NABARD and its role

NABARD & its role

INTRODUCTION

Indira Gandhi, India’s iron woman and a successful Prime Minister once said, “A nation’s strength ultimately consists in what it can do on its own, and not in what it can borrow from others”. To encourage and augment economic growth and development of rural areas and agriculture, there is urgency of an institution like NABARD, which can bring evolution in agricultural credit. In India, there is an enormous need for proper agricultural credit as the economic conditions of Indian farmers is getting deteriorated day by day. Agricultural credit is one of the most fundamental involvement and contribution for conducting all agricultural development programmes. With growing modernization of agriculture, during post-green revolution period, the requirement of agricultural credit has increased further in recent years.

Currently speaking, the long term and short term credit needs of these institutions are also being met by National Bank for Agricultural and Rural Development (NABARD). It is the evolution of agricultural finance. It has the objective of promoting the health and the strength of the credit institutions which are in the front position of the delivery system which includes cooperatives, commercial banks and regional rural bank. It is, in brief, an institution for the purpose of refinance; with the complementary work of directing, inspecting and supervising the credit- flows for agricultural and rural development.

Besides providing finance to credit institutions, NABARD is providing innovations in regard to formulation of schemes, monitoring of implementation, evaluation of results and evolution of suitable supporting structures of all kinds of agricultural activities. It is performing the various functions assumed by it smoothly and efficiently. A rural infrastructural development fund (RIDF) was established under NABARD in 1995-96. Every year the resources of RIDF have been increased to finance rural infrastructure development project by States. The outstanding refinance from NABARD by State Co-operative Banks, RRBs and State Governments was Rs. 7,075 crore as at end June 2002, which was a slightly higher than Rs. 6,857 crore as at end June 2001.

The concept of Farm mechanisation got the highest amount of assistance and the second place went to minor irrigation. The rest of the amount was distributed for sectors like forestation/Plantations, Land Development, sheep-rearing, poultry farming, dairy farming etc.

The National Bank has enthusiastically continued its efforts for promoting investments in the agricultural sector in the less developed/under banked states. U.P., Bihar, M.P., Rajasthan and Orissa, have been the biggest beneficiaries.

Thus NABARD is taking the necessary steps to revitalise and rejuvenate the rural economy of India by developing agriculture, small scale and cottage industries and trading activities in all possible ways.

National Bank for Agricultural and Rural and Development (NABARD) is a Development Bank. It’s prime objective and directive is to provide and regulate 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. This objective comes with an outlook to promote integrated rural development and also securing prosperity of rural areas, and is therefore is connected with matters related and corresponding with it to.

On July, 1982, NABARD was established on the recommendations of Shivaraman Committee, by an act of Parliament to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). NABARD is one of the leading agencies which provide credit in rural areas. Furthermore, RBI sold its stake in NABARD to the Government of India, which now accounts for 99% stake.

 In 1982, NABARD was set up, and was primarily committed to Rural Prosperity through intervention of credit and developmental activities.

 It has the Paid-up Capital Rs.3000 crore against the Authorised Capital of Rs.5000 crore.

It may be noted that NABARD was set up with an initial capital of Rs.100 crore. Following to the revision in the composition of share capital between Government of India and RBI, the paid up capital as on 31 March 2013, stood at  4000 crore with Government of India holding  3,980 crore (99.50%) and Reserve Bank of India 20.00 crore (0.50%).

NABARD operates through Head Office at Mumbai, and has about 30 Regional Offices in State Capitals & 391 District Offices.

As a facilitator for rural prosperity, NABARD is assigned with objectives like

1.       To provide refinance to lending institutions in rural areas.

2.       To bring about or promote institutional development.

3.       To evaluate, monitor and inspect the client banks

Besides playing these fundamental roles, NABARD also play pivotal roles as:

1.       NABARD acts as a coordinator in the operations of rural credit institutions.

2.       It extends assistance to the government, the Reserve Bank of India and other organizations in matters which are related to the rural development.

3.       It offers training and research facilities for banks, cooperatives and organizations working in the field of rural development.

4.       It helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development.

5.       It also acts as regulator for cooperative banks and RRBs

The landmarks in NABARD's activities are as follows:-

1.       Business Operations:

a.       Production Credit: During 2012-13, NABARD sanctioned a sum up of Rs. 66,418 crore short term loans to Cooperative Banks and Regional Rural Banks (RRBs), against which, the maximum outstanding was 65,176 crore.

b.      Investment Credit : On 31 March 2013, Investment Credit for capital formation in agriculture & allied sectors, non-farm sector activities and services sector to commercial banks, RRBs and co-operative banks reached a level of 17,674.29 crore, recording an increase of 14.6 per cent, over the previous year.

c.       Rural Infrastructure Development Fund (RIDF):During 2012-13, it was through the Rural Infrastructure Development Fund (RIDF) 16,292.26 crore was paid out. On 31 March 2013, a cumulative amount of 1,62,083 crore has been sanctioned for 5.08 lakh projects which covered irrigation, rural roads and bridges, health and education, soil conservation, drinking water schemes, flood protection, forest management etc.

