2020-2021 Agricultural & Rural Credit Policy and Program for the Fiscal Year 2020-2021

Bangladesh Bank (central bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh. www.bb.org.bd

Agricultural Credit Department

07 Srabon, 1427 Date: ———————— 22 July, 2020

ACD Circular No.-03

Managing Director/Chief Executive All Scheduled Banks and BRDBs operating in Bangladesh

Dear Sir,

2020-2021 Agricultural & Rural Credit Policy and Program for the Fiscal Year 2020-2021.

The Agricultural & Rural Credit Policy and Program for the fiscal year 2020-2021 has been formulated and is attached herewith.

In order to follow and implement the said policy and program, necessary instructions are being provided to the concerned banks and institutions. It is advised that all branches of scheduled banks and institutions, under the determined credit distribution targets of sub-sectors, and Microfinance Institutions (MFIs) under the determined credit distribution targets of microfinance, submit the details of their required credit distribution targets to this department by 23 August, 2020.

This policy and program will be considered effective from 01 July, 2020.

Appendices 4 to 5, pages 95.

Yours faithfully,

(Md. Habibur Rahman) Managing Director Phone: 9530138

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Table of Contents

Page No.
**1.0
**2.0
2.01
2.02
2.03
2.04
**3.0
**4.0
**5.0
5.01
5.02
5.03
5.04
5.05
5.06
5.07
5.08
5.09
5.10
5.11
5.12
5.13
5.14
5.15
5.16
5.17
5.18
5.19
5.19.1
5.19.2
5.19.3
5.19.4
5.20
5.21

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2020-2021 Agricultural & Rural Credit Policy and Program for the Fiscal Year 2020-2021

1.0 | Introduction

Agriculture is one of the driving forces of Bangladesh's economy. The role of the agricultural sector in the overall economy of the country is undeniable. The contribution of the agricultural sector to the country's Gross Domestic Product (GDP) is 15.36 percent (based on 2006-07 fiscal year prices). In addition, 80.30 percent of the country's total workforce is directly involved in agriculture. However, the majority of the public depends directly or indirectly on agriculture. Furthermore, the agricultural sector plays a significant role in food production, nutrition security, increasing sustainable income, creating employment, and above all, contributing to the country's internal (GDP growth). Even in coping with environmental disasters and climate change-related alternative effects, the role of agriculture is extensive. Therefore, the development of the agricultural sector is essential for the economic development of the country.

To ensure food and nutrition security for the population of Bangladesh, an advanced agricultural system is required. It is possible to improve the quality of life of the future public in the vast villages and rural areas of Bangladesh through the development of the agricultural sector. In this regard, the Government of Bangladesh has taken various initiatives, such as becoming self-sufficient in food grain production. In addition, Bangladesh has shown considerable success in fish and livestock production, horticulture, and fruit production. Due to the development of the agricultural sector, poverty alleviation is becoming easier, and per capita income of the country is gradually increasing. Therefore, the Government of Bangladesh has given maximum importance to all matters related to agriculture. In addition, continuous care of the agricultural sector is required for the main goals of the Sustainable Development Goals (SDGs), which are poverty alleviation, micro-liberation, and achieving security. Therefore, this sector will receive maximum benefits. The National Agricultural Policy has already been formulated by the government to ensure food self-sufficiency and food security for the country and to increase production of all types of classes. In the government's adopted processes (2015-2020) planning, more emphasis is being given to increasing agricultural production in rural areas through improved agricultural production and the use of new technology.

Recently, like various countries in the world, the crisis created by the coronavirus pandemic in Bangladesh has disrupted financial activities, and a negative impact is being observed in the agricultural sector as well as in other sectors. If the prevalence of the coronavirus becomes prolonged, there is a fear of various crisis situations arising in the future, such as a reduction in food production. Therefore, significant investment in the agricultural sector is required to maintain stability in the country's economic activities. It is worth mentioning that to provide land capital in the agricultural sector to cope with the prevalence of the coronavirus, Bangladesh Bank is running a refinancing scheme of 5,000.00 (five thousand) crore Taka. In addition, under the Sun-skti facility, a program to distribute loans to farmers at a low interest rate (4%) in the crop and horticulture sector has been started, which will remain active throughout the current fiscal year (2020-21).

