The country’s public and commercial banks exceed their farm loans disbursement target by 20% during the recently-concluded Fiscal Year 2016-17, according to the latest Bangladesh Bank data.
Agricultural loans disbursement by the banks in the July-to-June period totalled almost Tk21 crore against a target of Tk17,550 crore, and were up from the Tk17,646 crore lent in the previous FY.
As per the central bank data, more than half the amount of total credit went to the crop sector.
“Banks have been able to exceed the agricultural loan disbursement target over the last couple of years due to their strict monitoring of the credit disbursement,” BB Executive Director Subhankar Saha told the Dhaka Tribune.
“Every month, we hold meetings with scheduled banks to expedite agricultural loan disbursement activities.”
According to the banking sector analysts, agricultural credit disbursement in FY’17 far exceeded the target as the banks failed to disburse loans to other sectors, while a low interest rate made borrowing in the farm sector more attractive.
In a recent circular, Bangladesh Bank asked the country’s financial institutions to disburse farm loans at an interest rate of 9%. The central bank will announce its next agricultural and rural credit policy and programme for the ongoing fiscal year on July 27.
Default loans from eight state-owned banks stood at Tk5,101 crore in FY’17 while it was Tk4,013 crore a year ago
Public banks outperformed
The central bank data showed that private and foreign commercial banks outperformed public banks in terms of agricultural and non-agricultural credit disbursements in the last fiscal year.
The private and foreign commercial banks laid out agricultural credit of Tk11,300 crore, which was 37% over the target of Tk8,260 crore for FY’17.
In contrast, the eight state-owned and specialised banks disbursed Tk9,698-crore in agricultural credit, only 5% above the target of Tk9,290 crore. Of these banks, Agrani Bank disbursed Tk631 crore against a target of Tk660 crore, while BDBL lent Tk5.4 crore against Tk50 crore.
Among the private commercial banks, Farmers Bank, Modhumoti Bank, Union Bank, South Bangla Agriculture and Commerce Bank fell behind the target during the last fiscal year in disbursing farm and non-farm credit.
Among the foreign banks, National Bank of Pakistan did not disburse a single loan.
Default loan rises by 27%
Default loans in the agriculture sector kept pace with the credit disbursement in FY’17.
The defaulted loans in the last fiscal year stood at Tk5,241 crore, up by 27% compared to the Tk4,124.37 crore seen in FY’16.
According to the BB data, default loans from eight state-owned banks stood at Tk5,101 crore in FY’17 while it was Tk4,013 crore a year ago. In the meantime, such loans from both private and foreign commercial banks rose to Tk140 crore.
Experts said loans defaulted in FY’17 mainly rose as a large number of farmers in the flood-hit areas of the country failed to pay their instalments against their bank loans due to crop losses.
The central bank authorities, however, have asked the banks to take effective measures to realise default loans and especially those which are classified, according to a BB official.