9 banks cross annual agri-loan disbursement targets in just 7 months

Nine banks have crossed agricultural loan disbursement targets for FY23 in the first seven months – from July to January – amid the government campaigns for increased agricultural production to prevent any feared food shortage caused by ongoing global crises.

The lenders are Bank Al-Falah, Commercial Bank of Ceylon, Habib Bank, State Bank of India, Bank Asia, Dhaka Bank, One Bank, Shimanto Bank and Uttara Bank, according to the latest report of the Bangladesh Bank.

Fourteen other banks, however, performed poorly in disbursing agricultural loans. All of their disbursements remained under 50% of the annual targets during the seven-month period while three even failed to achieve 10% of the targets.

Overall, all the banks operating in the country, 61 in number, disbursed Tk18,684 crore in total in agricultural loans between July 2022 to January 2023, which is 60.45% of the Tk30,911 crore target for FY23. The disbursement was higher Tk1,600 crore than that of the same period of the previous fiscal year.

"We have been able to cross the target far ahead of the end of the fiscal year because we always prioritise agricultural credit," said Shahnaz Akhter Shahin, head of the agricultural credit department at Bank Asia.

"We have a separate department for disbursing agricultural loans," she told The Business Standard and noted that the demand for agricultural loans remains higher in the peak season between October and February.

Banks that failed to perform well mostly blamed the lack of branches in rural areas. "Agricultural loans are usually distributed in rural areas, where many banks do not have branches. Again, the operating cost of disbursing loans in these areas are very high," a senior, private bank official, wishing to remain unnamed, explained.

Central bank officials said the banks which fail to disburse agricultural loans usually face the music at the end of fiscal year. Earlier, they were fined. Now, they are forced to deposit undistributed money to a central bank fund.

"The undistributed money [deposited to the central bank fund] will be disbursed through the capable banks," said Mazbaul Haque, spokesperson for the Bangladesh Bank.

"Overall, the banking sector has been able to disburse a satisfactory amount of agricultural loans [in the first seven months of FY23]. Hopefully, we will be able to achieve the entire target by the end of the year," he told TBS.

50-60% loans disbursed through NGOs

Most of the banks disburse agricultural loans through different non-governmental organisations or NGOs, several bankers told The Business Standard, which, in turn, raises the interest rates on the loans. The rates reach the highest 24% when the loans go through NGOs. They remain at only 8% in the case of regular lending from branches and agent banking outlets.

Almost 50-60% of agricultural loans are now distributed with the help of NGOs, bankers estimated.