CHAPTER1

INTRODUCTION OF NABARD
NABARD is an apex institution accredited with all matters concerning policy,
planning and operations in the field of credit for agriculture and other economic
activities in rural areas.
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 integrated 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 another allied economic activities in rural area with a view to
promote integrated rural development 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 development and secure prosperity of rural areas.
In discharging its role as a facilitator for rural prosperity NABARD is entrusted
with providing refinance to lending institutions in rural areas
1

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 institutions in agriculture and rural development acts as a
regulator in Co-operative banks and RRBs.
NABARD OVERVIEW
Twenty four years ago, to be precise on July12,1982, by an Act of the
parliament ,NABARD came into being with the avowed objective of providing
focused and undivided attention to the development of rural India which was, and
even now is, crucial to the countrys economic progress. Naiads mandate touches
practically every aspect of rural life. As its mission statement underscores,
NABARD is to promote sustainable and equitable agriculture and rural prosperity
through effective credit support, related services, institution development and other
innovative initiatives. As its core business is the credit support that suits every
activity in rural India. Today it has a tremendous reach through 28 regional offices
at the state capitals, a sub-office. It refinances commercial, co-operative and
regional rural banks for lending to on farm and non-farm activities like minor
irrigation, animal husbandry, farm mechanization, forestry, fisheries, land
development, horticulture, plantation and medicinal corps and non-farm like rural
industries, artisans, handicrafts, handlooms, rural housing, and rural tourism and so
2

on. Refinance is provided by NABARD for both long term investment credit as
well as short term production credit for crop rearing and working capital for nonfarm activities.
Clearly NABARD has been silently working for supporting diversified activities
and its stakes are quite awesome. The figures speak for themselves. It has
channelized whopping 8622crore disbursed during 2005-2006. under production
credit the bank sanctioned limits of Rs 11,889 crore during 2005-2006.

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

domain. To quote a few:
* SELF HELP GROUPS,
* FARMER CLUBS,
* RURAL INFRASTRUCTURE DEVELOPMENT FUND,
* WATERSHED DEVELOPMENT,
* KISSAN CREDIT CARD, DISTRICT RURAL
INDUSTRIES PROJECT CLUSTER
* DEVELOPMENT PROGRAMME AND
* RURAL INNOVATION FUND..
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
programmers endeavored to reach out to the last and most disadvantaged sections
3

of society, provide them with avenues of employment, 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 development 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 development, increased participation of people in the rural development
programs, decentralization of planning, better enforcement of land reforms and
greater access to credit are envisaged.
Objectives
NABARD was established in terms of the , "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
promoting IRDP and securing 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 LokSabha were
4

categorized as under: The National Bank will be an apex organization 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. The 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 pursuing this mission, NABARD focuses its activities on Credit functions,
involving preparation of potential-linked credit plans annually for all districts 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
programs Development functions, concerning reinforcement of the credit
functions and making creditmore productive Supervisory functions, ensuring the
proper functioning of cooperative banks and regionalrural banks

Chapter Role & Functions of NABARD

NABARD is an apex institution accredited with all matters concerning
policy, planning and operations in the field of credit for agriculture and other
economic activities in rural areas.
It is an apex refinancing agency for the institutions providing investment and
production credit for promoting the various developmental activities in rural
areas
It takes measures towards institution building for improving absorptive
capacity of the credit delivery system, including monitoring, formulation of
rehabilitation schemes, restructuring of credit institutions, training of
personnel, etc.
It co-ordinates the rural financing activities of all the institutions engaged in
developmental work at the field level and maintains liaison with
Government of India, State Governments, Reserve Bank of India and other
national level institutions concerned with policy formulation.
It prepares, on annual basis, rural credit plans for all districts in the country;
these plans form the base for annual credit plans of all rural financial
institutions
It undertakes monitoring and evaluation of projects refinanced by it.
It promotes research in the fields of rural banking, agriculture and rural
development

a. Institution Building Objectives

The rural financial system in the country calls for a strong and efficient credit
delivery system, capable of taking care of the expanding and diverse credit needs
of agriculture and rural development. More than 50% of the rural credit is
disbursed by the Co-operative Banks and Regional Rural Banks. NABARD is
responsible for regulating and supervising the functions of Co-operative banks and
RRBs. In this direction NABARD has been taking various initiatives in association
with Government of India and RBI to improve the health of Co-operative banks
and Regional Rural Banks.
COOPERATIVE DEVELOPMENT FUND (CDF)
In pursuance with the recommendations of the Parliamentary Committee on
Agriculture, 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 Purposes of the
fund are given below:

(a) Objective of the Fund:

Supporting the efforts of grass root level institutions (PACS) to mobilize
resources 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 efficiency and on
subjects referred to above.
(b) Purposes eligible for assistance:
Provision of infrastructural facilities to PACS for deposit mobilization.
Staff training and faculty support.
Computerization support for building of MIS in cooperative banks.
Conduct of special studies.
Creation of a conducive recovery climate through meeting the cost of
publicity, media, etc.
Providing mobility to the field staff for improving recovery.
Reimbursement of training expenditure to ACSTIs and JLTCs
Best Performance Awards to Cooperative Banks
Establishment of Business Development Department (BDD) in Cooperative
Banks Publicity of Kisan Credit Cards (KCC)
8

CURRENT POSITION OF NABARD

In a journey spanning 25 years, NABARD has paved the way for all-round
ruralprogress and development with 28 regional offices, sub-office at Port
Blair and 376district 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 mostlyof 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 244,651 projects covering irrigation, rural roads and bridges,
health and education, soil conversation, drinking water schemes etc.
Watershed development fund, with cumulative sanctions of Rs578.95 crore
for 427projects in 124 districts of 14 states, has created a Peoples
Movement in rural India.
Farmers now enjoy financial access and security through 582.50 lakh
Kansan Credit Cards that have been issued through a vast rural
bankingnetwork.
District Rural Industries Projects (DRIP) has generated employment for
23.34 lakh units in 105 districts

