BAAC was founded in 1966 with the primary objective of stimulating agriculture by extending financial services to the agricultural sector. It replaced the Bank for Cooperatives whose funding was limited and whose lending activities were restricted to agricultural cooperatives only. BAAC operates as a state-owned bank under the supervision of the Ministry of Finance and is restricted to lending for agricultural-related activities only.

BAAC enjoys privileges aimed at stimulating lending to agriculture. For example, BAAC is exempt from certain taxes (including income tax) and from reserve requirements on deposits. The Bank of Thailand requires that commercial banks invest at least 20 percent of their deposits in agriculture, either directly or through BAAC. Banks have opted mostly for the latter, providing BAAC with access to a large and consistent source of funds while the administrative costs associated with mobilizing and servicing these deposits were borne by these banks and not by BAAC.

With regard to setting its operational and financial policies, BAAC generally enjoys substantial autonomy. BAAC's efforts have been directed mainly at the low to medium-income range. This strategy has been supported by a progressive interest rate policy and cross subsidization, with higher interest rates being charged on larger loans, ceilings on loan amounts, and lending to small farmers without traditional collateral through joint liability groups. At first, BAAC lent mostly through large agricultural cooperatives, but repayment problems led BAAC to significantly increase its lending directly to individual farmers.