Delinquent tanners get more time to repay loans

The cash-strapped tanners yesterday got three more months to repay their default loans under relaxed facilities.

The Bangladesh Bank took the decision considering the upcoming Eid-ul-Azha, when tanners usually invest huge amount to purchase rawhide.

Local tanneries, which have been facing the burden of default loans for years, are now allowed to repay their non-performing loans (NPLs) in a relaxed manner by September, according to a BB notice.

The central bank also considered the ongoing business slowdown caused by the coronavirus pandemic in extending the deadline.

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

The owners, whose bank loans amounted to up to Tk 5 crore as of December 31 last year, will get three years for the exit.

Defaulters with more than Tk 5 crore loans will have a maximum of five years to repay the amount owed.

The tannery owners who are able to run their business will enjoy a rescheduling facility by making a 2 per cent down payment.

Banks are permitted to reschedule the loans for 10 years, which includes a one-year grace period.

Banks can impose a maximum of 9 per cent interest on the rescheduled or restructured loans. Banks can rebate the interest amount but there is no scope to waive the principal amount.

Md Shaheen Ahamed, chairman of the Bangladesh Tanners Association (BTA), said the deadline extension would not help the beleaguered tanneries.

"We had requested the central bank last December to make the relaxed facility available throughout this year. But, it did not do so," he said.

The central bank has extended the deadline twice, but the economic shock may last longer than expected.

"So, how could the cash-strapped tanners repay the loans within September?" Ahamed asked.

Besides, tanners will have to invest heavily to purchase rawhides during Eid-ul-Azha, which will deepen their crisis to pay back loans.

Eid-ul-Azha is scheduled to be celebrated on July 21, depending on the sighting of the moon.

Tanners usually buy rawhides worth Tk 1,500 crore during the Eid-ul-Azha.

Tanners say several European countries, which are the major buyers of Bangladesh's finished leather products, are yet to see their economies pick up.

"So, we are still in a crisis," Ahamed said, adding that the BB should have considered these issues.

The BTA has 155 members, of which around 70 per cent have become loan defaulters.

The total amount of defaulted loans in the tannery industry stands at around Tk 2,000 crore.