Bangladesh Bank has cut the interest rate of farm credits to 8% from 9% to boost agricultural activities at a time when the sector has been hit hard by the pandemic.
The new rate will be effective from 1 April.
In 2017, the maximum interest rate of agriculture and rural credits was reduced to 9% from 10%.
Currently, interest on regular loans is capped at 9%, except for interest charged against credit cards.
A circular issued by the central bank on Thursday says agriculture is a very important sector for the economy, which is directly linked to food and financial security of the huge population. Therefore, the government is prioritising the sector for nutrition, poverty alleviation and employment generation.
In the current fiscal year, the government set a target to distribute Tk26,292 crore under the agricultural and rural credit programme. In eight months since July, Tk16,180 crore was disbursed in loans, which was a little over Tk15,000 crore in the same period a year ago.
Apart from the rural credit programme, the government took a Tk5,000 crore refinancing scheme last year to help the sector cope with Covid consequences. Borrowers have to repay at 4% interest rate for loans taken under the scheme.
Recently, the time for taking loans under the refinancing scheme has been extended for three months to 30 June.
Under the credit programme, loans are being given as working capital for growing fruits and flowers, fish farming, poultry farming and dairy and livestock farming. Moreover, entrepreneurs, who directly buy products from farmers to sell them in the market, will get loans under the scheme. A maximum of Tk5 crore can be given in loan to one organisation.
Apart from all these, special agricultural credits are available at a 4% interest rate. This programme provides credit support to farmers who grow spices, dal and oilseeds.