CHAPTER 1

INTRODUCTION

ABOUT NABARD

GENESIS & VISION

The importance of institutional credit in boosting rural
economy has been clear to the Government of India
right from its early stages of planning. Therefore, the
Reserve Bank of India (RBI) at the insistence of the Government of India,
constituted a Committee to Review the Arrangements For Institutional Credit
for Agriculture and Rural Development (CRAFICARD) to look into these very
critical aspects. The Committee was formed on 30 March 1979, under the
Chairmanship of Shri B. Sivaraman, former member of Planning Commission,
Government of India.

The Committee’s interim report, submitted on 28 November 1979, outlined the

need for a new organisational device for providing undivided attention, forceful
direction and pointed focus to credit related issues linked with rural
development. Its recommendation was formation of a unique development
financial institution which would address these aspirations and formation of
National Bank for Agriculture and Rural Development (NABARD) was
approved by the Parliament through Act 61 of 1981.

NABARD came into existence on 12 July 1982 by transferring the agricultural

credit functions of RBI and refinance functions of the then Agricultural
Refinance and Development Corporation (ARDC). It was dedicated to the
service of the nation by the late Prime Minister Smt. Indira Gandhi on 05
November 1982. Set up with an initial capital of Rs.100 crore, its’ paid up
capital stood at Rs.10,580 crore as on 31 March 2018. Consequent to the
revision in the composition of share capital between Government of India and
RBI, NABARD today is fully owned by Government of India.
NABARD strongly believes, that in small-farmer- dominated agriculture,
aggregation is an important strategy for inclusive growth. Hence, a theme
chapter titled “Economic Empowerment through Aggregation” focusing on the
role of FarmerProducer Organization (FPOs) has been included in the Annual
Report. The chapter highlights the positive contribution of aggregation in
enhancing farmer income and deliberates on the issues faced in scaling
upFPOs,amongothers.

VISION

DevelopmentBank of the Nation for Fostering Rural Prosperity.

MISSION
Promote sustainable and equitable agriculture and rural development through
participative financial and non-financial interventions, innovations, technology
and institutional development for securing prosperity.

WHAT THEY DO

Their initiatives are aimed at building an empowered and financially inclusive

rural India through specific goal oriented departments which can be categorized
broadly into three heads: Financial, Developmental and Supervision. Through
these initiatives we touch almost every aspect of rural economy. From providing
refinance support to building rural infrastructure; from preparing district level
credit plans to guiding and motivating the banking industry in achieving these
targets; from supervising Cooperative Banks and Regional Rural Banks (RRBs)
to helping them develop sound banking practices and onboarding them to the
CBS platform; from designing new development schemes to the implementation
of GOI’s development schemes; from training handicraft artisans to providing
them a marketing platform for selling these articles.

NABARD: Functions, Roles & Achievements

It is the apex banking institution to provide finance for Agriculture and rural
development. National Bank for Agriculture and Rural Development
(NABARD) was established on July 12, 1982 with the paid up capital of Rs.
100 cr. by 50: 50 contribution of government of India and Reserve bank of
India. It is an apex institution in rural credit structure for providing credit for
promotion of agriculture, small scale industries, cottage and village industries,
handicrafts etc.

Functions of NABARD:
NABARD was established as a development bank to perform the following
functions:
 To serve as an apex financing agency for the institutions providing
investment and production credit for promoting various developmental
activities in rural areas;
 To take measures towards institution building for improving absorptive
capacity of the credit delivery system, including monitoring, formulation
of rehabilitation schemes, restructuring of credit institutions and training
of personnel;
 To coordinate the rural financing activities of all institutions engaged in
developmental work at the field level and liaison with the Government of
India, the State Governments, the Reserve Bank and other national level
institutions concerned with policy formulation; and
 To undertake monitoring and evaluation of projects refinanced by it.
  NABARD gives high priority to projects formed under Integrated Rural
Development Programme (IRDP).
 It arranges refinance for IRDP accounts in order to give highest share for
the support for poverty alleviation programs run by Integrated Rural
Development Programme.
 NABARD also gives guidelines for promotion of group activities under
its programs and provides 100% refinance support for them.
 It is setting linkages between Self-help Group (SHG) which are organized
by voluntary agencies for poor and needy in rural areas.
 It refinances to the complete extent for those projects which are operated
under the ‘National Watershed Development Programme‘and the
‘National Mission of Wasteland Development‘.
 It also has a system of District Oriented Monitoring Studies, under which,
study is conducted for a cross section of schemes that are sanctioned in a
district to various banks, to ascertain their performance and to identify the
constraints in their implementation, it also initiates appropriate action to
correct them.
 It also supports “VikasVahini” volunteer programs which offer credit and
development activities to poor farmers.
 It also inspects and supervises the cooperative banks and RRBs to
periodically ensure the development of the rural financing and farmers’
welfare.
 NABARAD also recommends about licensing for RRBs and Cooperative
banks to RBI.
 NABARD gives assistance for the training and development of the staff
of various other credit institutions which are engaged in credit
distributions.

