New Delhi, July 31: The Cabinet today approved the Nabard (amendment) Bill, 2003 that will make available crop loans to farmers at 9 per cent interest rate as against 14-16 per cent prevailing rates. The bill, which will be moved in the current monsoon session of Parliament, is in keeping with the government decision to make available crop loans to farmers up to Rs 50,000 at an interest rate not exceeding 9 per cent, an official spokesperson told reporters here.

The agriculture sector could not avail the benefit of falling interest rates due to multiplicity of processing agencies. The amendment will reduce one tier in the state cooperative credit system to bring down the incidence of add on interest rate, he said. After the bill is passed by the Parliament, Nabard will directly refinance district Central Cooperative Banks (DCCBs) who will in turn refinance the Primary Agriculture Credit Societies (PACs) so that utimately borrowers will be able to get crop loans with a reduced interest rate.

Currently the Nabard gets funds from Reserve Bank of India at 6-6.25 per cent interest rate. Nabard than provides the same to state cooperative bank at an additional margin of 0.7 per cent. SCB after charging 0.5-2.5 per cent margin than pass on the finance to district central cooperative banks who in turn add another 2.5-3 per cent to the interest before passing it on to PACs.

The effective interest rate for PACs to farmers after the entire exercise came to 14-16 per cent. Bureau Report