Published: 12:21 AM, 07 July 2026
Rampage and Irregularities in NBFIs Alarm Economists
The non-banking financial institutions (NBFI) sector in Bangladesh is facing growing scrutiny amid rising allegations of corruption, nepotism, and widespread financial irregularities. Once envisioned as a vital complement to the country's banking system, many NBFIs are now struggling under the weight of poor governance, politically influenced lending, and weak regulatory enforcement.
Industry experts and regulatory observers warn that systemic failures within several institutions have eroded public confidence and created serious liquidity risks. A number of NBFIs are reportedly burdened with high levels of non-performing loans (NPLs), much of which stem from politically connected borrowers and insider lending practices.
One of the most frequently cited concerns is nepotism in recruitment and loan approval processes. Senior officials in multiple institutions are accused of appointing relatives or close associates to key positions, bypassing merit-based hiring standards. In some cases, board members are alleged to have influenced credit decisions to benefit affiliated businesses, leading to large-scale loan defaults.
Former central bank officials note that weak internal controls have allowed repeated violations of credit risk management guidelines. Loans are often disbursed without proper collateral verification, while loan rescheduling practices have been misused to conceal default status. This has created an artificial picture of financial stability in several institutions, masking deeper solvency issues.
Regulatory oversight by the Bangladesh Bank has also come under criticism. While periodic inspections are conducted, enforcement of corrective measures is often inconsistent. Analysts argue that political pressure and institutional lobbying have at times slowed down disciplinary action against influential defaulters and board members.
The problem is compounded by concentrated ownership structures in many NBFIs. A number of institutions are controlled by a small group of shareholders, enabling conflicts of interest in governance decisions. This concentration of power has facilitated self-dealing, where loans are extended to entities linked directly or indirectly to the institution's leadership.
Financial analysts also point to poor risk diversification strategies. Instead of investing in productive sectors, many NBFIs have heavily exposed themselves to real estate and large corporate borrowers. When market conditions tightened, defaults increased sharply, exposing structural weaknesses in portfolio management.
Customers have also reported delays in withdrawals and reduced access to deposits in some institutions, raising concerns about liquidity stress. Although no systemic collapse has occurred, confidence in the sector has been steadily declining.
Experts suggest that restoring stability will require urgent reforms, including stronger enforcement of corporate governance rules, transparent board appointments, and stricter monitoring of related-party transactions. Strengthening Bangladesh Bank's supervisory authority and ensuring its operational independence is also seen as critical.
There are also calls for digitalization of loan approval systems to reduce human discretion and minimize corruption risks. Enhanced whistleblower protections and mandatory disclosure of loan beneficiaries could further improve accountability.
Despite these challenges, the NBFI sector still holds potential to support small and medium enterprises (SMEs) and diversify Bangladesh's financial ecosystem. However, without significant structural reforms, experts warn that continued mismanagement could deepen financial vulnerabilities and pose broader risks to economic stability.
In conclusion, corruption, nepotism, and irregularities in Bangladesh's NBFI sector reflect deeper governance failures that require immediate attention. Addressing these issues will be essential not only for restoring trust in financial institutions but also for ensuring long-term economic resilience.
Dr. Debapriya Bhattacharya, Distinguished Fellow of Center for Policy Dialogue (CPD) said that financial institutions are suffering from rampage, illegal money transfer and mismanagement due to widespread corruption and anomalies in the banking industry. He added that regulators are not found taking stern action against scammers and oligarchs who spoil NBFIs which worsens the situation.
Professor Anu Muhammad, Jahangirnagar University said that owners of NBFIs always pack hands with ruling authorities by means of illegal connivance which makes them too influential. Financial sector and banking system cannot be corrected without restraining political interventions, Anu Muhammad commented.
Former caretaker government adviser Dr. Hossain Zillur Rahman stated that all governments extend undue privileges to financial sector oligarchs. He blamed political parties for taking funds from banks and financial institutions for different programs and elections. For this reason major politicians keep mum over corruption and theft in financial and banking sectors when they go to power, Dr. Hossain Zillur Rahman remarked.
Dr. Iftekharuzzaman, Executive Director of Transparency International Bangladesh (TIB) said that ruling parties in Bangladesh don't acknowledge corruption allegations, which encourages financial fraudsters and money launderers to keep up their diabolical vices.
