Jute millers to get financial lifeline as BB, banks sign agreement

Bangladesh Bank signed Monday participatory agreements with 16 commercial banks to disburse the Tk 2 billion (200 crore) refinance fund among jute millers and traders with a view to helping them in purchasing raw jute during the current season.
Managing directors of the banks and their representatives signed the agreement with the central bank on behalf of their respective institutions at a ceremony held at the BB conference room. BB Agricultural Credit and Financial Inclusion Department General Manager Provash Chandra Mallick signed the agreement on behalf of the central bank.
Bangladesh Bank formed a Tk 200 crore refinance fund last year to help jute growers to have fair prices and jute millers and traders in purchasing required quantity of raw jute during the season to run their mills and business.
The central bank formed the fund to help salvage the country's ailing jute industry, once the main foreign currency earner of the country, said Deputy Governor SK Sur Chowdhury who presided over the meeting, which was attended by chief executives of all the participatory banks and their representatives. The meeting was addressed, among others, by BB Executive Director SM Moniruzzaman and Sonali Bank Managing Director Prodip Kumar Datta.
Of the Tk 200 crore refinance fund, Sonali Bank will disburse Tk 31 crore, Agrani Bank Tk 44 crore, Janata Bank Tk 47 crore, Rupali Bank Tk 42 crore, Basic Bank Tk 7 crore, UCBL Tk 6 crore, IFIC, NBL, Prime, AB and Mercantile Bank will disburse Tk 3 crore each, Uttara, Bank Asia and Standard Bank will disburse Tk 2 crore each while each of the One Bank and the City Bank will disburse Tk 1 crore.   
While addressing the chiefs of the banks, the BB Deputy Governor said Jute, the golden fibre, is still playing its due role in improving rural economy, job creation and export earnings. "And that is why the government decided to revive the environment friendly jute industry," said the deputy governor.
With the signing of this agreement, the deputy governor said, the traders will be able to buy raw jute at growers' level and thereby the farmers will also be benefited. He, however, urged the bankers to be more vigilant so that the loans could not be diverted and be realised in time.
According to the central bank, state-owned jute mills, private jute mills and raw jute traders will get 40 per cent, 40 per cent and 20 per cent of loans respectively from the refinance fund. The fund for the refinance scheme will come from the BB's own treasury and the commercial banks would get the loans at the rate of 5 per cent interest. The banks will, however, disburse the loan at the rate of 9 per cent interest. The repayment has to be made within a year with interests.
A meeting of the central bank in June last took the decision to disburse the loan among the state-owned jute mills, private jute mills and raw jute traders. The BB also issued a circular to managing directors and chief executive officers of all scheduled banks saying that the board of directors of the central bank had approved the fresh refinance scheme to boost the country's jute industry.
Presently, the jute mills, both under BJMA and BJMC (Bangladesh Jute Mills Association), have been incurring heavy losses and passing crucial time due to acute shortage of fund. Many of the mills are also facing serious problems in procuring raw jute to run their industries mainly due to fund constraints.
The BJMA has set a target to procure about 1.1 million bales of raw jute for the FY 2014-15, according to sources. Usually mills under BJMA, BJMC and BJSA (Bangladesh Jute Spinners Association) use about 50,00,000 bales of raw jute annually for their production. Presently, there are 238 jute manufacturing units in the country. Of these, 90 private spinning mills produce jute yarn while 18 state-owned mills under BJMC and 130 private jute mills under the BJMA manufacture hessian, sacks and bags.
Hit hard by export decline, most of the mills, industry sources said are suffering from inadequate funds for procurement of raw jute. Banks, in some cases, are reluctant to provide funds in advance since most jute mills had defaulted on earlier loans. Often mills were found to be facing tough time repaying their debts because of lack of required net income from their current transactions. Because of the big debt burden, majority of the mills are in a financially weak position.