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| Time not ripe for decontrol of lending rates: RBI |
| Newswire18 / Mumbai Mar 09, 2010, 00:41 IST |
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 A complete decontrol of lending rates was not possible currently, but it might be possible when the country achieved double-digit growth and a sharp rise in farm productivity, said Reserve Bank of India Governor D Subbarao.
"For the export sector and agriculture, you have to give some support. Complete decontrol is not possible at this point," Subbarao said.
He said the downside risk of decontrolling lending rates was that sectors that receive subsidised rates now are suffering from lack of adequate growth.
“Are we ready for that (decontrol), because 60 per cent of the people are still employed in agriculture and you must keep that in mind,” Subbarao said.
Small loans of up to Rs 200,000 given to agriculture, small-scale industries and weaker sections of the society are capped at the benchmark prime lending rate, while loans to exporters are given at 2.5 per cent below a bank's BPLR.
Banks offer small farm loans at 7 per cent, with the government providing a 3 per cent subsidy on such loans through a budgetary provision.
Finance Minister Pranab Mukherjee in the Union Budget, raised farm sector lending target to Rs 3.75 lakh crore from Rs 3.25 lakh crore in the current year.
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