Along with various agricultural initiatives taken by the Government of Bangladesh to make the agricultural sector sustainable and prosperous, Bangladesh Bank has been taking necessary measures from time to time to assist the country's agricultural sector. To increase credit flow in the agricultural sector and increase production in this sector, Bangladesh Bank is emphasizing financial importance towards modern agricultural systems. In addition, to ensure the supply of necessary funds through increased credit flow in this sector, along with the modernization of agriculture and increasing the use of technology in the agricultural sector, Bangladesh Bank is adopting new methods to ensure that sufficient agricultural credit reaches small and marginal farmers who do not have sufficient funds available for investment in the agricultural sector. As a result, it is becoming possible to distribute agricultural credit at low interest rates, transparently, and without harassment to farmers in a timely manner. To increase banking services in unbanked areas, 150 permissions have been determined for banks to open new branches in urban and rural areas. In addition, in areas where there are not sufficient bank branches, agricultural and rural credit is being distributed through agent banking, bank-MFI partnership, and custom farming facilities.

Despite various steps taken by Bangladesh Bank following the agricultural system policy of the Government of Bangladesh, there is a need for further initiatives for the development of the agricultural sector. Overcoming the pandemic created by the coronavirus, continuing the trend of increasing agricultural production, increasing the pace of commercial agriculture, ensuring food and nutrition security, maintaining income-generating activities through employment creation in rural areas, ensuring fair prices for agricultural products at the farmer level, and above all, keeping the supply system of agricultural products intact have become the main challenges for agriculture in Bangladesh at present. In addition, it is necessary to take necessary steps and unavoidable measures to overcome crises created by natural environmental factors such as climate change effects, e.g., specific temperature increases, excessive rainfall, increased salinity, extreme weather changes, etc. It is necessary to take timely initiatives to overcome these challenges, such as providing new innovative ideas of cultivation among farmers, supplying improved and high-yielding variety seeds, developing and expanding area-based climate and environment-friendly crop varieties and technologies, and taking necessary steps for the overall development of Bangladesh's agricultural sector.

In this context, keeping in line with the government's agriculture and farmer-friendly policy to overcome the emerging contemporary challenges, the Agricultural & Rural Credit Policy and Program for the current fiscal year 2020-21 has been formulated by keeping the main directions of the Agricultural & Rural Credit Policy and Program for the previous fiscal year 2019-20 intact. Among the new matters added to the Agricultural & Rural Credit Policy for FY 2020-21, notable ones include increasing the targets and scope of agricultural and rural credit, adding credit structures for poultry and fish farming to increase credit distribution in the livestock sector, creating opportunities for providing credit for fish farming in modern (bio-floc) methods, and increasing the single limit per borrower in the credit structure. The main objective of formulating this policy is to build a sustainable agricultural system that is farmer-friendly and helps in poverty alleviation. Detailed instructions are given in this policy regarding the staff relations of banks in agricultural and rural credit activities. It is expected that this policy will play a supportive role in achieving the desired agricultural production, increasing credit flow in favor of farmers, alleviating poverty, improving the quality of life of the public in rural areas, and helping to overcome the accumulated work caused by the coronavirus pandemic.

2.0. Review of the Agricultural & Rural Credit Policy and Program for the previous fiscal year (2019-2020)

The Agricultural & Rural Credit Policy and Program for the previous fiscal year 2019-20 was announced with a target of distributing 24,124 crore Taka of agricultural and rural credit, with the aim of increasing the scope of agricultural credit, financial inclusion, expanding banking activities in rural areas, increasing credit safety through the expansion of technology in rural areas, and alleviating rural poverty. Along with crop and horticulture loans, sufficient credit was distributed under the agricultural and rural credit program in the two other main sectors of agriculture - fisheries and livestock, as well as in supportive agricultural credits, income-generating activities in rural areas, and poverty alleviation.

2.01. Targets and Achievements of the previous fiscal year (2019-2020)

In the fiscal year 2019-20, six state-owned commercial banks, two specialized banks, 38 private commercial banks, and 08 specialized commercial banks distributed a total of 22,749.03 crore Taka of agricultural and rural credit in the country, which is approximately 94.30 percent of the total target. This amount of credit distribution is 837.22 crore Taka or 3.67 percent less compared to the previous fiscal year (2018-19). In addition, 818.14 crore Taka of agricultural and rural credit was distributed by MFIs in the fiscal year 2019-20. It is worth mentioning that among private banks, some banks have increased their capacity by suddenly forming separate agricultural and rural credit departments or sub-departments and employing skilled manpower.

2.02. Implementation of steps taken in the previous fiscal year

• In the fiscal year 2019-20, a total of 30,66,786 farmers received agricultural and rural credit, of which 15,14,357 women received approximately 8,359.93 crore Taka of loans from various banks through the bank's own network and MFI linkage.

• To provide agricultural credit through a transparent process, agricultural credit was distributed by various banks at the union level in the presence of local representatives, organized agricultural officers, teachers, and other respected personalities. Through a total of 15,522 public credit distribution programs organized by various banks in the fiscal year 2019-20, approximately 676.31 crore Taka of agricultural credit was distributed publicly among approximately 1,02,889 farmers.

