Financial Daily from THE HINDU group of publications
Tuesday, Jun 18, 2002
Financial Daily from THE HINDU group of publications Tuesday, Jun 18, 2002 |
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Money & Banking
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Financial Institutions Agri-Biz & Commodities - Farm credit Nabard plans direct financing of projects Poornima Mohandas
MUMBAI, June 17 THE National Bank for Agriculture and Rural Development (Nabard), that has hitherto been only into refinancing, is all set to make a foray into direct financing of projects. It is expected to get the RBI nod shortly. To begin with, the bank has decided to go with commercial banks for co-financing projects, particularly large agricultural projects. So far, Nabard has been providing direct finance only to State Governments under the Rural Infrastructure Development Fund (RIDF) schemes. According to Mr M.V.S. Chalapathi Rao, Managing Director, Nabard, it has already had discussions with State Bank of India, Punjab National Bank, Union Bank of India, Corporation Bank and Allahabad Bank on co-financing large projects in the agricultural sector. "Our board has agreed to the co-financing initiative in principle. We are now awaiting approval from RBI,'' Mr Rao said. There could be 50:50 or 60:40 consortium funding of projects along with banks. In some projects, Nabard may co-finance the project directly and as well as re-finance the banks. "We may even involve more than one bank in certain projects if need be,'' said Mr Rao. Co-finance amounts to direct finance. This is a prelude to direct financing, said Mr Rao. Nabard has recently got permission to take up direct financing of projects following the passing of the Nabard Amendment Act 2000. There is to be joint appraisal of projects by both Nabard and banks before sanctioning of loans. "We will provide multi-disciplinary technical expertise,'' said Mr Rao. Nabard will charge the same rates of interest as banks for the loans. The banks will look after borrower appraisal and documentation. We will pay the requisite service charges to the banks, Mr Rao added. Through co-financing, the Nabard is eyeing only large agricultural projects which commercial banks are unable to handle. The national bank with just 29 regional offices in the State capitals is unable to get into such initiatives by themselves. They find it necessary to tie up with commercial banks, which have a wide network across the country. "We do not plan to get into retailing of direct finance. That is not our objective nor is it in our interest. We can only strengthen the resources of banks,'' said Mr Rao.
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