introduction

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National Bank for Agriculture and Rural Development

Logo of NABARD

Headquarters Mumbai, Maharashtra, India

Established 12 July 1982

Managing Director Dr K G Karmakar

Currency

Reserves 81,220crore (US$ 18.11 billion) (2007)

Website www.nabard.org

NABARD is the apex development bank in India

http://www.nabard.org/

http://en.wikipedia.org/wiki/File:NABARD_logo.svg

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Introduction

National Bank for Agriculture and Rural Development (NABARD)

NABARD is an apex development bank in India based in Mumbai, Maharashtra. It has been accredited with "matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India". NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and devel-opment of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with:1) Providing refinance to lending institutions in rural areas2) Bringing about or promoting institutional development 3) Evaluating, monitoring and inspecting the client banksBesides this pivotal role, NABARD also: Acts as a coordinator in the operations of rural credit institutions Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development Helps the state governments in reaching their targets of providing assistance to eligible insti-tutions in agriculture and rural development Acts as regulator for cooperative banks and RRBs Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development

NABARD was established on the recommendations of Shivaraman Committee, byan act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Devel-opment Act 1981. It replaced the Agricultural CreditDepartment (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Develop-ment Corporation (ARDC). It is one of the premiere agencies to provide credit in rural areas. The Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) set up by the RBI under the Chairmanship of Shri B Sivaraman in its report submitted to Governor, Reserve Bank of India on November 28, 1979 recom-mended the establishment of NABARD. The Parliament through the Act 61 of 81 approved its setting up. The Committee after reviewing the arrangements came to the conclusion that a new arrangement would be necessary at the national level for achieving the desired focus and thrust towards integration of credit activities in the context of the strategy for Integrated Rural Development. Against the backdrop of the massive credit needs of rural development and the need to uplift the weaker sections in the rural areas within a given time horizon the arrange-

3ment called for a separate institutional set-up. Similarly. The Reserve Bank had onerous re-sponsibilities to discharge in respect of its many basic functions of central banking in monet-ary and credit regulations and was not therefore in a position to devote undivided atten-tion to the operational details of the emerging complex credit problems. This paved the way for the establishment of NABARD.CRAFICARD also found it prudent to integrate short term, medium term and long-term credit structure for the agriculture sector by establishing a new bank. NABARD is the result of this recommendation. It was set up with an initial capital of Rs 100 crore, which was enhanced to Rs 2,000 crore, fully subscribed by the Government of India and the RBI.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 Chair-manship of Shri B. Sivaraman, conceived and recommended the establishment of the Na-tional 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 12 July, 1982was dedicated to the service of the Nation by the Humble Prime Minister, Smt Indira Gandhi on 5 November, 1982NABARD is set up by the Government of India (GoI) as a development bank with the man-date for facilitating credit flow for promotion and development of agriculture, small-scale in-dustries, cottage and village industries, handicrafts and other rural crafts. It also has the man-date to support all other allied economic activities in rural areas, promote integrated and sus-tainable rural development and secure prosperity of rural areas, as also for matters connected therewith and incidental thereto.

The Committee to Review Arrangements for Institutional Credit for Agricultureand Rural Development (CRAFICARD), set up by the Reserve Bank of India (RBI) under the Chair-manship of Shri B. Sivaraman, conceived and recommended the establishment of the Na-tional 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 12 July, 1982was dedicated to the service of the Nation by the Humble Prime Minister Smt Indira Gandhi on 5 November, 1982 NABARD is set up by the Government of India as a development bank with the mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas, as also for matters connected therewith and incidental there to. It’s subscribed and paid-up Capital was Rs.100crore which was enhanced toRs.500crore, contributed by the Gov-ernment of India (GOI) and RBI in equal proportions. Currently it is Rs.2000crore, con-tributed by Government (Rs.550crore) and RBI (Rs.1450crore)

The Management of NABARD vests with the Board of Directors. The Board of Direct-ors of NABARD comprises the Chairperson, Managing Director, representatives of RBI, Government of India, State Governments and Directors nominated by the Government

NABARD is a specialized financial institution in the field of agriculture and rural development. It has been designed specifically as an organizational device for providing un-divided attention, forceful direction and pointed focus, to the credit problems of rural sec-tor. Half of NABARDs capital was contributed by RBI and other half by the government. It has enough financial resources to support agricultural and rural development program.

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NABARD operates through its Head Office at Mumbai, 28 Regional Offices located in the State Capitals, a Sub Office at Port Blair and 1 special cell located at Srinagar and 360 District Of-fices. NABARD has on its roll around 2968 professionals supported adequately by a number of other staff.????????????????????????

NABARD's 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 Govern-ment 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 Rs1, 574,800 mil-lion in 2005-2006. The overall GDP is estimated to grow at8.4 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. 512830 million have been sanctioned for 2,44,651 projects cov-ering 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. The assistance is extended to Individuals, NGOs, Cooperatives, Self Help Group, who have the expertise and willingness to implement innovative ideas for improving the quality of life in rural areas.

Through member base of 250 million, 600000 cooperatives are working in India at grass root level in almost every sector of economy. There are linkages between SHG and other type in-stitutes with that of cooperatives. 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.

5 NABARD was established in terms of the Preamble to the Act, "for providing credit for the promotion 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 pro-moting IRDP and securing prosperity of rural areas and for matters connected therewith in in-cidental thereto".

Classification of Agriculture Credit:-Agriculture credit may be further classified into the following ways.1) Short-term credit.2) Medium-term credit.3) Long-term credit.

NABARD operates through its Head Office at Mumbai, 28 Regional Offices located in the State Capitals, a Sub Office at Port Blair and 1 special cell located at Srinagar and 360 District Of-fices. NABARD has on its roll around 2968 professionals supported adequately by a number of other staff. NABARD was set up with an initial capital of 100 crore. Consequent to the re-vision in the composition of share capital between Government of India and RBI, the paid up capital as on 31 March 2015, stood at 5000 crore with Government of India holding 4,980 crore (99.60%) and Reserve Bank of India 20.00 crore (0.40%).

NABARD headoffice located at Mumbai , Maharashtra, India

NABARD has effectively brought in a number of innovations in the rural credit domain. To

quote a few:

6 SELF HELP GROUPS,

FARMER CLUBS,

RURAL INFRASTRUCTURE DEVELOPMENT FUND,

WATERSHED DEVELOPMENT,

KISSAN CREDIT CARD,

DISTRICT RURAL INDUSTRIES PROJECT CLUSTER

DEVELOPMENT PROGRAMME ANDRURAL INNOVATION FUND

LITERATURE REVIEW Nilakantha Rath:- As per Nilakantha Rath NABARD has crossed a payment of one lakh crore Rupees for the Creation of rural infrastructure of the country from out of its Rural Infrastructure Develop-ment Fund (RIDF), the disbursal includes loans to 28 states and the union territory of Pu-ducherry as well as to the National Rural Roads Development Agency to support the rural roads component of Bharat Nirman.

Dr.Swaminathan:- As per Dr.Swaminathan NABARD's support is being provided to various forms of mi-crofinance institutions covering mFIs, second tier mF lending institutions, Grameen bank rep-licators, NGO-mFIs, SHG Federations etc. NABARD provides loan funds in the form of Re-volving Fund Assistance (RFA)To NGO-mFIs on Avery selective basis. The RFA is generally provided for a period of 5 to 6 it necessarily to be used for on lending to mF clients.

Satish:- As per Satish (2006) reviewed the distress in agriculture in Punjab. He observed that since the nationalisation of banks and the green revolution, institutional credit for agriculture has grown in Punjab. But the growth had not been uniform and in line with the demand for such credit. Indebtedness has also increased in the state, but a large part of the debt has been for non-productive purposes. The incidence of suicides in Punjab has not been higher than the all India average and studies reveal that while indebtedness is indeed one of the major causes of suicides, it is neither the only cause nor the main one. There is thus no direct causal relation-ship between institutional credit, indebtednesdists and suicides in rural Punjab.

7Mohan RakeshMohan Rakesh (2004) while reviewing performance of agricultural credit in India indicated that though the overall flow of institutional credit has increased over the years, there are sev-eral gaps in the system like inadequate provision of credit to small and marginal farmers, paucity of medium and long-term lending, etc. These have major implications for agricultural development as also the well-being of the farming community. He, therefore, suggested that efforts are required to address and rectify these issues.

OBJECTIVE OF THE PROJECT

The objectives of this project are as follows-

To find out the satisfaction level of the NABARD customers provided by NABARD.

To investigate whether there where fraud practices done in NABARD.

To analyse and compare the efficiency of NABARD.

To assess the role of NABARD in agriculture sector.

To know the various Depth scheme of agriculture sector.

To analyse different types of schemes taken by different types of customers.

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HYPOTHESIS

That credit elasticity of agricultural GDP for entire period is increased

That there would be fraud practices done by NABARD in previous years.

That due to services the satisfaction level of the customers has been tremendously increasing

That the efficiency level of the customers has been increased in past 1 decade.

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METHODOLOGY The study of Service Marketing in Banks requires technical & conceptual understanding of term service marketing for which a good deal of information need to collected.

Researcher collects secondary data through various books and also from websites (Internet).

Secondary Data are those, which have already been collected by someone else and which have already been passed through the statistical process. This data is collected from the following sources

Reports of NABARD BANK – ANNAUL REPORTS 5 YEARS

NEWSPAPERS- TIMES OF INDIA, THE ECONOMIC TIMES

Research paper based NABARD-

Books on NABARD - AGRICULTURAL FINANCE IN INDIA: The Role OF NABARD.

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CHAPTER 1

CONCEPT OF NABARD

Rural India which comprises 5.5 lakh villages and encompasses three fourths of the

Country's population is characterized by low income levels, inadequate to ensure a quality of

life compatible with physical well-being. The Ministry of Rural Development, spearheading

the frontal attack on rural poverty, through its various programmes endeavoured to reach out

to the last and most disadvantaged sections of society, provide them with avenues of employ-

ment, be it self-employment or wage-employment, and to improve infrastructure relating to

their life support systems.

India has been a welfare state ever since her Independence and the primary objective

of all governmental endeavors has been the welfare of its millions. Planning has been one of

the pillars of the Indian policy since independence and the country's strength is derived from

the achievement of planning. The policies and programmes have been designed with the aim

of alleviation of rural poverty which has been one of the primary objectives of planned devel-

opment in India. It was realized that a sustainable strategy of poverty alleviation has to be

based on increasing the productive employment opportunities in the process of growth itself.

Elimination of poverty, ignorance, diseases and inequality of opportunities and providing a

better and higher quality of life were the basic premises upon which all the plans and blue-

prints of development were built.

NABARD implies both the economic betterment of people as well as greater social

transformation. In order to provide the rural people with better prospects for economic devel-

opment, increased participation of people in the rural development programmes, decentraliza-

11tion of planning, better enforcement of land reforms and greater access to credit are envis-

aged.

1.1 Establishment of the Bank:

The Bill for setting up the Bank was passed by the Parliament in December, 1981 and Na-

tional Bank came into existence on 12th July, 1982.The review committee envisaged that the

new apex bank would be an organizational device for providing undivided attention, forceful

direction and pointed focus to the credit problems arising out of the integrated approach to

rural development.

The Committee recommended that the new bank take over from the Reserve Bank the over-

seeing the entire rural credit system, including credit for rural artisans and village industries,

and the statutory inspection of co-operative banks and Regional Rural Banks on an agency

basis, the Bank continuing to retain its essential control. The new bank was to have organic

links with the Reserve Bank by virtue of the latter contributing half of its share capital (the

other half being contributed by the Central Government), and three members of the Central

Board of Directors of the Reserve Bank being appointed on its board, besides Deputy Gov-

ernor of Reserve Bank being appointed as its Chairman. On the establishment, the National

Bank has taken over the entire undertaking of the Agriculture Refinance and Development

Corporation, and has taken over from the Reserve Bank its refinancing functions in relation

to the State Co-operative Banks and the Regional Rural Banks.

The bank is now coordinating agency in relation to the Central Government, Planning Com-

mission, State Governments and institutions at all-India level and State-level engaged in the

development of small-scale industries, rural crafts, etc. for giving effect to the various

policies and programmes related to rural credit.

Genesis and Historical Background

The Committee to Review Arrangements for Institutional Credit for Agriculture and Rural

Development (CRAFICARD) set up by the RBI under the Chairmanship of Shri B Sivara-

man in its report submitted to Governor, Reserve Bank of India on November 28, 1979 re-

http://www.nabard.org/craficard.asp

12commended the establishment of NABARD. The Parliament through the Act 61 of 81, ap-

proved its setting up.

The Committee after reviewing the arrangements came to the conclusion that a new arrange-

ment would be necessary at the national level for achieving the desired focus and thrust to-

wards integration of credit activities in the context of the strategy for Integrated Rural Devel-

opment. Against the backdrop of the massive credit needs of rural development and the need

to uplift the weaker sections in the rural areas within a given time horizon the arrangement

called for a separate institutional set-up. Similarly. The Reserve Bank had onerous responsib-

ilities to discharge in respect of its many basic functions of central banking in monetary and

credit regulations and was not therefore in a position to devote undivided attention to the op-

erational details of the emerging complex credit problems. This paved the way for the estab-

lishment of NABARD.

CRAFICARD also found it prudent to integrate short term, medium term and long-term

credit structure for the agriculture sector by establishing a new bank. NABARD is the result

of this recommendation. It was set up with an initial capital of Rs 100 crore, which was en-

hanced to Rs 2,000 crore, fully subscribed by the Government of India and the RBI.

