Industrial Groups face challenges, non-coop from certain banks
Staff Reporter :
Several major industrial groups in Bangladesh are struggling to open Letters of Credit (LCs) due to non-cooperation from certain banks. The inability to secure LCs has led to difficulties in importing raw materials, threatening supply chain disruptions ahead of Ramadan.
Industry stakeholders warn that this situation, if unresolved, could significantly affect the production and availability of essential commodities.
The group alleges that certain banks are deliberately undermining their operations by withholding LCs and disseminating misleading information.
To mitigate the crisis, they have urged the government and Bangladesh Bank to provide clear directives to commercial banks and facilitate industrial growth while preserving jobs.
The industrial sector is at a critical juncture. Immediate intervention by regulators and cooperation from banks are essential to prevent supply chain disruptions, safeguard employment, and sustain economic stability in Bangladesh.
They said, certain banks specifically Islamic Shariah-based banks, in particular, are reportedly being uncooperative to them.
Issues like working capital shortages, dollar scarcity and high exchange rates, along with gas and electricity crises, are severely impacting industries.
These challenges have hindered the production of critical goods such as edible oils, sugar, construction materials, pharmaceuticals, ceramics, and textiles.
They said rising loan interest rates and liquidity constraints have reduced cash flow. Political instability has further eroded the confidence of entrepreneurs.
Many industrial groups, including those in Chittagong and Dhaka, have scaled down or ceased production due to the inability to secure LCs, despite offering 100pc cash margins.
The psychological rift between large industrial groups and Islamic banks has worsened, stakeholders said.
The industry insiders said, Deshbandhu Group, a prominent industrial group, has sought redress from the High Court to compel banks to comply with Bangladesh Bank’s directives.
Besides, Bangladesh Bank’s latest instruction (December 30, 2024) asked the banks to waive interest and normalize accounts for Deshbandhu Group.
As a case study, insiders said, First Security Islami Bank has extended loans worth BDT 3,934.40 crore to Deshbandhu Group since 2017, of which BDT 3,605.73 crore have been repaid.
Besides, Social Islami Bank provided BDT 1,549.81 crore since 2019, with repayments of BDT 1,146.33 crore. Apart from these, Islami Bank Bangladesh lent BDT 753.70 crore since 2023, with BDT 380.87 crore repaid. The group faces losses of approximately BDT 500 crore due to currency depreciation.
Historical losses from government-mandated sugar imports in 2011 amounting to BDT 378 crore compounded financial strain.
As their employment and economic contribution, they said they have employed over 25,000 people, saying Deshbandhu Group’s contributions are vital for Bangladesh’s economy.
