Bangladesh Bank (BB) has raised farm loan target by 5.5% for the current fiscal year compared to the previous year.
Under its expanded farm loan policy for FY16, it set a target for disbursing Tk16,400 crore among farmers.
Of the targeted amount, six state-owned banks – Sonali, Janata, Agrani, Rupali, BASIC and Bangladesh Development Bank – will have to lend at least Tk2,890 crore and two specialised state banks – Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank – Tk 6,400 crore.
BB Governor Atiur Rahman unveiled the new farm loan policy at a press conference at its headquarters yesterday with senior bankers from private, public and foreign banks attending the programme.
Private and foreign banks will have to lend at least 2.5% of their total loans to the agriculture sector, and the rate is 5% for nine new private commercial banks, according to the new agriculture and rural loan policy and programmes for FY16.
“Those banks that will fail to fulfill the target will have to deposit their undisbursed amounts in a blocked account with the BB and will get no interest on that deposit as punishment,” said Atiur.
“The central bank will not show any relaxation about the matter. But those who will meet the target will get priority in opening new and authorised dealer branches like every year.”
The new farm credit policy has encouraged banks to lend in producing vermicompost (red wiggler), a kind of manure that is good, cheap and affordable and works as an alternative of chemical fertiliser.
“Bangladesh Bank is in the process of launching re-financing scheme against the banks’ funding in this sector,” said Rahman.
The central bank will consider the banks’ performance of the farm loan disbursement to calculate their (banks) CAMELS rating from this financial year. According to the BB data, all banks collectively disbursed Tk15,978.46 crore, up 3% from Tk15,550 crore targeted for disbursement in FY15.
Some banks failed to achieve the farm loan disbursement target in four crops – pulses, oil seeds, spices and maize – in FY15, it said.
The banks would have to upload the farm loan application form with their respective websites and publish media advertisements in this regard in a bid to encourage the farmers, according to the new policy.
Earlier, some banks dilly-dallied to provide the farm loan application form, thereby discouraging the farmers to receive the loan.
BB Deputy Governor SK Sur Chowdhury said the central bank plans to introduce the crop insurance to minimise the losses of farmers in natural calamity.
“Banks should consider disbursing loan to promote crops marketing.”
He advised that banks should avoid farm loan disbursement through non-government organisation as such type of activities hamper the rate of interest and interest rate spread.