FNB News - NABARD reduces PLR to 9%; lending under Food Processing Fund may get lower

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NABARD reduces PLR to 9%; lending under Food Processing Fund may get lower

Monday, 23 February, 2015, 08 : 00 AM [IST]

Ashwani Maindola, New Delhi

National Bank for Agriculture and Rural Development (NABARD) has decided to reduce its prime lending rate (PLR) to 9 per cent from 9.25 per cent on loan. This will include lending under the Warehouse Infrastructure Fund (WIF) and Food Processing Fund (FPF) wherein the lending rates of interest may become lower.

Loans under WIF are for construction of warehouses and cold storage infrastructure while FPF is meant for establishment of food processing units in the mega food parks (established and designated).

However, according to sources, the FPF is not doing well and NABARD is not getting many takers for this loan. In this regard, one senior official stated that while they were hopeful of achieving the target under WIF by the fiscal-end, that might not be the case for FPF. The official said that the sector of food processing was not doing well in the country and hence NABARD did not receive good number of proposals under this fund so far.

"We have reduced the rate of interest for loans falling under the long-term refinance facility to 10 bps (basis point) in case of repayment period going beyond five years, while it has been reduced by 20 bps in case of loan with the repayment tenure of less than five years," said the official to make the loans further attractive.

”This will facilitate the banks to borrow at concessional rates to enhance their investment credit to the agriculture and rural development portfolio which contributes to the capital formation,” he added.

Meanwhile, there was no formal announcement in this regard, as according to sources the lending rates were depending upon Bank Rates and when the latter was reduced by 25 basis points, automatically the PLR of NABARD got reduced by the same point basis.

Further the current lending rates for the food processing and warehousing projects is ranging around 9.5 to 10 per cent and there may not be any change as sources say that such project is also charged with risk premium and tenure premium and therefore the lending rate for such projects may remain unchanged.

“It depends upon case to case. If the lending is for seven years, the rates of interest may be less but beyond the period of seven years there is a risk premium and tenure premium attached which will make it same as it is,” said one official privy of the development adding that if the bank rates go up, PLR will automatically go up.

All India Food Processors’ Association’s D V Malhan says that there needs an awareness programme for dissemination of information. “The state governments, which are the implementing authority of the schemes of MoFPI, need to be geared up for enhancing the food processing sector in this country. Dedicated officials needed to lead the departments with a serious approach towards public dissemination of information of all schemes and incentives provided thereunder,” he said.

NABARD has already sanctioned loans valued at Rs 2,500 crore under WIF out of a total corpus of Rs 5,000 crore. It has also sanctioned loan to the tune of Rs 500 crore under FPF which was having corpus of Rs 2,000 crore so far. Both corpus funds were set by the Union Ministry of Finance in last year’s Budget.