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Banks offer cheap loans to farmers but Govt must fill gap

Written by: Staff

New Delhi, Mar 23 (UNI) Bank Chairmen today sought from Finance Minister P Chidambaram tax breaks and grants if the agriculture sector is to be financed at the subsidised interest of seven per cent, as announced in the Budget for 2006-07.

The Finance Minister said he has taken the suggestions'' on board'' and in order to tide over the liquidity crisis, he announced a Committee of five bank Chairmen who will meet the Reserve Bank of India next week, ahead of the annual Credit Policy review on April 18.

In a meeting with the bank chiefs, the Finance Minister reviewed a number of issues related to the hardening of interest rates, shortfall between the demand for credit growth and the deposit growth and the ways to help the banks to finance the agricultural loans at a lower rate of seven per cent.

''A number of suggestions were made and I have taken them on board,'' the Finance Minister told reporters after the meeting.

He said for enhancing money availability for the economy which is growing at eight per cent, the five-member bankers' committee under the aegis of the Indian Banks' Association would meet the RBI Governor on March 28.

''I would also speak to the Governor,'' he stated.

An important suggestion of increasing the interest rates on the NRI deposits was also made so that the required liquidity can be pumped into the system, IBA Chief Executive Officer H N Mr Sinore said.

At present the NRI funds are given rates, 25 basis points below the LIBOR.

As regards the agricultural loans, Mr Chidambaram said the banks were willing to ''cooperate'' and lend to farmers at seven per cent from the next Kharif season. While the Finance Minister did not elaborate the concessions sought by the banks, Mr Sinore said the banks have asked ''subventions'' so that the burden of cheap loans is not borne by their balance-sheets.

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