The non-bank financial institution Bangladesh Industrial Finance Company is on the verge of collapse after it failed to pay loans worth Tk 200 crore with 14 banks.
This is the first time that a financial institution has become a defaulter.
Subsequently, the management of BIFC has sought a bailout package from the Bangladesh Bank for its survival. “If the central bank does not provide the fund immediately, we will have to go for liquidation,” said the NBFI in a letter to the BB earlier in July.
The NBFI has been barred from lending and taking deposits by the BB for several months now.
BIFC's troubles started when its former chairman Abdul Mannan took out loans worth Tk 703 crore through forgery, according to a central bank report.
The falsification in paperwork by Mannan and his family members including his wife Umme Kulsum Mannan, who altogether hold 62 percent stakes in BIFC, was unearthed in 2015 by a BB investigation.
In 2016, the central bank informed the Anti Corruption Commission, the Criminal Investigation Department and the Bangladesh Financial Intelligence Unit about the anomalies in Mannan's paperwork but no action was taken, the report said.
As of March last year, Mannan, also the chairman of Sunman Group, owed Tk 860 crore to BIFC, according to data from the central bank.
In June 2015 an observer was appointed in BIFC but the NBFI's financial health continued to deteriorate. In July 2015, Kulsum through a letter to the central bank acknowledged all the irregularities that the BB investigation team found.
In another letter, Mannan took responsibility of the irregularities and agreed to pay back the sum.
But, he did not keep his word, taking the company into severe financial crisis. BIFC has managed to recover only Tk 120 crore from him so far.
Contacted, Kulsum said the dues are being paid off gradually. She, however, disputed the due amount of Tk 860 crore. “We do not owe that sum to BIFC,” she said without specifying the actual amount her family owes. BIFC has been making net loss of Tk 6.40 crore every month and could not maintain the required Statutory Liquidity Ratio and Cash Reserve Ratio, facing continuous penalty from the central bank, according to the report.
The firm saw its default loans spiral in the last five years: from 12.21 in December 2012 to 90 percent in December 2016.
The NBFI's total default loans stood at Tk 780 crore at the end of last year in contrast to Tk 84.28 crore in 2012.
At the end of last year, its total deposits stood at Tk 508.62 crore, down 13.25 percent from a year earlier.
Its loan portfolio shrunk to Tk 876 crore at the end of last year from Tk 1,063 crore the previous year.
BIFC has submitted a recovery plan containing three options to the central bank.
One option involves taking Tk 500 crore from the BB to pay off the bank loans such that BIFC's normal activities can be resumed.
Another option is to inject fresh equity by raising the paid-up capital.
The third option is to block the bank loans for 10 years and reschedule the payment with a year's grace period.
“The central bank is studying the proposal,” an official of BB said.
Listed on the Dhaka Stock Exchange in 2006, BIFC became a “Z” category stock eight years later.
BIFC's shares traded between Tk 10 and Tk 12 in the last two years and closed yesterday at Tk 10.80.