The Reserve Bank of India with the approval of the Government of India, has reduced the deposit and lending rates under the Rural Infrastructure Development Fund by 200 basis points (2 per cent) with effect from November 1, 2003.

"Keeping in view the declining interest rates scenario and the need to further rationalise the rate structure under the Rural Infrastructure Development Fund, it has been decided to restructure the lending and deposit rates," the central bank said in a statement.

For interest rates under RIDF-IV to VII, deposit rates have been reduced from 8 per cent to 6 per cent , lending rates have come down from 9 per cent to 7 per cent.

For RIDF-VIII to IX, deposit rates earlier linked to shortfall with rates between 8 per cent and 5 per cent has been revised and will now vary between bank rate and bank rate minus 3 per cent.

Similarly, lending rates under the said category, will now be bank rate plus 0.5 per cent as against 8.5 per cent earlier.

The RIDF was set up by the National Agricultural Bank for Rural Development in 1995-96 to help state governments and companies run by them to complete minor and medium projects for irrigation, soil conservation and watershed management.

Both state-run and private sector Indian banks are required to contribute to this fund on the basis of the shortfall in their compulsory lending to the agriculture sector or small scale industries.