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Bangladesh Bank has issued new operational guidelines for the Bangladesh Bank Agricultural Development Common Fund (BBADCF) to help ensure scheduled banks fully achieve their annual agricultural and rural credit disbursement targets.
According to a circular issued Wednesday by the Agricultural Credit Department (ACD) of Bangladesh Bank, scheduled banks that fail to meet their agricultural and rural credit disbursement targets by June 30 of a financial year will be required to deposit the unachieved portion of the target into the BBADCF within three months after the end of that financial year.
The circular also stated that any agricultural and rural loans identified as unacceptable following quality verification will likewise be deducted and transferred to the fund.
Under the new guidelines, Bangladesh Bank will allocate funds from the BBADCF to eligible banks within 30 working days based on their financing requirements and annual agricultural credit targets.
The fund will be provided at an interest rate of 4 percent for a maximum tenure of 18 months. If sufficient applications are not received, the central bank will allocate the fund on a case-by-case basis.
Banks receiving the funds will be allowed to lend to customers at a maximum interest rate of 10 percent.
The guidelines specify that loans must be disbursed only through banks’ own branch networks, while lending through microfinance institution (MFI) linkages has been prohibited.
The maximum loan limit for an individual borrower under the scheme has been set at Tk 50 lakh.
To strengthen risk management, participating banks will be required to establish a Risk Mitigation Fund by depositing an amount equivalent to 1 percent of the interest earned. They must also maintain an additional 1 percent of interest income as a General Reserve under Common Equity Tier-1 (CET-1) capital.
Banks must submit quarterly progress reports to Bangladesh Bank’s Agricultural Credit Department-1, which will oversee implementation through both on-site and off-site inspections.
The circular further clarified that all credit risks related to customer loans will remain with the lending banks, which must repay Bangladesh Bank regardless of their loan recovery performance.
The guidelines also allow contributing banks to treat the amount deposited in the BBADCF as part of their Statutory Liquidity Ratio (SLR).
If a bank fails to repay the principal and interest within the stipulated 18-month period, Bangladesh Bank will recover the outstanding amount by debiting the bank’s current account.
The circular warned that any misuse of the fund would trigger immediate recovery of the amount along with interest charged at the prevailing policy rate.
Issued under Section 45 of the Bank Company Act, 1991, the new guidelines supersede the previous instructions issued on December 19, 2022, and took immediate effect.