10

Chapter 2.
FUNCTIONS OF NABARD
CREDIT ROLE
CREDIT OPERATIONS PERFORMED BY THE
BANK:
The National Bank is empowered to provide short-term refinance assistance
forperiods not exceeding 18 months to state Co-operative Banks, Regional Rural
Banks and anyfinancial institution approved by Reserve Bank in this behalf; for a
wide range of purposes,including marketing and trading, relating to rural economy.
These short term loans grantedto State co-operative Banks and Regional Rural
Banks, in so far as they relate to thefinancing of agricultural operations or
marketing of crops, can be converted by the NationalBank into medium-term loans
for periods not exceeding seven years under conditions of
Drought, famine or other natural calamities, military operations or enemy action.
The National Bank can grant medium-term loans to the State co-operative Banks
andRegional 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 timesubject to their being fully guaranteed by the State
Governments as to the repayment ofprincipal and payment of interest. Such
guarantee can however be waived by the NationalBank in such circumstances.
The National Bank is empowered to provide by way of refinance assistance longterm loans extending upto a maximum period of 25 years including the period of
re-schedulingsuch loans to the State Land Development Banks, Regional Rural
11

Banks, CommercialBanks, State Co-operative Banks or any other financial

institutions approved by the ReserveBank for the purpose of making investment
loans. It may also give short-term loansalongwith long-terms loans where such
composite loans are considered necessary. Loans forperiods not exceeding 20 years
can be made to the State Governments to enable them tosubscribe directly or
indirectly to the Share capital of Co-operative Societies.
Moreover, the new bank can contribute to the share capital or invest in the
securitiesof any institutions concerned with agriculture or rural development.
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 districtand projects credit
requirements, taking into account long-term physical potential,availability of
infrastructure, extension services and marketing support and the strengths
andweaknesses of the RFIs in the district.
*State Level Planning NABARD prepares a State Focus Paper for every State. This presents a
comprehensivepicture 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 thesesectors. It can be used by bankers and
other agencies for preparing their action plans formaking these investments.
State Credit Seminars are convened by NABARD annually where all agencies
concernedviz., the State Government, banks, NGOs, etc. participate and discuss

12

policies andoperational measures required to be taken for tackling constraints in

development ofpotentials 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
toagriculture and rural development.

Chapter 3
NABARDs RESOURCE FOR THE OPERATIONS :
For its short-term operations, the National Bank will borrow funds from the
Reserve Bank inthe form of Line of Credit under Section 17 (4E) of the Reserve
Bank of India Act whichpermitted the Reserve Bank to grant short-term loans to
the Agricultural Refinance andDevelopment Corporation earlier and which has
now been amended suitably by the NationalBank for Agriculture and Rural
Development Act.
For its term-loan operations, the National Bank will draw funds, as the Corporation
wasdoing earlier, from the Central Government, World Bank/IDA, and other
multilateral andbilateral aid agencies, the market and National Rural Credits (longterm operations).Fundthat it has established. To this Fund has been transferred the
balance in the NationalAgricultural Credit (Long term operations).Funds
maintained by the Reserve Bank. Furthercontributions would be made annually to
the new Fund by the Reserve Bank in addition tothe contributions by the National
Bank itself. Provision has been made also for the CentralGovernment and the State
Governments to contribute to this Fund from time to time.

13

Interest Rates
* Margin money
The beneficiary's contribution to the project cost is necessary in order to ensure his
stake inthe investment. Such margin money varies from 5% to 25% depending on
the type ofinvestments and the category of the beneficiaries. The margin money
can be by way ofcontribution in cash or own or family labour. Large farmers,
firms, corporate borrowersincluding state-owned corporations, forest development
corporations provide margin money up to 25% puff the investment cost.
* Special focus
Removal of regional and sectoral imbalances is one of the thrust areas and hence
preferenceis given to the needs of the underdeveloped areas. For example, the
development of thenorth-eastern region has been a key programme and special
efforts have been made throughrefinance offered on liberal terms and other
supportive measures so that the rural creditdelivery system in the region is
strengthened.
* Monitoring
Special attention is paid to monitoring the projects that are offered assistance so
that thetargets are met and the implementation is properly done. An evaluation of
the project istaken up and in the light of the findings the quality of the projects and
their implementationmethods can be improved. District-oriented monitoring
studies are conducted to evaluate theperformance of the ongoing agricultural
development schemes sanctioned. Specific sectorstudies are also undertaken like
floriculture, mushroom, aqua culture, agro-processing, etc.to get an insight into the
14

problems and prospects of these sectors.Guidelines are often issued for formulation
of high-tech and export-oriented projects in farmand non-farm sectors. Besides,
even consultancy is also offered for projects, includingappraisal 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 therebyincreasing their capacity to leverage larger resources, NABARD
provides loans to StateGovernments to contribute to the share capital of these
institutions.
Rural Infrastructure Development
With the objective of assisting State Governments in the completion of ongoing
ruralinfrastructure projects and to take up new infrastructure projects, the Rural
InfrastructureDevelopment Fund (RIDF) was set up with NABARD in 1995-96
with contributions fromCommercial 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 thedisbursements were Rs. 25384.02 cr.

15

NABARD also offers various credit facilities like:

Short-term/ Medium term/ Long-term refinance for various types of
production/marketing/ procurement activities at attractive interest rates to various
organizations, societies, Government etc.
Investment Credit (Medium and Long Term) Refinance with a mission of
Accelerating Private Capital Formation to Promote Sustainable and Equitable
Agriculture and Rural Prosperity with Refinance as Lever.
Rural Infrastructure Development Fund (RIDF) is a fund to promote the
investment in infrastructure for agriculture. State Governments as well as
Panchayat Raj Institutions (PRIs), Non-Governmental Organizations, Self-Help
Groups, etc. are eligible to borrow out of RIDF for their schemes like ongoing
Irrigation, Flood Protection, Watershed Management projects, rural Road & Bridge
projects, Primary and Secondary Schools, Primary Health Centers, Village Haats,
Joint Forest Management, Terminal and Rural Market/Godowns,
Rain Water Harvesting, Watershed development, flood protection, drainage, Cold
Storage, Riverine Fisheries, Fishing Harbour& Jetties, Mini/Small Hydel Projects
in Power Sector, Rural Drinking Water Supply Schemes, Citizen Information
Centres, Modern abottoir, Seed/Agri./Hori.Farms etc.
Rural Farm and Non Farm Sector Schemes
Refinance for Rural Housing Facilities scheme provides Credit to the
Individuals, Co-operative Housing Societies, Public Bodies, Housing Boards/
Housing Development Authorities/ Improvement, Trusts, Local Bodies,
Voluntary agencies and NGOs, Housing Finance Companies registered, with NHB
for finance extended by them to housing projects in the 'rural' areas only. The
16

