Sonali Bank urges repayment of Tk 70b in loans from state-run sugar mills

With around Tk 70 billion in loans remaining unpaid by state-run sugar mills for years, Sonali Bank has urged the government either to repay the money immediately or issue bonds or provide state-guarantees to ease the bank's classified-loan burden and capital shortage.

In a recent letter to Finance Division Secretary Dr Khairuzzaman Mozumder, Managing Director of Sonali Bank Shawkat Ali Khan wrote that the requirement to maintain higher provisions against unrealised loans has created direct and indirect pressure on the bank's business operations.

On various occasions, Tk 31.05 billion was disbursed as loans to the Bangladesh Sugar and Food Industries Corporation (BSFIC) and nine sugar mills. Due to the prolonged delays in repayment, Tk 40.73 billion was added as interests and other charges, pushing the total outstanding to Tk 71.79 billion as of September 30 last year. However, Tk 2.532 billion was repaid in the meantime, leaving net dues at Tk 69.25 billion.

Officials said the government issued guarantees against Tk 26.73 billion worth of dues, which expired in December last year. The remaining Tk 42.52 billion is not covered by any  guarantees but is backed by a tripartite agree among the sugar mills, the Ministry of Finance and the bank.

In his letter, the Sonali Bank managing director also noted that, despite remaining unpaid for years, the loans were not classified as non-performing due to the existence of government guarantees and the tripartite agreement, as the borrowers are public-sector entities.

In the central bank's Credit Information Bureau (CIB) report, he wrote, the loans are being reported as 'unclassified', but the bank needs to maintain a substantial amount of provisioning, which could become a source of capital shortage in the future.

When contacted, a senior finance division official on Monday acknowledged receiving such a request from the Sonali Bank. He said the BSFIC has dues of Tk 80.50 billion as trade gap and subsidy with the government, preventing the corporation from repaying the loans to Sonali Bank. "We are examining options to pay back the Sonali Bank's dues or provide fresh state-guarantees against them," he said.

syful-islam@outlook.com