The Hindu Business Line : Nabard to refinance crop loans at 2.5 pc interest

Currently, Nabard provides refinance to 30 per cent of the co-operative crop loans at 5.5 per cent interest, while farmers get it at 8.5-10 per cent.

Thiruvananthapuram , June 21

Nabard will provide refinance to co-operative banks at 2.5 per cent on the crop loans extended by them.

The low interest rate will be available to 40 per cent of the amount of crop loans issued by the co-operative banks and on the condition that the farmers get the loans at seven per cent interest or below.

Mr B.S. Shekhawat, Chief General Manager of the Kerala Regional Office of Nabard, made the offer at a meeting of senior officers of the Co-operation Department and co-operative banks, presided over by the Minister of Co-operation, Mr G. Sudhakaran.

Mr Shekhawat said that the new rate would be effective from July 1. Currently, Nabard provides refinance to 30 per cent of the co-operative crop loans at 5.5 per cent interest, while farmers get it at 8.5-10 per cent.

Nabard has also agreed to release refinance instalment of Rs 78 crore, so far withheld, to the Kerala Sate Co-operative Bank.

Mr Shekhawat said in a statement that the Centre has announced that all farmers in the country should get crop loans at seven per cent or below in the current year, irrespective of whether the loans are sourced from commercial, co-operative, or regional rural banks.

The Centre will provide two per cent interest subvention to commercial banks, as they do not get refinance for crop loans from Nabard.The regional rural banks, which get Nabard refinance to the tune of 30 per cent of their loans, will receive support at 4.5 per cent, besides two per cent from the Centre on their own funds.

At the national level, the estimated amount of crop loans during the current year is Rs 1,05,000 crore, to be shared in the ratio of 56 per cent by commercial banks, 34 per cent by co-operative banks, and 10 per cent by regional rural banks.

However, in order to provide extra relief to the co-operatives, Nabard will mobilise Rs 14,000 crore and get subvention from the Centre on the interest between the market rate and 2.5 per cent.

Nabard will not retain any margin from this operation. This will ensure that the co-operatives do not incur any losses on crop loans disbursed at seven per cent, the statement said.

In Kerala, the total crop loans in 2005-06 amounted to about Rs 7,300 crore.

This year, the expected figure is Rs 8,000 crore, shared in the ratio of 54 per cent by commercial banks, 32 per cent by co-operative banks, and 14 per cent by the regional rural banks.