New Delhi: In line with Reserve Bank of India's (RBI's) rate cut, National Bank for Agriculture and Rural Development (NABARD) is likely to slash lending rates and has issued direction to banks and co-operatives to re-schedule loans of drought-hit farmers amounting to about Rs 7,000 crore.

The apex bank for rural credit is also talking to Reserve Bank for extending the one- time settlement (OTS) scheme for recovering non-performing assets to March 31, 2003 from earlier deadline of September 2002, its chairman Y C Nanda said in New Delhi on November 6.

Referring to 0.25 per cent cut in bank rate to 6.25 per cent by RBI, he said, "We are reviewing the interest rate structure. There is a possibility of reduction in rates."

NABARD, a subsidiary of RBI, provides refinance facilities to co-operative and rural banks at 5.5 to seven per cent for short-term loans, seven to 10 per cent for term loans and 8.5 per cent on Rural Infrastructure Development Fund (RIDF).

Although non-committal on the extent of a possible cut in re-finance rate, Nanda said NABARD has taken a number of measures to provide relief to ailing farmers although the rabi crops were expected to do well.

"We have already issued instruction to commercial banks, co-operatives and regional rural banks to extend the loan period in drought hit areas. We had made a rough estimate that the extent of relief required would be in the range of Rs 6,500-7,000 crore," he said.

NABARD has extended re-finance loan tenure to three to seven years from the maximum 18 months for drought hit areas.

Nanda said the bank has reduced interest rates on irrigation loans to seven per cent and launched a special funding scheme for fodder and deepening wells.

PTI