Deposit in non-bank financial institutions dropped by 5.33 per cent or Tk 2,428 crore in the year 2019 due to fund withdrawal pressure amid growing public distrust of the entities.
As per the Bangladesh Bank’s latest report, total deposits in the NBFIs dropped to Tk 43,121 crore at the end of December 2019 from Tk 45,549 crore at the end of the previous year.
Although deposit growth in the banking sector has slowed down in recent months, the growth rate remained around 11 per cent even during the coronavirus pandemic when the country’s economic activities remained almost suspended.
BB officials and bankers said that the fall in deposits in the NBFIs was quite unusual considering the deterioration in public perception regarding the entities after a series of scams and irregularities surfaced.
A number of companies have completely collapsed while a few others have been suffering badly, they said.
Apart from the public distrust, the entities were also facing distrust from banks as many of the banks were on a spree to withdraw funds from the NBFIs, prompting the Bangladesh Leasing and Finance Companies Association to pursue the central bank to prevent the fund encashment pressure from the banks.
In order to support the ailing NBFIs, the BB in June this year reduced the cash reserve ratio for the country’s non-bank financial institutions by one percentage point.
The policy relaxation allowed the NBFIs to utilise around Tk 350 crore, kept as CRR with the BB, for income generation purposes.
Besides, the central bank also assured to give the NBFIs a number of facilities to improve the liquidity situation of the sector to overcome the coronavirus pandemic fallout.
The central bank would provide Tk 2,000 crore to the NBFI sector as a pre-finance scheme under the existing two stimulus packages.
A BB report showed that only four out of 34 non-bank financial institutions were positioned in the green zone while the remaining 30 entities were placed in the yellow and red zones.
As per the BB data, fixed deposits, representing 96.45 per cent of the deposits in the NBFIs, dropped by 4.62 per cent or Tk 2,037.61 crore to Tk 42,022.58 crore at the end of December, 2019 from Tk 44,060.2 crore a year ago.
Special purpose deposits in the NBFIs decreased by Tk 428.09 crore to Tk 281.43 crore in 2019 from Tk 709.52 crore in the previous year.
A number NBFIs’ failure to repay depositors’ money along with the liquidation of the People’s Leasing and Financial Services have resulted in public distrust of the financial institutions.
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