Bangladesh Bank has reset the highest limit of interest rate on farm loan at 11% instead of existing 13%, considering the downward trend in interest rate on loans and deposits in the banking sector.
Earlier, the central bank set the interest rate on farm loan at 13% in 2011 while the weighted average lending rate was 12.80%.
The new instruction will be effective from January 01, said a circular Bangladesh Bank issued yesterday.
According to the circular, the new interest rate has been set, considering agriculture and rural credit as priority sector.
Average interest rate on bank loans and advances has come down to as low as 12% in July this year, breaking a steady trend of over 13% in last 30 months.
This is due to lack of loan demand in the industrial sector and increased inflow of low-cost foreign loans.
The lending rate stood at 12.49% in October from 12.58% in the previous month.
It had been ranging between 13.9% and 13.1% for the last two and half years, according to the central bank data.
Earlier in December 2011, the rate came below 13% to stand at 12.9%.
The interest rate on deposit also fell to 7.40% in October from 7.48% in the previous month. It came down to as low as 7% in June, breaking a steady trend over 8% in last two years.