Rakub's default loans increase on potato price fall
The slump in potato prices has compounded the non-performing loan ratio of Rajshahi Krishi Unnayan Bank (Rakub), which has lent heavily to potato farmers and cold storage owners.
The bank was supposed to cut back on its default loans by Tk 400 crore in a year as per the terms agreed with the Bangladesh Bank. In reality, it swelled by about Tk 224 crore.
At the end of June, Rakub's total default loans amounted to Tk 1,200 crore, up 23.02 percent from a year earlier, according to data from the BB.
“The significant rise in default loan was only due to the massive price fall of potato in the wholesale market,” said Md Muin Uddin, managing director of Rakub.
Subsequently, potato farmers and cold storage operators incurred huge losses and defaulted on their loans with Rakub.
The short-term loans were given at the beginning of the year and were supposed to be realised in June-July, according to Muin Uddin.
But the small businessmen could not pay back the money as the wholesale potato price slumped to about Tk 4 per kg in July from Tk 6-7 in January-February.
“Curiously, the potato price in the retail market is still high at Tk 20, which is almost the same as in last year,” Muin Uddin said, while calling on the government to investigate the wide difference in prices.
He went on to state that Rakub's default loans will come down by the end of the year as the affected small businessmen will be extended the loan rescheduling facility.
Qamrul Hussain Chowdhury, vice-president of Bangladesh Cold Storage Association (BCSA), blamed the higher production for the slump in price in the wholesale market.
This year, potato production was one crore tonnes against expected consumption of 80-85 lakh tonnes.
Chowdhury said retail price of potato is very low when compared with the price of rice, which is Tk 70-80 a kg. Rice is the first staple crop in Bangladesh and potato the second.
It costs Tk 16 to store a kg of potato in the cold storage whereas the wholesale price hovers between Tk 6.39 to Tk 8.13, he said.
This year, potato farmers will count losses of Tk 7,000 crore to Tk 8,000 crore, according to Chowdhury.
Subsequently, he urged the government to provide support to farmers. “Otherwise, they will lose the financial capability to produce the crop next year,” he added.
Some 15-20 lakh tonnes of potato will remain unsold by the end of the year, according to BCSA. Farmers and traders have preserved 53 lakh tonnes of the tuber in the cold storages this year, up 32 percent year-on-year. As of now, only 10 percent of the tuber has been marketed.
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