SBI reduces interest rates on new agri loans

MUMBAI: The State Bank of India on Thursday said it has reduced interest rates on new crop and minor irrigation loans and the special concession would be valid for both kharif as well as rabi seasons (end of March 2011).

Interest rates on new minor irrigation loans have been reduced from 10.50-13.25 per cent to 8.5 percent in the first year, and 9.5 percent in the second and third years for loans up to Rs 25 lakh, a SBI statement said.

Similarly, interest rates on crop loans between Rs 3 lakh and Rs 25 lakh have been reduced from 11.75-12.75 percent to 10 per cent per annum for one year, it said.

Both are on the fixed rate basis. "Last year, after the weak monsoon, we had devised this scheme to help farmers and give a fillip to the agriculture sector. This year, despite expectations of a good monsoon, we want to focus on investment credit to farmers," SBI general manager (agri-business) Niranjan Parsha told.

The only change is that while the interest rate was 8 per cent for minor irrigation loans last year, it has been upped to 8.5 percent in this one.

"This is because interest rates are rising and the cost of funds has gone up," Parsha said, adding that SBI was implementing this scheme to help farmers "keeping the larger interests of the country in mind".

The margin money requirement for new minor irrigation loans has been reduced to 10 per cent flat, from the existing 15-25 per cent of the project cost. An additional moratorium period of one year has been given for minor irrigation loans sanctioned during this year, Parsha said, adding, "Thus, the repayment period for new loans has been extended by one year."

Speaking on crop loans, he said that an additional concession of one per cent interest will be offered to regular borrowers who repay the loan promptly. "Thus, the effective interest rate will be only 9 per cent per annum (fixed) up to one year, for borrowers paying promptly," he said.