In a move to help drought-hit farmers, the country's largest lender, State Bank of India (SBI), has slashed interest rates for minor irrigation like wells and pump sets and crop loans above Rs3 lakhs.
The rate cut could be as high as up to 525 basis points.
The rate on new minor irrigation loans has been reduced to 8 per cent in the first year and 9 per cent over the next two years. The concessional rates would be applicable for loans up to Rs25 lakh that are sanctioned and disbursed till March 2010. The earlier rates levied were 10.5 per cent and 13.25 per cent on the loans.
The new rates would be applicable for loans granted in 2009-10 and even farmers who had availed loans in April 2009 would benefit even though the scheme had been announced now, according to SBI general manager Niranjan Parsha.
He added that the margin money requirement for new minor irrigation loans has been reduced to 10 per cent from the current 15-25 per cent of the project cost and the moratorium period for irrigation loans has been extended by one year due to the drought situation.
The repayment period for new loans would also be extended by a year. The loan processing charges also stand reduced by 50 per cent.
For crop loans the bank has reduced the rate to 10 per cent for the first year with the rate being available for advances or Rs 3-25 lakh sanctioned and disbursed till the end of March 2010.