Agri loan drops by 10%

Mazharul Islam Mitchel

The disbursement of agricultural loans decreased by nearly 10% year-on-year in the first month of the current fiscal year, as reported by Bangladesh Bank (BB). Bankers attribute this drop to disruptions caused by student-led protests, internet blackouts, and curfews in July. However, they are optimistic that disbursements will gradually recover as conditions improve.
In July 2024, commercial banks disbursed Tk 17.90 billion in agricultural and rural loans, compared to Tk 19.91 billion during the same month last year, according to BB's data.
The total outstanding agricultural loans now stand at Tk 568.94 billion, with non-performing loans (NPLs) amounting to Tk 47.39 billion (8.33% of the total). A year earlier, total loans were Tk 523.62 billion, and NPLs were Tk 40.44 billion, indicating both loans and defaults have risen over the past year.
A senior BB official stressed the significance of agriculture in Bangladesh's economy, urging all governments to prioritise the sector. He noted that the newly formed interim government has introduced an agricultural policy, and the central bank is reactivating several refinancing schemes. Furthermore, efforts are being made to support farmers affected by flooding.
For the 2024-25 fiscal year, commercial banks have been allocated Tk 380 billion for agricultural loans, an 8.57% increase from the previous year's target of Tk 350 billion. In the last fiscal year, banks disbursed Tk 371.54 billion, up from Tk 328.30 billion the year before.
This year, state-owned and specialised banks are expected to distribute Tk 126.15 billion, while private and foreign banks are allocated Tk 253.85 billion. In July, state-owned banks disbursed Tk 5.78 billion (4.58% of their target), and private and foreign banks disbursed Tk 12.13 billion (4.78%).
Bangladesh Krishi Bank, a specialised state-owned bank, distributed the largest share of loans, disbursing Tk 2.84 billion, or 3.95% of its target. Farmers repaid Tk 25.34 billion in loans during the first month of the fiscal year, compared to Tk 27.10 billion last year, a decline of Tk 1.76 billion, or 6.49%.
Agricultural loans are divided into farm loans (such as livestock and fisheries) and non-farm loans. In July, Tk 7.34 billion was disbursed for crop production, Tk 4.71 billion for poultry, and Tk 3.23 billion for fisheries. Additionally, Tk 2.63 billion was allocated to non-farm loans.
To achieve the disbursement target, banks are permitted to use their networks (branches, sub-branches, agent banking, contract farming, and group loans) as well as bank-MFI linkages. According to BB guidelines, 60% of the target must be allocated for crops, 13% for fisheries, and 15% for livestock.