The Hindu : Interest rates on crop loans up to Rs. 50,000 reduced

Online edition of India's National Newspaper
Thursday, Jul 17, 2003

Front Page

Front Page

Interest rates on crop loans up to Rs. 50,000 reduced

By Our Special Correspondent

NEW DELHI JULY 16. After launching the old-age pension and universal health schemes for the underprivileged earlier this week, the Government today announced a Rs. 2,500-crore sop for farmers by drastically reducing the interest rates on crop loans of up to Rs. 50,000 to nine per cent from the current 14-18 per cent per annum.

Besides, instructions have been issued to the National Bank for Agriculture and Rural Development (NABARD) to directly refinance District Central Cooperative Banks (DCCBs) so that their lending rates too come down to nine per cent.

At a press conference here, the Union Finance Minister, Jaswant Singh, said he had also followed up on his budget promise to make agricultural credit available through post offices and a pilot project for this was being launched in Tamil Nadu from September 1. Based on the experience gathered, the scheme would subsequently be expanded to other States.

On another of his budget promises — that of providing loans for tractors and agricultural machinery on terms similar to loans for motor cars — a consortium led by the State Bank of India had been set up to negotiate with manufacturers and dealers of tractors and other equipment to obtain the maximum possible discounts and concessions.

Elaborating on his decisions, the Minister said a series of discussions had been held with the Reserve Bank and the Indian Banks' Association. "The IBA has (now) advised all public sector banks to reduce their lending rate for agriculture to a single digit rate of not more than nine per cent interest per annum, on crop loans up to a ceiling of Rs. 50,000. I am confident that this single digit rate will benefit most of the crop loan holders, also cover almost all small and marginal farmers. It will be ensured that the volume of credit to the agriculture sector does not decline in the process," Mr. Singh said. The scheme would be prospective and not retrospective because "I cannot change history, but I can improve the present and the future," he said.

The Union Agriculture Minister, Rajnath Singh, released a statement saying that the reduction in interest rates on agricultural loans would benefit farmers to the extent of Rs. 2,500 crores in the current year and that the benefit was likely to go up to Rs. 7,000 crores by 2006-07.

Asked about the impact of the reduction in lending rates on the balance sheets of the banks, the Finance Minister said that the RBI and IBA had said that public sector banks would be able to absorb it. As for the cooperative banks, though agriculture credit refinancing from NABARD was at 6-6.25 per cent, the various layers through which the credit passed before reaching the farmer added to the cost and resulted in a lending rate of 14 to 18 per cent. "Direct refinancing to the DCCBs would result in doing away with various layers and the cost of credit to the farmer would be brought down to nine per cent."

Mr. Jaswant Singh explained that direct refinancing to DCCBs required the cooperation of the States which would be purely on a voluntary basis. "The States have to cooperate voluntarily. If they don't, they will not get the benefit of the low cost credit. To facilitate the refinancing of DCCBs directly, we are ready to bring about legislation, if necessary, during the monsoon session of Parliament itself," he said.

Printer friendly page
Send this article to Friends by E-Mail

Front Page

Stories in this Section

40 killed in Himachal cloudburst, flash floods

Interest rates on crop loans up to Rs. 50,000 reduced

Not quitting, says Jaswant

SC orders CBI probe into Taj heritage project

Noor better; funds, goodwill pour in

Tohra to be SGPC chief

Bus service to Dhaka

Clue in pistol theft case

Actor injured

Man arrested