The Hindu Business Line : Rate war spills over to farm loans sector

THE rate war is on. Not just in home loans but in priority sector lending and farm loans in particular. The nationalised banks are competing with each other to offer a better rate to the farm sector.

The Agriculture Development Branch (ADB) of the State Bank of India in Udumalpet has extended a total credit of Rs 1.29 crore to 771 farmers, who have taken to maize cultivation under contract farming. "We have lent them at a concessional rate of 8.75 per cent," says the Branch Manager Mr N. Arumugham.

SBI has tied up with the city-based Prime Bio Products (India) Ltd - a farm service provider and with the Mumbai-based Mahindra Sulabh. While the farm service providers supply the technical guidance and inputs, the bank supports by extending timely finance, direct to the growers.

According to the Managing Director of Prime Bio, Mr Vikram Mohan, the onus of repayment rests with the company as per the agreement. The AGM of the Agricultural Technical Cell of SBI in Chennai Mr D. Janakirama Raju expressed confidence about a cent per cent recovery this year. "Despite the dry weather conditions, the crop yield levels looks promising," he said.

According to him, the recoveries would be made after realisation and not after harvest. With Prime Bio assuring to buy back the produce at the market rate this year, the farmers appear the contented lot.

While the company is targeting the small and medium farmers with a holding of not more than 4 acres to bring within its fold for extension of the contract-farming concept, the farmers in Udumalpet belt revealed that financial support from banks was not a problem any more. The farmers in that belt are an enlightened lot. They are aware of the market rate - both for availing credit and for the produce. "The rate charged by the cooperative society is high when compared to bank rate, and the assistance is not available on time," Mr P. Navaneethakrishnan of Alampalayam Village said.

According to the farmers, there was a minute difference in the rates offered by the different banks in that belt. Farmers on their part prefer to wait and get the best rate possible. Bankers concede that with the industrial off take being low, the thrust was on farm lending and this space offered enormous scope.

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