Overdue agricultural loans of scheduled banks jumped nearly 88 percent year-on-year at the end of September, according to Bangladesh Bank, reflecting a sharp deterioration in recovery following tighter loan classification rules and mounting stress in rural lending.
Bangladesh Bank’s monthly report on agriculture and rural finance shows that overdue agri credit rose from Tk11,754 crore in September last year to Tk22,120 crore this year. The central bank attributed the surge mainly to state-owned specialised banks, private commercial banks and state-owned commercial banks, which together account for the bulk of agricultural lending.
A key factor behind the spike was the revised loan classification framework that came into force in April. Bangladesh Bank said the new criteria led to the reclassification of a large volume of rescheduled and borderline loans, pushing them into overdue status and sharply lifting reported arrears.
Despite the worsening recovery picture, agricultural lending by banks continued to expand. Outstanding agri credit of scheduled banks, including interest, stood at Tk59,500 crore at the end of September, up about 8 percent from Tk54,928 crore a year earlier. The data indicate that banks maintained disbursement momentum even as repayment capacity weakened.
Bangladesh Bank cautioned that the widening gap between loan growth and recovery signals rising credit risk in the sector and underscores the need for tighter monitoring, stronger supervision and more effective recovery strategies, particularly at state-owned lenders that dominate agricultural finance.
A different picture emerges in the microfinance segment, which is reported separately from bank lending. Grameen Bank and 10 large non-governmental organisations disbursed Tk 18,464 crore in microcredit in September, about 21 percent higher than in the same month last year. Recoveries rose to Tk 16,968 crore, marking a year-on-year increase of just over 16 percent.
Their combined outstanding microcredit portfolio stood at Tk123,006 crore at the end of September, with overdue loans amounting to Tk8,383 crore, or nearly 7 percent of total outstanding. Bangladesh Bank data show that microcredit overdues increased about 20 percent from Tk6,997 crore a year earlier.
The central bank attributed the rise in microfinance arrears to erratic borrower behaviour and repayment difficulties linked to crop losses caused by floods, as well as pressure from higher living costs, which have strained household cash flows in rural areas.
However, Bangladesh Bank noted that the scale of stress in microfinance remains significantly lower than in bank-financed agricultural credit. The Palli Karma-Sahayak Foundation’s loan programme, which refinances partner MFIs, reported an outstanding balance of Tk13,692 crore at the end of September, with overdue loans of Tk108 crore, indicating relatively strong asset quality.
