Bangladesh Bank has relaxed its loan rescheduling rules and suspended loan recovery for six months for the farmers and small entrepreneurs in the country's flood-hit areas.

The central bank issued a circular in this regard yesterday, including a set of measures favouring the agricultural and SME loan borrowers.

The decision was taken to support the farmers and small entrepreneurs who may fail to clear their loans in time because of the recent floods, the banking regulator said.

"It will be impossible for such borrowers to pay down payment which will cause default loans and interrupt fresh loan disbursement."

If these borrowers do not get fresh loans due to being defaulters, there will be a slowdown in the economy, the circular read.

According to the circular, banks will relax the conditions for down payments in case of rescheduling farm loans, SME and cottage loans and micro credit.

The borrowers will get 6 months time to pay instalments after rescheduling their loans. Moreover, affected borrowers will be allowed to get fresh loans without repaying existing dues. Besides, banks can reschedule loans, even suspend certificate cases if they have to, according to the circular.

Banks will provide fresh loans to the farmers and small entrepreneurs under the relaxed policy till June 30, 2018.

The total outstanding loan in the agriculture sector was Tk 39,047 crore as of June 2017, of which Tk 25,470 crore remained overdue, central bank data shows.

A total of Tk 22,426 crore in loans was disbursed in the agriculture sector in 2016-17.

Of the total, Tk 10,060 crore went for crops, Tk 3,056 crore for livestock and Tk 2,413 crore for fisheries, according to central bank data. The recovery of agriculture loans was 48.25 percent during the fiscal year.

Disbursement of agricultural credit to sharecroppers under the refinance schemes of Bangladesh Bank amounted to Tk 561.85 crore during the last fiscal year.

Bangladesh Bank has another refinancing fund of Tk 200 crore at 5 percent interest rate for livestock. The fund was created in June 2015. Since then, Tk 173 crore was disbursed through 14 banks, shows central bank data.

Loan disbursement for the SME sector amounted to Tk 141,935 crore last year.