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The Bangladesh Krishi Bank (BKB) has sought Tk 20.46 billion as interest subsidy from the government to meet its capital shortfall, finance ministry officials said.
When asked, BKB managing director Md Ali Hossain Prodhania said, "We provide loans to agriculture sector at lower interest, meaning less than the cost of fund."
According to a Bangladesh Bank (BB) guideline, the BKB gives loans to crops, fisheries and livestock sectors at a maximum of 9.0 per cent interest rate.
For this, the BKB has been making loss per annum. Currently, it has accumulated a deficit of funds, Mr Prodhania told the FE.
According to the BB, the BKB has the highest capital shortfall at Tk 79.30 billion as of last March.
"We recently sought interest subsidy from the government since the BKB lends to farmers at interest less than its cost of fund," said the BKB official.
"We've also sent a proposal to the BB in this regard. The central bank will report to finance ministry after scrutiny," he stated.
Mr Prodhania hoped the BKB will be able to cover its shortfall if the government provides the funds sought.
The state-run financial institution fails to meet the minimum capital requirement due to the widening defaulted loans, a source said.
It sought Tk 20.46 billion as interest subsidy between fiscal years (FYs) 2013-14 and 2016-17 to meet its capital shortages, according to the BKB data.
The government provided over Tk 7.97 billion as subsidy against BKB's demand for Tk 20.44 billion between FYs 2003-04 and 2012-13.
The government released Tk 4.0 billion for the BKB as part of recapitalisation for FY 2017-18.
Until May, the BKB had the highest 81,211 agri loan cases pending among all the state banks, involving over Tk 2.68 billion.
Some 376 cases involving over Tk 14.58 million were settled in the same month.
The bank could not trace 4,558 borrowers after issuance of warrants involving Tk 139.10 million loans.
The disbursement of farm loans by the BKB has reached 84.57 per cent of its full-year target in the first 10 months of last fiscal year.
The total target was fixed for the bank at Tk 49 billion for FY '18, according to the data available at the central bank.