Two-year rescheduling facility on agri loans without down payment

Short-term agricultural loans can be rescheduled without a down payment for two years based on the bank-customer relationship.

Besides, new loan facilities will also be available after rescheduling. Even, the customers who have previously rescheduled short-term agricultural loans will get the benefit.

The Bangladesh Bank's Banking Regulation and Policy Department issued a circular in this regard on Tuesday, which will remain in force till 31 March next year.

The circular reads that the production and marketing activities of the agricultural sector like other sectors are being disrupted due to the prevalence of Covid-19. As a result, farmers are not able to repay bank loans regularly.

If agricultural loans default, new financing may be disrupted and agricultural production may be hampered, which is likely to have a negative impact on the overall economic progress of the country.

The circular highlights the fact that short-term agricultural loans are being rescheduled to reduce defaulted loans in the agricultural sector and ensure uninterrupted credit supply.

Agricultural loans can be rescheduled by relaxing the condition of down payment based on the bank-customer relationship. Besides, there are options to reschedule loans without a down payment in special circumstances.

If a loan, whose legal procedures are going on in a case, can be rescheduled by withdrawing or settling the case based on agreement (solenama) with the customer.

According to the Agriculture and Rural Credit Policy for the current financial year, short term loans are given in more than 20 sectors including paddy, wheat, potato, sugarcane, mustard, peanut, jute, maize, cotton, fish and salt cultivation and grain warehousing and marketing.

Banks have given a target to disburse Tk26,292 crore for the current financial year under the Agriculture and Rural Credit Programme. During the 10 months, from July to April, disbursements amounted to Tk20,372 crore, which is 77.49% of the target.

During July-April of the current financial year, the amount of defaulted loans in the agriculture sector has increased slightly, and stood at Tk4,263 crore, up from Tk4,103 crore in the same period last fiscal.

In addition to the agriculture and rural credit programme, a refinancing scheme of Tk5,000 crore has been launched for the agricultural sector to address the Covid-19 pandemic. Tk3,954 crore has been disbursed from this scheme till 15 May, which is 79% of the total scheme.

In addition, a separate loan programme at a 4% interest rate has been introduced for the production of pulses, oil and spices and maize and to reduce import dependence. A study by the central bank in March showed that these loans played a role in changing the fortunes of farmers.

Under the agriculture and rural credit programme, loans are being provided at a 4% subsidy interest for the cultivation of paddy, wheat, cereals, cash crops, vegetables and tuber crops (potato, arum, etc).

The current interest rate on other general agricultural loans is 8%.