Country’s commercial banks in last fiscal year disbursed Tk 7,489.52 crore in farm loans through their linked non-governmental organisations which charged an interest rate ranging from 24 per cent to 27 per cent for the loans.
Farmers get agriculture loans at 9 per cent interest rate if the loans are disbursed by the banks directly.
The distribution of farm loans by the banks through NGO channel sharply increased in the FY 2016-17 despite the fact that Bangladesh Bank had earlier taken a number of initiatives to discourage the practice.
Besides, 22 banks disbursed more than 70 per cent of their farm loans through their NGO linkages in the period, breaching the central bank’s directive that at least 30 per cent of the farm loans must be distributed using their own capacity, according to a central bank report.
The banks disbursed 35.67 per cent or Tk 7,489.52 crore in farm loans through NGO channel against their annual agriculture loan disbursement of Tk 20,998.69 crore in FY17.
The banks disbursed Tk 5,371.23 crore in farm loans in FY16, Tk 4,828.14 crore in FY15 and Tk 3,351.42 crore in FY14 through their NGO linkages.
Many farmers who got farm loans through NGOs counted much higher interest rate than the bank rate set by the central bank, a BB official told New Age on Tuesday.
‘NGOs and microfinance institutions charge interest rate between 24 per cent and 27 per cent on the loans they give to farmers after taking the fund from the banks at an interest rate of 9 per cent. In the process, the basic concept of giving low-interest loans to farmers gets dented severely,’ he said.
Against the backdrop, the central bank asked the banks to disburse at least 30 per cent of their farm loans annually through their branches with a view to facilitating farmers getting loans at low interest rate.
The BB, however, at a recent programme defended the imposition of high rates of interest on farm loans by the NGOs.
The NGOs have to bear at least 17 per cent to 18 per cent operating cost while disbursing farm loans, so they have to impose a high interest rate on agriculture loans, BB deputy governor SM Moniruzzaman said at the unveiling event of the Agriculture and Rural Credit Policy and Programme for FY18 held at the central bank headquarters in the capital on July 27.
The BB’s stance on the issue will encourage the banks to disburse more farm loans through the NGO channel, the BB official said.
The upward trend in the farm loan disbursement by the banks indicates that they (banks) are now more interested in disbursing agriculture loans through NGOs and MFIs, he said.
The private banks usually disburse major portion of their farm loans through their NGO linkages as they are reluctant to expand their activities in the rural areas, he said.
‘The private banks can avoid the supervisory- and recovery-related cost for their disbursed farm loans if they distribute the loans through the NGOs. Besides, taking the channel for disbursing farm loans also help the banks achieve the disbursement quota — 2.50 per cent of their total lending,’ the official said.
The 22 banks, which disbursed more than 70 per cent of their farm loans through the NGOs violating the central bank’s directive, include Eastern Bank, Premier Bank, Midland Bank, Trust Bank, Mutual Trust Bank, Meghna Bank, NCC Bank, Jamuna Bank and Southeast Bank.
The central bank is now thinking what types of punitive measures would be taken against the 22 banks, the official said.
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