Role of NABARD:
  It is an apex institution which has power to deal with all matters
concerning policy, planning as well as operations in giving credit for
agriculture and other economic activities in the rural areas.
 It is a refinancing agency for those institutions that provide investment
and production credit for promoting the several developmental programs
for rural development.
 It is improving the absorptive capacity of the credit delivery system in
India, including monitoring, formulation of rehabilitation schemes,
restructuring of credit institutions, and training of personnel.
 It co-ordinates the rural credit financing activities of all sorts of
institutions engaged in developmental work at the field level while
maintaining liaison with Government of India, and State Governments,
and also RBI and other national level institutions that are concerned with
policy formulation.
 It prepares rural credit plans, annually, for all districts in the country.
 It also promotes research in rural banking, and the field of agriculture and
rural development.
 NABARD is the most important institution in the country which looks
after the development of the cottage industry, small scale industry and
village industry, and other rural industries.
 NABARD also reaches out to allied economies and supports and
promotes integrated development.

Some of the milestones in NABARD's activities are:

Business Operations:

 Production Credit: NABARD sanctioned aggregating of 66,418 crore

short term loans to Cooperative Banks and Regional Rural Banks (RRBs)
 during 2012-13, against which, the maximum outstanding was 65,176
crore.

 Investment Credit: Investment Credit for capital formation in

agriculture & allied sectors, non-farm sector activities and services sector
to commercial banks, RRBs and co-operative banks reached a level of
17,674.29 crore as on 31 March 2013 registering an increase of 14.6 per
cent, over the previous year.

 Rural Infrastructure Development Fund (RIDF) Through the Rural

Infrastructure Development Fund (RIDF) 16,292.26 crore was disbursed
during 2012-13. A cumulative amount of 1,62,083 crore has been
sanctioned for 5.08 lakh projects as on 31 March 2013 covering
irrigation, rural roads and bridges, health and education, soil
conservation, drinking water schemes, flood protection, forest
management etc.

New Business Initiatives:

 NABARD Infrastructure Development Assistance (NIDA):

NABARD has set up NIDA, a new line of credit support for funding of
rural infrastructure projects. The sanctions under NIDA during the year
2012-13 was 2,818.46 crore and disbursement was 859.70 crore.

 Direct refinance assistance to CCBs for short term multipurpose

credit:
Direct refinance assistance to CCBs was conceived and additional line of
finance for CCBs in the light of recommendations of the “Task Force on
Revival of Short Term Rural Cooperative Credit Structure, which enables
 the latter to raise financial resources other than from StCBs. During 2012-
13, refinance assistance aggregating 3,385 crore was sanctioned to 42
CCBs and disbursement stood at 2,363.45 crore. Now it can be conclude
that the Agricultural & rural development is totally dependent on the
efficiency of the NABARD, which is doing its job as per the
requirements of the economy.

GOVT. SPONSORED SCHEMES

The Government of India encourages farmers in taking up projects in select

areas by subsidizing a portion of the total project cost. All these projects aim at
enhancing capital investment, sustained income flow and employment areas of
national importance.
NABARD has been a proud channel partner of the Government in some of
these schemes shown in this section. Subsidy as and when received from the
concerned Ministry is passed onto the
financing banks.

FARM SECTOR

Dairy Entrepreneurship Development Scheme

The Department of Animal Husbandry, Dairying and Fisheries (DAHD&F),

GoI launched a pilot scheme titled “Venture Capital Scheme for Dairy and
Poultry” in the year 2005-06. The main objective of the scheme was to extend
assistance for setting up small dairy farms and other components to bring
structural changes in the dairy sector.
During a mid-term evaluation of the scheme, certain recommendations were
made to accelerate the pace of implementation of the scheme. Taking into
account the recommendations of the evaluation study and the representations
received from various quarters including the farmers, State Governments and
banks, DAHD&F decided to make some key changes to the scheme, including
changing its name to Dairy Entrepreneurship Development Scheme
(DEDS).The revised scheme has come into operation with effect from 1
September 2010.

Objectives of the scheme

 To promote setting up of modern dairy farms for production of clean milk
 To encourage heifer calf rearing, thereby conserving good breeding stock
 To bring structural changes in the unorganized sector so that initial
processing of milk can be taken up at the village level itself
 To upgrade the quality and traditional technology to handle milk on a
commercial scale
 To generate self-employment and provide infrastructure mainly for
unorganized sector.

Who can benefit from this scheme?

Farmers, individual entrepreneurs, NGOs, companies, groups of organized and

unorganized sectors, etc. Groups of organized sector include Self-help Groups
(SHGs), dairy cooperative societies, milk unions, milk federations, etc.
An individual will be eligible to avail assistance for all the components under
the scheme but only once for each component
More than one member of a family can be assisted under the scheme provided
they set up separate units with separate infrastructure at different locations. The
 distance between the boundaries of two such farms should be at least 500
metres.

Capital Investment Subsidy Scheme for Commercial Production Units for

organic/ biological Inputs

The increasing and indiscriminate use of synthetic fertilizers and pesticides and
deteriorating soil health and productivity is concerning people all over the
world. Growing awareness for safe and healthy food has underlined the
importance of organic farming, which is a holistic system based on the basic
principle of minimizing the use of external inputs and avoiding the use of
synthetic fertilizers and pesticides.

In view of these challenge, there is a need in the country to augment the

infrastructure for production of quality organic and biological inputs.
Accordingly, under National Project on Organic Farming a Capital Investment
Subsidy Scheme for Commercial Production Units for organic/biological inputs
has been introduced. The scheme is being implemented since 2004-05.

