The government is set to provide Tk 2.3 billion as interest subsidy to Bangladesh Krishi Bank (BKB), finance ministry officials said.
The Financial Institutions Division (FID) has asked the finance division to take necessary action for releasing the fund, they added.
Earlier, the state-owned bank sought the fund from the FID. The division decided to provide the fund after scrutiny, the officials also said.
When contacted, a senior BKB official said, "We provide loans to the agriculture sector at lower interest, meaning less than the cost of fund."
According to a Bangladesh Bank (BB) guideline, Krishi Bank gives loans to crops, fisheries and livestock sectors at a maximum of 9.0 per cent interest rate.
For this, the bank has been making loss every year. Currently, it has accumulated a deficit of funds, the official said.
According to the central bank, BKB has the highest capital shortfall of Tk 79.30 billion as of March.
"We have sought interest subsidy from the government since BKB lends to farmers at interest less than its cost of fund," said the BKB official.
He added: "We'd also sent a proposal to the BB in this regard. The central bank has sent a report to the finance ministry after scrutiny."
The government provided over Tk 7.97 billion as subsidy between FYs 2003-04 and 2012-13.
The ministry of finance allocated Tk 20 billion as recapitalisation fund for the fiscal year (FY) 2017-18. Of the allocation, the government released Tk 4.0 billion for BKB for FY 2017-18.
Until May, the bank had the highest 81,211 farm loan cases pending with all the state-owned banks, involving over Tk 2.68 billion.
Some 376 cases involving over Tk 14.58 million were settled in the same month.
The bank failed to trace 4,558 borrowers after issuance of warrants involving Tk 139.10 million loans.
