Rural Finance by Commercial Banks: Challenges and Remedies

Commercial banks are considered not merely as dealers in money but also the leaders in economy development. They are not only the store houses of the country's wealth but also the reservoirs resources necessary for economic development.

They play an important role in the economic development of a country. A well-developed banking system is essential for the economic development of a country. The "Industrial Revolution" Europe in the 19th century would not have been possible without a sound system of commerce banking. 

In case of developing countries like Bangladesh, the commercial banks are considered to be backbone of the economy. Commercial banks can contribute to a country's economic development in the following ways:

Rural Finance by Commercial Banks: The actual disbursement of rural credit under Anne Agricultural Credit Program me by the participating Commercial banks in fiscal year15 stood Taka 159.8 billion which was 0.4 percent lower than the actual disbursement of Taka 160.4 bill in fiscal year 14. About 79.8 percent of disbursement was short term lending and the rest was long term loans to purchase irrigation equipment, agricultural machinery, livestock, etc. The credit production of crops and poverty alleviation programmes constituted 59.6 and 11.6 pero- respectively of the total short term loans.

The total outstanding loan in the agricultural sector (including all banks) decreased by Taka 16.9 billion or 4.9 percent to Taka 329.4 billion in fiscal year 15 frimi Taka 346.3 billion in fiscal year 14. Two specialized banks- Bangladesh Krishi Bank, Rajshahi Krishi Unnyán Bank and six State owned Commercial Banks have played key role in the disbursement of agricultural and rural finance while contribution of foreign and private commercial banks is also increasing. However, the State owned Commercial Banks and Rajshahi Krishi Unnyan Bank fell short of targets by 9.2 and 4.0 percent respectively.

On the other hand. Bangladesh Krishi Bank, Foreign Commercial Banks and Private Commercial Banks exceeded the disbursement target by 0.1. 13.3 and 11.8 percent respectively in fiscal year15. Apart from this, Bangladesh Rural Development Board and BSBL disbursed Taka 7.2 billion from their own fund which raised total disbursement to Taka 167.0 billion (including all banks) during fiscal year 15. 

Let, Mr. Karim his first borrowings after x years

Interest = 994.5 - 500 - 400= 94.5

According to the question:

$$\begin{gathered} \left(500\times 5\%\times x\right)\left(400\times 3.5\%\times \frac{6}{12}\right)=94.5 \\ \Rightarrow 25x+7=94.5 \\ \Rightarrow 25x=94.5-7 \\ \Rightarrow 25x=87.5 \\ \therefore x=\frac{87.5}{25}=3.5 years \end{gathered}$$

Rahim can do in 80 days = 1 work

Rahim can do in 1 days = $\frac{1}{80}$part of work

Rahim can do in 10 days=$\frac{10}{80}=\frac{1}{80}$ part of work

Remaining work= $1-\frac{1}{8}=\frac{7}{8}$ part of work

Again, Karim can do $\frac{7}{8}$ part in 42 days.

Karim can do 1 part= $\frac{42\times 8}{7}=48$ days

Karim can do in 1 day = $\frac{1}{48}$ part of work

(Rahim + Karim) can do in 1 day = $\frac{1}{80}+\frac{1}{48}=\frac{3+5}{240}=\frac{1}{30}$

So, Rahim + Karim can do the work in 30 days, ans.

Repeat: One Bank Ltd. (SCO) 01.04.2017