Farm loan release drops 22% in December
Bank lending to the agriculture sector decreased by 21.74% year-on-year in December, which bankers attributed to tight liquidity and uncertainty ahead of the 7 January national elections.
In December 2023, banks disbursed Tk3,046 crore to farmers, down from Tk3,892 crore in the same month of 2022. However, in the first six months of the current fiscal year, banks disbursed Tk18,326 crore in farm loans, up 9.9% from the same period of the previous fiscal year.
Bankers say farmers were election-focused in December and were not interested in taking new loans due to the uncertainty ahead of the polls.
They also say liquidity constraints in banks were another major reason. However, they have expressed hope that disbursement of agricultural loans will pick up in January.
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The central bank has set a target for banks to disburse Tk35,000 crore in agricultural loans in FY24. In the first six months of the fiscal year, the banks disbursed 52.36% of the target.
Bangladesh Bank data shows in the July-December period of FY24, Tk17,779 crore was collected from agricultural loans. In the same period of the previous fiscal year, the collection was Tk16,429 crore. That means the collection in the period increased by 8.21% year-on-year.
Kaniz Fatema, director of the Agricultural Credit Division of the Bangladesh Bank, told The Business Standard that they hold meetings with state banks every month to increase agricultural lending. Meetings with private banks are held every two months, she said. "Therefore, they have been encouraged to distribute more agricultural loans than before."
The managing director of a state-owned bank told TBS, "Some banks are unable to distribute agricultural loans according to the target. On the other hand, some banks can distribute more than the target. Therefore, the central bank has a directive that banks that cannot distribute agricultural loans will transfer their funds to supportive banks."
He went on to say, "As a result, agricultural loans are growing rapidly. This year, like last year, the target set by the central bank will be easily achieved."
Total outstanding loan reaches Tk55,395 crore
As of December 2023, the outstanding amount of agricultural loans reached Tk55,395 crore, from Tk50,997 crore a year ago.
According to the central bank data, during the first six months of FY24, state-owned banks distributed Tk6,568 crore in agricultural loans, which is 54.60% of the target for the entire fiscal year.
On the other hand, private foreign banks could achieve 52.36% of their target by distributing Tk11,758 crore during the period.
Meanwhile, 11 banks distributed less than 30% of their target in the July-December period.