• In the fiscal year 2019-20, 23,54,888 small and marginal farmers received approximately 16,250 crore Taka of agricultural credit from various banks.

• In the fiscal year 2019-20, approximately 21.21 crore Taka of agricultural and rural credit was distributed among 7,179 farmers in low-lying areas such as chars and haors through the initiative of various banks.

• Banks, including state-owned banks and other scheduled banks, have opened approximately 101.51 lakh accounts so far by accepting deposits of only 10 Taka for farmers. Banks are advised to use these accounts for distributing agricultural credit, accepting savings and deposits, remittance deposits, etc., in addition to land grants provided by the government. Bangladesh Bank is regularly monitoring how these accounts are being used in normal banking activities.

• Due to the repatriation of banks by Bangladesh Bank in the program of distributing agricultural credit at a 4 percent rebate interest rate for certain imported crops (pulses, oilseeds, spices, and corn), interest has been generated among farmers to cultivate these types of crops. Approximately 106.57 crore Taka of credit was distributed in this sector in the fiscal year 2019-20. As a result, local production of these crops has increased, and its effect has been seen in the market. It is worth mentioning that the amount of credit distributed in this sector in the fiscal year 2019-29 was 108.81 crore Taka.

• In the fiscal year 2019-20, 79.76 crore Taka of credit was distributed among approximately 20,666 indigenous farmers in 3 districts of the Chittagong Hill Tracts at an interest rate of only 5 percent.

• To protect the interests of agricultural and rural credit and other high courts, protect customers from any kind of harassment in getting banking services, and resolve their complaints quickly, Bangladesh Bank has established a Customers’ Interest Protection Center (CIPC). A hotline number 16236 has also been activated in the said center. Appropriate measures have been and are being taken based on complaints received in the said center regarding agricultural and rural credit.

• Along with storing mobile numbers of agricultural credit beneficiaries in the bank path, monitoring of farmers' receipt of agricultural credit by organized banks and Bangladesh Bank has been further strengthened.

• In the fiscal year 2019-20, credit was distributed among successful farmers by various banks.

2.03. Agricultural and Rural Development Support Programs

Despite having fertile land, poverty alleviation in the fertile western region of Bangladesh was the objective of the traditional agriculture instead of high-value crop/vegetable/fruit production. The Northwest Crop Diversification Project (NCDP) implemented by the government ended on 30 June 2009. In light of the success of this project, under the Second Crop Diversification Project (SCDP), loans are being distributed among qualified farmers through the helpline management of Inter-Bank Ltd. and Basic Bank Ltd. In the said project, a credit component of 26 million dollars, approximately 203 crore Taka, has been distributed from Bangladesh Bank to the two helpline banks participating in the project.

2.04. Supportive role in monetary policy implementation

In the rapidly changing global context, in a developing country like Bangladesh, through the government's political and various developmental initiatives and Bangladesh Bank's prudent and vigilant monetary policy, it has been possible to achieve over 7 percent GDP growth in recent years. Due to the skillful implementation of Bangladesh Bank's monetary policy, price stability in the last fiscal year 2019-20 has been maintained within a tolerable limit. In this regard, it is noteworthy that food price stability was in a tolerable and downward trend. This was helped most by the significant increase in food production. Despite the reduction in cultivated land due to decreasing population pressure, the production of agricultural products in Bangladesh has continued to increase steadily. Compared to the post-independence period, rice production has now become approximately three times. In addition, besides exporting rice, it has become possible to export frozen fish, vegetables, fruits, and other agricultural products to various countries in the world. Again, due to the provision of credit at a rebate interest rate in the import substitution sector to encourage import substitution, production has increased extremely in those sectors. Due to the extensive increase in all types of economic activities outside the agricultural sector in the rural economy, there has been a huge increase in demand across the country, and the market has become complete.

3.0. Targets for Agricultural & Rural Credit Disbursement for FY 2020-21

Considering the increasing demand for agricultural and rural credit, the target for agricultural and rural credit disbursement for the current fiscal year has been determined at 25,292 (twenty-five thousand two hundred ninety-two) crore Taka (Appendix 'B'), calculated based on the self-determined targets of state-owned commercial and specialized banks and the policy loan plus an additional 2% rate for private and foreign commercial banks. This amount has increased by approximately 8.99 percent compared to the previous fiscal year 2019-20. Considering the delayed situation, scheduled banks must prioritize credit distribution in the agricultural and rural credit sectors over other sectors. In addition, Bangladesh Cooperative Bank Ltd. and Bangladesh Rural Development Board (BRDB) will distribute 22 crore Taka and 957 crore Taka of agricultural and rural credit respectively under their own supervision, outside the determined targets for banks.

