Nabard to raise Rs 20,000 cr for on-lending to cooperative banks

Lending rate will be 4.5% with an aim to provide cheaper crop loans to farmers

Cabinet on Tuesday permitted Nabard to raise about Rs 20,000 crore from the market for on-lending to cooperative banks at 4.5 per cent interest with an aim to provide cheaper crop loans to farmers.

"In the light of good monsoon and expectation of increased credit demand and in order to boost agricultural production, the farmers need to be supported through cooperative banks, which purvey credit at their doorstep, to enable them to scale up their agricultural operation," an official said.

Nabard will make short-term borrowings at prevailing market rate of interest for approximately Rs 20,000 crore for on-lending to cooperative banks at 4.5 per cent, said a statement issued after the Cabinet chaired by Prime Minister Narendra Modi gave post-facto nod to the proposal.

Additional capital of Rs 2,000 crore is to be provided to Nabard for this purpose through the Union Budget, it added.

"To start with, additional capital of Rs 500 crore may be released to Nabard during 2016-17 itself," the release said.

Further, an interest subvention of about 1.8 per cent and Nabard's administrative cost of 0.2 per cent will be provided according to the scheme of Department of Agriculture, Cooperation and Farmers Welfare (DAC&FW).

The extent of interest subvention may vary depending on the rate at which Nabard raises funds, the release said.

"The approval will ensure increased availability of short-term crop loans to farmers through cooperative banks at a reduced rate of interest," it said.

National Bank for Agriculture and Rural Development (Nabard) will also coordinate the conversion of operative/live Kisan Credit Cards (KCCs) into RuPay or ATM-enabled KCCs by cooperative banks and Regional Rural Banks (RRBs) in a mission mode.

"The conversion of operative or live KCCs into RuPay or ATM-enabled KCCs will enable easy and hassle free availability of credit and in keeping with the spirit of 'Digital' India, will facilitate digital and cashless transactions by farmers," the release added.