Bangladesh Bank will set simple rate of interest on farm loan instead of existing compound rate of interest in a bid to save the farmers from the burden of bank interests, said officials of the central bank. The BB will receive the relaxed rule in its upcoming agriculture and rural credit policy and programmes for financial year 2014-15. The credit policy is likely to be declared next month.
Under the simple rate of interest, the farmers will pay their interest of the bank loans at the end of loan tenure meaning that they will get relief from a huge amount of interest.
‘The farmers are now counting interest on quarterly basis. From second quarter on, they have to pay the interest on the principal amount including the quarterly interest’, a BB official told New Age on Wednesday.
The tenure of farm loan is maximum one year.
The banks usually set compound rate of interest for almost all types of credit products, but they will have to set the simple rate of interest for the farm loan from July, he said.
He said that the new policy would help the farmers to repay the bank loans as they would count lower rate of interest than the existing rate of interest.
He said that the farmers would be able to protect themselves from the defaulting situation when the new policy will be introduced.
The BB is likely to set farm loan disbursement target for local and foreign banks at around Tk 15,547 crore for the FY15 in its new farm loan policy.
The probable loan disbursement target is 6.52 per cent higher than that of the current FY.
The BB had set annual farm loan disbursement target at Tk 14,595 crore for the FY14, Tk 14,130 crore for the FY13 and Tk 13,800 crore for FY12.
The banks disbursed Tk 14,667.49 crore, or 103.80 per cent of the annual target of Tk 14,130 crore farm loan in FY13.
In the FY12, the banks disbursed Tk 13,136.91 crore, or 95 per cent, farm loan against the target of Tk 13,180 crore.
Farm loan disbursement by the banks stood at Tk 13,109.53 crore in July-April of the FY14 against the annual target of Tk 14,595 crore.
The banks collectively disbursed 89.82 per cent of their annual farm loan target in the first 10 months of FY14 whereas 83.09 per cent was disbursed during the same period of FY13.
-With New Age input
