Roundup: Bangladesh sets 2.10-bln-USD farm credit disbursement target

Bangladesh has raised the farm credit disbursement target by 5.5 percent to 164 billion taka (2. 10 billion U.S. dollars) for the current fiscal year from July 2015 to June 2016 to support sharecroppers to augment domestic food production, a central bank official said Tuesday.

The official said Bangladesh Bank (BB) which has made mandatory for all local and foreign commercial banks in the country to disburse agriculture credit to ensure the country's food security also unveiled a new policy for farm-credit disbursement.

He said BB governor Atiur Rahman discussed the farm-credit distribution policy at the central bank headquarters in a meeting with managing directors and chief executive officers of all scheduled banks on Monday.

Rahman asked the banks to achieve their annual farm loan targets, otherwise they (banks) would have to deposit the undisbursed agriculture loans in a blocked account with the BB.

According to the new BB loan disbursement policy, each bank has to disburse to the agricultural sector 2.50 percent of its total lending while the new banks will have to disburse 5 percent each.

It said BB will consider the banks' performances in the farm loan disbursement to calculate their (banks) CAMELS rating from this fiscal year.

Rahman informed the meeting that BB would keep the undisbursed farm loans in the blocked account without paying any interest as punishment for banks failure in achieving the annual targets.

The central bank will not show any relaxation in imposing such penalty, he added.

Rahman said like in previous years, the BB will strictly monitor the farm credit disbursement by the state-owned banks and financial institutions along with private commercial banks to achieve target.

The central bank of Bangladesh in September 2008 made mandatory for all local and foreign commercial banks to disburse agriculture credit to ensure food security of the country.

As a result of relentless efforts, the BB governor said some 159.78 billion taka or 103 percent of the target amounting to 155. 50 billion taka has been disbursed as farm credit in the immediate past 2014-15 fiscal year.

"We've raised farm credit disbursement target to support relevant authorities' efforts to bring more farmers into the banking system," Rahman said in the meeting.

He also sought bankers' support to encourage more farmers for cultivation of import-substitute crops.

The governor asked the bankers to encourage farmers for opening 10-taka bank account.

The central bank of Bangladesh in 2010 took the courageous step to introduce opening bank accounts at 10 taka for disadvantaged people.

A BB official, who preferred to be unnamed, said the central bank set up the biggest ever credit program to boost the country's agro-based economy as the Bangladeshi government gave special attention to the sector to augment domestic food production.

Bangladesh has been attaching more and more importance to its agricultural sector, which contributes over 16 percent to GDP, since the country faced an acute shortage of foodgrain after being hit by super cyclone Sidr in November 2007.

The food prices in Bangladesh skyrocketed nearly 60 percent between 2007 and 2008, putting the poor and lower income groups of the country into hardships. (1 U.S. dollar equals to 78 taka) Endi