Overdue farm loans rise sharply despite higher recovery

Overdue loans given by banks to the farm sector rose further in July, signalling growing repayment stress and rising credit risk in the agricultural sector, according to a Bangladesh Bank (BB) report released this week.

Unpaid loans almost doubled to Tk 23,806 crore at the end of July 2025 from Tk 12,131 crore a year ago, said the central bank in its July report on agriculture and rural finance.

The increase in overdue loans was primarily attributed to a rise in unpaid loans of state-owned commercial and specialised banks as well as private banks.

July was the second month in which overdue loans taken by farmers operating in various subsectors, including crops, poultry, fisheries, and livestock, increased.

In June, unpaid loans jumped to Tk 21,629 crore from nearly Tk 10,000 crore the previous month.

The BB report said the loan classification criteria, which came into effect in April this year, were a major reason for the significant rise in overdue payments.

"The rise in overdue loans signals growing concerns over credit recovery and the requirement for stronger oversight and risk management to address the credit recovery challenges in the sector," it said.

"This underscores the need for strengthened monitoring and prudent credit management," it said.

"The long-term sustainability of the agricultural sector will depend on strengthening repayment practices while ensuring that farmers continue to have reliable access to credit," it said.

The BB earlier set a target for banks to disburse Tk 39,000 crore during the current fiscal year (FY) of 2025-26, which was 4.48 percent higher than the actual lending of Tk 37,326 crore in the previous fiscal year.

In July of FY26, banks disbursed Tk 2,154 crore, up 20 percent from Tk 1,790 crore a year ago. The amount was, however, lower than the disbursement in June.

The report said the share of agricultural credit disbursement for crops and fisheries decreased slightly in July, while the share of loans to livestock, poultry, and poverty alleviation increased.

"These indicate a notable shift in sectoral priorities and a strategic move towards promoting livestock-based activities and strengthening rural livelihoods, signalling diversification beyond traditional crop production," said the report.

In terms of recovery, the BB report said banks recovered Tk 2,953 crore in July, which was 15 percent higher year-on-year, thanks to a sharp rise in the recovery of loans by state banks.

However, the recovery fell compared to that in June.

The report said at the end of July, outstanding loans given by the scheduled banks increased by 4.5 percent year-on-year to Tk 59,470 crore.

This increase was mainly driven by the rise in the outstanding balance of foreign banks and state-owned banks.