The Board of the central bank has given preliminary approval to initiate the closure or liquidation of five non-bank financial institutions (NBFIs) in Bangladesh, marking one of the most significant interventions in the country’s troubled financial sector in recent years. The decision follows years of mounting loan defaults, liquidity stress, and repeated failures to safeguard depositors’ funds.
The decision was taken at a meeting of the Board of Directors of the central bank held on Tuesday, chaired by Governor Mostakur Rahman. According to officials, the liquidation process is expected to begin from July in the next fiscal year, following assurances of budgetary allocation in the upcoming national budget to support depositor repayments.
The five institutions included in the liquidation list are: FAS Finance, Fareast Finance, Aviva Finance, People’s Leasing, and International Leasing.
A senior official of the central bank confirmed that the institutions will be wound up under the Banking Resolution Act, which provides the legal framework for restructuring, merging, or liquidating distressed financial entities. As part of the process, each institution will be placed under administration, with a Bangladesh Bank-appointed administrator supported by two additional officials.
Authorities estimate that approximately Tk 50 billion will be required to repay individual depositors of the affected institutions. The Governor informed the meeting that the government has indicated willingness to allocate the necessary funds in the forthcoming budget, enabling the central bank to proceed with liquidation.
Financial distress indicators
The scale of deterioration in these institutions is reflected in their extremely high non-performing loan (NPL) ratios, which in several cases are close to total loan exposure. Long-standing defaults have crippled cash flow, leaving the firms unable to return depositor funds.
| Institution | Non-Performing Loan Ratio (latest available) | Status |
|---|---|---|
| FAS Finance | 99.99% | Proposed liquidation |
| Fareast Finance | 98.50% | Proposed liquidation |
| Aviva Finance | 93.93% | Proposed liquidation |
| People’s Leasing | ~95% | Proposed liquidation |
| International Leasing | 99.44% | Proposed liquidation |
Officials noted that persistent loan recovery failures and governance breakdowns have rendered these institutions effectively non-viable. Earlier, the central bank had issued notices to around 20 troubled NBFIs, asking why they should not be closed due to severe capital erosion and inability to repay depositors.
Following evaluation of recovery plans, nine institutions were initially shortlisted for potential closure. This list was later reduced after several entities were removed from consideration, while others were reassessed. Eventually, six institutions were moved forward for resolution, with further refinements leading to the current list of five.
Industry observers have attributed the crisis in part to systemic irregularities and weak oversight during previous political administrations, which allowed large-scale loan fraud and insider abuse to go unchecked. These governance failures significantly worsened balance sheets across the sector.
A frequently cited example involves allegations against former managing director PK Haldar, who is accused of embezzling approximately Tk 35 billion from multiple financial institutions, including People’s Leasing, International Leasing, FAS Finance, and Bangladesh Industrial Finance Company.
With the resolution process now formally approved, authorities are expected to prioritise depositor protection, asset recovery, and orderly winding-up procedures over the coming months, signalling a decisive shift in regulatory action against long-failing financial entities.