BB revises rules for Agri refinancing funds busting employment , food security

In a major policy shift aimed at bolstering national food security, accelerating agricultural productivity, and driving rural economic growth, Bangladesh Bank has revised several key provisions across two separate concessional refinancing schemes totaling Tk 13,000 crore.

The central bank issued a circular on Sunday, under its Agricultural Credit Department, streamling interest rate structures, repayment schedules, and administrative compliance for both the nationwide Tk 10,000 crore agricultural refinancing fund and the specialized Tk 3,000 crore scheme dedicated to establishing an agri-based economic hub in the northern region of Bangladesh.

Under the unified financing framework, participating commercial banks will receive refinancing facilities directly from Bangladesh Bank at a highly concessional interest or profit rate of 3 percent.

At the end-user or farmer level, the maximum interest or profit rate has been strictly capped at 7 percent per annum on a simple interest basis or calculated on a declining balance where applicable.

For Shariah-based financial institutions, customer-level profit margins must be determined in accordance with approved Islamic investment guidelines, while strictly adhering to the 7 percent ceiling.

This revised interest rate structure applies uniformly across all categories of agricultural borrowers without exception.

To address the operational differences between national agricultural needs and regional development goals, the central bank defined distinct repayment timelines for each scheme.

Under the Tk 10,000 crore nationwide program, participating financial institutions must fully repay the principal along with interest or profit to Bangladesh Bank within a maximum period of 18 months from the date of receiving the refinancing funds.

Conversely, the Tk 3,000 crore northern regional scheme introduces flexible tenure structures designed to accommodate varied project requirements.
For general eligible sectors, loans disbursed to customers include up to a 3-month grace period with a total maximum tenure of 18 months.

For specific higher-investment agricultural projects under this regional fund, the loan term extends up to 36 months, inclusive of a grace period ranging from 3 to 6 months.

To enforce strict discipline and eliminate potential irregularities, Bangladesh Bank has instituted penal measures for non-compliance.

If a participating bank fails to properly utilize the disbursed funds or charges any farmer an interest or profit rate exceeding the stipulated 7 percent threshold, the central bank will levy a mandatory one-time penalty charge of an additional 2 percent interest over the prescribed rate on the misused amount.

Furthermore, to maximize grassroots awareness, banks are mandated to proactively publicize these low-cost credit facilities by displaying prominent banners both inside and outside their branch premises and conducting special promotional campaigns.

All other terms from earlier circulars remain intact, with the revised instructions taking effect immediately.