BB eases farm loan rescheduling

The central bank yesterday instructed banks to reschedule defaulted loans in the farm sector without any down payment as part of its efforts to protect farmers from the ongoing economic hardship deriving from the coronavirus pandemic.

Banks will have to give a timeframe of two years to the farmers to repay the rescheduled loans, according to a notice by the banking regulator.

Lenders can follow the banker-customer relationship to reschedule the defaulted loans.

Farmers will get new loans without repaying any instalments of their rescheduled loans. The farmers who are facing 'certificate cases' will also be considered for fresh financing from banks.

An agreement will be needed between farmers and banks in order to withdraw or settle the certificate cases.

The farmers who have recently rescheduled their defaulted loans will enjoy the central bank's relaxed facility as well. The directives will come into effect immediately, which will remain in force until March 31 next year.

Defaulted loans in the farm sector stood at Tk 4,264 crore as of April 30 this year, up 4 per cent year-on-year, data from the central bank showed.

Banks disbursed Tk 20,373 crore in farm loans in the first 10 months of this fiscal year, an increase of 17 per cent from a year earlier. The production and marketing activities of the agricultural segment like other sectors of the country have been disrupted since 2020.

As a result, it was not possible for many farmers to repay their bank loans on time.

If agricultural loans become defaulted, providing new financing to the farmers will be hindered, which will subsequently put an adverse impact on agricultural production.

"Against the backdrop, such a situation may put a negative impact on the GDP growth," according to Bangladesh Bank.