In a letter to the Prime Minister, Ms Jayalalithaa pointed out that State Governments have been using the Rural Infrastructure Development Fund of the National Bank for Agriculture and Rural Development as a cost-effective financing option for taking up various essential infrastructure activities in rural areas. Tamil Nadu was one of the front-running States both in terms of sanction of projects as well as drawal of funds from RIDF, she noted. At present, Tamil Nadu has a bank sanction of 2184 crore rupees for which funds would be drawn in 2012-2013 and subsequent years.
The Chief Minister noted that Tamilnadu had proposed such massive investment using RIDF loan, only on the assumption that the lending rates would remain reasonable.
She said that now it was understood that the Reserve Bank of India had revised the interest rates for RIDF loans to 8% per annum. Such a high rate would make RIDF loans unviable and States would be forced to cut down on investment in rural infrastructure which was vital for inclusive development, she observed.
Ms Jayalalithaa said that what was more shocking was that the higher interest rate of 8% was made applicable to the drawals after the first of April 2012 even for those projects which had already been sanctioned in the previous financial years.
She said she was sure that the prime minister would agree with her that once a project was sanctioned, it was not fair to alter the conditions during the project period.
This unilateral action by the Reserve Bank of India had totally taken the Tamilnadu government by surprise and had upset the financial projections.
As a result, Tamil Nadu would have an additional interest burden of 229 crores rupees on the projects already sanctioned and under implementation, she said.
In view of this, she requested the prime minister's personal intervention to ensure that:
(i) The interest rate on RIDF loan is restored to its original rate of 6.5% and
(ii)If at all the interest rate had to be enhanced, it should be kept around 7% and made applicable only to the loans for those projects which would be sanctioned from 2012-2013 onwards.
She said that she was confident that an amicable solution would be found for this issue at his behest at the earliest in consultation with the Reserve Bank of India.