Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has revised its required provision on undisbursed farm loan for all private commercial banks (PCBs) and foreign commercial banks (FCBs) operating in Bangladesh.

Under the latest revised provisions, the PCBs and FCBs are now allowed to deposit 3.0 per cent of their undisbursed farm credits with the central bank for lending within two years or forfeit the money.

They may deposit the certain percentage of their undisbursed farm loans from announced annual targets with the Bangladesh Bank (BB) as an alternative remedial measure.

But the deposited money will be refunded totally or proportionally on the basis of next two years’ disbursement performance of any bank. Otherwise, the unused deposited funds will not be refundable, according to a circular issued by the central bank on Sunday.

Currently, the PCBs and the FCBs have to deposit the entire remaining funds with the central bank if they fail to meet the annual target of lending to the farm sector.

The BB will not provide any interest on the deposited funds.

“The PCBs and FCBs are now allowed both the options—deposit the total undisbursed funds for an unlimited time or 3.0 per cent of that amount under a two-year timeline,” a senior BB official told BBN in Dhaka while explaining the main objective of the policy revision.

The central bank earlier had asked all PCBs and FCBs to fix agricultural-credit-disbursement target at least 2.5 per cent of their total loans and advances.

Currently, 39 PCBs and nine FCBs are operating in the country.

The BB, however, exempted the specialised and state-owned commercial banks from the punitive measures.
The central bank blocked undisbursed farm loan amounting to BDT 1.40 billion of four banks after they failed to achieve their targets in FY16.