NABARD raises refinance interest rate by 50 basis points

Long term finance to farmers through cooperative and regional rural banks (RRB) has turned costly with National Bank for Agriculture and Rural Development (NABARD) raising interest rate on refinance by 50 basis points.

With the revision in interest rate, the new interest rate on refinance for cooperative sector is pegged at 8.25 per cent per annum and 8.75 per cent per annum for commercial banks.

"The rate (interest rate) has been revised upward in the wake of monetary police review undertaken by Reserve Bank of India this month," a senior official of NABARD said here.

RBI had hiked key short-term lending and borrowing rates by 25 basis points each as part of steps to rein in inflation.

The long term finance, disbursed to farmers through cooperative structure and RRBs is given for dairy development, farm mechanisation, horticulture, poultry, micro finance and fisheries etc. "The long term finance is primarily given for capital formation in farm sector," he said.

A major chunk of credit, given to farmers in Punjab, is routed through cooperative sector, RRBs and commercial banks.

NABARD is aiming to disburse money to the tune of Rs 1,000 crore through refinance window in Punjab in 2010-11 against Rs 704 crore disbursed in 2009-10.

Of Rs 1,000 crore, state cooperative banks, RRBs and commercial banks will disburse Rs 550 crore, Rs 150 crore and Rs 300 crore, respectively in the current fiscal, he said.