Image credit: Dhaka Tribune
The decision follows a bankers’ meeting chaired by Bangladesh Bank Governor Ahsan H Mansur on 7 December, where managing directors (MDs) of various banks requested a reduction in provisioning to accelerate lending growth in these sectors.
In a move aimed at encouraging greater lending to the agriculture and SME sectors, the Bangladesh Bank has reduced the mandatory provisioning requirement for these loans to just 0.5%, down from the earlier 1–5% range.
The central bank issued a circular on this policy change yesterday (21 December).
Previously, banks were required to maintain a 1% provision against Standard and Special Mention Account (SMA) loans. Under the new directive, financial institutions providing loans under the CMSME (Cottage, Micro, Small, and Medium Enterprise) sector can enjoy the reduced provisioning until 31 December 2026.
A spokesperson for Bangladesh Bank said the reduction is intended as a form of incentive to motivate banks to distribute larger volumes of loans to SMEs and agricultural borrowers. "However, if banks attempt to misclassify other sector loans as SME loans to avail the benefit, strict action will be taken," the spokesperson warned.
The decision follows a bankers' meeting chaired by Bangladesh Bank Governor Ahsan H Mansur on 7 December, where managing directors (MDs) of various banks requested a reduction in provisioning to accelerate lending growth in these sectors. Governor Mansur also highlighted that although agriculture contributes 14-15% of GDP, it receives only about 2% of total bank credit, urging banks to increase agricultural lending to over 10% of total credit.
He further advised bank MDs to target a 20% growth in SME lending to stimulate economic activity. Under normal circumstances, banks maintain provisions on their loans and higher rates of 20-50% for non-performing loans, but the new measure provides them greater flexibility to expand lending to priority sectors.
Source: https://www.tbsnews.net/economy/central-bank-cuts-loan-provision-requirement-boost-agriculture-and-sme-lending-1315791?amp