Banks to reschedule farm loans without down payment

February 25, 2015

Bangladesh Bank has asked scheduled banks to reschedule the defaulted farm loans without taking any down payment in a bid to save the farmers from the existing political unrest, said officials of the central bank. The BB issued a circular to managing directors and chief executive officers of all banks on Monday asking them to disburse fresh loans to the farmers after rescheduling their defaulted loans without taking down payments on the basis of banker-customer relationship.
The farmers will also be allowed to receive fresh loans without paying any installment against their rescheduled loans.
The BB circular, however, said the banks would be able to take relaxed amount of down payments on the basis of the mutual understanding between the banks and farmers.
The relaxed policy will remain effective till December 31, 2015, the circular said.
A BB official told New Age on Tuesday that the central bank had relaxed the rescheduling policy for the farm loans as the defaulted farm loans had increased significantly in the recent months due to supply chain disruption amid political unrest.
The farmers failed to repay their loans as they did not get fair prices of their products due to supply chain disruption amid continuing political turmoil, he said.
As per the previous rules, a client had to pay at least 15 per cent down payment of the total farm loans to make rescheduling of the loans for the first time.
The banks had to take down payment between 30 per cent and 50 per cent for the defaulted farm loans for the second time and third time rescheduling.
The banks will be allowed to withdraw the certificate cases through mutual understanding with the farmers after which they will be able to give fresh loans to them (farmers), the latest BB circular said.
The BB official said that the relaxed policy would play a vital role in decreasing the defaulted loans in the banking industry.
The defaulted loans in the agriculture sector increased by 14.42 per cent in the first seven months of this financial year despite a downward trend in farm loans disbursement in the period.
According to the BB data released last week, the defaulted loans in the farm sector rose to Tk 7,218.66 crore as of January 31, 2015 from Tk 6,308.95 crore as of June 30, 2014.
A large number of farmers failed to repay their loans mainly between January and February this year as they counted losses for failure in supplying their products to Upazila and district headquarters and to metropolitan cities due to a countrywide nonstop blockade and frequent hartals enforced by the opposition political parties, the official said.
He said that the defaulted farm loans had decreased significantly in the first quarter of the FY15 due to an eased political situation in the period. The defaulted loans in agriculture sector were Tk 6,006.80 crore as of September 30, 2014.
The farm sector defaulted loans accounted for 23.72 per cent of the total loans (Tk 30,434.66 crore) disbursed in the sector as of January 31, 2015.
The classified loans in the sector were 21.92 per cent of the total loans (Tk 32,074.66 crore) disbursed as of January 31 last year.
The political unrest also put an adverse impact on the farm loan disbursement as it (farm loan disbursement) decreased by 3.80 per cent in the first seven months of the FY15 compared with that in the same period of the FY14.
The farmers are now reluctant to receive farm loans as they are not getting fair prices of their products due to political unrest, the BB official said.
According to the BB data released on Thursday, farm loan disbursement by all scheduled banks decreased to Tk 8,484.42 crore in July-January of the FY15 from that of Tk 8,819.96 crore in the corresponding period of the FY14.
The BB official said that the defaulted loans in the agriculture sector would increase further in the coming months if the central bank had not relaxed the rescheduling policy.

-With New Age input

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