SBI loans to farmers at 8 per cent

State Bank of India, the country’s largest lender, today slashed the interest rate on loans to farmers against cold storage and warehouse receipts to 8 per cent – up to 625 basis point reduction over the existing rates.

“These loans will be made available to farmers irrespective of whether they were given crop loans… The 8 per cent interest will be at fixed rate for a period of 12 months in respect of loans sanctioned and disbursed till the end of May 2009,” the bank said in a statement. So far, the bank used to extend these loans at 10.5-14.25 per cent.

Business will surely shift to SBI as other banks are charging 11-12.70 per cent on these loans. The negotiability of warehouse receipts, likely to be notified on March 1, is unlikely to bring liquidity into the commodity warehousing business,” said National Bulk Handling Corporation (NBHC) managing director Anil Choudhary.

Through warehouse receipts, farmers or traders can deposit commodities with warehouse operators instead of selling it in the market. In turn, they receive receipts that can be used to reclaim the underlying product or use them as a collateral.