Nabard Refinance Limit For Banks May Be Raised

The National Bank for Agriculture & Rural Development (Nabard) is believed to be considering an increase in the refinance limit for commercial banks from 40 per cent to 50 per cent. The Reserve Bank of India recently sanctioned Rs 400 crore under the National Rural Credit Long-Term Operation Fund in the current budget session.

The move to enhance the refinance limit for commercial banks is being contemplated in view of the increase in Nabards paid-up capital from Rs 100 crore to Rs 500 crore. The last budget had taken into consideration an enhanced corpus of Rs 2,000 crore in the next four years.

 

The rate of refinance to commercial banks declined from 70 per cent to 50 per cent and then to 40 per cent in the current financial year. It may be raised back to 50 per cent. This provision will apply to all schematic lending schemes with a special thrust on high-tech agro processing projects.

Industry sources say that with the reduction in refinance facilities, many commercial banks showed a disinclination for financing agricultural projects. This was more evident in case of banks dependent on Nabard refinance.

Nabard had this year withdrawn the refinance support to commercial banks in respect of the integrated rural development programme, which used to be the major area of refinance for most of the states. The apex agricultural bank had also stopped refinance to commercial banks against automatic refinance schemes, farm mechanisation and schemes related to Prime Ministers Rozgar Yojana.

In tune with the reduced allocation to commercial banks, sources said, the allocation to commercial banks and achievement by the banks in most cases showed a net decline in 1995-96 over that of the previous year.

The rates of refinance to regional rural banks, state co-operative banks and land development banks would remain unchanged at 80 per cent and 95 per cent respectively.