finance is provides for Construction of New Houses as well as Repairs/Renovation

of existing houses in rural areas/ Rainwater Harvesting Structures/ Sanitary
Latrines, etc.
Under the Micro Credit Innovation scheme, NABARD facilitates sustained
access to financial services for the unreached poor in rural areas through various
microFinance innovations in a cost effective and sustainable manner
NABARD has been designated the Implementing Agency for implementing the
Revival Package in all the states. TheDepartment for Cooperative Revival and
Reforms (DCRR) has been constituted in NABARD for this purpose. NABARD
is providing dedicated manpower at the national, state and district levels for
implementing the Package.
Loans to State Governments for funding equity of Co-operative Credit
Institutions.
NABARD has formulated a Model scheme for issue of Kisan Credit Cards to
farmers, on the basis of their land holdings, for uniform adoption by banks, so that
the farmers may use them to readily purchase agricultural inputs such as seeds,
fertilisers, pesticides, etc. and also draw cash for their production needs. Farmers
have to get in touch with Authorised banks to use this facility
A Research and Development Fund has been established by the bank with the
objective of acquiring new insights into the problems of agricultural and rural
development through

in-depth studies and applied research and trying

out

innovative approaches backed up by technical and economic studies. It includes

facilities for training, dissemination of information and promotion of research by
undertaking studies techno-economic and other surveys in the fields of agriculture,
rural banking and rural development. The eligible Institutes for the fund are
Approved research institutions, organizations and

other agencies which are

engaged in action-oriented, applied research, Individuals or groups of individuals

17

would also be extended assistance

provided they are sponsored by suitable

organizations which would certify the proper use and accounting of funds, Private
and commercial organizations are not normally eligible for assistance under the
this fund.
SWAROJGAR CREDIT CARD SCHEME aims at providing adequate and
timely credit ie. Working capital or block capital or both to small artisans,
handloom weavers, service sector, fishermen, self employed persons, rickshaw
owners, other micro-entrepreneurs, SHGs, etc from the banking system in a
flexible, hassle free and cost effective manner. Borrowers in urban areas can be
covered under SCC Scheme. Small business covered under priority sector is also
eligible under SCC Scheme. Any scheme/project that is income generating/
employment generating may be covered under the scheme. The facility may also
include a reasonable component for consumption needs. Farm sector activities like
fisheries, dairy, etc. can also be covered under the scheme. Generally such of the
self-employment activities which have regular turn over/income stream on shortinterval basis can be covered under SCC scheme. SCC is a credit delivery mode
and not a purpose. Coverage of SCC will not make a unit ineligible for subsidy.
Banks can issue SCCs to target borrowers of SCC scheme for disbursing credit
under any schemes whether they are covered under subsidy or not.
Farmers' Club Programme is a grass root level informal forum. Such Clubs are
organised by rural branches of banks with the support and financial assistance of
NABARD for the mutual benefit of the banks concerned and rural people. The
broad functions being to coordinate with banks to ensure credit flow among its
members and forge better bank borrower relationship, interface with subject matter
specialists in the various fields of agriculture and allied activities etc., extension
18

personnel of Agriculture Universities, Development Departments and other related

agencies for technical know how
up gradation. Liaison with Corporate input suppliers to purchase bulk inputs on
behalf of members, organize/facilitate joint activities like value addition,
processing, collective farm produce marketing, etc.; for the benefit of members.
They can also sponsor / organise SHGs, undertake socio-economic
developmental activities like community works, education, health, environment
and natural resource management etc.
NABARD Consultancy Services (Nabcons) is engaged in providing
consultancy in all spheres of agriculture, rural development and allied areas.
Nabcons leverages on the core competence of the NABARD in the areas of
agricultural and rural development, especially multidisciplinary projects, banking,
institutional development, infrastructure, training, etc., internalized for more than
two decades.
Crafts Mart scheme was initiated with the objective of providing the rural
artisans and entrepreneurs access to urban and upcountry markets, products of few
artisans supported by NABARD under its various promotional programmes are
displayed along with the contact addresses
Rural Innovation Fund (RIF) is a fund designed to support innovative, risk
friendly, unconventional experiments in Farm, Non-Farm and micro-Finance
sectors that would have the potential to promote livelihood opportunities and
employment in rural areas. The following areas/sectors are as thrust areas for
support from the Fund. Dry land / Rain fed farming, Rainwater harvesting, Energy
from biomass, Crop residues and non-crop bio mass, Distribution and use of water
19

and energy, Storage devices for agricultural and rural products, Managing common
property resources, Roads, Sanitation and Waste disposal, micro-Finance,
Entrepreneurship/Skill development, micro-Enterprises, Marketing, Housing,
Service sector, Health care and Hygiene.
Water Harvesting Scheme is for the SC / ST Farmers with main objective of the
scheme is to cover SC/ST farmers in providing irrigation facilities to their
homesteads / farmlands. In order to augment the income generating capacity of
these SC/ST farmers suitable local water-harvesting structures are proposed along
with provision for small lifting devices on a nationwide scale. Freshwater
aquaculture wherever feasible can also be taken up as per the choice of farmers.
CHAPTER 4
DEVELOPMENT ROLES OF NABARD
Credit is a critical factor in development of agriculture and rural sector as it
enables investment in capital formation and technological up-gradation. Hence
strengthening of rural financial 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

20

Enter into MoU with state governments and cooperative banks specifying their
respective obligations to improve the affairs of the banks in a stipulated timeframe
Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying
the irrespective obligations to improve the affairs of the Regional Rural Banks in a
stipulated timeframe
Monitor implementation of development action plans of banks and fulfillment of
obligations under MoUs
Provide financial assistance to cooperatives and Regional Rural Banks for
establishment of technical, monitoring and evaluations cells
Create awareness among the borrowers on ethics of repayment through Vikas
Volunteer Vaahini and Farmers club, provide financial assistance to cooperative
banks for building
Improved management information system, computerization of operations and
development of human resources
Watershed Development Fund (WDF)
Pursuant to the announcement by the Honble 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 throughout 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
21

watershed projects through the village level communities, non-governmental

organizations (NGOs) or project facilitating 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 women 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.
COOPERATIVE DEVELOPMENT FUND (CDF)
In pursuance with the recommendations of the Parliamentary Committee on
Agriculture, 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, 2004aggregated to Rs.62.18 crore against which an
amount of Rs.50.87 crore has been disbursed.
The Objectives and Purposes of the fund are given below:

22

*Objective of the Fund:

Supporting the efforts of grass root level institutions
(PACS) to mobilize resourcesetc.
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
efficiency 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
correlation between the index of infrastructure development and rural
development. Indeed it is far too crucial to have infrastructure for agriculture,
industrial and overall economic
development. Infrastructure also provides basic amenities that improve the quality
of life. Therefore, for supporting State Governments and other development
institutions, NABARD
opened the window of RIDF in 1995-1996 NABARD so far have sanctioned Rs
51,283crore for 2,44651 projects under the Fund.
A cumulative position of sector-wise sanctions as on 31st March 2006 : Irrigation :
Rs15105,50 crore(107.92 lakh hectares) Rural Connectivity :Rs 20,290,40 crore of
rural road
23

network (2.20 lakh km) and bridges (3.69 lakh mtrs) power Rs 1,327.7 crore social
sector :Rs 4,128.1 croreOther :Rs 3,539 crore. A separate window has been created
for rural connectivity with villages of population less than 500, with a corpus of Rs
4000 crore to support the Bharat Nariman project.
Chapter 5
DISTRICT RURAL INDUSTRIES PROJECT(DRIP)
NABARD,launched DRIP, an integrated area based credit intensification
programme,in collaboration with government, banks and other development
agencies with focus on creating sustainable employment opportunities in rural
areas. Today itis being implemented in 106 districts all over thecountry.
Maharashtra Rural Credit Project
The project was under implementation since January 1994 and covers 1483
villages in twelve districts of Maharashtra. The primary objective is poverty
alleviation through increased 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 promoting 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.

24

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
supported 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
programme under 7792 REDPs
Rural Marketing
A number of marketing interventions have been made for marketing of rural nonfarm products since marketing is a key factor in the sustainability of any
suchendeavour.

With

the

financial

support

of

NABARD

under

its

promotionalprogrammes like Rural Haats, Rural Marts, participation in fairs,

exhibitions andmarketing melas, rural artisans and entrepreneurs can get a larger
market for theirproduce and showcase their talent to urban and upcountry markets.
Revival of Short-Term Rural Co-operativeStructure(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
Agricultural Coop. Societies. (PACS). The revival package has been approved by
the Govt. ofIndia based on the recommendations of the Vaidyanathan Committee.
NABARD hashad 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 implementing committees, NABARD has designed guidelines and training
manuals for the special audit of PACS under the Package.

25

Rural Innovation Fund:

In association

with

Swiss Agency

for

Development

and Cooperation

(SDC),NABARD has constituted the NABARD SDC Rural Innovation Fund

(RIF) to support 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
national 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
hightech/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.
72.42crore. Floriculture, organic farming, milk processing, ethanol production.

26

CHAPTER6
LATEST SCHEMES NABARD
MILLION SHALLOW TUBEWELLSPROGRAMME
The 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 tube
wells with pump sets to bring an additional two million hectares of land under
irrigation during the next five years and increase the agricultural production and
productivity of the State. The Scheme is being implemented 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

27

i.e the borrowers will not be eligible for subsidy if loan is liquidated completely
within five years from the date of initial disbursement.
ON FARM WATER MANAGEMENT FOR
INCREASING CROP PRODUCTION IN EASTERNINDIA (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 :
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/STborrowers. 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 and2002-03 are 48699 Shallow Tubewells with
pumpsets, 4571 LLIP, 924 Dugwells and 6252Pumpsets.

28

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
initial disbursement
NABARD SDC Rural Innovation Fund
[RI 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 envisaged that the entire fund will be utilized 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 Micro-Finance Sectors leading to creation of
livelihood opportunities for the poor.
NABARD invites proposals for funding support to innovative projects having the
above objective.
An illustrative list of areas is given below :
Biological and Engineering measures/techniques which improve productivity of
water.

29

 Design of economic and efficient water harvesting structures.

Efficient water use systems : low cost micro-irrigation technology/ micro tube
irrigation technology, etc.
Diversification of farm activities - agro-forestry, silvipasture, agro-horticulture
and animal husbandry etc.
Organic farming - bio-fertilizers 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 rain fed agriculture.
Banking through SHGs, VWCs and user teams, Joint Liability
Groups, etc.
Innovative rain water harvesting for rural dwellings.

30

 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 Innovation 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 awareness about the Swarojgar credit card scheme. Under the promotional
scheme, financial

31

grants will be provided to select regional rural banks and cooperative banks to
support publicity programmes 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,
handloom weavers, rickshaw owners and other micro-entrepreneurs. The
promotional campaign 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 number of people, the release adds.
In Kerala, one time grant assistance will be provided to three banking entities to
create 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 Agriculture and Rural Development Bank, according to the press
release. The three banks will receive 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.

32

CHAPTER 7
Nabard's refinance scheme for Kerala co-op bank
The Regional Office of Nabard has released schematic refinance to the tune of Rs
15.29crore 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 sector 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 toRs 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
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.
The maximum amount of loan to be available under the scheme is Rs 3,500 at 7.5
percent rate of interest with quarterly rest, payable between three and five years,
according to a bank release

33

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 Indias assistance under
the scheme. An allocation of Rs.115crore has been proposed during 2002-03.
The scheme aims at developing irrigation facility at the command of the farmers by
tapping 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.
GENDER DEVELOPMENT
Women Development:
Women 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 -

34

Gender Sensitization ProgrammesWith 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 conducting 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
banking, 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 crorecovering 27.94 lakh women since inception of WDCs.
Based on a review of their performance a modified incentive 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
components, 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 ofMother Units, Product Design, Quality
Control, Organising Women etc. NABARD provides100% 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.
35

Assistance for Marketing of Non Farm Products of Rural Women (MAHIMA)

Recognizing the importance of marketing as a crucial link for women
entrepreneurs the scheme MAHIMA was introduced. It aims at supporting
various initiatives for promoting marketing of items produced by rural women such
as market survey, capacity building, technology upgradation, branding, labeling,
packaging, publicity, setting up of showrooms/sale outlets, etc. 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
women 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 building, 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
society, viz. the Small and Marginal farmers, Scheduled Castes and Scheduled
Tribes(SCs/STs) and people living below the poverty line (BPL).

