No plans to reduce interest rate on farm loans: Thomas

New Delhi: The government today said it has no plans to reduce the rate of interest to 4% from the current 5% on farm loans, reports PTI.

In a response to a written query in Rajya Sabha, minister of state for food and agriculture KV Thomas said that the government has no proposal under consideration for reducing the interest rate to 4% on farm loans.

The minister said in 2009-10, the government provided an additional 1% interest subvention to those farmers who repaid their short term crop loan as per schedule.

“The government has raised this subvention for timely repayment of crop loans from 1% to 2% from the year 2010-11,” he said while adding that thus the effective rate of interest for such farmers will be 5% per annum.

The minister said that during the first half of current fiscal (April-September period) public sector commercial banks have disbursed total loan of Rs86,284 crore to farmers.

“The loan amount has benefited 77.68 lakh farmers for meeting their credit requirements for agricultural operation purposes,” the minister said.


Aadhaar launched in Tripura, first in N-E region

Agartala: Aadhaar, a 12-digit Unique Identification Number (UID) to be issued to each citizen of the country, has been formally launched in Tripura, the first state in the north eastern region where the project was inaugurated, reports PTI.

State industries and commerce minister Jitendra Chowdhury launched Aadhaar at a function at Sabroom in South Tripura district, about 135 km from here, on Thursday.

However, the citizens of Sabroom have to wait for sometime to get the Aadhaar number, to be issued by the Unique Identification Authority of India (UIDAI).

“We hope the process of enrolment in Tripura would be completed by next year and then the people of the state would be given the Aadhaar number by UIDAI,” Mr Chowdhury told PTI from Sabroom today.

The number will store basic demographics and biometric information of each individual in a central database, officials said. This would help the government launch various programmes.

Tripura is the eighth state in the country to have launched Aadhaar.

Meanwhile, UIDAI chairman Nandan Nilekani has said the ‘Aadhar’ number should not be the basis for any discrimination.

Asked about activists like Jean Dreze, a member of the National Advisory Council (NAC), not favouring linking Aadhar to MNREGA, he said the number should not be used in such a manner that one gets discriminated against.

He said the number was optional and not compulsory and that ‘Aadhar’ only aims at ensuring that people get the right services they are entitled to.

Talking about other aspects of the project, including privacy, he said there should not be any fears with regard to the UID databank as it will store very limited information.

Nilekani said the Aadhaar number will be helpful in opening a bank account, getting a ration card and many other things especially for the poor and the migrant labourers.

He said the number will enable inclusive growth and development for the deprived and will act as an instrument of social inclusion.


Cut lending rates and raise deposit rates: RBI governor

Mumbai: Reserve Bank of India (RBI) governor D Subbarao today asked banks to hike deposit rates and lower the lending interest to improve their efficiency to the level of their global peers, reports PTI.

“We need to raise the level of national savings and channel those savings into investment. This means banks need to raise the interest rates offered to depositors and reduce the lending rates charged on borrowers,” Mr Subbarao said in his address to the Bancon 2010 here today.

The governor said the net interest margins of the banks, which though have came down by 0.5% in the last decade to 2.5% now, continue to be higher than their peers in other emerging markets even after accounting for their mandatory social sector spends.

Banks can maintain profitability by optimising operating costs like non-interest expenses, which include wages and salaries, transaction costs and provisioning expenses, Mr Subbarao said.

“The task for our banks clearly is to press on with efforts for sustainable reduction in operating costs through productivity improvement and skill enhancement and by leveraging of technology,” he said.

Nurturing asset quality, diligent loan restructuring of viable assets and reducing non-performing assets through recovery or upgrade can be the other streams for non-interest costs reduction, he said.

On the need to improve efficiencies, Mr Subbarao, particularly, picked out large-sized banks and said their efficiency should be comparable to global standards.

Flagging the financial inclusion agenda, Mr Subbarao said he is “troubled” that Indian banks see it as an obligation rather than as an opportunity.

“Financial inclusion will provide banks access to sizeable low-cost funds as also opportunities for lending in the small volume segment,” he said, and added that instead of looking at it as an obligation, banks should embrace it as an opportunity that can help them increase their asset base.

However, some banks pointed out that issue of net interest margins should be considered in the context of the sector profitability.

Leading private sector lender ICICI Bank chief executive and managing director Chanda Kochhar said, “The issue of net interest margins should be looked at keeping the entire profitability of the sector.”

She also pointed out that the composition of banking profits vary in each country. “Composition of NIMs (net interest margins), operating costs determine the margins of a lender.”

The second largest private sector lender HDFC Bank managing director Aditya Puri told newspersons, “In the long run, what the governor said is laudable—but there are challenges of delinquency, ticket size, costs, statutory liquidity ratio requirements et al.”

Echoing similar views, state-run Indian Bank chairman and managing director TM Bhasin told reporters, “The NIMs of the domestic banks are lower than the global average but increasing the non-interest income is both, an opportunity as well as a challenge.”

It can be noted that domestic banks in their efforts to maintain better margins and protect profits, pay very low interest rates on deposits, especially on savings deposits, which form a major share of their lendable resources, while charge very high interest rates from borrowers.

While savings deposits attract a poor 3.5%, current accounts draw zero returns to the depositor, term deposits vary between 4.5% and 8%. On the other hand, the average benchmark lending rate is above 7.5%.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)