Bangladesh Bank Raises Depositor Refund Cap to Tk50 Lakh for Four Collapsed NBFIs

Bangladesh Bank has approved a far more generous repayment scheme for depositors trapped in four collapsed non bank financial institutions, raising the guaranteed refund from a flat Tk10 lakh to full principal recovery of up to Tk50 lakh, with a sliding scale of partial recovery for larger deposits above that. The decision, approved by the central bank's board on September 24 and made public two days later, closes out months of uncertainty for tens of thousands of savers whose money has been effectively frozen since regulators intervened in the four institutions last August.

The four companies covered by the new scheme are Aviva Finance, Fareast Finance, FAS Finance and International Leasing, all of which had non performing loan ratios sitting between 93 percent and nearly 100 percent by the time Bangladesh Bank stepped in. Combined, the four institutions owe depositors Tk12,483 crore, a figure broken down unevenly across the group. Aviva Finance alone accounts for Tk5,368 crore of that total, followed by International Leasing at Tk3,012 crore, FAS Finance at Tk1,246 crore and Fareast Finance at a comparatively smaller Tk449 crore.

How the New Tiered Scheme Works

Under the previous rules, any depositor at one of these institutions was guaranteed only Tk10 lakh regardless of how much they had actually deposited, leaving many small savers and retirees facing the prospect of losing the bulk of their life savings. The revised scheme raises that floor sharply and then applies a haircut that grows steeper as deposit size increases. Anyone with Tk50 lakh or less on deposit will now get their full principal back. Depositors with between Tk50 lakh and Tk1 crore will receive a maximum of Tk80 lakh. Those with between Tk1 crore and Tk1.5 crore will get Tk80 lakh plus half of whatever sits above the Tk1 crore mark. Depositors in the Tk1.5 crore to Tk2 crore range will receive Tk1.05 crore plus 40 percent of the excess over Tk1.5 crore, and anyone above Tk2 crore will get Tk1.25 crore plus 30 percent of whatever remains above that threshold.

Deposit size	Amount recoverable
Up to Tk50 lakh	Full principal
Tk50 lakh to Tk1 crore	Maximum Tk80 lakh
Tk1 crore to Tk1.5 crore	Tk80 lakh + 50% of amount above Tk1 crore
Tk1.5 crore to Tk2 crore	Tk1.05 crore + 40% of amount above Tk1.5 crore
Above Tk2 crore	Tk1.25 crore + 30% of amount above Tk2 crore

The structure means the overwhelming majority of ordinary depositors, the kind of retail savers who parked a fixed deposit receipt at a modest rate rather than institutional investors chasing yield, should walk away with their entire principal intact. It is the small number of large depositors, including corporate treasuries and wealthy individuals who concentrated tens of crores in a single struggling NBFI, who will absorb the biggest losses under the sliding scale.

A Crisis That Had Been Building for Years

The intervention did not come out of nowhere. Bangladesh Bank dissolved the boards of all four institutions and declared their managing director posts vacant on August 9, appointing administrators to run day to day operations while regulators worked out how depositors would eventually be repaid. That move itself followed a broader clean up effort that began in May of last year, when the central bank moved to cancel the licences of 20 underperforming non bank financial institutions across the sector. Five of those institutions were selected for closure in an initial phase, while four others, presumably including some overlap with the group now covered by this repayment scheme, were given a three month window to show signs of recovery before facing the same fate.

The non performing loan ratios at the heart of the crisis, ranging from 93 percent to nearly 100 percent across the four institutions, are a stark illustration of how completely these companies had stopped functioning as functioning lenders. An NBFI whose loan book is almost entirely in default has, in practical terms, no meaningful income from its core business, which is precisely why depositor money became trapped rather than simply devalued: the institutions had no ongoing revenue stream capable of funding routine withdrawals, let alone the kind of returns depositors had been promised when they signed up for fixed term deposits.

This is not the first time Bangladesh's non bank financial sector has forced regulators into a depositor rescue. People's Leasing and Financial Services was liquidated several years ago after a similar collapse in loan quality, and that earlier episode is still cited by industry analysts as the point at which public confidence in smaller NBFIs began to erode, pushing many savers toward the handful of larger, bank affiliated finance companies seen as safer. The current cleanup of Aviva Finance, Fareast Finance, FAS Finance and International Leasing suggests that erosion never fully reversed, and that a meaningful slice of the sector kept operating with loan books that were already unsalvageable well before regulators formally intervened last August.

Why This Matters Beyond the Four Institutions

Bangladesh's non bank financial institution sector has struggled with governance and asset quality problems for years, often overshadowed in public attention by the much larger commercial banking sector's own bad debt troubles. But NBFIs occupy a specific niche in household savings behaviour: many offer marginally higher deposit rates than commercial banks to attract savers willing to accept slightly less liquidity, which means the customer base skews toward retirees, small business owners and households treating an NBFI fixed deposit as a safe, income generating parking spot for savings rather than a speculative investment. When that assumption breaks down, as it did for depositors at these four institutions, the damage to public trust in the broader NBFI category can outlast the resolution of any single case.

The revised refund scheme is best understood as an attempt to limit that reputational spillover as much as it is a direct rescue of specific depositors. By guaranteeing full principal recovery up to Tk50 lakh, a threshold well above what the vast majority of individual retail depositors are likely to have held, Bangladesh Bank is signalling that ordinary savers should not bear the cost of institutional mismanagement, even as it lets larger depositors share proportionally more of the loss through the sliding scale. Whether the funding for these payouts comes from asset recovery at the four institutions, a broader deposit insurance mechanism, or some combination of the two has not been detailed publicly, and depositors are still waiting on a concrete disbursement timeline rather than just the revised formula.

What Comes Next

For now, the approval of the tiered repayment structure represents a policy decision rather than cash in depositors' hands. The administrators appointed in August will need to work through verification of individual deposit balances, a process that in past NBFI failures elsewhere has taken months rather than weeks, particularly where records were poorly maintained by outgoing management. Depositors at Aviva Finance, which alone represents close to 43 percent of the total Tk12,483 crore at risk across the four firms, will be the largest group watching the disbursement schedule closely. The four institutions given a three month recovery window under last year's broader clean up will also be worth tracking, since any of them sliding into the same category as Aviva Finance, Fareast Finance, FAS Finance and International Leasing would test how repeatable this kind of rescue formula is if Bangladesh Bank has to run it again.