Nabard creates Rs 2,500 cr liquidity support fund for agri-financing

Post implementation of the Rs 72,000 crore debt waiver scheme, the state-run National Bank for Agriculture and Rural Development Bank (Nabard ) has not only hiked its refinance amount for the current fiscal to Rs 22, 000 crore from Rs 16,000 crore a year ago, but also has created a new fund to provide liquidity to the RRBs (regional rural banks) and state co-operative banks.

For the first time, the bank has kept aside a sum of Rs 2,500 crore to provide liquidity support to the banks in rural areas of the country which are covered by it for the implementation of the debt waiver scheme.

The idea is to provide financial support to those co-operative banks that are faced with liquidity crunch in absence of repayment of loans by the agricultural borrowers.

The rate of interest to be charged by Nabard for shelling out money from its liquidity support fund will be akin to market rate of 9%. The bank has raised the money for the new fund directly from the market. Normally, Nabard raises money through corporate bonds.

However, the institution will be recovering 5.5% interest part from the government in the form of subvention, said a senior official of the bank. With a view to free the farmers from the trap of money lenders and make them eligible to apply for fresh agricultural loans, the government has launched agricultural debt waiver and debt relief scheme.

During his Mumbai visit on Sunday, The union finance minister, P Chidambaram, had asked all the heads of the Mumbai-based state-run banks to expedite the process of preparing the list of the eligible beneficiaries of the debt waiver and ensure that the scheme was implemented by them in a transparent manner by June 30.

Nabard is the nodal agency for co-operative banks and RRBs (regional rural banks) or the scheme. All the 92 RRBs and the co-op banks functioning in the rural areas are eligible to take loans from Nabard under the already existing refinance scheme. Under the scheme the banks can take a loan from Nabard in the range of 40% of the total loan disbursements being made by them to the agricultural borrowers.