12 Oct 2011

Banks still tight on rural lending

10:15 am on 12 October 2011

An independent rural finance specialist says banks are still keeping a tight rein on lending to the agricultural sector, although the level of farm debt is rising again.

The Reserve Bank's latest sector credit statistics show agricultural debt increased by $238 million in August to reach more than $47 billion, after rising for four consecutive months.

That's $700 million above the low in April, although it's still slightly lower than the debt level at the same point last year.

Fraser Farm Finance managing director Don Fraser says banks are contuinuing to take a fairly conservative approach in their lending, and many farmers are still struggling with debt.

He says the cost of borrowing for some farmers has also gone up because of new rules that came into effect earlier this year requiring banks to have a bigger reserve behind their rural lending.

''It's a whole new trend, really,'' he says.