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  1. 1. RURAL CREDIT OF NABARD INTRODUCTION TO BANKING A bank is financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank is the connection between customers that have capital deficits and customers with capital surpluses. Due to their influence within a financial system and the economy, banks are highly regulated in most countries. Most banks operate under a system known as fractional reserve banking where they hold only a small reserve of the funds deposited and lend out the rest for profit. They are generally subject to minimum capital requirements which are based on an international set of capital standards, known as the Basel Accords. Banking in its modern sense evolved in the 14th century in the rich cities of Renaissance Italy but in many ways was a continuation of ideas and concepts of credit and lending that had its roots in the ancient world. In the history of banking, a number of banking dynasties have played a central role over many centuries. The oldest existing bank was founded in 1472 1
  2. 2. RURAL CREDIT OF NABARD HISTORY Banking in India in the modern sense originated in the last decades of the 18th century. The first banks were Bank of Hindustan (1770-1829) and The General Bank of India, established 1786 and since defunct. The largest bank, and the oldest still in existence, is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955. For many years the presidency banks acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935. In 1969 the Indian government nationalized all the major banks that it did not already own and these have remained under government ownership. They are run under a structure know as 'profit-making public sector undertaking' (PSU) and are allowed to compete and operate as commercial banks. The Indian banking sector is made up of four types of banks, as well as the PSUs and the state banks; they have been joined since 1990s by new private commercial banks and a number of foreign banks. Banking in India was generally fairly mature in terms of supply, product range and reach-even though reach in rural India and to the poor still remains a challenge. The government has developed initiatives to address this through the State bank of India expanding its branch network and through the National Bank for Agriculture and Rural Development with things like microfinance. 2
  4. 4. RURAL CREDIT OF NABARD Banking Regulation Act, 1949 As per Section 5(c) of Banking Regulation Act, 1949 a "Banking Company" means any company which transacts the business of banking in India. Explanation: Any company which is engaged in the manufacture of goods or carries on any trade and which accepts the deposits of money from public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause." As per Section 5(b) of Banking Regulation Act, 1949, banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, and order or otherwise. As per Section 5(d) of Banking Regulation Act, 1949, company means any company as defined in Section 3 of the Companies Act, 1956 and includes a foreign company within the meaning of Section 591 of that Act. As per section 51 of Banking Regulation Act, 1949, certain provisions of the Banking Regulation Act are also applicable to the State Bank of India, any corresponding new bank, a regional rural bank and any subsidiary bank. "Corresponding new bank" has been defined under clause (ee) of section 2 of the DICGC Act to mean a corresponding new bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 or 1980. 4
  5. 5. RURAL CREDIT OF NABARD FUNCTIONS The functions of banks are divided into two categories: i) Primary functions, and ii) Secondary functions including agency functions. i) Primary functions: a) Accepting deposits The most important activity of a commercial bank is to mobilise deposits from the public. People who have surplus income and savings find it convenient to deposit the amounts with banks. Depending upon the nature of deposits, funds deposited with bank also earn interest. Thus, deposits with the bank grow along with the interest earned. If the rate of interest is higher, public are motivated to deposit more funds with the bank. There is also safety of funds deposited with the bank. b) Grant of loans and advances The second important function of a commercial bank is to grant loans and advances. Such loans and advances are given to members of the public and to the business community at a higher rate of interest than allowed by banks on various deposit accounts. The rate of interest charged on loans and advances varies depending upon the purpose, period and the mode of repayment. The difference between the rate of interest allowed on deposits and the rate charged on the Loans is the main source of a bank‟s income. 5
  6. 6. RURAL CREDIT OF NABARD Loans A loan is granted for a specific time period. Generally, commercial banks grant shortterm loans. But term loans, that is, loan for more than a year, may also be granted. The borrower may withdraw the entire amount in lumpsum or in instalments. However, interest is charged on the full amount of loan. Loans are generally granted against the security of certain assets. A loan may be repaid either in lumpsum or in instalments. Advances An advance is a credit facility provided by the bank to its customers. It differs from loan in the sense that loans may be granted for longer period, but advances are normally granted for a short period of time. Further the purpose of granting advances is to meet the day to day requirements of business. The rate of interest charged on advances varies from bank to bank. Interest is charged only on the amount withdrawn and not on the sanctioned amount. 6
  7. 7. RURAL CREDIT OF NABARD ii) Secondary functions Besides the primary functions of accepting deposits and lending money, banks perform a number of other functions which are called secondary functions. These are as follows - a. Issuing letters of credit, travellers cheques, circular notes etc. b. Undertaking safe custody of valuables, important documents, and securities by providing safe deposit vaults or lockers. c. Providing customers with facilities of foreign exchange. d. Transferring money from one place to another; and from one branch to another branch of the bank. e. Standing guarantee on behalf of its customers, for making payments for purchase of goods, machinery, vehicles etc. f. Collecting and supplying business information. g. Issuing demand drafts and pay orders. h. Providing reports on the credit worthiness of customers. 7
  8. 8. RURAL CREDIT OF NABARD RURAL CREDIT Rural credit is any type of lending program or line of credit that is aimed at impacting a rural population in some manner. There are banks and cooperatives that specialize in extending this type of credit to farmers and others engaged in the agricultural task. Depending on the nature of the organization, credit plans may focus on providing mortgage assistance, securing new equipment, or even funds to support research into various aspects of land development within a rural community. Individuals have access to rural credit options under certain circumstances. For example, novice farmers and ranchers may be granted a loan or line of credit to manage the acquisition and upgrade of an existing farm operation, or the establishment of a new one. Farmers and ranchers are sometimes extended credit of this type when some sort of natural disaster has ruined crops and threatens the ongoing operation of the ranch or farm. Some lenders specialize in farm loans that offer highly competitive fixed and variable mortgage rates which make it possible to refinance a farming operation for the purpose of acquiring new machinery or meet some other pressing need relevant to the operation. Businesses can also secure rural credit under specific situations. This includes the acquisition or establishment of a commercial farming operation, or a commercial ranch. A business may also obtain funds earmarked for development, assuming that the project concerned will benefit the rural community where it is based. 8
  9. 9. RURAL CREDIT OF NABARD Definition 'Agricultural Credit' Any of several credit vehicles used to finance agricultural transactions, including loans, notes, bills of exchange and banker's acceptances. These types of financing are adapted to the specific financial needs of farmers, which are determined by planting, harvesting and marketing cycles. Short-term credit finances operating expenses, intermediate-term credit is used for farm machinery, and long-term credit is used for real-estate financing. 9
