Bangladesh Agri Lending Jumps 15% to Tk 42,834 Crore: Banks Beat BB Target

Dhaka, August 5, 2026 — Agricultural lending by Bangladesh's banking sector rose nearly 15 percent in fiscal year 2025-26, exceeding the central bank's annual target, driven by strong lending from specialised and private commercial banks — a rare bright spot in an otherwise challenging macroeconomic environment.

Banks disbursed Tk 42,834.16 crore in agricultural and rural credit during the year, up 14.76 percent from Tk 37,326.52 crore a year earlier and equivalent to 109.83 percent of Bangladesh Bank's Tk 39,000 crore lending target for the country's 58 participating banks, according to the central bank's latest agricultural and rural credit report.

📊 Disbursement by Bank Category

• 🏢 Private commercial banks: 43.15% of total lending (largest share), 108.05% of target
• 🏛️ Specialised banks: Tk 12,615.57 crore disbursed, 123.4% of target (strongest performer)
• 🏢 State-owned commercial banks: 109.89% of target
• 🌏 Foreign commercial banks: 104.05% of target
• 🏛️ Islamic banks: Tk 6,059.32 crore, 94.37% of target (only category to miss)
• 📊 Islamic banks share: 14.15% of total lending

Specialised banks posted the strongest performance against their targets, disbursing Tk 12,615.57 crore, or 123.4 percent of their allocation. State-owned commercial banks achieved 109.89 percent of their target, private commercial banks 108.05 percent, and foreign commercial banks 104.05 percent. Islamic banks were the only category to miss their target, disbursing Tk 6,059.32 crore, or 94.37 percent of the planned amount.

🌾 Sector Distribution: Mismatch with Policy Priorities

The report highlighted a mismatch between policy priorities and the distribution of credit across sectors. Crop production received 47.32 percent of total lending, below the policy target of 55 percent, while livestock and poultry accounted for 26.38 percent, exceeding the 20 percent target. Fisheries and non-farm rural activities also surpassed their respective allocations.

• 🌾 Crop production: 47.32% of lending (below 55% target)
• 🐔 Livestock & poultry: 26.38% (above 20% target)
• 🐟 Fisheries: Exceeded target
• 🏗️ Non-farm rural activities: Exceeded target
• 🚚 Irrigation & machinery: 0.93% (below 2% target — less than half)

By contrast, lending for irrigation and agricultural machinery accounted for just 0.93 percent of total disbursement, less than half the policy target of 2 percent. The under-allocation to irrigation and machinery is particularly concerning given that agricultural modernisation and water management are critical to improving productivity and climate resilience — priorities that the government has emphasised in its long-term agricultural strategy. Without adequate investment in irrigation infrastructure and modern agricultural machinery, Bangladesh's crop yields will remain vulnerable to climate variability and water scarcity, limiting the sector's contribution to both food security and agricultural export growth.

💰 Loan Recovery Improves

Agricultural loan recovery rose 19.99 percent year-on-year to Tk 45,626.93 crore. Recoveries increased across all bank categories except Islamic banks, the report said. The strong recovery performance — which exceeded the disbursement growth rate — suggests that agricultural borrowers are generally servicing their loans better than other sectors, a positive signal for the sustainability of agricultural credit.

Asset quality also improved overall. Overdue agricultural loans fell 8.43 percent year-on-year to Tk 19,807.33 crore at the end of June, while classified loans declined 5.92 percent to Tk 18,578.47 crore. Foreign commercial banks more than doubled their loan recoveries from the previous fiscal year and reported no overdue or classified agricultural loans for a second consecutive year — a notable achievement that reflects disciplined lending practices.

• 💰 Loan recovery: Tk 45,626.93 crore (up 19.99% YoY)
• 📉 Overdue loans: Tk 19,807.33 crore (down 8.43%)
• 📉 Classified loans: Tk 18,578.47 crore (down 5.92%)
• ✅ Foreign banks: No overdue/classified loans (2nd consecutive year)

🏛️ Bangladesh Bank Assessment

Bangladesh Bank said the stronger lending performance signalled a positive outlook for agricultural finance. However, it warned that the large stock of overdue and classified loans remained a key challenge, underscoring the need to prioritise loan recovery and strengthen the management of defaulted loans. The central bank's caution is warranted: while the agricultural sector's NPL profile is better than the overall banking sector (where NPLs stand at 32.26 percent), the Tk 18,578 crore in classified agricultural loans represents a significant drag on rural credit sustainability.

📋 Strategic Context

The 15 percent growth in agricultural lending is a genuinely positive development for Bangladesh's economy, particularly at a moment when private sector credit growth overall has fallen to a 33-year low. The agricultural sector's ability to attract credit while manufacturing and services struggle suggests that banks see agricultural lending as relatively safe — a perception supported by the 20 percent recovery growth and declining overdue rates.

However, the sector distribution mismatch — particularly the under-allocation to irrigation and machinery — means that the lending is not being directed toward the productivity-enhancing investments that would deliver the greatest long-term returns. Crop production lending below the 55 percent target, combined with irrigation lending at less than half the target, suggests that banks are preferentially lending to livestock and fisheries (which may offer faster repayment cycles) rather than to the capital-intensive investments needed to modernise crop agriculture. For Bangladesh's food security and agricultural export ambitions, rebalancing this distribution should be a policy priority in the coming fiscal year.