36

Support to Small and Marginal Farmers

(SF & MF) As per NABARDs refinance policy for production credit, the banks are required to
earn, mark 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 predominantly 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
The programme has been under implementation with grant support from
KfW,Germany, since 1994-95 in DharampurTaluka of Valsad district through BAIF
Development Research 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 nonfarm sectors and employment opportunities in processing units. The establishment
of village level peoples organisations (POs) called Village AyojanSamitis (VAS)
have been the strongest tool and nuclei for planning and implementation of the
programme. The programme hasbeen a great success in converting 5,140 ha
37

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
Maharashtra (Nasik and Thane districts) with grant support from KfW, Germany
through Maharashtra Institute of Technology Transfer for Rural Areas (MITTRA),
Nasik, an NGO promoted by BAIF, Pune.
The programme with a project period of ten years (2000-2010), aims to
support15,000 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 belonging 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.

38

CHAPTER 8
Supervisory role of Nabard
Apart from the role of a development bank, NABARD undertakes certain
supervisory functions in respect of Coop Banks and RRBs under the Banking
Regulation Act. The
objective of NABARDs supervision is to assess financial and operational
soundness and managerial efficiency of these banks and their compliance with
banking regulations. NABARD has constituted 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 voluntary basis. Off-site surveillance of Coop Banks and RRBs are also
undertaken on an on-going basis.
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
institutions such as State Cooperative Agriculture and Rural Development
Banks(SCARDBs), Apex Weavers Societies, Marketing Federations, etc. on a
voluntary basis.

39

*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/Government 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 AppraisalOff-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 general 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 applicable by
RBI to the commercial banking sector had been extended to cover RRBs in 199596, SCBs and DCCBs in 1996-97 and to SCARDBs in 1997-98.

40

NABARD, through a concrete 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 NABARDs inspection was given
on the core areas of the functioning of banks pertaining to Capital Adequacy, Asset
Quality, Management Earnings, Liquidity and Systems Compliance (CAMELSC).
Thus, NABARDs focus in its statutory on-site inspections is on core assessments
leaving the collateral appraisals 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 direction, 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,
particularly 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 transactions 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 introduced as a supplementary tool to the on-site inspection. Its objectives are
to obtain and analyze 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 statutory and non-statutory returns.
While the periodical statutory on-site inspections attempt an overall evaluation of
41

the performance of the banks with a stipulated period, off-site surveillance

envisages continuous supervision supplementing the on-site inspections with
additional instruments of supervision.
Board of Supervision (for SCBs, DCCBs andRRBs)
Board of Supervision (for SCBs, DCCBs and RRBs) has been constituted by
NABARD under 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
practices, frauds, etc. Suggesting necessary follow-up measures
Recommending appropriate training for Inspecting Officers of NABARD for
imparting necessary 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

42

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 weaknesses.
Other Initiatives
The day-to-day functioning of the supervised banks is being monitored through
various statutory returns prescribed by the RBI/NABARD including OSS returns
Periodic coordination Meets are conducted with RPCD, RBI to discuss the policy
and operational 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, State
Government etc. to discuss the supervisory concerns.

43

CHAPTER 9
NABARD Consultancy Services Pvt. Ltd. (NABCONS):
NABCONS was set up on 17 November 2003 with an authorized capital of Rs.
25crore 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 Bodies,
Corporate entities and individuals.
NABARD AND MICROFINANCE IN INDIA-AN OVERVIEW
Background
The post nationalization period in the banking sector witnessed substantial amount
of resources being earmarked towards meeting the credit needs of the poor. The
banking
network underwent an expansion phase without comparables in the world. The
branchexpansion1 was synergized 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 underwent qualitative changes based on the experiences
gained. Besides
The programmes initiated by the Central Government, a large number of creditbased programmes were introduced by the state governments with large resource
allocations. While the underlying objectives were laudable and substantial progress
44

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 infrastructure 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 alleviation 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 subsidized credit. Against this background, a need was felt for
alternative policies, systems and procedures, savings and loan products, 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.
45

The launching of its Pilot phase of the SHG (SelfHelpGroup) 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 recognized as bank clients under the Pilot phase. The strategy involved forming
small, cohesive and participative groups of the poor, encouraging 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 emphasized 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 aconscious 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 financing500 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
organizations act as financial intermediaries as well.

46

CHAPTER 10
NABARD and Natural Resource Management
NABARD being apex institution directly and indirectly has been facilitating
processes to address the above challenges. NABARDs policy on NRM envisages
enhancing livelihoods and quality of life of the rural community through
improved resource conditions. The policy indicates that NABARD would direct
its NRM interventions towards achieving structural 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
various 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), SelfHelp 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. To 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.

47

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
stakeholders about the need and utility of appropriate technologies. Identification
and documentation of successful models.

Focus Areas of NRMC

The centres core functional areas would relate to land, water and biotic resources
including forestry. The agricultural production subsystems and renewable energy
will also be the focus along with national priorities / global concerns / eastern &
northeastern regional concerns like,

Food Security concerns

Sustainable agricultural growth @ 4% p.a.
Climate change (proofing, adaptation, mitigation)
Disaster Management (Special focus on flood control in Eastern Region).
Energy Security Need for renewable energy (Bio-fuel, solar, wind)
Evolution / dissemination of NRM based livelihood approaches
Financial Products development suited to NRM Sector
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
Promote CDM technologies and facilitate C- credit earning
48

Take up/ facilitate special studies, meets, workshops, Action research/ research in
NRM
Networking with academic institutions, research organizations, policy making
institutions, 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
stakeholders
Serve as NRM development technology clearing house
INTERNATIONAL ASSOCIATIONS OF NABARD
NABARD's

international

associates

range

from

World

Bank-affiliated

organizations to global developmental agencies working in the field of agriculture

and rural development.
These agencies offer material and advisory help in implementing schemes that are
aimed at uplifting the rural poor and in making agricultural processes effective and
yielding.

CHAPTER 11
The World Bank Group The
International Development Association
49

The World Bank works in close partnership with Indias Central and State
Governments, aligning its strategies with the countrys own development agenda.
It lays emphasis on investing in people through better health and education,
empowering communities to participate in their own development, improving the
effectiveness of government, and promoting private sector-led growth to achieve
the countrys development goals
IDA Rubber Project
The Project was under implementation since January 1994 and closed on
30September 2000. The achievements as at closure were commendable as more
than 85,500ha. 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 2ha. 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, replanting and processing
of rubber and rubber-wood activities in the traditional rubber growing 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

50

World Bank is presently actively appraising a loan to the Government of India for
revitalization of short term credit cooperative structure (STCCS) as proposed under
the
recommendations 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
Germany since 1990 in the sphere of Natural Resource Management, Micro
Finance, and Rural
Enterprise promotion and Development of Financial Sector.
Two phases of projects relating to Watershed Development have been completed in
Maharashtra during 1990-1999 and 1999-2005, propagating participatory approach
to watershed development involves the communities who also committed to
maintain the assets after the completion of the project. More than 1 lakh in 160
villages in 21 districts of Maharashtra have been treated under this programme.
Based on the success of the project, Government of India modified its Watershed
guidelines (Hariyali) to incorporate some of the elements 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
51

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 cooperatives 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.

