Resurgence of NBFIs in 2023: A surge in deposits, loans

Non-bank financial institutions (NBFIs) experienced a resurgence in 2023, marked by significant growth in both deposits and loans.

According to data from the Bangladesh Bank, deposits in NBFIs surged by Tk1,07,754 lakh compared to 2022, reaching Tk44,83,018 lakh by the end of December 2023, up from Tk43,75,264 lakh in December 2022.

Simultaneously, NBFIs saw a substantial increase in total loan disbursement, which rose by Tk3,43,752 lakh to reach Tk73,75,919 lakh by the end of December 2023, compared to Tk70,32,167 lakh in December 2022.

This surge in loans has resulted in a loan-to-deposit ratio of 1.65 for NBFIs, indicating a more assertive lending approach relative to their deposit base.

Experts have cautioned that the rapid growth of loans outpacing deposit collection could create an imbalance between available funds and the demand for loans, potentially resulting in an asset-liability mismatch for the NBFIs.

They have also noted that the entire NBFI sector is grappling with a financial crisis, with five to six NBFIs facing operational challenges due to a loss of public trust.

Data indicates that the majority of deposits in NBFIs originated from the private sector, comprising 92.17% of total deposits. Private sector deposits totalled Tk41,32,138 lakh by the end of December 2023, whereas deposits in the public sector amounted to Tk3,50,880 lakh.

Regional distribution of deposits revealed that the Dhaka division contributed the largest share, accounting for 92.45% of total deposits, while the Barishal division had the lowest share at 0.12%.
Furthermore, among these deposits, accounts holding deposits ranging from Tk1-5 crore totalled Tk4,148 crore, with the total deposit in these accounts surpassing Tk8,66,482 lakh in 2023.

The number of accounts holding deposits ranging from Tk50-100 crore totalled 20, with deposits reaching Tk1,65,922 lakh. Three accounts held deposits between Tk100-150 crore, totalling Tk40,050 lakh, while deposits in three accounts with Tk150 crores or above amounted to Tk58,000 lakh.

In 2023, loans extended by NBFIs to the private sector amounted to Tk73,64,904 lakh, while loans and advances to the public sector stood at Tk11,015 lakh. The majority of loan disbursements, totalling 45.60%, were allocated to industrial purposes, followed by disbursements for trade and commerce (25.99%) and consumer finance (14.22%).

Division-wise analysis of loans and advances showed that the Dhaka division accounted for the highest share at 83.31%, while the Barishal division had the lowest share at 0.50%. However, total loan recovery in 2023 decreased by 0.42% compared to December 2022.

According to Investopedia, NBFIs are entities that offer services similar to banks but do not hold a banking license. Bangladesh has 35 NBFIs operating with 296 branches, regulated under the Financial Institutions Act, 1993. NBFIs provide loans and advances for various sectors including industries, commerce, transport, agriculture, and building construction.