NAB Will Stop Charging Farmers Penalty Interest Rates In Crippling Drought
The bank admitted it ‘has lost touch’ with its rural customers, in the wake of the royal commission.
Australia’s biggest agri-bank will stop charging drought-affected farmers extra on missed repayments -- a move government and industry leaders say is “a step in the right direction”.
As farmers battle a crippling dry across much of the country’s east, National Australia Bank announced on Monday it will waive penalty interest rates for those in drought-declared areas, despite recently telling the banking royal commission the practice did not fall outside community expectations.
Some farmers will now also be able to reduce the amount of interest they pay by tapping into funds held in farm management deposits to offset against loans.
Announcing the changes at a meeting in Wagga Wagga on Monday night, NAB chief executive Andrew Thorburn acknowledged the challenges faced by farmers and admitted the bank had “lost touch”.
“Rural challenges are real, and we need to determine how to support these areas better," he said.
“The Royal Commission and other inquiries reveal that in some cases we have lost touch.”
NAB is Australia’s biggest rural lender, and boasts one in three farmers as customers.
In June, the commission heard NAB charged a drought-stricken cattle-farming couple in Queensland more than $2.6m in default interest on a $3.1m loan.
The move follows a meeting between the banks and federal Agriculture Minister David Littleproud. NAB is the first major bank to respond.
National Farmers Federation CEO Tony Maher told Sky News he was optimistic the banks were listening and providing “flexibility” for farmers.
“Drought is a regular occurrence unfortunately in the Australian agriculture landscape. As farmers deal with these hardships, it’s good to know the banks are listening and they are making some concessions,” he said.
‘We need to make sure that farmers get through these challenging times and are able to continue to produce food and fibre for Australia.”
Currently, farmers who have banks accounts with NAB cannot have an offset account, similar to those of homeowners. The bank will now allow farmers to tap into funds held in the government’s Farm Management Deposit (FMD) scheme to offset against loans.
“Farms are small to medium-sized to large businesses that vary significantly in their arrangements,” Maher said.
“This announcement is a step in the right direction that will help a level of farmers -- those that have FMD’s -- to reduce the interest they’re paying.”
NAB’s Thorburn said the bank will look at bringing face-to-face banking services to farmers as it considers further rural branch closures.
Looking ahead to a $100 billion industry target over the next 12 to 15 years, Maher said he expects other banks may soon follow.
“It’s a competitive marketplace and I’m sure other banks will be looking at their internal systems and seeing how they can offer these systems to farmers,” he said.
“Agriculture has a huge future, and financial institutions are a huge part of that … the more we can have that long term equitable relationship between farmers and banks, the industry will be much better off.”