The Financial Express

Yet one more player in non-bank FI sector

Analyst questions decision

SIDDIQUE ISLAM | Published: March 13, 2020 10:08:50 | Updated: March 16, 2020 10:38:55

Yet one more player in non-bank FI sector

Bangladesh Bank gave its final approval to one more non-banking financial institution on Thursday in a decision that raised eyebrows among analysts.

The central bank asked Strategic Finance and Investments Limited to bring in major portion of its equity and fund from overseas financiers.

The decision was taken at a meeting of the central bank's board of directors held at its headquarters in the capital, with BB governor Fazle Kabir in the chair.

"The board has given the final approval to the proposed Strategic Finance & Investments Limited to run its business," BB spokesperson Serajul Islam told the FE after the meeting.

Mr Islam, an executive director of the central bank, said the non-bank lender has been asked to bring major portion of its equity and fund from overseas sponsors.

But it will act like other such lenders, the spokesperson said.

The latest approval came when the non-bank lending sector has been struggling to stay afloat, with some failing to repay depositors' money, plagued with ballooning troubled loans along with murky corporate governances.

Currently, 34 non-bank lenders are running their business across the country.

Taking to the FE, another BB official said two foreign companies, one from the United States and another from Canada have already injected funds as 50 per cent stakeholders of the company.

"The board of the NBFI will be constituted, mostly by financial institutions instead of individuals, which is a good sign," the central banker noted.

Anjuman Ara Shahid, whose shares make up just two per cent, is the chairperson of the lender.

Officials, however, said 50 per cent shares is now held up by foreign fund managers while the remaining 48 per cent by local financial institutions.

According to the business plan, the non-bank lenders will invest Tk 200 billion and charge lower interest rates within the next three years.

A banking analyst was against allowing another player to get into the crisis-ridden sector.

"It's a wrong decision of the central bank, which would not be good for the existing players," Khondkar Ibrahim Khaled, former deputy governor of the BB, told the FE without elaborating.

One NBFI has already been in the liquidation process while three or four are now struggling to survive, according to the senior banker.

On March 03, the central bank advised leaders of the Bangladesh Leasing and Finance Companies Association, or BLFCA, to submit a restructuring scheme shortly focused on restoring the confidence of depositors.

The BLFCA, a forum of managing directors and chief executive officers of NBFIs, has almost finalised the scheme.

"We hope to submit the scheme to the governor next week," Mominul Islam, chairman of the association, told the FE.

Besides, the board decided, in principle, to allow privately-owned Jamuna Bank Limited to undergo Islamic transformation after complying with the existing rules and regulations.

On February 09, the BB board allowed two other conventional private banks -Standard Bank Limited and NRB Global Bank Limited-to get transformed into Islamic banks.

The three banks will be eligible for maintaining a 5.50 per cent statutory liquidity ratio, or SLR, with the central bank instead of 13 per cent when the trio will get transformation.

Currently, the required SLR is 13 per cent daily for conventional banks and 5.5 per cent for Shari'ah-based banks and Islamic Shari'ah-based banking of traditional lenders.


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