Home ›› 13 Aug 2021 ›› Front
The ship breaking and ship building industry now has the highest non-performing loans (NPLs) ratio in the country as many companies in the sector failed to repay their loans due to various constrains.
According to Bangladesh Bank’s Financial Stability Report-2020, total loans in the ship breaking and ship building industry stood at Tk16,981 crore in 2020, while NPLs stood at Tk3,118 crore or 18.36 per cent of the total outstanding loans in the sector.
Bankers said that the sector’s NPL ratio rose as many businesses made heavy investments without proper planning or competence, which has now become a major concern for banks.
“Although ship breaking and ship building business is a very lucrative, it is very risky as the price of scrap iron is very volatile. This is one of the biggest issues in the sector,” Mati Ul Hasan, additional managing director of Mercantile Bank, told The Business Post.
At the same time, the industry also poses risks to the environment and that is why it is discouraged across the world,” he added.
Bankers also said that many Chattogram-based entrepreneurs joined the industry for its high profit margin and because the banks maintained an aggressive lending attitude towards the sector.
“The ship breaking and building sector is now facing various difficulties due to the aggressive and unplanned investment by its owners,” Mutual Trust Bank Managing Director Syed Mahbubur Rahman said.
Therefore, the sector’s low performance had been a major blow for many banks in the last few years, he added.
Contacted, Bangladesh Ship Breakers and Recyclers Association (BSBA) President Mohammad Abu Taher said that once there were 160 ship breaking yards, of which only 50 yards are active now.
“The rest of the ship breaking yards are now closed as the owners have become defaulters after failing to bring profits despite huge investments, mainly owning to the lack of proper planning and competency,” he added.
Claiming that active ship breaking yards were regular with their loan repayments, he also alleged
that many companies took loans from banks in the name of the ship breaking sector, but utilised the funds in other sectors.
Meanwhile, Bangladesh Bank’s Financial Stability Report-2020 also said that after the ship breaking industry, the cottage, micro, small and medium enterprise (CMSME) sector came second highest in the NPL ratio.
In 2020, total loans of the CMSME sector stood at Tk44,789 crore, of which NPLs stood at Tk5,424 crore or 12.11 per cent of the total outstanding loans.
Loans in agriculture sector stood at Tk46,690 crore while NPLs stood at Tk4,465 crore or 9.56 per cent of the total loans in the sector.
Loans in RMG sector stood at Tk1,30,849 crore, while NPLs stood at Tk11,451 crore or 8.75 per cent of the total loans in the sector, the report added.
