NBFI Defaults Surge by Tk 2,100cr in Q1

The non-bank financial institution (NBFI) sector in Bangladesh witnessed a sharp rise in default loans during the first quarter of the current year (January–March), with non-performing loans (NPLs) increasing by Tk 2,100 crore. This brings the total defaulted loans in the sector to Tk 27,189 crore, accounting for 35.31 percent of total disbursed loans, according to the latest data from Bangladesh Bank.

Bankers and industry insiders attribute the growing default burden to a severe liquidity crisis, intense competition with banks, reputational damage due to irregularities, and delayed disclosure of default data by influential defaulters. As transparency improves, hidden defaults are gradually surfacing, pushing up the overall default figures.

According to Bangladesh Bank, total loans disbursed by NBFIs stood at Tk 76,987 crore at the end of March 2024, up from Tk 75,450 crore in December 2023—an increase of Tk 1,537 crore in just three months. In comparison, the total loan amount in March 2023 was Tk 74,389 crore.

Over the past year, default loans in the sector have surged by Tk 3,300 crore. At the end of March 2023, NBFI default loans totalled Tk 23,889 crore. By December 2023, the figure had reached Tk 25,089 crore—meaning defaults rose by Tk 2,100 crore in the first quarter of 2024 alone.

Speaking on the issue, Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan stated, “Not all financial institutions are weak. Some are doing good business and maintaining healthy recovery rates. However, over 35 percent of loans being in default is a serious concern. The sector must undergo restructuring, and frameworks like the Bank Resolution Act and Prompt Corrective Action (PCA) should also be applied to NBFIs.”

A managing director of a financial institution, requesting anonymity, said, “The overall economy is under stress, which is causing repayment delays and an increase in defaults. Unlike banks, NBFIs lack the same range of financial tools, which limits their ability to absorb shocks. Bangladesh Bank is now uncovering the true volume of hidden default loans.”

Another senior central bank official remarked, “Most NBFIs have failed to prove their worth. They haven't introduced innovative products and have little to no presence in the capital market. As a result, even a single major branch of a large bank contributes more to the economy than the entire NBFI sector combined.”

Bangladesh Bank identified some of the worst-performing NBFIs, including: People's Leasing, BIFC, International Leasing, Fareast Finance, GSP Finance, FAS Finance, Premier Leasing, CVC Finance, Meridian Finance, IIDFC, Hajj Finance, Phoenix Finance, National Finance, Bay Leasing, Uttara Finance, and Union Capital.