bihar executive summary

8/14/2019 Bihar Executive Summary

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Executive Summary

The State Focus Paper is aggregate of Potential Linked Credit Plans of all the districts

prepared by NABARD. The PLPs map the existing potentials for development and

involve an appropriate mechanism through which such potential could be exploited in a

specified time frame. They are efforts at making projections of the credit requirements in

different sectors in a district taking into account the long term physical potential,

availability of infrastructure, marketing support, absorption capacity and other strengths

and weaknesses of the rural credit institutions. This document presents an estimate of

exploitable potential through credit in agriculture and rural non-farm sector for the State

of Bihar for the year 2006-07. It also spells out infrastructure requirements and the

action to be initiated by the stakeholders.

The potential credit flow of Rs. 6943 crore has been projected for the year 2006-

07. Of this projected outlay, an amount of Rs. 4671 crore (67%) has been envisaged for

agriculture sector, Rs.866 crore (13%) for Rural Non Farm Sector (RNFS) and Rs. 1406

crore (20%) for other priority sector. The exploitation of the developmental potential

would critically depend on the availability of quality economic and social infrastructure.

The other requirements for achievement of potential are adequate extension service,

input supply and land reforms (land consolidation).

Progress in action points of previous credit seminar

Action points emerging out of State Credit Seminar 2005 were followed up with the

State Government and Banks through correspondence, seminar/ workshop, meetings and

also by one to one meetings.

Increase in credit flow

The loans disbursed by banks have shown a rising trend and as on 31 March 2005 the

credit disbursement towards agriculture was Rs. 2050 crore representing a growth of

71% over the previous year. The progress recorded by the RRBs has been noteworthy as

they recorded a growth of 110%.

Banks and Other Agencies as Self Help Promoting Institution (SHPI)

Eight RRBs are also acting as Self Help Promoting Institutions (SHPIs). Out of the

28015 credit linked SHGs, RRBs with 15691 SHGs account for 56 % and Commercial

Banks with 12191 SHGs account for 43.51 %.



• Several rural entrepreneurial development programmes and other training

programmes for farmer’s education were conducted in association with the

NGOs.

• The concept of Farmers Clubs is increasingly gaining acceptance from bankers.

NABARD initiatives for strengthening of Cooperatives

CDF assistance to the Cooperative Banks

Sanction of assistance of Rs. 110.28 lakhs to the Cooperative Banks

Reimbursement of Rs. 4.97 lakhs and Rs. 3.38 lakhs to the BSCLDB and BSCB

respectively, as assistance for publicity measures with regard to doubling of

Agriculture credit flow.

Capacity building of client banks/staff

Owing to the closure of the ACSTI in the State, NABARD accorded approval for the

conduct of training for the staff of BSCB/DCCBs in D N Singh Regional Institute of

Cooperative Management, Patna

Conduct of on-location training programmes for the staff of Siwan and Nalanda

DCCB

Conduct of ODI programmes for the staff of DCCBs.

Provision of faculty support for the training programmes in JLTC and DNS Institute

Provision of financial support for conduct of training programmes in JLTC and DNS

Institute

DAP-MoU

Execution of DAP-MoU with the BSCB and BSCLDB

Pursuing with the banks for conduct of SLMRC and DLMRC Meetings to review theprogress in implementation of DAP-MoU. Owing to constant persuasion BSCB had

convened two meetings of SLMRC during the year after a gap of 3 years

Provided training to the District Development Managers of NABARD on DAP-MoU

to enable them to provide guidance to cooperative banks in the preparation of DAP-

MoU.

Other initiatives

Provision of refinance to BSCLDB



Implementation of KCC scheme

Participation in the DLTC meeting for fixation of scale of finance

Participation in the boards of SCB/LDB and provision of guidance for development

of the banks

Recommendation to the RBI for opening 3 new branches of BSCB.

Periodic visits to branches of LDB

Farmer’s Perception

• During the course of interaction with the farmers, it was observed that lack of

information and virtual absence of extension services are some of the inhibiting

factors in adopting alternative cropping patterns, commercial agro forestry and

other innovative activities like medicinal and herbal plants, mushroom,

beekeeping, organic farming, vermi-compost, etc.

• The farmers were having problems in getting Land Possession Certificates

(LPCs) in many of the districts.

• There is an all-round appreciation for the activities of Farmers’ Clubs and

farmers viewed them as vehicles for technology information sharing.

• The farmers expressed dissatisfaction with the present arrangements for inputs

and markets. The arrangements for procurement of paddy through PACS was

generally appreciated and farmers in general opined that relaxations in norms for

procurement of food grains by FCI could result as a motivating factor in adopting

modern seed and fertilizer technology.

• The farmers wanted change in the attitude of bankers as also relaxation in

security norms, reduction in interest rates and timely availability of credit.

• The farmers appreciated introduction of KCC, but were not aware of full details

of Rashtriya Krishi Bima Yojana (RKBY) and Personal Accident Insurance

Scheme (PAIS).

Agriculture situation in Bihar State

• Core activities: The emerging core activities with substantial potential are

agriculture, allied activities and agro-based industries.

• Floods and drought: Almost 41 percent of the geographical area of the State is

flood prone. On the other hand 40 percent of the geographical area of the south

Bihar is drought prone.



• Waterlogging: 9.41 lakh hectares of land in Bihar are water logged of which

around 7 lakh hectares can be drained after executing drainage works.

• Irrigation: Average ground water exploitation in the state is 39 percent, leaving

a very large potential gap. The ultimate irrigation potential of the state has been

assessed at 106 lakh hectares which far exceeds the gross sown area of 80 lakh

and net sown area of 56 lakh hectares.

• Input Use: The per hectare consumption of fertilizers increased from 22 Kgs in

the early eighties to the level of 96 Kg./ha in 2003-04.

