Bangladesh Bank has formed a refinance scheme of Tk 5000 crore to boost food production and strengthen the country's food security.

Farmers can take loans from this fund at a 4 percent interest rate. They can borrow from this fund for a maximum of 18 months with a grace period of three months.

Bangladesh Bank issued a circular in this regard on Thursday and sent it to top executives of all banks. Farmers can take loans from this fund for crop cultivation, fish, poultry, dairy, vegetables, fruits, and flower firming.

The central bank believes that there is risk of a global food crisis due to the disruption in supply chain and prices of food grains are increasing for this reason.

In such a situation, to ensure the food security of the country, it is necessary to increase production.

Read: No forex crisis from Jan 2023, Bangladesh Bank Gov says

To this end, the central bank has decided to create a refinancing fund of Tk 5000 crore to maintain the flow of loans at low interest in the agricultural sector.

The circular stated that only farmers will get loans from this fund. Small marginal farmers can take a single collateral-free loan up to a maximum of Tk 2 lakh for the cultivation of crops including rice, vegetables, fruits and flowers.

According to the agricultural and rural loan policies of Bangladesh Bank, loans can be disbursed only against the related crop liability in the case of cultivation on a maximum of five acres of land.

Besides, banks can provide loans if it wishes by taking collateral on the basis of the customer-banker relationship.

Read: Bangladesh Bank curtails banks’ power to waive interest on loans

The loan money from this fund cannot be used to adjust the customer's old loan. Loan defaulters will also not get loans from this fund, the circular stated.

The duration of this loan disbursement is set to June 30, 2024, which would be increased if necessary.