In an attempt to further reduce the cost of credit for farmers, the National Bank for Agricultural and Rural Development (Nabard) has slashed by 125-225 basis points interest rates on refinance extended by it to co-operative banks.
It is also considering lowering interest rates on loans extended earlier to pass on the benefits of the low interest rate regime to the agricultural sector.
Refinance rates for co-operative banks will now be around 5.25 per cent for loans up to Rs 50,000 and 6.75 per cent for those up to Rs 200,000, bringing them in line with those for commercial banks, according to Nabard Chairperson Ranjana Kumar.
Co-operative banks were earlier given refinance at 6.5-9 per cent.
The reduction in refinance rates is expected to be a boon for farmers who are now eligible to avail of loans at 2 per cent below the prime lending rate of nationalised banks.
Finance Minister Jaswant Singh has been instrumental in ensuring the flow of cheaper credit to the agricultural sector. He has maintained that the rural and the agricultural sector should also benefit from the low interest rate regime.
Kumar said Nabard was also considering additional measures to improve the credit delivery mechanism for the agricultural sector and was planning consultations with state governments to make credit available through mandals.
"The use of post offices for extending agricultural loans was another viable option," she said on the sidelines of the Nabard Utsav at Dilli Haat here, which was showcasing the produce of women self-help groups.
"The credit delivery mechanism needs to be reworked and the existing schemes should be modified to factor in the prevailing environment in the agricultural sector when we have surplus production in many crops," Kumar said.
The new definition of non-performing assets for farm loans, being looked into by the Vyas Committee, is also expected to help ease credit flow to the agricultural sector.
Kumar also said the coverage of agricultural credit should include the food processing sector, which was emerging as a competitive area for India.
For the self-help groups, Nabard is planning to initiate measures to improve the product quality and help them market their products. Till January this year, banks had extended loans amounting to Rs 2,800 crore (Rs billion) to 842,000 self-help groups.
Cheaper credit
- Refinance rates for co-operative banks will now be around 5.25 per cent for loans up to Rs 50,000 and 6.75 per cent for those up to Rs 200,000.
- Co-operative banks were earlier given refinance at 6.5-9 per cent.
- Finance Minister Jaswant Singh has been instrumental in ensuring the flow of cheaper credit to the agricultural sector.
- Nabard is considering other measures to improve the credit delivery mechanism for the agricultural sector.
