Chief minister J. Jayalalithaa has opposed Reserve Bank of India (RBI) enhancing the interest rate on rural infrastructure development fund (RIDF) to 8 per cent per annum, and urged Prime Minister Manmohan Singh to restore it to its original rate of 6.5 per cent.
The chief minister, in a letter to the PM, 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.”
“If at all the interest rate has to be enhanced, it should be kept around 7 per cent and made applicable only to the loans for those projects which will be sanctioned from 2012-13 onwards,” she suggested.
She said it was more shocking that RBI had made the higher interest rate applicable to drawals after April 1 even for projects already sanctioned in the previous financial years. The PM would agree with her that once a project was sanctioned, it was not fair to alter the conditions, she said.
She said the 'unilateral action' has totally taken TN by surprise and upset the financial projections. “As a result, TN will have an additional interest burden of Rs229 crore on the projects already sanctioned and under implementation,” said the CM.
At present, the state has a bank sanction of `2,184 crore for which funds will be drawn in 2012-13 and subsequent years, she said, adding, “We had proposed such massive investment using RIDF loan only on assumption that the lending rates would remain reasonable,” the chief minister added.