Dhaka, Bangladesh (BBN)– Country’s top executives of non-bank financial institutions (NBFIs) have sought emergency liquidity support from the central bank to improve their financial health.
The support was sought in a meeting with the newly-elected committee of the Bangladesh Leasing and Finance Companies Association (BLFCA) at the Bangladesh Bank (BB) headquarters in Dhaka on Tuesday with BB Governor Fazle Kabir in the chair.
The central bank high-ups assured the BLFCA leaders of examining their proposal on the emergency liquidity support at the meeting.
Talking to the BBN, a BB senior official said the central bank will examine the legal aspects of such a liquidity support.
He also said the central bank advised the BLFCA leaders to take initiatives to help each other in solving their liquidity problems.
The BLFCA, a forum of managing directors (MDs) and chief executive officers (CEOs) of the NBFIs, also proposed a special refinancing scheme involving BDT100 billion on the same grounds.
The proposed scheme envisages five-year term-loans to be extended to them and the loans will be repayable on a semi-annual instalment basis.
The interest rate of the loan should be equivalent to the six-month Treasury bill rate.
On the other hand, the central bank also advised the BLFCA leaders to submit a reconstruction scheme shortly, focusing on how to restore confidence of depositors through ensuring good governance in the sector.
“We’ll try to submit within a week a draft reconstruction programme to the central bank on how to revive the weak NBFIs after discussions with our chairmen,” Mominul Islam, chairman of the BLFCA, told reporters after the meeting.
Mr. Islam, also MD and CEO of IPDC Finance Limited, said the BLFCA sought an emergency liquidity support from the BB against their cash reserve requirement (CRR) and statutory liquidity ratio (SLR) with the central bank.
Under the existing provisions, deposit-recipient NBFIs maintain SLR at the rate of 5.0 per cent and non-deposit receiving NBFIs at 2.5 per cent while both types of NBFIs keep CRR with the central bank at 2.5 per cent.
Some banks are still feeling shy to deal with the NBFIs to avoid possible risks, according to insiders in the banking sector.
Some NBFIs are facing extra pressure on liquidity because of the shyness of the banks about transactions with them, they explained.
In the meeting the NBFIs were advised to move forward to help develop the country’s bond market that might become a source of funds for them, the meeting sources said.
Earlier on Monday, the BLFCA leaders met with Finance Minister AHM Mustafa Kamal in a bid to improve the financial health of the NBFIs.
Currently, 34 NBFIs are running their business across the country.