Farm and rural loan disbursements by banks fell by more than one-fifth in the first four months of fiscal year (FY) 2024-25, owing to a dip in the flow of credit mainly from foreign and private banks.

Banks lent Tk 9,391 crore in the July-October period of this fiscal year, according to data of Bangladesh Bank (BB).

It was Tk 11,960 crore in the same period a year ago.

The BB attributed the downturn to a reduction in loan disbursements by foreign commercial banks.

In figures, their disbursements were down by 76.5 percent year-on-year.

Meanwhile, disbursement by private banks declined 29 percent.

State banks' agricultural and rural credit disbursement also fell.

Only state-owned specialised banks expanded lending to the farm and rural economy.

The banks as a group disbursed 12 percent more loans, said the BB, adding that it had no significant impact as the overall fall was high.

The BB data showed that farm and rural credit disbursement was one-fourth of the lending target of Tk 38,000 crore for the banks in FY25.

This target was 8.57 percent higher than that of the previous year.

The central bank report said nearly half—46 percent of farm loans given in the first four months of this fiscal year—went to facilitate crop production.

The share of the total credit disbursed for the crop sector was 45 percent a year ago.

The livestock and poultry sector increased its share from 24 percent to 25 percent, alongside the fisheries sector from 15 percent to 17 percent.

Conversely, the share for poverty alleviation initiatives decreased from 7 percent to 4 percent.

"These changes indicate a growing focus on crops, livestock & poultry, and fisheries, with a corresponding reduction in the emphasis on the poverty alleviation sector," said the BB, in its October issue of agriculture and rural finance.

The central bank said despite the decline in lending, recovery of agricultural credit grew 12.55 percent year-on-year to Tk 12,322 crore during July-October of FY25, buoyed by increased recovery by private banks and state-owned specialised banks.

The BB said at the end of October FY25, the outstanding balance of agricultural credit for all scheduled banks was Tk 55,084 crore, reflecting only a 0.40 percent increase from that a year ago.

However, the overdue amount of agricultural credit soared 40 percent to Tk 11,931 crore at the end of October 2024 from that a year ago.

The BB said the disbursement of agricultural and rural finance shows a stronger focus on crops, livestock, and fisheries.

"But the reduced emphasis on poverty alleviation programmes signals the need for a balanced approach," said the central bank.

It said overall credit recovery showcased an improvement, but the sharp rise in overdue loans, particularly in state banks, highlights challenges in repayment and recovery.

"Microfinance disbursement and recovery saw marginal declines, with overdue balances rising due to external shocks and operational inefficiencies," it said.