NABARD has reduced the rate of interest by 20 basis points (bps) on their long term refinance facility to banks with an objective to promote investments in agriculture. The new rates will be applicable from 6 June 2014.

Announcing the new rates, Dr. Harsh Kumar Bhanwala, Chairman, NABARD said that rates of refinance will now be 9.50% for 5 years and above and 9.70% for 3-5 years period, Banks availing more than Rs.500 crore in a single drawl will further be incentivised by 10 bps.

To combat food inflation, efficient agricultural technologies get a further incentive of 50 basis points

In addition, NABARD shall further give 50 basis points reduction, for innovative agricultural activities which enhance production & productivity. These activities among others include; production under controlled conditions like poly houses with water saving drip & fertigation facilities, precision farming, post-harvest management, etc. The list includes 12 such innovative farm practices to enhance fruit and vegetable production. This initiative is aimed at combating the food inflation by addressing the supply side constraint.

NABARD will also extend the 50 basis points rebate for supporting single purpose under area development schemes, mainly to benefit small and marginal farmers.

Dr. Bhanwala said that this initiative will incentivise the Cooperative Banks, RRBs and Commercial Banks in reversing the decelerating trend of investment credit and will aid in enhancing capital formation in agriculture.

Refinance rate reduction incentivises agricultural investment via lower long term refinance pricing and targeted rebates for innovative farming. NABARD reduced long term refinance rates by 20 basis points effective 6 June 2014 (9.50% for five years and above; 9.70% for three-five years) and offers an additional 10 basis points for large single drawals. NABARD also grants a further 50 basis points reduction for financing specified innovative agricultural activities (including protected cultivation with drip and fertigation, precision farming, and post harvest management) and extends the 50 basis points rebate to single purpose area development schemes benefiting small and marginal farmers to promote investment credit and address supply side constraints.