Regulatory bindings have forced private commercial banks to roll out more money to the farm sector in the current fiscal year, according to data from Bangladesh Bank.

Agriculture credit disbursed by private banks, both local and foreign, rose 42.68 percent to Tk 3,471 crore in the 10 months through April from Tk 2,433 crore in the same period a year ago.

“We have made farm credit compulsory and set an annual target for banks,” SM Moniruzzaman, an executive director of the central bank, told The Daily Star yesterday.

If any bank fails to achieve the target, it will have to deposit the same amount to the central bank that will pay only 5 percent interest on the fund.

It means an interest loss to a bank if it does not provide agriculture credit at 10 percent rate. “It might compel the banks to speed up farm credit disbursement,” Moniruzzaman said.

As the local private and foreign banks have a limited number of branches, the BB has allowed them to take help from microfinance institutions to disburse the loans across the country.

Farm credit disbursed by state and private banks combined increased 5.67 percent to Tk 10,200 crore during July-April against an annual target of Tk 13,800 crore, which is 9.4 percent higher than the previous year's target, the data shows.

The total disbursement will stand at Tk 10,853 crore if loans for sharecroppers disbursed through BRAC and credit provided by state-owned BRDB are taken into account.

The central bank has adopted a new agricultural credit policy, strengthened the monitoring system and opened help desks to boost farm credit that remained ignored for years.

According to the policy, no report from the Credit Information Bureau is required for a bank to lend up to Tk 1.5 lakh in agriculture loans. A sanctioned loan must be distributed in 10 days, the policy says. The loan can also be distributed through a farmer's account opened with Tk 10.

If anybody faces difficulty getting the agriculture loan he can lodge complaints with the central bank's help desk at its headquarters or regional offices.

An inspection team has been deployed at the BB headquarters to monitor hassle-free disbursement of loans and help the farmers use the money properly.

The Daily Star/ Bangladesh/ 14th May 2012