Vol. 5 Num 1141 Tue. August 14, 2007  

9 NBFIs to come under lens
BB concerned at high bad debt

The Bangladesh Bank (BB) has decided to monitor the activities of 9 non-banking financial institutions (NBFIs) as classified loans and provision shortfall of those went alarmingly high.

In a meeting with the leasing companies in Dhaka yesterday, BB Governor Dr Salehuddin Ahmed expressed his concern over such rise and asked the NBFIs for forming a special recovery cell to realise the bad debt.

The central bank chief also wanted the NBFIs to strengthen their activities at this transition period of Bangladesh economy.

Presently, the total number of NBFIs is 28.

During the meeting, the governor made a suggestion that the leasing companies can come forward with more easy term loans for housing facilities, small and medium enterprises (SMEs) and women entrepreneurship.

"If necessary, Bangladesh Bank will increase its refinancing facility to the NBFIs," Dr Salehudin said.

According to the BB report put up at yesterday's meeting, as on March 31, 2007, of the total outstanding loans of First Lease International Limited, 31.89 percent is marked as classified loans, while of the total outstanding loans of International Leasing and Financial Services Limited, 11.79 percent went classified.

Besides, classified loans of Prime Finance and Investment Limited stood at 11.17 percent of its total outstanding loans.

Out of total outstanding loans of Saudi-Bangladesh Industrial and Agricultural Investment Company Limited, 31.46 percent has been marked classified, while the provision shortfall of the company is Tk 11.45 crore.

The amount of classified loans of the Industrial Promotion and Development Company of Bangladesh Limited reached 22.86 percent of its total outstanding loans, while its provision shortfall is Tk 6.37 crore.

Classified loans of Oman Bangladesh Leasing and Finance Limited stood at 16.76 percent out of its total outstanding loans, while the company's provision shortfall is Tk 3.96 crore.

Of the total outstanding loans of Islamic Finance and Investment Limited, 12.05 percent is classified and Tk 1.69 crore provision shortfall.

Tk 2.94 crore is the provision shortfall of Uttara Finance Investment Limited, while Fareast Finance and Investment Limited's is Tk 2.05 crore.

The central bank also asked six leasing companies to float shares in the capital market through initial public offering (IPO).

These companies are Industrial and Infrastructure Development Finance Company Limited, Fareast Finance and Investment Limited, GSP Finance Company (Bangladesh) Limited, Bay Leasing and Investment Limited, National Housing Finance and Investments Limited, and Delta Brac Housing Finance Corporation Limited.

The NBFIs told the governor that floating shares of the companies is under process. However, the BB governor felt it necessary to faster the process.

Referring to some commercial banks' lease financing activities, the NBFIs pointed out that cost of funding of the leasing companies is much higher than that of the banks.

The NBFIs also appealed to the central bank for lifting to withdraw up-front tax on interest income from investment on bonds.