Bangladesh Bank creates fund to utilise undisbursed portion of farm loans

Bangladesh Bank (BB) has taken a decision to form a fund, titled Bangladesh Bank Agricultural Development Common Fund (BBADCF), for increasing farm production.

Under the initiative, banks would deposit money equivalent to the un-disbursed amount of farm and rural loans in the fund and the BB would give 2 per cent interest on the deposits, as per a BB circular issued on Monday.

The funds of the BBADCF would then be distributed among banks in proportion to their capacity. Banks would pay back the loans to the BB, along with 2 per cent interest, within 18 months of the fund release, says BSS citing the circular.

“Banks can charge 8 per cent interest on the loans given to farmers using the money from the BBADCF. The loans have to be disbursed using banks' own network, not through microfinance institutions,” said the notice.

Banks would be allowed to transfer 4 percentage points of the interest to their income segment on the loans made from the fund.