Post-debt waiver, bailout for RRBs, cooperative banks

National Bank for Agriculture and Rural Development (Nabard) has decided to initiate a slew of measures to provide liquidity to co-operative banks and regional rural banks (RRBs) that are short of cash following the farm loan relief package.

Of the Rs 66,600 crore package, these banks together settled outstanding debt amounting to Rs 35,400 crore. Since they depend on recovery of dues to finance fresh lending, the banks are complaining of cash constraints in disbursing fresh loans.

To help the RRBs and co-operative banks tide over the problem, Nabard has decided to refinance 75 per cent of the actual crop loan disbursed during the 2008 kharif season, compared with 35 per cent last year. The determining factor will be the bank’s non-performing assets (NPA) at the end of March this year or the same period last year, whichever is lower.

Nabard suggested a refinance budget of Rs 21,500 crore in 2008-09 against Rs 18,432 crore last year. The cooperative banks will be allocated Rs 5,491 crore, while each RRB will get Rs 60 crore. The Maharashtra state co-operative banks will get a share of Rs 330 crore.

The regulator-cum-refinance agency has also decided to defer the dues repayable by state co-operative banks up to six months or till funds are received from the Centre. The dues of three state cooperative banks — Andhra Pradesh SCB, Madhya Pradesh SCB and Orissa SCB — estimated at Rs 1,130, have also been deferred, a source close to the development said.

In addition, loans given to eight RRBs and cooperative banks, estimated at around Rs 1,061 crore, have been rescheduled and the defaulting banks will not have to pay any penalty as it will be treated as a technical default.

The interim finance limit has also been raised from 25 per cent of the annual programme to 35 per cent and the facility will be available to even those banks that are not in a position to pay an interest. The facility does not have a fixed tenure and gives the banks a longer time to clear the debt.

Nabard executives said that the agency will extend the relaxed lending policy for rabi season too if the government is unable to reimburse the RRBs and cooperatives next month.