BB ready to go tough against non-compliant banks

Bangladesh Bank (BB) is set to penalise banks for non-compliance with its directive regarding disbursement of farm loans, a top central bank official said. He said state-owned, private and foreign banks will come under the potential punitive action of the central bank. The move is to ensure BB's efforts to achieve success in the agricultural loan disbursement intended to raise farm output. "We're going to spare none . The loan disbursement target is amied at boosting agricultural production," the official of the BB's agricultural credit department said. The official said the punitive action would be taken according to the Bank Company Act 29 (3), sub section (2) of (A) and (B). The act says that if any bank-company fails comply with any instruction of the central bank, the latter will ask for depositing the amount which remained undisbursed. The official said that the central is expected to issue a circular shortly for the banks in this regard. After receiving the amount against penalties, the BB might disburse the amount through the banks which have successfully completed their disbursement. He, however, said the penalised banks will get the minimum interest rate on their penalty amount as applicable in different treasury bonds and other financial instruments. The BB has set a target of Tk 126.70 billion to be disbursed by all categories of banks as agricultural loan during the current (2010-2011) fiscal year. Of the target, public banks are to disburse Tk 89.86 billion and the PCBs and FCBs together Tk 36.31 billion. Of Tk 91.54 billion, eight government-owned banks and institutions disbursed Tk 70.09 billion and the remaining Tk 21.44 billion was disbursed by FCBs and PCBs during July-March period of the current fiscal year, the data showed. "Because of our relentless persuasion to the SCBs--- specialised banks, PCBs and FCBs, we were hopeful that the disbursement of agricultural credit will cross the target even before the close of the current fiscal year. But due to apathy of some banks, the target might not be achieved", he said. "Though the loan disbursement in the current fiscal year (FY) 2010-2011 has increased compared with the last fiscal, the lack of adequate efforts on the part of some banks forced us to consider the penalty," another high official of BB said. The performance of the state-owned banks--commercial and specialised - was better than that of the private commercial banks (PCBs) and foreign commercial banks (FCBs). State-owned banks -- commercial and specialised--have achieved 78.01 per cent of their total target while PCBs and FCBs have achieved 59.06 per cent. According to the BB data on agricultural loan, Tk 35.34 billion was disbursed as crop loan, Tk 230.04 million against irrigation equipment, Tk 1.41 billion against agriculture equipment, Tk 5.60 billion against livestock, Tk 6.03 billion for fisheries, Tk 1.64 billion for grain storage and marketing, Tk 16.11 billion for poverty alleviation and Tk 25.15 billion for other farm-related activities during the first nine months of the current fiscal year.