The TamilNadu government has reduced the interest rates on non-agricultural loans that are disbursed by cooperative banks by 50%, bringing it to 6%, and waived the penal interest to reduce the non-performing assets (NPAs) of the banks.

"The government has come to this decision after the appeals to waive the non-farm loans. Waiver of such loans is not possible as they were issued against securities," Finance Minister K. Anbazhagan told the assembly on Tuesday. 

Borrowers can choose to make a one-time settlement or pay back in three instalments after paying 25% of their outstanding amount upfront, he said. 

The state government's decision will benefit around 132,000 debtors owing a total of around Rs.709.51 crore. 

The state will bear 4% of the interest loss due to the waiver and the balance two percent will have to be borne by the banks. 

A total of Rs.251.21 crore is being forgone, Anbazhagan said.