• Rural Power Supply: Power generation and availability rates are the lowest in

Bihar in the country. Compared to an all India average annual electricity

consumption level of 334 kWh and 895 kWh of Punjab, the average per capita

consumption of electricity in Bihar was only 55 kWh.

• Land records, tenancy and reforms: The process of obtaining records of

ownership rights of land is cumbersome process and is reported to involve very

high transaction costs. Unrecorded oral tenancy is prevalent with very weak

tenant security. Tenancy in Bihar overwhelmingly consists of leasing-in by small

and marginal farmers. The computerization of land records, protection of tenancy

and fixation of rent are of prime importance for development of agriculture sector

in Bihar.• Land holdings: Landholdings in Bihar are predominantly marginal farms with a

high level of fragmentation.

• Rural Infrastructure: The total surface length of roads per lakh of population is

only 43.89 Kms as opposed to national average of 151.27 Km (1999-2000).

Although 32 percent of the villages in the State are connected by roads but due

the lack of maintenance it is reported that most of the village roads provide only

seasonal connectivity.

BANKING PROFILE OF BIHAR STATE

• 59% of total branches Commercial Banks and 86 % of total branches of RRBs are in rural

areas.

• Out of total deposits, Commercial Banks have share of 84%, RRBs 12% and Cooperatives

Banks 4%

• CD ratio of Commercial Banks is 28%, RRBs is 33%



Cooperative Credit Structure

The short Term Cooperative Credit Structure consists of Bihar State Cooperative Bank

and 22 DCCBs with 279 branches covering 33 out of 38 districts in the State. Three

DCCBs viz Darbhanga, Chhapra and Madhepura-Supaul covering 5 districts have been

refused license by RBI to carry on banking business reducing the number of DCCBs in

the State from 25 to 22 and coverage of districts from 38 to 33. Seven DCCBs cover

more than one district.

State Cooperative Bank

The BSCB is operating in the State with 14 branches. The BSCB has been granted

license by RBI to open branches at Darbhanga, Chapra and Madhehpura to act as

Central Financing Agency.

After a continuous operating loss, the bank started earning operating profit since

2000-01. Due to improved recovery performance and reduction of cost of funds, the

bank has earned net profit of Rs.52.55 crore during 2003-04(As per Inspection

Report). The bank has reported a profit of Rs. 68.41 crore during 2004-05 and all the

accumulated losses of the bank have been wiped out.

The net margin from its operations as on 31.03.2005 +2.31%

The NPA level has decreased from 57.10% of loans outstanding as on 31.03.2004 to

28.67% as on 31.03.05.

District Central Cooperative Bank

The state had originally 25 DCCBs of which license applications of 3 were rejected

RBI, reducing the number to 22

Of the remaining 22 DCCBs, 19 have accumulated losses

The no. of DCCBs that earned profit during the year has increased from 12 in 2003-

04 to 15 in 2004-05.

The recovery percentage of the DCCBs stands at 40.17% as on 30 June 2005.

The NPA level of the DCCBs has declined 64% of the loan outstanding as on

31.03.04 to 57% of the loan outstanding as on 31.03.05.

All the DCCBs except two have got their elected boards restored after a gap of 15

years in 2003



During the year 2004-05 crop loans issued by the DCCBs amounted to Rs. 273 crore

.

The National Agriculture Insurance Company has sanctioned a sum of Rs. 211.85 cr

on account of claim of Kharif 2004 for Bihar State, out of which an amount of

161.98 cr pertains to the DCCBs in the State. This will help the banks in improving

their liquidity position.

PACS :

There are approximate 5936 PACS in the State of which only 5172 are active.

Non availability of Secretary in each society is the major problem being faced. Only

1200 paid secretaries are posted in the PACS.

Audits of PACS are in huge arrears. Out of 5172 active PACS only 2171 PACS

were audited upto 2004.

4009 PACS are in loss as on 31.03.04.

Societies suffer from huge imbalances.

Loaning under KCC is done by DCCBs branches. Consequently the PACS are

losing business.

The PACS at ground level face the problems of low recoveries, high overdues.

SCARDB

1. The owned funds, deposit mobilised from public, advances outstanding of the bank are

on declining trend during the 5 years. The bank has not been mobilising deposits from

public since 2003 as per instructions from the RCS.

2. The bank is continuously incurring losses during the last 5 years. The losses are on

account of poor recovery , high level of NPAs ( 78.9% of loan outstanding as on

31.03.2005), high cost of management etc.

3. The accumulated losses of LDB have increased from 78.76 crore in 2003-04 to Rs.

150.08 crore in 2003-04.

4.. The financial position as on 31.03.05 is not yet available. The position of DCB as on

30.06.05 is also not available.

5. The bank has reported completion of its audit by Chartered Accountant upto 2003-04 .

The audited balance sheets of the bank has been submitted upto 31.03.04



Major Issues pertaining to Cooperatives in Bihar

ST Structure

1. Infusion of share capital to strengthen the DCCBs

2. Strengthening internal check and control

3. Lack of supervision over PACS

4. Introducing professional in the boards of DCCBs

5. Audit of PACS on priority basis to ascertain their viability

6. Conduct of District Level Monitoring and Review Committee meetings on

quarterly basis.

7. Inadequate training arrangements

LT Structure

1. Approval of revival package by the State Government

2. Issue of Government guarantee on a continuing basis.

3. Recovery and NPA Management

4. Lack of professionalism in Management

Institutional Initiatives - Credit

Flow of ground level credit

The total ground level credit flow in Bihar during 2004-05 at Rs. 5040.73 crore

registered a growth of 32.31% over previous year. The priority sector credit has shown

an impressive share of 68% as compared to 32% share of non-priority sector credit. The

ground level credit has registered an impressive growth of 32.31% during 2004-05

against 29.77% during FY 2003-04. While priority sector credit has shown the growth of

54.63% during 2004-05 against 29.31% during 2003-04, nonpriority sector has recorded

a negligible growth of 1.40% during 2004-05 against 18.98% during 2003-04.

