The Hindu Business Line : Banks told to go soft on farm loans

The Finance Minister, Mr Jaswant Singh, with Mr V. S. Chalapathi Rao, MD, Nabard, and Mr Y. C. Nanda, Chairman (extreme right), on his way to present Nabard's best performance awards for cooperative credit institutions in New Delhi on Wednesday.

NEW DELHI, Nov. 6

THE Finance Minister, Mr Jaswant Singh, has asked the banks to align the interest rates for agriculture and rural sectors with the soft interest rate structure in the rest of the economy.

According to Mr Singh, interest rates for the farm and rural sectors where 80 per cent of the country's population was engaged in were still high at 12 -13 per cent. Even though there have been several cuts in the Bank Rate in the past few years, it has not translated into lower rates for the agriculture sector.

"Only a small segment is a beneficiary of the low interest regime of the Reserve Bank of India. Low interest rates have not been passed down to rural areas as the transaction costs remain high. This inequality must be addressed or the entire process would be defeated," he said here on Wednesday.He told bankers to address this issue.

Last week, the Reserve Bank of India cut the Bank Rate to a 30-year low of 6.25 per cent. However, the Governor, Dr Bimal Jalan, had said hat the RBI could only review the interest rates. "We cannot direct banks to lend at any particular rate."

Referring to the problems in the co-operative sector, the Finance Minister said that the important question was why the "child" (the co-operative sector) had become sick and why it had taken so long for the child to get cured."

Mr Singh said that the Government would provide support every effort to strengthen this sector, which has witnessed uneven growth.

The Minister of State for Finance, Mr Anand Rao Adsul, said that co-operative banks should come forward on their own for strengthening the co-operative credit structure rather than depending on external support.

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