Farm loan interest cut to 8pc
Bangladesh Bank yesterday cut the interest rate on farm loans within its efforts to improve the agriculture sector amidst the ongoing monetary slowdown due to the coronavirus pandemic.
Banks will need to hand out farm loans at an 8 per cent interest rate rather than the previous 9 %, according to a central bank notice.
Atiur Rahman, a former governor of the central bank, welcomed the move, saying that the farm sector played a significant role in enabling the rebound of the overall economy from the adverse impacts stemming from the pandemic's first wave.
The farm sector has faced difficulties as a result of pandemic combined with the other sectors of the economy, said the central bank. Banks should decrease the interest on farm loans such that the sector can secure funds better value. This may also help farmers increase their production aswell, it said.
In April this past year, the central bank imposed mortgage loan cap of 9 % on all loan products, except for credit cards, made available from banks.
The central bank has been fixing mortgage loan cap on farm loans for a long time so that farmers can avail funds better value compared to that of other loan products.
The Agriculture Credit Department of the central bank has recently recommended its high-ups lower the interest rate on farm loans predicated on the circumstances.
In June 2017, the central bank lowered the interest rate to 9 % from the previous 10 per cent.
Rahman said three sectors -- agriculture, remittance and exports -- had played an integral role in the economy's turnaround from the precarious situation created by Covid-19.
The agro-processing commercial sector has expanded to a large extent recently based on the nice performance of the farm sector. The rural economy in addition has diversified in recent years riding on the farm sector, he said.
"So, the latest rate cut by the Bangladesh Bank may also help the industrial sector as well," Rahman said.
Between July and February of the existing fiscal year, banks disbursed farm loans amounting to Tk 16,181 crore, up 7.21 per cent year-on-year, showed data from the central bank.
Loan repayments increased 13 per cent year-on-year to Tk 17,492 crore in the first seven months of the fiscal year.
This means farmers have already been paying the instalments of their credit constantly despite the pandemic.
The rural economy has bounced back strongly based on the wonderful performance of the farm sector, said a survey report of the energy and Participation Research Centre (PPRC) and the Brac Institute of Governance and Development.
The fallout of the pandemic has hurt the indegent in cities as their per capita daily income declined to Tk 107 from Tk 124, the survey said.
However the income of rural persons risen to Tk 108 from Tk 106.
The survey also discovered that 27.3 % of urban slum-dwellers migrated from the major cities to villages following the pandemic hit the united states in March this past year. Of these, 9.8 % are yet to come back, it said.
While unveiling the survey result on April 20, Hossain Zillur Rahman, executive chairman of the PPRC, said agriculture had played an excellent role in tackling the first wave.
A shift in policy mindset towards strengthening rural regeneration and a holistic method of supporting agriculture is a key lesson from the Covid crisis, he said.
The rural economy has shown resilience significantly, and therefore the country's rural economy is a lot more powerful than that of the cities, he said.
