Now, a package for rural India

Farm credit rate to be cut to 8%

The finance ministry will soon finalise a comprehensive agriculture loan package after consultations with the agriculture ministry on Friday to give a boost to the feel-good factor in rural India.

A decision has to be taken whether to announce this as part of the vote-on-account on February 3 or separately.

At an hour-long meeting here between Finance Minister Jaswant Singh and Agriculture Minister Rajnath Singh and attended by officials of the Reserve Bank of India (RBI), the finance ministry agreed to the proposals of reducing the interest rate on the agriculture loan from 9 per cent to 8 per cent, strengthening the co-operatives and facilitating loan disbursal to farmers.

However, there was stiff resistance from the RBI to lower the interest rate below 8 per cent""a proposal mooted by the agriculture ministry to benefit farmers on the eve of elections.

Sources in the government said Rajnath Singh still insisted that interest rate should be lowered below the 8 per cent.

But what appears to have agreed upon by the finance ministry and the RBI is the proposal to waive the condition of pledging land lease titles as collateral security to the banks for obtaining loan by farmers.

"This condition will be waived to take the pressure off the farmers," official sources said.

The decision was taken to give a psychological assurance to farmers in light of a spate of suicides in the recent on account of debts, they added.

That co-operative societies played a crucial role in the rural economy had also been emphasised at today's meeting when the finance ministry, it is learnt, okayed the proposal to revitalise the co-operative structures all over the country.

This implied that the Centre will give financial assistance to co-operative banks to provide loans to farmers at a low interest rate.

As of now, there are complaints about disbursal of loans by the co-operative banks at lower interest rates.

The package follows a series of measures for farmers including a television channel and the setting up of information facilities for farmers.

The Centre is said to be concerned about the sugarcane farmers and is working on sectoral packages to woo this group of rich and influential farmers.

The sops on farm loans are expected to reach out to middle and small farmers, in particular, address their problem of credit and access to capital.

The package is a political gesture, shaped by Rajnath Singh's own experience of being a farmer with a small landholding.

The Bharatiya Janata Party (BJP) at its national executive in Hyderabad had emphasised farm-friendly policies and promised to strengthen the credit system.

In a year, when the monsoon is good, there will be less seekers of credit than other years. But from the propaganda point of view, the BJP can claim the credit for having fought industrial lobbies to ensure a better lot for farmers.