Segregate service areas of banks, NBFIs

The non-bank financial institutions (NBFIs) have urged the regulators to segregate the financial services provided by them and the banks so that they could play a more effective role in the country's overall socioeconomic development.
Both are offering almost similar products in the same marketplace with the banks enjoying competitive advantage in terms of cost of funds with better earnings opportunities, they said at a discussion at a city hotel on Wednesday.
They said the NBFIs' struggle intensified further due to the uneven competition in the overheated money market, making it difficult for the sector to turn around.
They called for an immediate regulatory move to segregate the areas of the financial services provided by the banks and NBFIs to ensure a level-playing field.
Bangladesh Leasing and Finance Companies Association (BLFCA) and Banik Barta, a vernacular business daily, jointly organised the discussion titled "The Prospects and Challenge of Bangladesh's Financial Institutions".
Prime Minister's economic affairs adviser Dr. Mashiur Rahman was present at the event as the chief guest.
Presenting a keynote paper, BLFCA Chairman Md Golam Sarwar Bhuiyan informed the meeting that a total of 35 NBFIs are operating in the country with aggregate investment and deposit portfolios of Tk 712.39 billion and Tk 436.98 billion respectively.
"The NBFIs' share in overall loans given by both banks and non-banks has now dropped to 5.0 per cent from 10 per cent while the NBFIs' deposit share is only 3 per cent," he said.
Sharing the NBFIs' statistics in the region, he said the number of financial institutions in India and Sri Lanka was 9,443 and 39 respectively while the NBFIs' share of investment is 29 per cent in India and 17.5 per cent in Sri Lanka.
Mr. Bhuiyan, also Managing Director and CEO of Industrial and Infrastructure Development Finance Company Ltd. (IIDFC), said both banks and NBFIs are doing business mostly in the same areas although the banks' cost of funds is much lower than that of the NBFIs.
On the other hand, he said, the banks have more earning opportunities like various fees and commissions, but the NBFIs don't have such benefits.
"These create an uneven competition in the market, which is unexpected," he added.
Md Kayser Hamid, Managing Director and CEO of Bangladesh Finance Ltd., said the image of the sector badly shattered because of wrongdoings surfaced in a few problematic NBFIs.
Demanding exemplary legal actions against the wrongdoers who looted public money, he said the authorities should take measures to confiscate shares of the persons involved in the looting and re-inject those to the entities as part of a bailout measure.
Top executive of IPDC Finance Mominul Islam said the regulator has been feeding the struggling banks with required liquidity support to uphold trust of the people in the banking system.
The struggling NBFIs need some support through which they will be able to rebound and make contribution to the country's socioeconomic development.
Former chairman of the National Board of Revenue (NBR) Muhammad Abdul Mazid said the banks and NBFIs are supposed to be complementary to each other. "Unfortunately, they are now competitors. I think the Bangladesh Bank (BB) has a big role to play in this regard," he added.
Dr. Mashiur Rahman said the problem in the NBFIs sector has been created because of managerial weakness. "It is not created by external factors. So the demand for recapitalisation or restructuring is not logical to me."
He suggested the NBFIs to concentrate more on enhancing productivity of the institutions with exploring more areas of returns.
Commissioner of the Bangladesh Securities and Exchange Commission (BSEC) Professor Mizanur Rahman, among others, also spoke at the meeting.

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