The National Bank for Agriculture and Rural Development (Nabard) will more than double its share of refinance for crop loans extended by the co-operative banks in Kerala.
The refinance will be increased from an estimated Rs 300 crore to Rs 650 crore at an interest rate of 2.5 per cent.
The arrangement is on the condition that the co-operatives will extend the loan to the farmers at no more than 7 per cent interest. Currently, the interest rates for crop loans ranges between 8.5 and 10.5 per cent.
Nabard refinance is a supplementary resource for the co-operative banks to recoup their finances and to cross-subsidise their crop loan operations. This makes it imperative for the co-operative banks to raise their share in crop loans to fully avail themselves of the enhanced refinance allocation.
Nabard has also asked the Government to refund the treasury deposits of Ernakulam and Palakkad district co-operative banks, amounting to Rs 67 crore and Rs 88 crore, respectively. This will make them eligible for Nabard refinance and also free the funds for lending to the farmers.
Besides, the Government will have to streamline the functioning of the Kerala State Co-operative Bank and improve its credit absorption capacity for the enhanced amount of refinance.