'Cannot repay': Investees tell ICB over Tk927cr money refund

'Cannot repay now' — that was the blunt response from several non-bank financial institutions to the Investment Corporation of Bangladesh (ICB), rendering the state-owned investment bank's efforts to recover over Tk927 crore in trapped fixed deposits with principle and interest completely in vain.

Infographics: TBS

Niranjan Chandra Debnath, managing director of ICB, told The Business Standard, "We are trying to recover the funds, but we have failed. The majority of the institutions expressed regret over their inability to repay, while some have requested more time."

"We served legal notices to them, but we are not satisfied with their response. We are planning to file suits against the defaulting institutions and will seek legal opinion before proceeding," he added.

Having received clear expressions of inability — and regret — from defaulting investee entities, the ICB is planning to file suit against the default institutions, according to sources.

"After receiving legal opinions, the corporation will move forward to file lawsuits against the defaulting entities, as it has no other options to recover the funds. The corporation tried every available avenue for recovery, leaving no option untapped," said ICB officials familiar with the matter.

Founded in 1976, primarily to develop the country's capital market, the ICB invested its surplus funds in various banks and non-bank financial institutions alongside supporting the capital market.

The corporation made fixed-term deposits of Tk668.38 crore in a bank and 10 financial institutions in the 2017-18 period at annual interest rates ranging from 9% to 12% amid a downturn in the capital market.

With the accrued interest, current outstanding of its FDRs are Tk927 crore, according to its annual report for 2024-25.

The NBFIs where the ICB has parked its money are People's Leasing and Financial Services, Fas Finance and Investment, International Leasing and Finance, First Finance Limited, Bangladesh Finance and Investment, Prime Finance and Investment, Premier Leasing and Investment, First Finance and Investment, Reliance Finance Investment, and Phoenix Finance and Investment Limited.

An ICB official stated that fund recovery and legal action were discussed during a recent Board of Directors meeting. Following the discussion, the board decided to seek further legal and expert opinions on the matter.

Despite seeking intervention from the central bank as the money market regulator, sending repeated letters demanding repayment, and a special task force to recover the funds, ICB now appears unlikely to reclaim its investments after spending nearly five years.

The investee institutions face severe financial distress, which has been exacerbated by fund misappropriation by their owners. As a result, repayment to depositors has come to a complete standstill.

In January, the investment banker, struggling with a severe liquidity crunch and seeking government funds to stay afloat, issued separate legal notices to institutions amid failure to get back investment. ICB's funds were trapped for years as the institutions defaulted to payback on maturity of the investments.

As these assets soured into bad loans, the ICB had to take a heavy financial hit, forced to set aside massive provisions against the stuck capital.  

ICB officials stated that several of these institutions, facing dire financial straits due to the misappropriation of funds by former sponsors and owners, informed the investment banker that they were unable to repay the money, while others requested additional time.

Meanwhile, four of the non-bank financial institutions (NBFIs) are facing liquidation due to financial anomalies and an inability to run operations or return client deposits.

According to the ICB, public funds were invested in these institutions under the promise of high returns starting back in 2015.

While the institutions initially paid interest regularly, they began defaulting on both interest and principal payments upon maturity around 2019.

To recover the trapped capital, the ICB previously sought central bank intervention and held discussions with the boards of the defaulting NBFIs.

However, after years of fruitless negotiations and repeated written warnings, the ICB concluded that voluntary recovery is unlikely, prompting the state-owned entity to move forward with legal proceedings.

According to ICB officials, these non-performing FDR investments have now become a major burden for ICB, plunging the corporation deep into the red and resulting in its highest-ever loss in the last fiscal year due to mandatory provisions for bad investments.

According to available data, International Leasing and Financial Services, which has been struggling with a high volume of classified loans, holds the highest amount of ICB's FDRs, totaling Tk191.60 crore.

As per data of the ICB for 2024-25, Padma Bank holds Tk162 crore dues of ICB's FDRs, followed by First Finance holds Tk161.09 crore, Phoenix Finance and Investment Tk134.75 crore, Fareast Finance and Investment Tk74.23 crore, FAS Finance Tk56.94 crore and Premier Leasing and Finance by Tk47.29 crore.

Additionally, ICB has FDR investment in Peoples Leasing and Financial Services, Bangladesh Finance and Investments, Aviva Finance, Prime Finance and Investment.

How FDRs hit ICB

Over the years, the FDRs remained due from the NBFIs and Padma Bank amid financial crisis in these institutions, but ICB showed the outstanding as receivable and could not keep provisioning against the funds.

The existing board of ICB, mostly reconstituted after the political changeover, decided to maintain provisioning against the non-recovery investment.

In FY25, ICB maintained a total provision of Tk791.26 crore.

Of this amount, Tk586.41 crore was kept aside for other assets (mainly the defaulting FDRs), which became the key contributor to the Tk1,213.86 crore loss.

In the previous fiscal year, ICB had reported a profit of Tk32.68 crore.