Agency-wise analysis

The state of Bihar has a banking network of 30 commercial banks with 2075 branches,

14 RRBs with 1486 branches, 22 DCCBs, Bihar State Cooperative Banks and Bihar

State Land Development Bank with 118 branches. Three RRBs viz. Begusarai,

Bhagalpur-Banka and Munger have been merged into one RRB named Bihar KGB with

effect from 12 September 2005.



Commercial Banks have shown an extra-ordinary performance by registering a growth of

132.36% during 2004-05 against a growth of 29.99% during 2003-04. The SCB has also

recorded a remarkable growth of 93.57% during 2004-05 against 39.19% growth during

the year 2003-04. The performance of RRBs during 2004-05 has also been

overwhelming with a growth of 126.26% as compared to 18.58% reported during 2003-

04. However, the performance of SACRDB during the year 2004-05 was not upto the

satisfactory level with only 18.49% achievement.

Sectoral Analysis

The achievement of ACP target (under priority sector) during the year 2004-05 was to

the extent of 84.32%. The agricultural credit has recorded the achievement of 86.76%

against 60.45% of the previous year. The achievement under Other Priority Sector at

99.89% of the target was the highest as it was during the previous year and NFS has

recorded 40.03% achievement against 29.78% during the previous year showing the

marginal improvement in credit disbursement.

The priority sector lending has shown overall growth of 54.63% during 2004-05 against

29.31% during 2003-04. The agricultural credit has recorded an impressive growth of

76.71% as compared to 33.55% during the previous year. The Non-farm Sector has

registered a growth of 41.95% during 2004-05 against 21.98% during the previous year.

NABARD’S Refinance under Investment Credit

• NABARD has been serving as an apex institution for providing investment and

production credit to promote and facilitate activities related to agriculture and

development in rural areas. In Bihar, NABARD has been extending refinance to

BSCLDB, RRBs and Commercial Banks (CBs).

• The following table shows the refinance disbursement by NABARD under

investment credit for the previous 3 years:

Sr.

No. Year

Refinance Disbursed

(Rs. Crore)

% Growth over

previous year

1 2001 –

2002

97.31 -33.09

2 2002-2003 82.10 -18.52

3 2003-2004 96.71 17.79

4 2004-2005 176.45 82.45



Policy Measures

As announced in the Union Budget for 2005-06, Rural Infrastructure

Development Fund (RIDF) XI established with a corpus of Rs.8,000 crore

Operational guidelines issued for financing of 30 eligible activities under RIDF

XI.

Extension of RIDF X Loans for construction of toilet blocks in existing schools

so as to improve the amenities available to the students specially girl students

along with installation of pay and use toilets in rural areas.

Mobilisation advance to the State Governments allowed @ 20% of the RIDF

Loan amount phased to be drawn during the year and additional advance upto

10% of the loan amount phased to be drawn during the current year when a report

on commencement of work is received.

Checklists for preparation of projects related to Irrigation, Roads & Bridges,

Social Sector and projects allied to agriculture sectors like plantation,

horticulture, forestry circulated to the State Governments to facilitate project

formulation.

Production & Marketing Credit

Liquidity Support Scheme - To supplement the resources of State Cooperative

Banks and RRBs which have extended relief measure to farmers in distress and

farmers in arrears as per GOI’s announcements on 18 June 2004, Liquidity

Support Scheme introduced by NABARD. Under the Scheme,

Cooperatives/RRBs allowed to avail refinance from NABARD to the extent of

50% of the conversions/ reschedulement granted under the schemes.

Tenant Farmers’ Group - A model scheme formulated for provision of credit

to Tenant Farmers and Oral Lessees for raising crops by organising them into

Tenant Farmers Groups (TFGs) on the pattern of SHGs.

Kisan Credit Card - The scope of Kisan Credit Card (KCC) extended to cover

Investment Credit and consumption credit component of the farmers

Short Term refinance to Cooperatives/RRBs - The policy and procedure for

provision of Short Term refinance facilities to cooperative banks simplified to

enable more DCCBs & RRBs eligible to avail refinance from NABARD.



Short Term refinance to Self-employed Weavers’ Group - In addition to

primary weavers cooperative societies, Self-employed Weavers Groups formed

on the pattern of SHGs made eligible for refinance in respect of working capital

requirements.

Investment Credit

New line of refinance - A New line of refinance support extended on pilot

basis to SCARDBs of Punjab, Harayana and Kerala for provision of Short

Term credit for agricultural and allied activities for which term loan has been

provided.

Special Scheme for Tsunami affected - Special relief scheme announced in

Tsunami affected areas of Tamil Nadu, Kerala and Andhra Pradesh. Refinance

assistance extended against loans granted by banks under the GoI package, for

rehabilitation of persons in areas affected by Tsunami Tidal Waves and Special

Housing Scheme for Tsunami Victims. Refinance provided at a concessional rate

of 4.25% p.a. subject to the banks lending rates not exceeding 7 % p.a.

Repayment period of refinance by Commercial Banks under Automatic

Refinance Facility (ARF) against loans for traditional activities under Farm

Sector fixed at 5 years at ultimate borrower level and instalment corresponding

to the repayment of instalment by the borrower.

Farm Sector - Promotion

Jatropha Plantation - Initiatives taken to promote biodiesel through Jatropha

Plantation with institutional credit. Model Bankable Project with three different

types of planting materials/methods prepared and made available to the financial

institutions. NABARD refinance available to all eligible financial institutions.