2.       New Business Initiatives:

a.       NABARD Infrastructure Development Assistance (NIDA): NABARD has set up NIDA, which implies to a new line of credit support for funding of rural infrastructure projects. During the year 2012-13, the sanctions under NIDA was 2,818.46 crore and disbursement was about 859.70 crore.

b.      Producers Organisations Development Fund (PODF): In its effort to support Producer’s Organizations in a wide-ranging manner, as an assistance, NABARD sanctioned an amount of 55.95 crore out of Producer Organization Development Fund (PODF) to 34 PO’s during 2012-13. The disbursement was approximately 29.18 crore and covered major activities like dairy, fishery, marketing infrastructure and agro processing infrastructure.

c.       Direct refinance assistance to CCBs for short term multipurpose credit: It was conceived and additional line of finance for CCBs and worked under the recommendations of the “Task Force on Revival of Short Term Rural Cooperative Credit Structure”, which enables the latter to raise financial resources other than from StCBs. During 2012-13, refinance assistance aggregating 3,385 crore was sanctioned to 42 CCBs and three StCBs and disbursement stood at 2,363.45 crore.

d.      Support to develop PACS as Multi Service Centres: To develop PACS (Primary Agricultural Credit Societies) so as to serve as “one Stop Shop” unit for meeting the various requirements of the farmers, NABARD extended financial support to StCBs/CCBs/PACS.  During 2012-13, about 747 PACS were supported with sanction of 141.17 crore and the disbursements there against stood at 48.84 core. It provided desired assistance for establishment of agro service, processing, storage and information centres, etc.

e.      NABARD Initiated Project on Core Banking Solutions (CBS) in Co-operatives : To be compatible with other banks for business and growth, Core Banking Solution (CBS), Co-operatives are being brought to an advanced and developed technology platform. This programme took giant developments with as much as 5,543 branches of 163 banks across 10 States joining the platform in the first phase and also 42 banks joining in the second phase, and totaling up to 7,088 branches of 205 StCBs and CCBs across 16 States and three UTs came into the umbrella of the programme as on 31 March 2013.

3.       Development Initiatives:

a.       Watershed Development Fund (WDF): On 31 March 2013, the collective number of watershed projects sanctioned under Watershed Development Fund (WDF) stood at 586 in 16 States which covered an area of 5.40 lakh ha with total commitment (loan and grant component) of 306.36 crore.

b.      Farm Innovation and Promotion Fund (FIPF) and Farmers’ Technology Transfer Fund (FTTF): To support technology transfer in farm sector and to back up innovative ventures, the funds were created out of the operating profits of NABARD. On March 2013, the corpus was estimated to be at 50.00 crore and 61.21 crore respectively. During 2012-13, the grant assistance of 9.90 crore and 39.79 crore, respectively, were disbursed for various interventions under the programme.

c.       Farmers’ Clubs: With the launching of 24,802 new Farmers’ Clubs during the year, the number of clubs reached to about 1.27 lakh, on 31 March 2013.

d.      Umbrella Programme on Natural Resource Management (UPNRM): The basic objective of UPNRM was to improve and enhance rural livelihoods by supporting community-managed sustainable natural resource management projects. During 2012-13, the assistance of about 174.30 crore was sanctioned and it went on to cumulative sanction of 386.92 crore as at the end of March 2013. The cumulative disbursement under the programme was amounted to 217.57 crore, which included 207.23 crore as loan and 10.34 crore as grant.

e.      Tribal Development Fund (TDF): During the year 2012-13, there was financial assistance of 224.26 crore which was sanctioned for 69 projects which benefited almost 53,700 tribal families in 14 States. On March 31, 2013, the cumulative sanction was about 1,432 crore, which covered around 3.80 lakh families in 484 projects across 26 States/UTs.

f.        Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund (FITF): On March 2013, the cumulative sanctions under FIF and FITF were around 181.64 crore and 365.49 crore, respectively against which disbursements were about 69.77 crore and 201.30 crore, respectively.

g.       SHG-Bank Linkage Programme: On 31 March 2013, under the micro-finance programme, there were more than 73.18 lakh savings linked Self Help Groups (SHG) and more than 44.51 lakh credit-linked SHGs covering over 10.3 crore poor households. During 2012-13, NABARD carried forward its guiding role in the microfinance programme by taking a congregation of new initiatives and also consolidating some of the already operational interventions.

CONCLUSION

To sum up, the recently appointed Government of India has shown keen interest in recently announced Budget, which showed positive attitude towards uplifting the lifestyles and economic conditions of farmers and agriculture. To complement it, Mr. HK Bhanwala, chairman NABARD, welcomed Budget proposals for agricultural and rural farming sectors and hoped that it will strengthen rural economy.  He further showed his pleasure in measures like allotting additional resources under the rural infrastructure development fund (RIDF). In another statement, NABARD chairman specifically pointed to the Rs 200-crore allocation to producer organisations, and welcomed it as the need of the hour. He also welcomed the Rs 5,000-crore allocation for long-term farm credit, and hoped that it will make farming more productive incoming years. There is also a move to form 5 lakh more joint liability groups of farmers as they will shelter many landless farmers. The budget also laid stress on allocating Rs 5,000 crore for the warehousing infrastructure fund for the storage of grains through the proposals on warehousing, as a strong measure of food security. To avoid high cost of borrowing, Mr. Bhanwala also welcomed the ten-fold increase in the corpus under the short term cooperative rural credit (STCRC)-refinance fund to Rs 50,000 crore. Agriculture is the main sector of India and it will be really encouraging that an institution like NABARD is enthused with positive support from Government authorities, for making India a trouble free and prospering agriculturally enriched nation.