The cabinet in its weekly meeting on Monday decided to waive interest on outstanding agriculture loans up to Tk 5,000. Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank lent the major portion of the overdue farm loans while the four nationalised commercial banks -- Sonali, Janata, Rubali and Uttara banks -- share the less chunk.

The interest-waiver will cost the banks Tk 374.36 crore. Of the amount, the government will pay the banks Tk 149.74 crore in compensation while the rest -- Tk 224.62 crore -- will be counted as loss.

The banks will also incur the burden of 'other charges' involved in dealing with the loans.

The decision has a brighter side for the banks: they at least will get their money back in a year. Only those who start paying back their principal loan from this month and complete the refund in a year will be entitled to the waiver.

According to yesterday's circular, interests of such loans that became classified and overdue on December 31 last were waived.

Any defaulter who does not start paying back his borrowed amount from April, all additional interests will be added to his loan. On the other hand, those who start repaying will also be entitled to new loans.

The circular said these measures were taken to help small and marginal farmers and sharecroppers and enhance agricultural production.