Pawar hints at cut in farm loan rate

New Delhi, May 22 (UNI) Union Food and Agriculture Minister Sharad Pawar today hinted at a possible reduction in the interest rate on loans to farmers from the present 7 per cent, saying the spate of farmers' suicides was causing ''grave concern'' to the government.

Talks have been initiated with the Reserve Bank of India (RBI)and NABARD to remove irrationalities in credit flow to the cooperative societies to bring down the interest rate, Mr Pawar told the Lok Sabha while replying to a debate on 'suicide by farmers in various parts of the country'.

''We want to bring down the interest rate from 7 per cent. Some ways can be found out,'' he said inviting huge applause from members cutting across party lines.

The government had reduced the interest rate on farm loans from 11 per cent to 7 per cent in the Union Budget this year.

The government, he said, wants to remove at least one level of the credit flow, which could cut costs. Though the interest rate on loans from NABARD (the nodal agency for disbursal of agricultural credit) to the State Cooperative Banks is pegged at 4 per cent, the rate soars to 7 per cent when it reaches the Panchayat Cooperative Society.

After getting loans at 4 per cent from NABARD, the State Cooperative Banks add one per cent more, making its rate to 5 per cent while giving loans to the District Cooperative Banks, which in turn charges another 2 per cent on loans to the Panchayat Cooperative Societies.

In his 70-minute speech, Mr Pawar said his own thinking was that so many layers of credit flow were not required and if at least one layer is removed, ''we can save 2 per cent here''.

The government was talking to RBI and NABARD to remove one level of credit flow, he added expressing confidence at the possibility of reducing interest rate for loans to farmers.

Mr Pawar, however, ruled out reducing the rate to 4 per cent as recommended by the M S Swaminathan-led National Commission for Farmers saying the government lacked the funds for doing so.

According to the Agriculture Minister, 100,257 farmers have killed themselves between 1998 and 2003 (the year for which the latest figures are available) due to a variety of reasons like crop failure, huge debts, high rate of interest from state and private agencies and non-availability of term loans.

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