Nabard raises refinance interest rate by 50 bps

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

With the revision, the interest rate on refinance is now pegged at 8.25 per cent an year for the cooperative sector and 8.75 per cent for commercial banks.

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

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

Long-term finance, disbursed to farmers through cooperative structure and RRBs, is given for dairy development, farm mechanisation, horticulture, poultry, microfinance and fisheries etc. “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 at disbursing money to the tune of Rs 1,000 crore through a refinance window in Punjab this year, as against Rs 704 crore last year.

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