The major bank has announced its commitment to disburse $100 million in loans to eligible drought-affected agribusiness customers as a record dry spell hits the east coast of Australia.
Westpac said it would provide drought-stricken farmers loans of up to $1 million at "heavily-discounted" rates, with the additional option to defer repayments for existing business term loans or equipment finance for up to 12 months, under a new drought assistance package.
Also on offer, the major bank said, is an interest rate reduction for customers with Farm Management Deposits (FMDs) to offset FMD balances against their eligible business loans.
Westpac did not specify the discounted interest rates on offer.
Speaking of the commitment, Steve Hannan, national agribusiness manager at Westpac, said: “Of all the challenges that farmers face, drought is one of the most difficult.
“Taking into consideration the widespread impact of the drought, we are committing $100 million to lend exclusively to eligible drought-affected customers to help them through these challenging times.”
Mr Hannan continued: “This is the first time in Westpac’s 200-year history that we have set aside such an amount to provide immediate and long-term financial relief to our agribusiness customers.
Westpac previously announced it would be donating $100,000 to the Salvation Army Rural Support Services Program, as well as $100,000 in Community Resilience grants to aid communities suffering the effects of prolonged droughts.
The major bank also revealed it had expanded its agribusiness team by 15 percent to offer financial relief options to customers.
Other major banks also announced a number of drought relief packages, initiatives, and lending policy changes to repair reputational damage, after their dealings with agribusiness customers were called out for being below community standards and expectations in the fourth round of royal commission hearings.
National Australia Bank, for example, announced that it would stop applying penalty interest to drought-stricken customers if they get into loan arrears, as well as “proactively” offer them the ability to offset their FMDs against their agricultural loans, with the offset taking the form of an interest rate discount.
Similar moves were announced by ANZ Bank, which also offered to suspend loan repayment for up to three months, waive restructuring fees, and keep interest rates on hold for agribusiness customers experiencing financial stress.
Commonwealth Bank followed suit, discontinuing the charging of penalty interest, while also allowing drought-affected farmers to use their FMDs as offsets against their mortgages.
Westpac, on the other hand, has not charged default interest for a number of years.
It is the only major back to quantify its drought relief package.
The series of announcements made by the major banks in recent weeks were praised by the Federal Minister for Agriculture David Littleproud, though he urged for a broader industry reassessment of penalty interests as well as FMDs being used as security.
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, similarly commended the changes, but urged that the leniencies be extended to other small businesses and rural industries that are also affected by drought.
Tas Bindi is the features editor for The Adviser magazine. She writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.
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