Bangladesh Bank is set to ask scheduled banks to disburse at least 30 per cent of farm loan in their own capacity against fiscal target as some banks distribute their whole annual target of such loans through the linkage of non-governmental organisations.
Many farmers who get farm loan through NGOs count more than double the interest rate set by the central bank, a BB official told New Age on Monday.
‘NGOs and microfinance institutions charge around 25 per cent interest on the loans they give to farmers after taking the fund from the banks at a rate of 10 per cent. In the process, the basic concept of giving low-interest loans to farmers severely gets dented,’ said the official.
‘So, the central bank is going to make a decision that the banks will have to disburse at least 30 per cent of farm loans in their own capacity against their fiscal target,’ he said.
Foreign commercial banks, however, will be excluded from the rules as they have no available branches in the rural areas.
BB executive director and spokesperson Subhankar Saha told New Age on Monday that the central bank had earlier made a decision to disburse farm loan through NGO linkage as maximum number of private commercial banks did not have adequate branches in the rural areas at that time.
But, the banks have recently set up a good number of branches in the rural areas and so the BB is now thinking to set a certain ceiling of farm loan disbursement in their (banks) own capacity, he said.
The central bank will give a directive to the banks in this regard when it announces the agriculture and rural credit policy and programmes for the financial year 2016-17, Saha said.
The BB is scheduled to disclose the policy at the first week of August.
BB data showed that the scheduled banks disbursed Tk 4,028.15 crore or 25.20 per cent of their total farm loans of Tk 15,978.46 crore through NGOs and MFIs in the FY15.
The banks disbursed farm loans of Tk 3,351.42 crore through the organisations in the FY14.
The trend indicates that the banks are now more interested in disbursing agriculture loans through NGOs and MFIs, said another BB official.
According to the BB’s farm loan policy, banks are supposed to give loan to farmers at an interest rate of 10 per cent.
The finance ministry in August, 2015 sent a letter to the BB asking it to issue a circular to the scheduled banks with an instruction that the banks would force NGOs and MFIs to keep the loan interest at a logical level.
The banks’ dependency on NGOs and MFIs for farm loan disbursement will decrease if the central bank compels the banks to disburse farm loan in their own capacity, BB officials said.