The Tamil Nadu Government has sought the Prime Minister, Dr Manmohan Singh's assistance to roll back the interest rate hike on loans under the Rural Infrastructure Development Fund.
In a letter to Dr Singh, the Chief Minister, Ms J. Jayalalithaa, said the Reserve Bank of India has hiked the interest rates to 8 per cent from the prevailing 6.5 per cent on loans under this Fund. This makes the loans unviable.
The loans provided by the National Bank for Agriculture and Rural Development were cost effective earlier and Tamil Nadu has a bank sanction for Rs 2,148 crore to be drawn in the current financial year.
The Chief Minister urged the Prime Minister to intervene with the RBI to bring down the interest rates to 6.5 per cent. If a hike is inevitable it should be pegged around 7 per cent and applicable only on loans sanctioned in the current financial year.
The RBI has not only hiked the rates with effect from April 1, 2012, but has revised the rates for funds drawn after that date for projects sanctioned in the previous financial years. This will add an interest burden of over Rs 229 crore.