The Hindu : Separate agriculture lending rate mooted

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Tuesday, Jul 08, 2003

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Separate agriculture lending rate mooted

By Our Special Correspondent

NEW DELHI July 7. Expressing deep concern over the slow rate of private sector investments in agriculture for the past few years, the Union Agriculture Minister, Rajnath Singh, has asked the Finance Minister, Jaswant Singh, to have a separate agriculture lending rate (ALR) on the pattern of the prime lending rate available for the weaker sections and other such categories.

In a letter to his counterpart in the Finance Ministry, the Agriculture Minister said the special rate for the farm sector should be lower than the PLR and be followed by all commercial banks and regional rural banks.

"Till interest rates were deregulated in 1994, interest on agricultural loans used to be much lower than industrial, housing and consumption loans. Now, the situation appears to have got reversed. While the rate of interest for housing, etc., ranges between 8.5 per cent and 10 per cent, the interest rates charged for agricultural loans by commercial banks and RRBs ranged between 11 per cent and 14 per cent. In the case of cooperative banks, the rate paid by the ultimate borrower has been even higher, in the average range of 12 per cent to 14 per cent,'' he noted.

Mr. Rajnath Singh also called for an increase in the credit limit set for lending to cooperative banks and RRBs through NABARD. The limit of Rs. 6,500 crores had remained constant and consequently its proportion in the lending of cooperatives and RRBs had come down from 35 per cent a few years ago to 20 per cent now.

The RBI, he said, needed to increase the credit support gradually to Rs. 15,000 crores in the next three to four years and also bring down the interest rate charged on it. Earlier, the RBI had provided the credit at an interest rate of three per cent below the bank rate and this concession must be reintroduced. "After the lifting of the Quantity Restrictions as per the requirements of WTO, it has now become essential that the productivity of our agricultural holdings increase to the level of developed countries so that our exports could compete in the international markets. For doing so and also for making value addition to our agricultural produce, it is essential that enough capital is provided to the farmers at reasonable rate of interest,'' he said.

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