Tamil Nadu halves interest rate on non-farm credit

Chennai July 7 : The Tamil Nadu government has cut by half the interest rate on non-agricultural loans disbursed by cooperative banks, bringing it to 6 percent, and waived penal interest to reduce these banks' non-performing assets (NPAs).

'The government has come to this decision after the appeals to waive the non-farm loans. Waiver of such loans is not possible as they were issued against securities,' Finance Minister K. Anbazhagan told the assembly Tuesday.

Borrowers can choose to make one-time settlement or in three instalments after paying 25 percent of their outstanding amount upfront, he said.

The state government's decision will benefit around 132,000 debtors owing a total of around Rs.709.51 crore.

The state will bear four percent of the interest loss due to the waiver and the balance two percent will have to be borne by the banks.

A total of Rs.251.21 crore is being forgone, Anbazhagan said.