The new interest rate would be effective from April 1 this year
Bangladesh Bank on Thursday slashed the interest rate for agricultural loans to 8% from the previous 9% for ensuring more disbursement of low-cost loans in the agriculture sector and boost production amid the Covid-19 pandemic.
The new interest rate would be effective from April 1 this year.
The central bank re-fixed the interest rate of farm and rural credit in the context of the contribution of the agricultural sector to the national economy, said a central bank notice issued on the day.
The notice also said that the country’s economic activities were being disrupted since last year owing to the global pandemic.
As a result, the country’s agricultural sector also suffered like other sectors, which prompted the central bank to take such an initiative, said Bangladesh Bank officials.
In June 2017, The BB had set the lending rate to 9%, which in turn was a reduction from 10%, as agriculture was designated to be a priority sector.
Then, on April 1 last year, the central bank brought down the interest rate to 9% of all kinds of loans, barring credit cards, to provide some breathing space to the country’s businesses.
However, now the weighted average interest rate of lending stood at 7.48% owing to the low demand of credit amid the pandemic.
In the first seven months of the current fiscal year, the country’s lenders disbursed Tk14,148.7 crore to farmers, which was 53.8% of the total disbursement target for fiscal 2020-21, BB data said.
Alongside the regular farm loan disbursement process, as many as 43 banks are implementing the Tk5,000 crore rescue package announced by the government on April 13 last year for the agriculture sector.
The tenure for the loans was set at 18 months, including a grace period of six months.
Banks will borrow the funds at 1% interest rate and lend at 4% to farmers in line with the BB guidelines.
As of 2020, the 43 lenders had disbursed at Tk3,350.8 crore among 143,747 farmers, according to the data from the central bank.