Deposits in NBFIs fall by Tk525cr in March quarter

Deposits in non-bank financial institutions (NBFIs) decreased by Tk525 crore in the first three months of this year.

According to a central bank report, outstanding deposits in the NBFI sector stood at Tk44,305 crore at the end of the March quarter, reflecting a 1.37% decrease compared to the previous quarter.

A senior central bank official said while deposits are currently growing at a rate of 9-10% in the banking sector, deposits in the NBFI sector are decreasing. There were significant irregularities in this sector previously, with some NBFIs having very high classified loan amounts.

Consequently, these institutions are unable to repay customers' deposits, leading to a loss of interest in making fresh deposits. While a few NBFIs are performing well, inflation is also affecting their ability to attract deposits, he added.

The central bank said overall deposits fell due to lower fixed deposits in the NBFI sector in the March quarter compared to the December quarter, with fixed deposits decreasing by Tk597 crore over three months. Sector-wise classification indicates that the private sector has also withdrawn these deposits.

Md Kyser Hamid, managing director and chief executive officer of the Bangladesh Finance and Investment Company Limited (BD Finance), told The Business Standard that the lack of trust is an old issue.

He said several NBFIs are performing well, suggesting that the decrease in deposits cannot solely be attributed to a lack of confidence.

Highlighting the main reasons for the decline in NBFI deposits, he pointed out, "Firstly, we can currently offer a maximum interest rate of 12.55% on deposits, as set by the central bank. This cap limits our ability to attract deposits."

Meanwhile, banks and the government have increased their interest rates, with many banks offering up to 13% and government Treasury bills and bonds providing interest rates of up to 12%. Consequently, customers prefer to deposit their funds in banks or invest in Treasury interest rates of bills and bonds, he said.

"Secondly, we observe that many small depositors are withdrawing their funds, likely due to inflation," he added.

According to the central bank report, NBFIs are losing both customers and deposits, with 3,880 accounts closing in the first three months of this year. As of March, there were 4.27 lakh individual and institutional accounts in this sector.

Central bank data also shows that despite the decrease in deposits, loans in the NBFI sector have increased. As of March, outstanding loans in this sector amounted to Tk74,529 crore, marking a 1.04% increase or Tk770 crore compared to the December quarter.

According to Bangladesh Bank data, 17 out of 35 financial institutions have a default loan rate of more than 50%, with the total defaulted loans across all financial institutions amounting to Tk21,658 crore. 

Of these, the 17 worst-performing institutions account for defaulted loans totalling Tk17,464 crore.