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Sudhanshu Ranade

Almost 20 per cent of home loan accounts with SCBs were charged less than 10 per cent per annum even two years ago.

Chennai , March 8

NINETY per cent of agricultural accounts were charged between 10 per cent and 16 per cent per annum in 2003.

Less than a third of loan accounts in this category were charged 10-13 per cent; the remaining two thirds were in the 13-16 per cent bracket.

However, loans to agriculture seem to have been significantly under-reported in the RBI's Basic Statistical Return (BSR).

The total rupee amount of direct agricultural loans is shown in the table at 2.9 per cent of total loans and advances. The correct figure is likely to be much higher.

Perhaps this is because BSR data relate to March 31, when agricultural loans outstanding are at their lowest.

Turning to loans by Scheduled Commercial Banks (SCBs) for consumer durables and housing, 65 per cent of loan accounts for consumer durables were in the 13-16 per cent bracket; a similar percentage of home loans (which carry a 50 per cent risk weight) from SCBs fell in the 10-13 per cent category.

A number of these accounts may have migrated into lower interest brackets since then.

Almost 20 per cent of home loan accounts with SCBs were charged less than 10 per cent per annum even two years ago.

Thirty six per cent of loan accounts for finance fell in the 10-13 per cent bracket, as compared with only 28 per cent of direct loan accounts to agriculture.

Forty seven per cent of finance sector loan accounts were charged 13-16 per cent per annum, as against 62 per cent of direct loans to agriculture.

3.3 per cent of financiers or finance houses paid less than 10 per cent per annum, as against less than 1.5 per cent of direct loans to agriculture.

As for the industrial sector, 22 per cent of loan accounts enjoyed 10-13 per cent interest.

Fifty three per cent had to shell out 13-16 per cent each year, and almost 20 per cent had to cough up between 16 per cent and 20 per cent.

This is without taking the compounding of interest on board. Is it any wonder that corporates prefer to look outside the banking sector for the funds they require?

From the point of view of bank earnings, of course, the question is not how many accounts fall in this or that interest rate bracket, but rather how much money is deployed across brackets.

According to the table, the weighted average rate of interest on loans and advances is around 14 per cent per annum.

As against this, according to figures provided by the RBI's Trend and Progress of Banking in India 2003, the average cost of funds from the public as well as other sources works out to less than six per cent per annum.

This figure was arrived at by dividing the total interest paid out by banks during the entire year by the Gross Demand and Time Liabilities as on March 2003.

So, as in the case of the 14 per cent average rate of interest on loans mentioned above, this six per cent figure must be treated as only a crude approximation.

Be that as it may, the position today so far as agricultural loans are concerned, may not be very different.

Had there been a sizable drop in rates of interest on direct loans to agriculture, there would have been more of a circus by the ruling parties - and louder yelps of pain from bankers.

Personal loans, however, are cheaper now than they were two years ago.

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