| |
| Automobile companies, especially the tractor makers and agriculture equipment manufacturing companies, are in for a good time. |
| |
| The recent reduction of interest rates on agriculture sector loans to single digit rates in tandem with other sector loans is expected to make equipment purchase affordable and fuel demand for these products. |
| |
| The reduced interest rate slabs announced by banks last week would make agriculture equipment and tractors affordable as interest rates payable on purchases would be equivalent to rates payable for utility vehicles. This was expected to push up agriculture sector advances by banks. |
| |
| The cost of loans was slashed from 14-19 per cent to put them on par with auto and housing loans priced at 9-14 per cent. |
| |
| Agri sector loans up to Rs 50,000 will attract 9 per cent rate of interest, about 2 per cent less than before. |
| |
| Loans between Rs 50,001 to Rs 2 lakh will be at 10 per cent, and those between Rs 2 lakh and Rs 5 lakh at 12 per cent. Loans Rs 5 lakh will attract 13 per cent interest, lower than 13-19 per cent charged earlier. |
| |
| Moreover, good rains this year are expected to lead to higher disposable income in the hands of the rural community. |
| |
| Investment in agriculture equipment and tractors should rise as a result. |
| |
| Banks have been shying away from increasing their lending to agriculture sector for too long. |
| |
| They are now gearing up to deliver more credit to the rural community. Distortions in priority sector relating to agriculture and rural business were being eliminated. |
| |
| Banks seem to have realised that after the housing, automobile and personal loan categories, agriculture loans can be the next high growth category. |
| |
| If institutional financing to the agriculture sector can be made attractive enough, it can replace the vast network of credit built up over the years by private financiers, who still have a stranglehold on agriculture credit. |
| |
| The task of replacing private credit with institutional credit is mammoth and only the banking sector can do this. Lower interest rates will make the shift easier as private finance is very expensive. |
| |
| Banks have also started working on alliances with local self help groups, rural non-government organisations and co-operatives to finance agriculture equipment including tractors. |
| |
| Corporate borrowers are expected to emerge in the rural sector thanks to recent policy changes allowing private sector participation in agriculture through contract farming and land leasing arrangements. |
| |
| Corporate involvement was expected to lead to accelerated technology transfer, besides higher capital inflow to the countryside. |
| |
| For farmers, corporate involvement would mean assured markets for their produce, especially of oilseeds, cotton and horticultural crops. |
| |
| As corporates are expected to focus on mechanisation, demand for agriculture equipment and machinery would grow. |
| |
