Ministry writes to Bangladesh Bank to bail out Deshbandhu Group
Rescheduling loans, providing working capital, and reopening back-to-back LC facilities sought
Highlights
- Several Deshbandhu factories shut down after fall of Hasina govt
- Only five export-oriented RMG factories are now running
- Those operating now at just 25% capacity, affecting 25,000 workers
- Labour and employment ministry writes to BB governor to address it
The labour and employment ministry has requested the Bangladesh Bank to urgently facilitate loan rescheduling, provide essential working capital, and reopen back-to-back Letter of Credit (LC) facilities for Deshbandhu Group factories to ensure the distressed conglomerate's operation continues.
The move comes after several factories under the Deshbandhu Group ceased production following the political transition after the fall of the Hasina government on 5 August 2024. Currently, five export-oriented ready-made garment (RMG) units are struggling to remain partially operational.
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These factories, which together have 25,000 workers, are running at only 25% of their capacity due to the critical shortage of working capital and the inability to open new back-to-back LCs, officials said.
Management and the ministry fear imminent labour unrest, as the current revenue is insufficient to cover workers' wages and benefits.
In a letter addressed to Bangladesh Bank Governor Ahsan H Mansur on 14 October, the ministry stressed the group's importance to the national economy.
"Deshbandhu Group is one of the country's largest industrial conglomerates. Since 1989, it has contributed to the national economy by establishing large and medium-sized industries in remote areas, creating 25,000 jobs. Various factories remain shut due to a lack of necessary raw materials and working capital, with five operating at a maximum of 25% capacity," the ministry stated.
The letter urged the central bank to provide capital and back-to-back LC facilities to resolve the impending labour crisis and restore factory operations.
Management blames banks for crisis
Ghulam Rahman, managing director of Deshbandhu Group, told TBS that the export-oriented factories, which previously generated $50 million in annual exports under normal operations, are now unable to achieve even 25% of that figure.
He asserted that the group has consistently operated by the rules and has never sought undue favours from the government. Rahman claimed that the banks and financial institutions with which the group maintained regular business ties ceased transactions over a year ago, eventually declaring the group a defaulter.
He further alleged that their repeated requests for debt rescheduling and business renewal were met with a negative response, leading to the current crisis.
Debt vs assets
The managing director provided details of the group's financial dealings, stating that Deshbandhu Group borrowed Tk13,787 crore from various banks between 2005 and 2024, of which Tk12,765 crore has been repaid. The outstanding principal loan amount (excluding interest) is now only Tk1,278 crore.
An audit report by the international audit firm Ernest & Young reportedly assesses the Deshbandhu Group's total assets at approximately Tk14,000 crore.
The group's 27 institutions employ around 30,000 officials and staff directly, and an estimated 5,00,000 to 7,00,000 people indirectly. Rahman stated the entire crisis could be resolved if the banks provided Tk2,000 crore in working capital and the requested loan rescheduling facility.
The financial woes were further aggravated by a Tk825-crore loss, which the MD attributed to a combination of factors, including lower-than-expected output at the Deshbandhu Sugar Mill following its Balancing, Modernisation, Renovation, and Expansion, high-interest rates that climbed as high as 15 to 18%, and the high cost of the US dollar, which the group had to pay at rates up to Tk123, up from Tk84.
