Date:04/08/2005 URL: http://www.thehindubusinessline.com/2005/08/04/stories/2005080402950600.htm

Back Nabard to continue `carrot and stick' policy on resetting rates — Seeks Rs 14,000 cr from Govt to offset loss

Our Bureau

Kolkata , Aug. 3

THE National Bank for Agriculture and Rural Development (Nabard) will continue to reset its rates for select States, ones that are willing to meet stiff conditions set by it.

In the process, it will take a hit. Meanwhile, it has sought about Rs 14,000 crore from the Government to provide assistance on easier terms.

State governments will be required to re-orient their planning, recruitment and NPA recovery policies, among others, in order to seek support on the basis of restructured rates.

Already, States such as Haryana, Andhra Pradesh, Kerala and Karnataka have agreed to do so.

Resetting of rates in future will be part of Nabard's existing strategy, said Ms Ranjana Kumar, Chairperson of Nabard, adding that it had taken a hit of over Rs 300 crore on this count in the last fiscal.

"This year, we will try to provide better rate of refinance to small and marginal farmers," she told presspersons on Wednesday.

The idea is to lend at cheaper rates, especially in the context of similar moves taken by banks. Incidentally, the depletion of co-operative banks' share in rural credit (22 per cent now, down from over 60 per cent in 1992) remains a matter of concern. Nabard, which will look at more `agri clinics' to facilitate liaison with farmers, sees great scope for employing modern IT tools for facilitating its activities.

It also proposes to help corporates that are considering investment in the farm sector. So far, over 700 agri clinics have been formed, while a number of rural knowledge centres have been flagged off.

The FI has recently started co-financing along with bankers; in each case, it shares 50 per cent of the loan amount involved - a trend that is expected to be bolstered in the coming days.

Sees scope in sugar, tea

NABARD, Ms Ranjana Kumar noted, expects to be more closely involved with tea and sugar - the two commodities it has so far distanced itself from. While it has already outlined a package for the sugar industry (in States such as Karnataka and Maharashtra), it may well start working more closely with tea producers.

"The tea industry should provide sufficient scope for us in the days ahead, especially so in the view of our experience in developmental finance," she said, while reacting to a point raised by Mr C.K. Dhanuka, Chairman of FICCCI (Eastern Region) and MD of Dhunseri Tea.

The latter felt that the tea industry was starved of finance and that commercial banks were not availing themselves of any refinance from Nabard as their cost of incremental deposits was lower than the refinance rate.