Foreign banks cautious over farm credit

Foreign commercial banks seem cautious to make comments on Bangladesh Bank's (BB) decision to make farm loans mandatory for all banks operating in the country.
They said they are waiting to receive details of the BB decision and directives before talking on their next course of actions on the issue. They said at present they do not provide any farm credit.
The central bank on Tuesday decided to make disbursement of agricultural credit to the farmers mandatory for all banks to facilitate farming activities to ensure food security.
The BB took the decision at a meeting of Agriculture Credit Monitoring Committee.
To comply with the BB decision, banks will have to introduce a 'revolving crop credit limit', distribute loans to farmers through identity cards and issue collateral-free loans to fishermen and sharecroppers.
“We are aware of the news, but have not received the circular from Bangladesh Bank as yet,” said Mahbub-ur-Rahman, head of corporate banking of HSBC.
“We are committed to comply with the regulatory guidelines which are issued by the central bank from time to time," said Rahman.
Standard Chartered Bank (SCB), another major foreign bank operating in the country for long, also echoed HSBC.
“We have been informed about the news through media. We are now waiting for detailed direction from Bangladesh Bank in this regard,” said Sarwat Ahmad, senior manager of SCB's corporate affairs.
A Citi NA official said the bank authority would not make any comment before receiving the BB guidelines on mandatory credit to the farmers.
Private banks however hailed the BB move, saying the decision would help the country achieve food security through increased agricultural production.
Shahjahan Bhuiyan, managing director of United Commercial Bank, termed the central bank's move to make farm loan mandatory for all banks as 'an excellent decision'. “Increasing farm credit will help boost food production in the country,” Bhuiyan said.
Bangladesh has set a target to disburse Tk 9,379 crore as agricultural loan this fiscal year, a 13 percent increase from the last fiscal year. The agricultural loan disbursed last fiscal year was Tk 8,308 crore, Tk 6,974 crore of which being disbursed by nine government-owned banks, according to BB statistics.
The government has been persistent in pursuing banks to provide farm credit for the sake of the economy and the farmers, which has not been met with much response by the banks. However, in recent times private banks have come up with an increased amount of farm credit, seeing the market and the profit margin in this.
Some 30 private banks disbursed Tk 2,048 crore of farm credit in fiscal 2007-08, which was almost half in the previous fiscal year. The private commercial banks have set a target for disbursing 55 percent more than in the previous fiscal year in agricultural loan, Nazrul Huda added.
No foreign banks operating in the country disbursed any loan for agriculture. “Currently, we do not provide any credit for agriculture. But we lend for agro-based industries,” Sami A Hafiz, a spokesman of HSBC, said.