Objectives

NABARD was established in terms of the , "for providing credit for the promotion of agricul-

ture, 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 IRDP and secur-

ing prosperity of rural areas and for matters connected therewith in incidental thereto".

The main objectives of the NABARD as stated in the statement of objectives while placing

the bill before the Lok Sabha were categorized as under:

The National Bank will be an apex organisation in respect of all matters relating to policy,

planning operational aspects in the field of credit for promotion of Agriculture, Small Scale

Industries, Cottage and Village Industries, Handicrafts and other rural crafts and other allied

economic activities in rural areas.

13The Bank will also provide direct lending to any institution as may approved by the Central

Government.

The Bank will have organic links with the Reserve Bank and maintain a close link with in.

Mission

Promoting sustainable and equitable agriculture and rural development through effective

credit support, related services, institution building and other innovative initiatives. In pursu-

ing this mission, NABARD focuses its activities on

Credit functions, involving preparation of potential-linked credit plans annually for all dis-

tricts of the country for identification of credit potential, monitoring the flow of ground level

rural credit, issuing policy and operational guidelines to rural financing institutions and

providing credit facilities to eligible institutions under various programmes

Development functions, concerning reinforcement of the credit functions and making credit

more productive

Supervisory functions, ensuring the proper functioning of cooperative banks and regional

rural banks

CURRENT POSITION OF NABARD

In a journey spanning 25 years, NABARD has paved the way for all-round rural pro-

gress and development with 28 regional offices, sub-office at Port Blair and 376 dis-

trict offices.

The Micro Finance programme is the largest of its kind in the world. The programme

has helped over 329.90 lakh households through 22.38 lakh SHGs comprising mostly

of women members. Women empowerment in rural areas. Rs 872 lakh have been

sanctioned by way of assistance to women entrepreneurs.

Through the infrastructure development fund Rs 51,283 crore have been sanctioned

for 2,44,651 projects covering irrigation, rural roads and bridges, health and educa-

tion, soil conversation, drinking water schemes

Watershed development fund, with cumulative sanctions of Rs578.95 crore for 427

projects in 124 districts of 14 states, has created a ‘Peoples Movement’ in rural India.

http://www.nabard.org/rolefunctionssupervisory.asp

http://www.nabard.org/development&promotional/developmentalinitiatives.asp

http://www.nabard.org/creditfunctions/introduction.asp

14 Farmers now enjoy financial access and security through 582.50 lakh Kisan Credit

Cards that have been issued through a vast rural banking network.

District Rural Industries Projects (DRIP) has generated employment for 23.34 lakh

units in 105 districts.

CHAPTER 2

What is NABARD?

NABARD is established as a 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 integ-

rated rural development and securing prosperity of rural areas and for matters connected

therewith or incidental thereto

The National Bank for Agriculture & Rural Development (NABARD): was setup by

an act of 1981. The objective of the Bank was to provide credit for promotion of Agriculture,

small-scale Industry, cottage and village industries, handicrafts and other rural crafts and

other allied economic activities in rural area with a view to promote integrated rural develop-

ment and to secure prosperity of rural area and for matters connected therewith or incidental

thereto.

NABARD is set up as an apex Development Bank with a mandate for facilitating

credit flow for promotion and development of agriculture, small-scale industries, cottage and

village industries, handicrafts and other rural crafts. It also has the mandate to support all

other allied economic activities in rural areas, promote integrated and sustainable rural devel-

opment and secure prosperity of rural areas. In discharging its role as a facilitator for rural

prosperity NABARD is entrusted with

15Providing refinance to lending institutions in rural areas

Bringing about or promoting institutional development and

Evaluating, monitoring and inspecting the client banks

Besides this pivotal role, NABARD also Acts as a coordinator in the operations of rural credit

institutions

Extends assistance to the government, the Reserve Bank of India and other organizations in

matters relating to rural development

Offers training and research facilities for banks, cooperatives and organizations working in

the field of rural development

Helps the state governments in reaching their targets of providing assistance to eligible insti-

tutions in agriculture and rural development

Acts as regulator for cooperative banks and RRBs.

Major Activities

Preparing of Potential Linked Credit Plans for identification of exploitable potentials under

agriculture and other activities available for development through bank credit.

Refinancing banks for extending loans for investment and production purpose in rural areas.

Providing loans to State Government/Non-Government Organizations (NGOs)/Panchayati

Raj Institutions (PRIs) for developing rural infrastructure.

Supporting credit innovations of Non-Government Organizations (NGOs) and other non-

formal agencies.

Extending formal banking services to the unreached rural poor by evolving a supplementary

credit delivery strategy in a cost effective manner by promoting Self Help Groups (SHGs)

Promoting participatory watershed development for enhancing productivity and profitability

of rainfed agriculture in a sustainable manner.

http://www.rbi.org.in/home.aspx

16On-site inspection of cooperative banks and Regional Rural Banks (RRBs) and iff-site sur-

veillance over health of cooperatives andRRBs

REGIONAL OFFICES OF NABARD ALL OVER INDIA

NABARD operates throughout the country through its 28 Regional Offices and one Sub-of-

fice, located in the capitals of all the states/union territories. It has 336 District Offices across

the country, one Sub-office at Port Blair and one special Cell at Srinagar. It also has 6 train-

ing establishments.

17Organization Structure

Some of the milestones in NABARD's activities are:

Refinance disbursement under ST-Agri & Others and MT-Conversion/ Liquidity support ag-

gregated Rs.16952.83 crore during 2007-08.

18Refinance disbursement under Investment Credit to commercial banks, state cooperative

banks, state cooperative agriculture and rural development banks, RRBs and other eligible

financial institutions during 2007-08 aggregated Rs.9046.27 crore.

Through the Rural Infrastructure Development Fund (RIDF) Rs.8034.93 crores were dis-

bursed during 2007-08. With this, a cumulative amount of Rs.74073.41 crore has been sanc-

tioned for 280227 projects as on 31 March 2008 covering irrigation, rural roads and bridges,

health and education, soil conservation, drinking water schemes, flood protection, forest man-

agement etc.

Under Watershed Development Fund with a corpus of Rs.613.71 crore as on 31 March 2008,

416 projects in 94 districts of 14 states have benefited.

Farmers now enjoy hassle free access to credit and security through 714.68 lakh Kisan Credit

Cards that have been issued through a vast rural banking network.

Under the Farmers' Club Programme, a total of 28226 clubs covering 61789 villages in 555

districts have been formed, helping farmers get access to credit, technology and extension

services.

NABARD and its Role in Training

National Bank Staff College, Lucknow

National Bank Training Centre, Lucknow

Zonal Training Centre, Hyderabad

Regional Training Centre, Bolpur

Bankers Institute of Rural Development (BIRD), Lucknow

The provisions of the Act as stated below very clearly indicate the nature and scope of the de-

velopmental mandate of the Bank and its role in training and capacity building with the un-

derlying belief that the process of development cannot be accomplished by credit/refinance

alone.

Section 38 of the NABARD Act provides that the Bank shall:

http://www.nabard.org/trainingestablishments.asp


http://www.nabard.org/training/bolpur.asp

http://www.nabard.org/training/bolpur.asp





19Maintain expert staff to study all problems relating to agriculture and rural development and

be available for consultation to the Central Government, the Reserve Bank, the State Govern-

ments and the other institutions engaged in the field of rural development.-+

Provide technical, legal, financial, marketing and administrative assistance to any person en-

gaged in agriculture and rural development activities;

may provide consultancy services in the field of agriculture and rural development and other

related matters in or outside India, on such terms and against such remuneration, as may be

agreed upon;

In this context, the role of training in NABARD and the role played by it for capacity build-

ing in client institutions, partner agencies and other developmental agencies is important.

For maintaining 'Expert Staff', the bank needs to provide continuous exposure to its officers

and staff for upscaling their knowledge and skills in core areas. However, in the initial years

the Bank had recruited expert staff from various technical disciplines and created a separate

cadre of officers. These officers were involved in formulating, appraising, monitoring and

evaluating different agricultural projects implemented by different credit agencies. These of-

ficers, irrespective of their academic background, were imparted similar type of training as all

other officers. Their placements and the regular job rotations helped in grooming them to take

up assorted assignments, get involved in a variety of roles and functions including credit, de-

velopmental, promotional, supervisory and necessary support and information for decision

making. The Bank also had access to their specialised skills which were utilised whenever

needed.

In pursuance of the Bank's mandate as stated in the Act, the Bank provides training facilities

for the RFIs and agencies involved in rural development through BIRD and the two RTCs.

With a view to broad base the training and capacity building efforts, the Bank encourages the

RFIs to set up their own training systems and provides these training institutes the necessary

support to conduct meaningful and quality training. Options and avenues for strengthening

the training interventions at the client level are continuously examined so that the human re-

sources in these institutions are developed to take on the challenges, reckon with the competi-

tion, improve customer service, expand outreach, develop suitable products and thereby con-

tribute to rural development.

20As NABARD primarily functions through other agencies, the needs of the client institu-

tions largely determine the knowledge and skill requirements of NABARD officers.

NABARD endeavours to blend the experiences of client bank training with the training for

NABARD officers so as to make training meaningful and relevant to their roles. Efforts are

also made to blend the study findings with the outcome from training to periodically measure

the overall impact of the investments made in the training efforts.

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CHAPTER 3

FUNCTIONS OF NABARD

CREDIT ROLE

CREDIT OPERATIONS PERFORMED BY THE BANK:

The National Bank is empowered to provide short-term refinance assistance for peri-

ods not exceeding 18 months to state Co-operative Banks, Regional Rural Banks and any fin-

ancial institution approved by Reserve Bank in this behalf; for a wide range of purposes, in-

cluding marketing and trading, relating to rural economy. These short term loans granted to

State co-operative Banks and Regional Rural Banks, in so far as they relate to the financing

of agricultural operations or marketing of crops, can be converted by the National Bank into

medium-term loans for periods not exceeding seven years under conditions of drought, fam-

ine or other natural calamities, military operations or enemy action.

The National Bank can grant medium-term loans to the State co-operative Banks and

Regional Rural Banks for period extending from 18 months to seven years for agriculture and

rural development and such other purposes as may be determined by it from time to time sub-

ject to their being fully guaranteed by the State Governments as to the repayment of principal

and payment of interest. Such guarantee can however be waived by the National Bank in such

circumstances.

The National Bank is empowered to provide by way of refinance assistance long-term

loans extending up to a maximum period of 25 years including the period of re-scheduling

such loans to the State Land Development Banks, Regional Rural Banks, Commercial Banks,

State Co-operative Banks or any other financial institutions approved by the Reserve Bank

for the purpose of making investment loans. It may also give short-term loans along with

long-terms loans where such composite loans are considered necessary. Loans for periods not

exceeding 20 years can be made to the State Governments to enable them to subscribe dir-

ectly or indirectly to the Share capital of Co-operative Societies.

Moreover, the new bank can contribute to the share capital or invest in the securities

of any institutions concerned with agriculture or rural development.

22 Credit Planning by NABARD:

District Level Planning -

NABARD prepares Potential Linked Credit Plans (PLPs) for all the districts of the country. It

maps the potentials available for development in agriculture and rural sectors in the district

and projects credit requirements, 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.

State Level Planning -

NABARD prepares a State Focus Paper for every State. This presents a comprehensive pic-

ture 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 sec-

tors. 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 potentials available

in agriculture and allied sectors in the State.

National Level Planning -

NABARD facilitates policy decisions by GoI and RBI in the areas of credit flow to agricul -

ture and rural development.

RESOURCE FOR THE OPERATIONS:

For its short-term operations, the National Bank will borrow funds from the Reserve Bank in

the form of Line of Credit under Section 17 (4E) of the Reserve Bank of India Act which per-

mitted the Reserve Bank to grant short-term loans to the Agricultural Refinance and Develop-

23ment Corporation earlier and which has now been amended suitably by the National Bank for

Agriculture and Rural Development Act.

For its term-loan operations, the National Bank will draw funds, as the Corporation was do-

ing earlier, from the Central Government, World Bank/IDA, and other multilateral and bilat-

eral aid agencies, the market and National Rural Credits (long-term operations). Fund that it

has established. To this Fund has been transferred the balance in the National Agricultural

Credit (Long term operations). Funds maintained by the Reserve Bank. Further contributions

would be made annually to the new Fund by the Reserve Bank in addition to the contribu-

tions by the National Bank itself. Provision has been made also for the Central Government

and the State Governments to contribute to this Fund from time to time.

24 CREDIT STRUCTURE OF NABARD

25

TYPES OF REFINANCE FACILITIES

Agency Credit Facilities

Commercial Banks Long-term credit for investment purposes

Financing the working capital requirements of

Weavers' Co-operative Societies (WCS) & State

Handloom Development Corporations

Short-term Co-operative Structure (State

Co-operative Banks, District Central Co-

operative Banks, Primary Agricultural

Credit Societies)

Short-term (crop and other loans)

Medium-term (conversion) loans

Term loans for investment purposes

Financing WCS for production and marketing pur-

poses

Financing State Handloom Development Corpora-

tions for working capital by State Co-operative

Banks

Long-term Co-operative Structure (State

Co-operative Agriculture and Rural De-

velopment Banks, Primary Co-operative

Agriculture and Rural Development

Banks)


Regional Rural Banks (RRBs) Short-term (crop and other loans)


State Governments Long-term loans for equity participation in co-op-

eratives

Rural Infrastructure Development Fund (RIDF)

26loans for infrastructure projects

Non-Governmental Organisations

(NGOs) - Informal Credit Delivery Sys-

tem

Revolving Fund Assistance for various micro-

credit delivery innovations and promotional pro-

jects under 'Credit and Financial Services Fund'

(CFSF) and 'Rural Promotion Corpus Fund'

(RPCF) respectively

Interest Rates

Margin money

The beneficiary's contribution to the project cost is necessary in order to ensure his stake in

the investment. Such margin money varies from 5% to 25% depending on the type of invest-

ments and the category of the beneficiaries. The margin money can be by way of contribution

in cash or own or family labour. Large farmers, firms, corporate borrowers including state-

owned corporations, forest development corporations provide margin money up to 25% pf

the investment cost.

