Lending to the agriculture sector fell 9 percent year-on-year to Tk 7,475.60 crore between July and November of the current fiscal year, according to central bank data.
Farm loan disbursement also dropped 16 percent from July to October.
The ongoing liquidity crunch in the banking sector has left an adverse impact on the disbursement of farm loans, creating difficulties for farmers in growing crops without any interruption, said a central bank official.
The Bangladesh Bank has set a farm loan disbursement target of Tk 21,800 crore for the current fiscal year of 2018-19, of which 34.29 percent was disbursed between July and November.
Eight state-owned commercial and specialised banks — Sonali, Janata, Agrani, Rupali, BASIC, BDBL, Bangladesh Krishi, and Rajshahi Krishi Unnayan Bank — disbursed Tk 3,807 crore altogether.
Private and foreign banks gave out Tk 2,744 crore in agriculture loans during the five-month period.
Lenders faced a difficult time to mobilise deposits throughout the outgoing year as clients prefer savings certificates and bonds, as they offer higher yield than banks’ savings products, the central banker said.
The decision of the banking watchdog to tighten the banks’ advance-deposit ratio by March next year has also worsened the farm loan disbursement. Banks have to lower the ADR by cutting down on credit disbarment.
As per the central bank’s instruction, traditional lenders will have to cut the ADR by 1.5 percentage points to 83.50 percent from 85 percent and to 89 percent from 90 percent for Shariah-based banks.
The liquidity crunch has prolonged because of a huge cash withdrawal from banks by the candidates who took part in Sunday’s national polls.
Besides, the government is borrowing from commercial banks to finance its election-related expenditure, piling further pressure on the lenders.
The liquidity crunch will continue into February next year and it will not only hit the farm sector but also the industrial sector, said a top banker.
Farm loan has been declining for the last few years thanks to the reluctance of private and foreign banks to provide financing to the agriculture sector, according to a recent survey of the Bangladesh Institute of Bank Management.
As per the central bank’s policy, banks have to set aside at least 2 percent of their total loans for the agriculture sector.