Central Bank Eases Rules to Boost Agricultural and SME Lending

Bangladesh Bank has announced further relaxations to encourage lending in the agriculture and cottage, micro, small, and medium enterprise (CMSME) sectors. The central bank has reduced the required security provision ratio that banks must maintain against loans in these sectors, making it easier for banks to extend credit.

The new directive, issued on Sunday, allows banks to hold a smaller portion of their operational profit as loan security. Officials of the regulator expressed hope that this measure will incentivise banks to increase lending in these priority sectors, thereby supporting both economic growth and employment.

Under the previous guidelines, banks were required to maintain security provisions at rates of 1 per cent for standard loans and 5 per cent for Special Mention Accounts (SMA). The new regulation permits banks to reduce this rate for short-term agricultural loans and CMSME industrial initiatives to 0.50 per cent—effectively halving the prior requirement—until 31 December 2026.

“The adjustment is aimed at encouraging banks to disburse more short-term agricultural loans and CMSME sector financing, especially at a time when lending to larger industrial groups has slowed,” said a senior official of Bangladesh Bank.

The move follows requests from the Association of Bankers, Bangladesh (ABB), which formally petitioned the central bank and raised the matter during a meeting with Bangladesh Bank Governor Ahsan H. Mansur and other senior officials.

Currently, the government has set a target of allocating at least 25 per cent of total bank loans to the CMSME sector within the current year. As of June, only 17 per cent of overall loans had been directed to this sector, a decline compared with the previous two years. In line with the National SME Policy, the government aims to achieve a 27 per cent allocation by 2029, with an interim target of 25 per cent by the end of 2025. The latest measure to reduce the security provision is expected to support this goal and stimulate greater employment generation.

Table: Key Details of Bangladesh Bank Loan Provision Relaxation

Bangladesh Bank officials emphasise that by lowering the security provision requirements, banks will enjoy greater operational flexibility and profitability, which will encourage them to actively lend in sectors crucial for economic resilience and employment growth.