NBFIs face hardship
Rafiqul Akter: The non-bank financial institutions (NBFIs) are facing severe crisis to pay the depositors’ money mainly due to capital shortfall of the banking sector.
Most of the NBFI clients expressed their dissatisfaction to the Daily Industry because of they are being failure to avail the adequate financial assistances from the non-bank financial institutions.
Experts said the ongoing liquidity crisis in the banking sector put a negative impact on the NBFIs, as a result; most of the NBFIs are failing to respond to their clients accordingly. The clients are not getting their aspirant loans from the non-bank financial institutions, they said.
A senior Bangladesh Bank official said that about 60 percent funding of the leasing companies comes from the banking sector, of them 40 percent are fixed deposits of banks and 20 percent funding comes from call money market. Such huge dependency on banks tuned the leasing companies into severe crisis, he mentioned. The banking sector is facing huge liquidity crisis, as a result, the non-banking financial institutions are not getting adequate deposit from the banks, he added.
In this situation, most clients of the vulnerable NBFIs are having difficulties in realising their deposits and profits even after the maturity of their deposits. In some cases, the clients of most vulnerable entities are not getting a single penny. As a result, they are passing times in frustration after investing huge amount of money in the institutions for some profits.
The four companies that are doing better in this sector are Lankan Alliance Finance Ltd, Meridian Finance & Investment Ltd, Bangladesh Infrastructure Finance & Funds Ltd and Agrani SME Financing Company Ltd.
Already, the People’s Leasing & Financial Services Ltd closed their operation. According to Bangladesh Bank sources, the most vulnerable NBFIs are, Bangladesh Industrial Finance Company Ltd (BIFC), International Leasing and Financial Services Ltd, Reliance Finance Ltd, Fareast Finance & Investment Ltd, Prime Finance & Investment Ltd, Premier Leasing & Finance Ltd, First Finance & Investment Ltd, FAS Finance & Investment Ltd, Union Capital Ltd and Bay Leasing & Investment Ltd.
Bangladesh Leasing and Finance Companies Association (BLFCA) Chairman Khalilur Rahman said that about 60 percent funding of leasing companies comes from the banking sector but some companies are fully dependent on banks. Due to the liquidity crisis of the banking sector, almost NBFIs are highly affected, he said.
During a physical verification to a recognized leasing headquarters at Motijheel, people were seen crowding the office premises to draw their fixed deposits but most of them were not getting their demands answered because of fund crisis. The situation is prevailing almost of the non-banking financial institutions.
“We are paying the depositors’ money slowly. All the money of fixed deposits cannot be repaid at once due to liquidity crisis”, said a official of a leasing company on the condition of anonymity.
Now banks are unable to deposit their money in the leasing companies as most of the banks are now withdrawing their deposits with the companies, he added.
Khalilur Rahman, also managing director of National Housing Finance and Investments Ltd, however, claimed: “Our Company has not been affected by liquidity crisis as beside the banks, we collect funds from individual and institutional depositors.
He urged the central bank to assist the leasing companies so that they can overcome such embracing situation. He also demanded for reopening of the housing fund under the refinance fund of the central bank.
Sources said that non-banking financial institutions cannot take deposits easily from the depositors like the banks. They cannot take any deposits for less than three months from depositors.
Leasing companies cannot directly pay depositors money without banking transaction. They cannot issue any checkbooks, and for this, the depositors are not interested in keeping deposits in leasing companies.
According to Bangladesh Bank source, the central bank received 10 to 15 complaints every day on non-payment of depositors’ money from the NBFIs’ clients.
However, NBFIs proposed to borrow up to 80 percent of their equity through call money market to tackle an intensive liquidity crisis. As per central bank rules, the NBFIs are allowed to borrow up to 30 percent of their equity through the call money market.
Meanwhile, some 12 NBFIs out of 34 non-banking entities were in the red zone that denotes high vulnerability. Of the rest 22 NBFIs, 18 were in the yellow zone that indicates less risky state, and only four entities were in the green zone or safe state.
In this backdrop, the capital base of the country’s banks deteriorated as 12 banks suffered Tk 17,658.32 crore in capital shortfall as of September 30 last due to raising the non-performing loans (NPLs). At the end of April-June quarter last year, 11 banks suffered Tk 16,001.49 crore in capital shortfall.