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After BKB, now RAKUB seeks state guarantee

Tk10b refinancing scheme
Hasan Arif
26 Nov 2022 00:00:00 | Update: 25 Nov 2022 22:09:51
After BKB, now RAKUB seeks state guarantee

The Rajshahi Krishi Unnayan Bank  (RAKUB) has sought state guarantee against a Tk 1,000 crore refinancing scheme  for the agricultural sector.

The bank is seeking the money from the central bank as it failed to achieve the loan disbursement target for the sector with its own deposits, people familiar with the matter said.

Although there has been no official statement from the government regarding the request, RAKUB officials said authorities have responded positively to the request. 

The request from RAKUB comes only days after the Financial Institutions Division (FID) nodded to guarantee a similar Tk 10,000 crore scheme of the Bangladesh Krishi Bank to finance the SME and agriculture sectors.

According to RAKUB sources, the bank is struggling to compete with other banks in ensuring deposits at high interest.

“We have asked the central bank for Tk 1,000 crore to disburse agricultural loans. A state guarantee has been sought from the Ministry of Finance against the fund,” Zahidul Haque, managing director of RAKUB, told The Business Post (TBP).

He said the FID has asked for some information regarding the asked guarantee from RAKUB on 22 November, which will soon be submitted.

“Hopefully, we will get the guarantee after that,” added the RAKUB official.

Meanwhile, FID officials said this is not a new case for RAKUB.

The officials said RAKUB takes guarantees against such loans every year and pays it back as well. They have asked for one this year too. They are expected to get the guarantee.

In its application to FID, the state-run RAKUB said, “Due to the huge demand for agricultural credit in the current fiscal year, additional funds are required for disbursement of loans, which cannot be met from the bank’s own funds.

“In this situation, it is necessary to take refinancing funds from the Bangladesh Bank, for which a state guarantee is needed.” RAKUB stated, “The bank is left with little liquidity to disburse agricultural loans after settling the old debts to the Bangladesh Bank and the bank’s own liabilities.

“RAKUB will face a liquidity crisis if it has to pay the old debt of Bangladesh Bank along with completing the annual agricultural loan distribution target, meeting the demand liabilities and carrying out the normal operating expenses.”

The specialised nationalised bank is yet to completely pay back its previous loan, for which they got a state guarantee, from the central bank.

RAKUB officials said the requested fund from the Bangladesh Bank will be used to finance small and marginalised farmers and small entrepreneurs.

Loans from the refinancing fund will be disbursed on easy terms. It is expected to benefit farmers who are pressured with the soaring prices of seeds, fertilisers, labour wages, pesticides, etc. RAKUB hopes to reduce poverty and income inequality with the refinancing scheme, as well as increase its balance sheet.