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Banks fail to keep pace with agri-credit needs

Bank borrowing to finance 4.7pc budget deficit tolerable: BB governor

UNB, Dhaka
Commercial banks have failed to keep pace with the credit requirement to help recover the agriculture output losses from two recurrent floods and devastating cyclone Sidr.
During July-January period of the current fiscal year, the banks disbursed only 54 percent against the requirement of around 80 percent of the year's total credit target of Tk 8,370 crore to stimulate farm production.
The disbursement of Tk 4,551 crore during the period was, however, 62 percent more than what the commercial banks disbursed during same period in the previous fiscal, according to Bangladesh Bank (BB) figures released yesterday.
The central bank has been insisting the banks since the second flooding last year to increase agriculture credit and disburse 80 percent uf the fiscal year’s total credit target by January so that the farmers could recoup their production losses through increased Boro cultivation.
"The response from the state-owned banks has been slow. The private banks did better,” Bangladesh Bank Governor Dr Salehuddin Ahmed said yesterday.
He was exchanging views with the new executive committee members of Economic Reporters Forum at the BB conference room on current economic issues including government's borrowing from the banking system, inflation and foreign exchange reserve position.
The governor said the central bank will again talk to the commercial banks to expedite agriculture credit disbursement and achieve the target by March.
He advised the banks not to chase the certificate cases while considering loan disbursement, as the amount stuck up against the cases would be at most Tk 50 crore, which is much less than one single loan defaulter from the large sectors.
On the most recent estimate of increased government borrowing from the banking system, Dr Salehuddin said: “The 4.7 percent budget deficit is quite tolerable. It's unlikely to affect the inflation as well as the private sector lending."
He said the government borrowing so far was not so high except for the portion of Bangladesh Petroleum Corporation (BPC).
The government has so far borrowed only Tk 4,667 crore, excluding BPC's Tk 7,000 crore, from the banking system during the current fiscal year against total budgeted amount ofTk 7,253 crore.
About the forex reserve that stood at USS 5.9 billion as of yesterday, the governor said some people have suggested that the BB should hold the reserve at a level of USS 3.5 billion and release the rest to ease the forex market.