  10. 10. RURAL CREDIT OF NABARD History of rural credit In the 1950s, a network of rural credit cooperatives was created. At this time, they were not commercial enterprises similar to banks, but rather channeled credit between the state and the people's communes in rural areas.[1] In the late 1970s, after economic reforms enabled some individual entrepreneurialism and the creation of collective enterprises, the RCCs began to function as grassroots banks that provided credit and savings accounts to families and collective enterprises. In the reform era, the RCCs were intended to serve as a means for the Agricultural Bank of China to funnel credit into rural areas. However, the RCCs were insufficient to meet the high demand for credit in these areas. Individual and enterprises often turn to other sources of credit, which range from Rotating Savings and Credit Associations to pawn shops. However, these other forms are all illegal (although some are tolerated to a greater degree than others, and are tolerated in some locations more than in others). Commercial banks are legal, but since fewer than one percent of loans from state banks go to private entrepreneurs, they do not meet the credit needs of rural areas. Until 1996, the RCCs were supervised by the Agricultural Bank of China. In 1996, they were transferred to the People's Bank of China. In July 1998, the rural credit foundations were banned when the State Council of the People's Republic of China issued the “Provisions on the Cancellation of Illegal Financial Institutions and Activities.” This left the RCCs as the only legal financial institution (other than banks) that served rural enterprises and individuals. As of 1998, when the RCFs were banned, there were approximately 44,000 township-level RCCs and 280,000 village-level RCC branches 10
  11. 11. RURAL CREDIT OF NABARD Evolution of the Rural Credit System in India Rural financial market development is a complex process. The creation of the formal credit structure for financial agriculture and other rural activities commenced in India in the early part of this century with the introduction of co-operatives. It received a big push during the plan era. The All India Rural Credit Survey Committee (AIRCS) 1954, forms the edifice for the policy towards the development of the Institutional credit structures. The committee highlighted the awful inadequacy in the supply of institutional credit to the rural sector and proposed an integrated scheme of reorganization many more committees and recommendations. Priority sector lending, lead bank scheme, services area approach, setting up of NABARD, are some of the outcomes of the repeated scrutiny of the system. Coming to the recent committees, the Agriculture Credit Review Committee (ACRC) 1989, examined the existing rural credit system in detail. It highlighted the yawning gap between income generated and costs incurred by rural credit institutions, necessitating external assistance. The committee recommended greater autonomy for commercial banks; the weakness of RRBs were seen as endemic to the system with nonviability built into them. Co-operatives were sought to be strengthened through thrust on deposit mobilization and reduction of political interference. The Narsimham Committee on Financial Sector Reforms 1991, among other things, recommended a redefinition of priority sector, gradual phasing out of directed credit programmes to 10% of aggregate bank credit and deregulation of interest rates. 11
  12. 12. RURAL CREDIT OF NABARD Looking at the situation today, the excercises seems to have resulted in a scenario where "an imposing superstructure of credit institutions has been built which one committee after another has kept reshuffling or adding to" (Dandekar, 1993). Commenting broadely on the exercise in developing countries (to which the India experience seems to be no exception), Braveman and Guasch, 1986, see most of the changes in institutional design as largely superficial, window dressing type rather than substantial. "the institutions have been perceived more like a welfare agency than a commercial undertaking. There seems to be little effort to integrate deposit taking activities or to generate saving mobilization-a vital activity for the long run success of a credit institution. No provisions were made to deal with non-compliance, or to implement a reasonable system of incentives to both lenders and borrowers to induce the desired objectives." 12
  13. 13. RURAL CREDIT OF NABARD The major problems of the rural credit system thus evolved are as follows: 1. It has not produced desired results in terms of the direction, quantum and quality of the flow of credit. 2. It is afflicted by alarming high overdues, bad debts, loan defaults, unviability, low profitability, overburdening of staff, declining control and deteriorating customer services. It is estimated that the over dues of credit institutions have increased from Rs. 2,818 crores to Rs. 9,661 crores during 1983-93. 3.The complex tiering of funds through RBI-NABARD-Commercial Banks-State Cooperative Banks (SCBs)-District Co-operative Banks (DCBs)-Primary Agricultural Credit Societies (PACS), has tended to unduly increase the cost of banking. 4. Features of rural credit markets in developing countries may be understood as responses to the problems of adverse selection, moral hazard and enforcement. Imperfect information in this sense creates problems from the perspective of constrained Pareto efficiency. In Indian case too, information imperfactions have contributed to inefficiencies like high transaction costs and low recycling of credit. 5. From the institutional perspective, role of an appropriate institution as an enforcer and transmitter of incentives and motivator and inducer of saving is essential for development. The institutional design should serve to promote and facilitate functioning at the levels of both the leaders and borrowers. This factor seems to have been largely overlooked in the Indian case. Motivating to perform has not been given due importance. 6.Directed credit programmes and subsidized lending have badly affected viable functioning of credit disturbing units. The entire exercise has largely come to be characterized by tiering of funds from above to borrowers who often tale as a gift that need not be returned. 13
  14. 14. RURAL CREDIT OF NABARD India: Priorities for Agriculture and Rural Development BACKGROUND Although agriculture contributes only 21% of India‟s GDP, its importance in the country‟s economic, social, and political fabric goes well beyond this indicator. The rural areas are still home to some 72 percent of the India‟s 1.1 billion people, a large number of whom are poor. Most of the rural poor depend on rain-fed agriculture and fragile forests for their livelihoods. The sharp rise in foodgrain production during India‟s Green Revolution of the 1970s enabled the country to achieve self-sufficiency in foodgrains and stave off the threat of famine. Agricultural intensification in the 1970s to 1980s saw an increased demand for rural labor that raised rural wages and, together with declining food prices, reduced rural poverty. Sustained, although much slower, agricultural growth in the 1990s reduced rural poverty to 26.3 percent by 1999/00. Since then, however, the slowdown in agricultural growth has become a major cause for concern. India‟s rice yields are onethird of China‟s and about half of those in Vietnam and Indonesia. With the exception of sugarcane, potato and tea, the same is true for most other agricultural commodities. The Government of India places high priority on reducing poverty by raising agricultural productivity. However, bold action from policymakers will be required to shift away from the existing subsidy-based regime that is no longer sustainable, to build a solid foundation for a highly productive, internationally competitive, and diversified agricultural sector. 14
