Tuesday, May 21, 2024

BB mulls farm credit target for banks

Sajjadur Rahman
Bangladesh Bank (BB) mulls fixing a farm credit target to boost agriculture production, officials said.
“BB is considering a target for private local and foreign commercial banks, as those are reluctant to give farm loans,” a senior central bank official told The Daily Star yesterday.
In fiscal year 2007-08, 30 private commercial banks (PCBs) disbursed Tk 1,560 crore in farm loans, while nine foreign commercial banks (FCBs) disbursed only Tk 854 crore.
The PCBs’ lending to the agricultural sector was Tk 1,117 crore and Tk 334 crore in 2006-07 and 2005-06 fiscal years respectively.
“The contribution of the private local and foreign banks in agricultural lending still remained poor compared to that of the state-owned and specialised lenders,” the official said, supporting the BB move to impose a minimum requirement.
Four state-owned and five specialised banks, including Bangladesh Krishi Bank (BKB), disbursed Tk 6,167 crore and Tk 5,293 crore farm credit in 2007-08 and 2006-07 respectively.
FCBs operating in Bangladesh did not disburse any agricultural loan before the last fiscal year ended in June 2008, according to BB statistics.
The government, private sector and donors emphasised raising farm productivity in the wake of a huge rise in the prices of agriculture products, especially food grains, in 2008.
In a bid to increase farm output, the Awami League-led grand alliance government has halved the prices of non-urea fertiliser just a week after assuming power.
Meanwhile, the central bank in September 2008 issued a circular asking all banks operating here for agriculture lending, but there was no mention of a ceiling in the circular.
“We have asked the PCBs and FCBs to give a reasonable amount as farm credit, but we don’t get expected response from all banks,” said another official in the central bank’s agriculture credit department.
Pointing to the poor presence of some PCBs and FCBs in rural areas, the official said the central bank has asked the banks for making collaboration with other banks and NGOs located in rural areas to disburse farm credit.
On the alleged FCBs’ industrial lending in the name of farm credit, the official said, “We don’t allow it”.
Even any lending to 33 areas identified as agro-based industry will not be considered as farm credit, he added.
“The government can consider giving tax incentives against farm credit to encourage banks for more loans,” said Shahjahan Bhuiyan, managing director of United Commercial Bank.
He suggested that a certain percent tax rebate might be given against a bank’s farm credit. Currently, banks give 45 percent tax against their income.

Courtesy: thedailystar.net

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