Business leaders urge exit policy and loan relief measures for struggling enterprises

Highlights:

● BCI proposes 2% down payment, one-year moratorium, and 12-year repayment for large enterprises

● Suggests 1% down payment and 15-year repayment for SMEs

● Proposes raising single borrower limit from 15% to 25% of bank capital

● Calls for reduced bank interest rates from the current 15%

● Demands quicker cash incentive disbursement within 2–3 months

● Requests policy support for rising energy costs and higher taxes

Business leaders have called for an exit policy for struggling large and medium-sized industrial enterprises to help them address their bank liabilities.

During a meeting with the Bangladesh Bank governor today (12 January), they highlighted the need for such a policy as businesses face mounting pressures from high interest rates, rising energy costs, and increased taxation.

"There are no clear policies on how existing ailing industrial enterprises in Bangladesh will be liquidated. We have requested an exit for businesses unable to operate profitably and with dignity," Anwar-ul Alam Chowdhury (Parvez), president of the Bangladesh Chamber of Industries (BCI), told the media after the meeting.

The proposal includes a facility for large enterprises to repay bank liabilities with a 2% down payment, a one-year moratorium, and a repayment period of 12 years. For small and medium enterprises (SMEs), the BCI suggested a similar policy with a 1% down payment, a one-year moratorium, and repayment over 15 years.

When asked how ailing organisations would repay their liabilities after availing of the exit facility, Anwar-ul Alam said, "A person often owns multiple organisations. Not all organisations face difficulties at the same time. The liabilities of the struggling institution can be repaid through the income of their other profitable businesses."

The business leaders also requested that the existing loan classification policy not be immediately aligned with international standards and that current facilities remain in place until December this year.

Under IMF loan conditions, Bangladesh Bank has begun classifying loans after six months of overdue payments, down from the previous nine months. From April, the system will fully align with international practices, marking loans as defaulted after three months of overdue payments.

Anwar-ul Alam said, "On one side, the government is increasing VAT and taxes, and on the other, the prices of gas and electricity are constantly rising. Workers' wages also need to be increased. Meanwhile, the central bank has made loan classification even more stringent.

"If these facilities are withdrawn, it will become very difficult to do business. We have requested policy-based support and urged the central bank to issue a separate circular to address these concerns."

The BCI also raised concerns about the treatment of companies as groups. Most companies are not registered as groups under the Joint Stock Company, but banks consider them as such if they share the same directors. This contradicts the Joint Stock Company Act.

As a result, if one company under a group becomes non-performing, other companies with the same directors are denied loan facilities. The BCI urged that each company be treated as a separate entity.

Additionally, the letter raised concerns about delays in cash incentive disbursement. Submissions for cash incentives take 9–12 months for audit and another 8–12 months for disbursement. The BCI called for this process to be reduced to 2–3 months.

They also proposed increasing the single borrower limit for groups from the current 15% of a bank's capital (for funded exposure) and 10% (for non-funded exposure) to 25%, citing the devaluation of currency and its impact on party exposure limits.

The business leaders underscored the need to address several key issues impacting the industrial sector. They urged the government to reduce bank interest rates, which have risen significantly from 9% to 15%, making it challenging for manufacturing industries to sustain operations. They called for fiscal support or alternative solutions to mitigate this burden.

They also highlighted the importance of developing mechanisms for long-term financing, as scheduled banks currently lack the capacity to offer such facilities. This, they argued, is essential for ensuring the stability and growth of businesses.

To support cottage, micro, small, and medium enterprises (CMSEs), they proposed lowering interest rates and expanding financing through digital platforms. They suggested selecting specific districts or SME clusters to pilot such initiatives.

The business leaders stressed that implementing these measures is critical to ensuring the survival and growth of the industrial sector.