Special focus

Removal of regional and sectoral imbalances is one of the thrust areas and hence preference

is given to the needs of the underdeveloped areas. For example, the development of the north-

eastern region has been a key programme and special efforts have been made through refin-

ance offered on liberal terms and other supportive measures so that the rural credit delivery

system in the region is strengthened.

Monitoring

Special attention is paid to monitoring the projects that are offered assistance so that the tar-

gets are met and the implementation is properly done. An evaluation of the project is taken up

and in the light of the findings the quality of the projects and their implementation methods

can be improved. District-oriented monitoring studies are conducted to evaluate the perform-

ance of the ongoing agricultural development schemes sanctioned. Specific sector studies are

also undertaken like floriculture, mushroom, aqua culture, agro-processing, etc. to get an in-

sight into the problems and prospects of these sectors.

27Guidelines are often issued for formulation of high-tech and export-oriented projects in farm

and non-farm sectors. Besides, even consultancy is also offered for projects, including ap-

praisal of projects even in cases where refinance is not secured from the bank.

Direct Credit

Direct credit from NABARD constitutes loans to State Governments.

Supporting Cooperatives

In order to strengthen the owned funds position of cooperative credit institutions and thereby

increasing their capacity to leverage larger resources, NABARD provides loans to State Gov-

ernments to contribute to the share capital of these institutions.

Rural Infrastructure Development

With the objective of assisting State Governments in the completion of ongoing rural infra-

structure projects and to take up new infrastructure projects, the Rural Infrastructure Devel-

opment Fund (RIDF) was set up with NABARD in 1995-96 with contributions from Com-

mercial banks by way of deposits. The shortfall in agri/priority sector lending was deposited

by the commercial banks with NABARD as part of their contribution to the RIDF. The total

corpus covering RIDF I (1995-96) to X (2004-05) is Rs. 42,000 crore. Sanctions under all

trenches of RIDF as on 31 March 2005 were Rs.42948.51 crore against which the disburse-

ments were Rs. 25384.02 cr.

Rural Infrastructure

With the objective of assisting State Governments in the completion of ongoing rural infra-

structure projects and to take up new infrastructure projects, the Rural Infrastructure Devel-

opment Fund (RIDF) was set up with NABARD in 1995-96 with contributions from Com-

mercial banks by way of deposits. The shortfall in agri/priority sector lending was deposited

by the commercial banks with NABARD as part of their contribution to the RIDF. The total

corpus covering RIDF I (1995-96) to X (2004-05) is Rs. 42,000 crore. Sanctions under all

trenches of RIDF as on 31 March 2005 were Rs.42948.51 crore against which the disburse-

ments were Rs. 25384.02 cr.

28Farm Sector Schemes

Village Adoption/Village development Plan

Backward Blocks

Bamboo Farming

MACs

Bio Fuels

Crop Insurance

Agriculture Commodities

SGSY

Farm Mechanisation

Land Purchase

Scheme for AgriClinic/ Agri-Business Centres (ACABCs)

SEMFEX

Capacity Building for Adoption of Technology (CAT)

Agri Export Zone (AEZ)

http://www.nabard.org/farm_sector/aez.asp

http://www.nabard.org/farm_sector/cat_capacity_building.asp

http://www.nabard.org/farm_sector/semfex.asp

http://www.nabard.org/farm_sector/schfor_agri.asp

http://www.nabard.org/farm_sector/land_pur.asp

http://www.nabard.org/farm_sector/farm_mech.asp

http://www.nabard.org/farm_sector/sgsy.asp

http://www.nabard.org/farm_sector/agri_com.asp

http://www.nabard.org/farm_sector/crop_ins.asp

http://www.nabard.org/farm_sector/biof.asp

http://www.nabard.org/farm_sector/macs.asp

http://www.nabard.org/farm_sector/bamboo.asp

http://www.nabard.org/farm_sector/back_blo.asp

http://www.nabard.org/farm_sector/vdp.asp

29

CHAPTER 4

PROMOTIONAL ROLE of NABARD

Promotion of RNFS has been recognized as an important and necessary adjunct to the refin-

ancing function. The objective of promotional programmes is to establish replicable models

for generating/enhancing opportunities for employment and income generation in rural areas

in a sustainable, demonstrative and cost effective manner by providing grant/revolving fund

assistance etc., to NGOs, Voluntary Associations(VAs), Trusts and other Promotional Or-

ganizations. And trained around 1, 51,000 rural youth with grant assistance of Rs. 11.91 crore

Here are some of the promotional schemes of NABARD like:

Swarojgar credit card schemes

Farmer’s club programme

Self-help groups

Kissan credit card schemes

Many more

Development and Promotional Functions

Credit is a critical factor in development of agriculture and rural sector as it enables invest-

ment in capital formation and technological upgradation. Hence strengthening of rural finan-

cial institutions, which deliver credit to the sector, has been identified by NABARD as a

thrust area. Various initiatives have been taken to strengthen the cooperative credit structure

and the regional rural banks, so that adequate and timely credit is made available to the

needy.

In order to reinforce the credit functions and to make credit more productive, NABARD has

been undertaking a number of developmental and promotional activities such as:-

Help cooperative banks and Regional Rural Banks to prepare development actions plans for

themselves

30Enter into MoU with state governments and cooperative banks specifying their respective ob-

ligations to improve the affairs of the banks in a stipulated timeframe

Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying their re-

spective obligations to improve the affairs of the Regional Rural Banks in a stipulated time-

frame

Monitor implementation of development action plans of banks and fulfilment of obligations

under MoUs

Provide financial assistance to cooperatives and Regional Rural Banks for establishment of

technical, monitoring and evaluations cells

Provide financial support for the training institutes of cooperative banks

Provide training for senior and middle level executives of commercial banks, Regional Rural

Banks and cooperative banks

Create awareness among the borrowers on ethics of repayment through Vikas Volunteer

Vahini and Farmer’s clubs

Provide financial assistance to cooperative banks for building improved management inform-

ation system, computerisation of operations and development of human resources

Swarozgar Credit Card (SCC) Scheme -

31The SCC Scheme formulated by NABARD in consultation with RBI and GoI envis-

ages adequate and timely credit, both working capital and block capital, to small artisans,

handloom wevers, service providers, fishermen, self-employed persons, rickshaw owners and

other micro entrepreneurs, in rural and urban areas in a flexible, hassle free and cost effective

manner from the banking system. The facility also includes a reasonable component for con-

sumption needs. As on 31 March 2004, 28,925 cards were issued by CBs, Coop Banks and

RRBs involving credit limit of Rs. 64.26 crore

Farmers' Club Programme

What are Farmers' Clubs?

Farmers’ Clubs are grassroot level informal forums. Such Clubs are organised by rural

branches of banks with the support and financial assistance of NABARD for the mutual bene-

fit of the banks concerned and rural people.

What is Farmers' Club Programme?

National Bank for Agriculture and Rural Development (NABARD) encourages banks

to promote Farmers' Clubs in rural areas under the Farmers’ Club Programme, earlier known

as “Vikas Volunteer Vahini (VVV) Programme”. The Programme was launched by

32NABARD in November 1982 to propagate the five principles of “Development through

Credit”.

Mission

Development in rural areas through credit, technology transfer, awareness and capacity build-

ing.

Membership

All villagers except wilful defaulters can become members of the club. The club must make

endeavour to raise their own resources by way of contribution from members, undertaking

certain business services such as bulk procurement of inputs and collective marketing of agri-

cultural produce, etc.

Financial Support from NABARD

Sl. No. Name of the Programme Maximum Eligible

Grant other than NER

North East Region

(including Sikkim and Anda-

man & Nicobar Islands)

1 Maintenance of a Farmers'

Club

Rs. 3,000 per Club

per year for 3 years.

Rs. 3,000 per Club year for 5

years

2 Grant if applicable in the

case of KVKs, NGOs, Agri-

culture Universities etc.

Rs. 2,000/- per Club

per year for 3 years.

Rs. 2,000/- per Club per year

for 3 years.

3 Inauguration Rs. 5000/- Rs. 5000/-

4 Basic Level Orientation

Training Program (BLOTP)

335 "Meet with Experts" Pro-

gram

Rs. 1,250 per meet for

4 meets for 3 years.

Rs. 1,250 per meet for 4 meets

for 3 years.

NABARD would provide financial support for the first three years and for the next two years

the bank sponsoring the club may provide the support, if necessary. The club is expected to

attain self-sustainability in a period of 3-5 years.

Self-help groups

Self-help groups comprise homogenous groups of poor people who have voluntarily come to-

gether mainly with the idea of overcoming their financial difficulties. SHGs can rightly be

called a potent tool for human development. SHGs enable the poor, especially the women

form the poor households, to collectively identify, prioritise and tackle the problems they face

in their socio-economic environment. By pooling their meager resources and using them for

lending among themselves, they develop the habit of thrift and the skill of credit appraisal,

before getting linked to the banks. Staring with small loans for consumption they soon gradu-

ate to bigger loans for a wide range of micro-enterprise like vermin-composting, livestock

rearing, handicrafts, vending of various commodities in rural areas, running distribution ma-

terials, etc. with a modest beginning of just 500SHGs in 1992, today the programme boats

over 22 lakh SHGs and 3.3 crore households influencing the lives of over 16 crore poor pop-

ulation. During the year 2005-06 alone, as many as 6, 20.109 groups were credit linked.

KISAN CREDIT CARD SCHEME

34

As a pioneering credit delivery innovation, Kisan Credit Card Scheme aims at provi-

sion of adequate and timely support from the banking system to the farmers for their cultiva-

tion needs including purchase of inputs in a flexible and cost effective manner.

Since launching in August 1998, around 2.38 crore Kisan Credit Cards issued up to 31

March 2002 by Cooperative Banks, Regional Rural Banks and Commercial Banks put to-

gether. Scheme implemented in all States and Union Territories (except Chandigarh, Daman

& Diu and Dadra & Nagar Haveli) with all Cooperative Banks, RRBs and Commercial Banks

participating. Agency-wise/State-wise progress in issue of cards by all banks during 2001-02

and since inception of Scheme.

Agency-wise KC Cards issued up to 31 March 2003 (since inception) (No. of cards)

Year Cooperative

Banks

RRBs Commercial Banks Total

1998-1999 155353 6421 445451 607225

35

CHAPTER 5

DEVELOPMENT ROLES OF NABARD

Credit is a critical factor in development of agriculture and rural sector as it enables invest-

ment in capital formation and technological upgradation. Hence strengthening of rural finan-

cial institutions, which deliver credit to the sector, has been identified by NABARD as a

thrust area. Various initiatives have been taken to strengthen the cooperative credit structure

and the regional rural banks, so that adequate and timely credit is made available to the

needy. I

In order to reinforce the credit functions and to make credit more productive, NABARD has

been undertaking a number of developmental and promotional activities such as:-

Help cooperative banks and Regional Rural Banks to prepare development actions plans for

themselves

Enter into MoU with state governments and cooperative banks specifying their respective ob-

ligations to improve the affairs of the banks in a stipulated timeframe

Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying their re-

spective obligations to improve the affairs of the Regional Rural Banks in a stipulated time-

frame

Monitor implementation of development action plans of banks and fulfilment of obligations

under MoUs

Provide financial assistance to cooperatives and Regional Rural Banks for establishment of

technical, monitoring and evaluations cells

36Create awareness among the borrowers on ethics of repayment through Vikas Volunteer

Vahini and Farmer’s clubrovide financial assistance to cooperative banks for building im-

proved management information system, computerisation of operations and development of

human resources

Watershed Development Fund (WDF)

Pursuant to the announcement by the Hon'ble Union Finance Minister in the Union

Budget for the year 1999-2000, a Watershed Development Fund (WDF) has been set up in

NABARD with a corpus of Rs.200 crores equally contributed by the Government of India

and NABARD, with an objective to promote participatory watershed development through-

out the country.

The Fund envisaged coverage of 100 priority districts in 14 states over a period of 3 years.

The participating states can avail loans out of WDF for implementing watershed projects

through the village level communities, non-governmental organizations (NGOs) or project fa-

cilitating agencies (PFAs) in the selected districts. The loans are repayable over a period of 9

years (including a grace period of 3 years) and carry a rate of interest of 4.5% per annum at

present.

One-third portion of the Fund is earmarked for promotional efforts, capacity building,

replication of Indo German Watershed Development Programme (Maharashtra) or any other

successful model and Self Help Group (SHG) related activities particularly targeted at wo-

men in the project areas. As on 31 March 2004, the Rs. 154.61 crore has been added to the

corpus by way of interest on unutilized portion and excess margin on RIDF loans.