Capacity Building for Adoption of Technology - A special scheme called

“Capacity Building for Adoption of Technology (CAT)” devised to sensitise the

farmers (prefarably small/ marginal/tribal) to enable them to adopt proven

technologies for agriculture developed by research institutes, corporate houses,

NGOs, progressive farmers etc. This is to be done through mainly exposure

visits and training of farmers.



Agri Clinics and Agri Business Centres - Nine activities which can be

undertaken by agripreneurs have been made eligible by Ministry of SSI, GoI for

coverage under Credit Guarantee Fund Scheme for small enterprises.

Watershed Development Fund (WDF) - Major changes announced are :-

The rate of interest on loans to be availed by the State Govt out of WDF

reduced to 4.5%.

To all the identified States under WDF (irrespective of their

participation) two clusters of watersheds of about 3000 ha each to be

taken under full grant basis.

As an additional incentive to participating States , one grant project

allowed for every 5 loan projects successfully implemented.

To provide loans to NGOs [Project Implementing Agencies (PIA)/ Project Facilitating Agencies (PFA)] for on lending to

individuals/SHGs / VWCs/WUAs for taking up any post watershed

activities which will increase production and productivity on a pilot

basis.

To lend VWCs for watershed plus activities in watershed areas.

Farm Innovation and Promotion Fund (FIPF) - An exclusive fund titled

“Farm Innovation and Promotion Fund” with an initial corpus of Rs 5.00 cr

established to support innovative projects in farm sector and also to promote

those innovations through demonstrations, facilitation for commercialisation,

development of proto types, information dissemination among the farming

community, etc.

Farm Mechanisation Programme -

The tractor financed by banks/refinanced by NABARD to comply with

Minimum Performance Standards (MPS) norms as prescribed by

Government of India.

The practice of advising the banks regarding names of tractor/power

tiller models/makes dispensed with. Banks to use their commercial

judgment while financing for tractors and power tillers.

Scheme for Land purchase - Policy changes initiated in the Scheme for

financing SF/MF/Share croppers/Tenant farmers for purchase of land for

agricultural purposes -

No margin for loans upto Rs.50000. For higher loan amount, minimum

of 10% margin stipulated



Repayment period increased to 7 to 12 years as against 7 to 10 years.

Increased coverage of women beneficiaries.

Farmers allowed to purchase land within the village boundary or in a

radius of 3 to 5 kms from the existing piece of land owned by them,

keeping in view the manageability of such fragmented holdings.

Equity participation in Multi Commodity Exchange (MCX) - NABARD

contributed Rs. 1.25 crore towards the equity of Multi Commodity Exchange

(MCX) which is one of the three national level commodity exchanges in India,

to achieve the objective of establishing an efficient and transparent agricultural

market in India, in the larger interest of farming community for better price

realisation

Venture Capital Fund for Dairy / Poultry Sectors - “Venture capital Fund for

dairy and poultry sectors” created by GoI to provide interest free loan/ interest

subsidy on the bank loan to the entrepreneurs for undertaking certain activities in

these two sectors. NABARD to be the nodal agency for implementing the

scheme.

Non Farm Sector - Promotion

Cluster Development - Policy announced to undertake intensive development

of 5 selected clusters on its own and develop 50 additional clusters by

partnering with other agencies over a period of 5 years. The activities of the

identified clusters to focus on one of the areas Viz. Agro based , Food

Processing , Manufacturing/ Industrial SMEs, Handicraft , Handloom.

Support for establishment of Training Institute - To support Indian Bank and

Indian Overseas Bank in setting up RUDSETI type training institute at Sivganga

district in Tamil Nade for providing training to unemployed rural youth. Swarojgar Credit Card (SCC) - Pilot scheme announced for financial

assistance to select RRBs/ Cooperatives for publicity of Swarojgar Credit Card

(SCC) scheme.

Venture capital Support for Local Marketing - Pilot project launched to

faciltate marketing linkages for handicraft and agro based products through

setting of retail outlet and to cover the risk involved in the initial stages of setting

up of rural retail outlets.



Expansion of District Rural Industries Project (DRIP) to 25 additional districts

covering 16 States.

Development of Rural Tourism Clusters - Rural Tourism clusters to be

developed with multi activity dimensions involving entrepreneurs providing

accommodation, catering, entertainment, educative inputs, health and fitness

related activities, tour operators, travel guides and other service providers.

Priority Sector Credit Planning

PLP - the basis of credit planning - With a view to facilitating banks to

improve their credit delivery mechanism, the restrictive provisions of service

area approach dispensed with except for government sponsored programmes by

RBI and Potential linked Credit Plans (PLPs) made the basis for preparingDistrict Credit Plans .

PLP process - Consultative process involved in PLP making further

strengthened with the introduction of pre-PLP and Special DCC meet.

Infrastructure Support - A separate chapter on “Infrastructure Support”

introduced in PLP to indicate the infrastructure status of the district vis-a-vis the

State and bring out critical infrastructure gaps in all sectors of rural economy.

Micro Finance

Micro Finance Development and Equity Fund - The Micro Finance

Development Fund (MFDF) re-designated as the Microfinance Development and

Equity Fund (MFDEF) and its corpus increased from Rs.100 crore to Rs.200

crore

Farmers’ Club - Revised policy guidelines issued in respect of “Farmers’ Club”

programme to make it sustainable and more vibrant.

Increase in refinance quantum - Quantum of NABARD refinance increased

from 80% to 100% of bank loan provided to MFIs at the interest rate of 6 % with

the stipulation that interest charged by banks from mFIs not to exceed 9 % p.a.

Increase in grant assistance - The maximum grant assistance to NGOs for

promotion and nurturing of groups enhanced from Rs. 2000 to Rs.3000 per

SHG, to be released over a period of three years instead of two years.

