Bangladesh Bank Requires NBFI Borrowers to Withdraw Lawsuits Before Receiving Policy Support

Dhaka, August 17, 2026 — Borrowers of non-bank financial institutions (NBFIs) will have to withdraw pending lawsuits against the government, Bangladesh Bank (BB), or their respective finance companies before receiving policy support or incentives, according to a new directive from the central bank. The BB issued the directive on Sunday, saying applications for policy support can be considered only after borrowers withdraw such cases — in a move to reduce litigation in the financial sector.

📜 The Directive Requirements

Under the new BB directive, borrowers seeking policy support must meet specific conditions:

• 📜 Withdraw pending lawsuits — against government, BB, or concerned finance company
• 📜 Submit affidavit — confirming no such case remains pending
• 📜 List withdrawn cases — affidavit must include cases already withdrawn
• 📜 In-principle sanction letters — finance companies process based on these
• 📜 Policy support or incentives — approved terms applied after compliance

👥 Objectives of the Directive

The central bank's directive has multiple strategic objectives:

• 💼 Help distressed borrowers — rebuild businesses and restore financial health
• 👥 Create jobs — support economic growth through borrower recovery
• 🚧 Reduce litigation — decrease legal battles in the financial sector
• 🤝 Restore financial health — help borrowers return to viability
• 💰 Economic growth support — policy support as growth stimulus

🌐 Context: NBFI Sector Resolution

The directive comes amid Bangladesh Bank's broader NBFI sector resolution process — which has already seen four NBFIs declared non-viable (Aviva Finance, Fareast Finance, FAS Finance, International Leasing) and Tk 2,000 crore allocated for liquidation and depositor protection. The new directive addresses the borrower side of the NBFI crisis:

• 🏭 4 NBFIs non-viable — already declared by BB
• 🏭 4 more NBFIs given 3-month window — to regain viability
• 🏭 Midas Financing — 54% NPL ratio, severe liquidity crisis
• 💰 Tk 2,000cr liquidation fund — for depositor protection
• 📜 Borrower lawsuits — many NBFI borrowers have filed cases against BB or finance companies

🚧 The Litigation Problem in the Financial Sector

The financial sector litigation burden is significant — with Tk 12,000 crore stuck in interbank legal battles alone. The NBFI borrower lawsuits add another layer of litigation that delays resolution and recovery:

• 💰 Tk 12,000cr interbank cases — 7,354 pending cases
• 📜 NBFI borrower cases — separate litigation stream
• ⏳ Case disposal slow — only 72 cases disposed in 2025
• 🚧 Recovery blocked — lawsuits prevent loan recovery and restructuring
• 💰 Capital locked — litigation ties up capital that could support new lending

📊 Strategic Context: Financial Sector Resolution

The BB directive represents a carrot-and-stick approach to NBFI sector resolution:

• 🍮 Carrot: Policy support — incentives for compliant borrowers
• 💣 Stick: Lawsuit withdrawal — mandatory before receiving support
• 🤝 Resolution acceleration — reducing litigation speeds up sector cleanup
• 💰 Capital recovery — freed-up capital can be redeployed
• 👥 Depositor protection — faster resolution protects depositors

For Bangladesh's broader financial sector, the directive signals the BB's determination to break the litigation deadlock that has slowed NBFI resolution. By requiring lawsuit withdrawal as a precondition for policy support, the central bank is pushing borrowers to choose between litigation and recovery — creating a powerful incentive for dispute resolution through negotiation rather than prolonged court battles. If successful, this approach could accelerate the NBFI sector cleanup and free up capital for productive lending to support economic growth and export competitiveness. The approach represents a pragmatic balance between protecting borrower rights and advancing sector resolution — ensuring that the financial system can move forward without being perpetually entangled in litigation.

The directive also reflects a broader pattern in Bangladesh's financial sector reform approach — where the BB is increasingly using conditional incentives to drive behavioural change among borrowers and financial institutions. Rather than simply imposing penalties or restrictions, the central bank is offering policy support as a reward for compliance — allowing borrowers who cooperate with the resolution process to access relief while those who continue litigation remain in legal limbo. This approach balances enforcement with rehabilitation — recognising that some NBFI borrowers may have legitimate grievances that can be resolved through negotiation rather than adversarial litigation.

For the broader economy, reducing financial sector litigation has significant benefits beyond the NBFI sector itself. Court backlogs slow the entire justice system, and financial sector cases — often involving complex commercial disputes — consume disproportionate judicial resources. By incentivising out-of-court settlement and case withdrawal, the BB directive could contribute to broader judicial efficiency — freeing up court capacity for other cases and reducing the time and cost of dispute resolution across the economy. This, in turn, could improve Bangladesh's overall business environment and investor confidence — supporting the broader economic reform agenda that the government is pursuing ahead of LDC graduation.