Objectives of the Scheme

 To promote organic farming in the country by making available organic

inputs, such as bio fertilizers, bio pesticides and fruit & vegetable market
waste compost and thereby generate better return for the produce.
 To increase agricultural productivity while maintaining soil health and
environmental safety.
 To reduce total dependence on chemical fertilizers and pesticides by
increasing the availability and improving the quality of bio fertilizers, bio
pesticides and composts in the country.
 To convert organic waste into plant-nutrient resources
 To prevent pollution and environment degradation by proper conversion and
utilization of organic waste.

Who can benefit from the scheme?

 Bio fertilizers and Bio pesticides production Units

 Fruit & vegetable waste compost units
 Individuals, group of farmers/growers, proprietary and partnership firms, Co-
operatives, fertilizer industry
 Companies, Corporations
 Non-Governmental Organizations (NGOs)
 Agricultural Produce Market Committees (APMCs)
 Municipalities
 Private entrepreneurs Links for downloads

Agriclinic and Agribusiness Centres Scheme

The scheme aims to promote the establishment of Agri-Clinics and Agri-

Business Centres (ACABC) all over the country.

Agri-Clinics

Agri-Clinics are envisaged to provide expert advice and services to farmers on

various aspects to enhance productivity of crops/animals and increase the
incomes of farmers. Agri-Clinics provide support in the following areas:

 Soil health
 Cropping practices
  Plant protection
 Crop insurance
 Post-harvest technology
 Clinical services for animals, feed and fodder management
 Prices of various crops in the market, etc.
 Agri-Business Centres

Objectives of the scheme

To supplement efforts of public extension by necessarily providing extension

and other services to the farmers on payment basis or free of cost as per the
business model of agripreneur, local needs and affordability of target group of
farmers
To support agricultural development to create gainful self-employment
opportunities for unemployed agricultural graduates, agricultural diploma
holders, intermediate in agriculture and biological science graduates with Post
Graduation in agri-related courses.

Who can benefit from the scheme?

The scheme is open to the following categories of candidates:

 Graduates in agriculture and allied subjects from State Agriculture
Universities (SAUs)/Central Agricultural Universities/Universities
recognized by ICAR/UGC. Degree in Agriculture and allied subjects
offered by other agencies are also considered subject to approval of
Department of Agriculture & Cooperation, GOI, on recommendation of
the State Government.
 Diploma (with at least 50% marks)/Post Graduate Diploma holders in
Agriculture and allied subjects from State Agricultural Universities, State
 Agriculture and Allied Departments and State Department of Technical
Education.
 Diploma in Agriculture and allied subjects offered by other agencies are
also considered subject to approval of Department of Agriculture,
Cooperation & Farmers’ Welfare, GOI on recommendation of the State
Government.
 Biological Science Graduates with Post Graduation in Agriculture &
allied subjects.
 Degree courses recognized by UGC having more than 60 percent of the
course content in Agriculture and allied subjects.
 Diploma/Post Graduate Diploma courses with more than 60 percent of
course content in Agriculture and allied subjects, after B.Sc. with
Biological Sciences, from recognized colleges and universities.
 Agriculture related courses at intermediate (i.e. plus two) level, with at
least 55% marks.

National Livestock Mission

National Livestock Mission is an initiative of the Ministry of Agriculture and

Farmers’ Welfare. The mission, which commenced from 2014-15, has the
objective of sustainable development of the livestock sector.
National Livestock Mission (NLM) launched in financial year 2014-15 seeks to
ensure quantitative and qualitative improvement in livestock production systems
and capacity building of all stakeholders.
The scheme is being implemented as a sub scheme of White Revolution –
Rashtriya Pashudhan Vikas Yojana since April 2019.
NABARD is the subsidy channelizing agency under Entrepreneurship
Development & Employment Generation (EDEG) component of National
Livestock Mission. This includes:
  Poultry Venture Capital Fund (PVCF)
 Integrated Development of Small Ruminants and Rabbit (IDSRR)
 Pig Development (PD)
 Salvaging and Rearing of Male Buffalo Calves (SRMBC)

Who can benefit from the scheme?

Farmers, Individuals Entrepreneurs, NGOs, Companies, Cooperatives, groups

of organized and unorganized sector which include Self- Help Groups (SHGs)
and Joint Liability Groups (JLGs)

Eligible financial institutions

 Commercial Banks
 Regional Rural Banks
 State Cooperative Banks
 State Cooperative Agriculture and Rural Development Banks
 Other institutions eligible for refinance from NABARD.

MISSION OBJECTIVES

 Establishing convergence and synergy among ongoing Plan programmes and

stakeholders for sustainable livestock development.
 Promoting applied research in prioritized areas of concern in animal nutrition
and livestock production.
 Capacity building of state functionaries and livestock owners through
strengthened extension machinery to provide quality extension service to
farmers.
 Promoting skill based training and dissemination of technologies for reducing
cost of production, and improving production of livestock sector.
 Encouraging formation of groups of farmers and cooperatives / producers’
companies of small and marginal farmers / livestock owners.

GSS – Ensuring End Use of Subsidy Released

To ensure end use of subsidy released under various schemes of GOI routed
through NABARD, the banks have been advised to ensure that credit and
subsidy are not mis-utilized by the beneficiaries. In the event of such misuse,
the financing bank is required to refund the subsidy released in respect of the
unit concerned to NABARD immediately.