The maximum grant assistance to RRBs and Co-operatives for promotion and

nurturing of groups enhanced from Rs. 1000 to Rs. 1500 per SHG.

The incentives for Individual Rural Volunteers (IRVs) revised from Rs.700 to Rs.

1200 per SHG



Rating of mFIs - A new scheme introduced for one year for financial assistance

to banks for rating of mFIs. NABARD to bear 75% of the rating charges by

CRISIL and the concerned mFI to bear the balance 25%.

Sectoral Analysis

Production Credit - Crop Loans

A potential for coverage of 18.82 lakh hectares under different crops with a bank loan of

Rs.2655.32 crore has been estimated during the year 2006-07. The major constraints in

the sector are weak short-term cooperative credit structure, slow pace of issue of KCCs,

cumbersome procedure of obtaining land records, tenancy problems, poor state of rural

infrastructure, lack of adequate supplies of electricity, high level of overdues and small

and fragmented holdings.

Major action points

• Revitalization of cooperative credit structure,

• Adequate and regular power supply,

• Coverage of all eligible farmers under the KCC scheme

• Increasing outlay on rural infrastructure

• Computerization of land records and tenancy reforms

• Consolidation of land holdings

Minor Irrigation

The State of Bihar is fortunate to have ample surface water as well as balance ground

water resources to bring over all development and prosperity in the State. Private

investment is taking place in this sector mainly for exploitation of ground water through

shallow tubewell, cavity well, bamboo well and also through dugwell and irrigation pond

in limited area.

The ground water resource of the State has been estimated as on March 2004 after taking

into account the present ground water use. The availability of ground water in future for

irrigation works out to 16.11 lakh ha.m. which may support approximately 8 lakh new

tubewells in the State. A bank loan of Rs.570 crore has been estimated for exploitation of

potential under this sector for the year 2006-07. The constrains are erratic supply of

power, inadequate availability of fuel in rural areas - particularly in cropping seasons,

most of the northern part of the State is affected by recurrent floods affecting the



irrigation structures, tenancy problems, inadequate extension support - through State

Govt. Depts., and NGOs / VAs .

Action Points for Banks

• Since MI has been declared as a thrust area by GoI and adequate refinance facility on

a concessional basis is available from NABARD, all banks operating in the State

should gear up their activities and concentrate their efforts to increase their lending

for MI schemes

• Concept of Community Irrigation Schemes / Group Loans should be publicised,

encouraged and adopted for MI schemes

• Banks and District Administration should take up coordinated efforts for improving

the recovery of bank loans, thereby creating a conducive atmosphere for sanction of

fresh loans

• Banks / District Administration could identify local progressive farmers within the

service area of branches, motivate them to adopt new diversified activities and use

these units / farmers as “local demonstration units”

Action Points for Government agencies

• BSEB and SGWIO should endeavour to bridge the infrastructural gaps

• Concept of Community Irrigation Schemes / Group Loans should be publicised,encouraged and adopted for MI schemes

• Efforts may be made to revive the functioning of BSCLDB which would involve

activity in schematic lending under MI

• District Level Monitoring Committees set up under MSTP and OFWAMS should

meet at stipulated monthly intervals for review of progress under MI schemes

• Agriculture Dept., MI / Water Resources Dept., in consultation with NABARD

should identify potential areas for Area Development Schemes, involving MI as anintegral component

• Greater efforts on vertical integration are necessary, involving farmers, produce

processors and marketing channels - thereby creating a congenial business

environment to enable NABARD to encourage banks to step up lending

• Strengthening of extension services of the Line Departments of the State Govt.



Action Points

• Concept of Community Irrigation Schemes and Group Loans may be adopted for

MI schemes

• Banks and District Administration should take up coordinated efforts for

improving the recovery of bank loans, thereby creating a conducive atmosphere

for sanction of fresh loans

• BSEB and SGWIO should endeavor to bridge the infrastructure gaps

• Efforts may be made to revive the functioning of BSCLDB which would involve

activity in schematic lending under MI

Land development, Water management and Agronomy

The activities under the sector are On-Farm development (OFD), reclamation of saline

and alkaline soil, soil & water conservation, farm fencing, water harvesting tanks and

watershed development. A bank loan of Rs.52 crore has been estimated for realization of

potential under this sector.

Major action Points

• State level Seminar followed by district level workshops may be conducted for

sensitizing the various partners. Based on the inputs from the seminars and study,

unit costs/scales of finance may be worked and model schemes are to be

formulated for implementation in potential districts.

• Banks, particularly commercial banks may organise special programmes on land

and water management for sensitizing their Branch Managers on the potential and

demand for land development sub-sector.

• Financing for OFD works, may be encouraged in the command areas of the

completed irrigation projects with credit support.

Farm Mechanization

A bank loan of Rs.573 crore has been estimated for realization of potential for

mechanization of farming operations.

Major action Points

• Publicity for subsidy linked schemes under “Macromode management scheme”

• Improvement in pace of consolidation of land holdings

• Improvement in the road network.



• Establishment of custom hiring and service centers – considering Agri-clinics,

Agri-business centers for machinery and equipment custom hiring also.

• Banks and District Administration should take up coordinated efforts for

improving the recovery of bank loans, thereby creating a conducive atmosphere

for sanction of fresh loans

Plantation and Horticulture

Bank loan of Rs.139 crore has been estimated for the year 2006-07 for exploitation of

activities under this sector.

Developments / Initiatives During The Year

Establishment of Agri- Export Promotion Zone (AEPZ) for Litchi :. Bihar has been

allotted a AEPZ for litchi covering the districts of Muzaffarpur, Samastipur, Vaishali, E

& W Champaran, Bhagalpur, Begusarai, Khagaria, Sitamarhi, Saran and Gopalganj.

Bihar State Export Corporation Ltd has been identified as the Nodal Agency for

implementation of the scheme.

