Non-bank financial institutions (NBFIs) have remained comparatively less regulated owing to a major gap between the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) on some provisions relating to corporate governance, according to analysts.

"There are some basic regulatory differences between the BB and the BSEC," said Mizanur Rahman, a commissioner of the BSEC.

When the central bank sees any difference in the provisions of laws, it orders NBFIs not to comply with BSEC's rules, he said, citing the Corporate Governance Code 2018.

He made the comments yesterday during a discussion titled "Prospects and Challenges of Financial Institutions in Bangladesh" at the "NBFIs Songjog-2023" at the Pan Pacific Sonargaon hotel in Dhaka.

There are too many NBFIs with very small balance sheets, asset sizes, profitability and capital base while their net margin is also questionable. So, operating sustainability is very questionable for many NBFIs, said Rahman.

There is little regulatory oversight of the NBFIs' formation of boards, their activities, and diversity and independence of the boards.

There are many missing regulations and a lack of enforcement of regulations in the NBFI sector, added Rahman, also a professor of the Department of Accounting and Information Systems at the University of Dhaka.

Some vested groups control the board by taking over the lenders' stake and concentrating shareholding.

He said the performance of an NBFI depends on corporate governance, so there are opportunities for the BB and the BSEC to work together on the issue.

Mashiur Rahman, economic affairs adviser to the prime minister, admitted earlier that there was a difference in opinion between the two regulators.

The issue on which they differ is whether the bank will issue dividends even if they make losses, he said.

"But in any case, I was sympathetic to the central bank in this regard. They differed on such a matter. But I don't know what happened last."

Besides, he said, the BSEC's policies on good governance were very good but could not be implemented in many cases.

Meanwhile, managing directors and CEOs of NBFIs promised to provide better services to customers and assured it was safe to park money in leading companies.

The NBFI CEOs made the promise at a time when the sector is facing a series of challenges, including a liquidity crisis, growing non-performing loans (NPLs) and a lack of good governance. At least 10 NBFIs are in dire straits, mainly due to huge irregularities and scams. Most of them are unable to repay the depositors' money.

During a session titled "Meet the leaders", Mominul Islam, managing director of IPDC Finance, said that there were some weak companies in the NBFI sector but the rest were financially sound.

He added that customers should do their due diligence before parking money in the NBFIs.

"Your money will not disappear if you park it in leading NBFIs," he assured depositors.

M Jamal Uddin, managing director of IDLC Finance, said that the NBFI sector's role was no less important than the banking sector's.

BLFCA Chairman Md Golam Sarwar Bhuiyan said while presenting a paper that NPLs in the sector now stood at Tk 17,855 crore, which is very concerning.

It recommended that sponsors and directors involved in loan irregularities have their shares in those companies confiscated. It also urged to increase the number of independent directors. It further recommended the formation of a financial sector reform committee for the betterment of the sector.

Industries Minister Nurul Majid Mahmud Humayun said that non-bank financial institutions should build trust among people since many had lost their money owing to irregularities.