Chattogram Bureau :
Chattogram-based steel and ship breaking industry has defaulted on Tk10,000 crore in the last eight years, thanks to a borrowing spree from banks in the sector’s good times, from 2008 to 2012.
Banks say now they are concerned about recovering the debt mounting every year as many businessmen have already dropped out of the steel and shipbreaking businesses. Debt recovery court counts suggest the number of cases filed by banks and non-banking financial institutions in the last eight years against steel-makers has also been on the rise. The total volume of loans by Chattogram businessmen that is in default is around Tk36,000 crore, spread across sectors such as essential commodities, steel, readymade garments, and real-estate. Now, shipbreakers hold nearly one-third of that debt, Tk 9,895 crore to be exact. Industry insiders say investments by new businessmen in steel manufacturing between 2008 and 2012, and bank loans to them without assessment, have prompted the situation. In 2020 alone, as much as Tk473 crore of bank loans in the sector was in default, with financial houses filing cases against 15 businessmen.
Abu Taher, president of the Bangladesh Ship Breakers and Recyclers Association, said, “Many people without any prior business experience jumped into the shipbreaking sector in the good times as banks were lending very generously then. They ran away from the business with an international and domestic market slump.” The entire sector is still bearing the loan burden of that time and the bad reputation earned by the business newbies,” he told The New Nation.
Shipbreaking industry people say bankers were lending with a free hand to everybody and to new steel and shipbreaking businessmen in 2008-2012. It seemed banks were competing to lend to the steel sector and fulfil their annual lending targets. After availing the loans, many businessmen purchased land and spent easy money on luxuries. But the 2013 international and local steel market collapse dealt the industry a heavy blow, forcing steel enterprises into huge losses.
In the face of market collapse, there were cases of steel scrap selling for $220 per ton in the local market after buying that at $760 from the international market. The steel newbies then started to disappear. Not only newcomers to the steel sector, but many old enterprises became loan defaulters too. Since then, the number of defaulters has been on the rise as has the volume of steel bad debt. Zahed Iqbal, executive vice president at Dhaka Bank Limited and also manager of Chattogram’s Agrabad branch, said, “Bankers are also responsible for the whopping bad debts to the steel and shipbreaking industry. Because they approved the loans at that time without any credit assessment and risk analysis.
They even competed with one another in giving loans.” “With the loans, most of their clients bought lands, spent it on luxuries, or siphoned off the money abroad. Bank officials are now bearing the brunt of the bad debt,” he told the media.
