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Deposits in NBFIs drop, loans rise

Deposits in the country’s non-bank financial institutions dropped by 1.19 per cent or Tk 53.8 crore at the end of March compared with that of December due mainly to lack of trust and confidence among customers in the entities.

However, loans disbursement by NBFIs increased by Tk 917.7 crore in the January-March period compared with that in the previous quarter (September-December), according to Bangladesh Bank data.

The Bangladesh Bank data showed that the deposits in the NBFIs fell to Tk 43,698 crore at the end of March quarter of 2023 from Tk 43,752 crore in deposits at the end of December quarter.

The deposits were Tk 42,272 crore in January-March of 2022.

However, the total loans by the NBFIs increased to Tk 71,239 crore at the end of March 2023 from that of Tk 70,321 crore at the end of December in the past year.

Therefore, loans disbursement by NBFIs was 61pc higher than their deposit collection.

The total loans of the sector were Tk 68,910 crore at the end of March 2022.

Meanwhile, loan recovery by NBFIs dropped by 5.46 per cent to Tk 6,586 crore in January-March period from the preceding quarter in 2022.

Experts said that the increase in loans without a corresponding rise in deposits indicated an imbalance between the availability of funds and the demand for loans.

Such a situation raises concerns about the asset-liability mismatch for NBFIs, they said.

The NBFIs suffered a deposit contraction at a time when the banks posted growth in deposits in the same period.

Total deposit liabilities (excluding interbank items) of the scheduled banks increased by Tk 25,052.07 crore or 1.58 per cent to Tk 16,13,062.64 crore in the quarter January-March 2023 compared with that of Tk 15,88,010 crore in the previous quarter.

The fixed deposits in NBFIs decreased to Tk 42,528 crore at the end of March compared with that of Tk 42,610 crore in the previous quarter.

Despite NBFIs offering deposit interest rates above 6 per cent, which are more competitive than those of most banks, they have struggled to improve their liquidity base.

Massive irregularities in the NBFI sector prompted the government to initiate a process of liquidation of People’s Leasing and Financial Services in 2019.

The liquidation process was later scrapped and steps have been taken to revive the entity following a court order.

Apart from People’s Leasing, Bangladesh Industrial Finance Company and International Leasing and Financial Services are among the other NBFIs which are going through an intense crisis.

Bangladesh Bank officials attributed the liquidity crisis in the sector to fund withdrawals by banks from NBFIs and lack of public confidence in the entities.

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