*Projects under implementation in association with - 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. Itenvisages rehabilitation of about 8000 tribal families and 2000 landless
women living in the
52

Dunger region of Dharampur Taluka of Valsad district in Gujarat through

development of 1acre 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 aswell as inter-cropping. The programme was subsequently extended to
nearby Dangs District
of Gujarat to cover 700 additional tribal families. BAIF Research and
Development Foundation, Pune, is the implementing agency. As on 30 September
2006, the cumulative
coverage under this programme stood at 12733 acres benefiting 13663 families
from 162villages for which grant assistance of Rs. 50.85 crore has been received
upto 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 socioeconomic condition of 14,000 tribal families and 1000 landless women through
various economic and social welfare activities in 3 hilly blocks of Thane and Nasik
districts of Maharashtra. The project 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 operative up to 30 December 2010. As on 31 September 2006, 13848
families from 258villages had taken up wadi development in 12294 acres for
which grant support of Rs 33.10crore was received upto 31 December 2006 from
KfW.
53

*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 about90 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, anassociate 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 often years commencing from January 2007. The Objective
of the programme is to develop atleast 30 micro watersheds to stabilize agricultural
production and improve pasture lands. The agreements were executed with KfW
during December 2006. The programme is expected to be grounded shortly

CHAPTER11
Set backs of NABARD

54

FARMERS COMITTING SUICIDE

The principal agriculture development bank has to witness unprecedented crisis in
the agricultural 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 Vulnerable to suicide. Another category of
NABARD clientele, landless laborers 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 cultivator
household is outside the ambit of any form of credit at all and out of 49 percent of
the indebted 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 percents; the formal credit deliverys 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 governments
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 behind national rural credit
long term operations fund, national rural creditstabilization fund(in spite of
statutory obligations of RBI under sections 42 and 43 of NABARDAct,1981)to
55

support long and mediumterm 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 RBIs surplus, instead, is diverted to
balance the government of Indias fiscal deficit especially after operationalisation
of Fiscal Responsibility and Budget Management (FRBM) Act.
NABARD UNABLE TO BE RURAL CREDITBANK
It is a quiet admission of poor credit flows to the needy in the rural and urban
centers despite 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 being 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.

56

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 1.5per 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 0.5per 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 make 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 effective
November 3, going by talk on Mint Street.

57

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 organization 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 mobilize 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
borrower

Chapter
Promotional intiatives by NABARD

58

KISAN CREDIT CARD SCHEME

Genesis

Hon'ble Union Finance Minister announced in his budget speech for 199899 that NABARD would formulate a Model scheme for issue of Kisan
Credit Cards to farmers, on the basis of their land holdings, for uniform
adoption by banks, so that the farmers may use them to readily purchase
agricultural inputs such as seeds, fertilisers, pesticides, etc. and also draw
cash for their production needs'.

NABARD formulated a Model Kisan Credit Card Scheme in consultation

with major banks.

Model Scheme circulated by RBI to commercial banks and by NABARD to

Cooperative banks and RRBs in August 1998, with instructions to introduce
the same in their respective area of operation.

Objectives
As a pioneering credit delivery innovation, Kisan Credit Card Scheme aims
at provision of adequate and timely support from the banking system to the
farmers for their cultivation needs including purchase of inputs in a flexible
and cost effective manner.

Contents of Credit Card

59

 Beneficiaries covered under the Scheme are issued with a credit card and a
pass book or a credit card cum pass book incorporating the name, address,
particulars of land holding, borrowing limit, validity period, a passport size
photograph of holder etc., which may serve both as an identity card and
facilitate recording of transactions on an ongoing basis.
Borrower is required to produce the card cum pass book whenever he/she
operates the account.
4. Salient features of the Kisan Credit Card (KCC) Scheme
Eligible farmers to be provided with a Kisan Credit Card and a pass book or
card-cum-pass book.
Revolving cash credit facility involving any number of drawals and
repayments within the limit.
Limit to be fixed on the basis of operational land holding, cropping pattern
and scale of finance. Entire production credit needs for full year plus
ancillary activities related to crop production to be considered while fixing
limit.
Sub-limits may be fixed at the discretion of banks.
Card valid for 3 years subject to annual review. As incentive for good
performance, credit limits could be enhanced to take care of increase in
costs, change in cropping pattern, etc.
Each drawal to be repaid within a maximum period of 12 months

60

Conversion of loans also permissible in case of damage to crops due to

natural calamities
Security, margin, rate of interest, etc. as per RBI norms
Operations may be through issuing branch (and also PACS in the case of
Cooperative Banks) through other designated branches at the discretion of
bank.
Withdrawals through slips/cheques accompanied by card and passbook

Advantages of the Kisan Credit Card Scheme

Advantages to farmers
Access to adequate and timely credit to farmers
Full year's credit requirement of the borrower taken care of
Minimum paper work and simplification of documentation for drawal of
funds from the bank.
Flexibility to draw cash and buy inputs
Assured availability of credit at any time enabling reduced interest burden
for the farmer
Sanction of the facility for 3 years subject to annual review and satisfactory
operations and provision for enhancement.