Interest Subvention Scheme

The Honourable Finance Minister in his budget speech (para 49) for 2006-07
announced that the Government had decided to ensure that farmers receive short
term credit at 7% with an upper limit of Rs. 3.00 lakh on the principal amount.
The policy came into force with effect from Kharif 2006-07. The amount of
subvention was to be calculated on the amount of crop loan from the date of
disbursement up to the actual date of repayment of the crop loan by the farmer
or up to the due date of the loan fixed by the banks, whichever is earlier, subject
to a maximum period of one year.The scheme, introduced in 2006-07, has
continued in the following years with certain modifications and changes in rate
of subvention. Year-wise rate of interest subvention made available to the banks
on their own funds was as under:
2007-08 - 2%
 2008-09 - 3%
2009-10 - 2%
2010-11 - 1.5%
2011-12 - 2%
2012-13 - 2%
2013-14 - 2%
2014-15 - 2%
2015-16 - 2%
2016-17 - 2%
2017-18- 2%

 Incentive to farmers on prompt repayments

Since the year 2009-10, Government of India introduced additional incentive

for farmers who promptly repay the loans on or before the due date or the date
fixed by the bank, subject to a maximum period of one year. Year-wise rate of
incentive to prompt-paying farmers was as under:
2009-10 - 1%
2010-11 - 2%
2011-12 - 3%
2012-13 - 3%
2013-14 - 3%
2014-15 - 3%
2015-16 - 3%
2016-17 - 3%
2017-18- 3%

 Relief to farmers
 To provide relief to farmers affected by natural calamities, Interest Subvention
of 2% has been made available to banks for the first year on restructured
amount of crop loans. Such restructured loans will attract normal rate of
interest from the second year onwards as per the policy laid down by the RBI.

 Interest Subvention to Small and Marginal Farmers against Negotiable

Warehouse Receipts

In order to discourage distress sale of produce by farmers and to encourage

them to store their produce in warehouses against warehouse receipts, GOI had
introduced a scheme in 2011-12 for extending concessional loans to the farmers
against negotiable warehouse receipts.

The benefit of 2% interest subvention will be available to banks on their own

funds involved for extending credit support up to Rs 3.00 lakh at 7% interest per
annum to Small and Marginal farmers (SF/MF) having Kisan Credit Card for a
further period of upto six months post the harvest of the crop against Negotiable
Warehouse Receipts issued on the produce stored in warehouses accredited with
Warehousing Development Regulatory Authority.SF/MF, who have not availed
crop loans through banking system, would not be eligible.

New Agricultural Marketing Infrastructure(AMI) sub- scheme of

Integrated Scheme for Agricultural Marketing (ISAM)
Agriculture is one of the most critical sectors of the Indian economy that not
only drives the growth and development of agriculture and allied sectors
directly but also affects the well-being of rural people at large, their prosperity
and employment and also forms an important resource base for a number of
agro-based industries and agro-services. While the food security constantly
augmented though various plan periods by strategic planning and mission mode
schemes has largely been achieved ,but the fulcrum of monetizing the farmers
and their economic well being is still a challenge. Considering the aforesaid
facts, there has been a major policy rejig from mere focusing food security to
sustained income and nutritional security aligned climate change and gender
equality .Conclusively, agriculture like any other enterprise can sustain, only
when it can generate net positive returns to the producer.

OBJECTIVES OF THE SUB-SCHEME

 To promote innovative and latest technologies in post-harvest and
agricultural marketing infrastructure.
 To develop alternative & competitive marketing channels for agricultural
and allied produce through incentivizing private and cooperative sectors to
make investments .
 To benefit the farmers individually and collectively through FPOs from farm
level processing and marketing of processed produce along with promotion
of small size processing units.
 To promote creation of scientific storage capacity for storing farm produce,
processed farm produce and agricultural inputs etc. to reduce post-harvest &
handling losses, promote pledge financing and market access.
 To incentivize developing and upgrading of Gramin Haats as GrAMs to
make better farmer-consumer market linkages and also to assist in
integration GrAMs with e-NAM portal so as to improve transparency in
trading and better price discovery.
OFF FARM SECTOR

Credit Linked Capital Subsidy Scheme

The Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Up-
gradation of Micro & Small Enterprises was launched by the Government of
India in October 2000. The scheme aims at acilitating technology up-gradation
of SSI units in the specified products/ sub-sectors by way of induction of well-
established and improved technologies approved under the scheme for which
capital subsidy is extended by GOI. NABARD is designated as one of the nodal
agencies for channelizing subsidy under the scheme through Cooperative Banks
and RRBs; and Commercial Banks.

DeendayalAntyodayaYojana – National Rural Livelihoods Mission (DAY-

NRLM)

The Ministry of Rural Development (MoRD), Government of India launched

the National Rural Livelihood Mission (NRLM) by restructuring Swarnajayanti
Gram SwarojgarYojana (SGSY) with effect from 01st April 2013 (RBI Circular
No. RBI/2012-13/559 dated 27 June 2013).
NRLM was renamed as DAY-NRLM (DeendayalAntyodayaYojana – National
Rural Livelihoods Mission) w.e.f. March 29, 2016 and is the flagship program
of Govt. of India for promoting poverty reduction through building strong
institutions of the poor, particularly women, and enabling these institutions to
access a range of financial services and livelihoods services.
 NABARD is implementing the Interest Subvention Scheme for Women SHGs
under DAY-NRLM for RRBs and Cooperative Banks in Category-I (250)
districts.

