Govt resorts to old practice of giving guarantee for SOE loans

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Nazmul Ahsan
The government has decided to give guarantee for loans amounting to Tk 6.38 billion that the Bangladesh Jute Mills Corporation (BJMC) has sought from the four state-owned commercial banks (SCBs)-- Sonali, Janata, Agrani and Rupali banks.
Finance Minister AMA Muhith has agreed to issue guarantees as the financially ailing Corporation is now in dire need of funds for purchasing raw jute, officials in the MoF said.
The BJMC being one of the major defaulting state-owned enterprises had a bad debt of Tk 7.25 billion at the end of 2009, according to the latest data of Bangladesh Bank.
The Corporation has to reschedule its classified loans to become eligible for further loan facility, a MoF official said.
The ministry is likely to issue the letters of guarantee to banks by the end of this week, the official added.
Of the total amount, guarantee for about 1.01 billion will be given to Sonali, Tk 3.32 billion to Janata, Tk 1.03 billion to Agrani and Tk 1.02 billion to Rupali bank ltd.
The loans will have to be refunded to respective banks within the next 10 years with a grace period of two and a half years, sources said.
Top officials in the SCBs said they are not interested to provide any credit facilities to SoEs such as the BJMC since such loans finally become burden on any bank or financial institution.
He, however, said as the government is the owner of four SCBs, they have nothing to do other than providing loan facility to BJMC maintaining basic requirement of BB and having bank guarantee from the government.
They said the culture of directed loan should be done away with to make the newly corporatised SCBs more competitive and profit making.