Bangladesh Bank has directed the country’s commercial banks to reschedule loans of defaulting 22 apparel exporters for once as their buyer- the Indian Lilliput company falls into cash crunch.
The central bank has also asked the banks to open letters of credit for those exporters.
A policy paper of Bangladesh Bank sent to finance minister for a new guidelines for the apparel sector before announcement of next budget contains the directive.
According to official sources, the outstanding bills of Lilliput to the Bangladeshi exporters stand at $5m in last one and half years.
The sources said Bangladesh Bank had already sought assistance from chief general manager of Reserve Bank of India (RBI) on the Lilliput’s outstanding bills to the Bangladeshi exporters.
Bangladesh Bank’s governor Dr Atiur Rahman also talked to deputy governor of RBI on this matter.
This was also discussed at a meeting of India-Bangladesh Joint Business Council on March 22, attended by RBI representatives, according to position paper of Bangladesh Bank.
The Delhi-based Indian Lilliput Kidswear Ltd is one of the largest importers of Bangladeshi apparel.
The company had been importing apparel items from Bangladesh for four years before it stopped paying bills.
In April 2013, the founder of Lilliput Kidswear Sanjeev Narula told media that he hoped to clear all dues in two to three months.
"We have withstood huge storms recently and resolved all issues related to our bankers and investors. I hope to clear the amount owed to the vendors in Bangladesh in the next 60 days," he said.
Sanjeev Narula, however, said the amount owed to the Bangladeshi vendors was half of the exporters’ claim.
Lilliput, established in 2003, hit troubled waters in 2011 when private equity investors - Bain Capital and TPG - accused Narula of not providing auditors' access to financial documents. Bain and TPG had invested $86m in Lilliput in 2010.
Narula worked out his differences with the investors in October 2012 after they sold their 45% stake to him. The company has a debt of Rs85bn, of which Rs58.6bn has been restructured.
He explained to the Commerce Department that the default to Bangladeshi vendors by Lilliput was unintentional, as the payment was due at a time when the dispute between the shareholders was going on and the banks had put on hold all payments. “So, the LCs could not be honoured.”