37COOPERATIVE DEVELOPMENT FUND (CDF)

In pursuance with the recommendations of the Parliamentary Committee on Agricul-

ture, NABARD had created Co-operative Development Fund for providing assistance to Co-

operative Credit Institutions for improving their infrastructural facilities for growth. The

Fund, which started with an initial corpus of Rs.10.00 crore from the surplus contributed by

NABARD, has a balance of Rs.115.68 crore as on 31 March, 2003. The assistance sanctioned

to various cooperative institutions from the Fund till 31 March, 2004 aggregated to Rs.62.18

crore against which an amount of Rs.50.87 crore has been disbursed. The Objectives and Pur-

poses of the fund are given below:

Objective of the Fund:

Supporting the efforts of grass root level institutions (PACS) to mobilize re-

sources etc.

Human Resource Development aimed at achieving better working results and

improvements in viability and also for improvement in systems in cooperative

credit institutions.

Building of better MIS and Conduct of special studies for improving functional effi-

ciency and on subjects referred to above.

Rural infrastructural development fund:

If there is one development programme that has dramatically helped rural India, it is

projects undertaken through RIDF. Economist have explicitly emphasized on the direct cor-

relation between the index of infrastructure development and rural development. Indeed it is

far too crucial to have infrastructure for agriculture, industrial and overall economic develop-

ment. Infrastructure also provides basic amenities that improve the quality of life. Therefore,

38for supporting State Governments and other development institutions, NABARD opened the

window of RIDF in 1995-1996 NABARD so far have sanctioned Rs 51,283 crore for 2,44651

projects under the Fund.

A cumulative position of sector-wise sanctions as on 31st March 2006 : Irrigation : Rs

15105,50 crore(107.92 lakh hectares) Rural Connectivity :Rs 20,290,40 crore of rural road

network (2.20 lakh km) and bridges (3.69 lakh mtrs) power Rs 1,327.7 crore social sector :

Rs 4,128.1 crore Other :Rs 3,539 crore. A separate window has been created for rural con-

nectivity with villages of population less than 500, with a corpus of Rs 4000 crore to support

the Bharat Nariman project.

DISTRICT RURAL INDUSTRIES PROJECT (DRIP)

NABARD, launched DRIP, an integrated area based credit intensification pro-

gramme, in collaboration with government, banks and other development agencies with focus

on district. It was introduced in 1993-94 with the objective of creating sustainable employ-

ment opportunities in rural areas. Today it is being implemented in 106 districts all over the

country.

Maharashtra Rural Credit Project

39The project was under implementation since January 1994 and covers 1483 villages in

twelve districts of Maharashtra. The primary objective is poverty alleviation through in-

creased access to bank credit for the rural poor. It envisages formation and promotion of Self

Help Groups through NGOs. The project has been completed. As against a target of promot-

ing 2600 SHGs, 9000 groups have been promoted, of which 7027 groups have been credit

linked with banks. MRCP has provided a window of opportunities, particularly to the poor

rural women to enhance their skill and secure credit for income generating activities. The

project has helped in empowerment of rural women in addition to providing access to bank

credit.

Rural Entrepreneurship Development Programme (REDP):

In order to generate employment in rural areas, it was felt necessary to develop

the entrepreneurial skills of the rural youth. REDP is a promotional programme sup-

ported by NABARD to motivate and train educated unemployed rural youth, to set up

their own enterprises. So far, 2.32 lakh persons have been trained under the pro-

gramme under 7792 REDPs

Rural Marketing:

A number of marketing interventions have been made for marketing of rural

non-farm products since marketing is a key factor in the sustainability of any such en-

deavour. With the financial support of NABARD under its promotional programmes

like Rural Haats, Rural Marts, participation in fairs, exhibitions and marketing melas,

rural artisans and entrepreneurs can get a larger market for their produce and show-

case their talent to urban and upcountry markets.

Revival of Short-Term Rural Co-operative Structure (STCCS)

NABARD is the implementing agency for the Revival package for the STCCS

which mean the State Coop. Banks, District Coop. Banks and the Primary Agricul-

tural Coop. Societies. (PACS). The revival package has been approved by the Govt.

of India based on the recommendations of the Vaidyanathan Committee. NABARD

has had dialogues with State Govts. And so far 10 states have executed MOU with

GoI and NABARD. Apart from being on the national, state and district level imple-

40menting committees, NABARD has designed guidelines and training manuals for the

special audit of PACS under the Package.

Rural Innovation Fund:

In association with Swiss Agency for Development and Cooperation (SDC),

NABARD has constituted the “NABARD SDC Rural Innovation Fund (RIF)” to sup-

port innovative projects in Farm, Non-Farm and Micro-Finance Sectors leading to

creation of livelihood opportunities for the poor. Government and Non-Government

Institutions, corporate bodies, financial institutions and individuals can avail funding

support for activities involved in development of new products, processes, prototypes,

technology etc. which have the poor in their focus.

NABARD Consultancy Services (NABCONS)

NABCONS is a wholly owned subsidiary of NABARD, which has established

itself as a dependable and professional consultancy services provider in agriculture

and allied activities. As on 31 March 2007, it has cumulatively contracted 487 na-

tional and international assignments involving consultancy fee of Rs.25.49 crores.

Co-Financing

It has been the experience that Banks are wary of taking credit risk of financing high

tech/large scale/ export oriented agricultural projects or those involving sunrise technologies.

To instill confidence in banks and ensure credit flow to such projects, NABARD has entered

into agreements for co-financing with 14 commercial banks. During 2006-07, seven projects

were sanctioned with bank loan of Rs. 145.03 crore and NABARD's share of Rs. 72.42 crore.

Floriculture, organic farming, milk processing, ethanol production and agro processing are

among the projects sanctioned so far.

CHAPTER 6

LATEST SCHEMES OF NABARD

MILLION SHALLOW TUBEWELLS PROGRAMME

41The Million Shallow Tubewells Programme (MSTP) submitted by GoB which was

approved by the Planning Commission, Govt. of India in March 2001 for the State of Bihar.

The objective of the programme is to install one million shallow Tubewells with pumpsets to

bring an additional two million hactres of land under irrigation during the next five years and

increase the agricultural production and productivity of the State. The Scheme is being imple-

mented by NABARD / GoB through Commercial Banks and Regional Rural Banks that have

branches in rural areas in the State.

The funding pattern of the scheme is as follows:

Margin money contributed - 20% by the farmers

Subsidy - 30%

Bank Loan - 50%

All non-defaulting individual farmers of all categories will be eligible for assistance under

the scheme.

The total subsidy for the programme is Rs. 45.50 crores which has been released by

GoI to GoB. For the year 2001-02, the targets were 33798 and for the year 2002-03, 23313.

Thus the overall targets for combined two years is 57111. The Scheme envisages a lock-in

period of five years with the subsidy being back ended i.e the borrowers will not be eligible

for subsidy if loan is liquidated completely within five years from the date of initial disburse-

ment.

ON FARM WATER MANAGEMENT FOR INCREASING CROP PRO-

DUCTION IN EASTERN INDIA (OFWAMS)

The Centrally sponsored programme has been appeared by the Ministry of Agriculture

(MOA) GoI for the duration of the 9th Plan Period (2001-02) and 10th Plan Period. The

scheme will cover all the districts of 8 Eastern India States viz. Arunachal Pradesh, Assam,

Bihar, Chhattisgarh, Jharkhand, Manipur, Mizoram and Orissa and 35 districts of Eastern UP

and 9 districts of West Bengal.

The funding pattern of the scheme is as under:

42 Borrowers contribution - 20%

Subsidy - 30%

Bank Loan - 50%

All non-defaulting individuals’ farmers or groups of farmers will be eligible for assistance

under the scheme. Proforma will be given to small and marginal farmers and SC/ST borrow-

ers. The assistance will be available for Shallow Tubewell with pumpsets, Dugwells, Low

Lift Irrigation Points and Pumpsets in isolation. The combined targets for 2001-02 and 2002-

03 are 48699 Shallow Tubewells with pumpsets, 4571 LLIP, 924 Dugwells and 6252 Pump-

sets.

The subsidy will be back-ended with a lock in period of 2 years i.e the borrowers will not be

eligible for subsidy if the loan is completely liquidated within two years from the date of ini-

tial disbursement.

NABARD SDC Rural Innovation Fund (R I F)

A new fund named as "NABARD SDC Rural Innovation Fund" has been created by merging

the erstwhile Rural Promotion Corpus Fund (RPCF), Credit and Financial Services Fund

(CFSF) and Interest on RPCF and the new fund came into being on 01 October 2005. It is en-

visaged that the entire fund will be utilised in a period of 5 years.

National Bank for Agriculture and Rural Development (NABARD) in association with Swiss

Agency for Development and Cooperation (SDC) has constituted the "NABARD-SDC Rural

Innovation Fund (RIF)" to, inter alia, support innovative projects in Farm, Non-Farm and Mi-

cro-Finance Sectors leading to creation of livelihood opportunities for the poor.

NABARD invites proposals for funding support to innovative projects having the above ob-

jective.

An illustrative list of areas is given below:

Biological and Engineering measures/techniques which improve productivity of wa-

ter.

Design of economic and efficient water harvesting structures.

43 Efficient water use systems: low cost micro-irrigation technology/ micro tube irriga-

tion technology, etc.

Diversification of farm activities - agro-forestry, silvipasture, agro-horticulture and

animal husbandry etc.

Organic farming - bio-fertilisers and pesticides.

Development of location specific crops and agronomic practices.

Extension of technology - Agri-clinics, Agro Service Centres & e-Service Centres.

The e-Service Centres may include the feasibility of commodity trading/ Village

Knowledge Centres.

Community farming.

Contract farming.

Insurance products for rainfed agriculture.

Banking through SHGs, VWCs and user teams, Joint Liability Groups, etc.

Innovative rain water harvesting for rural dwellings.

Rural energy from biomas, agri waste.

Techniques for increasing value of crop residues and non-crop bio mass.

Community regulation of distribution and use of waste and energy.

Storage devices for agricultural and rural products.

Innovative methods of managing Common Property Resources.

Materials and designs for rural roads.

Rural sanitation and waste disposal.

The list is illustrative and new ideas/innovations in tune with the objective of the Rural In-

novation Fund would be supported.

Nabard to provide funds for Swarojgar awareness scheme

On NABARD has launched a pilot scheme to provide funds to select banks to create aware-

ness about the Swarojgar credit card scheme. Under the promotional scheme, financial grants

will be provided to select regional rural banks and cooperative banks to support publicity pro-

grammes on the Swarojgar credit card scheme.

The idea is to create greater awareness about the Swarojgar credit card scheme, which

has been developed by Nabard to provide adequate and timely bank credit to small artisans,

44handloom weavers, rickshaw owners and other micro-entrepreneurs. The promotional cam-

paign on the Swarojgar credit card scheme is also intended to educate card holders on how to

use the cash credit facility optimally and to help the scheme reach out to the maximum num-

ber of people, the release adds.

In Kerala, one time grant assistance will be provided to three banking entities to cre-

ate awareness about the Swarojgar credit card scheme. The assistance will be given to North

Malabar Gramin Bank, South Malabar Gramin Bank and Kerala State Cooperative Agricul-

ture and Rural Development Bank, according to the press release. The three banks will re -

ceive one-time grant assistance up to 60 per cent of their expenditure on publicity, subject to

a maximum of Rs 1 lakh per bank, the release adds. Funds from the grant assistance can be

used to prepare publicity material on the Swarojgar credit card scheme and also to arrange

banker-borrower meets and other promotional activities.

Nabard's refinance scheme for Kerala co-op bank

The Regional Office of Nabard has released schematic refinance to the tune of Rs 15.29

crore to the Kerala State Cooperative Agricultural and Rural Credit Bank (KSCARDB). An

official spokesman said here that, of this, Rs 9.47 crore was directed to the rural housing sec-

tor while the rest would go into various non-farm sector activities, including road transport

operators. The applicable rates of interest ranged from 5.5 per cent to 6.5 per cent per annum.

So far during this financial year, Nabard has released schematic refinance aggregating to

Rs 102.78 crore to various agencies in the State. This includes Rs 57.33 crore advanced to the

apex Kerala State Cooperative Bank (KSCB), Rs 29.51 crore to the two Regional Rural

Banks (RRBs) in the State and Rs 0.64 crore to commercial banks

6.2 LPG connection finance scheme from United Bank

ON 1ST June, 2006 UNITED Bank of India has introduced a special scheme under

Nabard's refinance facility for financing LPG connections in rural areas.

The scheme covers the cost of supplying a regulator, a cylinder and accessories and a

burner stove.

45The maximum amount of loan to be available under the scheme is Rs 3,500 at 7.5 per

cent rate of interest with quarterly rest, payable between three and five years, according to a

bank release

NEW SCHEME TO INCREASE PRODUCTION OF CROPS

The centre has launched a new scheme "On-Farm Water Management for increasing crop

production in Eastern India" in 10 states of Eastern India. The scheme will be implemented in

all districts of Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Manipur, Mizoram

and Orissa besides 35 districts of Eastern Uttar Pradesh and nine districts of West Bengal. An

amount of Rs.15 crore has been released during 2001-02 to NABARD as the share of the

Government of India’s assistance under the scheme. An allocation of Rs.115 crore has been

proposed during 2002-03.

The scheme aims at developing irrigation facility at the command of the farmers by tap-

ping ground water resources of the region in a planned manner with proper spacing. Thus,

there will be a substantial increase in agricultural production and productivity and per capita

income.

CHAPTER 7.

