Govt allows Beximco Group’s Shinepukur Ceramics to open LC

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The Finance Ministry has approved a legal exemption for Shinepukur Ceramics, a concern of the default-hit Beximco Group, to open a letter-of-credit (LC) with the Sonali Bank.

However, Sonali Bank cannot demand any financial assistance from the Ministry of Finance in relation to the loan, nor will the Finance Division under the ministry bear any liability to this end, the ministry said in a letter sent to the Bangladesh Bank.

As per the Bank Company Act, all the entities under a business conglomerate will be classified as default, if the group itself has been listed as one. Any single entity will be classified as such even if it has not defaulted individually.

However, in 2024, a provision was included in the Act, allowing exemptions in selected cases.

Under clause 27A(3) of the Act, a non-default entity of any default group can be excluded from the classification, if the group has not “willfully defaulted” and rather has logical grounds for defaulting on the loans it took.

The Bangladesh Bank can ask the government to re-classify the originally non-default entity, list it as a regular one, and open LCs against it.

Under the legal provision, the Finance Ministry has allowed Bangladesh Bank to open LC at 100% margin for Shinepukur Ceramics.

All the income of Shinepukur will be deposited under a single bank account from where Sonali Bank will periodically draw funds to recover the loan it gave, the ministry said in the letter to the central bank.

Shinepukur Ceramics Executive Director and Company Secretary Mohammad Asad Ullah said Beximco Group is not a “willful defaulter,” and therefore, Shinepukur can avail the exemption allowed in the Bank Company Act.

The Bangladesh Bank wrote to the Finance Ministry asking to learn about the provisions available for opening an LC for Shinepukur Ceramics with the Sonali Bank. Upon receiving the request from central bank in this regard, the ministry has approved the LC opening at 100% margin.

A senior official at the Sonali Bank told reporters that the Bangladesh Bank governor sought the government’s permission for availing the exemption to spur industrial output in the economy.