Readymade garment (RMG) industry owners have now asked for six years, including a 1-year grace period, to repay the money they have borrowed under the government's stimulus package to pay the salaries and allowances of their employees and workers.
An inter-ministerial meeting at the commerce ministry, chaired by Commerce Secretary Md Zafar Uddin, on Monday decided in favour of the proposal.
Now, the commerce ministry will send recommendations to the Finance Division to increase the loan repayment term from two years to six years.
The meeting also formed a committee to resolve the issue of the folding of 133 ailing industries by repayment of their bank loans on behalf of the government.
Representatives of the finance ministry, the Bangladesh Bank, industries ministry, National Board of Revenue, Federation of Bangladesh Chambers of Commerce and Industry, Bangladesh Garment Manufacturers and Exporters Association, and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) were present at the meeting.
Since these packages have been announced by Prime Minister Sheikh Hasina herself and the Finance Division has been implementing the decision through the central bank, the division will finally decide the issue, Commerce Secretary Zafar Uddin told The Business Standard.
Following the Covid-19 outbreak in the country, Prime Minister Sheikh Hasina announced a Tk5,000-crore fund to help the country's export-oriented apparel industries clear the salaries and allowances of their workers for the April-June period.
The loan repayment period of the fund was set at two years, and the Bangladesh Bank allowed a grace period of six months for the industries. The central bank also imposed a one-time service charge of 2% on the interest-free loan.
From April, industry owners started paying the workers from this fund but ran out of money before paying the June salaries.
At that point, the government gave them another Tk2,500 crore at 2% lending rate from the Tk30,000-crore fund set up for large industries. It also assured them of subsidising another 7% interest on the loan.
Following a demand from the garment owners, banks later lent another Tk3,000 crore from the fund for large industries to enable them to clear salaries for July. This loan will cost the owners 9% in interest, half of which will be subsidised by the government.
The total loan amount of Tk10,500 crore, lent to garment industries for paying the workers' salaries and allowances, is conditional on repayment in 18 instalments, including a 6-month grace period. As such, the owners will have to repay the first instalment of the loan, taken in April, in November this year.
BKMEA Senior Vice President Mohammad Hatem, who was present at the commerce ministry meeting, later told The Business Standard that the price of ready-made garments in the international market has dropped by 10% as compared to that before the pandemic. In order for the RMG owners to be able to repay the loans, the global price should have grown by five percentage points to 15% as compared to what it is now.
"But we cannot afford to repay the loans because of the decline in garment export profits. Moreover, it will take 180-195 days to obtain the money from the present sales in the international market."
Asked whether the loan interest rate or service charge will increase if the loan repayment period is extended, Hatem said banks would levy 5-year interest on the Tk3,000 crore lent from their own funds. They have already deducted a 2% service charge on the remaining Tk7,500 crore at the time of lending and there is no chance of new charges being levied.
Body formed to decide folding of ailing industries
Meanwhile, the commerce ministry meeting also discussed the issue of the killing off of 133 sick garment factories after a repayment of their bank loans by the government. However, the meeting could not reach a decision.
A commerce ministry official present at the meeting said a decision has been taken to form a committee to decide on the repayment of over Tk686 crore bank loans owed by the factories.
Commerce Secretary Zafar Ahmed told The Business Standard that the list of 133 ailing factories was compiled many years ago. It has been decided to form a committee to review the current status of these factories and make recommendations based on that.
The final decision on the issue will be taken after receiving the report of the committee, he added. ***