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P. Devarajan

If below 6 per cent per annum is good for corporates, it is also good for quality farmers. Nay, any discrimination is unconstitutional.

SOMETIME last week, ONGC reportedly raised from the market around Rs 3,000 crore, 90-day money between 4.50 per cent and 4.58 per cent from banks such as SBI.

It is a regular practice for bankers to please corporates with funds at any rate as an excuse to get business. The same does not apply to the farm sector and bankers are crying over falling margins and shrinking profits when the Finance Minister told them to offer farm loans at less than 9 per cent.

(As an aside, did any newspaper think of sending out its correspondents to India Interior to get the views of farmers on the budget? Why is budget reaction only corporate reaction?)

Bank balance sheets are not hit when banks put in depositor funds in government securities at yields lower than the price of deposits. The Finance Minister is pushing for various funds like Agriculture Infrastructure and Credit Fund, the Small and Medium Enterprise Fund and the Industrial Infrastructure Fund to place monies with borrowers at two percentage points below the PLR, which is 10.25 per cent per annum for SBI.

Mr Singh and the Finance Ministry are not clear over the modalities of the various Funds and seemingly the idea was drummed up without any reference to bankers.

The Finance Minister is rather averse to meeting bankers and prefers to get things done through the RBI Governor, if at all. Banks could have been told by the Finance Minister to lend to these sectors at specific interest rates to make things easier.

Why should SBI, ICICI and others put their deposits to set up an Infrastructure Fund when they are lending to these sectors, albeit at stiff interest rate tags?

What should Nabard do with the Rural Infrastructure Development Fund and how will Nabard raise Rs 50,000 crore for the Agriculture Infrastructure and Credit Fund with some Rs 30,000 crore lying unutilised with RIDF?

Critics have blasted the Finance Minister for interfering with the lending policies of banks. Should the Finance Minister not do anything when bankers treat farmers with scorn and refuse to look beyond triple-rated corporates and treasury incomes?

Perhaps, the Finance Minister is doing the job of the RBI.

When do incentives like cheaper bank funds to corporates become subsidies for farmers? When and at what interest rates is corporate funding profitable and farm funding loss making for banks?

The point needs some clarification for if below 6 per cent per annum is good for corporates, it is also good for quality farmers. Nay, any discrimination is unconstitutional.

The Finance Minister is not arguing for a loan mela for farmers; rather he wants bankers to credit rate them and reject the habitual defaulters.

The Finance Minister is on dot when he said: "Traditionally, banks have sought relatively higher security on credit for agriculture. To illustrate, banks insist on mortgaging the entire land holding of a farmer borrower, as security for advances for agricultural purposes. Banks are, therefore, now being advised to assess individual credit-worthiness and to not routinely insist on additional collateral through a mortgage of the entire land holding. As a principle, collateral security should be proportionate to the value of the loan."

Banks adopt this sane policy for corporates and do not ask them to mortgage their empires against every loan proffered. Next to a good monsoon, it is the low interest regime that has helped tune up corporate growth and it is time other sectors also benefited.

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