Presently the task of establishing AEPZ has been entrusted to BIADA having its office at

Patna.

Project for promotion of Litchi, Mango, Makhana and Spices :

Capital Investment Subsidy Scheme for Development of Horticulture, approved by the

Planning Commission, Government of India has been launched with aims of giving a

further boost to developing horticulture crops in four districts of Bihar viz. Muzaffarpur,

Darbhanga, Samastipur and Madhubani. The scheme envisages to cover potentially the

most important horticulture crops of the State, viz., Litchi, Mango, Spices and Makhana

Constitution of Medicinal Plant Board :

GoB has accorded its approval for Constitution of Medicinal Plant Board in the State.

Department of Health has been designated as the nodal agency for the same. The Board

shall promote cultivation and processing of medicinal and aromatic plants. NABARD

has identified MAPs as a ‘Thrust Area’ and decided to provide 100 percent refinance at

concessional rates of interest .

Action Points

• Strengthening the extension wing of the Department of Horticulture (DOH) by

filling the existing vacancies of technical posts and to reorient their services to

credit-linked development activities.



• Financing bank branches may be provided with adequate technical manpower at

least in the potential zones / pockets to ensure large scale financing to this sector.

The concept of Area Development Project (ADP) may be adopted by the banks to

ensure organised development of feasible activities in potential districts, with

necessary credit support.

Forestry and Wasteland Development

Against the stipulated 33% of the total geographical area, forest cover in Bihar is only

6.58%. There are about 6,58,429 ha. of wastelands and 1,39,051 ha of permanent fallow

land and 17871 ha of grasslands and pastures in the State. A major portion of this land

area, with necessary promotion and incentives, can be utilized for farm forestry/

agroforestry. The agro-climatic and physiographic conditions of the State are also

suitable for many important, commercially suitable forest tree species. A potential for

bank loan of Rs. 12 crore under agroforestry schemes has been estimated during 2006-

07.

Action Points

• Extension mechanism of Forest Department & Wasteland Board needs to be

strengthened.

• The State Forest Department may simplify the cumbersome procedures of

harvesting trees on the private land. Industrially grown trees may be exempted

from the Transit Pass.

• Banks may play a proactive role in publicising bankable forestry schemes in the

state.

• The Department of Industries may study the reasons for closure of practically all

the forest-based industries in the State, and work out a package for their revival.

• Forest Department may promote newly identified high potential plants like

‘Jatropha’, which yields precious bio-diesel and can be profitably grown on

degraded lands/ wastelands.

• Existing Forest/ Wood based industries may be encouraged to consider contract-

farming approach for procurement of raw wood on sustainable basis.

Animal Husbandry sector

Dairy farming is the major activity of this sector followed by poultry and other activities.

Potential for a bank loan of Rs 321 crore under dairy and Rs 68 crore under poultry has



been estimated. These apart, bank loan of Rs.31 crore for financing bullock and bullock

carts and Rs12 crore for financing bio-gas plants has also been envisaged.

Constrains under this sector are low productivity of existing livestock and large number

of unproductive animals, shortage of veterinary clinics and breeding centers, inadequate

extension support to farmers and entrepreneurs, limited availability of good quality

animals, shortage of feed and fodder, problem in procurement of day old chicks due to

absence of adequate number of hatcheries, poor road connectivity as well as erratic

power supply, absence of modern abattoirs for wholesome meat production and efficient

utilization of slaughter house by-products.

Action Points

• The existing infrastructure in the animal husbandry sector should be made

functional by allocation of adequate budget, manpower and materials.

• Breeding farms should be established in the government and private sectors to

augment the supply of crossbred animals.

• Awareness creation among farmers regarding various avenues of employment

and income generation in the livestock sector.

• Bankers may pro-actively finance the agriculture and veterinary graduates trained

under Agriclinics and Agri business Centers scheme for setting up of veterinary

dispensaries and provision of services including frozen semen banks, liquid

nitrogen supply and extension consultancy.

• Providing training to local people and NGOs who take care of the upkeep of the

bio-gas plants

Fisheries

An area of 1,13,664 ha is available in Bihar in the form of tanks/ponds, mauns (oxbow

lakes), chaurs (flood plains) and reservoirs. Further, vast low-lying areas of about

3,38,745 ha can be suitably developed for various aquaculture activities. Against the

huge water resources potential available, only about 26,000 ha (7.68%) of water areas

have been developed for fish culture. However fisheries is the fastest growing sub-sector

indicating a growth rate of over 10 percent per annum. A bank loan of Rs.77 crore has

been estimated for development of various activities of the sector like composite fish

culture, renovation of old ponds, scampi farming etc,



Action Points

• Extension services support provided by Fisheries Department may be

strengthened by providing for resources and manpower

• Government hatcheries may be revived and private sector be encouraged for

setting up of hatcheries so as to ensure supply of quality seeds.

• Government owned water bodies might be leased only on long-term basis for ten

years preferably to the educated unemployed entrepreneurs.

• The Fisheries Department and banks should have better coordination in

identification of borrowers, appraisal, sanction and implementation of various

fisheries schemes.

• Fisheries Department may arrange scampi seeds for farmers interested in this

culture.

• Financing of fisheries to women SHGs may be explored

Cold Storages and Rural Godowns

Considering the huge volume of annual production of perishable agriculture and

horticulture produce in the State and inadequacy in the existing arrangement for post

harvest handling and storage capacity, a credit flow of Rs.79 crore is estimated for this

sector.

