Agriculture, SME branches now mandatory for banks

The central bank is set to ask private commercial banks to open agriculture and SME branches from next year to boost lending to farmers and small businesses across the country.

Bangladesh Bank as the regulator took the decision yesterday and is expected to issue a circular next week.

“I have already signed the circular,” BB Governor Atiur Rahman told The Daily Star.

Agriculture and SME branches must be located outside divisional headquarters, according to the circular.

Presently, private banks operate SME and farm lending through conventional bank branches and some SME service centres.

In a decision last year, Bangladesh Bank allowed commercial banks to open SME service centres to serve the SME sector exclusively. The centres were not allowed to run conventional banking.

According to the circular, SME service centres will turn into SME branches and no permission will be given to banks to open new SME centres.

Agriculture is a priority issue both for the government and the central bank. The government has already reduced the prices of fertilisers and other inputs.

On the other hand, the central bank has set a Tk 11,512 crore farm credit disbursement target for banks for the current fiscal year, an increase of nearly 24 percent from a year ago.

A senior central banker said the move would help banks reach out to rural potential customers.

“We are taking this initiative to boost lending to small and medium enterprises and the farm sector,” said BB Deputy Governor Nazrul Huda.

According to the circular, half of the fund to be collected through SME and agriculture branches has to be invested in those sectors. The central bank will monitor the loan disbursement issue strictly.

A bank will have to submit a list of branches it wants to open to the central bank every year.

The banks will have to mention the numbers of SME and agriculture branches along with their conventional branches.

Another BB official said banks will be given priority in opening branches in potential rural areas at upazila level. In these branches all types of transactions except for foreign currency dealings could be done.

Anis A Khan, managing director of Mutual Trust Bank, welcomed the BB move saying that it would help farmers and small enterprises get bank loans easily.

“We can't do banking through the existing SME service centres,” said Khan.

sajjad@thedailystar.net