GENDER DEVELOPMENT

Women Development:

46Women constitute almost half the population and make up one third of the labour

force in India. Various schemes for financing farm and non-farm sector activities through

banking system are available both to men and women. In order to give focus to women in

various developmental activities and to increase their access to institutional credit, NABARD

has formulated various programmes -

Gender Sensitization Programmes -

With the objective of facilitating internalization of gender concerns in credit as also to

improve the outreach of the banks in respect of women clients, NABARD has been conduct-

ing gender sensitization meets/ workshops for various levels of bankers at the district and

state level. 330 such programmes covering over 6000 bank personnel have been conducted

till 31 March 2004.

Women Development Cells (WDC) -

With a view to strengthening institutional capabilities for addressing gender issues in

credit and support services and accelerating credit flow to women through ‘relationship bank-

ing’, NABARD has extended grant support for setting up of Women Development Cells in

RRBs and Coop Banks. NABARD has so far supported 100 such cells in Coop Banks and

RRBs. The credit flow to women through these banks is Rs.3595.79 crore covering 27.94

lakh women since inception of WDCs. Based on a review of their performance a modified in-

centive based scheme was formulated under which 8 banks have been sanctioned assistance.

Assistance to Rural Women in Rural Non-Farm Development (ARWIND) -

ARWIND, a single window scheme comprising credit as well as promotional com-

ponents, has been formulated with the objective of entrepreneurial development among rural

women. Under the scheme, assistance is available for activities like Escort Services (help in

actual setting up of units), Common Facility Centres/Service Centres, setting up of Mother

Units, Product Design, Quality Control, Organising Women etc. NABARD provides 100%

refinance to banks under the Scheme. As on 31 March 2004, Rs. 3 crore has been sanctioned

for 128 projects covering 9813 rural women in 22 states.

47 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 promot-

ing marketing of items produced by rural women such as market survey, capacity building,

technology upgradation, branding, labelling, packaging, publicity, setting up of showrooms/

sale outlets, etc. NABARD provides 100% refinance to banks under the scheme. As on 31

March 2004, 26 projects in 11 states were supported with assistance of Rs.59 lakh.

Development of Women through Area Programme (DEWTA)

Responding to the need for an integrated and holistic approach to development of wo-

men entrepreneurs, this scheme is being implemented in three RRBs on a pilot basis. Under

the programme the WDCs of select banks will identify the skill upgradation, capacity build-

ing, and credit needs of women and fulfill the same over a period of three years. A grant of

Rs.32 lakh has been sanctioned to the WDCs.

Support to Weaker Sections:

NABARD, has designed special programmes for upliftment of weaker sections of so-

ciety, viz. the Small and Marginal farmers, Scheduled Castes and Scheduled Tribes (SCs/

STs) and people living below the poverty line (BPL).

Support to Small and Marginal Farmers (SF & MF) -

As per NABARD’s refinance policy for production credit, the banks are required to

earmark a certain percentage of their lending to small and marginal farmers.

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 predomin-

antly tribal areas. Short Term credit limits are also sanctioned to cooperatives for financing

collection and marketing of various types of minor forest produce. SUCH AS

Adivasi Development programme in Gujarat

48The programme has been under implementation with grant support from KfW, Ger-

many, since 1994-95 in Dharampur Taluka of Valsad district through BAIF Development Re-

search Foundation, Pune. The focus is on development of wadi (small orchard) while other

supportive interventions viz, water resource development, agriculture development, women

development, health and sanitation are also addressed. Small and marginal farmers, including

women, are selected under the programme.

The landless are supported by providing them micro-enterprises in farm and non-farm

sectors and employment opportunities in processing units. The establishment of village level

people's organisations (POs) called Village Ayojan Samitis (VAS) have been the strongest

tool and nuclei for planning and implementation of the programme. The programme has been

a great success in converting 5,140 ha wastelands into orchards of cashew, mango and

forestry plants by 13,663 Adivasi families from 162 villages.

Adivasi Development Programme in Tribal Areas of Maharashtra

The successful implementation of Wadi model in Gujarat is being replicated in Maha-

rashtra (Nasik and Thane districts) with grant support from KfW, Germany through Maha-

rashtra Institute of Technology Transfer for Rural Areas (MITTRA), Nasik, an NGO pro-

moted by BAIF, Pune.

The programme with a project period of ten years (2000-2010), aims to support

15,000 tribal families by developing wadis on their marginally productive lands. The project

which was launched in September, 2000 has covered an area of 2076 ha under wadis belong-

ing to 5676 families from the 160 villages and has been instrumental in bringing about an

overall improvement in the quality of li8fe of the families in the project area.

50

CHAPTER 8

SUPERVISORY ROLE OF NABARD

Apart from the role of a development bank, NABARD undertakes certain supervisory func-

tions in respect of Coop Banks and RRBs under the Banking Regulation Act. The objective

of NABARD’s supervision is to assess financial and operational soundness and managerial

efficiency of these banks and their compliance with banking regulations. NABARD has con-

stituted a Board of Supervision as an Advisory Committee to the Board of Directors of

NABARD, which gives directions and guidance in respect of policies and on matters relating

to supervision and inspection.

NABARD undertakes on-site inspection of RRBs, SCBs and DCCBs on a two-year cycle

basis. Inspection of SCARDBs and apex non-credit cooperatives are undertaken on a volun-

tary basis. Off-site surveillance of Coop Banks and RRBs are also undertaken on an on-going

basis.

51

Core Functions

NABARD has been entrusted with the statutory responsibility of conducting inspections of

State Cooperative Banks (SCBs), District Central Cooperative Banks (DCCBs) and Regional

Rural Banks (RRBs) under the provision of the Banking Regulation Act, 1949. In addition,

NABARD has also been conducting periodic inspections of state level cooperative institu-

tions such as State Cooperative Agriculture and Rural Development Banks (SCARDBs),

Apex Weavers Societies, Marketing Federations, etc. on a voluntary basis.

Objectives of Inspection.

To protect the interest of the present and future depositors

To ensure that the business conducted by these banks is in conformity with the provisions of

the relevant Acts/Rules, regulations/Bye-Laws, etc.

To ensure observance of rules, guidelines, etc. formulated and issued by NABARD/RBI/Gov-

ernment

To examine the financial soundness of the banks

To suggest ways and means for strengthening the institutions so as to enable them to play

more efficient role in rural credit.

Instruments of Supervision

Periodic on-site inspection of 31 SCBs, 371 DCCBs, 20 SCARDBs and 82 RRBs and other

Apex level Cooperative institutions

Supplementary Appraisal

52Off-site Surveillance System (OSS)

Portfolio inspection/System study

CMA returns

Supervisory Strategy

In the wake of the banking sector reforms, new set of international norms/practices were

made applicable to Commercial Banks (CBs) to make them more competitive and sustainable

in the changing scenario. The co-operative banks and RRBs were also to function in the gen-

eral banking environment, emerging out of the financial sector reforms, introduced by the

GOI/RBI. Accordingly, the prudential norms were extended to them in phases. While the

capital adequacy norm has not yet been made applicable to these banks, the other prudential

norms viz. income recognition, asset classification and provisioning, which were made ap-

plicable by RBI to the commercial banking sector had been extended to cover RRBs in 1995-

96, SCBs and DCCBs in 1996-97 and to SCARDBs in 1997-98. NABARD, through a con-

crete and time-bound supervision strategy, facilities these banks to adjust to the new financial

discipline so as to internalize prudential norms stipulated.

Current Focus

Under the revised strategy, a sharper focus of the NABARD’s inspection was given on the

core areas of the functioning of banks pertaining to Capital Adequacy, Asset Quality, Man-

agement Earnings, Liquidity and Systems Compliance (CAMELSC). Thus, NABARD’s fo-

cus in its statutory ‘on-site’ inspections is on core assessments leaving the collateral apprais-

als to supplementary inspections. The micro level aspects are to be taken care of by the banks

themselves by way of internal inspections or by other agencies such as auditors. In this direc-

tion, through a series of workshops and meetings held with the Chief Executives and the

Chief Auditors of cooperative banks, NABARD attempted to ensure that the other areas, par-

ticularly relating to the internal checks and controls, revenue and income realization by way

of interest on loans and deposits and other routine features of carrying out general banking

53transactions were suitably taken care of by the respective banks and their concurrent/statutory

audit systems.

Off-site Surveillance

As a part of the new strategy of supervision, a system of `Off-site Surveillance' has been in-

troduced as a supplementary tool to the on-site inspection. Its objectives are to obtain and

analyse critical data on a continuous basis, to identify areas of supervisory concern and to

identify early warning signals and risky areas requiring further probe. The system basically

envisages desk scrutiny of operations of cooperative banks and RRBs through a set of stat-

utory and non-statutory returns. While the periodical statutory on-site inspections attempt an

overall evaluation of the performance of the banks with a stipulated period, off-site surveil-

lance envisages continuous supervision supplementing the on-site inspections with additional

instruments of supervision.

Board of Supervision (for SCBs, DCCBs and RRBs)

Board of Supervision (for SCBs, DCCBs and RRBs) has been constituted by NABARD un-

der Section 13(3) of NABARD Act, 1981 as an Internal Committee to the Board of Directors

of NABARD.

The broad powers and functions of the Board of Supervision are:

Giving directions and guidance in respect of policies and on matters relating to supervision

and inspection, reviewing the inspection findings, suggesting appropriate measures

Reviewing the follow-up action taken by Department of Supervision (DoS) on matters of

frauds and internal checks and control

Identifying the emerging supervisory issues in the functioning of cooperative banks/RRBs

such as NPAs recovery, investment portfolio, credit monitoring system, management prac-

tices, frauds, etc.

Suggesting necessary follow-up measures

54Recommending appropriate training for Inspecting Officers of NABARD for imparting ne-

cessary skills and knowledge

Recommend issue of directions by RBI

Oversee the quality of inspections carried out and the reports issued

Review the information generated through off-site surveillance and other supplementary

vehicles, action taken thereon

Undertake any other functions entrusted from time to time by the Board of Directors of

NABARD

The Board of Supervision, since its formation on 20 November 1999, has held 45 meetings

till 21 September 2010 and reviewed the financial position of Cooperative Banks and RRBs.

Based on the observations of BoS, authorities concerned have been apprised of the weak-

nesses.

Other Initiatives

The day-to-day functioning of the supervised banks is being monitored through various stat-

utory returns prescribed by the RBI/NABARD including OSS returns

Periodic coordination Meets are conducted with RPCD, RBI to discuss the policy and opera-

tional matters relating to supervision

State level groups comprising RCS, Apex bank, Cooperation and Finance Department, State

Government, Director of Audit and non-compliant banks have been constituted/convened for

preparing/discussing suitable strategy for Section 11 non-compliant banks and monitoring the

progress of Action Plan prepared by them to facilitate them recompliance with the provision.

Periodic discussions are held with the MD, Apex Banks, RCS and State Government etc. to

discuss the supervisory concerns.

NABARD Consultancy Services Pvt. Ltd. (NABCONS):

55NABCONS was set up on 17 November 2003 with an authorized capital of Rs. 25

crore of which Rs. 5 crore has been fully subscribed by NABARD. It provides consultancy

services in agriculture, agro processing and infrastructure projects, institutional development,

microfinance, watershed development, non-farm enterprises, training, potential identification

and related areas. In 2003-04, NABCONS had contracted business to the tune of Rs.10.26

crore. The clients of NABCONS include GoI, State Governments, Banks, International Bod-

ies, Corporate entities and individuals.

CHAPTER 9

NABARD AND MICRO FINANCE IN INDIA-

56AN OVERVIEW

Background

The post nationalization period in the banking sector witnessed substantial amount of re-

sources being earmarked towards meeting the credit needs of the poor. The banking network

underwent an expansion phase without comparable in the world. The branch expansion1 was

synergised with massive manpower recruitment drive for manning such branches. Credit

came to be recognized as a remedy for many of the ills of the poverty. Credit packages and

programmes were designed based on the perceived needs of the poor. Programmes also un-

derwent qualitative changes based on the experiences gained. Besides the programmes initi-

ated by the Central Government, a large number of credit-based programmes were introduced

by the state governments with large resource allocations.

While the underlying objectives were laudable and substantial progress was achieved, credit

flow to the poor, and especially to poor women, remained low. This led to initiatives that

were institution led, that attempted to converge of the existing strengths of rural banking in-

frastructure and leverage this to better serve the unbanked poor. The pioneering efforts at this

were made by National Bank for Agriculture and Rural Development (NABARD), which

was vested with an enviable task of framing appropriate policy for rural credit, provision of

technical assistance backed liquidity support to banks, supervision of rural credit institutions

and other development initiatives.

NABARD during the early eighties conducted a series of research studies in association with

MYRADA (a leading NGO from South India) and also independently which showed that

despite having a wide network of rural bank branches that implemented specific poverty alle-

viation programmes and self-employment opportunities through bank credit for almost two

decades, a very large number of the poorest of the poor continued to remain outside the fold

of the formal banking system. These studies also showed that the existing banking policies,

systems and procedures, and deposit and loan products were perhaps not well suited to meet

the most immediate needs of the poor. It also appeared that what the poor really needed was a

better access to these services and products, rather than cheap subsidised credit. Against this

background, a need was felt for alternative policies, systems and procedures, savings and loan

1

57products, other complementary services, and new delivery mechanisms, which would fulfill

the requirements of the poorest, especially of the women members of such households. The

emphasis therefore was on improving the access of the poor to microfinance (mF) rather than

just micro-credit.

The launching of its Pilot phase of the SHG (Self Help Group) Bank Linkage programme in

February 1992 could be considered as a landmark development in banking with the poor.

The SHG-informal thrift and credit groups of poor came to be recognised as bank clients un-

der the Pilot phase.

