Bangladesh Bank on Sunday reduced the interest rate on farm loan to 11 per cent from 13 per cent after the farmers had showed reluctance to receive agriculture loans from the scheduled banks and non-government organisations due to the high rate of interest.
The BB issued a circular to managing directors and chief executive officers of all banks asking them to implement the interest rate on farm loan from January 1, 2015.
The BB circular said that the central bank had taken the initiative amid a downward trend in interest rate of loans and deposit rate.
A BB official told New Age on Sunday that banks were now charging interest rate between 12 per cent and 14 per cent on industrial short-term and long-term loans amid dull business due to political uncertainty.
But, banks charged 13 per cent interest rate on farm loan while the NGOs imposed rate between 25 per cent and 27 per cent, he said.
‘So, farmers continued to show reluctance to receive loans due to the high rate considering the rate for the industrial sector.’
According to the BB data released on Sunday, farm loan disbursement decreased by 3.86 per cent in the first five months of the current financial year 2014-15 compared with that in the same period of the FY14.
The BB data showed that farm loan disbursement by all scheduled banks decreased to Tk 5,288.27 crore in July-November of the FY15 from that of Tk 5,500.95 crore in the corresponding period of the FY14.
Banks should have disbursed farm loans at least 41.66 per cent of their annual target in the first five months of the FY15 to achieve their fiscal programmes but they distributed 34.01 per cent of the agriculture loan in the period.
The central bank set a farm loan disbursement target of Tk 15,550 crore for the FY15.
The BB official said that the farm loan disbursement would get tempo in the coming months due to the central bank’s initiative reducing the interest rate.
He, however, said that some banks were still unwilling to disburse their targeted farm loans as the disbursement and monitoring process of the agriculture loans were tougher than other credit programmes.
The BB data showed that 14 scheduled banks had disbursed agriculture loan below 15 per cent of their fiscal target in the first five months of the FY15.
The 14 banks are Rupali Bank, Bank Al-Falah, Commercial Bank of Ceylon, Habib Bank, National Bank of Pakistan, State Bank of India, The Farmers Bank, IFIC Bank, Midland Bank, NRB Bank, Shahjalal Islami Bank, Southeast Bank, The City Bank and The Premier Bank.
Of the 14 banks, seven — Bank Al-Falah, Commercial Bank of Ceylon, Habib Bank, National Bank of Pakistan, State Bank of India, The Farmers Bank and NRB Bank — did not disburse any farm loan in the first five months of the FY15.
The BB official said that the central bank had already warned the banks due to their low and zero performance in disbursing farm loans saying that it would take punitive measures against them if they (banks) failed to achieve their targets at the end of the FY15.
In July-November of the FY15, the state-owned commercial banks — Sonali, Janata, Agrani and Rupali — and the two specialised banks — Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank — together disbursed Tk 2,996.72 crore in farm loans, which is 32.79 per cent of their annual loan disbursement target of Tk 9,140 crore.
The private and foreign commercial banks together disbursed Tk 2,291.55 crore in agricultural loans in the period, which is 35.72 per cent of their total annual loan disbursement target of Tk 6,410 crore, the BB data showed.
-With New Age input
