SYDNEY, (Reuters) – National Australia Bank moved to soothe public anger after a major inquiry showed it dealt harshly with rural borrowers, saying it won’t penalise farmers for loan defaults in droughts amid a record dry spell in parts of the nation.
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Farm banking in hot, dusty Australia has long been tough and although it is a small component of overall books, rural loans are some of the riskiest and most politically sensitive.
That has made it a lighting rod for criticism as the worst drought in living memory sweeps over parts of eastern Australia at the same time as a quasi-judicial Royal Commission probes misdeeds in the banking sector.
NAB’s move, which also includes offering access to discounted loans to farmers, is the latest from banks scrambling to reform their own practices ahead of expected recommendations for stricter regulation of the sector.
“The Royal Commission and other inquiries reveal that in some cases we have lost touch,” NAB chief executive officer Andrew Thorburn said in speech yesterday evening in the rural town of Wagga Wagga.
The bank, Australia’s largest rural lender, would no longer levy default interest if drought put borrowers behind on repayments and added that farmers who make deposits could also access money at discounted interest rates, he said.
The relief comes as winter rain across much of eastern Australia has gone missing, with rainfall levels at or near record lows across vast tracts of the country.
Production of wheat, Australia’s largest rural export, is set to fall to an eight-year low this season and graziers are killing cattle and sheep by the thousand lest they starve to death.
The drought has hit fertiliser and pesticide maker Nufarm Ltd, which slashed earnings guidance yesterday as demand fell.