The Hindu : Andhra Pradesh News : State pitches for soft loans

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Friday, Dec 07, 2007
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Andhra Pradesh

Andhra Pradesh

State pitches for soft loans

A. Saye Sekhar

To ask banks to absorb ‘pavala vaddi’ burden

Huge business avenue for banks
Excellent repayment complaince

HYDERABAD: The State government is going to appeal to banks at Friday’s meeting of the State Level Bankers Committee (SLBC) to absorb the burden of its programme for providing loans at three per cent interest (‘pavala vaddi’) to identified groups.

Presently, the government is reimbursing to banks the difference between the interest rate charged by banks and the ‘pavala vaddi’. The government is contending that the loans to SHGs and beneficiaries of Indiramma housing scheme is a huge business avenue it has shown to the banks. Besides, the excellent repayment compliance (about 99 per cent) has enhanced the credit-worthiness of the beneficiaries. Its argument further goes that since the banks are flush with funds, they can extend the loans at ‘pavala vaddi’ and still absorb additional costs.

While these two schemes are covered under ‘pavala vaddi’, Chief Minister Y. S. Rajasekhara Reddy is contemplating advancing even crop loans at three per cent of interest. Besides, Dr. Reddy has announced that the ‘pavala vaddi’ scheme would be extended to weavers and the physically challenged also.

Asked how the government proposed to meet the additional burden, Principal Secretary, Finance, Dinesh Kumar said: “We will cross the bridge when we come to it.”

When contacted, chairman and managing director of Andhra Bank K. Ramakrishnan, who is also the convener of the SLBC, said: “If the government comes up with the proposal, it will be placed before the member banks for their opinion.”

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