NABARD to refinance crop loans at 2.5 per cent

Thiruvananthapuram, Jun 21 (UNI) In a step to help the crisis-ridden farmers in Kerala, the NABARD has agreed to provide refinance to cooperative banks at 2.5 per cent on 40 per cent of the amount of crop loans issued by them with the condition that the farmers should get the loans at seven per cent interest.

At a meeting to discuss the modalities of bringing down the interest rates on crop loan and other issues related to cooperatives in the state, Mr B S Shekhawat, Chief General Manager of the NABARD, assured Cooperation Minister G Sudhakaran that the rates would be effective from July one this year.

At present, Nabard provides 30 per cent of the cooperative's crop loans, at 5.5 per cent interest, while the farmers get it at five to 10.5 per cent.

Mr Shekhawat said the Centre had announced that all farmers in the country should get crop loans at seven per cent or below in year 2006-07, whether sourced from commercial banks, cooperative banks, or RRBs.

The Centre would provide two per cent interest subvention to commercial bank as they do not refinance for crop loans from NABARD, RRBs, who get NABARD refinance to extent of 35 per cent of their loans, will receive Nabard support at 4.5 per cent besides two per cent support from the Centre on their own funds.

At national level, the estimated amount of crop loans during 2006-07 was Rs 1,05,000 Crore to be shared in the ratio of 56 per cent by Commercial bank 34 per cent by coorperative banks and ten per cent by RRBs.

In Kerala, the total crop loans during 2005-06 were approximately Rs 7,000 crore. The total flow of crop loans during 2006-07 is expected to be around Rs 8,000 Crore.

The NABARD also agreed release the refinance instalment of Rs 78.0 crores, so far withheld, of Kerala State Cooperative Bank.

The Minister also discussed with the cooperative banks if interst rates on crop loans could be futher brought down to below seven per cent and advised them to call better returns on their non-agriculture loans which constituted more than 80 per cent of the total loans.

NABARD suggested that cooperatives will have to bring down their cost of funds and management expenditure and improve per employee business in order to attract better borrowers and retain the existing clients within the cooperative fold.

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