This activity is sieged with several constraints viz. lack of awareness among prospective

entrepreneurs about CISS, most of the produce stored in cold storages in Bihar is potato;

GoI’s objective of increasing storage capacity through multi-produce cold storages is not

achieved, irregular power supply necessitates usage of generators, which increases the

operational costs substantially, poor road network, particularly in the rural sector

hampers movement of farm produce, and delay in obtaining clearance from various

Government agencies

Action Points

• State Government may identify potential areas and draw up a plan for

construction of specialized storage facility for fruits like Litchi, Mango, Banana,

etc. and their processed products.

• Uninterrupted power supply to the Cold Storage units by the BSEB may be

ensured or alternative mechanism for compensating increase in costs may be

worked out.



• There are many old cold storages requiring renovation in the State. The owners

may be encouraged to renovate the same by availing assistance under the CISS

Rural Non - Farm Sector and Other Priority Sector

Despite availability of enormous potential in the form of agro-based raw materials, skill

and demand for setting up of cottage, tiny and village industries, credit flow under NFS

has not been picking up as envisaged. Based on the exploitable potential under RNFS

and OPS, a credit support of Rs.2272 crore is projected during 2006-07.

Action Points

• State Government may strengthen the existing DRDA marketing outlets.

• Provision of Marketing support to weavers through PWCS, renovation of

handloom / handicraft emporia and setting up of design / packaging units for the

weavers.

• Concerned agencies of State Government needs to ensure provide support /

coordinate with banks for NFS promotion in districts and development of

identified clusters.

• Banks have to take initiative for financing non-traditional activities such as

cooking gas connections in the rural area, upgradation of PCOs with Cyber Cafe

facilities.

• CBs / RRBs may compile the lending under NFS in rural area in respect of rural/

semi urban branches.

Rural Infrastructure Development Fund

A total of 7031 projects with a loan assistance of Rs. 1057.69 crore have been sanctioned

under RIDF for the State of Bihar. The projects sanctioned include Major irrigation

projects (Chandan, Badua and Eastern Kosi); Medium irrigation projects (Tilaiya Dadar,

Phulkaha, Sindhwarni, Nagi and Nakthi); Minor irrigation projects (tube wells, surface

water, barge lift irrigation etc.), small hydel power projects and rural roads and bridges.

Disbursement

As against the aggregate RIDF sanction of Rs.1057.69 crore as on 01 December 2005

(Tranche I to XI), disbursement stood at Rs.197.16 crore (19%).



Action Points

• Submission of projects conforming to RIDF guidelines by the implementing

departments through the Finance Department, GoB

• Quick acceptance of terms and conditions of sanctioned projects by the nodal

department

• Energisation of tube well projects sanctioned under RIDF

• Adequate and timely budget provision and fund allotment for quick

implementation of the sanctioned minor irrigation, medium irrigation and rural

bridges projects

• Systematic and structured monitoring of the status of fund allotment, expenditure

incurred, work done at the ground level and submission of drawal applications on

a quarterly / monthly basis to NABARD

• Quick submission of project completion reports in case of completed projects.

Micro Credit Innovation (SHG Bank Linkage Programme)

Bihar is slowly but surely catching up with the other States in SHG Bank linkage

program and has a cumulative total of around 32,116 SHGs credit linked as on 31

December 2005. The State which is having second largest concentration of population

below the poverty line (47 % of the state population as against the national average of 26

% ) makes SHGs the most potent vehicle of providing sustainable livelihood to people in

the rural areas. The State has a scope for formation of around 5 lakh SHGs of which 1.5

lakh can be credit linked by 2006 - 07.

The experience with Linkage Bank program has brought certain areas which require

more attention to improve the performances of the Self Help Groups further in tune with

the requirements of the changing economic scenario. Some of these are :

More efforts need be geared towards Institution building including the strengtheningof groups functioning in existing setup as well as the promotion of federal structures

of the SHGs.

Need to develop more effective Management Information Systems (MIS) to promote

further consolidation of sustainable financial service delivery through the SHG mode.

Focus more on training and capacity building of SHG members to improve

productivity of financial service delivery.

To increase the outreach of the program to address sectoral imbalances in the SHG

movement with different delivery models.

S G b d l f f ll d l i h



Action Points

• State Government to promote SHGs under SHG Bank Linkage Programme on the

pattern of Andhra Pradesh, Karnataka and Tamilnadu by involving DRDA as

SHPI

• Removal of stamp duty for inter-se agreement and loan documents for the SHG

Bank Linkage Programme could be looked into by GoB,

• Involvement of Zila Sakhsharata Samiti, Bihar Education Project and other

developmental agencies in SHG formation.

• Lending to SHG should be included in the Business Development Plan of the

CBs/RRBs as an exclusive item under Priority Sector lending

• SHG lending need to be incorporated in the Performance Budgeting of the

branches of CBs/RRBs

• 2-3 years old and matured SHGs should be given business ideas by the branches

of the concerned banks to take up Income Generating Activities (IGAs)

• The BSCB may expedite the issue of creating “cooperatives within cooperatives”

by organizing self-help groups at the level of PACS



Follow up of issues in State Credit Seminar

Action points emerging out of State Credit Seminar 2005 were followed up with the State

Government and Banks through correspondence, seminar/ workshop, meetings and alsoby one to one meetings. The follow up strategies were realigned consequent upon

announcement by hon'ble Union Finance Minister for doubling the agricultural credit

flow. The following are noteworthy follow up actions:

Increase in credit flow

The loans disbursed by banks have shown a rising trend and as on 31 March 2005 the

credit disbursement towards agriculture was Rs. 2050 crore representing a growth of 71%

over the previous year. The progress recorded by the RRBs has been noteworthy as they

recorded a growth of 110%. This was possible due to: -

Doubling of agriculture credit package of the GoI and consequent increase in the

targets

Monthly monitoring of the progress of financing for agriculture by the

Cooperative Banks and the RRBs by NABARD

Regular monitoring of the RRBs and the Commercial Banks for ascertaining

progress under the doubling of agriculture credit by the RBI

Regular monitoring in SLBC meetings

Proactive role of GoB

Close monitoring of MSTP by NABARD and GOB.

