Jayalalithaa opposes rate hike on rural infra loans

Chennai, April 27 (IANS) Tamil Nadu Chief Minister J.Jayalalithaa Friday urged Prime Minister Manmohan Singh not to raise the interest rates on loans provided under the Rural Infrastructure Development Fund (RIDF).

She was referring to the recent decision of the Reserve Bank of India (RBI) to hike the interest rates from 6.5 per cent to 8 per cent per annum from this April for all loans, including all past loans, provided under the RIDF. The RIDF scheme is from the National Bank for Agriculture and Rural Development (NABARD) for the states taking up rural infrastructure works.

In a letter to the prime minister whose text was released to the media here Friday, Jayalalithaa said: "Such a high rate will make RIDF loans unviable, and the states will be forced to cut down on investment in rural infrastructure which is vital for inclusive development."

"What is more shocking is that the higher interest rate of eight percent is made applicable to the drawals after 1.4.2012 even for those projects which have already been sanctioned in the previous financial years," she added.

The chief minister noted that Tamil Nadu has a bank sanction of Rs.2,184 crore under the RIDF for which funds will be drawn in 2012-13 and subsequent years.

Stating that the state had proposed such massive investment using RIDF loan on the assumption that the interest rate would remain reasonable, she said the recent increase in interest rate would add an additional burden of Rs.229 crore on the projects already sanctioned and under implementation.

"You will agree with me that once a project is sanctioned, it is not fair to alter the conditions during the project period," she said in the letter.