4.0. Notable Features of the Agricultural & Rural Credit Policy and Program for FY 2020-21

Despite the provision that all private and foreign commercial banks in the country must determine a target for agricultural and rural credit disbursement of at least 2.5 percent of the total loans of scheduled banks, considering the capacity and branch location of the banks, the target for the current fiscal year has been determined for private and foreign commercial banks based on policy loans plus an additional 2% rate as of 31 March, 2020, as in the previous fiscal year. This target for agricultural and rural credit disbursement must be implemented mandatorily. Even after providing relaxation in the calculation of the target, banks that will not be able to achieve the target must mandatorily deposit the amount equal to the shortfall included in the target or 3% of the calculated amount to Bangladesh Bank at the end of the fiscal year. However, Bangladesh Bank will not pay any interest on the deposited amount.

• According to the Agricultural & Rural Credit Policy, priority must be given to credit distribution in the 3 core sectors of agricultural credit (i.e., crops, fisheries, and livestock) compared to other sectors.

• Along with distributing at least 60% of the total target in the crop sector, at least 10% of the target must be distributed in the fisheries sector and at least 10% in the livestock sector.

• Private commercial banks must emphasize credit distribution through their own network by reducing dependence on microfinance institutions.

• Application forms for agricultural credit for normal (eligible) farmers must be made easily available.

• Banks must conduct the preliminary activities of farmers' loan applications. If a farmer's loan application for agricultural credit is not considered, the reason for not receiving the loan must be mentioned and the farmer must be informed through the next medium, and it must be stored in a file.

• To avoid delays in filling out application forms and related work, all kinds of instructions must be provided to the customer at the time of receiving the application form. If any additional information is needed, all information must be provided to the customer in a single meeting.

• Loan applications for crop and horticulture cultivation must be resolved as quickly as possible. In this regard, the time limit for resolving loan applications will be a maximum of 10 working days.

• To encourage normal banking activities through farmer accounts opened with 10 Taka, exemption from remittance fees has been provided for debit/credit balances up to a maximum of 1 lakh Taka in such accounts. In addition, to bring dynamism to the use of such accounts, ACIFT Circular Letter-04 was issued on 06 November, 2012. Through detailed monitoring, Bangladesh Bank monitors the actual use of farmers' 10 Taka accounts and associated economic observation.

• To ensure timely delivery of temporary agricultural credit at the farmer level, CIB reports will not be required for short-term crop and horticulture loans up to 200,000 Taka for new wages or renewals. However, CIB reports must be reported for all crop and horticulture loans of any amount.

• Agricultural credit distribution must be implemented through the Area approach method by giving importance to economic crop production, i.e., giving importance to crops that produce well in specific areas.

• Providing the necessary amount of money at the right time to small and marginal farmers along with the wealthy is one of the objectives of the Agricultural & Rural Credit Policy. Priority must be given to providing agricultural credit in relatively undernourished and neglected areas (e.g., chars, haors, coastal areas, etc.).

• To bring more transparency in agricultural credit distribution, emphasis must be given to public agricultural credit distribution at the union level. If necessary, officers of the concerned bank branch can camp at the local market day to disseminate information related to agricultural credit and distribute loans.

• To ensure that genuine farmers receive the necessary amount of agricultural credit at the right time, that farmers do not become victims of harassment in getting agricultural credit, and that the determined target of agricultural credit can be fully achieved, concerned banks must ensure effective monitoring systems.

• Genuine small, marginal farmers and the wealthy must be given agricultural credit easily on a single/group basis.

• To ensure fair prices for products produced at the farmer level, credit must be provided to genuine farmers in the crop processing and marketing sector against processed agricultural products.

• Measures must be taken to provide the necessary amount of agricultural credit to successful farmers so that other farmers are also encouraged to follow them.

• To ensure balanced participation of banks in credit distribution against government-provided principal loss in the cultivation of pulses, oilseeds, spices, and corn, and at the same time to enable private and foreign commercial banks to participate in this program, the applicable interest rate for credit distributed at the farmer level has been determined at 4 percent since the fiscal year 2011-12. Banks must provide credit at a rebate interest rate to farmers to produce these crops to reduce import dependence. To enable banks to receive benefits, the process of receiving benefits has been simplified.

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If a farmer has not taken any other agricultural loan in default, a discounted interest rate of 4% may be provided for loans for cultivating pulses, oilseeds, spices, and corn.

Loans must be supplied at the user level for irrigation machinery and agricultural machinery as supporting sectors of agriculture.

Loans must be provided for the establishment of solar home systems and solar-powered irrigation pumps.

