Tanners guarded about loan rescheduling benefits

The tannery industry body has said the central bank’s offer to allow the rescheduling of loans until December would only benefit tanners that have a good relationship with their respective commercial banks.

Their guarded optimism stems from past experience wherein only a handful of tanners benefitted based on their bank-client relationship. Other tanners eligible for rescheduling were not able to secure benefits.

The association said the rescheduling process had been ongoing for the past few months.

Bangladesh Bank on Tuesday decided to extend the loan repayment deadline by three more months, to December at the end of this year.

This is only applicable to leather industries that relocated to the BSCIC Leather Industrial Estate at Savar, on the outskirts of the capital.

The facility was offered due to slow business as a result of the Covid-19 pandemic.

The central bank declared the policy in January saying that the facility would last until March 31.

But it later extended the deadline several times.

Banks are allowed to offer a one-time exit policy with only a 2% down payment to tannery owners who are unable to run their businesses amid the current crisis.

Owners whose bank loans amounted to up to Tk5 crore as of December 31 last year, would get three years for the exit.

Defaulters with more than Tk5 crore loans have a maximum of five years to repay the amount owed.

Tannery owners who are able to run their business will enjoy a rescheduling facility by making a 2% down payment.

Talking to the Dhaka Tribune, Shaheen Ahmed, president of the Bangladesh Tanners Association (BTA), said that debt rescheduling is an ongoing process.

"This circular has been issued four times since January. But commercial banks are not taking initiative in this regard. We have met with banks and financial institutions more than once,” he added.

Shakawat Ullah, general secretary of the BTA, told the Dhaka Tribune that the circular issued by the central bank always has a number of conditions.

It has been seen that not all the conditions can be met, so the commercial banks are slow to reschedule the loans, he added.

However, based on the bank-customer relationship, many tanner owners have taken advantage of this. But those who do not have such a relationship face problems, Shakawat added.

Although the central bank has issued the circular, not every bank has implemented it completely, he said.

“However, we welcome the decision. Many industry owners may try to take advantage of this decision and this is a good decision for them,” he added.

But he also said that it was still unclear how helpful this debt rescheduling would be for tanners.

“Shifting our tanneries to the leather industry estate in Savar was unplanned and rushed. We had to come here based on a decision taken in a few days. Then the tannery estate did not have the environment to go into production as the central effluent treatment plant (CETP) was not ready at all and the infrastructure was poor,” he said.

He also said that many factories were completely out of production for more than two years, so they could not repay the loan. So, these rescheduling benefits might help them.

“However, our demand was to waive all interest for 4 years. This might have given the tannery owners some advantage to turn around,” he added.

He also said that it is still doubtful how useful the rescheduling of loans with a 2% down payment.

However, tanner owners said that their production has been hampered significantly by the Covid-19 pandemic for the past year and a half.

Although the production has been at a somewhat normal level for several months, the new directive has raised concerns among the owners.