Debt relief far off for 133 ailing garment factories
The process to act on arrest warrants against loan defaulters, issued by money loan courts, and to confiscate the properties of the owners is likely to be suspended
Highlights
- 289 garment factories lost business until 2005
- 133 of them could not exit from financial liabilities
- Banks took over their assets
- Garment owners have their homes mortgaged too
- They have to wait for exemption from loan repayment
The government is not going to relieve 133 ailing and closed garment factories from the liability of bank loans amounting to Tk686 crore anytime soon amid deepening pandemic owes.
According to Bangladesh Bank, if the government has to exempt the factories from the obligation of repayment, it itself will have to pay out the banks that had released the funds. As per the policy, the interest charged against the cost of funds cannot be waived even if the government wants to.
However, the process to act on arrest warrants against loan defaulters, issued by money loan courts, and to confiscate the properties of the owners is likely to be suspended.
To this end, the inter-ministerial committee formed for loan settlement asked the commerce ministry to make a request to the finance ministry for the suspension of arrest warrants and wealth confiscation, according to a report that the committee submitted to Commerce Secretary Md Jafar Uddin on January 6.
The committee also recommended that the Finance Division close the loan accounts in phases.
An additional secretary of the commerce ministry, speaking on condition of anonymity, told The Business Standard that the ministry would soon send a letter to the Finance Division, as suggested.
As many as 289 garment factories lost business altogether between 1985 and 2005. In 2012, the government offered them an opportunity to get rid of their financial liabilities through partial payment of the principal loan amount to banks. But 133 of them could not take the advantage.
After the lenders filed cases against them, money loan courts issued arrest warrants and orders to seize properties of several borrowers.
In September last year, Bangladesh Garment Manufacturers and Exporters Association President Rubana Huq appealed to Finance Minister AHM Mustafa Kamal to waive the outstanding loans of the factory owners.
BGMEA also wrote to Commerce Minister Tipu Munshi requesting the loans be waived. In response, the inter-ministerial committee was formed in October last year to review the matter. It was asked to submit a report within two months, including recommendations.
The committee in its report said owners of the garment units had begun operations in rented accommodation without any knowledge about banking and international business rules, which ultimately pushed them out of business.
At one point, money dried up and they became unable to pay salaries to workers, rent, gas and electricity bills. Cases were filed against the ailing companies over this as well.
A decline in work orders due to the global recession and failure to ship goods in time for political instability led to loan defaults. Moreover, the companies had to forfeit machinery for unpaid rent and utility bills, forcing them to shut down.
Caught in a situation like this, the companies could not even use the opportunity to exit from the financial liability, according to the report.
A member of the panel said the matter would have to wait to get dissolved because the primary issue in hand was to support garment factories in business with easy loans so that they could overcome the challenges of the pandemic.
Meanwhile, in letters to the convenor of the panel and an additional secretary of the commerce ministry, BGMEA President Rubana Huq said the troubled factories had not been given further bank loans after becoming defaulters.
Instead, the lenders took over the possession of all movable and immovable assets.
The owners of the factories out of operation have their homes mortgaged too, and banks may auction those anytime, driving out the occupants, Rubana said in her letters.
She also said the garment entrepreneurs were living like a fugitive following the arrest warrants. Some died and some became physically and mentally inactive with age.
Therefore, resuming business operations or paying back the loans is beyond them.
