When the agriculture sector is in acute need of financing to revive businesses affected by the coronavirus pandemic, the Bangladesh Bank has slashed the farm loan growth target for the current fiscal year as banks could not achieve the disbursement target set for the last fiscal year.
The central bank on Wednesday unveiled the "Agriculture and Rural Credit Policy and Programme for 2020-21", setting the agriculture loan growth target at 9 percent for the current fiscal year, down from 10.66 percent set for the previous fiscal year.
The total agri credit disbursement target was set at Tk26,292 crore for the current fiscal year.
In fiscal year 2019-20, banks achieved 94.30 percent of the disbursement target. The shortfall of 3.67 percent or Tk867 crore in disbursement was owing to the banks' reluctance to lend to the agriculture sector.
In fiscal year 2018-19, the banks disbursed 108 percent of their disbursement target.
In the last fiscal year, 20 private and foreign banks did not achieve their targeted ceiling for the farm loans.
Although there is a provision that banks must deposit 3 percent of unattained targeted amounts to the Bangladesh Bank if they fail to reach the farm loan target, it was not implemented in the cases of the 20 banks that failed to comply with the provision.
The provision of penalty will continue under the new farm loan programme.
Despite strict instructions from the Bangladesh Bank to disburse agri loans, some private and foreign banks have not been complying with them, said Ashok Kumar Dey, executive director of the Bangladesh Bank.
It is because they fear that they might not get back loans, he added.
He said the Bangladesh Bank had been providing money from the refinancing scheme for agri loans at 1 percent and banks lend at 4 percent. The 3 percent margin is well enough according to international practice. Despite that, the private banks are reluctant to lend to the agriculture sector, he added.
He said 20 banks failed to achieve their targets, but no action had been taken against them yet. The central bank would take action after receiving information from the field-level about their disbursements.
He said the banks had been strictly instructed to focus on the agriculture sector for lending in order to create jobs in the pandemic situation.
In the programme, the Bangladesh Bank asked banks to focus on three core segments of the agriculture sector, namely, crop cultivation, fishing and livestock.
The banks have to disburse 6o percent of the total targeted loans to crop cultivation, 10 percent to fishing and 10 percent to livestock, according to the policy.
The Bangladesh Bank instructed the banks to enhance their own network for disbursing agriculture loans instead of depending on microfinance institutions.
It also encouraged the banks to use mobile banking and agent banking networks for disbursing agri loans.