SBI Reduced Interest Rates to Increase Farm Loan Portfolio

The State Bank of India (SBI) in December 2010 decided to reduce interest rates to 10-10.5% for setting up high value dairy, poultry, horticulture projects and construction of warehouses, rural godowns and cold storages. The decision was taken to increase farm loan portfolio. SBI declared that it would charge 10% on term loans and working capital limits for setting up high-value dairy projects and to small dairy borrowers with a herd size of 10 cattle and above provided they have tie-ups with reputed milk processers for assured buying arrangement. SBI will charge 10.5% for term loans and working capital limits to new poultry units with credit requirements of Rs 5 lakh. For horticultural activities 10.5% would be charged provided a letter of intent is issued by the National Horticulture Board. SBI would charge 10.5% for construction of new godowns, warehouses and cold-storages. Crop loans above Rs 3 lakh and up to Rs 25 lakh will be offered concessional interest rate of 10% till 31 March 2011 while those up to Rs 3 lakh are charged 7%.

The lower rate of interest will be available only for new loans that are sanctioned till 31 March 2011. The interest rate will be reset every year. Without the reduction or concession in rates,the bank card rate for the above activities was in the range of 12.10%-14.85%. On September 30,t he banks exposure in setting up high-value dairy stood at around Rs 1150 crore, while new poultry unit cost stood at Rs 590 crore. Horticulture projects cost was at Rs 1400 crore and construction of warehouses, rural godowns and cold storages cost stood at 1400 crore.

SBI currently offers a concessional rate of interest of 8.5% under the produce marketing loan scheme on loans up to Rs 10 lakh per farmer for storage of agri-produce against warehouse and cold-storage receipts. This scheme will be available up to 31 March 2011.