New Delhi, July 16
The Centre today announced major initiatives to ease fund flow to the credit-starved agriculture sector, including a reduction of interest rates to 9 per cent on loans not exceeding Rs 50,000 and easier norms for acquiring loans on tractors and farm equipment.

In addition, a pilot project will be launched to disburse loans to farmers through post offices. Initially, the State Bank of India, ICICI Bank and Indian Overseas Bank have been mandated to execute the project through post offices in Tamil Nadu from September 1, 2003. Depending on its success, the project will subsequently be extended to all states bringing the entire network of 1.54 lakh post offices under the proposed franchisee network.

“This ( disbursal of loans) will be done by the post offices for which they will be paid a fee”, Union Finance Minister Jaswant Singh said while addressing a joint Press conference with Agriculture Minister Rajnath Singh here. On the reduction of the interest rates, the Finance Minister said at present, the interest rates on farm loans worked out to as high as 16-18 per cent. “Banks have been directed to provide farm loans up to Rs 50,000 at 9 per cent,” he said.

The slashing of interest rates have been brought about by allowing District Central Cooperative Banks (DCCBs) to directly re-finance funds from Nabard. To this effect, the Nabard Act will be suitably amended. Presently, State Cooperative Banks (SCBs) and Regional Rural Banks (RRBs) source about 40 per cent of their funds from Nabard, which in turn takes recourse to the General Line of Credit of the Reserve Bank of India (RBI).

The SCBs disburse the funds to farmers through various agencies, including the DCCBs and the Primary Agriculture Credit Societies (PACS).

Today’s decision to allow the DCCBs to directly source the funds from Nabard will reduce the cost of re-finance enabling the final recipient (the farmer) to raise loans at lower rates.

Through the single digit loan rate the government is targeting to increase the credit flow to Rs 7,36,510 crore to the farm sector by the end of the 10th Five Year Plan in 2007, from Rs 70,810 crore disbursed during 2002-03.