Garment makers on Wednesday demanded for keeping the apparel sector out of the central bank’s new rules for loan classification, rescheduling and provisioning as the country’s highest foreign currency earning sector is passing through a critical time.
Bangladesh Bank issued two circulars on the rules of loan classification, rescheduling and provisioning on June 14 stating that an ongoing loan operation will be classified in the event of non-repayment of any installment within three months, instead of the six-month duration now in effect.
Term loans of five years have also been brought under the new regulation.
Leaders of all three garments and textile related associations - Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Textile Mills Association (BTMA) in a joint press briefing at the BGMEA office demanded for keeping the sector out of the new rules.
Shafiul Islam Mohiuddin, president of the BGMEA, said normally it takes 120 days for repatriation of money from the exported goods, but the central bank reduced the period of Special Mention Account (SMA) to 60 days from 90 days.
“So, transferring the continuous loan and demand loan to SMA within 60 days is not logical,” he said.
He said the number of loan classified factories will increase for such a move in such a critical period while the banks will not be interested to give more loans to the garment factories.
“As a result, the move will ultimately hamper the investment flow in the private sector,” he said.
The BGMEA president also indicated that the low import of capital machinery at garment sector at 28 percent and 18 percent in textile sector over the last nine months of the current fiscal year.
He also said if the factory owners do not get adequate loan from the banking system in time, they will also face problem in payment of salary of the workers and continuation of day to day activities.
Shafiul Islam said the exports of apparel items from Bangladesh declined for global financial meltdown. Also the sector is now suffering from perennial low pressure of gas and inadequate supply of power in the factories.
The export has already declined by 6.39 percent, 11.40 percent and 2.59 percent in the months of March, April and May respectively.
He also said frequent price hike of electricity will have a bad impact on the garment sector.