The National Bank for Agriculture and Rural Development (NABARD) has reduced the rate of interest by 20 basis points (bps) on its long term refinance facility (3-5 years and 5 years) and by 50 bps for the medium term refinance facility (18 months to 3 years) to banks with an objective to give a spur to investments in agriculture.
According to a statement issued by NABARD, the new rates of interest on refinance will now be 9.30 per cent for five years and 9.50 per cent for three-five year period and 9.5% for 18 months to three years period. In addition to this rate cut, NABARD shall further give 50 basis points reduction for area development projects and innovative activities which enhance production and productivity of agriculture.
These activities among others include production under controlled conditions like poly houses, water saving drip and sprinkler facilities and precision farming.Banks availing more than Rs 500 crore in a single drawal will further be incentivised by 10 bps.In addition to the above, NABARD has also reduced rate of interest by 50 bps on short-term loans to State Cooperative Banks, and Regional Rural Banks (RRBs) for financing of other prescribed activities (other than crop loans) like financing to Weaver’s Cooperative Societies, Handloom Development Corporations, marketing of crops etc.
The revised rate of interest will now be 10 per cent per annum. The new refinance rates are be applicable from August 14, 2014.