The strategy involved forming small, cohesive and participative groups of the poor, encour-

aging them to pool their thrift regularly and using the pooled thrift to make small interest

bearing loans to members, and in the process learning the nuances of financial discipline.

Subsequently, bank credit also becomes available to the Group, to augment its resources for

lending to its members. It needs to be emphasised that NABARD sees the promotion and

bank linking of SHGs not as a credit programme but as part of an overall arrangement for

providing financial services to the poor in a sustainable manner and also an empowerment

process for the members of these SHGs. NABARD, however, also took a conscious decision

to experiment with other successful strategies such as replicating Grameen, wholesaling

funds through NGO-mFIs.

The NABARD led Pilot Project commenced with the support of the Central Bank of the

country, i.e., Reserve Bank of India, from 1992 onwards aimed at promoting and financing

500 SHGs across the entire country, the SHG- bank linkage strategy has come a long way.

The strategy includes financing of SHGs promoted by external facilitators like NGOs,

bankers, socially spirited individuals and government agencies, as also promotion of SHGs

by banks themselves and financing SHGs directly by banks or indirectly where NGOs and

similar organisations act as financial intermediaries as well.

Overall Strategy

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 the poor, especially the women from the poor households, to collect-

58ively identify and analyse the problems they face in the perspective of their social and

economic environment. It helps them to pool their meagre resources, human and fin-

ancial, and prioritise 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 skilfully, prudently and with a

more lasting impact

Encourage SHGs to become a forum for many social sector interventions.

SHG-Bank Linkage Programme

Facilitating SHGs to access credit from formal banking channels. SHG-Bank Linkage

Programme has proved to be the major supplementary credit delivery system with

wide acceptance by banks, NGOs and various government departments

Region-specific Initiatives

NABARD has intensified its efforts for roping in new partners for promotion and

linkage of groups in regions where the growth of groups has not been commensurate

with potential

Priority has been assigned to awareness- building and for identification of NGOs and

other partners in 13 priority states, which account for 70% of rural poor in the coun-

try.

Capacity Building

NABARD sponsors capacity building programmes for various partners in the field of

microfinance to sensitise and equip them with concept & nuances of SHG bank link-

age programme.

NABARD provides training inputs on SHG financing to training establishments of

participating banks, to help them to internalise the training requirements at their level.

NABARD gives technical support to banks to evolve suitable intermediate structures

like Farmers' Clubs to increase the outreach of their branches in promotion and link-

ing SHGs

59 NABARD supports and helps banking institutions (especially RRBs & cooperative

banks) to take on the role of Self Help Promoting Institutions (SHPIs)

Support to Governments

Necessary assistance is provided to the governments by NABARD for dovetailing mF

practices with the poverty alleviation programmes

NABARD also encourages the association of Panchayati Raj Institutions (PRIs) in ad-

opting group processes for maximization of empowerment.

NABARD, in association with Lal Bahadur Shastry National Academy of Adminis-

tration, Mussoorie conducts tailor made exposure programme on self-help group and

microfinance for senior and middle level officers of Indian Administrative Services

(IAS) who are posted as district collectors/ Chief Executive Offices of local adminis-

trative set ups (Zilla Parishad)

Support to NGO Partners

Several steps have been taken by NABARD for capacity building of NGOs which

partner in promotion and nurturing of SHGs. The emphasis is on involving a large

number of NGOs. Special focus is on those NGOs participating in watershed develop-

ment, health, literacy and women development, to encourage them to take up promo-

tion, nurturing and linkage of SHGs as an 'add-on' activity.

NABARD has a scheme of part-financing the cost of promotion of groups by NGOs.

NABARD has developed specialized programmes for use by CEOs of NGOs for ap-

propriately envisioning this as an add-on concept. Separate programmes have also

been designed for NGO field staff to appreciate the nuances of SHG functioning.

Alternate mF practices

The NGOs and other local bodies at village, block and district levels in the North

Eastern States are encouraged to take up alternative micro-credit delivery mechanisms

through direct funding.

Formation and operation of SHG Federations is supported and encouraged by

NABARD. Similarly, networking of NGOs is also encouraged.

60Coordinating mF Efforts in India

NABARD coordinates the mF activities in India at international/ national/ state / district

levels. These include organizing international/national Workshops, Seminars, etc. for experi-

ence sharing, Organizing National and State level Meets of Bankers and NGOs etc. Dissem-

ination of best practices in SHG / microfinance.

Monitoring and Review

Block/district/state level review meetings are organised and/or organised by NABARD. The

relative documentation and database is also carried out by NABARD. In addition, periodical

Monitoring studies are conducted through NABARD/Bank Officers. Internal Impact Studies

and are conducted by NABARD periodically.

Other Initiatives:

Microenterprise Development Programme (MEDP) for Matured SHGs

The progression of SHG members to take up micro enterprise involves intensive training and

hand holding on various aspects including understanding market, potential mapping and ulti-

mately fine tuning skills and entrepreneurship to manage the enterprise. Hence, a separate,

specific and focussed skill-building programme ‘Micro Enterprise Development Programme

(MEDP)’ has been formulated. This involves organizing short duration, location specific pro-

grammes on skill upgradation / development for setting up sustainable micro-enterprises by

matured SHG members. The duration of training programme can vary between 3 to 13 days,

depending upon the objective and nature of training. The training may be conducted by agen-

cies that have background and professional competency in the field of microenterprise Devel-

opment with an expertise in skill development.

Scheme for Capital/ Equity Support to Micro-Finance Institutions (MFIs) from MFDEF

The scheme attempts to provide capital/equity support to Micro Finance Institutions (MFIs)

so as to enable them to leverage capital/equity for accessing commercial and other funds from

banks, for providing financial services at an affordable cost to the poor, and to enable MFIs to

achieve sustainability in their credit operations over a period of 3-5 years.

61Scheme for financial assistance to banks/ MFIs for rating of Micro Finance Institutions

(MFIs)

In order to identify MFIs, classify and rate such institutions and empower them to intermedi-

ate between the lending banks and the clients, NABARD has decided to extend financial as-

sistance to Commercial Banks and Regional Rural Banks by way of grant. The banks can

avail the services of credit rating agencies, M-CRIL, ICRA, CARE and Planet Finance in ad-

dition to CRISIL for rating of MFIs. The financial assistance by way of grant for meeting the

cost of rating of MFIs would be met by NABARD to the extent of 100% of the total profes-

sional fees subject to a maximum of Rs.3,00,000/-/-. The remaining cost would be borne by

the concerned MFI. The cost of local hospitality (including boarding and lodging) towards

field visit of the team from the credit rating Agency, as a part of the rating exercise, would

also be borne by the MFI. Those MFIs which have a minimum loan outstanding of more than

Rs. 50.00 lakh (Rupees fifty lakh only) and maximum of Rs 10 crore (Rupees Ten crore only)

would be considered for rating and support under the scheme. Financial assistance by way of

grant would be available only for the first rating of the MFI.

MFIs availing Capital Support and/or Revolving Fund Assistance from NABARD are also

eligible for re-imbursement of 50% of the cost of professional fee charged by Credit Rating

Agency for second rating subject to a maximum of Rs.1.50 lakh (i.e 50% of Rs.3 lakh). This

will be in addition to the re-imbursement of professional fee for first rating of the MFI.

Refinance support to banks for financing mFIs

The scheme is to provide 100% refinance to banks for financing mFIs. Interest rate on refin-

ance to Commercial Banks and Regional Rural Banks on their loans to mFIs for on lending

to clients will be at 3% less than that charged by banks subject to minimum interest rate of

7.5% for all regions and all eligible purposes. The revised rate of interest is applicable to re-

finance disbursed on or after 01 March 2010.

Scheme for financing matured SHGs for Farm Production and Investment activities

The objective of the scheme is to facilitate the members of matured SHGs to meet their credit

requirement for farm production and investment activities and to enable them to diversify

their income generating activities. Term Loan and Cash Credit limit given by the banks for a

62period of five years to SHGs exclusively for farm production and investment activities cover-

ing agriculture sector and allied activities. Banks can also sanction composite loans by com-

bining consumption credit to the extent of 30% of the total limit. Matured SHGs which have

successfully utilised bank loans and whose members have moved from consumption require-

ments to production requirements, may be considered for financing for farm production and

investment activities. Due freedom may be given to SHGs to monitor and ensure end-use of

credit as is usually practiced by banks under SHG Bank Linkage Programme. Refinance -

100% of the bank loan under Automatic Refinance facility (ARF). The refinance provided to

the banks under the scheme will be payable in 5 years at half yearly intervals.

MICRO FINANCE INSTITUTIONS

Chapter 1 A range of institutions in public sector as well as private sector offers the micro

finance services in India. They can be broadly categorized in to two categories namely,

formal institutions and informal institutions. The former category comprises of Apex Devel-

opment Financial Institutions, Commercial Banks, Regional Rural Banks, and Cooperative

Banks that provide micro finance services in addition to their general banking activities and

are referred to as micro finance service providers. On the other hand, the informal institutions

that undertake micro finance services as their main activity are generally referred to as micro

Finance Institutions (mFIs). While both private and public ownership are found in the case of

formal financial institutions offering micro finance services, the mFIs are mainly in the

private sector.

Micro Finance Service Providers

The micro finance service providers include apex institutions like National Bank for

Agriculture and Rural Development (NABARD), Small Industries Development Bank of In-

dia (SIDBI), and, Rashtriya Mahila Kosh (RMK). At the retail level, Commercial Banks, Re-

gional Rural Banks, and, Cooperative banks provide micro finance services. Today, there are

about 60,000 retail credit outlets of the formal banking sector in the rural areas comprising

12,000 branches of district level cooperative banks, over 14,000 branches of the Regional

Rural Banks (RRBs) and over 30,000 rural and semi-urban branches of commercial banks be-

sides almost 90,000 cooperatives credit societies at the village level. On an average, there is

at least one retail credit outlet for about 5,000 rural people. This physical reaching out to the

far-flung areas of the country to provide savings, credit and other banking services to the

63rural society is an unparalleled achievement of the Indian banking system. In the this paper an

attempt is made to deal with various aspects relating to emergence of private micro finance

industry in the context of prevailing legal and regulatory environment for private sector rural

and micro finance operators.

9.7 MF in India - An Overview

Innovative Pilot Projects

The phenomenal growth rate of microfinance sector, especially the SHG bank linkage pro-gramme has posed number of issues and challenges which need immediate attention. In re-sponse to this NABARD has initiated a number of innovations basically as an investment for posterity. At the core of these innovations is a desire to improve the outreach and sustainabil-ity of the programme. Some of the pilot projects designed and initiated recently are summar-ized here.

Introduction of Processor/Memory Cards- Application of IT in SHG Bank Linkage Pro-gramme

There are now many branches of Commercial Banks and Regional Rural Banks that service more than 200 SHG accounts which were hitherto considered impossible. Howsoever wel-come the trend may be, the burgeoning numbers have also brought to the fore a host of issues relating to tracking, monitoring and adequately servicing SHG accounts. It was felt that the best way to deal with the huge numbers would be to take recourse to new technologies avail-able.

Also in general, the branch manager in the rural areas is hard pressed for time and as a result does little for developing the business of the branch or for scouting for new business oppor-tunities for the branch. It was felt that use of Information Technology in the form of pro-cessor/memory cards for SHGs and other clients coupled with automation in a branch would serve to solve these vexed issues and leave adequate time for business development work.

NABARD has therefore decided to launch an experiment through five branches each of two RRBs in Andhra Pradesh & Karnataka. Introduction processor/memory Cards for active cli-ents and SHGs & automation of book keeping in SHGs is expected to reduce paper work, save time and thus improve the efficiency of the field worker. This is also expected to reduce the scope of manipulation, reduce unintended leakages and also maintain up to date books at SHG level.

The first pilot project on smart cards has been launched with Sri Visakha Grameena Bank in Andhra Pradesh (Reorganised as Andhra Pradesh Grameen Vikas Bank).The users of pro-cessor/memory cards would include SHGs and other good customers of the bank who are its regular customers. About 500 such customers, who would perform all banking transactions on a fast track, would be selected in each bank branch; time taken for banking by these regu-

64lar good clients is likely to be reduced considerably. Use of processor/memory cards by SHG customers also adds another set of advantages like effective book keeping, tracking and mon-itoring of SHGs, reducing the hassles of illiterate SHG members seeking the assistance of the NGO / promoter/ local book writer to perform these functions. In addition to prompt upkeep of books by SHGs, auditing of books of accounts, computing interest, could also be ensured with this system. The transaction data of each SHG collected from the field could be consol-idated at branch office to generate MIS reports, which the branch staff could effectively use to track the functioning of SHGs, ensure prompt credit linkages and recovery. This coupled with automation of back office operations of the branch would ease the branch manager of a lot of time spent on routine matters and they could use the spare time to build new customers and enhance business relations.

Scheme to finance Joint Liability Groups of tenant farmers

A Joint Liability Group (JLG) is an informal group comprising preferably of 4 to10

individuals coming together for the purposes of availing bank loan either singly or through

the group mechanism against mutual guarantee. The JLG members would offer a joint under-

taking to the bank that enables them to avail loans. The JLG members are expected to engage

in similar type of economic activities like crop production. The management of the JLG is to

be kept simple with little or no financial administration within the group. JLGs can be formed

primarily consisting of tenant farmers and small farmers cultivating land without possessing

proper title.

