Nabard cuts refinance rate by 50 bps

Written by Sanjay Jog | Mumbai | Updated: Jan 3 2009, 05:06am hrs
Following the footsteps of banks and financial institutions the National Bank for Agriculture and Rural Development (Nabard) on Thursday slashed refinance rate by 50 basis points. Nabard provides refinance to commercial banks, regional rural banks (RRBs) and cooperative banks.

Nabard chairman Umesh Chandra Sarangi told FE In view the macro economic scenario the rate of interest on refinance in respect of investment credit for all eligible purposes has been revised to 10.25% per annum. The interest rate applicable for North Eastern Region, Sikkim, Andaman & Nicobar Islands, Himachal Pradesh, Uttarkhand and Jammu and Kashmir will be 9.75% per annum for all the eligible purposes. The interest rate on refinance to commercial banks on loans to micro finance institutions (MFIs) for onlending to clients will be at 3% less than that charged by banks subject to a minimum interest rate of 10.25% per annum. The minimum interest rate for this purpose in respect of North Eastern Region, Sikkim, Andaman & Nicobar Islands, Himachal Pradesh, Uttarkhand and Jammu and Kashmir will be 9.75% per annum.

The revised rate of interest is applicable to the refinance to be disbursed on or after January 1, 2009 and will apply to all the drawal applications pending with Nabard. Nabard has sought response by January 23 from commercial banks, RRBs and cooperative banks if any bank/institution not intending to avail of refinance in respect of the pending drawal applications at the revised rate.

Further, in the event of default in repayment of principal and payment of interest under any line of credit, the banks/constituents will be liable to pay to Nabard interest on the amount of default at 12.25% per annum with effect from January 1, for the period for which the default persists. The revision will apply to the existing default and future default, if any and the rate is subject to revision from time to time.

Meanwhile, Sarangi in his New Year missive to Nabard employees said the exercise of repositioning of Nabard is on now. While Rural Infrastructure Development Finance (RIDF) will continue to be Nabards main business plank, Nabard proposes to entering into the micro finance sector more directly, more focused initiatives for agriculture per separticularly for small farmers; pursuing aggressively our time tested models of wadi and watershed based development.

We have to ensure that the large infusion of capital of Rs 15,000 crore in the cooperatives sector works purposefully, resulting in more commercially viable cooperatives which meet the needs of the small & marginal farmers, Sarangi said.