Bangladesh Commerce Bank and Janata Bank Ltd are in a difficult position to recover Tk 633 crore which they deposited with six non-bank financial institutions as the financial health of the latter has deteriorated due to massive scams and disruption. ‘a lack of good governance.
Private lender BCB and state-owned Janata held the fund together with Peoples Leasing & Financial Services, First Finance, FAS Finance & Investment, Bangladesh Industrial Finance Company (BIFC), International Leasing and Financial Services (ILFS) and Premier Leasing & Finance Ltd several years ago.
Although the funds have expired, the NBFIs are unable to return the money to the banks.
The two banks asked the central bank to intervene to help them make the money. But they received a weak response from the regulator.
Recently, the BCB informed the central bank that up to Tk 502 crore was blocked with the six NBFIs as of November 15 of last year.
NBFIs have also stopped paying interest to the bank since fiscal year 2018-19, according to a central bank document.
The amount, which was held in the form of term deposits, cannot be rolled over because NBFIs do not pay interest on the fund.
“This created an obstacle to the completion of the banking operation, including the management of liquidity and the realization of the profits of the fund,” the bank told BB.
BCB has served legal opinions on BIFC and ILFS as part of its efforts to file a complaint. But the lender was forced to back down by the central bank intervention.
“In the context, the bank is in a quagmire,” said a senior bank official.
The central bank has uncovered massive financial scams in a number of six NBFIs. Some of them did not repay deposits to ordinary savers.
Janata Bank deposited Tk 110 crore with Premier Leasing, ILFS and FAS Finance. The NBFIs have paid no interest for over a year, said Md Abdus Salam Azad, chief executive of the public lender.
The fund’s interest on deposit was Tk 21 crore, he said.
The bank wrote to the central bank in March last year, requesting permission to sue the three NBFIs. But the BB suggested not to file any complaints as it would send the wrong signal to depositors in the NBFI sector, the BB newspaper said.
“We are in a difficult situation,” said Azad.
Pritish Kumar Sarker, managing director of FAS Finance and Investment, said the NBFI will refund the money as soon as possible.
“We are not receiving deposits from common savers at the moment. We have asked the banks to renew the term deposits,” he said.
Abdul Hamid Mia, chief executive of Premier Leasing & Finance, said his company was now paying the interest.
“We have already refunded Tk 100 crore to BCB. The rest will be returned soon.”
Premier Leasing asked Janata Bank to renew the term deposit, he said.
Prashanta Kumar Halder and her associates embezzled a large sum of money from four NBFIs, creating a haphazard situation in the financial sector, according to a central bank report.
Halder, former managing director of NRB Global Bank, embezzled 2,500 crore of Tk from ILFS, 2,200 crore of Tk from FAS Finance, 3,000 crore of Tk from Peoples Leasing and 2,500 crore from Tk from Reliance Finance between 2015 and 2019. He fled to Canada.
The central bank took the High Court in 2019 to liquidate Peoples’ Leasing due to its deteriorating financial health. The court accepted the plea and appointed a liquidator.