Alongside agriculture and its supporting sectors, arrangements must be made to provide loans on an individual/group basis for various self-employment or income-generating activities that bring momentum to the rural economy.

Since foreign banks and many private banks are participating in agricultural loan distribution programs through MFIs due to branch ownership reasons, instructions have been issued to verify the agricultural and rural loan programs distributed by private and foreign banks through MFIs on a random basis. Bank supervision reports will be verified and selected, and Bangladesh Bank will conduct field supervision programs on a daily (random sampling) basis to verify the accuracy of agricultural and rural loan distribution.

Women must be given priority in the distribution of agricultural and rural loans.

The achievement of agricultural and rural loan distribution targets will also be seen as the success of the management authority of the concerned bank. Consequently, this achievement will be considered as one of the negative criteria in opening new branches of the concerned bank, approving dealer branches, and approving the opening of exchange houses abroad. In addition, the success of banks in distributing agricultural loans will also be considered along with other matters in the CAMELS Rating by Bangladesh Bank. Agri Financing Performance, target achievement, crop sector loan distribution, 4% discounted rate loan

Fiscal Year 2020-21 Agricultural and Rural Credit Policy and Program 59

distribution, loan distribution through own branches, and recovery rate against recoverable loans will be considered. In the case of special liquidity support, transparent banks in the agricultural loan program will get priority.

- District Agricultural Credit Committees formed under the leadership of Commissioners in each district must be made more active.

- Arrangements must be made for the participation of nominated representatives of private and foreign commercial banks in the meetings of the District Agricultural Credit Committee.

- The concerned banks must follow the instructions given for the implementation of agricultural and rural loan programs on the basis of partnership with MFIs approved by the Microcredit Regulatory Authority (MRA).

- Outsourcing can be used in the operation of agricultural and rural loan programs.

- Emphasis should be placed on 100% distribution and recovery of agricultural and rural loans, and the use of information technology and mobile phones in the agricultural loan system should be encouraged.

- Special emphasis should be given to providing loans in the high-value crop sector.

- Agricultural loans can be provided to farmers considering the parasitism provided by the concerned entrepreneur institution in the contract farming system. In addition, under the specific crop production plan, agricultural loans can be provided at the farmer/entrepreneur level with the consent of Bangladesh Bank to supply money/agricultural inputs on time for crop production. Under contract farming, agricultural loans can be provided to farmers/entrepreneurs with the consent of Bangladesh Bank to supply money/agricultural inputs on time for crop production under the specific crop production plan.

- In order to adapt the loan system with climate change, some changes in the time limit for loan distribution and recovery may be made as needed, along with providing loan facilities for initiatives such as cultivating salt-tolerant crops in saline areas, water-tolerant crops in flood-prone and flood-prone areas, and drought-tolerant crops in drought-prone areas, which are adaptive crops with climate change.

- Loans must be provided to salt farmers in the coastal areas of the country on easy terms. The interest subsidy refund provided by the government can be provided to salt farmers at a 4% interest rate as a discounted facility for salt farming.

- Concerned parties must take necessary initiatives for awareness and training on the Agricultural and Rural Credit Policy.

- In order to ensure that there is no liquidity crisis for agricultural loans and to ensure the optimal use of funds, separate Recovery cells must be formed in respective banks as needed for loan recovery.

- Priority must be given to providing loans to farmers for crop cultivation on non-residential land.

- Loans can be provided for fish farming in the bio-grass method.

- Loans can be provided in the sectors of duck farming, tilapia farming, and cattle farming.

- Loans can be distributed for cultivation in floating systems and in all agricultural projects for agricultural-related work.

## 5.0. Agricultural and Rural Loan Distribution Method

### 5.01. Identification of Genuine Farmers/Borrowers

Banks will identify genuine farmers based on the National Identity Card and Agricultural Input Assistance Card of applicants for agricultural and rural loans. For farmers with open accounts who have deposited only 10 Taka against the Agricultural Input Assistance Card, genuine farmers can be identified solely based on the passbook in the distribution of loans. In cases where there is a National Identity Card but no Agricultural Input Assistance Card, a certificate from the Chairman of the Union Parishad or the Principal of a local school/college or a person acceptable to the bank can also be used for the identification of genuine farmers as needed.

Fiscal Year 2020-21 Agricultural and Rural Credit Policy and Program 58

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In such cases, a certificate from the Chairman of the Union Parishad or the Principal of a local school/college or a person acceptable to the bank can also be used for the identification of genuine farmers as needed.

### 5.02. Eligibility of Borrowers

Genuine farmers directly engaged in agricultural work will be considered eligible for agricultural loans. Those involved in income-generating activities in rural areas can also receive loan facilities for agricultural and rural loans in the relevant sectors. However, generally, borrowers in default will not be considered eligible for new loans. Loans can be provided to open, small, remote farmers, and other farmers easily on an individual/group basis.

