A large number of local corporate bodies who borrowed from foreign sources are now pushing for deferred payments and rescheduling.
Officials at the Bangladesh Investment Development Authority (BIDA) said the Covid-19 that battered their business activities in Bangladesh as elsewhere in the world forced the companies to opt for that.
Local private companies sometimes borrow from external sources as they are cheaper compared with domestic borrowing.
This is foreign currency loan and the rate of interest hardly crosses 5.0 per cent, including LIBOR while local banks still charge 9.0 per cent after capping the lending rate by the central bank.
The companies take the loans mostly for the procurement of capital machinery and other foreign goods while some borrow to invest.
Local companies involved in power generation, construction, trade, commerce, transport, storage and communications mostly take out overseas loans.
The cumulative approved loan from January 2016 to July 2020 was approximately US$ 10.8 billion. The volume of disbursement was approximately $ 8.9 billion as of March.
The BIDA officials said between April and July, fresh loan approval was poor at just $176 million, much lower than the pre-lockdown period.
However, as of March last, the amount of repayment by the private firms including interest was $4.5 billion, according to Bangladesh Bank data.
As of March 2020, the outstanding loans were $ 4.9 billion, the statistics showed.
The loan hardly gets defaulted as local bank guarantee is required for obtaining such credit, usually borrowed on medium to long-term basis.
But people at the BIDA said that many may default this time if the pandemic lasts for a few months more as there is a rush for rescheduling and deferred payments.
"The new trend in foreign borrowing by local corporate houses is that most of the cases are for amending terms," said an official working at the BIDA.
The corporate houses need to amend deferred payment, rescheduling, vendor changes and other issues through the BIDA. A no objection certificate from the BIDA is required.
He said local borrowers have mostly sought three to six months of deferred payment.
He said they met last on August 19, where they approved 21 cases, two new cases while the rest were for deferred payment and rescheduling.
He said the new cases are low in recent times.
Pran-RFL, a leading conglomerate, which also took loans from the foreign financial institutions, said that the Covid has impacted their business.
A local clothing group said that they have contacted the foreign lender to consider the deferred payment of installments.
"Though we are recovering now, we were the worst affected sector by the Covid-19, after getting green signal form lender we will go to BIDA for its permission," said a managing director at a clothing major in Bangladesh.
On the other hand, some structured companies are paying on a regular basis.
Aameir Ali Hussain, managing director at the BSRM, told the FE they are yet to apply for such a facility with their foreign lenders.
"Most probably our $5.0 million is outstanding out of $40 million," Mr Hussain.
The loan consisting of medium to long-term is sourced from Asia to North America.
More than 30 nations such as Hong Kong, the USA, the United Kingdom, the Netherlands and Singapore provide such loans to Bangladeshi private firms.
The debt instruments include term loans, trade credit and debt securities.
jasimharoon@yahoo.com
