The New Nation - Internet Edition

UNB, Dhaka

Agriculture credit disbursement is going to be compulsory for all commercial banks from this fiscal year as Bangladesh Bank decided on Tuesday.

"Bangladesh Bank will issue necessary circular immediately," deputy governor Nazrul Huda told reporters after a meeting in this regard at the central bank.

He chaired the meeting of the high-powered Agricultural Credit Monitoring Committee comprised of representatives from the Ministry of Agriculture and commercial banks.

"The recent experience has made it clear that there is no alternative to investment in agriculture to face the challenge of food security in the global price situation," Huda said, explaining the need for enhanced agriculture credit.

He added that the practice of directed lending has been absent since the inception of Financial Sector Reform Programme (FSRP) undertaken in 1990, resulting in the freedom of the commercial banks whether they would provide agriculture credit.

He said Bangladesh Bank would not impose the credit target of the banks concerned, but would take measures to ensure a rational target.

"We'll impose a certain percentage of banks' annual credit for agriculture unless the banks comply with the directive on their own," warned the deputy governor. Asked about the interest rate, he said the interest rate was not the problem of the farmer, but access to credit is their problem. "I will appreciate an even lower interest rate though the commercial banks are already providing agriculture credit at lower rate of interest," he added.

Asked if Bangladesh Bank would provide enhanced refinance facility for the commercial banks against agri-credit, Nazrul Huda said Bangladesh Bank would consider it.

He said Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank, having a very low deposit base, share about 50 percent of the total agriculture credit and they were dependent on the Bangladesh Bank refinance.

Earlier, Bangladesh Bank set an agriculture credit target of Tk 4,900 crore for the current fiscal year, which is 13 percent more than the last fiscal year, considering the need for increasing domestic food production.

The BB deputy governor said they would also introduce a new mechanism of revolving crop credit limit for a three-year term to relieve farmers of fresh applications, documentation, approvals and often middlemen again for a fresh loan.

He said disbursement loan would be effective on the basis of area approach, selecting the areas on the basis of intensity of crop production.

Huda said the new mechanism would facilitate the loan account of a farmer automatically renewed immediately after full repayment of the earlier loan of a particular product cycle and the farmers would be entitled to a fresh crop loan without any new application.

The eligible farmers for the credit would be identified from the farmers' ID cards the Department Agriculture Extension (DAE) was providing through a survey.

Huda said the central bank would also take steps to provide collateral-free agriculture loans to sharecroppers and fishermen.

Bangladesh Bank, he said, would further strengthen the role of the District Agriculture Credit Committees to ensure proper supply of fertilizer and quality seeds.