### 5.03. Simplification of Application Forms

To make farmers more bank-oriented, it is desirable that the application process for agricultural loans, especially crop/seasonal loans, be as simple as possible. Considering the educational qualification of the general farmers of Bangladesh, the time required to fill out forms, the use of information in forms, and their usefulness, banks will take initiatives to simplify the application forms for agricultural loans, especially crop/seasonal loans, as needed. To avoid delay in filling out application forms and related work, all kinds of instructions regarding the account should be provided to the customer at the time of accepting the application form. If any additional information is needed, all information should be provided to the customer in a single meeting. Initiatives must be taken to make the application forms for agricultural and rural loans more accessible to borrowing farmers. To make the application forms for agricultural and rural loans more accessible to borrowing farmers, banks must upload the agricultural loan application form on their website, publish it clearly, and take necessary arrangements to promote it in print and electronic media to encourage farmers to apply for agricultural loans according to the uploaded/published sample form.

In the account process, a sample application form for agricultural loans (applicable for crop and seasonal loans) for use by all banks, "Appendix-B", has been attached. Each commercial bank will prepare its agricultural loan application form according to the said sample application form.

### 5.04. Acceptance, Preliminary Processing, and Consideration of Application Forms

The concerned bank branch will approve the annual required seasonal loan and other loans of the applicant in a lump sum according to the prescribed loan regulations. However, arrangements must be made at least 15 days before the start of the concerned crop production season for loan distribution. For this purpose, concerned bank branches will accept application forms along with the annual crop production plan of farmers. As needed, farmers will be given the opportunity to evaluate changes in their annual production plan later.

A receipt must be issued for the customer's application form. After receiving the application form, the time gap between loan approval and distribution must be minimized, and if the customer has any complaint, it must be resolved quickly. Especially, applications for loans for crop and seasonal cultivation must be resolved as quickly as possible. In this case, the time limit for resolving loan applications will be a maximum of 10 working days from the date of submission of the application form.

Cancelled application forms must be kept in a file mentioning the reason for cancellation. The file must be kept for verification by the Bangladesh Bank inspection team and the inspection teams of their respective banks.

### 5.05. Account Opening Fee/Charges for Application Forms

Accounts can be opened for a primary deposit of only 10 Taka in response to the farmer's application. In operating such accounts, the conditions mentioned in Section 5.17 must be followed. As a priority sector, to ensure the receipt of low-interest loans for farmers/customers, no other charges, processing fees/monitoring fees, etc., in any name other than the prescribed interest for all kinds of agricultural and rural loans will be charged by banks. In addition, no other fees/charges will be charged in the distribution of agricultural and rural loans through bank-MFI linkage/partnership by small enterprises, except for fees/charges determined by the Microcredit Regulatory Authority.

For crop/seasonal loans (up to 5 acres), banks and small loan institutions distributing agricultural and rural loans in partnership with banks can accept the following charges/documents other than any other charge/document:

- DP Note (Stamp/Official instruction from 10 Taka to 50 Taka)
- Letter of Hypothecation (No stamp required)
- Letter of Guarantee Personal (No stamp required)

### 5.06. Maximum Limit of Loan

A farmer can be provided a loan without guarantee at the prescribed rate for cultivating up to 15 bigha (5 acres or 2 hectares) of land for crop production. Applications for agricultural loans for land larger than the mentioned amount can be considered by banks under their existing conditions.

### 5.07. Legible Reporting and Legible Inquiry

According to ACD Circular Notice-02 dated December 03, 2018, a legible report must be made for all outstanding seasonal and crop loans in any account. However, for short-term seasonal and crop loans up to 2.5 lakh Taka for new approval or renewal, a legible report is not required. However, the concerned loan distributing bank must ensure that the farmer has not received agricultural loans due to default loan clearance.

### 5.08. Guarantee

Generally, for crop loans for cultivation on land up to 5 acres, loans can be provided only against the hypothecation of the concerned crop. However, for providing loans for cultivating more than 5 acres of land, the issue of accepting/not accepting guarantees will be determined by banks/financial institutions under their existing conditions based on the bank-customer relationship. In the case of providing loans for income-generating activities under the agricultural and rural loan program, the issue of accepting group/individual guarantees can be considered.