  15. 15. RURAL CREDIT OF NABARD ISSUES AND CHALLENGES Slow Down in Agricultural and Rural Non-Farm Growth: Both the poorest as well as the more prosperous „Green Revolution‟ states of Punjab, Haryana and Uttar Pradesh have recently witnessed a slow-down in agricultural growth. Some of the factors hampering the revival of growth are: Poor composition of public expenditures: Public spending on agricultural subsidies is crowding out productivity-enhancing investments such as agricultural research and extension, as well as investments in rural infrastructure, and the health and education of the rural people. In 1999/2000, agricultural subsidies amounted to 3 percent of GDP and were over 7 times the public investments in the sector. Over-regulation of domestic agricultural trade: While economic and trade reforms in the 1990s helped to improve the incentive framework, over-regulation of domestic trade has increased costs, price risks and uncertainty, undermining the sector‟s competitiveness. Government interventions in labor, land, and credit markets: More rapid growth of the rural non-farm sector is constrained by government interventions in factor markets -labor, land, and credit -- and in output markets, such as the small-scale reservation of enterprises. Inadequate infrastructure and services in rural areas. 15
  16. 16. RURAL CREDIT OF NABARD INTRODUCTION NABARD is an apex institution, accredited with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India. The Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD), set up by the Reserve Bank of India (RBI) under the Chairmanship of Shri B. Sivaraman, conceived and recommended the establishment of the National Bank for Agriculture and Rural Development (NABARD). The Indian Parliament through the Act 61 of 1981 approved the setting up of NABARD. The Bank which came into existence on 12th July, 1982, was dedicated to the service of the Nation by the Hon'ble Prime Minister, Smt Indira Gandhi 5th November, 1982. NABARD is established as an development bank, in terms of the Preamble of the Act, "for providing and regulating Credit and other facilities for the promotion and development of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promoting integrated rural development and securing prosperity of rural areas and for matters connected therewith or incidental thereto." NABARD took over the functions of the erstwhile Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of RBI and Agricultural Refinance and Development Corporation (ARDC). Its subscribed and paid up Capital was Rs. 100 crore which enhanced to Rs. 500 crore, contributed by the Government of India and RBI in equal proportions. 16
  17. 17. RURAL CREDIT OF NABARD VISION "To facilitate sustained access to financial services for the unreached poor in rural areas through various micro finance innovations in a cost effective and sustainable manner". ROLE  Facilitating credit flow for agriculture, rural infrastructure and rural development.  Promoting and supporting policies, practices and innovations conducive to rural development.  Strengthening rural credit delivery system through institutional development. MISSION "Promote sustainable and equitable agriculture and rural prosperity through effective credit support, related services, institution development and other innovative development. 17
  18. 18. RURAL CREDIT OF NABARD HISTORY OF NABARD  Reserve Bank of India (RBI) established in 1935 interalia, with a mandate to set up a Agricultural Credit Department (ACD) with expert staff.  ACD and RBI, initiated different measures to develop a healthy rural credit structure and provided guidance to State Governments and Co-operative Credit Structure.  Agricultural Refinance Corporation (ARC) was established in 1963 to support investment credit needs for agricultural development.  Consequent to undertaking of development and promotional functions, ARC was renamed as Agricultural Refinance and Development Corporation (ARDC) in 1972.  RBI, at the instance of Government of India appointed a Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) IN 1979.  The CRAFICARD reviewed the need of integrating short-term, medium-term and long-term agricultural credit structure.  The CRAFICARD recommended the establishment of National Bank for Agriculture and Rural Development (NABARD).  National Bank for Agriculture and Rural Development Act, 1981 was passed by the Indian Parliament and NABARD was established on 12th July 1982 with an initial of Rs. 100 crore. 18
  20. 20. RURAL CREDIT OF NABARD FUNCTIONS Serves as an apex financing agency for the institution providing investment and production credit for promoting the various developmental activities in rural areas. Takes measures towards institution building for improving absorptive capacity of the credit delivery, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc. Co-ordinates the rural financing activities of all institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India (RBI) and other national level institutions concerned with policy formulation, and Undertakes monitoring and evaluation of projects refinanced by it. NABARD's refinance is available to State Co-operative Agriculture and Rural Development Banks (SCARDB's), State Co-operative Banks (SCB's), Regional Rural Banks (RRB's), Commercial Banks (CB's) and other financial institutions approved by RBI. While the ultimate beneficiaries of investment credit can be individuals, partnership concerns, companies, State-owned corporations or co-operative societies, production credit is generally given to individuals. 20
  21. 21. RURAL CREDIT OF NABARD ROLE OF NABARD NABARD is the apex institution in the country which looks after the development of the cottage industry, small industry and village industry, and other rural industries. NABARD also reaches out to allied economies and supports and promotes integrated development. And to help NABARD discharge its duty, it has been given certain roles as follows: 1. Serves as an apex financing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas 2. Takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc. 3. Co-ordinates the rural financing activities of all institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India (RBI) and other national level institutions concerned with policy formulation. 4. Undertakes monitoring and evaluation of projects refinanced by it. 5. NABARD refinances the financial institutions which finances the rural sector. 6. The institutions which help the rural economy, NABARD helps develop. 7. NABARD also keeps a check on its client institutes. 8. It regulates the institution which provides financial help to the rural economy. 9. It provides training facilities to the institutions working the field of rural upliftment. 10. It regulates the cooperative banks and the RRB‟s, and manages talent acquisition through IBPS CWE. 21
  22. 22. RURAL CREDIT OF NABARD ORGANIZATIONAL ENVIRONMENT In the constantly changing socio-economic environment, continuous upgradation of skills and technical expertise coupled with a high degree of professionalism among employees assumes greater significance. Keeping this in view, NABARD lays emphasis on capacity building of its employees by refining its existing training modules, introduces new programmes and enhancing the exposure of employees through visits to various institutions within the country and overseas. The Bank through its pro-active human resource management strategies has sought to develop an environment conducive to the fulfillment of its mission by reinforcing its corporative vision and building a culture that fosters learning , creativity and adaptability. OBJECTIVES OF NABARD The rural financial system in the country calls for a strong and efficient credit delivery system, capable of taking care of the expanding and diverse credit needs of agriculture and rural development. More than 50% of the rural credit is disbursed by the Co-operative Banks and Regional Rural Banks. NABARD is responsible for regulating and supervising the functions of Co-operative banks and RRBs. In this direction NABARD has been taking various initiatives in association with Government of India and RBI to improve the health of Co-operative banks and Regional Rural Banks. 22
  23. 23. RURAL CREDIT OF NABARD OVERALL STRATEGY OF NABARD Forming and nurturing small, homogeneous and participatory self-help groups (SHGs) of the poor has today emerged as a potent tool for human development. This process enables then poor, especially the women from the poor households, to collectively identify and analyse the problems they face in the perspective of their social and economic environment. It helps them to pool their meager resources, human and financial, and priortise their use for solving their own problems. The emphasis on regular thrift collection and its use to solve immediate problems of consumption and production not only helps to meet their most urgent needs, but also,trains them to handle larger financial resources more skillfully, prudently and with a more lasting impact. Encourage SHGs to become a forum for many social sector interventions. 23