Weavers Package

National Handloom Development Programme (NHDP) to be implemented

during the XII Plan has been formulated as a centrally-sponsored plan scheme
approved by the Planning commission merging, with or without modifications.
 Revival, Reform and Restructuring (RRR) package .
 Institutional Credit component of Integrated Handlooms Development
Scheme (IHDS) as Concessional Credit, and
 Comprehensive Handlooms Development Scheme (CHDS).
CHDS, a component of NHDP, has been formulated by merging three plan
schemes i.e.Integrated Handlooms Development Scheme.

Marketing & Export Promotion Scheme

Diversified Handlooms Development Scheme implemented during 11th Plan
Out of the above schemes, the following two schemes are being implemented
by NABARD.
a) Revival, Reform and Restructuring (RRR) package
b) Comprehensive Handlooms Development Scheme (CHDS)

(a) Revival, Reform and Restructuring Package for Handloom Sector

The RRR package was aimed at covering all viable and potentially viable apex
and primary weaver cooperative societies (PWCs). The quantum of assistance
for weaver societies and individual weaver was based on audits and
recommendation of state implementation, monitoring and review committee.
The objectives of the financial package were:

 Loan waiver and recapitalization of handloom weavers’ cooperative

societies
 Waiver of loans to individual weavers
 Strengthening of weaver cooperative societies
 Three percent interest subsidy for fresh loans to be changed to Six percent
subsidy for fresh loans
 Credit guarantee for fresh loans (administered by SIDBI)
 Training for the functionaries and
 Loss assessment exercise

As per the guidelines of RRR package, all viable and potentially viable Apex
and Primary weaver societies (as per the package norms) were to be covered
under the package. The quantum of assistance to be made available to each
weaver society is linked to special audit on the basis of the audited Financial
Statements (Balance sheet & P/L Account).
 INTEREST RATE

DETAILS OF RATES OF INTEREST CHARGED BY NABARD

FOR REFINANCE TO BANKS UNDER VARIOUS SCHEMES
(w e f 21 August 2019)
Interest Rate
Sr.No Particulars
(%)
1 Short Term refinance assistance:
a State Cooperative Banks for financing crop loans 4.50
b RRBs for financing crop loans 4.50
c DCCBs directly financing for crop loans 4.50
d Commercial Banks./RRBs in respect of their finance to PACS towards crop loans 4.50
e ST – Additional SAO/ST(Others)/ ST (SAO ) -SCARDBs (Annual Product) 7.55
StCBs/RRBs - Conversion of Short Term- crop loans into Medium Term loans (3% less
f than the interest rate charged by banks to ultimate beneficiaries subject to minimum interest 8.10
rate at 8.10%)

2 Long Term refinance assistance

a LT loan to State Govt. for contribution to share capital of coop. credit institutions 8.50
b RRBs/ StCBs/SCARDBs
- Refinance for 5 years and above 8.55
- Refinance for 3 years to less than 5 years 8.70
- Refinance for 18 months to less than 3 years 8.55

3 Direct Lending
a. Warehouse Infrastructure Fund (WIF)
Bank rate –
State Governments
1.50%
Bank rate –
State Government Corporation (with State Govt. Guarantee)
1.50%
Entities promoted by State / Central Government owned/assisted (without State Govt. PLR + risk
Guarantee) premium
PLR+risk
Other entities
premium
* Current Bank Rate – 5.65%
b. Food Processing Fund (FPF)
Bank rate –
State Governments
1.50%
Bank rate –
Entities promoted by State Governments (with Govt. Guarantee)
1.50%
PLR + risk
Entities promoted by State Governments(without Govt. Guarantee)
premium
PLR+risk
Other entities
premium
* Current Bank Rate – 5.65%
 CHAPTER 2

REVIEW OF LITERATURE

Acquaintance with the contribution of previous investigations

will broaden the perspective and deepen the understanding of the
researchers. With this objective in mind, some related studies have been
reviewed and the list has been presented in this chapter.

Malhotra1(1990) observed that at present both RBI and NABARD are

involved in various aspects of co-ordination and liaising at the district
level. As it would be advantageous to have a single agency to plan, co-
ordinate and monitor credit programmes of banks and cooperatives at the
district level, NABARD has been identified as the appropriate agency to
undertake these functions. For this purpose, NABARD will be setting up
offices in all the districts within the next four to five years. These offices
will be compact outfits with a manager and twenty three technical subject
matter specialists, with personal computer support. NABARD’s presence
at the district level will be it in closeproximity with gross-roots realities
and bring about a new dynamism in its activities for both agricultural and
non-agricultural rural development.

Bansal and Agarwal2 (1991) say that the NABARD is now the single
integrated agency for meeting the credit needs of all types of agricultural
and rural development activities in the country. It also contemplates
undertaking of all works relating to the establishment of RRBs and
administration of refinance scheme and monitoring of the performance of
RRBs. Ever since the NABARD came into being, it has been playing an
important role in strengthening and re-organizing the cooperative structure
in the NationalEconomy. It has actively taken over the responsibilities of
the Reserve Bank of India in relation to rural financing and rural
reconstruction.

