The readymade garments (RMG) and textile sector entrepreneurs Wednesday urged the government not to enforce the recently issued Bangladesh Bank (BB) circular which tightened rules for classification, provisioning and rescheduling of term loans.

Top apparel industry leaders at a joint press conference in Dhaka said enforcement of the new rules would hamper export-import activities of the RMG and textile sectors.

They said the new circular has curtailed the time limit for repayment of credit, which ultimately would raise the volume of classified loans as RMG and textile industry entrepreneurs depend on bank loans for raw materials import, to expand industrial units and for setting up new projects.

In the circular issued on June 14, Banking Regulations and Policy Department (BRPD) of the central bank curtailed the time limit for assessing probability of loan recovery from borrowers on the basis of qualitative judgments.

The BRPD circular suggests that banks reduce timeframe by three months for classification, provisioning and rescheduling of term loans as per the BB prescribed format for sub-standard (SS), doubtful (DF) and bad/loss (BL) accounts.

Industry leaders say the new BRPD rules would restrict the Bank-client relationship which is a major avenue to recover bank assets by avoiding classification, provisioning and rescheduling.

“Thus, the BRPD’s circular is an untimely move and it would create an impasse in the country’s overall trade and commerce,” said Shafiul Islam Mohiuddin, President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in a written statement.

“Once a loan is written as BL (bad or loss) account, borrowers will not be sanctioned further credit (short-term) from banks. As a result, the entrepreneur will lose competitiveness as the bank loan will become burden on him or her,” he said.

“On the other hand, the bank will lose its strength when a large amount of money will be blocked as classified,” he said.

He said the RMG and textile industry is reeling under tremendous local and international pressure.

He said two major festivals – Eid-ul-Fitr and Eid-ul-Azha – are approaching and RMG entrepreneurs will need to get prepared for additional payments as bonus.

He said local causes disruptive to production include acute gas and electricity crisis, high tariff for utility services, hike in wages, political impasses including shutdowns, labour unrest, raising tax at source, high rate of interest for bank loans and non-availability of credit from banks.

The Daily Sun/Bangladesh/ 28th June 2012