Farm, micro loans made cheaper

The central bank has made a move to reduce commercial banks’ cost for agricultural loans and microcredit to encourage lending in the two segments.

Banks have been instructed to maintain 1 percent general provisioning against all unclassified farm and micro loans instead of 2.5 percent, said a circular from the central bank yesterday.

The step was taken to increase agriculture loan disbursement to farmers hit by the recent floods, said a central bank official.

This will make farm loans less expensive compared to consumer loans, especially credit cards.

The provisioning requirement for credit card loans, considered the riskiest lending in the banking industry, was brought down to 2 percent last month from 5 percent to promote cashless transaction.

“The BB softened the provisioning requirement for farm loans to make it cheaper than consumer loans,” said the central banker.

The BB in its quarterly report for January-March predicted that the flash floods in the northern haor areas will have some impact on farm production.

The banking regulator relaxed loan rescheduling rules and even suspended loan recovery for six months for the farmers and small entrepreneurs in the flood-hit areas.

On August 22, the central bank issued a notice in this regard and took a set of measures in favour of agricultural and SME borrowers.

Total loan disbursement in the agriculture sector was Tk 1,219 crore in August and the recovery for the month was Tk 1,252 crore, according to central bank data. A total of Tk 22,426 crore was disbursed in the agriculture sector in fiscal 2016-17. Of the amount, Tk 10,060 crore was meant for crops, Tk 3,056 crore for livestock and Tk 2,413 crore for fisheries. The recovery of agriculture loans was 48.25 percent in the year.

The BB has targeted to disburse Tk 20,400 crore as farm loans in 2017-18, which is 16.24 percent higher than that of last year.

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