The study by Shivaji3(1993) revealed that, NABARD has been providing

a variety of training to offices of the commercial banks, RRBs,
SCBs/DCCBs and SLDBs as to its own staff. It has also established a
central training institute at Lucknow called Bankers Institute for Rural
Development (BIRD) with a capacity to run two streams of training course
with 30 participants each, besides two regional training centres at
Bolpurand Mangalore. NABARD has also been providing financial and
other support to the junior level training centres of SLDBs and also to the
executives of cooperative banks.

According to Narasimban4 (1993) , the limits under the general line of

credit, (GLCI) provided by the Reserve Bank of India to the National Bank
for Agricultural and Rural Development (NABARD) for short term
seasonal agricultural operations were enhanced in January 1993 by Rs. 400
crore from Rs. 2,700 crore to support the Rabi agricultural operations, it
has been decided to further enhance the limits under GLCCI by Rs. 400
crore from Rs. 3,300 NABARD has been provided additional resources of
Rs. 1,000 crores to support agricultural activities.

Indian Bank 5(1995) had conducted a similar study in Tamil Nadu,

covering 45 branches of their bank and 101 SHGs. The study examined
only the transaction costs of the branches under different models for credit
delivered for medium team loans upto Rs. 25,000. It concluded that lending
to SHGs, which on-lend to borrowers with NGO acting as non-financial
intermediary, resulted in saving of transaction costs to an extent of 45 per
cent as compared to lending under government sponsored programmes and
other direct lending projects.

Puhazhendi 6(1995) studied 19 SHGs and five bank branches in Karnataka

and Tamil Nadu and concluded that the intermediation of SHGs reduced
the time spent by bank personnel in identification of borrowers,
documentation, follow up and recoveries effecting 40 per cent reduction in
the transaction cost of bank, as compared to direct lending to individual
borrowers. Transaction cost of borrowers was reduced by 85 per cent.6

KarnatiLingaiah and Anjana Devi7 (1996) expressed that agricultural

credit is one of the most crucial inputs in all agricultural development
programmes7. Institutional credit has been adopted to provide cheaper and
sufficient credit to farmers from 1950 onwards. The major policy in the
sphere of agricultural credit has been its progressive institutionalization for
supplying agriculture and rural development programmes with adequate
and timely flow of credit to assist weaker sections and under developed
areas- saying the functions of NABARD, they indicate that NABARD
provides short-term, medium term and long term and credit to State
Cooperative Banks, Regional Rural Banks, Land Development Banks and
other financial institutions approved by ReserveBank of India. They add
that NABARD inspects in the functioning of the above mentioned banks
and institutions and maintains a research and development fund to promote
research in agriculture and rural development. NABARD also provides
purpose-wise refinance assistance to different schemes like Minor
Irrigation Land Development, Farm Mechanization, Plant Horticulture,
Poultry, Sheep Breeding, Piggery, Fisheries and Dairy Development.

Rajesh Suneja8 (1997) suggests that the NABARD should try to impose
upon itself certain disciplines like the time taken to dispose of schemes and
proposals which are present for consideration. The cooperative banks
should also have a feeling that NABARD is their apex body in the matter
of taking up their problems with the Government and other financial
institutions. Hence, NABARD should have its own restructuring for
streamlining its operations-moreover, it should raise the bulk of its
resources from the market and the bulk of its lending should be at market
related interest rates-subsidized lending by NABARD should necessarily
be a relatively small segment of its total lending. Development of under-
banked states should engage more attention of NABARD while the
relevant procedures should be simplified. For this purpose, it should
explore further avenues of refinancing more institutions.

Robinson9 (2000) defined microfinance as small scale financial services

provided to the people who work in agriculture, fishing and herding; who
operate small or micro enterprises; who provide services; who work for
wages or commission; and other individuals and groups at the local levels
of developing countries, both rural and urban. Financial services usually
include credit and savings, but there are Microfinance Institutions (MFIs)
who provide additional services also such as issue of cheques, drafts,
guarantees, etc.9

Shivamaggi10 (2000)observed that, while the rural infrastructure

development fund of the national bank for agricultural and rural
development NABARD is helping infrastructure projects to a significant
extent the development of brand names for agricultural products water
saving technology, cold storage, agro-processing and packaging have also
be assisted. Rural development projects tend to suffer if the banking policy
makers do not adopt a bold and flexible approach to rural credit. One
recent development under the leadership of NABARD and nongovernment
organization (NGOs) is the formation of informal self help groups (SHGs)
broadly on the model of the gramean banks of Bangladesh. The number of
SGHs linked to banks is now around 33000 NABARD hasan ambitious
plan for these groups. But much depends on the initiative and efforts of
voluntary organizations. Rural banking in India has made tremendous
quantitative progress. But quality is a different matter. On the whole it has
to be admitted that the policy makers have yet to arrive at a banking
structure and operational system which suit agriculturists credit and saving
needs and at the same time promote modern agriculture.

