Finance ministry to clear off BJMC loans

FE Team | Published: November 01, 2010 00:00:00 | Updated: February 01, 2018 00:00:00

Nazmul Ahsan
The Ministry of Finance (MoF) has decided to clear off all the outstanding principal loans worth about Tk 31 billion of Bangladesh Jute Mills Corporation (BJMC) it owes to four state-owned banks.
The ministry, however, has cancelled a recent bank guarantee for Tk 5.0 billion issued in favour of these banks to salvage the Corporation, a top ministry official said.
The amount will be provided to banks as interest bearing bond, which the banks could use as Statutory Liquidity Ratio (SLR) with the Bangladesh Bank, according to a decision taken at a recent meeting held at the MoF.
The meeting was presided over by Mohammed Tarek, Secretary, Finance Division, MoF, also decided to waive bank interest liability of BJMC amounting to Tk 19.40 billion.
The banks are Sonali, Janata, Agrani and Rupali Bank Ltd
However, the BJMC has to return back the money to the government by 2025 with a grace period of five years.
After the moratorium expires in December, 2015, the Corporation has to pay 2.0 per cent interest on the 25 per cent of the total principal amount, while 5.0 per cent interest rate will be applicable on the rest 75 per cent of the principal amount, according to the meeting decision.
'We want to make both the BJMC and banks viable as concept of 'free lunch' should no longer exist for BJMC and also for other state-owned Enterprises (SoEs)," a top MoF official told the FE.
"This is the last chance to be provided with Tk 31 billion to BJMC in phases"
A tripartite agreement will soon be signed between BJMC, all four banks and MoF to implement the government decision, the meeting also decided.
Of the total amount of Tk 31 billion, the amount of outstanding loan of Sonali bank ltd to BJMC up to June, 30 this year was Tk 8.62 billion, Janata bank Tk 9.44 billion, Agrani bank Tk 5.89 billion and Rupali's Tk 9.77 billion, according to the latest accumulative figure that was placed at the meeting.
The MoF will issue the bonds equivalent to Tk 31 billion in five installments over the period upto 2025.
The MoF officials said they are contemplating introducing a similar regulation for other loss-making SoEs.
The BJMC has to show its prudence in removing its public image as a bankrupt institution to get the further policy support and patronisation from the government, a ministry official said.
The top bankers of the government owned banks hailed the government's recent decision, saying, the SoEs are simply sucking our blood as we become compelled to issue them loan at the insistence of the government.
They termed the BJMC as an 'errant' client.
The government will no longer shoulder the financial burden of any SoEs as a policy is being formulated in this regard, a government official said.
Officials in the BJMC said the mills under the corporation are becoming profitable as the export earnings of 24 mills of BJMC have been increasing due to higher demand for jute goods abroad.
Insiders said problems like higher overhead expenditure, mismanagement, old machineries, corruption, excessive trade unionism and lack of long term planning are still hurting the public jute mills.