CHAPTER 10 Natural Resource Management Center

While the human life is depends on natural resources, they are also depend on humans

for their sustainability. In nature there are ways and means, which ensure a balance between

the various natural resources. However, advancement of human activities and excessive use

of natural resources. Natural resources are basically land, water, air, minerals etc. Their use /

exploitation has far exceeded their natural replenishment rates. Industrialization and various

other developmental processes have added to the problem by enhancing pollution and global

temperature and today the very future of mother earth is at stake. The most important re-

sources affected are water, land and air. While planned development of resources brings in

prosperity, the indiscriminate exploitation of nature leads to destruction of environment and

degradation of resources.

65In India, an estimated area of 146.82 million hectare suffers from various kinds of

land degradation due to water and wind erosion and other complex problems like alkalinity/

salinity, water logging, and soil acidity. In addition to erosion, salinity and alkalinity, our

soils are losing soil carbon and micronutrients due to irrational and unbalanced fertilizer use.

This must be addressed urgently since nearly two-thirds of our farmlands are in some way

either degraded or sick. Droughts and floods are also a common feature in many parts of the

country. A large part of the country depends on rains for agriculture. Due to heavy deforesta-

tion and denudation of soils, the rainwater received does not percolate much in many areas

for replenishing the aquifers and is lost in runoff. There is also over exploitation of available

ground water for agricultural and other uses. Management of natural resources is one of the

most critical aspects in the economic development of any country. In Indian conditions, it as-

sumes more importance, because the limited natural resources have to be judiciously used to

feed the ever-increasing population.

NABARD and Natural Resource Management

NABARD being apex institution directly and indirectly has been facilitating processes

to address the above challenges. NABARD‘s policy on NRM envisages “enhancing liveli-

hoods and quality of life of the rural community through improved resource conditions”. The

policy indicates that NABARD would direct its NRM interventions towards achieving struc-

tural impact on the NRM sector for livelihood enhancement, poverty reduction and ecological

sustainability.

NABARD has done pioneering and innovative work in NRM sector through its vari-

ous programs like Watershed development, WADI program under Tribal Development Fund,

Rural Habitat Programs, Environment Promotional Assistance, Rural Innovation Fund and

Farm Innovation and Promotion Fund (FIPF) etc. NABARD has also experimented with

Farmers Club (FCs), Joint Liability Groups (JLGs), and Self-help Groups (SHGs) as means

of peoples’ participation in development. Through these interventions, NABARD has been

able to prove the success of the experiment and successful models have emerged. The larger

replication on a wider scale requires more partners and public and private investments. While

NABARD would take up the policy advocacy and capacity building needs, it looks towards

the financial institutions to come forth for financing the NRM based livelihood interventions

and towards the technical institutions for appropriate technology.

66To give focused attention and facilitate NRM activities on a larger scale, NABARD

has set up a Natural Resource Management Center (NRMC) at Kolkata. NRMC is visioned

as a brand institution of NABARD and an institution of excellence, which will facilitate the

thematic leadership role of NABARD in NRM sector.

Objectives and Functions

The overall objective of NRMC is to facilitate improvement in livelihoods of rural

poor through sustainable management of natural resources. For achieving this, the center

would undertake following initiatives,

identify appropriate technologies available and ready for transfer

Awareness creation among and capacity building of communities and other stake

holders about the need and utility of appropriate technologies

Identification and documentation of successful models.

Focus Areas of NRMC

The centre’s core functional areas would relate to land, water and biotic resources in-

cluding forestry. The agricultural production subsystems and renewable energy will

also be the focus along with national priorities / global concerns / eastern & north

eastern regional concerns like,

o Food Security concerns

o S sustainable agricultural growth @ 4% p.a.

o Climate change (proofing, adaptation, mitigation)

o Disaster Management (Special focus on flood control in Eastern Region).

o Energy Security – Need for renewable energy (Bio-fuel, solar, wind)

o Evolution / dissemination of NRM based livelihood approaches

o Financial Products development suited to NRM Sector

o Other related areas (e.g. delivery models, gender issues).

Facilitate replication of successful models in NRM and transfer of technologies

Facilitate NRM based livelihoods integrating technology and credit

67 Promote CDM technologies and facilitate C- credit earning

Take up/ facilitate special studies, meets, workshops, Action research/ research in

NRM

Networking with academic institutions, research organizations, policy making institu-

tions, technical institutions, financial institutions, livelihood promoting institutions.

Adopt a multi sectoral and multi-disciplinary approach.

Policy feedback and advocacy.

Publish relevant literature for various stakeholders

Maintain comprehensive database on resources, technologies and approaches in NRM

Establish and maintain information and knowledge systems(IKM) for various stake

holders

Serve as NRM development technology clearing house

Activities of NRMC

Workshops and Meets

Celebration of Earth day

Workshop on Opportunities in Green Finance on the occasion of World Envir-

onment Day

Seminar on Community based NRM to mark NABARD’s foundation day

Meet on post Aila livelihood NRM based promotion

Meet with KVKs, research organizations

Consultative Meet on Impact of Climate Change on Agriculture and Farmers’

Adaptation.

Training programmes on new Jute retting technology

Networking with National Afforestation and Eco-development Board, NIRJAFT,

WWF, NAIP etc.

68

Chapter 11 Animal Husbandry

Why to do Dairy Farming?

Dairying is an important source of subsidiary income to small/marginal farmers and agricul-tural labourers. The manure from animals provides a good source of organic matter for im-proving soil fertility and crop yields. The gober gas from the dung is used as fuel for do-mestic purposes as also for running engines for drawing water from well. The surplus fodder and agricultural by-products are gainfully utilised for feeding the animals. Almost all draught power for farm operations and transportation is supplied by bullocks. Since agriculture is mostly seasonal, there is a possibility of finding employment throughout the year for many persons through dairy farming. Thus, dairy also provides employment throughout the year. The main beneficiaries of dairy programmes are small/marginal farmers and landless labour-ers. A farmer can earn a gross surplus of about Rs. 12,000 per year from a unit consisting of 2 milking buffaloes. The capital investment required for purchase of 2 buffaloes is Rs. 18,223/-. Even after paying a sum of Rs. 4294/- per annum towards repayment of the loan and interest the farmer can earn a net surplus of Rs. 6000 - 9000/- approximately per year. (For details see model scheme enclosed). Even more profits can be earned depending upon the breed of animal, managerial skills and marketing potential.

According to World Bank estimates about 75 per cent of India's 940 million people are in 5.87 million villages, cultivating over 145 million hectares of cropland. Average farm size is about 1.66 hectares. Among 70 million rural households, 42 per cent operate up to 2 hectares and 37 per cent are landless households. These landless and small farmers have in their pos-session 53 per cent of the animals and produce 51 per cent of the milk. Thus, small/marginal farmers and land less agricultural labourers play a very important role in milk production of the country. Dairy farming can also be taken up as a main occupation around big urban centres where the demand for milk is high.

69

Scope for Dairy Farming and its National Importance.

The total milk production in the country for the year 2001-02 was estimated at 84.6 million metric tonnes. At this production, the per capita availability was to be 226 grams per day against the minimum requirement of 250 grams per day as recommended by ICMR. Thus, there is a tremendous scope/potential for increasing the milk production. The population of breeding cows and buffaloes in milk over 3 years of age was 62.6 million and 42.4 million, respectively (1992 census)

Central and State Governments are giving considerable financial assistance for creating in-frastructure facilities for milk production. The nineth plan outlay on Animal Husbandry and Dairying was Rs. 2345 crores.

Farmers

Modern and well established scientific principles, practices and skills should be used to ob-tain maximum economic benefits from dairy farming. Some of the major norms and recom-mended practices are as follows:

I. Housing:

1. Construct shed on dry, properly raised ground.

2. Avoid water-logging, marshy and heavy rainfall areas.

3. The walls of the sheds should be 1.5 to 2 meters high.

4. The walls should be plastered to make them damp proof.

5. The roof should be 3-4 metres high.

706. The cattle shed should be well ventilated.

7. The floor should be pucca/hard, even non-slippery impervious, well sloped (3 cm per metre) and properly drained to remain dry and clean.

8. Provide 0.25 metre broad, pucca drain at the rear of the standing space.

9. A standing space of 2 x 1.05 metre for each animal is needed.

10. The manger space should be 1.05 metre with front height of 0.5 metre and depth of 0.25 metre.

11. The corners in mangers, troughs, drains and walls should be rounded for easy cleaning.

12. Provide 5-10 sq. metre loaf space for each animal.

13. Provide proper shade and cool drinking water in summer.

14. In winter keep animals indoor during night and rain.

15. Provide individual bedding daily.

16. Maintain sanitary condition around shed.

17. Control external parasites (ticks, flies etc.) by spraying the pens, sheds with Malathion or Copper sulphate solution.

18. Drain urine into collection pits and then to the field through irrigation channels.

19. Dispose of dung and urine properly. A gobar gas plant will be an ideal way. Where gobar gas plant is not constructed, convert the dung along with bedding material and other farm wastes into compost.

20. Give adequate space for the animals. (The housing space requirement of crossbred cattle in various

Organic farming is emerging as a sustainable alternative in reviving Indian Agricul-

ture especially in areas where the indiscriminate usage of chemical fertilizers and pesticides

had resulted in loss in soil fertility and productivity with adverse effects on water quality,

soil, plant and human health.

Recognising the importance of organic farming in Indian Agriculture, Government of India

has taken various initiatives to promote and support organic production. Setting up of Na-

71tional Centre of Organic Farming with Regional Centres at various places, launching of the

National Programme on Organic Production encompassing National Standards and Accredit-

ation Programme for Certification Agencies etc., are important steps in this direction. The im-

portance of organic inputs in development of organic farming is adequately emphasized with

the launching of the Capital Investment Subsidy Scheme for Commercial Production Units of

Organic Inputs by Government of India.

NABARD, as an apex institution in the field of agriculture and rural development has identi-

fied Organic Farming as a thrust area and has taken various initiatives for its promotion.

These initiatives include building capacities of bankers, NGOs, farmers through training pro-

grammes, exposure visits etc., technology development and its dissemination through various

funds and suggesting policy measures for financing organic farming. Package of practices

for organic farming is being developed by many Universities and Research Institutions.

These practices need to be developed into a bankable model for aiding financial institutions

in extending credit for organic farming. Preparation of model bankable schemes based on

package of practices developed by research institutions and those adopted by farmers is an at-

tempt in this direction. I am certain that these model schemes may act as a catalyst in promot-

ing organic farming amongst prospective entrepreneurs especially with the support of institu-

tional credit.

State Specific Projects

The Uttarakhand State is strategically located and forms part of the Northern bound-

ary of the country sharing its borders with Nepal in the East and Tibet (China) in the North,

Himachal in the West and Northwest, Gangetic plains of UP in the South. It extends between

77o 43’and 81o 02’E Longitude and 28o 43’ to 31o 27’ N Latitude. Starting from the foothills

in the South it extends to the snow clad mountains in the North. The elevation extends from

approximately 300 to 7000 m above mean sea level. The highest peak is Nanda Devi (7817

m) in the Chamoli district. The entire State of Uttarakhand forms a part of the Central Him-

alayas. The State is interspersed with rivers, deep valleys, glaciers, Alpine meadows and high

peaks; the state presents a very pristine, pure and picturesque environment.

In view of Uttarakhand's advantage as a major horticulture crops producing state, the state

Govt. has taken various steps to tap the resources for integrated development of horticulture

72sector ensuring nutritional security, utilization of wastelands and capture of foreign market.

With a holistic approach to improve the quality and productivity of horticultural crops by in-

tegrated implementation of viable, eco-friendly, refined technologies, and the centrally

sponsored scheme on Technology Mission for Integrated Development of Horticulture in Ut-

tarakhand was launched on 16th December 2003 in the state. The technology mission was fo-

cused to bring significant increase in production and productivity of horticultural crops

through area expansion under various horticultural crops incorporated with creation of water

sources to ensure availability of water for irrigation and launch modern and scientific systems

of irrigation like Drip/Micro irrigation as water scarcity in hills and Bhabar areas of Ut-

tarakhand is the major constraint which influence the crop yield badly.

As a policy to encourage use of such systems, the Govt. of India under centrally sponsored

scheme for small and marginal farmers to increase the irrigation efficiency, provides subsidy

to the extent of 50% of the cost of the equipment, the balance would be provided by banks as

a bank loan.

Keeping in view the declaration of Litchi Export Zone in Uttarakhand the use of micro irriga-

tion systems like drip has become all the more essential to improve the yield and quality of

Litchi to compete with the world market. In this context, an attempt has been made to pre-

pare a Model Drip Irrigation Scheme for cultivation of one hectare of Litchi in Uttarakhand

State.

Biotechnology

The success of Horticulture development hinges on selection of desired types of plants and

their multiplications. Selection of desired types is based on evaluation of the quantitative and

qualitative performance of plants and also in some cases their aesthetic appeal. Over the

years, the horticulturists have developed various techniques for selection of desired types of

plants and their multiplication. Recently interesting developments have taken place in the

field of plant multiplication which involves culture of cells or tissues in laboratory.

Traditionally, horticultural plants are multiplied by means of seeds (sexual propagation) or

organs other than seeds (asexual or vegetative propagation). These organs are usually stems,

leaves or roots. Though multiplication by seeds is the cheapest method, it suffers from certain

73disadvantages. Plants raised from seeds may not repeat good performance of mother plants.

Many horticultural plants take a long time to produce seeds/fruits and many of them do not

produce viable seeds or desired quality of seeds. Plants propagated vegetatively do not suffer

from these disadvantages. However, vegetative propagation is rather a slow, time and space

consuming process. Besides, it is usually infected with latent diseases. Some plants are also

not amenable to vegetative method of propagation, for example, coconut, papaya, oil palm,

clove etc.

