Farmers facing drought are being offered greater financial flexibility by Australia’s largest agricultural lender.
The National Australia Bank (NAB) has announced it will no longer charge penalty interest payments on farmers who fall into debt on their loans.
Farm management deposits (FMD) allow farmers to remove money from their taxable income during good years to later use during tough times and NAB will now allow farmers to offset these deposits against their loans.
Until now Rural Bank was the only lender to allow the FMD offset since laws were changed to allow the practice in 2016. One in three farmers bank with NAB so pressure is on the other big banks to make the change. Agriculture Minister David Littleproud is urging others lenders to follow suit.
“This is an investment in agriculture’s future and farmers can now vote with their wallets. I hope other Aussie banks follow NAB’s lead and get on board,” Littleproud said. “If you’re a farmer whose bank doesn’t offer an FMD offset, you can tell them to bugger off because there are banks now which do.”
Speaking about penalty interest payments for farmers in drought, Littleproud said, “I don’t think the charge truly reflects the cost to the bank. It’s really a kick in the guts when someone’s down, which isn’t the Australian way.”