Textile millers and ready-made garment makers are once again seeking an extension of the loan repayment deadline until December of next year, arguing that their production and overall business have significantly contracted in recent months.
Default loans increased to Tk1,31,620 crore in the January-March period, which was 8.80% of the total outstanding loans
Since the onset of the Covid-19 pandemic in March 2020, the central has provided various facilities to businesses, such as loan moratoriums and loan repayment deadline extensions, in order to prevent defaults.
However, as of June 30th this year, the deadline for loan rescheduling by paying a small portion of the loans has expired, prompting them to lobby for an extended repayment period.
As part of that move, a team of the Bangladesh Textile Mills Association (BTMA) will sit with a deputy governor of the Bangladesh Bank today.
Mohammad Ali Khokon, president of the BTMA, told The Business Standard that they will seek policy concessions on many issues at the meeting with the central bank.
In a recent letter sent to the central bank, the BTMA explained their plight, saying that textile sector mills are not able to utilise 50-60% of their production capacity due to insufficient gas supply.
Besides, readymade garment export orders fell by almost 30% which also affected the textile sector.
As a result, it has become difficult for the institutions of this sector to pay other debts including term loans, the letter said.
For the last three years, borrowers received various benefits from banks.
The central bank in a circular on 20 June provided an exemption from default status if only 50% of the term loan and current principal is repaid by June.
Apparel makers demand this period be extended till December 2024.
The managing director of a private bank, however, told TBS that there is no justification to give such facilities at the moment.
“If the loan money is not repaid now, it will be difficult to give out new loans, resulting in disruptions in the annual growth,” the banker added.
After the loan rescheduling facility was awarded to banks in September 2022, there has been a massive increase in default loan rescheduling in the banking sector.
Non-performing loans increased by Tk13,740 crore in the October-December period last year.
After the central bank lifted the loan repayment concession at the beginning of 2023, default loans increased to Tk1,31,620 crore in the January-March period, which was 8.80% of the total outstanding loans.
EDF facility
The BTMA also wants an increase in loan moratorium under the Export Development Fund (EDF) facility.
In a letter sent to the central bank, the trade group said the repayment period of the EDF loans has been reduced to 180 days from 270, causing problems for the industry.
It takes 200-220 days for them to receive export proceeds. As a result, it becomes difficult for the mills to repay the loan within 180 days, the letter said.
As of early January 2023, the size of EDF was $7 billion, which has been reduced to $4.5 billion in compliance with International Monetary Fund (IMF) conditions.
Fazlee Shamim Ehsan, vice president of Bangladesh Knitwear Manufacturers & Exporters Association, told TBS that the crisis now is more complicated than Covid.
“The central bank provided facilities during Covid. In this crisis, the facilities should be increased rather than reduced,” he stressed.
On the contrary, an official of the central bank said there should be no extension of loan repayment facility to meet the demands of traders as the banks are in a difficult situation themselves.
