Agricultural lending hit a new high in August, but unpaid farm loans have soared at an alarming pace after Bangladesh Bank enforced a stricter loan classification policy from April 2025 – a shift that requires banks to treat loans as default if instalments remain unpaid for three months instead of six.
According to the central bank’s Monthly Report on Agriculture and Rural Finance, banks disbursed Tk 2,672 crore in agricultural loans in August 2025 – up 28.5 percent from Tk 2,080 crore a year earlier and 24 percent higher than July’s Tk 2,154 crore. Recovery also increased to Tk 3,112 crore in August, a 7.9 percent year-on-year rise.
However, the surge in disbursement has been overshadowed by a dramatic rise in defaults. Overdue agricultural loans jumped to Tk 22,968 crore at the end of August, compared to Tk 11,844 crore in the same month last year – a 94 percent increase. Bangladesh Bank officials confirmed that this spike is largely driven by the reclassification rule introduced in April, which halved the grace period for overdue loans and immediately pushed thousands of rural borrowers into the default category.
From the ground level, bankers say the new rule is unrealistic for agricultural cycles. A senior official at Bangladesh Krishi Bank, speaking on condition of anonymity, told TIMES, “It takes farmers four to five months to grow a crop. They borrow, cultivate, harvest and only then are able to repay. Under the new policy, they are being classified as defaulters even before their crops are ready for sale.”
Even with rising stress, total outstanding agricultural loans stood at Tk 59,542 crore by the end of August, up 6.7 percent from August 2024, showing continued credit expansion. But loan quality is deteriorating faster than lending is growing.
The composition of lending is also shifting. Crop loans fell to 44 percent of total farm credit in July–August FY26 from 46 percent last year, while financing for livestock and poultry increased to 29 percent from 23 percent, and fisheries rose slightly to 15 percent. This reflects a move towards higher-value agricultural activities but also sectors more vulnerable to market volatility and disease outbreaks.
Microcredit institutions are experiencing similar stress. Grameen Bank and ten major NGOs disbursed Tk 16,568 crore in August – 45.51 percent higher than a year ago – but overdue loans climbed to Tk8,212 crore, up 23.83 percent year-on-year. Floods, rising input costs and consumer inflation have weakened repayment capacity in many rural households.
PKSF recorded stronger performance, disbursing Tk 576 crore and recovering Tk 635 crore in August. In contrast, Bangladesh Samabaya Bank Limited continued to halt new lending due to high overdues and focused only on partial recoveries.
