Banks sandwiched in spinners & knitters tug of war

31 May '10

2 min read

The banking circles in Bangladesh are sandwiched between the segments which make up the textile value-chain in the country. They have huge exposures in the form of loans or working capital extended to the capital intensive spinning sector or the knitters and the apparel producers.

At a time when prices of yarn were ruling high in the last few months, the spinners were rejoicing, along with the bankers, but at the same time, the other segments of the value-added chain like handlooms, powerlooms and the apparel manufacturing sectors were bearing the brunt of the yarn price hike.

Now when the government has permitted imports of yarn from India thorough the Benapole land port the ball is now in the other court. The spinners are wriggling their hands in despair, while the downstream sector is celebrating on expectations that yarn prices will now come down or stabilize.

But in all this, it is the banks who have lent huge sums of money that stand to lose in either case. In the latest instance, the banks are worried about the huge exposure to the capital intensive spinning sector which could be hugely impacted by freeing of yarn imports through Benapole port.

The bankers were put in dire straits, when the global economic crisis unfolded as spinners started defaulting on their prepayments due to the slowdown in demand from the downstream sectors and they are once again apprehensive that freeing imports could once again create a crisis-like situation.

Fibre2fashion News Desk - India

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