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Gaurav Raghuvanshi

Mehsana (Gujarat) , April 8

THE National Bank for Agriculture and Rural Development (Nabard) has worked out a special package for cash-starved State cooperative banks that allows them refinance at attractive rates subject to their adhering to strict guidelines.

"We decided to adopt a carrot and stick policy for State cooperative banks, over whom we have no direct control. We have already committed Rs 3,375 crore as refinance credit to five State-level cooperative banks under the special package. In return, we have got their commitment to stick to strict parameters laid down by us," the Nabard Chairperson, Ms Ranjana Kumar, told Business Line here.

The five States whose cooperative banks will get Nabard assistance under the scheme are Andhra Pradesh, Kerala, Chhattisgarh, Karnataka and Haryana. Nabard will reserve the right to pull back the concessional line of credit if the beneficiary bank does not follow a nine-point agreement that it would have to sign before availing itself of the facility. The cooperative banks will be charged an interest of 5 per cent under the special scheme as against over 7 per cent in the normal course.

The State cooperative banks will have to sign a memorandum of understanding with Nabard on performance parameters that include credit norms, reduction in transaction costs and clear loan policies. The banks will have to prepare a business plan for the next three years and have a proper human resource policy. Finally, they will have to pass on the benefit of the reduced rate of interest to their end-customers, she said.

In addition, Nabard is already implementing a special liquidity scheme against the rescheduling of loans for farmers in distress for the cooperative banks. Nabard has sanctioned Rs 1,666 crore under the scheme and hopes to meet its target of Rs 2,500 crore by the onset of the kharif season in June. The special liquidity scheme carries an interest of 5 per cent as against the minimum refinance rate of 5.25 per cent for advances towards production credit.

Going forward, Ms Kumar said that Nabard would lay greater stress on investment credit to build capital resources. Nabard will also focus on providing credit for tenant farmers and share croppers. "Farmers who do not own any land are an area of concern, as banks fight shy of extending them credit. We have tried to get around this problem through a pilot scheme launched in nine States last year. We organise such farmers to make Joint Liability Groups or self-help groups, and then banks extend credit to them," Ms Kumar said.

As many as 4,754 Joint Liability Groups comprising 65,000 farmers were formed in the last financial year and credit worth Rs 31 crore was extended to them.

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