The government is set to issue a guarantee against a Tk 10-billion central bank refinancing loan to aid farm credit disbursements by Bangladesh Krishi Bank (BKB).
The Bangladesh Bank has already sanctioned the recapitalisation loan to the state-owned specialised bank.
Financial Institutions Division (FID) has sent a summary note to finance ministry, seeking steps to this end, an official concerned said.
The central bank lends at 5.0 per cent interest rate, but the banks in most cases add 3.0-4.0 per cent to the rate based on sectors while disbursing the loans.
When contacted, BKB managing director Md Ali Hossain Prodhania said, "The bank's agriculture credit disbursements will be expedited further if the government issues a guarantee."
He termed their loan disbursements satisfactory.
FID sources said the division has some conditions attached to the state guarantee against the loan.
As stipulated, the tenure of the guarantee will be one year to be counted from its issuing date.
The loan will have to be repaid within the guaranteed period and necessary evidence be submitted to the division concerned.
The operating losses of the specialised bank will have to be reduced, specified one of the terms set by the FID.
BKB must slash non-performing loans, expand business, operate with skills and get out of its critical situation to be monitored by its own asset liability committee, according to the conditions.
The government issued BKB guarantees worth Tk 62.55 billion from fiscal year (FY) 2000-2001 to date. The bank has so far repaid Tk 15 billion.
According to the central bank guideline, BKB gives loans to crops, fisheries and livestock sectors at a maximum of 9.0 per cent interest rate.
The government had provided more than Tk 7.97 billion in subsidy between FY 2003-04 and FY 2012-13.
Finance ministry allocated BKB Tk 20 billion in recapitalisation fund for FY 2017-18.
Of the amount, the government released Tk 4.0 billion.
BKB has 2,029 branches across the country except Rajshahi and Rangpur divisions.
The authorised capital of the bank as determined by the government amounts to Tk 15 billion and paid-up capital Tk 9.0 billion.
According to BKB, the total target was fixed for the bank at Tk 55 billion for FY 2019-20.