61

Flexibility of drawals from a branch other than the issuing branch at the
discretion of the bank
Benefits of the Scheme to the Banks
Reduction in work load for branch staff by avoidance of repeat appraisal and
processing of loan papers under Kisan Credit Card Scheme.
Minimum paper work and simplification of documentation for drawal of
funds from the bank.
Improvement in recycling of funds and better recovery of loans
Reduction in transaction cost to the banks.
Better Banker - Client relationships
Budget 2001-02 announcement - Follow up :
Hon'ble Union Finance Minister in his Budget Speech for the year 200102 set the future agenda for the Scheme as under :
The innovation of KCC is proved to be very successful. Since the year of its
introduction in 1998-99, almost 110 lakhs KC cards have been issued. I am
asking our banks to accelerate this programme and cover all eligible
agricultural farmers within the next 3 years. I am also asking the banks to
provide a personal insurance package to the KCC holders as is often done
with other credit cards to cover them against accidental death or permanent
disability, up to maximum amount of Rs.50,000/ and Rs.25,000/- respectively.
The premium burden will be shared by the card issuing institutions. "
62

Coverage of farmers - Future strategy

Banks, vide our Circular letter No.NB.PCD(KCC)/29/ 2001-02 dated 10
April 2001, requested to draw up an action plan immediately in
consultation with our Regional Office concerned, based on their past
performance and experience in implementing the scheme, to ensure the
coverage of all the eligible agricultural farmers under the KCC Scheme
within the next three years i.e. by 31 March 2004.
Banks to ensure that targets fixed for 2001-02, 2002-03 and 2003-04
include new agricultural farmers likely to become eligible for their KC
cards after 31 March 2001 also.
Targets fixed for issue of KC Cards be disaggregated month-wise and
branch/PACS-wise to facilitate close monitoring of progress vis-a-vis
target and also advised to RO concerned.
In order to ensure achievement of the targets so fixed, banks requested to
follow strategies suggested by NABARD from time to time. Towards this
end, banks to launch a campaign approach to accelerate pace of
implementation of the Scheme. Following specific steps may be taken by
the banks :
Conduct of Sensitisation/training programmes for the officers of
controlling offices of banks, branch managers and field level
functionaries as also district level functions for distribution of cards.
Holding Banker-Farmers' Meets, as part of the Kharif 2001 campaign, in
each block to identify the ground level constraints in the smooth

63

implementation of the Scheme and to initiate remedial measures

therefore
Use of VVV Clubs fora for propagation of the scheme.
Placement of hoardings/banners etc. at prominent places, such as branch
premises, Panchayat buildings, Mandis, etc.
Use of audio-video media, bringing out KCC literature in local language
to create better awareness about KCC Scheme among farmers.
Issue of plastic/laminated cards to serve as Identity Cards.
Monitoring of progress in implementation of the Scheme in Board
meetings as also through various state/ district and block level fora with
the participation of Government functionaries, bankers, farmers etc.
Personal Accident Insurance Scheme -Salient features :
Designated insurance company will nominate one office at district level to
function as nodal office for coordinating implementation of personal
accident insurance scheme for KCC holders in the district.
Nominated office of insurance company to issue a Master Insurance Policy
to each DCCB/RRB covering all its KCC holders
Premium payable Rs.15/- for a one year policy while Rs.45/- for a 3-year
policy.
Insurance coverage available under Policy only from date of receipt of
premium at insurance company
64

Banks to ensure to incorporate name of Nominee in Kisan Credit Card-cumPass Book

Simplified claim settlement procedure evolved under Scheme whereby an
Enquiry-cum-Verification Committee comprising Branch Manager of
implementing bank, Lead Bank Officer and representative of insurance
company to certify nature of accident causing disability/death and
recommend settlement of insurance claims.
Scheme covers risk of KCC holders against death or permanent disability
resulting from accidents caused by external, violent and visible means, as
under:
Death due to accident (within 12 months of the accident)
Caused by outward, violent and visible means -- Rs.50, 000/Permanent total disability -- Rs.50, 000/Loss of two limbs or two eyes or one limb and one eye -- Rs.50, 000/Loss of one limb or one eye -- Rs.25, 000/(cover subject to certain exclusions as per Annexure-A to Master Policy
document)
Major Steps taken by NABARD:
A Brochure on KCC Scheme highlighting the salient features, advantages
and other relevant information about the Scheme was brought out by
Head Office and ROs were asked to circulate the brochure to State govt.
65

departments, Commercial Banks, Cooperative Banks, RRBs and other

concerned agencies/officers so as to generate wider awareness about the
Scheme.
Floor limit of Rs.5000/- for issue of KC Cards stands withdrawn.
Studies on KCC Scheme have been entrusted to BIRD and NABARD
Staff College to facilitate feedback on the ground level issues/problems
so that changes, where necessary, could be considered.
Studies on the implementation of the Scheme undertaken by NABARD
periodically.
On the lines of instructions of RBI to Commercial Banks, Cooperative
Banks and RRBs have been advised that they may, at their discretion, pay
interest at a rate based on their perception and other relevant factors on
the minimum credit balances in the cash credit accounts under the Kisan
Credit Cards of farmers during the period from 10th to the last day of
each calendar month.
NABARD has prepared a Model Scheme for providing financial
assistance for publicity campaign activities of Cooperative Banks under
KCC Scheme under CDF with a view to speed up the pace of
implementation of KCC Scheme.
Progress in implementation of the Scheme
Since launching in August 1998, around 2.38 crore Kisan Credit Cards
issued upto 31 March 2002 by Cooperative Banks, Regional Rural Banks
and Commercial Banks put together.
66

 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.

Supervisory

67

CONCUSION
Reserve Bank of India (RBI) entrusted NABARD (National Bank for Agriculture
and Rural Development) in 1981 to look after agriculture and rural development
through all the

68

Cooperative and other Nationalized banks of India. NABARD will observe 25th
eventful journey on 12th July 2006 for advancement of Indian agriculture,
economy and social
structure. Animal husbandry programmes with Rs.2000 crores have been approved.
Indian agriculture is dominated by a vast multitude of landless, sub marginal,
marginal and small
farmers, who are at the bottom of pyramid; consisting 80% of total cultivators
having only little above one hector of land. For this NABARD has given stress on
animal resources productivity. From the beginning ,NABARD has grown into a
unique kind of apex hybrid organization combining best of central and
development bank practices like planning, regulation of credit and supervision of
rural financial institution like agriculture cooperative banks(both short and long
term structures),Regional Rural Banks(RRB) etc. It also plays a
unique institution building role that was instrumental in safe guard of many a loss
making RRBs and Cooperative Banks in various parts of the country. During 200506,the balance
sheet of NABARD grew by 11.3 percent from around Rs.60,000+ crore in 200405 toRs.67,645 crore in 2005-06.
From the parameter of profitability ,it is one of the best run banks, not only in
India, but in the world, as its per employee profitability is Rs.22 lakh(its net per
employee profitability
is around Rs.17 lakh assuming an income tax of Rs.300 crore).It may not be out of
place to mention here that NABARD is the pioneer in the Self Help Group(SHG)
Bank linkage programme in the country that has brought the taste of banking to
doorsteps of the poor clientele, especially the women. Beginning with a modest
number of 500 groups in 1992,
69

today this flagship programme comprises 2 million groups touching the lives of
150 million people.
NABARD support to RIDF behind 2.4 lakh projects has translated into developing
irrigation potential of 108 lakh hectres,2 lakh km of roads,370 lakh meters of
bridge length, schools benefiting 28 lakh students, rural health centers benefiting
2.47 lakh people, drinking water supply benefiting 5.82 lakh people. In this
connection, it may not be out of place to mention here that the declining creditdeposit ratio in backward regions of the country viz. northeastern, eastern and
central regions, in wake of concentration of banking business in developed urban,
semi-urban centers in the post linearization phase, got improved bit when the RIDF
investment are factored in. As the principal nodal agency, NABARD has been
really instrumental in pushing the programme of doubling of the ground level agri
credit in the countryfrom Rs.86,981 crore in 2003-04 to Rs.1,46,688 till
February end 2006.