Banks and Other Agencies as Self Help Promoting Institution (SHPI)

The promotion of SHGs is primarily undertaken by NGOs / VAs operating in the

districts. Eight RRBs are also acting as Self Help Promoting Institutions (SHPIs). Out of

the 28015 credit linked SHGs, RRBs with 15691 SHGs account for 56 % and

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Commercial Banks with 12191 SHGs account for 43.51 %. The Cooperative Banks have

credit linked only 133 SHGs. Commercial Banks, RRBs, Cooperative Banks have to now

make all out efforts for achieving the projected credit linkage of 21050 SHGs during

2006-07. In our quest for newer models to accelerate the SHG formation in the State,

Individual Rural Volunteer (IRV) scheme of NABARD has been sanctioned to

Samastipur RRB. In order to strengthen the Accounting aspect of the SHGs, a Book

writers scheme is also in operation in Samastipur and Munger KGBs (now Bihar KGB).

The impact of these projects would result in further replication of these models on a

wider scale in the State.

NGOs as Self Help Promoting Institution (SHPI)

Under SHG Bank Linkage Program, NABARD has, so far, engaged 96 NGOs as SHPI

partners. Besides, around 100 more small NGOs, aptly called “Briefcase” NGOs, are also

associated with the SHG Bank Linkage Program in W Champaran district. NABARD has

so far extended grant assistance of Rs. 32.29 lakh to 64 NGOs acting as SHPIs. In

addition to NGOs acting as SHPIs and other small NGOs were provided support for

conducting capacity building programs. A district wise directory of NGOs has been

prepared by NABARD and is made available to all partners in their endeavor.

Upscaling SHG Bank linkage program

SHG Bank linkage program in the State was accorded top priority by NABARD and the

following steps have initiated in upscaling the program :

Identification of good NGOs

Synergy of efforts with other agencies for expediting linkage process

Organizing capacity building programs for NGOs, Branch Managers of CBs/RRBs

Special sensitization programs for LDMs

Exposure Visits for the members of BLBC to good SHGs

Conducting workshops for the senior level officers of Commercial Banks/ RRBs.

26



It is expected that the initiatives taken by NABARD shall result in creating a favorable

environment towards the SHG movement in the State.

Strengthening Rural Infrastructure

• MSTP has been a major success story in

• There are signs of revival in the cooperative sector.

• The Bihar Horticulture Project has been initiated.

• The Bihar Watershed Project has been initiated.

• The Bihar Intensive Cattle Development Project has been initiated.

Monitoring of field level disbursement for agriculture

During the year, monitoring mechanism for ascertaining the progress of grassroots level

of disbursement for agriculture was set up so as to generate timely data for monitoring of

the efforts for doubling of agriculture credit. In this endeavor, the following noteworthy

developments took place: -

• Structured State Level Monitoring Committee Meeting to review MSTP and

OFWAMS.

• Structured meeting of the Empowered Committee of Horticultural Projects in 4

districts.

• Sensitisation of senior officers of the State Government and senior bankers was

done through presentations on the model bankable projects.

• The scales of finance and unit costs of various investments were rationalized by

holding of DLTF in most of the districts and the State Level Unit Cost Committee

Meeting respectively.

• The scope of DRIP was expanded in more districts and the State Level Project

Coordination and Guidance Committee (SLPCGC) was initiated.

27



• The Chief Secretary / Development Commissioner of the Government of Bihar

undertook periodical High level meeting / follow up which resulted in timely

ground level compliance and the same was reflected in increase in credit flow.

• The platform of BLBC and DLRC has been revitalised

Sensitization of bankers and farmers education

• Several training camps were organized by NABARD for sensitizing the bankers

on cultivation of medicinal and aromatic plants, formation of SHGs and credit

linking, scampi farming, apiculture, rural industries, etc.

• Several rural entrepreneurial development programmes and other training

programmes for farmer’s education were conducted in association with the

NGOs.

• The concept of Farmers Clubs is increasingly gaining acceptance from bankers.

NABARD initiatives for strengthening of Cooperatives

CDF assistance to the Cooperative Banks

Sanction of assistance of Rs. 110.28 lakhs to the Cooperative Banks

Reimbursement of Rs. 4.97 lakhs and Rs. 3.38 lakhs to the BSCLDB and BSCB

respectively, as assistance for publicity measures with regard to doubling of

Agriculture credit flow.

Capacity building of client banks/staff

Owing to the closure of the ACSTI in the State, NABARD accorded approval for the

conduct of training for the staff of BSCB/DCCBs in D N Singh Regional Institute of

Cooperative Management, Patna

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Conduct of on-location training programmes for the staff of Siwan and Nalanda

DCCB

Conduct of ODI programmes for the staff of DCCBs.

Provision of faculty support for the training programmes in JLTC and DNS Institute

Provision of financial support for conduct of training programmes in JLTC and DNS

Institute

DAP-MoU

Execution of DAP-MoU with the BSCB and BSCLDB

Pursuing with the banks for conduct of SLMRC and DLMRC Meetings to review the

progress in implementation of DAP-MoU. Owing to constant persuasion BSCB hadconvened two meetings of SLMRC during the year after a gap of 3 years

Provided training to the District Development Managers of NABARD on DAP-MoU

to enable them to provide guidance to cooperative banks in the preparation of DAP-

MoU.

Other initiatives

Provision of refinance to BSCLDB

Implementation of KCC scheme

Participation in the DLTC meeting for fixation of scale of finance

Participation in the boards of SCB/LDB and provision of guidance for development

of the banks

Recommendation to the RBI for opening 3 new branches of BSCB.

Periodic visits to branches of LDB

bihar executive summary

Documents