Dinabandhu Mahal 11(2000) in his article has highlighted National Bank

for Agriculture and Rural development(NABARD) is giving great
importance for the effective implementation of the schemes under the non-
form sector. The co-operatives have been playing a significant role in
dispensing credit. The NABARD provides various other facilities like
establishment of technical monitoring and evaluation (TIME) cell, training
to the participating banks. It is true that if the co-operative banks would
expand their network in the rural areas it would take various benefits under
the NFS financing and undertake proper asset management definitely they
would not only achieve viability but also proper and compete with other
financial institutions.

Nanda12 (2000) observed that NABARD has been directing its parties and
programs to support the rural credit institutions towardsachieving the goal
of providing adequate and timely credit support for on farm, off-farm and
non-farm operations in the rural sectors. Various schemes have been
formulated and implemented by NABARD for policy and refinance
support to banks, in different fields like creation of aggregation facilities,
farm mechanization, plantation horticulture animal husbandry, watershed,
development, and agro-processing infrastructure in rural areas. NABARD
is supporting large scale investment in rural infrastructure that includes a
wide range of support services like irrigation, food control, soil
conservation, watershed development, roads bridges, marketing in rural
areas. These efforts will go a long way towards improving the productivity
and profitability of agriculture and the quality of life in the rural areas. This
should also lead to increased credit absorption capacity in the rural areas.

NABARD 13(2000) is a unique development finance institution committed

to rural development15. It provides refinance to banks and the state
Governments, takes development and promotional initiatives to improve
the impact of credit on development and attempts to bring about equity and
justice in such development. It also supervises the operations of rural
financial institutions like co-operative banks and RRBs. The year 1999-
2000, gives high degree of satisfaction to NABARD. New heights have
been achieved in all its areas of operations. Innovations were introduced
and new strategies chalked out for better achievement in future.

Patel 14(2000)observed that the rural credit structure in India has

completed 95 years and is un paralleled in the world. It serves around 120
million rural households in about seven lakh villages through its 92000
primary agricultural credit societies, 11426 branches of short term
cooperatives 32948 branches of commercial banks and 11426 branches of
regional rural banks. After independence, the rural credit system has
disbursed credit for farm development. He recommends that it is necessary
to form an internal committee consisting of a representative each from the
RBI, NABARD and ministry of finance to examine the recommendations
of several working groups expert committees.

Manab Sen 15(2000) has attempted a study to find out the development of
SHGs promoted by SreemamahialaSamity and its impact on women
members. It was a study of 10 SHGs selected in Nadia district on a random
sampling technique in July, 1999. The study included focus group
discussion with the members of the SHGs in separate sessions followed by
interview of 100 members through structured schedule. The findings of the
study revealed that the individual loans were mostly used for productive
purposes, the rate of recovery was very high compared to the rate of
recovery of the formal institutional system and group dynamics was an
instrument for change in the quality of life of the poor people. The study
also revealed that other than economic activities, the groups worked
towards primary education, basic health care of family, safe drinking water
and environment protection. The study concluded that group cohesion,
group action, need-based credit timely repayment are essential elements for
sustainability of the groups.
 CHAPTER 3

RESEARCH METHODOLOGY

3.1 Introduction

As it is indicated in the title, this chapter includes the research

methodology of the dissertation. In more details, in this part the author
outlines the research strategy, the research method, the research approach,
the methods of data collection, the selection of the sample, the research
process, the type of data analysis, the ethical considerations and the
research limitations of the project.

Meaning of Research

When we analyze the word “Research” the meaning of it becomes clear to

us.Re + Search = Research

Research in common parlance refers to a search for knowledge. Once can

also define research as a scientific and systematic search for pertinent
information on a specific topic. In fact, research is an art of scientific
investigation. The Advanced Learner’s Dictionary of Current English lays
down the meaning of research as “a careful investigation or inquiry
specially through search for new facts in any branch of knowledge.”1
Redman and Mory define research as a “systematized effort to gain new
knowledge.”2Some people consider research as a movement, a movement
from the known to the unknown. It is actually a voyage of discovery. We
all possess the vital instinct of inquisitiveness for, when the unknown
confronts us, we wonderand our inquisitiveness makes us probe and attain
full and fuller understanding of the unknown. This inquisitiveness is the
mother of all knowledge and the method, which man employs for obtaining
the knowledge of whatever the unknown, can be termed as research.

According to Clifford Woody “Research comprises defining and redefining

problems, formulating hypothesis or suggested solutions; collecting,
organizing and evaluating data; making deductions and reaching
conclusions; and at last carefully testing the conclusions to determine
whether they fit the formulating hypothesis.Research is, thus, an original
contribution to the exiting stock of knowledge making for its advancement.
It is the pursuit of truth with the help of study, observation, comparison and
experiment. In short, the search for knowledge through objective and
systematic method of finding solution to a problem is research.

3.2 Research strategy

The research held with respect to this dissertation was an applied one, but
not new. Rather, numerous pieces of previous academic research exist
regarding the study of NABARD in various financing schemes and its
impact on Indian economy, not only for funds in specific sector, but also
for other financing schemes in India. As such, the proposed research took
the form of a new research but on an existing research subject.

3.3 Research method – Qualitative versus Quantitative techniques

In order to satisfy the objectives of the dissertation, a qualitative research

was held. The main characteristic of qualitative research is that it is mostly
appropriate for small samples, while its outcomes are not measurable
andquantifiable (see table 3.1). Its basic advantage, which also constitutes
its basic difference with quantitative research, is that it offers a complete
description and analysis of a research subject, without limiting the scope of
the research and the nature of participant’s responses (Collis & Hussey,
2003).