Chapter
The Banks recent initiatives
NABARD to provide Rs 400 cr credit for Punjab dairy sector
70

NABARD to provide Rs 400 cr credit for Punjab dairy sector

Chandigarh, Dec 3 (PTI) National Bank for Agriculture and Rural Development
(NABARD) will provide a credit flow of Rs 400 crore to the Punjab's dairy sector
during the next three years to boost milk production and promote dairy farming in
the state, an official release said here today. NABARD has identified three districts
-- Ludhiana, Jalandhar and Ropar for modernisation and capacity building in the
dairy sector, it said. NABARD is in the process of redefining the concept of dairy
sector as commercial activity rather than calling it as allied agriculture activity, the
release said. It said that milking machines will be provided to dairy farmers, milk
coolers would also be given to both farmers and societies, under the project.
Punjab's dairy farming has 9 per cent share in the country's milk output with less
than 2 per cent livestock, it said. Per capita availability of milk in the state stood at
931 gm, which is highest in the country, it added. For cheaper and economic milk
production, resources of green fodder will be further developed in the state for
sustainable dairy farming. The government will provide about 30,000 quintals
fodder seeds to the farmers annually for enhancing green fodder production, it said.
PTI SUN DKR

As farmers suffer, NABARD offers soft loans to corporates

71

Private companies get loans at 6.5% with additional cash refunds; for farmers it is
7%
The National Bank for Agriculture and Rural Development (NABARD), which is
dedicated to promoting rural development by providing soft loans to State
governments for social sector projects, has given hundreds of crores as loans to
corporates on concessional terms.
In the Union Budget of 2011-12, Rs. 18,000 crore was allocated by the Centre to
NABARDs Rural Infrastructure Development Fund (RIDF), of which Rs. 2,000
crore was exclusively earmarked for the creation of warehousing facilities. While
the allocation of Rs. 16,000 crore to the States was made by NABARDs State
Projects Department, the allocation of Rs. 2,000 crore towards warehousing was
entrusted to a new team set up on the recommendation of global consulting firm
72

Boston Consulting Group (BCG), after being awarded the mandate for a
repositioning exercise.
In a circular of September 27, 2011, NABARD, making a significant deviation
from its earlier policies, included private entities as eligible institutions without
consulting the RBI. In another circular of December 23, 2011, NABARD further
revised the scheme, again without consulting the RBI, to provide private firms an
interest rate rebate of 1.5%. In violation of the regulated 8% rate levied by RIDF,
an avenue was created for flow of funds to corporates and release of the interest
rate rebate to the borrowers directly by NABARD.
According to documents available with The Hindu, a total of Rs. 759 crore was
disbursed, including as refinance at 8% to various banks to fund 516 warehouses
and cold storage projects of private entities in March 16-31, 2012. Shubham
Logistics Ltd, a subsidiary of the over Rs. 6,000 crore Kalpataru Group, was
handpicked for a rebate of 1.5%, allowing it to access Rs. 115 crore under a
government scheme at a concessional 6.5% rate of interest. Shubham Logistics
would have paid a 10.5% rate of interest had the funds been sourced from the
market. The company, which was disbursed a total of Rs 180.87 crore, to set up 18
warehouses, became the beneficiary of a further 15% subsidy under another
government scheme, entitling the company to a refund of over Rs. 20 crore.
The two schemes that were used to favour Shubham Logistics are Grameen
Bhandaran Yojana which offers subsidy of 15% to 33.33% for construction of rural
godowns. For corporates the subsidy is 15% of total financial outlay up to a
maximum of Rs 28.12 lakh. Under the other scheme, Warehousing scheme under
RIDF, banks are offered refinance at 8% which can be further reduced to 6.5% as
an incentive for prompt repayment.
73

Documents reveal that the RBI has questioned NABARDs interest rate
manipulations in financing warehousing projects without its permission and
demanded a recall of the Rs. 759 crore allocated to private firms. Compliance with
this directive means that NABARD will have to return the money to the RBI and
raise debt from the market to honour its commitments. This is likely to hit
NABARDs balance sheet by roughly Rs. 150 crore. The Ministry of Agriculture
has further questioned irregularities in Shubham Logistics storage projects in
Deesa, Banaskantha, pointing out that the project is ineligible for sanction of the
subsidy.
Meanwhile, Aditya Bafna, Executive Director of Shubham Logistics Ltd (SSLL), a
subsidiary of Kalpataru Power Transmission Ltd was appointed Director on the
board of NABARD Consultancy Services Private Ltd (NABCONS) a wholly
owned subsidiary of NABARD on January 15, 2010. He refused to comment on
either the allegations of special favours or the conflict of interest arising from his
appointment on the NABCONS Board.
NABARDs response to a RTI query reveals that it released Rs 13.3 crore BCG for
a repositioning report that it admits has never been submitted. Sources in
NABARD allege that an additional payment of Rs. 9 crore has also been released
to rollout the recommendations. NABARD Chairman Prakash Bakshi, under
whose leadership these transactions were sanctioned, did not respond to detailed
questions that were emailed to him on December 3, including on the fresh release
of Rs 9 crore to BCG or what hit NABARDs balance sheet was likely to take after
the repayment to RBI of the unauthorised fund transfers to corporates.
BCGs Chairman, Asia Pacific, Janmejaya Sinha did not respond to detailed
questions regarding whether the firm had any exposure to working with any
74

developmental financial institution prior to its consulting assignment with

NABARD, especially in the Asia Pacific region, the terms of reference and
payment for the assignment or whether it was true that BCG was scouting for fresh
business opportunities with the RBI.

75