SoCBs look to value 'client relations' for support to private jute mills

Syful Islam State-owned commercial banks (SoCBs) are less interested in providing to private jute mills the same facilities they offer to such public sector mills, sources have said. Rather, the SoCBs want to address the issues individually based on bank-customer relations, according to the sources. The ministry of finance (MoF) has formed a committee to assess what types of facilities the SoCBs can offer to the private jute mills to help them run smoothly, as they are passing a tough time following a fall in their export orders. Sources said that on advice of the MoF in 2009 and 2010 the SoCBs took initiatives to put some private jute mills' loans, which were at the stage of becoming classified, in a block account until the mills get the capacity to start repayment. It was done to help the cash-strapped mills avert accrual of interest on the loans during the period of non-repayment. But the block account facility was not allowed for loans taken by the mills for other purposes, as the banking policy does not permit it. "The private jute mills are passing a tough time, but are not yet at the stage of facing closure. So, the SoCBs do not want to put the mills' loans in a block account on the ministry's advice. The banks want to handle the issue case by case based on their relations with the mills," committee chairman and MoF's additional secretary Jalal Ahmed told the FE. He said: "We want that the mills run smoothly so that none faces closure. They are employing a good number of people. So, we are examining how to cooperate with them." Mr Ahmed said the committee finalised its recommendations and would soon send them to the finance minister for his consideration. However, the private mills are being provided with export credit at the interest rate of 7.0 per cent like any other export-oriented sector. But the mills are charged interest rates ranging from 18 per cent to 20 per cent for their other types of loans. Owners of the private jute mills told a meeting at the MoF that the banks were charging the high interest rates on their other types of loans. Doing business, they said, by paying such high rates of interest became tough for them, when the exports of jute and jute goods have declined. They feared their mills might face closure in the near future, if the rate of interest against bank loans is not lowered. They said presently Indian and Turkish currencies were depreciating against the US dollar while the Bangladeshi currency was appreciating. As a result, India and Turkey reduced imports of jute and jute goods from Bangladesh. They said the ongoing crises in Middle East countries also resulted in reduction in export of jute and jute goods there. For a long period the countries had been main importers of Bangladeshi jute and jute goods, they said. The private sector jute millers also said though the rate of interest on export credit was 7.0 per cent, they were not benefited, as they have to make the repayment in 120 days. They sought extension of the repayment period to 180 days to help them truly benefit from it. They also demanded that the government immediately implement the mandatory jute bag packaging act to increase the demand for their goods locally.