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BB revises provision for undisbursed farm credits

FE Report | October 23, 2017 00:00:00

The private commercial banks (PCBs) and foreign commercial banks (FCBs) operating in Bangladesh can now deposit 3.0 per cent of their undisbursed farm credits with the central bank for lending within two years or forfeit the money.

Under a latest revised provision, they are allowed to deposit 3.0 per cent of their undisbursed farm credits from announced annual targets with the Bangladesh Bank (BB) as an alternative remedial measure.

But the deposited money will be refunded totally or proportionally on the basis of next two years' disbursement performance of any bank. Otherwise, the unused deposited funds will not be refundable, according to a notification issued Sunday by the central bank.

Currently, the PCBs and the FCBs have to deposit the entire remaining funds with the central bank if they fails to meet the annual target of lending to the farm sector.

"The banks are now allowed both the options-deposit the total undisbursed funds for an unlimited time or 3.0 per cent of that amount under a two-year timeline," a senior BB official told the FE.

The BB will not provide any interest on the deposited funds.

The central bank earlier had asked all PCBs and FCBs to fix agricultural-credit-disbursement target at least 2.5 per cent of their total loans and advances.

Currently, 39 PCBs and nine FCBs are operating in the country.

Meanwhile, the farm-loan disbursement grew by nearly 23 per cent or Tk 7.92 billion in the first quarter (Q1) of the current fiscal year (FY) following the strengthening of monitoring and supervision by the central bank.

Disbursement of farm credits rose to Tk 42.36 billion during the July-September period of the FY 2017-18 from Tk 34.44 billion in the same period of the last fiscal, according to the central bank's latest statistics.

Of the Tk 42.36 billion handed out, eight state-owned banks disbursed Tk 14.75 billion while the remaining Tk 27.60 billion was given by the PCBs and FCBs.

All scheduled banks have achieved nearly 21 per cent of their annual agricultural-loan-disbursement target for FY 18, fixed at Tk 204 billion. The recovery of farm loans, however, rose to Tk 45.64 billion during the period under review from Tk 35.42 billion in the corresponding period of the FY 17.

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