# Businessmen are worried about rising interest rates
# Production disruption will affect default loans
# Many garment factories are suffering from insecurity
# Bank loan uncertainty threatens to meet import costs
Due to the instability in the readymade garment sector, there is a fear of increasing loan defaults. More than 50 factories in Gazipur and Ashulia, the country's largest industrial areas, have been closed for more than 27 days. This is increasing the pressure on the entrepreneurs not to repay the bank loan on time.
Besides, the owners of the concerned industries may face huge losses if the buyer is unable to deliver the product in the lead time. Many of the owners of these factories were involved in the politics of the former government. As a result, the owners have to abscond or went into hiding for fear of attacks, vandalism and lawsuits. These institutions made with loan money are more likely to become defaulted loans.
According to the central bank, banks last rescheduled defaulted loans of Tk 91,221 crore in 2023. This rescheduled figure is the highest ever in a year. If the businessmen fail to repay the loan on time, then there is a fear of further increase in default.
Meanwhile, Sheikh Hasina's 16-year rule fell through a mass upsurge of students and people on August 5. Then the interim government led by Dr Muhammad Yunus took over the governance of the country. The interim government announced reforms in various sectors of the country, including the financial sector, to prevent corruption.
Concerned with the export-oriented garment sector, said that business and trade had come to a standstill due to various pressures, including global recession and political instability. The financial sector was on its way to getting better. In the meantime, this crisis has been created anew. It is now uncertain when this crisis will end. So the cost is more likely to increase against the profit ahead.
Considering the overall aspect, it was seen that the situation is getting worse ahead. Unable to handle this situation, genuine businessmen will not be able to repay loans on time. As a result, these loans will be completely defaulted. This will increase the pressure on the bank.
The vice-president of Bangladesh Textile Mills Association (BTMA) said after seeking anonymity that the garment sector is contributing the most to the country's economy along with investment and employment. This sector contributes the most to GDP. This sector of the country is now passing through a delicate situation under various pressures. Businessmen are struggling to run business. And if this continues, the country's economy will go to the edge of the ditch.
At a view exchange meeting held at Uttara Club in the capital yesterday, the garment sector concerned complained that the country's largest export earnings sector, the garment sector, has been in turmoil for the last 27 days. Due to the inaction of the industrial police, the working environment in the industrial areas is not yet fully fixed. Many of us have warned that if the situation does not improve quickly, buyers will give their orders to other countries.
Entrepreneurs said that due to the long lockdown at home and abroad due to the Corona epidemic, the business was negatively affected. As a result, due to financial loss, the bank re-schedules the loan, but the burden of debt increases. In the last one year, due to the Russia-Ukraine and Israel-Palestine wars, the prices of raw materials have increased in the world and the country's business is in crisis due to fluctuating prices of fuel oil. Now the business is going to face more crises. This will also have a negative impact on loan repayment.
The amount of defaulted loans in the banking sector is increasing gradually. Although various policies have been announced to reduce default loans, it is not actually decreasing. This cancerous increase called default has had an impact on the overall economy of the country. However, businessmen say that good entrepreneurs are also defaulting on loans due to policy mistakes. Overall, the increase in interest rates on bank loans, the jump in the price of the dollar and the disruption of production have affected the total defaulted loans.
It was known that banks last rescheduled defaulted loans of Tk 91,221 crore in 2023. It has been approved by Bangladesh Bank. The rescheduled amount is the highest ever in a year. In addition, the rescheduled loan status of the banking sector stood at Tk 2,88,540 crore at the end of 2023, which is 18.75 percent of the total loans distributed by the banks. If the defaulted and written off loans are added to the rescheduled loans, the amount of bad loans will be Tk 5 lakh crore.
According to the latest data of central bank, at the end of June this year, the default loan stood at Tk 2,11,391 crore which is 12.56 percent of the disbursed loan of Tk 16 lakh 83 thousand 396 crore. Not only that, it is the highest ratio of loans and defaulted loans distributed in the last 16 years.
According to Bangladesh Bank, till June last year, the default loan was Tk 1,56,039 crore. In the last three months, default loans have increased by Tk 29,096 crore, which was Tk 1,82,295 crore till March 30.
According to Bangladesh Bank data, the country's import decline was 15.81 percent in the 2022-23 fiscal year. In the 2023-24 financial year, the rate of decline in imports reached almost 30 percent till last December. In the 2021-22 fiscal year, the amount of goods imported every month is currently half of the imports. Due to the inability to import capital machinery and raw materials as per the demand, a large part of the production capacity of many industries of the country is sitting.
Asked about this, Bangladesh Association of Banks (BAB) Chairman Abdul Hye Sarker said, "There is a dollar crisis. Since businesses have to buy dollars at higher rates, they have to pay extra rates to pay LCs. So the authorities should subsidize the traders. They should be given some leeway."
Rizwan Rahman, former president of Dhaka Chamber of Commerce, said many businessmen are unable to repay loans on time even if they are not defaulters due to some government policies, including the central bank. He is struggling to conduct business in adverse conditions in the country. The interest rate of the loan has increased from 9 to 15 percent. All in all, businesses are under pressure.
He added that keeping production normal is very important for running a business. For a long time, the government has been subsidizing some defunct power stations. These have to stop. We also need to reduce our energy costs.
Khandaker Rafiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said, "I had to take responsibility for the changed situation of the BGMEA president. After assuming office, the interim government has put emphasis on export and foreign remittance. In light of that decision, a task force will be formed soon to remove the dissatisfaction of the garment sector."
ZH
