BB creates fund to use undisbursed portion of farm loans

Staff Reporter :
In a bid to boost agricultural production, Bangladesh Bank (BB) has formed a fund titled ‘Bangladesh Bank Agriculture Development Common Fund (BBADCF) for farmers with the undisbursed portion of the agriculture and rural loans.
The banks which fail to achieve its target in the disbursement of agriculture and rural loans will deposit the undisbursed money in the BBADCF. The BB would then give 2 per cent interest on the deposits, a BB circular said on Monday.
The fund would then be allocated among the banks based on their capacity and the banks will return the principal money along with 2 per cent interest within a period of 18 months since the fund is released.
Following the ‘Agriculture and Rural Loans Policy’, the banks will then distribute the loans to the recipients at 8 per cent interest rate through its own network, but not through Microfinance Institutions linkage, the circular said.
In a bid to reduce the risk of disbursing loans for the farmers, the banks will form a ‘Risk Mitigation Fund’ with the amount of money equivalent to one per cent interest against the distributed loans.
Banks would be allowed to transfer 4 percentage points of the interest to their income segment on the loans made from the fund.
The BBADCF will be effective from the fiscal 2022-23.
Stakeholders of the banking sector opine that such a move would help benefit the farmers in obtaining loans from the banks.
But they said that the process of obtaining loans from the banks should be easier so that the farmers can get loans without any hassles.
The recent incident of arresting 37 farmers in Pabna in November over loan related affairs drew much criticism across the country. Later a Pabna court granted their bail.
Court sources said Bangladesh Samabaya Bank gave loans of Tk 25,000-40,000 each to 37 farmers in 2016.
In 2021, the concerned bank manager filed a case against them on the charge of loan default. Later, on 23 November, the Pabna senior judicial magistrate issued arrest warrants against them.
Among the 37 accused, police arrested 12 marginal farmers and sent them to jail.
Farmers and their families claimed most of the borrowers refunded their loans within a year of loan disbursement and they had their deposit slips.