### 5.09. Allocated Area for Loan Distribution

Under the 'Lead Bank' system, concerned bank branches will provide loans for various sectors of agriculture, including crops, in the unions allocated to them. However, loans can be provided to any interested applicant from adjacent unions allocated to other bank branches, subject to submitting a no-objection certificate from the concerned branch. For this, lists of loan borrowers must be exchanged among adjacent bank branches. In addition, since agricultural and rural loan distribution is mandatory for all scheduled banks operating in Bangladesh, including private and foreign banks, private and foreign banks will distribute agricultural and rural loans in the said area from the bank branch to which the union is allocated under the Lead Bank system, after obtaining a no-objection certificate.

### 5.10. Agricultural Loan Passbook

The 'Passbook' is mandatory for providing loans under the agricultural loan program, and all existing rules and regulations related to it must be followed properly. For new loan borrowers, loans must be distributed through the issuance of a passbook. It is mentioned that bank statements will be acceptable instead of the passbook.

Fiscal Year 2020-21 Agricultural and Rural Credit Policy and Program 57

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5.11. Timely Loan Distribution According to Crop Production Calendar

A crop production calendar has been attached in Appendix "C" for the timely, smooth distribution, supervision, and recovery of loans by bank branches. However, banks can change the loan distribution time and repayment schedule for the concerned crops according to local conditions. Due to differences in the ideal time for sowing/planting crops in different areas and natural disasters, if sowing/planting is delayed or re-planting is required, loans can be distributed up to the basic time.

5.12. Mixed Crops/Intercropping/Relay Cultivation

In areas where it is possible to produce another companion crop on the same land at the same time along with the main crop, additional loans for companion crop cultivation can be provided to interested farmers along with the loans provided for the main crop. For this, follow the loan schedule of companion crops in Appendix 'D'. In the case of mixed crops/companion crops/relay cultivation not mentioned in the said appendix, banks will take necessary arrangements in consultation with the local sub-cooperative agricultural extension officer.

5.13. Crop Diversification

In order to achieve rapid self-sufficiency in food production in the country and to ensure balanced and nutritious food supply for the people, it is necessary to increase the production of the said crops through the "Crop Diversification Program" to popularize the diversified use of potatoes, pulses, oilseeds, corn, etc., among the people. Banks/financial institutions will give more emphasis on providing loans for the said profitable crops along with their general loan programs.

5.14. Area-wise Agro Calendar System

Agricultural loan distribution must be implemented based on the area-wise agro calendar, giving importance to area-based crop production, i.e., which crops produce well in which area. In areas where sufficient vegetables, onions, potatoes, garlic, pulses, bananas, cauliflower, strawberries, palm, oranges, agar, betel leaf, chili, potatoes, etc., are produced, sufficient loans must be distributed for those crops. For this, a list related to this can be collected from the Department of Agricultural Extension as needed and arrangements can be made. In addition, additional direct knowledge and experience through residence in the concerned area must be utilized in this case.

5.15. Loan Distribution in the Core Sectors of Agricultural Loans

Priority must be given to loan distribution in the three core sectors of agriculture (food crops, fisheries, and livestock) over other sectors.

5.16. Arrangements for Transparent Account-based Agricultural Loan Distribution

To ensure that genuine small farmers and marginalized people can easily and timely receive transparent account-based agricultural loans, especially crop and seasonal loans, agricultural loan distribution must be done in the presence of local representatives, agricultural-related officers, teachers, and other respected persons at the union level as much as possible. As needed, officers of the concerned bank branch can camp on the day of the local market to disseminate information related to agricultural loans and distribute loans.

5.17. Encouraging Loan Distribution and Keeping Accounts Active for Farmers with Accounts Opened at 10 Taka as Part of Financial Inclusion

As part of financial inclusion, the following steps have been taken to encourage banking activities such as loan distribution, savings deposit and withdrawal, remittance deposit, etc., through accounts opened at 10 Taka in various banks for farmers, in addition to subsidy deposits:

a) To increase sincerity in the agricultural loan program, loans must be distributed through these accounts for farmers who have such accounts, without special motivation.

b) Banks will consider giving interest at a rate 1-2% higher than the general savings account to increase transactions in these accounts.

c) The head offices of the concerned banks will determine the annual target for keeping these farmers' accounts active for their branch managers.

d) To keep this huge number of accounts active, farmers can be encouraged to deposit the money from the sale of their crops or the money they have formed, remit, etc., in these accounts through normal banking activities, which can collect un-tapped savings in rural areas.

e) Bank branches can consider providing short-term low-interest loan facilities up to 10% in such accounts.

f) There will be no mandatory requirement to keep a minimum annual balance in these accounts, and no charges or fees will be imposed.

g) Resident tax/ledger deduction has been waived for balances up to 1 lakh Taka in such accounts.

h) Farmers' accounts will never be made inoperative or dormant.

i) Considering the education of farmers, they will be given cash withdrawal vouchers instead of checks. However, checkbooks will be given to those farmers who want checkbooks.

j) To make rural economic activities more dynamic by keeping 10 Taka accounts active, Bangladesh Bank has formed a Revolving Refinance Fund of 200.00 Crore Taka from its own source to provide loans on easier terms.

