India offers credit facility to support farmers hit by cash clampdown

NEW DELHI (Reuters) - The Indian government on Wednesday offered a credit line to support millions of farmers who have been left short of cash to buy seeds and fertilisers for their winter crops after its decision to cancel 500 and 1,000 rupee bank notes.

Prime Minister Narendra Modi dropped a bombshell on Nov. 8 by abolishing the bank notes as legal tender that accounted for 86 percent of cash in circulation. The move was aimed at cracking down on the shadow economy but has brought India's cash economy to a virtual standstill.

It has also put in danger production of key commodities and hurt rural communities that were only just recovering after two years of drought.

In the latest step, the National Bank for Agriculture and Rural Development (NABARD), a state-run lender, will provide 210 billion rupees ($3.07 billion) in farm credit to help the sowing of winter crops such as wheat, a top finance ministry official told reporters.

New Delhi also announced measures to boost digital transactions.

Shaktikanta Das, economic affairs secretary, said the loan would be disbursed through farm cooperatives.

"This measure will ensure a smooth flow of credit to farmers," Das said. "As and when, additional (credit) limits are required, NABARD will sanction it."

The decision comes days after Modi's administration allowed farmers to purchase seeds with old 500 rupee banknotes from state-run outlets.

More than 40 percent of small and marginal farmers get their credit from cooperative banks, Das said.

(Reporting by Manoj Kumar; Writing by Rajesh Kumar Singh; Editing by Douglas Busvine & Shri Navaratnam)

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