  24. 24. RURAL CREDIT OF NABARD RURAL INNOVATION NABARD role in rural development in India is phenomenal. National Bank for Agriculture & Rural Development (NABARD) is set up as an apex Development Bank by the Government of India with a mandate for facilitating credit flow for promotion and development of agriculture, cottage and village industries. The credit flow to agriculture activities sanctioned by NABARD reached Rs 1,57,480 crore in 20052006. The overall GDP is estimated to grow at 8.4 per cent. The Indian economy as a whole is poised for higher growth in the coming years. Role of NABARD in overall development of India in general and rural & agricultural in specific is highly pivotal. Through assistance of Swiss Agency for Development and Cooperation, NABARD set up the Rural Infrastructure Development Fund. Under the RIDF scheme Rs. 51,283 crore have been sanctioned for 2,44,651 projects covering irrigation, rural roads and bridges, health and education, soil conservation, water schemes etc. Rural Innovation Fund is a fund designed to support innovative, risk friendly, unconventional experiments in these sectors that would have the potential to promote livelihood opportunities and employment in rural areas.[11] The assistance is extended to Individuals, NGOs, Cooperatives, Self Help Group, and Panchayati Raj Institutions who have the expertise and willingness to implement innovative ideas for improving the quality of life in rural areas. Through member base of 25 crore, 600000 cooperatives are working in India at grass root level in almost every sector of economy. There are linkages between SHG and other type institutes with that of cooperatives. 24
  25. 25. RURAL CREDIT OF NABARD The purpose of RIDF is to promote innovation in rural & agricultural sector through viable means. Effectiveness of the program depends upon many factors, but the type of organization to which the assistance is extended is crucial one in generating, executing ideas in optimum commercial way. Cooperative is member driven formal organization for socio-economic purpose, while SHG is informal one. NGO have more of social color while that of PRI is political one. Does the legal status of an institute influences effectiveness of the program? How & to what an extent? Cooperative type of organization is better (Financial efficiency & effectiveness) in functioning (agriculture & rural sector) compared to NGO, SHG & PRIs. Recently in 2007-08, NABARD has started a new direct lending facility under 'Umbrella Programme for Natural Resource Management' (UPNRM). Under this facility financial support for natural resource management activities can be provided as a loan at reasonable rate of interest. Already 35 projects have been sanctioned involving loan amount of about Rs 1000 crore. The sanctioned projects include honey collection by tribals in Maharashtra, tussar value chain by a women producer company ('MASUTA'), eco-tourism in Karnataka[13] 25
  26. 26. RURAL CREDIT OF NABARD AGRICULTURAL INSURANCE OF NABARD In pursuance of the announcement made in the Union Budget, 2002-03 for setting-up of an Agriculture Insurance Corporation for farmers, a new Company, viz., Agriculture Insurance Company of India Ltd. (AICI) was established in 2002 with the authorised and paid up capital of Rs.1,500 crore and Rs.200 crore, respectively. NABARD and General Insurance Company (GIC) have contributed 30 and 35 per cent, respectively, and four other Insurance Subsidiaries, at 8.75 per cent each to the equity. One of the objectives for the formation of AICI was to act as the implementing agency for the Government's 'National Agriculture Insurance Scheme' (NAIS). The company has obtained Certificate of Registration from Insurance Regulatory and Development Authority (IRDA). The Pilot Scheme on Seed Crop Insurance that was implemented through GIC has also been transferred to AICI. NAIS is in operation since rabi 1999-2000 and is being implemented by 23 states and 2 UTs. So far, 590.55 lakh farmers have been covered under the scheme. The salient features of NAIS are as follows; The premium rates in respect of food crops and oilseeds are determined on the basis of flat rates of premium or actuarial rates whichever is less as per the scheme in accordance with the decision of GoI. The rates are ranging from 1.5-3.5% of sum insured in respect of these crops under both kharif and rabi. 1. In respect of annual commercial / horticulture crops, the premium rates are charged on actuarial basis. 2. The actuarial premium rates are worked out on the basis of yield of the past ten years as per the data provided by the State Government concerned. The variation is high due to high variation in the yield during the specified period i.e. ten years. The premium rates, for example, are high in the case of groundnut and cotton (risky crops) because of high 26
  27. 27. RURAL CREDIT OF NABARD variation in yield whereas in case of sugarcane and wheat, the rates are comparatively low since these are stable crops. 3. The scheme stipulates transition of premium rates from flat to actuarial in case of cereals, millets, pulses and oilseeds in a period of five years and till such periods, claims beyond 100% of premium are borne by the Government. 4. In the case of annual commercial / horticulture crops, the implementing agency is to bear all normal losses i.e. claims up to 150% of premium in the first three years and 200% of premium thereafter subject to satisfactory claim experience. 5. The small and marginal farmers are entitled to a subsidy of 50% of the premium charged. 6. The scheme provides for compulsory coverage in respect of loanee farmers whereas non-loanee farmers may opt for insurance cover on voluntary basis. 7. The AICI has introduced, on a pilot basis, a new rainfall index based insurance product called Varsh Bima in four states, viz., Andhra Pradesh, Karnataka, Rajasthan and Uttar Padesh covering 21 rain gauge stations and crops like cereals, pulses and oilseeds during kharif 2004. NABARD is actively involved through its concerned ROs and DDMs in successful launching and marketing of the scheme. 27
  28. 28. RURAL CREDIT OF NABARD SUBSIDIARY NABCON NABARD Consultancy Services (Nabcons) is a wholly owned subsidiary promoted by National Bank for Agriculture and Rural Development (NABARD) and is engaged in providing consultancy in all spheres of agriculture, rural development and allied areas. Nabcons leverages on the core competence of the NABARD in the areas of agricultural and rural development, especially multidisciplinary projects, banking, institutional development, infrastructure, training, etc., internalized for more than two decades. The Company is registered under the Company's Act, 1956, with an authorized capital of Rs 250 million (US $5.75 million) and paid up capital of Rs 50 million (US $1.15 million). In tune with NABARD's mission to bring about rural prosperity, Nabcons has more than just commercial interest in the assignments it undertakes. ASSOCIATES NABARDs international associates range from World Bank-affiliated organizations to global developmental agencies working in the field of agriculture and rural development. These agencies offer material and advisory help in implementing schemes that are aimed at uplifting the rural poor and in making agricultural processes effective and yielding. 28
  29. 29. RURAL CREDIT OF NABARD NAFBINS NABARD Financial Services Limited, [NABFINS] is a subsidiary of National Bank for Agriculture and Rural Development (NABARD) with equity participation from NABARD, Government of Karnataka, Canara Bank, Union Bank of India, Dhanalakshmi Bank and Federal Bank. It is a non-deposit taking NBFC registered with the Reserve Bank of India and shall operate throughout India. The main objectives of the Company are to provide financial services in two broad areas of agriculture and microfinance. NABFINS provides credit and other facilities for promotion, expansion, commercialization and modernization of agriculture and allied activities. NABFINS shall engage in the business of providing micro finance services (with or without thrift) and other facilities to needy and disadvantageous sections of the society for securing their prosperity in both rural and urban areas. NABARD, which is the world renowned apex development bank of our country and pioneered the world‟s largest microfinance movement, while promoting NABFINS has envisaged that NABFINS shall evolve into a Model Microfinance Institution to set standards of governance among the MFIs, operate with exemplary levels of transparency and operate at reasonable / moderate rates of interest. 29
