The National Bank for Agriculture and Rural Development (Nabard) plans to give refinance to commercial banks at differential rates of interest depending on their exposure to agriculture credit in developed and underdeveloped regions.

The development finance institution is working on the scheme and it is likely to be finalised within a month's time, said Mr Prakash Bakshi, Chairman, Nabard.

“We are looking at a base-rate-like concept. For instance, we may charge higher interest rates for providing refinance to banks that have given agri loans in regions such as Punjab and lower rates for banks that have lent in regions such as Bihar Jharkhand. The idea is to incentivise the investment that can be used by small and marginal farmers,'' he said.

The refinance rate has been set at 10.5 per cent, but Nabard is re-looking the rate. The rate may be lower for the eastern states and dry land areas, Mr Bakshi said.

For the current financial year, Nabard has set a target of providing refinance to the tune of Rs 14,000 crore. Of this, it has already disbursed over Rs 4,000 crore and is likely to achieve the target by January or February.

In order to help RRBs put 100 per cent of their operations on the core banking platform, Nabard will be granting them assistance to the tune of 40 per cent of the cost from the Financial Inclusion Technical Fund.

“RRBs will not be able to meet the deadline of September 30, 2011. They may take two to three months more,'' he said.

As less than 30 per cent of agriculture credit is given by co-operative societies, commercial banks must work with state co-operative banks and Primary Agriculture Co-operative Societies to lend more, Mr Bakshi said.

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