BB offers defaulting tanners 5 years to repay loans

The Bangladesh Bank has come up with special benefits to the defaulting owners of tanneries shifted to the leather industrial city at Savar.

The tanners unable to continue their business will have a maximum of 5 years to repay their original loan including an interest waiver facility that could be obtained through a down payment of 2% of their loan status.

The central bank's Banking Regulation and Policy Department (BRPD) issued a circular in this regard on Wednesday.

Those who are able to continue their business will also be given the opportunity to reschedule or restructure the defaulted loan for a maximum period of 10 years along with the benefit of interest waiver.

However, the board of directors of the bank will decide on the basis of the banker-customer relationship as to whether the interest will be waived or not.

However, the bank will not waive the original debt in any way.

To avail this facility, the customer has to apply to the bank by 31 March. The bank will inform its customer about the application within three months of receiving the application i.e. by next June.

According to the BB circular, due to sufferings for various reasons, many tannery owners are not able to repay their loans regularly which have turned bad loans.

As a result, in many cases it is not possible to maintain normal credit flow in the leather industry.

The circular says in the case of those factory owners who are unable to continue their business and those who have a debt of Tk5 crore as on 31 December 2020 will be able to repay their principal loan within 3 years with a 2% down payment of the loan status.

At the same time, those who have a debt of more than Tk5 crore will get 5 years to repay the original loan with the same amount of down payment.

Those who want to make an exit from the business, the bank will be able to sell their property kept in the bank as collateral with the consent of the customer.

The tanners who are able to continue their business at Savar will get loan rescheduling or restructuring facility for a maximum of 10 years with a grace period of 1 year through the down payment of 2% of the loan status till 31 December 2020.

After taking this facility, the interest rate of the loan will be 9%.

Those who have availed loan rescheduling or restructuring facility earlier will also be able to avail the same facility under this circular. However, in case of default through fraud or forgery, the benefit of rescheduling or restructuring will not be applicable.

After availing this facility, if any customer fails to pay 6 installments or two quarterly installments per month, this facility will be canceled.

The installments paid before 31 March 2020 prior to applying for the rescheduling or restructuring facility cannot be considered as down payment.

However, if any customer violates any conditions, all the benefits will have to be canceled and the suspended case will have to be revived.

Asked about this, Engineer Abu Taher, chairman of Fortuna Group and Ruma Leather Industries, told The Business Standard it is impossible for tannery owners to make a 2% down payment. The owners who shifted their tanneries to Savar are in a cash crunch as their export earnings have declined.

Mentioning that if the decision to waive interest is taken, it will be easier for the tannery owners to run their business, he said, adding that interest waiver should be made effective from 2014.

Then the tannery owners will get the benefit of this facility offered by the central bank, said the businessman.