  30. 30. RURAL CREDIT OF NABARD ROLE AND FUNCTIONS NABARD is an apex institution accredited with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas. It is an apex refinancing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas It takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc. It co-ordinates the rural financing activities of all the institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India and other national level institutions concerned with policy formulation. It prepares, on annual basis, rural credit plans for all districts in the country; these plans form the base for annual credit plans of all rural financial institutions It undertakes monitoring and evaluation of projects refinanced by it. It promotes research in the fields of rural banking, agriculture and rural development 30
  31. 31. RURAL CREDIT OF NABARD MANAGEMENT OF RESOURCES N F und 2 013 012 et 2 N U 2 Accretio ses of Funds 013 012 n et 2 Utilisatio n C C apital 4 ,000 ,000 3 ,000 ash and 1 8 Bank ,466 ,313 8 1 53 Balances C R eserves & 1 5,234 Surplus 3,408 1 ,826 ollateralised 1 Borrowing and Lending 5 32 31 2 3 01 Obligation I nvestments in a ) GOI N 4,481 Fund 1 2 4,479 Securities 2 ,414 ,147 94 36 2 67 b) ADFC RC(LTO) 1 2 58 Equity N RC (Stabilisation 1 ,581 ,579 1 c 1 1 0 )2 AFC Equity 31
  32. 32. RURAL CREDIT OF NABARD ) Fund 48 48 48 d) SIDBI Equity e ) AICI Ltd. D eposits 3 02 91 2 1 6 1 0 6 0 5 0 0 f)NCDEX Ltd. & MCX 34 34 0 Ltd. g )Nabcons B onds and 4 7,666 Debentures 8,584 3 098 5 9 h) Biotech Venture 40 26 14 Fund i ) Treasury B orrowings 4 3 from GoI 5 8 -)42 0 Bills ( 5 8 j) Commercial 58 1,037 -989 3 48 - 3 Paper k ) Non B Convertible orrowings JNN Solar Mission 3 6 3 3 Bonds 3 85 75 0 l) Equity 1 1 1 0 Shares of Other 32
  33. 33. RURAL CREDIT OF NABARD Institution m ) Debentures F oreign 4 Currency 63 03 5 40 Loan in Nature of 0,249 Advance 1 1 2,344 2,095 2,334 2,038 296 n) Certificate - of Deposits C ertificate of 0 ,281 Deposits 1 1,281 oans and L Advances a ) Production & Marketing Credit C ommercial 1 ,936 Paper ,245 2 309 6 5,176 Conversion of 8,338 6,838 64 b) 4 129 -65 3 1 3 Production Credit into MT Loans C BLO 4 93 Borrowings 93 c T erm Money 4 1 38 82 1 44 )-MT & LT 8,255 0,762 ,493 0 2 7 -2 Project Loans 33
  34. 34. RURAL CREDIT OF NABARD d) Interim finance e ) LT Non R 7 IDF Deposits 8,758 5,107 7 ,651 1 Project 3 Loans 1 09 31 6,270 2,323 3,947 7 f) Other 40 - 7 Loans g ) RIDF S 2 TCRC Fund 5,000 0,000 2 ,000 Loans 5 5,061 h) Cofinance (Net 0,860 ,201 37 72 4 -35 of Provision) S T RRB F Credit 1 Refinance 0,000 0 0,000 Fund 15 Other Assets 3,172 7 Other ,781 Liabilities O ther Funds ,345 5 ,258 T otal ixed Assets 1 3 ,953 2 6 2 25 0 2,470 9 702 1 ,436 4 3 05 1 ,13,170 ,82,075 1,095 3 otal T 2 1 3 ,13,170 ,82,075 1,095 34
  35. 35. RURAL CREDIT OF NABARD FUNCTIONS ANDS PRODUCTS A) Credit Planning Preparation of district-wise credit plans annually that indicate exploitation potential available for development through bank credit under agriculture, allied activities, Rural Non-Farm Sector etc. Preparations of State Focus Paper based on district credit plans. Monitoring the flow of ground level credit. Issuing policy and operational guidelines to rural financial institution (RFIs) 1. District Level Planning NABARD prepares Potential Linked Credit Plans (PLPs) for all the district of the country. It maps the potentials available for development in agriculture and rural sectors in the district and projects credit requirement, taking into account long term physical potential, availability of infrastructure, extension services and marketing support and the strengths and weaknesses of the RFIs in the district. 2. State Level Planning NABARD prepares a State Focus Paper for every state. This presents a comprehensive picture of potentials available in the State for development of agriculture and allied sectors. It also provides a road map of the opportunities available for further investments in these sectors. It can be used by bankers and other agencies for preparing their action plans for making these investments State Credit Seminars are convened by NABARD annually where all agencies concerned viz., the State Government, banks , NGOs, etc. participate and discuss policies and operational measures required to be taken for tackling constraints in development of potential available in agriculture and allied sectors in the State. 35
  36. 36. RURAL CREDIT OF NABARD 3. National Level Planning NABARD facilitates policy decisions by GOI and RBI in the areas of credit flow to agriculture and rural development.  Promotion and Development 1. Institutional development of client organizations. 2. Capacity building in partner institutions. 3. Supporting experimentation with new development models and practices in credit delivery. 4. Dissemination of innovative products and ideas.Supporting Research and Development. 5. Assisting RBI/GOI in formulation of policies relating to rural credit. 6. Promotion of rural non-farm sector. 7. Promotion of Kisan Credit Card Scheme 8. Promotion of micro-credit innovations. 9. Consultancy services.  Supervision 1. On-site inspection of co-op banks and RRBs. 2. Off-site surveillance of the health of co-op banks and RRBs. 36
  37. 37. RURAL CREDIT OF NABARD  Financial Services Refinancing RFIs for providing loans for investments and production purposes in rural areas. Loans to State Governments for strengthening for cooperatives and also developing physical and social infrastructure in rural areas. Support for micro-credit innovations of Non-Government Organisations (NGOs) and other non-formal agencies. Monitoring and Evaluation of financed projects. 1. Short Term Credit Seasonal Agricultural Operations In order to ensure availability of timely credit to farmers, banks follow production-oriented system of lending. The system has features like assessment of credit needs based on area under cultivation and crop wise scales of finance, extending credit for purchase of agricultural inputs, etc. Refinance is provided for production purposes at concessional rates of interest to SCBs and RRBs by way of sanction of credit limits. Each drawal against the sanctioned credit limit is repayable within 12 months. Marketing of Crops Refinance facility is extended to co-op banks and RRBs for meeting the marketing credit requirement of farmers with a view to reducing incidences of distress sale and enhancing their holding capacity. Each drawal against the sanctioned credit limit is repayable within a maximum period of 12 months. 37
  38. 38. RURAL CREDIT OF NABARD Distribution of agricultural inputs In order to ensure timely supply of agricultural inputs a line of credit is made available to Co-op Banks and RRBs for financing Primary Societies for stocking and distribution of agricultural inputs by a way of sanction of yearly limits. Each drawal is repayable within a period of 120 days. Financing industrial societies Refinance is provided to Co-op Banks for financing production and marketing activities of industrial cooperative societies engaged in one or more of the 22 approved groups of cottage and SSIs. Weavers finance Given the importance of handloom sector in rural employment generation, refinance is extended to meet the working requirement of primary weavers societies and procurement, stocking, distribution and marketing activities of Apex Weavers Societies and SHDCs. Financing handicraft sector Rural craftsmen are provided support by financing through SCBs and CBs for production, procurement and marketing of handicraft goods. Pisciculture Refinance is extended to Co-op Banks and RRBs for meeting working capital requirements of fishermen engaged in Inland and Marine fishery activities. 38
