Now a NBFI is in trouble!

We have both reported and editorialised how the Farmers' Bank went down under and now we are seeing a similar situation emerging with the non-bank financial institutions (NBFIs). The Bangladesh Industrial Finance Company (BIFC) has failed to pay back Tk 31.73 crore it owes to state-owned Rupali Bank because it is facing a liquidity crunch. 

Reportedly, the BIFC management has been in trouble for some time now and has simply ignored repeated prods from Rupali Bank to pay back what is owed. When we delve deeper into the issue we find that this institution owes hundreds of crores of taka to multiple banks and has asked Bangladesh Bank to help bail it out. This culture of borrowing well beyond one's means, giving out ill-informed loans and then managing to not recover a large percentage of loaned-out amounts and finally asking for a bailout from the central bank, seems to have become the modus operandi of our financial institutions these days!

When we look at BIFC's books of accounts, it owed Tk 780 crore at the end of the last fiscal year. Our question is, where was the central bank when it had become apparent to the naked eye that things were not working out in this financial institution? The options BIFC had given the central bank for recovery, all of which were ludicrous to begin with, should have prompted the central bank to appoint an administrator to check the rot that had set in. We repeat what we have reiterated in the past and that is, the central bank must start acting as a responsible regulator to stop these malpractices in the financial sector before they become the norm.