BB reduces interest rate on farm loan to 10pc

Bangladesh Bank on Wednesday reduced the rate of interest on farm loan to 10 per cent from 11 per cent as the interest rates of other types of loans and deposits continued to decrease in recent months.
The BB issued a circular to managing directors and chief executive officers of all banks asking them to implement the new interest rate on farm loan from July 1, 2016.
The BB had cut the rate of interest rate on farm loan from 13 per cent to 11 per cent on January 1, 2015.
The BB circular said the central bank lowered the rate of interest on farm loan considering the agriculture sector as a priority area.
A BB official told New Age on Wednesday that the banks were now charging interest rates between 11 per cent and 13 per cent on consumer loans amid dull business due to political uncertainty and weak law and order situation.
According to the latest BB data, the weighted average interest rate on lending in the banking sector declined to 10.64 per cent in April from 10.78 per cent in March 2016.
The weighted average rate on lending was 10.91 per cent in February and 11.05 per cent in January of this year.
The BB data showed that the weighted average interest rate on deposit of the banks also decreased to 5.77 per cent in April from 5.92 per cent in March of 2016.
‘The latest BB initiative will help banks to disburse more loans to the farmers that would also release them (banks) from their excess liquidity burden,’ the BB official said.
The country’s businesspeople have adopted a ‘wait and see’ approach to expanding their business by taking bank loans due to the sluggish business trend, he said.
Due to the lower credit demand from the industrial sector, banks are now having huge excess liquidity that has forced them to rush to invest in government treasury bills and bonds, and to give farm loans.
The BB set a farm loan disbursement target of Tk 16,400 crore for FY16 with a growth of 5.5 per cent compared with the previous financial year FY15.
But, in the July-April period of FY16 banks disbursed Tk 14,128.15 crore in farm loans, which is 86.15 per cent of the annual target.
Besides, the growth in the 10 months is 13.94 per cent compared with the same period of FY15 when banks had disbursed Tk 12,399.18 crore in farm loans.

News Courtesy: www.newagebd.net