According to data from Bangladesh Bank, farm loan disbursement declined by 17.52% to Tk3,494.64 crore in the first quarter (Q1) of FY19 (July-September), having been Tk4,235.74 crore in the same period last year
The disbursement of loans to farmers has registered negative growth in the first quarter of the current fiscal year, as public banks are being hampered by a mounting number of bad loans, banking sector sources said.
According to data from Bangladesh Bank, farm loan disbursement declined by 17.52% to Tk3,494.64 crore in the first quarter (Q1) of FY19 (July-September), having been Tk4,235.74 crore in the same period last year.
Economists said stressed loan of the banking sector had limited the scope for banks to lend sufficiently.
They called upon Bangladesh Bank to pressure banks into providing adequate loans to farmers, to ensure a vibrant rural economy and reduce the possibility of a food crisis.
The loans disbursed by the banks in Q1 of FY19 amounted to 16.03% of the combined yearly target of Tk21,800 crore. In FY18, 20.76% of the Tk20,400 crore target had been disbursed in Q1.
Bangladesh Bank’s annual farm credit target for all operating scheduled banks in the current fiscal year is 6.86% higher than the target set for the last fiscal year. Last year, the credit target was fully disbursed by the banks, a senior official at the central bank said.
Another senior official of Bangladesh Bank said a handful of banks who are burdened with a mounting number of bad loans are being forced to keep provisions against the non-performing loans. This was further weakening their liquidity.
Banks in general have been facing dearth of investable capital, as a section of depositors recently withdrew a huge chunk of deposits mainly due to a cut in the deposit rates by the banks, sources from the central bank added.
The rising frequency of financial scams, corporate fraud, as well as reckless and aggressive lending was also reducing the confidence of depositors and hampering the lending ability of the banks.
“As a result of these factors and the stress they are putting on the banks, farm loan disbursement saw a slowdown in recent months,” the Bangladesh Bank official said.
Former advisor of the last Caretaker Government AB Mirza Md Azizul Islam told the Dhaka Tribune: “A huge number of classified loans are weighing on the banking sector. Furthermore, Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RKUB) have been suffering from various problems arising from NPLs and other financial crises. They are the specialized banks dedicated to providing low-cost agricultural loans to rural farmers.”
According to data from the central bank, eight state-owned commercial and specialized banks, namely Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, BASIC Bank, Bangladesh Development Bank, Bangladesh Krishi Bank, and Rajshahi Krishi Unnayan Bank, collectively disbursed Tk1,537.54 crore in agricultural loans in Q1 of FY19. This is 15.57% of their total annual farm loan target of Tk9,875 crore.
Private and foreign banks disbursed Tk 1,956.10crore during the period, which is nearly 16.40% of their annual target of Tk11,925 crore.
“Low demand for farm loans is the main reason for the negative loan growth, as the first quarter of the current fiscal year was the harvesting season.” Mohammad Ismail, Chairman of Bangladesh Krishi Bank (BKB) said.
He added that they are hopeful of reaching the target by the end of the fiscal year, as the demand for loans will increase during the peak season.
In Q1, Bangladesh Krishi Bank disbursed Tk878.22crore, which is 17.56% of its annual target of Tk5,000 crore.
Rupali Bank disbursed only 2.25% of its yearly target of Tk8.99 crore, while NRB Global Bank lent only 0.30 % of its annual target, amounting to Tk0.37 crore.
Modhumoti Bank, Shimanto Bank & foreign banks such as Bank Alfalah, Citi bank NA, Commercial bank of Ceylon, National bank of Pakistan, State Bank of India, and Woori Bank have not disbursed any farm loans in the first quarter of the current fiscal year, Bangladesh Bank data said.