Govt gives legal lifeline to scores of sick firms

Nazmul Ahsan | Published: February 28, 2011 00:00:00 | Updated: February 01, 2018 00:00:00

Nazmul Ahsan
Scores of sick firms received a lifeline after the government ordered six state-owned banks not to sue companies whose bank loans haven't crossed five million taka each, officials said Sunday. The Ministry of Finance (MoF) gave the order to the banks amid growing calls from leading industrial chambers to bail out hundreds of companies that have busted under the weight of default loans since early 1990s. The ministry said if cases have already been filed against the sick firms, the banks must slow down the litigation process against the owners, according to the order - a copy of which is obtained by the FE. Four state-owned commercial banks, Sonali, Janata, Agrani and Rupali, and two state-owned development banks, Bangladesh Krishi Bank (BKB) and Bangladesh Development Bank ltd (BDBL), were given the order last week. Along with the chambers, a high-powered state committee on sick industry has recommended that the government remove some loan burden on the firms so that they can resume operation. Officials said Bangladesh Bank (BB), which monitors debt portfolios of industrial borrowers, had scrutinised the list of sick industries and backed the finance ministry's decision to cut their loan troubles. They said scores of sick firms out of a list of several hundreds will enjoy legal immunity from the latest government move. There was no immediate reaction from chambers or the grouping that lobbies for sick firms. The firms that will enjoy legal immunity don't belong to textile and ready made garment sectors as a similar facility has been provided to both sectors by the finance ministry a couple of months back, an official said. The plight of the sick firms have hogged spotlight for more than a decade as many entrepreneurs have blamed the government's tax policy, natural disasters, lack of protection from foreign goods and high interest rate for their financial troubles. Major business bodies including the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) have been pressing the government to waive bank interest of these sick firms. They urged the government to bail out these companies with cash and credit, arguing that these firms can create hundreds of thousands of jobs badly needed for the country's millions of youths. "We have taken the issue of sick firms seriously and sympathetically," a top MoF official told the FE. "Their demand of interest waiver might be considered later," he added. Officials said Sonali Bank has 11 sick clients, Janata five, Agrani has 12, Rupali two, BDBL has three and BKB has four sick clients. Each of these clients has less than Tk 5.0 million bank loans as principal amount. They said from now on the defaulters would not face any auction notice or confiscation of assets by the banks. The government directive would give the industry owners "a sigh of relief", a banker said. A source in the MoF said owners of sick firms having default loans amounting to more than Tk 5.0 million have been lobbying hard in the past few days to get similar facility from the ministry.