Abolish practice of penalising companies due to a director's default

Former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Faruk Hasan said that if one entity within a group of companies defaults on a loan, the bank facilities for all other entities in the group are suspended, and they are considered defaulters as well. This practice needs to be abolished.

Faruk Hasan made these remarks in an interview with Bangladesh Pratidin on Tuesday.

He explained that most business owners do not have their own capital to operate. As a result, companies are often formed with multiple partners or family members. If any individual or entity within the company defaults, not only are that entity's privileges revoked, but the bank facilities for all related entities are also halted. This practice needs to be changed because it puts all the companies in trouble, leading to business closures with no chance of recovery.

The former BGMEA president also pointed out that the rise in interest rates on loans has increased the cost of fund management, which in turn has raised the cost of production. This has become a significant problem. In developing countries, interest rates are raised to control inflation, but he believes that increasing interest rates will not be effective in reducing inflation. Controlling inflation should mean lowering the prices of goods.

He further mentioned that most of the loans in Bangladesh are taken by large companies, business groups, and corporate institutions, while individual loans are relatively rare, unlike in foreign countries. This is why foreign countries raise interest rates to control inflation. However, in our country, if someone who makes bread takes out a loan from the bank, their production costs will increase.

Ultimately, the costs of all goods are rising, which is why production costs are increasing, and investments have already decreased. Many buyers have stopped coming. Several buyers have canceled their shipments for September and October, and in the future, it will decrease further. New employment opportunities won't be created, and it's uncertain where things will stand as the situation worsens.