The Hindu Business Line : Refinance operations: Nabard seeks Central aid of Rs 15,000 cr

THE National Bank for Agriculture and Rural Development (Nabard) has sought around Rs 15,000 crore from the Union Government to increase refinance operations with the regional rural banks (RRB) and cooperative banks for the agricultural sector.

According to Ms Ranjana Kumar, Chairperson of Nabard, the Union Government has agreed in principle to this proposal. The fund will be given to Nabard at a soft rate of interest.

With the support of this loan, Nabard wishes to reduce the agricultural lending rates to small and marginal farmers through the RRBs and cooperative banks to less than 9 per cent against the existing lending rates of around 12 per cent.

Talking to reporters after addressing the banking community at Bancon 2005, Ms Kumar said that for the first time Nabard would make a distinction between small and marginal farmers against the bigger farmers.

Farmers with less than 2.5 acres of land will be tagged as marginal farmers. The small farmers' holding has been pegged at five acres.

In 2003, Nabard refinanced 18 per cent of total agricultural lending of the RRBs and cooperative banks. Subsequently it has increased to 30 per cent. "Once we get this financial support we will be able to increase this refinance to around 50 per cent," she said.

Talking about micro finance initiatives, she said, steps were being taken to rate the micro finance institutions (MFI) by Crisil. Nabard had agreed to fund 75 per cent of the rating expense. The rating exercise would help the commercial banks to give loans to the MFIs easily.

According to Ms Kumar, who retires from Nabard on December 31, 2005, there are 800 MFIs in India. Of these, some have extremely good financial track records.

Meanwhile, the Union Government has decided to increase the fund for the MFIs from Rs 100 crore to Rs 200 crore. A part of this fund will also be utilised for equity participation in the MFIs.

"Within the next six weeks, we will be preparing a detailed set of guidelines for the MFIs. This fund is being managed by the Reserve Bank of India, Nabard and seven other public sector banks," she said.

Talking about self-help groups (SHG), Ms Kumar said as of March 2005, there were 16 lakh SHGs with a cumulative disbursement of Rs 6,898 crore. In the first half of 2005-06, 62,000 new SHGs had been set up and Rs 668 crore had been disbursed. In the current year, Nabard had set a target of creating three lakh SHGs. According to her, the southern States are traditionally strong in SHG development but some of the northern States are also picking up.

Regarding the overall functioning of Nabard, she said the disbursal target for 2005-06 had been pegged at Rs 20,000 crore.

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Refinance operations: Nabard seeks Central aid of Rs 15,000 cr