  39. 39. RURAL CREDIT OF NABARD New line of credit for allied and marketing activities A new line of credit is extended to Co-operative Banks for financing allied and marketing activities against security of gold / security other than charge on crops. Special Initiatives Direct Short Term Refinance to District central Co-op Banks for financing SAO. Special line of credit for oilseeds and pulses production. Special line of credit for development of tribals in pre-dominantly tribal areas which is in crores. 2. Medium Term Credit a. MT conversion Loans (on account of crops loss due to natural calamities) to Coop Banks and RRBs. b. MT (Non Schematic) loans for agriculture and allied activities to Co-op Banks and RRBs. 3. Investment Credit Refinance to State Co-op and Rural Development Banks (SCARDBs), SCBs, Scheduled Banks such as CBs, and RRBs for: a. Agriculture and allied activities. b. Financing artisans/ Khadi Village Industries/ Rural Non Sector, etc. c. Rural housing. 39
  40. 40. RURAL CREDIT OF NABARD 4. Direct Credit a. Loans to State Governments for share capital contribution to co-op credit institutions. b. Loans under Rural infrastructure Development Fund (RIDF) for rural infrastructure projects to State Governments, Panchayati Raj institutions, SHGs and NGOs, etc. c. Co-financing of hi-tech, export oriented agriculture projects involving large outlays/ sunrise technology etc. with CBs. d. Bulk lending for micro finance activities and promotional projects to NGOs. 40
  41. 41. RURAL CREDIT OF NABARD Other miscellaneous functions of NABARD are as follows 1. Conduct inspections of the RRBs and the co-operative societies, without any prejudice to the authority of the RBI. 2. All the applications for opening a branch by RRBs or co-operative societies should be forwarded to the RBI through the NABARD. 3. Copies of all returns submitted by the RRBs and co-operative societies to the RBI should also be furnished to the NABARD. 4. NABARD is also empowered to obtain any information or statement from the RRBs and the co-operative societies. 5. NABARD should undertake research and training programs. These comprehensive training programs should be targeted towards NABARD's own staff and the staff of SCBs and RRBs as well. The R&D department of NABARD should take the lead in promoting research concerning problems associated with India's agriculture and rural development and also other allied aspects. For this purpose the NABARD has been authorized to maintain and R&D fund out of profits earned by it every year. 6. NABARD is responsible for coordinating with the Government of India, the Planning Commission, State Governments and other agencies concerned with the development of rural industrialization. It is also responsible for ensuring the implementation of various policies and programs meant for providing finance to the rural industries. 41
  42. 42. RURAL CREDIT OF NABARD SUPPORT TO 1. To Weaker Section NABARD, has designed special programmes for upliftment of weaker sections of society, viz. the Small and Marginal farmers, Scheduled Castes and Scheduled tribes and people living below poverty line. 2. Small and Marginal Farmers As per NABARDs refinance policy for production credit, the banks are required to earmark a certain percentage of their lending to small and marginal farmers. 3. Special lines of Credit for Tribals In consonance with the policy to step up credit to tribal population, a separate line of credit on liberal terms known as Development of Tribal Population is being extended in predominantly tribal areas. Short term credit limits are also sanctioned to co-operatives for financing collection and marketing of various types of minor forest produce. 4. SC/ST Action Plan Investment credit is made available to the SC/ST population by identifying investment potential and preparing a banking plan with allocation of credit to banks. NABARD provides 100% refinance under the plan. 42
  43. 43. RURAL CREDIT OF NABARD In addition, NABARD has established a special “Tribal Development Fund” with a corpus of Rs. 50 crore to replicate successful sustainable models in Tribal Areas. 5. Assistance for Marketing of Non Farm Products of Rural Women (MAHIMA) Recognizing the importance of marketing as a crucial link for women entrepreneurs the scheme „MAHIMA‟ was introduced. It aims at supporting various initiatives for promoting, marketing of items produced by rural women such as market survey, capacity building, technology upgradation, branding, labeling, packaging, publicity, setting up of showrooms/sale outlets, etc. 6. Development of Women through Area Programme Responding to the need for an integrated and holistic approach to development of women entrepreneurs, this scheme is being implemented in the RRBs on a pilot basis. Under the programme the Women Development Cells of select banks will identify the skill upgradation, capacity building, and credit needs of women and fulfill the same over a period of three years. 7. Comprehensive Tribal Development Programme (Wadi Project) „Wadi‟ (orchard) project is being implemented for upliftment of tribals in Gujarat and Maharashtra with grant support from KFW, Gremany. Two NGOs viz., DHRUVA and MITRA, promoted by BAIF, Pune acts as the principal implementing agencies in Gujarat and Maharashtra respectively. Wadi project has resulted in: i. Rise in employment opportunities. 43
  44. 44. RURAL CREDIT OF NABARD ii. Reduction in migration. iii. Increased production of fruits and cashew nuts. iv. New avenues for processing activities. v. Enhanced entrepreneurial skill and empowerment of women. 8. Transfer of Technology for Sustainable Development The project assisted by Commission of European Community and implemented by BAIF aims at achieving sustainable development through family oriented approach for poverty alleviation by adopting simple but appropriate technologies. The major activities covered are orchard development, cattle development, sericulture and sustainable off farm activities. The participants families are now generating sizable income from the intervention undertaken by them and the project has effectively checked the migration of rural poor by providing employment opportunities locally. 9. Swarnjayanti Gram Swarozgar Yojana (SGSY) SGSY has been conceived as a holistic poverty alleviation programme by GOI which aims at bringing every assisted BPL family above the poverty line in 3 years by providing them with income generating assets through a mix of bank credit and government subsidy. 44
  45. 45. RURAL CREDIT OF NABARD Operations of NABARD in Parbhani District Potential Linked Credit Plans (PLPs) :The potentials available for the rural economic activities in the district were assessed and presented in physical and financial terms, as Potential Linked Credit Plan(PLP), which is now accepted as the reference document useful for Bankers, Govt. Officials and others involved in rural development. Bankers used it as the basis for preparation of Annual Credit Plan of the district and Govt. agencies for initiating action to fulfill infrastructure gaps. Potentials assessed under priority sector, for the last few years is as under : Year Priority sector potentials (In lakh Rs) 2003-04 27767.95 2004-05 27142.43 2005-06 31971.58 Refinance Support :NABARD is providing refinance support to the Banks for their financing in rural areas of the district, for investment purposes to support private capital formation. Besides this, NABARD has been supporting banks (DCCB and RRB) for financing production credit also. 45
  46. 46. RURAL CREDIT OF NABARD Kisan Credit Cards (KCC) :Kisan Credit Card is very useful instrument which takes into account various production needs of a farmer. NABARD is continuously monitoring the progress in this regard and facilitated issuance of around 3 lakh KCCs, to the farmers in the district, for timely and adequate availability of credit. Rural Infrastructure :NABARD supported the efforts of the State Govt. for creating rural infrastructure, by supporting from it Rural Infrastructure Development Fund (RIDF) created for the purpose. So far NABARD has sanctioned an amount of Rs 44 crores for 110 road projects and 17 bridge projects, with the help of which roads of around 625 KM could be constructed connecting 225 villages. NABARD has also assisted State Govt. for completing Minor Irrigation Project at Kodri (tal Gangakhed) which has created irrigation potential of 450 Ha. Micro Credit :To reach unreached is motto of NABARD. Empowerment of rural poor , especially rural women is one of the thrust areas of NABARD. Under SHG Bank Linkage Programme, NABARD is instrumental in credit linking 216 SHGs (Other than SGSY) to the banks with a credit of around Rs 52 Lakh, during 200405. 46
