Bangladesh Bank has initiated a move to file a plea with the High Court for liquidation of People’s Leasing and Financial Services Limited due to the non-bank financial institution’s insolvent state to clear depositors’ money on maturity.
The initiative of the central bank came following permission from the finance ministry to go for liquidation of People’s Leasing.
Following the approval from the government, the central bank has taken the initiative, a senior BB official said.
The next course of action would be determined by court, he said.
Court might authorise the central bank or the finance ministry as liquidator who would assess the company’s assets and liabilities, he said.
Afterwards, the liquidator would carry out the rest of the liquidation process under the court supervision, the BB official said.
Bangladesh Bank executive director Md Serajul Islam on Tuesday told reporters that the central bank had received the finance ministry’s approval on liquidation of People’s Leasing and would take measures as instructed by the ministry.
On Tuesday, a number of depositors were seen at the office of People’s Leasing located at the City Center in Dhaka. They went there to withdraw their funds.
However, the depositors were not given any assurance by People’s Leasing over how and when they would get back their money as none of the top officials of the company were present at the office then.
A woman, who has kept her mother’s money with People’s Leasing, said that she felt sick and had to take medicine to keep her blood pressure under control at the news of the government’s move to liquidate the company.
‘I have come here [the office of People’s Leasing] to know the fact but none informed us anything. We are in the dark,’ she said.
Apart from the entity’s failure to pay depositors’ money, it has also failed to pay salary of its officials for last two months.
As of December last year, People’s Leasing, established in November, 1997, has collected around Tk 2,000 crore — Tk 700 crore from individuals and Tk 1,300 crore from different banks and NBFIs.
Out of the entity’s Tk 1,131 crore disbursed loans, Tk 748 crore has become defaulted, as per the BB information.
Of the defaulted loans, Tk 570 crore has been swindled by the entity’s directors.
People’s Leasing, also a listed company, floated its shares at the Dhaka and Chittagong stock exchanges in 2005.
General shareholders hold 68 per cent of the entity’s shares, 23 per cent is held by its sponsor directors and the rest 9 per cent by institutional investors.
Apart from the BB’s proposal for liquidation of People’s Leasing, the central bank by late 2018 proposed that the government liquidate Bangladesh Industrial Finance Corporation due to its woeful financial state.
The finance ministry, however, is yet to give its consent regarding the BB proposal.
According to a stress test report of the central bank, 12 out of 34 non-bank financial institutions were in the red zone, denoting high vulnerability of the entities.
Of the rest 22 NBFIs, 18 were in the yellow zone that indicates less risky state, and only four entities were in the green zone or safe state.
A series of irregularities in loan distribution by a section of sponsor-directors of the NBFIs and to the individuals linked with them were the major reason for the present state of the sector, said BB officials.
Not only the NBFI sector but also the banking sector suffered a series of loan scams in recent years, they said.
Of the NBFIs in the red zone, Bangladesh Industrial Finance Corporation witnessed 95.31 per cent of its outstanding loans defaulted.
People’s Leasing, Bay Leasing, Fareast Finance, First Finance, FAS Finance, International Leasing and Financial Services, Premier Leasing, Prime Finance, Reliance Finance and Union Capital were the other entities in the red zone.