The New Nation - Internet Edition

UNB, Dhaka

Bangladesh Bank has made agriculture credit isbursement mandatory for all commercial banks and also introduced a ew credit mechanism of revolving crop credit in view of stimulating griculture production.

"The Governor (Dr Salehuddin Ahmed) gave necessary approval in this regard late Thursday," BB deputy governor Nazrul Huda told UNB.

He said two separate circulars would be issued within the next two working days before the Eid-ul-Fitr vacation, giving them effect from this fiscal year.

The practice of directed lending has been apparently 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.

But the recent experience of global food crisis 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.

Considering the situation, the high-powered Agricultural Credit Monitoring Committee comprised of representatives from the Ministry of Agriculture and commercial banks decided on September 16 to make the agriculture credit mandatory and introduce the revolving crop credit system considering the food situation.

Nazrul Huda, who is also the chairman of the committee, said Bangladesh Bank would not impose the credit target of the banks concerned, but would take measures to ensure a rational target.

He said the banks would set their credit target in keeping with their respective financial conditions and inform their targets to the central bank.

"If Bangladesh Bank considers that the target of a particular bank is not enough as compared to their financial condition, it will ask the banks concerned to raise their target further," he added.

The central bank deputy governor said the foreign commercial banks, operating here without having adequate branches, would use the NGO networks to disburse agriculture credit while the foreign banks would have to ensure whether the NGOs were using the fund only as agriculture credit.

He said the new mechanism of revolving crop credit limit would be for a three-year term to relieve farmers of fresh applications, documentation, approvals and often middlemen again for a fresh loan.

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

As per the new mechanism, the loan account of a farmer will be automatically renewed immediately after full repayment of the earlier loan of a particular product cycle and the farmers will be entitled to a fresh crop loan without any new application.

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

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.