One of Northern Ireland’s biggest banks has agreed to support lobbying of Agriculture Minister Michelle Gildernew, urging her department not to penalise farmers whose Single Farm Payments are delayed.

Stormont Agriculture Committee chairman Ian Paisley jnr said he would be writing to the minister about concerns that farmers have been unable to repay bank loans because of Department of Agriculture delays in making the payments.

They are then left to pay the interest on the loans during the period of the delay, often through no fault of their own, he said.

Cormac McKervey of the Ulster Bank said it couldn’t waive the interest, but would support lobbying of the minister by the committee asking that the burden of paying for delays through no fault of their own should not be placed on farmers.

His comment came during a meeting of the committee attended by representatives of the Ulster Bank, Northern Bank and First Trust over concerns farming businesses are threatened by a lack of lending.

Afterwards, Mr Paisley jnr said the meeting had been a productive one, especially in light of the Ulster Bank’s comments.

“The committee believes it is important we build a relationship with the banks and we want to make sure they are held to account as they play a crucial role in the success or failure of the farming industry,” he said.

“It’s necessary and did shed light on banking practices. There are some areas where we are going to get co-operation, for example, Ulster Bank is seeking assurances from DARD that farmers won’t be penalised over delays in the Single Farm Payment and are willing to talk to the department so that the department pays, not the farmers. If that comes from today, we did well.”

The total lent to farmers in Northern Ireland increased by £89m last year, the meeting heard.

Stephen Bloomfield, regional general manager at the Northern Bank, said all banks had lent £882m in the quarter ending March 2009, an 11% rise on March last year.

However, he admitted farmers seeking finance this year would find the room for negotiation with banks had narrowed.

He defended interest rates charged to farmers, saying deals took account of customer profile, customer loyalty, ability of businesses to find the cash to repay the banks and the risk of lending, and it was vital to customers that banks remained strong.

“At the end of the day, our chief executive has been on record as having said we are not in the business of owning farms — we are looking to lend to customers and have demonstrated that over the years,” he said.

The Ulster Bank said farmers are being charged 2.5-3.5% on loans, even thought the Bank of England interest rates sits at 0.5%, with the interbank lending rate at 1%.

Mr McKervey said the volatility seen in the dairy sector over the past couple of years had now spread to all sectors.

About £100m of the bank’s £250m Government fund to inject money back into small businesses has been used, he added.