Investigation launched into rural bank lending practices

An investigation has been launched into rural bank lending practices.

The Primary Production Select Committee says it hopes to thoroughly investigate farmers' claims of disparity between rural and urban bank lending practices.

It's just over a week since a drought was declared for Horowhenua farmers, adding another layer of financial stress.

"It's tough on farm at the moment, the costs are high, the commodity prices are all over the place and our interest bills are keeping us up at night and as you can see we're in a drought at the moment," said Federated Farmers dairy chair Richard McIntyre.

Budgeting is nothing new to farmers, but a recent Federated Farmers survey revealed confidence in their banks has slumped to a record low. 

A quarter of those surveyed say they've come under undue pressure from their bank.

"We want to have a really good look at the interest rates farmers are paying, they're 1 to 2 percent higher than residential borrowers which we really question the fairness of," McIntyre told Newshub. 

Farmers said they shouldn't have been excluded from the Commerce Commission's market study into personal banking services.

"Farmers were really frustrated to hear they'd been excluded from the commerce commission market study because so many of the issues that personal banking is facing farmers are facing too, plus a few more," he added.

The Primary Production Select Committee has now launched an investigation into rural banking. 

Chair Mark Cameron said "this has become topical conversation and I stress the point I think it is incumbent upon us to find out the validity of said concerns".

"I'm looking forward to the Select Committee doing their work and hearing more from them, including a better understanding on what's going on with banking in rural New Zealand," Agriculture Minister Todd McClay said. 

Just two banks responded to Newshub's request for comment. ANZ said it welcomed the opportunity to provide the committee with information about banking. And Rabobank said it was supportive of any process that improves the transparency of agribusiness lending.

Rabobank also said: "The local regulatory settings require NZ banks to hold a significantly greater proportion of capital against rural lending than for residential lending, and any comparison of rural and residential interest rates should take this difference into consideration."