National Bank for Agriculture and Rural Development (NABARD) on 11 January 2014 reduced the refinance rates for the banks and other lending agencies by 0.20 percent. This has been done with an aim to promote rural credit and rural infrastructure. The new rates will be in effect from 7 January 2014.
The revised rate of interest on refinance will be for a period of five years for commercial, state cooperative, regional rural and primary urban cooperative banks will be 9.70 percent, which has been decreased from 9.90 percent.
In its notification, NABARD has also mentioned that banks drawing refinance of 500 crore rupees and more in a single drawl would be allowed further reduction of 0.10 percent. In its notification it also mentioned that the reduction of 10 basis point for the State Cooperative Agriculture and Rural Banks (SCRDBs) will be allowed for a single drawl of 200 crore rupees and above.
With this reduction, NABARD expects that this step will give a boost to banks by extending investment credit. It will also help in creation of warehouse infrastructures for agricultural commodities in India.
NABARD (National Bank for Agriculture and Rural Development) was formed on 12 July 1982 by transferring the agricultural credit functions of RBI and refinance functions of then Agricultural Refinance and Development Corporation (ARDC). NABARD was dedicated for the service of the nation by the late Prime Minister Indira Gandhi on 5 November 1982. NABARD was constituted following the recommendation of a committee that was formed to review the arrangements for institutional credit for agriculture and rural development (CRAFICARD) on 30 March 1979. The committee was constituted by the RBI under the Chairmanship of B Sivaraman. The Parliament, through Act 61 of 1981, approved the setting up of NABARD. NABARD was set up with an initial capital of 100 crore rupees. NABARD basically looks for the financial and developmental issues. It also supervises the issues.
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