Defaulting tanners, who have shifted to the leather industrial city at Savar, now have an extension to 30 September as the deadline to apply for loan rescheduling with a 2% down payment.
Introducing a lifeline for tanneries in January this year, the Bangladesh Bank set 31 March as the application deadline for them to reschedule their loans. This was later extended to 30 June, and now to 30 September.
The central bank in a circular Tuesday said the application time has been extended due to the long and lingering pandemic, and because of the upcoming Eid-ul-Azha. As most of their rawhide comes from the festival ritual sacrifice of livestock, Eid-ul-Azha is a lifeline for tanners.
The Bangladesh Bank in January introduced a loan rescheduling and one-time exit policy with easy terms for tanneries that have already relocated to Savar. This was done to help the industry to flourish, and to bring down loan defaults in the leather and tanning industry.
According to the policy, tannery owners unable to continue their business can repay the loan with an additional 2% down payment, but the interest waived. Tanners able and wishing to continue in the business would qualify for loan rescheduling or restructuring with a 2% down payment on their loans.
According to the central bank, loans granted to tanneries had turned sour as the owners could not pay the instalments regularly after factory relocation.
"The disruption in instalment payments has, in turn, hampered the usual credit flow to the sector." Under these circumstances the Bangladesh Bank introduced five types of facilities for tanneries.
The lifelines include a three-year repayment exit policy, with a 2% down payment for tanners with bank loans of up to Tk5 crore as of 31 December 31 last year.
For tanneries with loans amounting to more than Tk5 crore as of December 31 last year, the exit policy will provide them five years to repay their loans.
Apart from this, the central bank said banks will decide about interest waivers based on bank-customer relationship but the original loans and investment cannot be waived under any circumstances. Banks will be able to sell the collateral assets through prior approval of the borrowers.
However, banks can offer special rescheduling facilities with only a 2% down payment in cash, for tannery owners able to continue their businesses. The lenders can reschedule their loans for ten years including a year's grace period.
The interest rate on the rescheduled or restructured loans will be 9%. The original loans and investments cannot be waived.
The central bank said borrowers who have already enjoyed the special rescheduling facility earlier, would also be eligible for the new scheme. But loans approved, violating banking rules and regulations, would be barred from availing this facility.
If a tanner fails to pay six monthly instalments, or two quarterly instalments, the facility will be revoked. Instalments paid before the scheme was introduced will not be considered as down payment.
While availing the facilities under the scheme, banks can settle cases against the clients based on deeds of compromise. But if a client violates any condition of the scheme, all the benefits will be cancelled and the postponed case will have to be reinitiated.