The farm loan disbursement by banks dropped by 5.75 percent or Tk 120 crore year-on-year in July-August, the first two months of the current fiscal year (2019-2020), as monsoon floods marooned more than one lakh hectares of croplands in July this year.
As per the Bangladesh Bank data, banks disbursed Tk 1,970.16 crore in July-August of FY20 against Tk 2,090.36 crore distributed in the same period of last fiscal year (2018-19).
Floods at the very beginning of the current fiscal year might have impacted badly the farm loan disbursement by affecting croplands in 28 districts, bankers said.
This year, banks disbursed Tk 977.15 crore in farm loans in July and Tk 993.01 crore in August against Tk 1,151.12 crore in July and Tk 939.24 crore in August last year.
Considering the farm loan disbursement target set by the BB, banks disbursed 8.16 percent in July-August of FY20 against their disbursement of 9.59 percent in FY19.
For FY20, the central bank set Tk 24,124 crore as farm loan disbursement target for banks, raising the target by 10.66 per cent from Tk 21,800 crore set for FY19.
In FY19, actual disbursement by the banks was Tk 23,616.25 crore while the amount was Tk 20,998.70 crore in FY17 and Tk 21,393.55 crore in FY18.
Although the farmers are getting loans due to the BB-set policy, the rate of interest imposed on them remains a major concern.
As per the BB data, the farmers were charged on average 19 percent interest as 35.14 percent of the farm loans were disseminated by banks through microfinance institutions or non-governmental organisations in FY19.
With the disbursement in July-August this year, the amount of outstanding farm loans increased to Tk 42,974.29 crore.
Against the disbursement in July-August this year, recovery of agricultural credit dropped to Tk 2,684.94 crore against the recovery of Tk 2,765.13 crore during the same months last year.
As per the central bank’s farm loan policy, banks are supposed to disburse 2 per cent of their total outstanding loans as farm loans.
If a bank fails to meet the target, it has to keep 3 per cent of the unachieved target amount as reserve in the BB.
The BB returns the money to the bank if it can later disburse the undistributed amount as farm loans.
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