Nabard chairman U.C. Sarangi (left) with India Tea Association additional vice-chairman C.S. Bedi in Calcutta on Tuesday. A Telegraph picture

Calcutta, July 22: The National Bank for Agriculture and Rural Development (Nabard) will increase its refinancing to rural credit institutions, such as co-operative banks and regional rural banks, to Rs 32,000 crore in the current financial year. Last year, Nabard refinanced about Rs 24,000 crore that these institutions gave to the agriculture and allied sectors.

“We may need to raise Rs 26,000 crore through market borrowings during the current financial year,” said U. C. Sarangi, chairman of Nabard, while speaking at a banking seminar organised by the eastern regional council of the Federation of Indian Chambers of Commerce and Industry here today.

The bank has got Rs 5,000-crore assistance from the Reserve Bank of India this year and it has a net-owned fund of Rs 5,000 crore for disbursal. “We have already raised Rs 3,000 crore through bonds,” Sarangi said.

Thus Nabard already has Rs 13,000 crore at its disposal.

“Apart from loan refinancing demand, we also expect an additional liquidity demand of Rs 7,000 crore from rural credit institutions in the aftermath of the implementation of the loan waiver scheme,” Sarangi said.

Nabard also expects a steep increase in demand for short-term refinance. “We have set a target of Rs 22,000-crore short-term refinancing in the current financial year, up from Rs 17,382 crore disbursed last year,” Sarangi said. The bank had set a target of Rs 14,758 crore for short-term refinancing in 2007-08.

Nabard charges an interest rate of 3.5 per cent for the refinance of agricultural loans and other rural credit given by regional rural banks and co-operative banks.

“However, for providing additional liquidity assistance we’ll charge an interest rate of 9 per cent because we will not get any government subvention (subsidy) for this,” Sarangi explained.

Nabard has outstanding borrowings of Rs 33,381 crore on March 31, 2008, up from Rs 32,146 crore at the end of 2006-07. For the non-farm sector, it extended a refinance support of Rs 2,748 crore to banks, including Rs 756 crore for rural housing.

In the last financial year, commercial banks provided nearly 4.2 lakh self-help groups with loans amounting to Rs 2,994 crore. Refinancing by Nabard was around Rs 1,615 crore, which was 25 per cent higher than the previous year.