Central bank creates fund to use undisbursed agri loans
The Bangladesh Bank has formed an Agricultural Development Common Fund to boost credit disbursement in the agricultural production sector to help tame inflation in the country.
Banks that have failed to meet their annual agricultural and rural credit disbursement targets will deposit the undisbursed amounts in this fund at 2% annual interest, which the central bank will distribute as loans to other banks for disbursement in the agriculture sector as per demand, according to a circular issued yesterday.
Money allocated to banks from the fund will be distributed to farmers at 8% interest, according to the agricultural and rural credit policy of the Bangladesh Bank. But the banks concerned will have to repay the loan with interest to the central bank within 18 months of borrowing.
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In order to reduce their credit risk, the lending banks should form a risk migration fund by depositing an amount equal to 1% interest on the loans distributed at the customer level from the common fund. And the amount deposited in the risk migration fund will be considered capital.
The banks can transfer the remaining interest income from the loans disbursed from the agricultural development common fund to their profits.
The directive will be effective from the current fiscal year 2022-23.
Meanwhile, in the first four months (July-October) of the current financial year, Tk9,469 crore in loans was disbursed in the agricultural sector in the country, which is 19.78% higher compared to the corresponding period of the previous year.
The agricultural credit disbursement target for the current fiscal year is Tk30,911 crore.
The agri loan disbursement target was Tk28,000 crore in the last fiscal and the banks could achieve the target.
Earlier, on 17 November, the central bank created a low-interest refinancing scheme of Tk5,000 crore in the agricultural sector for the sake of the food security of the country.
Under this programme, farmers can take out loans at 4% interest, while the interest rate for banks in taking money from the fund is 0.50%.
Farmers will repay the principal along with interest within a maximum period of 18 months, including a three-month grace period.
