The Hindu Business Line : Softer loan regime for tractor sector

TRACTOR companies have welcomed the farmer-friendly policies indicated in the Interim Budget on Tuesday, stating that it would result in higher credit availability with the farmers. The industry has specifically displayed optimism about the Government's intent to further reduce interest rates on farm loans and to simplify the loan-procuring process by providing for more reasonable collateral terms.

During the Budget speech, the Finance Minister, Mr Jaswant Singh, said, "I have been urging the Indian Banks Association to further lower the interest rates for agricultural purposes. Some public sector banks have already done so. I am confident that other banks will also respond by offering loans at rates lower than the prevailing rates". In July 2003, the rate of interest for crop loans by public sector banks was reduced to nine per cent.

Banks have also been "advised" to assess individual credit-worthiness and not to insist on additional collateral through a mortgage of the entire land holding. That is, collateral security should be proportionate to the value of the loan.

According to Mr R.C. Jain, President of the Tractor Manufacturers Association (TMA), both the steps would help the tractor industry, since at least 95 per cent of the tractors bought by farmers are financed. "In addition, collaterals have been another issue affecting loans for tractors, as the farmer's entire land is kept as collateral when he takes a loan to buy a tractor", he said.

In addition, the Finance Minister announced that a scheme has been prepared with an aim to revitalise the cooperative credit structure, envisaging an outlay of about Rs 15,000 crore, to be shared between the Central and State Governments, in an appropriate ratio.

Also, prescriptions relating to non-performing assets in relation to crop loan accounts have posed problems in the provisioning of credit to farmers where seasonality and uncertainty of farm incomes are not fully captured. The Government has set up a committee under Dr V. S. Vyas to address this issue.

Meanwhile, by March 31, all eligible farmers will be owners of Kisan Credit Cards, which upon individual request can now be used on ATM machines where such facility exists. The Finance Minister also said that the Indian Banks Association has been tasked to prepare a revival package for the tea industry. A special Tea Term Loan, repayable in five years, with a moratorium of one year shall be provided. The Government also proposes to prepare a revitalisation package for the sugar industry.

More Stories on : Agricultural Policy | Farm credit | Budget | HCV/LCV/Tractors

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