National Bank for Agriculture and Rural Development on Thursday drew Rs 10,200 crore (Rs 102 billion) from a special liquidity window created by the Reserve Bank of India to reimburse immediately the first instalment of Rs 25,000 crore (Rs 250 billion) for the farm debt waiver and relief scheme. However, the facility got a lukewarm response from commercial banks.
"Nabard drew Rs 10,200 crore from RBI today and the money has been transferred to its state-level offices for immediate distribution among regional rural banks and cooperatives," said a government official.
After the government announced fresh liquidity-infusing measures on Wednesday, the RBI created the special facility to lend to Nabard (Rs 17,500 crore) and commercial banks (Rs 7,500 crore) at 9 per cent interest for three weeks. The move was to immediately make available the money to lenders, who otherwise would have got it from the government by November 1.
Commercial banks, cooperatives and regional rural banks implemented the debt waiver and relief scheme on June 30 this year at a cost of Rs 30,000 crore (Rs 300 billion). The government will reimburse this amount in instalments by 2011. Reimbursement to cooperatives and RRBs is through Nabard.
Nabard is making available liquidity to cash-strapped cooperatives and regional rural banks to immediately start rabi-crop lending in time. Nabard is also bearing the interest cost of 9 per cent to ensure that cooperatives and RRBs absorb the money. Nabard will work out sharing of the interest burden with the government later.
"Unlike commercial banks, it is difficult to build a quick consensus on interest component with such a large number of cooperatives (371) and RRBs (89) across the country," the official said. Nabard will draw the balance of Rs 4,800 crore (Rs 48 billion) depending on the claims received from cooperatives and RRBs.
Most of the commercial banks did not show any interest on the facility today, probably on account of fresh liquidity infusion of Rs 40,000 crore (Rs 400 billion) in the banking sector after RBI cut the Cash Reserve Ratio by 100 basis points.
"Our bank has not drawn anything from the facility. We will do so only if we need additional liquidity," said a public sector bank chairman. Unlike RRBs and cooperatives, commercial banks will have to pay 9 per cent interest if they will use the facility.