SHIMOGA: The revised refinance policy of the National Bank for Agriculture and Rural Development (NABARD) for 2006-07 will hit the State Government's ambitious programme to disburse agricultural loans through cooperative institutions at four per cent interest.

What has put the District Cooperative Central Banks (DCCBs) in a fix is the drastic reduction in the amount of refinance by NABARD for the current year to 40 per cent of the total loans disbursed.

The presidents of the DCCBs, who discussed the problem at a meeting organised by the Karnataka State Apex Cooperative Bank in Bangalore on July 25, decided to request NABARD to not only withdraw the conditions laid down in its revised agricultural credit policy but also enhance its refinance level.

The meeting also decided to request Chief Minister H.D. Kumaraswamy and Deputy Chief Minister B.S. Yediyurappa to take up the matter with NABARD.

NABARD's revised credit policy has affected the farm loan targets fixed by all the DCCBs in the State. The Shimoga District Cooperative Central Bank (SDCCB), which is among the frontline cooperative banks in the State, will get hardly Rs. 42 crore by way of refinance from NABARD as against the target of Rs. 125 crore set by the bank for disbursement of short-term agricultural loans to small and marginal farmers at four per cent interest.

Another condition laid down by NABARD is that refinance at the rate of 2.5 per cent interest will be restricted to only loans advanced by the banks at seven per cent interest.

Pressure on banks

SDCCB managing director B.A. Mahadevappa told The Hindu here on Monday that there would be tremendous pressure on the banks to divert their deposits towards agricultural loans at four per cent interest.

He said that while the State Government wanted farm loans to be extended at four per cent interest, NABARD had fixed the rate at seven per cent. The problem was who would shoulder the three per cent difference in the rates, he said.

Mr. Mahadevappa said that though the bank received only Rs. 53 crore as refinance from NABARD last year, it exceeded the Rs. 80-crore target for agricultural loans by disbursing Rs. 108 crore. This was achieved by diverting nearly Rs. 50 crore from its resources, mainly from deposits.

What encouraged the bank to embark on this venture was its impressive performance in recovery of loans, which was as high as 98 per cent. But such lending could not become a regular feature, he said.

He said the SDCCB had not denied loans to farmers at four per cent interest just because NABARD had reduced the level of refinance. It had disbursed Rs. 67 crore to nearly 34,000 farmers, including 1,782 new borrowers, in the past three months, he said.

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