Loan benefits

Default loans of 6 NBFIs double in 3 months until March

Defaulted loans at six non-bank financial institutions (NBFIs) more than doubled in just three months through March of this year, following the withdrawal of the loan repayment exemption by the Bangladesh Bank.

The organizations are MIDAS Financing Limited, National Finance Ltd, CVC Finance Limited, Hajj Finance Company Limited, Uttara Finance and Investments Limited and Premier Leasing and Finance Limited. At the end of March, the total NBFI default loans stood at Tk 1649 crore.

Many financial institutions have sunk due to corruption of administrators and mismanagement. Out of 34 NBFIs, 16 are entangled in huge default loans.

According to the Bangladesh Bank, the NBFI recorded disbursed loans of Tk 66,962 crore at the end of March, of which 15.5% were classified loans.

Borrowers from banks and other financial institutions have benefited from a deferral of loan repayments amid lockdowns imposed across the country to verify transmission of the coronavirus last year.

Deferral of repayment was in place for NBFI clients from January to December of the same year, meaning they were not considered to be in default for not having paid short and long term loan installments for this period.

After the authority terminated the facility from January of this year, the amount of defaulted loans began to climb. The central bank then reinstated the facility, under increasing pressure from businessmen through a circular issued on September 1.

According to the circular, if a client repays half of that year’s total installments against a loan, they will not be classified.

Mustafizur Rahman, managing director and managing director of MIDAS Financing, said the default loan amount has jumped due to the sudden lifting of the repayment indemnity.

Even those who were able to make payments did not repay their loans when the special exemption was in effect, he said. However, MIDAS Financing’s default loan amount has decreased from what it was in March.

“In addition, the Bangladesh Bank refused a few requests for deferral benefits last year. That is why loans in default have increased. We were almost back to our previous position in June.

Due to the increase in classified credits, the company had to set aside Tk53 crore for loan provisioning in the first quarter of this year, which was 2,370% more than in the corresponding period of the year. last year.

MIDAS Financing, however, reported 2.5% in cash and 2.5% in stock dividends to shareholders for last year against earnings per share of 0.83 Tk.

On four-fold defaulting loans, Russel Miah, partner at CVC Finance Limited, said that due to the benefit, Credit Information Bureau reports did not show a borrower’s status change for his default on a loan before December. .

And they did not pay the dues after the authority ended the exemption. “As we did not have the authorization from the Bangladesh Bank, we did not provide the carry over facility. But defaulted loans have been on a downward trend since June. We are going to be in a better position than before. ”

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