Nabard to cut refinance rate for marginal farmers

To incentivise lending to marginal farmers and specific regions, National Bank for Agriculture and Rural Development (Nabard) may cut its refinance rate to these banks.

If banks want to finance only in Punjab, Nabard would say money is perhaps not available or it is available at a higher cost. But if you want to finance in Bihar or Jharkhand, money is available at a lesser cost because the bank wants to incentivise capital formation in backward areas, said Chairman Prakash Bakshi.

Speaking on the sidelines of conference jointly organised by industry chamber Ficci and the Indian Banks’ Association, he said: “Nabard wants my money to go to certain specific centres and specific areas.” A scheme detailing conditions would be ready in a month, he added.

Nabard has come up with its own version of the base rate being followed by the commercial banks which is used in refinancing. The base rate was recently increased by 25 basis points to 10.50 per cent, but Bakshi said Nabard was willing to lower it further in case of deserving loan portfolios.

Nabard has a refinancing target of Rs 14,000 crore for the current financial year of which it has already done Rs 4,000 crore, Bakshi said, and expressed confidence the bank would achieve the target by February.

Bakshi said Nabard’s “priority” in this financial year was to finance warehousing projects under the Rural Infrastructure Development Fund, which would help create space for additional food grains.

Of the Rs 2,000 crore allocated to finance such warehousing projects this year, Nabard has already sanctioned projects of Rs 500 crore and Bakshi said the finance would help create up to 8 million tonnes of storage space by March 2012. On microlenders, Bakshi said “there is a crisis at hand” prompted by repayment issues faced by the microfinance institutions (MFIs). Banks would have to take an “individual view” while lending to MFIs as the repayment rates and portfolio sizes had come down “drastically”, he said.