Therefore, scientists started a quest for an alternative method of plant propagation which

could overcome the disadvantages of both the methods described above. After many trials

and errors in the sixties, plant propagation by tissue culture method, which could overcome

disadvantages of propagation by seeds or vegetative organs, was found commercially suc-

cessful in the case of orchids. Subsequently, the method has been perfected for many other

plants (Annexure A). The method (also known as micro-propagation) involves the culture of

whole organism from cells or tissues or plant parts in glass (in vitro) on a defined medium

under germ free conditions (sterile or aseptic), whereas conventional method of vegetative

propagation (macro-propagation) involves culture of parts into whole organisms in natural

conditions (in vitro).

CHAPTER 12

INTERNATIONAL ASSOCIATIONS OF NABARD

NABARD's international associates range from World Bank-affiliated organisations

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.

The World Bank Group – The International Development Association

74The World Bank works in close partnership with India’s Central and State Govern-

ments, aligning its strategies with the country’s own development agenda. It lays emphasis on

investing in people through better health and education, empowering communities to particip-

ate in their own development, improving the effectiveness of government, and promoting

private sector-led growth to achieve the country’s development goals.

IDA – Rubber Project

The Project was under implementation since January 1994 and closed on 30 Septem-

ber 2000. The achievements as at closure were commendable as more than 85,500 ha. Were

replanted and newly planted with high yielding clones. More than 96% of the beneficiaries

under replanting and 99% in new planting were small holders owning up to 2 ha. Owing to

productivity enhancement measures adopted under the project, the yield increased by 379 kg

per ha. From the base yield. In general, economic status of the rubber cultivators improved in

the project areas. Under the project refinance assistance of Rs. 604.57 million was provided

by NABARD to banks for financing rubber growers and processors for increasing production

and generating on and off-farm development through activities such as rubber planting, re-

planting and processing of rubber and rubber-wood activities in the traditional rubber grow-

ing states viz., Kerala, Tamil Nadu and selected non-traditional states viz., Tripura,

Karnataka, Assam, Meghalaya and Nagaland. The project has since come to a close.

Revitalization of Cooperatives

World Bank is presently actively appraising a loan to the Government of India for re-

vitalization of short term credit cooperative structure (STCCS) as proposed under the recom-

mendations of Vaidyanathan Committee. World Bank is working closely with NABARD,

which is the designated project implementing agency for the revitalization of STCCS.

Kreditanstalt fur Wiederaufbau (KfW)

NABARD has been implementing projects with assistance from Government of Ger-

many since 1990 in the sphere of Natural Resource Management, Micro Finance, Rural En-

terprise promotion and Development of Financial Sector.

http://www.kfw.de/

75Two phases of projects relating to Watershed Development have been completed in

Maharashtra during 1990-1999 and 1999-2005, propagating participatory approach to water-

shed development involves the communities who also committed to maintain the assets after

the completion of the project. More than 1 lakh ha. In 160 villages in 21 districts of Maha-

rashtra have been treated under this programme. Based on the success of the project, Govern-

ment of India modified its Watershed guidelines (Hariyali) to incorporate some of the ele-

ments of the Indo-German Watershed project implemented by NABARD

The major benefits of the programme are –

Primary Impact

Augmentation of drinking water availability

Improvement in Ground Water recharge

Increase in agricultural production

Decline in Migration to urban areas

Secondary impact

Improvement in quality of life;

Housing

Health; and

Education (attendance in schools)

The other main initiative was promotion of sustainable livelihoods for Tribals through

tree based farming approach. The programme contributed to livelihood of more than 13000

families through plantation of mango and cashew in 1 acre plantations. In the initial years

supplementary income was generated through inter-cropping with pulses, growing vegetables

in corner patches and boundary plantation of fodder varieties. When the tree started bearing

fruits, additional employment was generated for processing the fruits through groups and co-

operatives of villagers. The implementing NGO had a producer cooperative where the

products were further processed into various table varieties. The produce from the project is

even being exported.

76Projects under implementation in association with KfW

KfW - NABARD - Adivasi Development Programme,

Gujarat - (Grant assistance of Euro 13.29 million equivalents to DM 26 m)

The project is under implementation since 1994 and will end by 30 December 2007. It

envisages rehabilitation of about 8000 tribal families and 2000 landless women living in the

Dunger region of Dharampur Taluka of Valsad district in Gujarat through development of 1

acre of marginal/ waste land per tribal family on an average by adoption of soil and water

conservation measures, development of plantation with fruit, fuel and fodder cultivation as

well as inter-cropping. The programme was subsequently extended to nearby Dangs District

of Gujarat to cover 700 additional tribal families. BAIF Research and Development Founda-

tion, Pune, is the implementing agency. As on 30 September 2006, the cumulative coverage

under this programme stood at 12733 acres benefiting 13663 families from 162 villages for

which grant assistance of Rs. 50.85 crore has been received up to 31 December 2006 from

KfW.

KfW - NABARD - Adivasi Development Programme Maharashtra -

Grant Assistance of Euro 14.32 million)

The project is similar to the one in Gujarat and aimed at improving the socio-economic con-

dition of 14,000 tribal families and 1000 landless women through various economic and so-

cial welfare activities in 3 hilly blocks of Thane and Nasik districts of Maharashtra. The pro-

ject is being implemented through Maharashtra Institute for Technology Transfer for Rural

Areas (MITTRA), an associate of BAIF, Pune. It commenced in September 2000 and is oper-

ative up to 30 December 2010. As on 31 September 2006, 13848 families from 258 villages

had taken up wadi development in 12294 acres for which grant support of Rs 33.10 crore was

received up to 31 December 2006 from KfW.

KfW - NABARD - Adivasi Development Programme

Gujarat Phase II - Grant Assistance of Euro 7.00 million

The second phase of the project envisages coverage of additional 4000 families from about

90 villages in Dangs district and 700 families in Dharampur taluka of Valsad district. The

project is proposed to be implemented over a period of 10 years through DHRUVA, an asso-

77ciate of BAIF Development Research Foundation, Pune. The Financing Agreement was

signed on 28 March 2006 and the Guarantee Agreement between KfW and GoI was signed

on 16 May 2006. The implementation agreement with DHRUVA has been executed during

Jan 2007 and project implementation has begun with baseline survey of the project area.

KfW - NABARD - Indo German Watershed Development Programme

Rajasthan -Grant Assistance of Euro 11 million

The Programme is scheduled to be implemented in Banswara, Chittorgarh, Dungarpur and

Udaipur districts of Rajasthan with financial assistance of Euro 11 million over a period of

ten years commencing from January 2007. The Objective of the programme is to develop at

least 30 micro watersheds to stabilise agricultural production and improve pasture lands. The

agreements were executed with KfW during December 2006. The programme is expected to

be grounded shortly

Deutsche Gesellschaft fur Techniche Zussammenardeit - GTZ

NABARD-GTZ Technical Cooperation – Rural Finance Program

GTZ provides viable, forward-looking solutions for economic, environmental and social de-

velopment in a globalised world. GTZ supports complex reforms and change processes

across the world. All the activities of GTZ are geared to improve people’s living conditions

and prospects on a sustainable basis. The work of GTZ in the field of micro finance has found

worldwide recognition. The CGAP Peer Review on micro finance assessed GTZ and gave it

the highest marks for quality and efficiency in comparison to various service providers

worldwide.

The objective of the GTZ – NABARD Rural Finance Program is to improve the access for

sustainable and quality financial services to the rural population. The Rural Finance Program

consists of two components.

Component I: “Linking Self Help Groups to Banks” supports the massive efforts of the

National Linkage Banking Program. Impact assessments indicated that the Linkage Banking

Program contributes substantially to the achievement of the Millennium Development Goals.

The support of GTZ is ensuring sustainability, which includes the implementation of MIS,

http://www.gtz.de/en/index.asp

78Financial Health Check Systems for bank branches, Transaction Cost and Impact Analysis

and contributions to further strategy development.

Component II “Revitalization of the Rural Cooperative Banking Sector”: A reform of

this size is unique in the history of the world. GTZ is supporting the overall planning and im-

plementation of the Reform Program. In addition GTZ is cooperating with NABARD in the

implementing of Corporate Governance Codes for all three tiers of the CCS. This cooperation

also includes the design of a Uniform Accounting System, Internal Control Systems, and MIS

and Deposit Safety Systems for the Primary Agricultural Cooperative Societies.

12.5 Umbrella Programme on Natural Resource Management

GTZ is also a Technical Cooperation Partner in the field of sustainable development of Nat-ural Resources Management for which a TC support under UPNRM has been committed un-der German Development Cooperation

CHAPTER 13 Set backs of NABARD

FARMERS COMITTING SUICIDE

The principal agriculture development bank has to witness unprecedented crisis in the ag-

ricultural front with hundreds of farmers committing suicides in at least 31 districts spanning

over five states. A study conducted by the Indira Gandhi Institute of Development Research

(IGIDR) says the small and marginal farmers (holding lands up to 5 acres) were more vulner-

able to suicide. Another category of NABARD clientele, landless labourers who leased in

land constituted 19 percent of the suicide cases .In spite of NABARD and public sector banks

glorious existence for the more than two and three decades respectably, 51 percent of cultiv-

ator household is outside the ambit of any form of credit at all and out of 49 percent of the in-

79debted cultivator households, only 27 percent are indebted to the formal sources. National

Sample Survey Organization (NSSO)data show that in regard to very small land holdings of

25 percent’s; the formal credit delivery’s outreach is only 23 percent, while in regard to farm

holdings of between 5 and 10 acres, it is around 65 percent.

CRISIS IN MOBILIZING RESOURCES

In the twenty-fifth year of its existence, NABARD is facing a crisis of sort in mobilizing

resources from the market with its cost of resource mobilization shooting up to around 8.17

percent so far in 2006-07,as against 5.76 percent in 2005-06.The government’s abolition of

long term capital gains tax has, in turn, deprived NABARD of a comparatively cheap source

of fund by way of capital gains bond, the average interest burden of which in 2005-06 being

5.45 percent .In addition, the near total discontinuation of RBI contribution to NABARD be-

hind national rural credit—long term operations fund, national rural credit—stabilization

fund(in spite of statutory obligations of RBI under sections 42 and 43 of NABARD

Act,1981)to support long and medium—term agri-credit needs and behind general line of

credit for short term agri-credit operations have aggravated the problem of cheap

resources .This, in turn, has accentuated the problem of cheap credit for farmers, even during

distress,(as NRC-STAB fund is utilized to res7chedule loans during calamities like flood,

drought, and farmers’ suicide).The RBI’s surplus, instead, is diverted to balance the govern-

80ment of India’s fiscal deficit especially after operationalisation of Fiscal Responsibility And

Budget Management (FRBM) Act.

NABARD UNABLE TO BE RURAL CREDIT BANK

It is a quiet admission of poor credit flows to the needy in the rural and urban centres des-

pite many government-subsidised programmes. The poor and the needy in the unorganized

sector cannot put up any collaterals against bank loans and bankers should get rid of the habit

of demanding security from the poorest who have nothing but themselves to offer.

Anyway bankers do okay big size corporate loans on a call from New Delhi. Reports are

the Government and the RBI could be looking afresh at flow of bank funds into agriculture

and rural development in general.

Priority sector funding has become a farce with software and information technology be-

ing classified as priority.

The Lead Bank Approach and the Service Area Approach exist for the records, with bank

chairmen not overly worried over defaulting on the 18 per cent agriculture norm.

An excellent idea like the Rural Infrastructure Development Fund (RIDF) has gone cold, with

State Governments pleading absence of rural projects.

The Fund is presently being used by banks to earn a good return. Banks have to place any

fund shortfall in agriculture lending with RIDF. The scheme is structured in a manner which

deters banks from going into rural areas and a view being taken is to scrap interest payments.

The rate of interest on the entire deposit to be made in RIDF is prevailing Bank Rate plus 1.5

per cent when the shortfall in lending to agriculture in terms of percentage to net bank credit

(i.e., target minus achievement) is less than two percentage points; it is Bank Rate plus 0.5

per cent if the drop varies between two percentage and 4.99 percentage points; Bank Rate

minus 0.5 per cent if the default varies between 5 percentage and 8.99 percentage points; and

Bank Rate minus 1.5 per cent if the default is 9 percentage points and above.

Only RBI and the Finance Ministry can evolve a scheme which pays a fixed return to banks

refusing to fund the priority sector. It may be best to knock off all incentives at one go and

81make it mandatory on errant banks to cough up funds free. And the rule should cover foreign

and new private banks, which have only contempt for rural India.Parallely the government

could be sending the appointment papers to Ms Ranjana Kumar as Chairman of Nabard ef-

fective November 3, going by talk on Mint Street.

That should provide a head to the lead rural credit agency which today is doing little, as there

are no takers for its refinance facility. Inside Nabard, officers have been discussing the

agenda for the organisation over the next five to 10 years. Most would back the idea of

Nabard turning a universal bank by picking up the branches of the Regional Rural Banks

(RRBs) to mobilise retail deposits. Perhaps, banks not keen on a rural presence could also sell

their branches to Nabard. There are doubts over the quality of staff manning RRBs and the

heavy losses run up by a few. With the co-operative credit structure sick, at this point of time,

there is only a single option for Nabard: To be India's first rural credit bank and running up

an asset portfolio of rural borrowers.

introduction

Documents

rural development act

integrated rural development

sustainable rural development

rural development nabardnabard

rural development craficard

rural planning

rural developmentacts

rural areas2