Primary Production Select Committee chair Mark Cameron says members were not satisfied with the response from banks to farmer claims that they are reluctant to lend to the rural sector.
Banks offer patchy defence to rural complaints
ACT MP and Primary Production Select Committee chair Mark Cameron said the committee wants to know why there is interest rate disparity between urban and rural loans. File photo

Select committee members disgruntled by response, says chair.

Primary Production Select Committee chair Mark Cameron says members were not satisfied with the response from banks to farmer claims that they are reluctant to lend to the rural sector.

“Members came away disgruntled and left the room with more questions to be asked,” Cameron said of the recent select committee hearing.

The select committee was told by farmers and Federated Farmers that banks appear to have lost their appetite to lend to the sector, and when they do lend, they do so with more stringent conditions.

Farmers considered safe borrowers a few years ago are being re-categorised as distressed lenders despite no change in their financial circumstances.

The Federated Farmers submission said farmers have noticed a steady decline in communication and service.

The federation is seeking a rural banking inquiry.

Cameron said banks provided the committee with the explanation that they are exposed to the impact of inflation, new lending criteria and regulations imposed by the Reserve Bank of NZ.

But that did not dispel the committee’s view that many of their questions were not answered and Cameron said the committee will meet in the coming week to decide what its next step will be.

That could be either a further hearing or a formal inquiry.

Cameron said the questions the committee want answered are wide ranging.

Equity-backed loans granted 20 years ago are now subject to more scrutiny and he has heard from farmers they are increasingly not being granted.

Cameron said the committee wants to know why there is interest rate disparity between urban and rural loans, and why there is a perception banks are reluctant to lend against equity or to the rural sector in general while looking more favourably at loans to those in the urban sector.

The committee was also told that banks are tending to extend credit to farmers as overdrafts instead of term loans.

“There is universal agreement amongst the committee that there are more questions warranting answers from the banking fraternity,” he said.

As a rural Member of Parliament, Cameron said he hears first hand the issues farmers are having with banks, including those who cannot use equity to raise funds and others who can only get funding as an overdraft rather than a term loan.

He said the relationship between rural bankers and their farming clients has changed during his farming career.

“It’s not like I was used to when meeting my bank manager, when I’d open the boot and see how dirty his gumboots were.”

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