Bangladesh eyes $1.4 bln farm loan to boost output

DHAKA, Aug 31 (Reuters) - Bangladesh's central bank has asked banks to lend up to 95 billion taka ($1.4 billion) in farm loans in the 2008/09 fiscal year, 14.5 percent higher than the previous year's level following sharp rises in global food prices. "We've set the target keeping the present world food crunch, rising demand and rocketing prices in consideration," a senior official at the Bangladesh Bank said on Sunday.

In the 2007/08 financial year that ended in June, more than 85.8 billion taka had been distributed among farmers, above the target of 83 billion taka.

"For the first time, agricultural loan disbursement exceeded the target after private commercial banks joined a venture to help recover flood losses in agriculture in the previous fiscal year," the official said.

The central bank took some effective measures to strengthen farm credits to offset the losses caused by floods and a deadly cyclone, which together destroyed nearly 3 million tonnes of food grains, mostly rice.

The banks were directed to open special units to monitor and supervise the overall credit disbursement.

Such credit helps farmers to buy seeds and fertiliser, and foot bills for irrigating their land.

Agriculture generates about 22 percent of the country's economic activity and is the principal source of employment.

Around half of Bangladesh's more than 140 million people live in poverty, or on less than $1 a day.

($1= 68.50 taka)

(Reporting by Ruma Paul, Editing by Jacqueline Wong)