ACD Circular No. 08: Formulation of Bangladesh Bank Agricultural Development Common Fund (BBADCF)

Bangladesh Bank (Central Bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh.

Agricultural Credit Department

ACD Circular No. 08 Date: 04 Poush 1429 19 December 2022

Managing Director / Chief Executive All Scheduled Banks Operating in Bangladesh.

Dear Sir,

Regarding the formation of the 'Bangladesh Bank Agricultural Development Common Fund (BBADCF)'.

With reference to Section 6.03 titled 'Determination and Implementation of Targets for Agricultural and Rural Lending Distribution' of the current 2022-23 Agricultural and Rural Lending Policy issued via ACD Circular No. 04 dated 28 July 2022, and ACD Circular No. 03 issued by this department on 22 October 2017, it is informed that a decision has been taken to form a fund named 'Bangladesh Bank Agricultural Development Common Fund (BBADCF)' to invest the unachieved portion of the annual agricultural and rural lending distribution targets of banks for the purpose of increasing agricultural production. The following policy will be applicable for the management of this fund:

a) Banks failing to achieve the target for agricultural and rural lending distribution must deposit an amount equal to the unachieved portion of the target into the 'BBADCF'. Bangladesh Bank will pay interest at the rate of 2% on the deposited amount to the depositing banks;

b) The amount deposited in the 'BBADCF' will be allocated to banks on a need basis and capacity assessment. The banks must repay the principal along with interest at the rate of 2% to Bangladesh Bank within a maximum period of 18 months from the date of allocation;

c) The amount allocated to banks must be distributed to customers as agricultural and rural loans at an interest rate of 8% in accordance with the 'Agricultural and Rural Lending Policy' of Bangladesh Bank, solely through their own network (excluding MFIs linkage);

d) To reduce the loan risk of lending banks, banks must deposit an amount equal to 1% interest of the loans distributed to customers from the 'BBADCF' into the 'Risk Mitigation Fund' of the respective bank;

e) An amount equal to 1% interest of the loans distributed to customers from the 'BBADCF' must be shown as a head under 'General Reserve' of the Common Equity Tier-1 (CET-1) capital component of the respective bank's capital adequacy, and appropriate Disclosure must be provided;

f) The remaining 4% of the interest collected against the loans distributed from the 'BBADCF' can be transferred to the income head of the respective bank;

g) The above instructions will be effective from the current 2022-23 fiscal year.

In this context, the instructions under (c) and (d) of Section 6.03 of the 2022-23 Agricultural and Rural Lending Policy, and under (b) and (c) of ACD Circular No. 03 issued by this department on 22 October 2017, are considered repealed through this circular.

These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991.

Yours faithfully,

(Signature) (Md. Abul Kalam Azad) Director (ACD) Phone: 9530138

Phone: 88-02-9550448, 9554896, IP: 88-02-55665001-6, Fax: 88-02-9530479, www.bb.org.bd