The government believes the waiver of cumulative interest on farm loans will directly benefit around 15 lakh small and marginal farmers, as it will free them from the burden of loan and associated harassment.

Finance Minister M Saifur Rahman at a cabinet meeting yesterday instructed the banks also to revoke all orders on attachment of property against certificate cases on agriculture loans and arrest warrants against farmers.

Prime Minister Khaleda Zia chaired the weekly regular cabinet meeting at her office.

Interest rates on agriculture loans would be lowered to 8 percent from 10 percent at the same time.

The rates on loans given by micro-credit NGOs through Palli Karma Sahayak Foundation need to be cut to 12 percent from the present 15 percent, Saifur said.

He warned the government would stop financing the NGOs if they refused to do so.

The decisions came as follow-ups to Monday's cabinet decision to waive all interest on agriculture loans up to Tk 5,000.

On why the NCBs should start providing collateral-free farm loans from Pahela Baishakh, Saifur said, "From Pahela Baishakh, farmers will start production for the new year. They should be able to buy cattle and seeds from this new day so that they can have a prosperous year ahead."

He added the cabinet decision will also inspire the farmers and banks have been told to fully implement the decision.

The cabinet decided that the defaulting farmers would be entitled to new loans once they clear the first instalment of the previous loan and all certificate cases filed against the farmers will be suspended on payment of the instalment.

The waiver will cost the banks Tk 490 crore and the government will pay the banks a chunk of the sum and the rest the banks will deem as lost.