The Union Cabinet on Tuesday gave post-facto approval to the National Bank for Agriculture and Rural Development (Nabard) to make short-term market borrowings of Rs 20,000 crore for on-lending to cooperative banks.
The Cabinet gave the nod at a meeting chaired by Prime Minister Narendra Modi.
"Nabard will make short-term borrowings at prevailing market rate of interest for approximately Rs 20,000 crore for on-lending to cooperative banks at 4.5 per cent rate of interest," Finance Ministry said in a statement here.
"Additional capital of Rs 2,000 crore would be provided to Nabard for this purpose through the Union Budget. To start with, additional capital of Rs 500 crore may be released during 2016-17," the statement said.
In light of good monsoon and expectation of increased credit demand and in order to boost agricultural production, the farmers need to be supported through cooperative banks, which purvey credit at their doorstep, to enable them to scale up their agricultural operation, it noted.
"The approval will ensure increased availability of short-term crop loans to farmers through cooperative banks at reduced rate of interest," the statement said.
Interest subsidy of about 1.8 per cent and Nabard's administrative cost of 0.2 per cent would be provided as per the scheme of Department of Agriculture, Cooperation and Farmers Welfare (DAC&FW).
The extent of interest subsidy may vary depending on the rate at which Nabard raises funds, the statement said.
Nabard would also coordinate the conversion of operative Kisan Credit Cards (KCCs) into RuPay or ATM-enabled KCCs by cooperative banks and regional rural banks (RRBs) in a mission mode, it said.
"The conversion will enable easy and hassle-free availability of credit and in keeping with the spirit of 'Digital India' will facilitate digital and cashless transactions by farmers," it added.
--IANS
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