BB to focus on small, farm loans to meet credit target

Bangladesh Bank will put more emphasis on small and medium loans, including agricultural credit, to meet higher target for private sector credit growth.

The central bank will announce a new agriculture loan policy today for the current fiscal year where some new steps will be taken so that the real clients of the farm and non-farm sectors get loans.

A BB official said the target for total agricultural loan in the current fiscal year has been set at Tk 17,550 crore which is 7 percent higher than that of the previous year.

The target for the last fiscal year -- Tk 16,400 crore -- was met by June.

This year private banks will be given a mandatory condition that they will have to distribute 30 percent of their total targeted loans through their own branches.   The banks can disburse the loans through their agent banks. Private banks are now bound to disburse agriculture loans. As the private banks have fewer branches in rural areas, they now have to disburse loans through third party, like non-governmental organisations.

To activate banks in using idle liquidity in productive lending, the area heads of central bank offices are now getting engaged in field visits with bankers in search of areas of economic activities, according to the new monetary policy statement (MPS).

“Potential client groups are still to be drawn into the financial sector's inclusive financing initiatives. With Bangladesh Bank's field level guidance and encouragements, banks are more proactively exploring new financing opportunities in diverse new areas of output activities of new agricultural and SME clientele segments,” the MPS said.

These initiatives will hopefully create more productive credit demand and new employment opportunities in the economy. The central bank will keep a close eye on the sector to ensure adequate supply of agricultural loans, BB Governor Fazle Kabir said last week while announcing the MPS.

The MPS set private sector credit growth target till December at 16.6 percent and for June next year the target will be 16.5 percent. The target for June last was 14.8 percent.

The credit growth target has been set at a time when default loans in the banking sector as well as non-food inflation are on the rise although investment demand is sluggish.

This is why the central bank governor said the new MPS is cautiously accommodative, according to the BB official.