  47. 47. RURAL CREDIT OF NABARD NABARD has supported 5 NGOs and Mahila Arthik Vikas Mahamandal (MAVIM), with grant assistance for promotion and linkage of SHGs in Parbhani district. These NGOs have so far promoted around 450 SHGs, covering nearly 4600 rural people, with this support. NABARD has also organised Sensitisation Meets for Bankers, Training for NGO workers, Exposure Visits to BLBC Members etc, for furthering SHG Bank Linkage programme and SHG movement in the district. Farmers Clubs :Under NABARD's Vikas Volunteer Vahini programme, so far 25 farmers clubs have been established in the district, with the help of Marathwada Gramin Bank, Bank of Baroda and Bank of Maharashtra. These clubs propagate the principles of "Development through Credit" and are supported with grant assistance from NABARD for initial few years. Watershed Development Programme :Indo-German Watershed Development Programme is being implemented by NABARD in Maharashtra in around 125 watersheds. In Parbhani district watershed development work under this programme has been successfully completed in Belwadi (tal. Gangakhed) watershed and work will shortly enter in main phase in Kundgirwadi watershed (Tal. Gangakhed). 47
  48. 48. RURAL CREDIT OF NABARD Non farm Sector :NABARD has taken a number of initiatives for development of NonFarm sector in the district, like organising Orientation Meets for Bankers, Govt. Agencies and NGOs, organising Rural Entrepreneurship Development Programmes by assisting MCED, MITCON. At district level, NABARD through the DDM office, continues to appreciate ground level situation and expectations of rural population in a better way and through representation on various important district level forums and other initiatives , it is playing an important role in bringing about the rural prosperity in the district. 48
  49. 49. RURAL CREDIT OF NABARD DEVELOPMENT INITIATIVES With the objective of facilitating development and ensuring prosperity in the rural sector, NABARD continued to support initiatives related to watershed development, integrated development of backward areas, promotion of cultivation of medicinal crops, Agri-Export Zones, agri-clinics and agri-business centres, contract farming, bio-fuels, non-farming activities, improving the outreach of the rural credit delivery system through Micro-finance institutions/Self-Help Group (SHGs), women empowerment, environmental protection, human resource development in the rural banking sector and research and development activities in the and rural sector. Some of the important initiatives taken by the banks and support extended by it to various developmental programmes of GOI and state governments are highlighted inthis section.  NABARD Supported Holistic Watershed Dev. Prog. At Washim & Yavatmal Background NABARD Supported Holistic Watershed Development Programme (NHWDP) was launched on 2nd October 2006 in six distressed districts of Vidarbha. The six distressed districts are Yeovatmal, Washim, Wardha, Amravati, Akola and Buldhana. The Watershed development measures are being taken up in 90,000 ha in these 6 districts as a participatory programme for micro level infrastructure development with regard to sustainable management of soil and water resources. The programme is launched with one day willingness shramdan (Volunteer Labor contribution) by the community. The project not only aims for soil and water conservation measures but also incorporates support for overall development of families through integraed activities like livestock 49
  50. 50. RURAL CREDIT OF NABARD development, Wadi (horticulture plantation), women‟s development and providing improved livelihood options to the landless families. The project is being implemented on a cluster (2500-3000ha watershed area) basis in order to ensure efficiency. Coverage: MITTRA has been implementing NHWDP programme in 22 villages. In Washim there are two clusters namely Phalegaon thet in Washim taluka and NayaniBhoyani in Manora block of Washim district. Likewise three cluster of Yeovatmal are Devdhari cluster of Ralegaon taluka, Shivani cluster of Kalamb taluka and Asoli cluster of Ghatanji taluka. Total area of these clusters is 13124 ha. Objectives Improve livelihood of farmers in the cluster (of 5 to 6 villages) through community participation. Strengthening village level institution like Village Watershed Committee, Cluster Level Committee and Self Help Groups to make them capable of undertaking the planned measures and develop linkages for sustainable management of resources in the cluster. Integration of activities to conserve soil and moisture leading to improve the crop productivity. 50
  51. 51. RURAL CREDIT OF NABARD Programme Approach The approach consists of participatory planning, management of natural resources for providing improved livelihood opportunities for the watershed dwellers. A cluster of five to six villages is considered to be a unit for implementation. Village Watershed Committees (VWC) are formed for each micro watershed and a Cluster Level Committee (CLC) is formed for efficient coordination and implementation of programme. „Sanykta Mahila Samittee (SMS)‟ is also formed to undertake activities related to women‟s development. The project measure funds are directly transferred to CLC account by NABARD and overall programme operations are managed jointly by PIA and committees. MITTRA is facilitating the programme. The monitoring and training inputs are being provided by BAIF Development Research Foundation Pune, the Resource Support Organisation (RSO) for this programme. Community has to contribute 10% of the total project cost which is being deposited separately in the maintenance fund account for the purpose of post project operations. The programme has two phases; first phase is called as a Capacity Building Phase (CBP) and second as Full Implementation Phase (FIP). The project period is three years. Activities : 1. Measures based on the watershed 2. Livelihood support activities including women and landless 3. Agronomical Interventions 4. Wadi 5. Demonstration and Training 51
  52. 52. RURAL CREDIT OF NABARD  Development of Bamboo Farming NABARD has accorded special status for development of Bamboo farming in consonance with the action plan prepared by National Mission on Bamboo Technology and Trade Development for upgrading the bamboo economy. NABARD aims at developing bamboo farming, processing and marketing as a mainstream activity by changing „forestry mindset‟ into „farm mindset‟. It is envisaged to provide credit support for development of bamboo over 1 lakh hectare with an estimated investment of Rs.200 crore annually. To streamline operational and policy issues, NABARD has taken following actions:A National Consultative Meet on Bamboo was organized by NABARD on 12 May, 2005 at HO, Mumbai. The Meet was attended by 170 participants, experts and major stakeholders including Planning Commission, Ministry of Forest and Environment, National Mission on Bamboo Application, INBAR, Bankers, Industries, NGOs and prominent training institutes engaged in bamboo development.  Integrated Development of Backward Blocks NABARD launched the Pilot Project for Integrated Development (PPID) of ten backward blocks in five states through the convergence of various credit and development programmes in July 2003. The planning and review workshop organized for PPID blocks during the year revealed that PPID as a development model for backward blocks had already made a mark at the grassroot level and attached the attention of policy planners. These blocks have achieved better results in respect of poverty alleviation initiatives such as SHG-bank linkage programme, Swarnajayanti Gram Swarozgar 52
