Agri loan defaulters decline in first 7 months of FY23

Banks' loan recovery up 19.27% in July-January period

Loan defaulters in the agricultural sector have been declining in the first seven months of this fiscal year. 

Unlike loan disbursements, defaults in the first seven months (July-January) of the current FY23 fiscal have come down to 7.63% from 8.15% in FY22.

According to the analysis of Bangladesh Banks' latest published data, during this period the total loan recovery position of agricultural credit was Tk18,445 crore in July-January of 2023, which is 19.27% higher than the recovery in the same period of FY22.

Data analysis revealed that the amount of farm loans disbursed by banks was Tk18,684 crore in the first seven months of the current FY23, 60.45% of the total annual disbursement target.

In January earlier this year, the disbursement of agricultural credit stood at Tk2,014 crore, 48.26% lower than the disbursement of Tk3,893 crore in the same month of the preceding year, according to central bank data.

The agricultural credit disbursement target has been set at Tk30,911 crore for FY23, 8.88% higher than Tk28,391 crore targeted in FY22.

Requesting anonymity, a Bangladesh Bank official said: “As agriculture plays a vital role in the country's economy, issuing credit to the farmers has become crucial to keep the agriculture-based rural economy alive at a time when the industry and service sectors are struggling due to the ongoing global economic crisis.”

“So the government is emphasizing on agricultural production, which is one of the key driving forces of Bangladesh's economy. Central bank's pressure on banks to expedite disbursement of loans to the farmers was one of the main reasons for the increase.” the official also added.

The outstanding balance, including interest, of the agricultural credit stood at Tk51,225 crore at the end of January, which is 5.93% higher than that in the same period in the past fiscal.

However, the disbursement target of all state-owned commercial banks and state-owned specialized banks together was set at Tk11,758 crore and that of private commercial banks and foreign commercial banks together was set at Tk19,153 crore.

In July-January 2023, the share of crop sub-sector was 47.63% of the total agriculture credit disbursement followed by livestock and poultry (21%), fisheries (12.2%), poverty alleviation (5.6%) and others (11%).

On May 22, 2022, the central bank prioritized the disbursement of agricultural credit at 4% concessional interest rate for cultivating import substitute crops, including pulses, oilseeds, spices and maize.

As much as 40.6% of the country's workforce is directly employed in the agriculture sector.