Bangladesh Bank (BB) on Sunday reduced the interest rate on its Tk 3,000-crore refinancing fund for the formation of a specialized agro-based economic hub in northern Bangladesh.

According to a circular issued by the Agricultural Credit Department-1 of Bangladesh Bank, participating banks will now receive refinancing facilities from the central bank at an interest rate of 3.0 percent, down from previous levels, while the maximum interest or profit rate at the customer level has been capped at 7 percent.

For Shariah-based financing, the profit rate at the customer level cannot exceed 7 percent under any circumstances, and interest or profit must be calculated on a reducing balance method.

The Tk 3,000-crore refinancing scheme was originally formulated on July 6 to boost agricultural production, preservation, marketing, processing, and export activities across the Rajshahi and Rangpur divisions.

Under the revised guidelines, the maximum loan or investment tenure for agricultural production will be up to 18 months, including a 3-month grace period based on the specific project.

For sectors including agricultural product preservation, transportation, marketing, infrastructure development, and agro-processing, the maximum loan tenure will be up to 36 months (3 years), including a grace period of 3 to 6 months. Participating banks must repay the principal amount along with the 3 percent interest to Bangladesh Bank within 18 to 36 months from the date of receiving the refinance funds.

Penalties for Irregularities

To prevent the misuse of funds, the central bank warned that if any bank misuses the fund or charges more than the stipulated 7 percent interest or profit rate, an additional penal interest rate of 2 percent will be realized as a one-time penalty on the misutilized amount.

Mandatory Publicity

Bangladesh Bank has made publicity mandatory for participating banks to ensure the benefits reach genuine entrepreneurs and farmers. Banks must display banners highlighting the 7 percent interest/profit rate scheme inside and outside their branch premises and organize special campaigns to promote the concessional credit facility.

The central bank emphasized that despite being a major agricultural hub, the northern region struggles to realize its full economic potential due to limitations in preservation, marketing, processing, and supply chain infrastructure. Lowering the interest rate to 7 percent is expected to reduce borrowing costs, boost investments in agro-processing, decrease crop wastage, and generate local employment across North Bengal.

All other terms and conditions of the original policy issued on July 6 will remain unchanged, and the revised directive takes immediate effect.