Date:15/02/2006 URL: http://www.thehindubusinessline.com/2006/02/15/stories/2006021502530600.htm

Back Nabard rate hike irks coop banks

Our Bureau

Thiruvananthapuram , Feb. 14

THE latest hike in refinance rates announced by the National Bank for Agricultural and Rural Development (Nabard) is "feared to deliver a mortal blow" to apex State-level cooperative lending banks and their farmer borrowers.

According to Mr K. Sivadasan Nair, President of the Kerala State Cooperative Agricultural and Rural Development Bank (KSCARDB), Nabard's announcement was as unexpected as it violated the prevailing lending principles.

Effective February 7, the rates were revised by 0.75 per cent to 6.5 per cent for loans up to Rs 50,000 and 7 per cent for loans of anything above this limit. In the process, Nabard had also managed to quietly do away with an intervening slab of rates.

This, at a time when instructions from the Centre and the State-Level Banking Committees have clearly said that under no circumstances should the maximum interest rates on agricultural loans on-lent to farmers exceed 8.5 per cent.

Marginal farmers are the worst hit from Nabard's unkind move, Mr Nair said. The timing also stood out since February and March saw maximum disbursement of farm loans.

Nabard must scrap the rate hike forthwith and set right the anomaly in slab revision in the best interests of farmers and lending institutions, Mr Nair added.