Kerala - Thiruvananthapuram   

NABARD urged to bridge refinance gap

THIRUVANANTHAPURAM: The National Cooperative Agriculture and Rural Development Banks Federation has urged the Centre to direct the National Bank for Agriculture and Rural Development (NABARD) to sanction additional funds to avert a liquidity crisis during the current year.

Federation chairman K.Sivadasan Nair told reporters here on Friday that the policy of NABARD to allocate a lion’s share of its resources to commercial banks, which have a shortfall in agriculture lending, should be stopped.

Agriculture rural development banks being non-resource based lending institutions, depend on NABARD refinance for advancing loans.

Till three years ago, NABARD used to give refinance support against the advances within the allocations given subject to government guarantee and other conditions.

Any shortfall in refinance in a particular year was compensated in the allocations given the subsequent year. Hence, agriculture banks did not have considerable refinance gap till 2004-05.

This gap had been widening year after year and it is now leading to a liquidity crisis. While the total allocation of NABARD in 2004-05 was Rs.3153.44 crore, the refinance provided was only Rs.2,710 crore, leaving a gap of Rs.443 crore.

In 2005-06, the banks were given a total allocation of Rs.3,100.20 crore against which refinance was only Rs.2,082.47 crore with a shortfall of Rs.1,017.73 crore.

When the accumulated refinance gap during 2004-05 and 2005-06 itself came to Rs.1,460 crore, the allocations for 2006-07 were reduced to Rs.2,320 crore against which actual disbursement was further reduced to Rs.1,973 crore.

Consequently, by March 2007, the accumulated shortfall and refinance touched Rs.1,807 crore, he said.

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