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Govt needs to push private banks for more farm loans

Says Prime Bank MD

Sajjadur Rahman
The government needs to push private commercial banks to disburse more agriculture credit, which remains a less preferred area for the banks, to spur rural economy, a top banker has said.
"The government should also give incentives to banks for disbursing increased farm loans," M Shahjahan Bhuiyan, managing director of Prime Bank, said on Monday.
Bangladesh's agriculture sector will not develop unless private commercial banks expand their activities in rural areas, Bhuiyan added.
Banking sector people say the private banks have a huge amount of idle money.
Bhuiyan said the banking sector in Bangladesh has about Tk 15,000 crore idle money despite the fact that farmers borrow at 50 percent interest rate from traditional moneylenders to meet their financial needs during peak farming seasons.
"If the commercial banks give the farmers credit at 12 percent interest rate, the farm production will rise significantly," he said adding that in many areas arable land remains underutilised because of fund crisis.
Disbursement of agricultural loan was Tk 5,293 crore in fiscal 2006-07, according to the central bank report. Of the disbursed loan in fiscal 2006-07, Bangladesh Krishi Bank alone disbursed 51.86 percent of total loans followed by 19.42 percent by the nationalised commercial banks.
The Bangladesh Bank report however said the private banks' lending to agricultural sector in fiscal 2006-07 increased signifi-cantly to Tk 1,117 crore. However, the BB report said private banks' lending to the farm sector is still low.
The central bank can set farm credit target for banks and reduce tax for the banks that disbursing more farm loans to promote rural economy.
Bangladesh has been struggling to deal with food grains crisis for a couple of years due to shortage in domestic production and price hike in international markets. The country needs about three crore tonnes of food grains a year. Twin floods and a deadly cyclone damaged crops badly last year.
The agriculture sector achieved a moderate growth of 3.2 percent in fiscal 2006-07 against 4.9 percent in the previous fiscal year.
"Lower disbursement of agricultural loan than that of
the previous year was also imperative in this regard,” a central bank report said.
Bhuiyan said, "Currently, Prime Bank finances most of its agricultural credits through NGOs."
The managing director also spoke on the bank's product diversification, corporate social responsibility, Islamic banking, and the role of directors in the private banking sector.
Prime Bank is one of the leading second generation private banks that started operations in mid 90s. It made an operating profit of Tk 326 crore in 2007, an increase of 52.83 percent from the previous year.
Currently the bank has taken a strategic shift towards developing and expanding the small and medium enterprises and agriculture financing.
The SME investment stood atTk 102 crore in 2007, a growth of 133.58 percent from the previous year, according to the bank statistics.
The bank opened some 8 rural branches in the last two years. This year it has a plan to open at least 3 branches to boost rural banking, Bhuiyan said.
sajjad@thedailystar.net