withdrawal pressure in both the banking and NBFI sectors.
Total deposits in NBFIs declined by Tk936 crore to Tk43,121 crore in December last year as compared to September in the same year, central bank data shows.
Even though the deposit scene saw a slight improvement in the January-March period of this year, the economic fallouts of the pandemic caused fresh withdrawal pressure.
Moreover, after the implementation of the single-digit lending rate for banks from 1 April, many NBFIs reduced their deposit rate to adjust to the curtailed interest rates in banks.
A senior executive of a NBFI said the sector has been finding it difficult to find deposits due to the liquidation of Peoples' Leasing and several loan scams in various NBFIs including Bangladesh Industrial Finance Company Limited (BIFC), International Leasing and FAS Finance.
He said pandemic dealt a fresh blow to NBFIs.
Moreover, some well-reputed NBFIs cut their deposit rates amid slow lending activities contributing to de-growth in deposits, he added.
For instance, IDLC, the top NBFI in the industry in terms of profitability and other financial indicators, cut its deposit rate to 5.75%, from above 6%, due to excess liquidity.
IDLC cut its deposit rate because it is now flooded with excess liquidity amid a lack of loan demand, said Arif Khan, managing director of the company.
IDLC saw a 7% growth in deposits last year, although the industry saw de-growth, he said.
However, scam-hit NBFIs have been offering a more than 14% interest rate for deposits but have not had a response from depositors, according to the industry insiders.
Currently, 34 NBFIs are operating on the market, of which only four have remained in the green zone, according to stress testing by the Bangladesh Bank.
That means only 11% of companies are risk-free for depositors.
The average rate of default loans in the NBFI sector stood at 9.5% at the end of December last year, according to the Bangladesh Bank's data.
Of the 23 listed NBFIs, nine companies have been trading shares at below Tk10.