GDP growth may not be affected by floods: BB
Tuesday, 14 August 2007
FE Report
The central bank has decided to monitor the agriculture credit activities of the banks to achieve targeted disbursement of the farm loan for curbing post-flood inflation pressures on the economy.
"We will monitor the overall agro-credit performances bank-wise to ensure achievement of the target," Bangladesh Bank Governor Salehuddin Ahmed told reporters Monday.
He also said the central bank has already asked the chief executives of the banks to form special cells to ensure supervision and proper disbursement of the agriculture credit across the country.
Meanwhile, the central bank has asked the state-owned banks to disburse fresh agricultural credit to the flood-affected farmers on relaxed rules and regulations.
Under the move, the flood-hit farmers will be eligible for fresh credit after rescheduling their previous classified loans. The banks, if necessary, may relax the provision on down-payment for rescheduling the loan.
"It'll be difficult to curb inflationary pressures on economy unless we can increase agriculture production," the central bank chief said, adding that the agricultural performance will contribute to the overall gross domestic product (GDP) growth.
Answering a query, the BB governor said the overall GDP growth would not be affected despite the flood if the rehabilitation programmes is implemented properly.
Regarding the impact of flood on the economy, the BB governor said the biggest challenge is to stimulate production so that the huge agriculture loan, if disbursed as per target, will not have adverse impact on the money supply.
Meanwhile, the central bank has set a target of Tk 76.98 billion, which includes an amount of Tk 10.78 billion for private commercial banks -- both local and foreign - for disbursement among flood-affected farmers across the country.
On the other hand, the central bank is encouraging imports of food items, which he expects would have a positive impact on the money supply.
The BB governor said excess liquidity in the banking sector has already been reduced recently by around Tk 10.00 billion from Tk 100.00 billion at the end of the last fiscal indicating some improvements in investment scenario.
The central bank is yet to take any measure to curb money supply growth that forced it to announce a cautious monetary policy last month, Salehuddin noted.
Replying to another query, Salehuddin said the Bangladesh Krishi Bank (BKB) and the Rajshahi Krishi Unnayan Bank (RAKUB) have increased interest rates on agro-credit in line with their board of directors' decisions.
The central bank would pursue the commercial banks that the interest rates on agro-credit should not be more than that of the industrial loan, the BB governor added.
For the first time, 39 private commercial banks, both foreign and local, have already allocated funds for the agricultural credit.
Most of the private commercial banks have already taken steps to disburse the agro-credit to farmers in line with the central bank's instructions, sources in the banking sector said.
According to the BB's statistics, the state-owned eight banks and financial institutions disbursed agricultural credit worth Tk 52.93 billion in fiscal 2006-07, which is over 83 per cent of the target worth Tk 63.51 billion.
In 2005-06, the banks and financial institutions disbursed agricultural credit worth Tk 54.96 billion and in 2004-05, the amount was Tk 49.57 billion.
The central bank has decided to monitor the agriculture credit activities of the banks to achieve targeted disbursement of the farm loan for curbing post-flood inflation pressures on the economy.
"We will monitor the overall agro-credit performances bank-wise to ensure achievement of the target," Bangladesh Bank Governor Salehuddin Ahmed told reporters Monday.
He also said the central bank has already asked the chief executives of the banks to form special cells to ensure supervision and proper disbursement of the agriculture credit across the country.
Meanwhile, the central bank has asked the state-owned banks to disburse fresh agricultural credit to the flood-affected farmers on relaxed rules and regulations.
Under the move, the flood-hit farmers will be eligible for fresh credit after rescheduling their previous classified loans. The banks, if necessary, may relax the provision on down-payment for rescheduling the loan.
"It'll be difficult to curb inflationary pressures on economy unless we can increase agriculture production," the central bank chief said, adding that the agricultural performance will contribute to the overall gross domestic product (GDP) growth.
Answering a query, the BB governor said the overall GDP growth would not be affected despite the flood if the rehabilitation programmes is implemented properly.
Regarding the impact of flood on the economy, the BB governor said the biggest challenge is to stimulate production so that the huge agriculture loan, if disbursed as per target, will not have adverse impact on the money supply.
Meanwhile, the central bank has set a target of Tk 76.98 billion, which includes an amount of Tk 10.78 billion for private commercial banks -- both local and foreign - for disbursement among flood-affected farmers across the country.
On the other hand, the central bank is encouraging imports of food items, which he expects would have a positive impact on the money supply.
The BB governor said excess liquidity in the banking sector has already been reduced recently by around Tk 10.00 billion from Tk 100.00 billion at the end of the last fiscal indicating some improvements in investment scenario.
The central bank is yet to take any measure to curb money supply growth that forced it to announce a cautious monetary policy last month, Salehuddin noted.
Replying to another query, Salehuddin said the Bangladesh Krishi Bank (BKB) and the Rajshahi Krishi Unnayan Bank (RAKUB) have increased interest rates on agro-credit in line with their board of directors' decisions.
The central bank would pursue the commercial banks that the interest rates on agro-credit should not be more than that of the industrial loan, the BB governor added.
For the first time, 39 private commercial banks, both foreign and local, have already allocated funds for the agricultural credit.
Most of the private commercial banks have already taken steps to disburse the agro-credit to farmers in line with the central bank's instructions, sources in the banking sector said.
According to the BB's statistics, the state-owned eight banks and financial institutions disbursed agricultural credit worth Tk 52.93 billion in fiscal 2006-07, which is over 83 per cent of the target worth Tk 63.51 billion.
In 2005-06, the banks and financial institutions disbursed agricultural credit worth Tk 54.96 billion and in 2004-05, the amount was Tk 49.57 billion.