Agri, Ssi Sectors To Cash In On Low Rates

HARVESTING CUTS: Priority sector lending rates in SBI band

Agriculture and small scale industries (SSI) will soon be able to reap the benefit of lower interest rates. The finance minister in his Union Budget has asked banks to follow the State Bank of India (SBI) interest rate band of 2 per cent above and below its prime lending rate (PLR) for secured advances to the priority sector.

Banks, depending on their PLR, which now ranges between 10.75 per cent and 11.50 per cent, currently charge a risk premium of 400 basis points for borrowers from the agriculture and SSI sectors. This jacks up the cost of borrowing for priority sector borrowers to between 14.75 per cent and 15.50 per cent.

 

However, following the budget announcement, banks will be required to lower the risk premium to 200 basis points over their PLR for this segment of borrowers. Now a priority sector borrower will be able to avail of loans substantially cheaper at 12.75-13.50 per cent.