Australia’s biggest rural lender has made a pre-emptive move to bolster its farm sector credibility, appointing two high profile rural advisers and allowing customers to use farm management deposit (FMD) earnings to offset their loan costs.
Former Deputy Prime Minister, John Anderson, and prominent educationalist and indigenous affairs adviser, Professor Chris Sarra, have been recruited as part of a three month review of the National Australia Bank’s activities in regional areas.
Public meetings and consultation sessions in rural communities will involve the two special “community advisers” working alongside senior NAB staff, including managing director Andrew Thorburn.
The Royal Commission and other inquiries reveal that in some cases we have lost touch
- Andrew Thorburn, National Australia Bank
The community feedback they collect will form the basis for recommendations on a host of hot button banking industry issues ranging from branch closures to dealing with farm debt and drought.
NAB alone has closed 28 branches in Australia since January.
Responding to the public pressure and toxic publicity coming from the banking industry Royal Commission, NAB has opted not to wait for recommendations from Commissioner Kenneth Hayne to be delivered later this year.
“The Royal Commission and other inquiries reveal that in some cases we have lost touch,” Mr Thorburn conceded to NAB customers and staff in southern NSW this week.
“Rural challenges are real and we need to determine how to support these areas better.
“Agribusiness clients are important to us and many of them are affected by drought.”
He said NAB had to improve consultation, improve its understanding of the trade-offs and knock-on impacts on communities, and “do a better job”.
Addressing a function in Wagga Wagga after a day of visiting Riverina farm and commercial customers at Wagga, Junee and Marrar he committed to do more for customers in drought.
Default penalties dumped
The bank promised, from this week, it will no longer charge a higher default interest rate if drought affected agribusiness customers cannot make their loan repayments.
“This matter came up in a Royal Commission case and we have decided change needs to occur,” Mr Thorburn said.
Customers in government-declared drought regions who fall into arrears will remain paying their existing interest rates without additional fees.
“We want to help at this time, not make it more difficult,” he said.
NAB has also extended nationally its drought assistance package announced early this month for NSW and Queensland which includes waiving charges for early withdrawals from FMD accounts and freezing personal loan repayments.
Cash for CWA
It further pledged to give the Country Women’s Association in Queensland and NSW $50,000 each for their drought relief funds and will match supporting donations totalling a further $25,000 to the CWA in each state.
We must focus on how we support rural and regional Australia
- Andrew Thorburn, NAB
Mr Thorburn said while change was inevitable in rural and regional communities, the bank ultimately wanted to help and support growth in regional Australia, where a third of Australia’s gross domestic product – about $500 billion a year – was generated.
Regional customers represented 40 per cent of NAB’s business customer base.
As an indicator of the value of its farm sector market, the bank’s agribusiness lending balance jumped by $3.7b in the three years to March 2018, which represented almost 60pc of Australia’s total agribusiness lending growth in that period.
“We must focus on how we support rural and regional Australia,” Mr Thorburn said.
“I want to put a new stake in the ground.
Bank for regional Australia
“We, at NAB, are determined to be the bank for rural and regional Australia.
“While we will maintain a focus on bigger population centres, like capital cities that provide growth, we need to create opportunities outside those outside those areas.”
In a direct response to submissions made to the Royal Commission and calls from federal Agriculture Minister David Littleproud, NAB will now adjust its policy on FMDs giving agri customers the chance to gain a financial benefit by offsetting their FMD against agricultural loans.
Eligible customers are to be informed by mail.
The offer will not be a direct offset, but will take the form of a discount to their lending interest rate.
A customer with an FMD of $165,000 and a loan of $1 million would therefore be entitled to a borrowing discount of approximately 0.5pc.
“We are doing this immediately so farmers benefit rather than waiting to work through a complex process of aligning multiple systems,” Mr Thorburn said.
“We will continue however to look at that process to make this an easier process for our customers and our bankers.”
He was “very much looking forward to our work over the next few months” to build trust in the bank, explore bigger questions involving banking services in regional areas and how to help.
“Both Mr Anderson and Mr Sarra would “help challenge us on these big questions,” he said.
“They will help us listen better and consider wider views.”
Mr Anderson, a sixth generation farmer from North West NSW was Deputy Prime Minister between 1999 and 2005, while Professor Sarra, of Italian and Aboriginal heritage, founded the Stronger Smarter Institute and is internationally acclaimed for working for better indigenous community outcomes.
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