SBI, the nation’s largest bank in agriculture finance has once again come forward to offer discounted interest rates for setting up and construction of Cold Storages and Warehouses to augment the storage capacity for agri-produce including fruits and vegetables.
India is the 2nd largest producer of vegetables and 3rd largest producer of fruits in the world, but lack of storage facility leads to post harvest losses of around 30% of these produce. In order to strengthen the storage capacity and save farmers from post harvest losses, Bank has introduced a discounted interest structure for construction of Cold Storages and Warehouses whereby prospective borrowers can avail 300 bps discounts in interest from the applicable card rates for first two years and 200 bps discounts from card rates for 3rd and 4th year of loan tenure. The applicable card rate would be charged from 5th year onward till 8th year of the loan period along with remission of 75 bps in term premium applicable to the full tenure of the loan. These loans are classified as an Indirect Agri-Advances under Priority Sector Lending.
These discounts would be available for new projects sanctioned and disbursed till 31st March 2012 and will also be available to existing borrowers for residual period of their loan period provided they comply with stipulations similar to what have been envisaged for new projects on annual review of their loan accounts.
SBI has been actively associated with the national objective of creating storage and preservation facilities for grains and horticultural commodities. Significant discounts on chargeable interest for Agriculture Term Loans are primarily aimed to encourage entrepreneurs/ borrowers to get the benefit of reduced burden of interest. In addition, the capitalization of interest during the initial period would enhance availability of sufficient cash flow in setting up of such projects. The cold storage projects would need to be in line with technical specifications outlined by National Horticulture Board (NHB) of Ministry of Agriculture, Govt. of India, which provides subsidy to the extent of 40% to 55% of the project cost. The warehouses have to be constructed as per the specifications laid down by the Ministry of Agriculture, Directorate of Marketing & Inspection, to get the benefit of eligibility under the discounted interest rate structure.
Thus, the above said discounts of 375 bps in first two years, 275 bps in 3rd and 4th year, and 75bps for the remaining tenure as against the card rates applicable to such projects, which range from 13.75% to 15.75% for the term loans of eight years tenure, should give rise to accelerated investments and create much needed storage capacity for the agriculture produce.