State to press arhtiyas to cap interest rate at 16%

Ruchika M Khanna

Tribune News Service

Chandigarh, September 12

The state government plans to press private moneylenders, mainly arhtiyas (commission agents), to limit the rate of interest they can charge from farmers seeking crop loans at around 16 per cent.

As of now, the rate of interest charged by these arhtiyas is 18 per cent. Recent studies have shown that over 20 per cent of the total farm loan taken by farmers in Punjab is from commission agents. The loan taken by 15 lakh farmers from institutional sources (banks — both cooperative and commercial banks) is around Rs80,000 crore. “It is estimated that Rs20,000 crore is the total worth of loan given by arhtiyas to farmers in Punjab,” said Dr MS Sidhu, a senior farm economist.

However, the arhtiyas in the state are up in arms against such a move. Vijay Kalra, president of the Federation of Arhtiya Association of Punjab, said the lowering of interest rate on loans extended to farmers was unacceptable to them.

A three-member Cabinet sub-committee, comprising Local Bodies Minister Navjot Singh Sidhu, Finance Minister Manpreet Singh Badal and Rural Development Minister Tript Rajinder Singh Bajwa, is to meet tomorrow morning and recommend the lowering of the interest rates. Sources said the sub-committee would give its recommendations for lowering the interest rates, which would be taken up in the next Cabinet meeting.

The government can only press the commission agents to lower interest rates, as was done during the previous tenure of Capt Amarinder Singh-led Congress government. Then, a committee formed under Laal Singh had negotiated with the arhtiyas and interest rates were lowered from 24 to 18 per cent.

The reason why the arhtiyas are unwilling to lower the interest rate is based on their claim that their commission on loans is just 2 per cent. Lowering the interest would make the moneylending business unviable for them.

Harban Singh Rosha, a leading commission agent in Khanna, said they get a working capital limit between Rs30 lakh and Rs50 lakh sanctioned from the bank, which is used to give loans.

“While we have to pay 13 per cent rate of interest on this limit to the bank each month, we charge only 18 per cent rate of interest per annum. We are paying the interest on the limit each month, whereas the framer pays 18 per cent interest when he returns the loan after six months. Lowering the interest rate will be impossible,” he said.

Matter to be taken up today 

A three-member Cabinet sub-committee, comprising Local Bodies Minister Navjot Singh Sidhu, Finance Minister Manpreet Singh Badal and Rural Development Minister Tript Rajinder Singh Bajwa, is to meet on Wednesday and recommend the lowering of the interest rates.