However, the effectiveness of qualitative research is heavily based on the

skills and abilities of researchers, while the outcomes may not be perceived
as reliable, because they mostly come from researcher’s personal
judgments and interpretations. Because it is more appropriate for small
samples, it is also risky for the results of qualitative research to be
perceived as reflecting the opinions of a wider population (Bell, 2005).

Table 3.1: Features of Qualitative & Quantitative Research

Qualitative Research Quantitative Research

The aim is a complete, detailed

The aim is to classify features,count
description.
them, and construct statistical models
in an attempt to explain what is
observed.

Researcher may only know roughly Researcher knows clearly in advance

in advance what he/she is looking for. what he/she is looking for.

Recommended during earlier phases Recommended during latter phases of

of research projects. research projects.

The design emerges as the study

All aspects of the study are carefully
unfolds.
designed before data is collected.
Researcher is the data gathering
Researcher uses tools, such as
instrument.
questionnaires or equipment to collect
numerical data.

Data is in the form of words, pictures Data is in the form of numbers and
or objects. statistics.

Subjective – individuals interpretation of Objective: seeks precise

events is important ,e.g., uses participant
observation, in-depth interviews etc.
Qualitative data is more 'rich', time
consuming, and less able to be
generalized.
measurement & analysis of target
concepts, e.g., uses surveys, questionnaires
etc.
Quantitative data is more efficient,
able to test hypotheses, but may
miss contextual detail.

Researcher tends to become Researcher tends to remain

subjectively immersed in the subject objectively separated from the
matter. subject matter.

Adapted from: Miles & Huberman (1994, p. 40). Qualitative Data

Analysis.

Objectives of study:

The major objectives are as follows:

 To study the role of NABARD and its various financing schemes.

 To depict the lending and borrowing policies,

 To analyze the loan disbursed and recovered,

 To evaluate the performance,

 To explore the customers’ attitude and

 To suggest remedial measures to improve the health of NABARD.

 To examine analytically the problems faced by the rural people of the

 State, particularly, small and marginal farmers while seeking financial
assistance from the banks,

 To study critically, the impact on the growth of rural economy and the
development of agriculture and other allied activities for the removal of
poverty, agricultural unemployment and under-employment.

Hypotheses of study:

The following hypotheses are sought to be examined:

 There is an institutional credit gap between the financial institutions

and the farmers who need it for agricultural activities.

 There has been no sound credit planning.

 The loans are misused.

 Overdue of loans is very high.

 Farmers have no willingness to repay the loans.

PERIOD OF STUDY

A study of last 5 years i.e. from 2015to 2019 will provide a good
knowledge about its working, fulfilled targets and target still to achieve.
The financing schemes of NABARD in India available data is from 2015-
2019. The period of 5 years under the study will provide some reasonable
thought forappraising the role of NABARD in rural transformation.
SOURCES OF DATA

The data will be collected from various annual reports of NABARD, such
as reserve bank of India bulletin, report on currency and finance report On
trends and progress of banking in India, economic survey and report of
various commissions And committee set up the government of India. The
reserve bank of India and The national bank for agriculture and rural
development banks annual report, circulars, national banks new review,
newsletters, information Boucher etc. of NABARD shall also be the main
sources of data.

ANALYSIS OF DATA

The data so collected the above said sources are arranged in the form of
tables so that meaningful inferences could be drawn. The analysis is carried
out by making use of different type tools like Non parametric test, t test,
and mean median simple statistical and mathematical tolls and also through
appropriate diagrams and graphs wherever necessary.

Methods of data collection:

The study is based on secondary data-The study adopted the Personal

Contact Method of Data Collection in order to draw primary date. In this
method, representative individuals but not sample individuals arepersonally
contacted and informations are collected. This method enables to collect
primary data by going deeply into the feelings of the respondents. There
were exchanges of ideas for making the study more useful and meaningful.
New questions can be asked and cross checking can be done at the same
time by this method. There are some information that is not normally
coming out from the respondents. But by adopting this method, such
informations are collected taking an opportunity to touch upon the main
incidental aspects.The secondary data are collected from the concerned
banks through the annual publications, documents and relevant records.
Information has also been obtained from published journals and
newspapers.

Data analysis technique:

After the data are collected with the help of the above methods, they are
properly tabulated and presented. Every table has a clear and concise title
to make it understandable without reference to the text. Thetables have
captions or column headings and stubs or row headings. This process helps
to eliminate the unnecessary details and keep only the relevant part of the
whole collected. In order to enable a quick interpretation o f the data., bar
diagram s, line chart and pie charts are also used.To analyze the dateifor
drawing conclusion, the study goes through various tools like Current
Ratio, Quick Ratio, Cash Ratio and Size of Deposits etc.

Limitation of data:

In order to collect primary data, the study spends more time. Since the
conclusion of the study is to be meaningful, selection ofrepresentative
sample is needed but it is not an easy task. There is a little non-cooperation
of respondents to collect primary data as they busy to perform their official
and private works.There is a slight inaccuracy and unreliability between
the study and secondary data. But all secondary data are critically
examined in order to make the study very meaningful and useful.
 Chapter 4

Data Analysis and Interpretation