It’s come to light that loans taken in the leather sector are often not coming back. Around three thousand crore Taka taken as loan by the leather sector cannot be traced.
Bangladesh Bank report on loans handed out to the leather industry says that 80 per cent of the distributed loan in this sector has become faulty.
Only loans worth Tk. 700 crore are within regular systems while only 5 per cent of regular loans are being repaid on time.
Banks now attach new conditions before giving loans in this sector – if installment on previous loan is unpaid then new loans will not be sanctioned.
Consequently, with the new clause, loan applications have fallen.
Agrani Bank’s MD, Shams Ul Alam, told Bangla Tribune: “the loans given in the 90s to the leather sector have become default; however, loans taken in recent times are being repaid regularly.”
Bangladesh Bank says, 71 organisations are currently getting loans to buy raw hide and these bodies owe Tk. 1137 crore to the banks. Of these, irregular loans stand at Tk. 85 crore 31 lakh.
President of Bangladesh Tanner Association, Shahin Ahmed, told Bangla Tribune: “those who are getting loans are genuine leather traders.”
In the nineties, 25 to 30 industries became moribund as they did not have solvency to import finished leather; as a result, they could not return the loan, he added.
In the leather sector, biggest loans are handed over by state owned, Sonali, Janata, Agrani, Rupali, Basic and Bangladesh Development Bank and in the private sector, Uttara, UCBL give loans.
According to central bank data, Sonali Bank handed out around Tk. 813 crore to the leather sector in the last six years.
Of this, around Tk 80 crore went to the regular leather industry while Tk. 733 went in buying hide from sacrificed animals during Eid ul Azha.
The loans were given to ten institutions, of which, Tk. 583 crore became default.
Of the other banks, Rupali gave out Tk. 793 crore till December, 2017 and, Janata, Tk. 215.
Bangladesh Bank has asked to inspect the default loan account of Crescent Group which had taken Tk. 1500 crore reportedly through unfair means.
The main supply of skins comes during Eid ul Azha and seasonal traders buy hide which later ends up in tanneries.