It is mentioned that, in addition to timely government subsidy deposits, concerned banks are submitting organic reports to Bangladesh Bank on how 10 Taka farmers' accounts are being used in normal banking activities, which will continue.

5.18. Revolving Crop Credit Limit System

A revolving crop credit limit system has been introduced to ensure the continuous flow of agricultural loan distribution and for a year-long period. Farmers involved in continuous crop production will receive loan facilities under this system. For this loan distribution, loans can be renewed and re-approved and distributed without re-documentation after collecting all interest-bearing seasonal loans previously distributed. Document preparation must be simplified as much as possible. In the case of loan approval, the bank's concerned branch will make a formal journal (Power delegate) to the branch managers. If the production plan changes after loan approval and the demand for loans increases, farmers can apply to the bank again. Banks will formulate this scheme involving loan guarantee, loan limit, interest rate, etc., in accordance with the Agricultural Loan Policy.

5.19. Loan Distribution to Concerned Farmers under Contract Farming

The contract farming system between producing farmers and large-scale agricultural product processing institutions can play a role in getting farmers a fair price for their produced products by reducing marketing costs through mutual understanding. Due to the processing of agricultural products, export, and increased demand, contract farming has become quite popular in some agricultural products. Banks can provide loans to entrepreneurs involved in industries such as ground spices, bottled oil, juice, chips, chanara, poultry kids, etc., to ensure the timely supply of the required amount of raw materials while maintaining quality standards through contract farming with farmers.

5.19.1. Basic Matters to be Mentioned in the Contract

Under the contract farming system, a valid contract (executed on a non-judicial stamp paper of 300 Taka value) must be executed with the buyer on an individual or group basis with the genuine farmer. The following matters must definitely be mentioned in the contract:

a) The contract must be executed before the production of agricultural products. When executing group-based contracts, contracts must be executed separately with farmers producing the same type of product. That is, contracts cannot be made with multiple product-producing farmers under the same contract. The contract must mention the duration, land area, location, description of the produced product, quality of the product, cultivation method, crop supply arrangement, price of the product, payment method, insurance arrangement (subject to crop insurance being active), etc.

b) It must be clearly mentioned in such contracts what kind of assistance will be provided to the farmer in the production of agricultural products. That is, if loans are provided to the farmer, the amount of the loan, interest rate of the loan, loan repayment method, etc., must be mentioned. In addition, in the case of assistance with inputs (e.g., seeds, fertilizers, pesticides, etc.), the name, amount, price of the inputs, and how the price will be adjusted with loan repayment must be mentioned.

c) If the farmer's produced product is according to the quality mentioned in the contract or not, how the selling price of the product will be determined, and if the farmer sells the said produced product to a third party, how the loan and input assistance provided to the farmer will be adjusted must be mentioned in the contract.

d) If other assistance such as training, provision of advanced technology facilities, etc., is provided in addition to loans and input assistance, whether it is free or priced, or what amount, must be mentioned in the contract.

e) In case of crop loss due to natural disasters, specific conditions for compensation or remedial measures for the farmer must be mentioned.

5.19.2. Eligibility of Entrepreneurs or Buyers

a) Must be a company registered with the Registrar of Joint Stock Companies and Firms.

b) Must have sufficient experience in storage, marketing, and processing of agricultural products.

c) Must have practical experience in working with farmers at the field level.

5.19.3. Other Conditions

a) In the case of providing loans to agricultural industrial centers/factories, a copy of the contract executed on an individual or group basis with the farmer producing agricultural products must be supplied to Bangladesh Bank, and the consent of Bangladesh Bank must be obtained before each such loan is provided.

b) If contracts are executed with farmers on a group basis under contract farming, the list of farmers and divisions must be supplied with the executed contract. The list must definitely mention the name, address, and mobile number of the farmers.

c) In the case of loans provided under contract farming, the maximum limit prescribed by Bangladesh Bank for agricultural loans will be applicable for determining the actual reducing balance interest rate at the farmer level, and no additional charges will be imposed on the said interest rate.

d) Necessary information and account details of beneficiary farmers must be kept by the concerned entrepreneur institution and supplied to the financing bank as needed.

e) Loans must be provided under contract farming following the loan schedule of the crops mentioned in the Agricultural and Rural Credit Policy. In this case, the loan limit per acre for specific crop cultivation must be followed.

Fiscal Year 2020-21 Agricultural and Rural Credit Policy and Program