Chairman, Pakistan Textile Exporters Association (PTEA) Khurram Mukhtar, has disclosed that at present almost all the major banks have discontinued their support for the textile industry and reportedly capped their exposures towards textile units.
In a meeting with Muhammad Kamran Shehzad, Deputy Governor, State Bank of Pakistan, he said that in fact the bank credit has decreased due to repayment of the term loans. In the present scenario, Khurram Mukhtar, Chairman, PTEA said that the survival of this industry is mainly dependent upon the relaxed credit policies and availability of cheaper finance from the banks.
The high costs of borrowings, due to increased Kibor and extraordinary spread being charged by the banks, are making this industry non-competitive in the global market. We need to reduce our interest rates according to the key players in the region like China, India and Bangladesh.
This high rate has caused closures on wide scale and may further hit the industry, whereas rival countries are highly subsidising their textile exports, he added. Khurram Mukhtar demanded that the bank mark up rate should be brought down to single digit. There is recession all over the World and even paying 10 percent would be tough time for the industry in prevailing conditions. Under the prudential regulations, working capital loan is permissible to industry against current assets.
However the banks do not adhere to the facility allowed under regulations and demand collateral against working capital loans, he added. He said that the prevailing situation is creating difficulty for the industry in further expanding their business.
During the course of export, huge amounts of exporters are stuck up in importing countries on account of weak banking system or due to financial difficulties in foreign exchange. Substantial export proceeds remain unrepatriated due to lack of resources with exporters to pursue the default.
Also individual follow up is often disregarded and unresponded, he added. Recently, Chairman PTEA said that the export proceeds of six members of PTEA amounting to $4.469 million have been stuck up in Russian Bank despite a period of eighteen months and despite our hectic efforts.
He suggested that a separate desk might be established at State Bank of Pakistan to help and recover export proceeds from foreign defaulting banks. He said that the State Bank of Pakistan vide circular BPRD No 5 of 2010 dated February 25th, 2010 restrained all commercial banks and DFIs from charging insurance premium and other charges in excess of actual cost.
This circular is not being strictly followed and exporters are being charged excessively in contravention of the above circular, as their respective schedule of charges is approved by the State Bank of Pakistan. Each bank charges different rates for; Courier charges, R&D refund claims processing, drawback refund claims processing, renewal fee on limits and processing fee on limits.
Khurram Mukhtar pointed out that the bank service charges have also been enormously increased over the last three years, which is also burden on exports. He said that the largest challenge being faced by our country is the trade deficit and we need to grow our exports to minimise the trade deficit.
The entrepreneurs in this industry had already invested heavily on the infrastructure and can play a vital role for achieving the export target of 25 billion dollars in next five years, but for this we need the support from the banking sector to provide finance at cheaper rates and look forward for continuation of Government support for the provision of basic facilities like electricity and gas for this sector on priority basis.
This is the most labour intensive industry and is the back bone of our economy. Khurram Mukhtar appreciated that the State Bank of Pakistan have played their vital role being the regulatory authority and took necessary measures to safeguard our banking system in Pakistan.
Due to timely and effective policies, our banking system remained safe during the severe financial crisis where the banking system of biggest economies suffered. He also appreciated that the role of State Bank of Pakistan Faisalabad office who have worked day and night to resolve the issues and problems faced by the exporters like processing of old R & D claims and mark-up subsidy etc.
Mian Muhammad Latif, former Chairman PTEA also expressed his views during the meeting. Later Mian Muhammad Latif presented the PTEA memento to the Deputy Governor and Malik Muhammad Anwar, Chairman FDPT presented moment to the Chief Manager SBP Faisalabad, Dr Muhammad Saleem.
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