Circular Letter No. 02: Formulation of Bangladesh Bank Agricultural Development Common Fund (BBADCF)

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

ACD Circular Letter No.-02 Date: ----------------- To: Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh.

Dear Sir,

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

We draw your attention to ACD Circular No.-08 issued by this department on December 19, 2022, concerning 'Bangladesh Bank Agricultural Development Common Fund (BBADCF)'.

2. In order to achieve the 100% target for annual agricultural and fisheries loan distribution, after reviewing the overall matters, the instructions mentioned in the aforementioned circular (paragraphs 'a' to 'f') are hereby cancelled, and the following instructions are issued:

a. For scheduled banks under the Bangladesh Bank's Annual Agricultural and Fisheries Loan Policy and Guidelines, the initial unutilized portion of the previously fixed alternative agricultural and fisheries loan distribution target (as per the statement based on June 30) by banks that have not achieved the target must be deposited into the 'BBADCF' within 03 (three) months of the end of the fiscal year. Additionally, any portion of loans/investments provided/distributed by banks in the agricultural and fisheries sector deemed unacceptable in quality assessment must be deposited into the 'BBADCF' immediately after deduction;

b. Within 30 days of the deposit of funds into the 'BBADCF', the deposited funds will be allocated proportionally to the banks under the Agricultural and Fisheries Loan Policy, based on their requirements and in coordination with their annual targets, at an interest rate of 4% for a maximum tenure of 18 months. In any fiscal year, if no application for allocation of deposited funds into the 'BBADCF' is received, or if applications for a small amount of fund allocation are received, Bangladesh Bank may take case-to-case decisions in the resulting situation. It is noted that no interest will be paid for the period prior to the release of funds to the bank after deposit into the 'BBADCF' (maximum 30 days);

c. The total principal and interest collected after the expiry of the fixed 18-month tenure will be returned to the respective banks that provided the principal funds within 07 (seven) days;

d. The funds distributed by the fund to customers by banks investing in the agricultural and fisheries loan sector can be shown under their annual target for agricultural loan distribution. In this regard, the investing bank must submit an updated report of the target achievement separately showing the funds used from the 'BBADCF' to the Agricultural Loan Department-1 every quarter, which Bangladesh Bank will verify (on-site or off-site) if necessary;

e. The bank must repay the entire principal along with interest/profit to Bangladesh Bank within the fixed tenure for the funds taken from the 'BBADCF'. If the taken funds are not repaid within the fixed tenure, the current account of the respective bank will be frozen to recover/adjust the amount;

f. The funds released to banks must be distributed to customers as agricultural and fisheries loans only through the bank's own network (excluding MFI linkage) at an interest rate of 10% in accordance with Bangladesh Bank's 'Agricultural and Fisheries Loan Policy'. In this regard, the maximum limit for loan distribution/investment to a single customer will be 500,000 BDT;

g. The funds deposited into the 'BBADCF' by the principal fund-providing banks can be shown as easily convertible assets (Liquid Assets) in their balance sheet;

h. All responsibilities for the recovery of loans distributed to farmers lie with the fund-using bank. In this regard, the bank's loan recovery cannot be linked to Bangladesh Bank's dues;

i. If it appears to Bangladesh Bank that any part of the funds taken from the 'BBADCF' has not been used properly, the interest/profit at the policy rate will be collected as a lump sum;

j. To reduce the loan risk of lending banks, the respective bank must form a 'Risk Reserve Fund' by depositing an amount equal to 1% interest on the loans distributed to customers from the 'BBADCF';

k. The amount equal to 1% interest on the loans distributed to customers from the 'BBADCF' must be shown by the respective bank as a sub-account under the 'Additional Tier-1 Capital' component of the bank's Tier-1 Capital (Tier-1) statement, and appropriate disclosure must be provided;

l. Bangladesh Bank will not incur any revenue or expense for the operation of the aforementioned fund, and in case of any policy or other complexity in depositing and allocating the unutilized portion for the purpose of managing and implementing this fund, the decision of Bangladesh Bank shall be considered final;

m. Banks must submit applications for allocation of funds from the 'BBADCF' to this department within 02 (two) months of the end of the fiscal year.

3. Apart from this, all other instructions mentioned in the aforementioned circular will remain unchanged, and the instructions of this circular letter will be implemented immediately.

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

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Yours faithfully,

(Debashis Sarkar) Director (ACD-1) IP: 0255665001-6/20170 Email: debashis.sarkar@bb.org.bd