The Hindu : Business : Banks keen to fund tea gardens' revamp

Online edition of India's National Newspaper
Saturday, Feb 10, 2007
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Business

Business

Banks keen to fund tea gardens' revamp

Indrani Dutta

Escrow mechanism, priority sector lending are the attractions in the scheme

KOLKATA: Major public and private sector banks are queuing up to participate in the Rs. 4,761 crore Special Purpose Tea Fund (SPTF), launched by the Union Minister of State for Commerce Jairam Ramesh recently.

The first loan agreement is slated to be signed in June.

Sources said that some of the banks have offered to take up the entire line of credit, adding that the banks were now likely to formally give their proposals.

Under the scheme, banks would lend to the Tea Board which would on-lend to the planters.

Repayments

The banks' keenness to join the initiative stems from the fact that this would be part of their priority sector lending programme.

The second reason is to be found in the fund itself, which has been structured in such a manner that it almost guarantees security of repayments.

Commitment

"One of the crucial aspects of the SPTF's structure is that the repayments will be from the revenues that tea gardens get from auction sales, through an escrow mechanism under which borrowers would have to commit to route tea of value equivalent to 200 per cent of their annual debt servicing liability through the tea auctions," sources said.

On its part, the Tea Board, which is the nodal authority for this fund, has begun taking steps to operationalise the scheme. It has circulated a draft scheme to all the tea gardens, industry sources said.

Under the programme, the total area to be replanted and rejuvenated over a 15-year period is 2.13 lakh hectares.

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