  53. 53. RURAL CREDIT OF NABARD yojana, entrepreneurship development and employment generation through non farm sector promotional programmes, watershed development, replication of wadi, promotion of bamboo clusters, infrastructure development for communication and post harvest handling, formation of farmers clubs and enhanced credit flow.  ITC‟s e-Choupal The e-Choupal, promoted by ITC Ltd., a multiproduct agrobusiness corporate, is an information technology enabled initiative aimed at providing guidance to farmers through readily accessible on-line knowledge on scientific farm practices, weather conditions and relevant market information including real time market linkage. They serve about 4-5 contiguous villages and are managed by leading farmers in the villages called „Sanchalaks‟. NABARD has been closely associated with the project since 2002. More than 5200 e-Choupals, covering around 20000 villages in six states, viz., Andhra Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh have been established so far. Nearly 10 million farmers spread over 1 lakh villages in 15 states will be covered through 20000 e-Choupals in the next few years. NABARD has supported a project entitled „Diagnostics for eChoupals‟ by ITC Ltd., in Madhya Pradesh with grant assistance of Rs.9 lakh. The objective of the project is to develop an IT based practical handbook and diagnostic tools for production and protection of major crops of the region with the help of experts from Agriculture Universities ITC Ltd, with this support, has brought out video films in CDs covering best practices on soil sampling, seed germination test and soyabean cultivation for the benefit of farmers during the year. 53
  54. 54. RURAL CREDIT OF NABARD  Bio-Fuels On account of constantly rising demand for energy and the prohibitive cost of importing fossil fuels, bio-fuel from Jatropha and other Tree Borne Oil Seeds as an alternative resource, is gaining acceptance both globally and locally. With a view to promote the production of eco-friendly, renewable energy crops, Planning Commission, GOI and NABARD have decided to promote Jatropha cultivation on wasteland in forest and non-forest areas through institutional credit. It is planned to support 1hectare of wasteland annually under Jatropha plantation, involving institutional finance of Rs. 200 crore. NABARD is developing a policy framework and bankable models to promote bio-fuels. The bank is also closely associated with National Oilseeds and Vegetable Oil Development Board, the nodal agency of GOI for promoting biodiesels. Besides undertaking fields studies in area having different agro-climatic conditions and interacting with scientists from ICAR and CSIR working in the field, NABARD provided a platform for interacting among concerned stakeholders.  National Level commodity Exchange In an increasingly liberalized environment, commodity market offers a market based instrument to the farming community for managing risk and uncertainty. NABARD is keen to participate actively in fostering efficient spot and futures agriculture markets. NABARD has become a partner and is participating in the management and equity of major national level commodity exchanges, so as to strengthen further the marketing infrastructure in the country. Accordingly, NABARD has contributed Rs. 4.50 crore and Rs. 1.25 crore to the equity of National Commodities and Derivatives Exchange (NCDEX) and MultiCommodity Exchange. 54
  55. 55. RURAL CREDIT OF NABARD  Initiatives for Tribal Development Owing to the historical, socio-cultural and geographical situation of tribals and the complexities of their way of life, the generalized approach adopted by various agencies for achieving sustainable development of the tribal population has not been successful. The experience of the Adivasi Development Programme through „wadi‟ (small orchard) approach, first launched in Gujarat in 1995 and extended to Maharashtra in 2000, was however, found to be very effective in creating sustainable livelihood for tribals families. With a view to replicating the programme and spreading the message of wadi in other tribal dominated areas of the country through various agencies, NABARD has created a Tribal Development Fund (TDF) with an initial contribution of Rs. 50 crore. Projects under TDF would be implemented through NGOs. Financial support would be provided out of TDF to enable tribal families to wadi and other sustainable micro-enterprises. In case of participation by state governments, they would be tribal women engaged in minor work required to contribute 50 percent of the project cost.  Cattle Development Projects Ministry of Rural Development, GOI has sanctioned two projects for setting-up of 100 Cattle Development centres (CDCs) each in Bihar and Uttar Pradesh to be implemented through BAIF, Pune with financial support of Rs. 26.52 crore for a period of 5 years. NABARD has been designated „facilitator‟ of the project for providing guidance, channelizing funds and monitoring. 55
  56. 56. RURAL CREDIT OF NABARD  Contract Farming and Agriculture Marketing Contract farming arrangement for different types of crops, viz., sugarcane, cotton, vegetables, coffee, tea and food grains are already in vogue. In order to harness this potential, NABARD took the important initiative of supporting contract farming arrangement by the banking sector. It extended financial support for conducting a comprehensive study by Maharashtra Economic Development Council (MEDC), Mumbai on contract farming and suitable follow-up action on the findings of the study is initiated. The National Agricultural Policy of the GOI and the Inter-Ministerial Task Force on Agricultural Marketing Reforms have recognized the increasing importance off contract farming in agri-business and its significance to small farmers. NABARD has developed a special refinance package for contract farming arrangements aimed at promoting increased production of commercial crops and creation of marketing avenues for farmers. NABARD will continue to support for sensitization initiatives. NABARD is represented in the Working Group on Warehouse Receipts and Commodity Futures set up by RBI and national level task forces set up by the confederation of Indian Industries on: a. Contract farming and b. APMC Act / Private Mandies. 56
  57. 57. RURAL CREDIT OF NABARD  Agro-Processing NABARD was actively involved in national level policy initiatives for the agro-processing sector. The Sub-Group on Investment Credit and Marketing Support set up by Ministry of Food Processing Industries (MOFPI), GOI was chaired by NABARD. The Bank also participated in national consultations organized by the MOFPI to firm up the draft National Processing Policy.  Farm Innovation and Promotion Fund In order to extend financial support for promoting various innovative initiatives being taken up in the field of agriculture and related areas by NGOs, research institutes, Agriculture Fund with an initial corpus of Rs 5 crore. The fund envisages supporting initiatives to bring about innovations in farm technology, develop new concept in agriculture and prototypes, undertake market survey for potential assessment of new activities, acquire patents for innovative technology, disseminate information relating to new products, innovation in IT , innovative ideas technological and managerial in farmsector. 57
  58. 58. RURAL CREDIT OF NABARD NABARD a 100% CSR Company NABARD has been instrumental in grounding rural,social innovations and social enterprises in the rural hinterlands. This endeavour is perhaps unparalleled in the country, it has in the process partnered with about 4000 partner organisations in grounding many of the interventions be it, SHG-Bank Linkage programme, tree-based tribal communities‟ livelihoods initiative, watershed approach in soil and water conservation, increasing crop productivity initiatives through lead crop initiative or dissemination of information flow to agrarian communities through Farmer clubs. Despite all this, it pays huge taxes too, to the exchequer – figuring in the top 50 tax payers consistently. NABARD virtually ploughs back all the profits for development spending, in their unending search for solutions and answers. Thus the organisation had developed a huge amount of trust capital in its 3 decades of work with rural communities. 58
  59. 59. RURAL CREDIT OF NABARD CONCLUSION NABARD has played a very vital role in the development of Indian commodity market. It has a wide scope of services through which it has helped various sectors for its development. Some of the important functions are crediting, housing, supervision, etc. but one of its most important function is micro-finance. MICRO-FINANCE includes functions such as giving loans for setting up business relating to agriculture and helping self-help groups {SHGs}. It also helps in savings functions. The main objective of microfinance is to promote sustainable and equitable agriculture and rural prosperity through effective credit supply, related services, institutional development and other innovative initiatives. Micro-finance has developed from micro-savings to micro-credit then to micro insurance, micro remittance and micro pension. 59
  60. 60. RURAL CREDIT OF NABARD Bibliography The Financial Express Business Standard 60