NABARD FINAL PROJECT

RURAL CREDIT OF NABARD

INTRODUCTION TO BANKING

A bank is financial

institution and

a financial

intermediary that

accepts deposits and channels those deposits into lending activities, either directly by
loaning or indirectly through capital markets. A bank is the connection between
customers that have capital deficits and customers with capital surpluses.
Due to their influence within a financial system and the economy, banks
are highly regulated in most countries. Most banks operate under a system known
as fractional reserve banking where they hold only a small reserve of the funds deposited
and lend out the rest for profit. They are generally subject to minimum capital
requirements which are based on an international set of capital standards, known as
the Basel Accords.
Banking in its modern sense evolved in the 14th century in the rich cities
of Renaissance Italy but in many ways was a continuation of ideas and concepts of
credit and lending that had its roots in the ancient world. In the history of banking, a
number of banking dynasties have played a central role over many centuries. The oldest
existing bank was founded in 1472

1


HISTORY
Banking in India in the modern sense originated in the last decades of the
18th century. The first banks were Bank of Hindustan (1770-1829) and The General
Bank of India, established 1786 and since defunct.
The largest bank, and the oldest still in existence, is the State Bank of India,
which originated in the Bank of Calcutta in June 1806, which almost immediately
became the Bank of Bengal.
This was one of the three presidency banks, the other two being the Bank of
Bombay and the Bank of Madras, all three of which were established under charters from
the British East India Company.
The three banks merged in 1921 to form the Imperial Bank of India, which,
upon India's independence, became the State Bank of India in 1955. For many years the
presidency banks acted as quasi-central banks, as did their successors, until the Reserve
Bank of India was established in 1935.
In 1969 the Indian government nationalized all the major banks that it did not
already own and these have remained under government ownership. They are run under a
structure know as 'profit-making public sector undertaking' (PSU) and are allowed to
compete and operate as commercial banks.
The Indian banking sector is made up of four types of banks, as well as the
PSUs and the state banks; they have been joined since 1990s by new private commercial
banks and a number of foreign banks.
Banking in India was generally fairly mature in terms of supply, product
range and reach-even though reach in rural India and to the poor still remains a challenge.
The government has developed initiatives to address this through the State
bank of India expanding its branch network and through the National Bank for
Agriculture and Rural Development with things like microfinance.

2


STRUCTURE

3


Banking Regulation Act, 1949

As per Section 5(c) of Banking Regulation Act, 1949 a "Banking Company"
means any company which transacts the business of banking in India.

Explanation: Any company which is engaged in the manufacture of goods or carries on
any trade and which accepts the deposits of money from public merely for the purpose of
financing its business as such manufacturer or trader shall not be deemed to transact the
business of banking within the meaning of this clause."

As per Section 5(b) of Banking Regulation Act, 1949, banking means the accepting, for
the purpose of lending or investment, of deposits of money from the public, repayable on
demand or otherwise, and withdrawable by cheque, draft, and order or otherwise.

As per Section 5(d) of Banking Regulation Act, 1949, company means any company as
defined in Section 3 of the Companies Act, 1956 and includes a foreign company within
the meaning of Section 591 of that Act.

As per section 51 of Banking Regulation Act, 1949, certain provisions of the Banking
Regulation Act are also applicable to the State Bank of India, any corresponding new
bank, a regional rural bank and any subsidiary bank. "Corresponding new bank" has been
defined under clause (ee) of section 2 of the DICGC Act to mean a corresponding new
bank constituted under the Banking Companies (Acquisition and Transfer of
Undertakings) Acts of 1970 or 1980.

4


FUNCTIONS
The functions of banks are divided into two categories:
i) Primary functions, and
ii) Secondary functions including agency functions.

i) Primary functions:

a) Accepting deposits

The most important activity of a commercial bank is to mobilise deposits from the public.
People who have surplus income and savings find it convenient to deposit the amounts
with banks. Depending upon the nature of deposits, funds deposited with bank also earn
interest. Thus, deposits with the bank grow along with the interest earned. If the rate of
interest is higher, public are motivated to deposit more funds with the bank. There is also
safety of funds deposited with the bank.

b) Grant of loans and advances

The second important function of a commercial bank is to grant loans and advances. Such
loans and advances are given to members of the public and to the business community at
a higher rate of interest than allowed by banks on various deposit accounts. The rate of
interest charged on loans and advances varies depending upon the purpose, period and the
mode of repayment. The difference between the rate of interest allowed on deposits and
the rate charged on the Loans is the main source of a bank‟s income.

5


Loans
A loan is granted for a specific time period. Generally, commercial banks grant shortterm loans. But term loans, that is, loan for more than a year, may also be granted. The
borrower may withdraw the entire amount in lumpsum or in instalments. However,
interest is charged on the full amount of loan. Loans are generally granted against the
security of certain assets. A loan may be repaid either in lumpsum or in instalments.

Advances
An advance is a credit facility provided by the bank to its customers. It differs from loan
in the sense that loans may be granted for longer period, but advances are normally
granted for a short period of time. Further the purpose of granting advances is to meet the
day to day requirements of business. The rate of interest charged on advances varies from
bank to bank. Interest is charged only on the amount withdrawn and not on the sanctioned
amount.

6


ii) Secondary functions

Besides the primary functions of accepting deposits and lending money,
banks perform a number of other functions which are called secondary
functions. These are as follows -

a. Issuing letters of credit, travellers cheques, circular notes etc.
b. Undertaking safe custody of valuables, important documents, and
securities by providing safe deposit vaults or lockers.
c. Providing customers with facilities of foreign exchange.
d. Transferring money from one place to another; and from one branch
to another branch of the bank.
e. Standing guarantee on behalf of its customers, for making payments
for purchase of goods, machinery, vehicles etc.
f. Collecting and supplying business information.
g. Issuing demand drafts and pay orders.
h. Providing reports on the credit worthiness of customers.

7


RURAL CREDIT

Rural credit is any type of lending program or line of credit that is aimed at
impacting a rural population in some manner. There are banks and cooperatives that
specialize in extending this type of credit to farmers and others engaged in the
agricultural task. Depending on the nature of the organization, credit plans may focus on
providing mortgage assistance, securing new equipment, or even funds to support
research into various aspects of land development within a rural community.
Individuals have access to rural credit options under certain circumstances.
For example, novice farmers and ranchers may be granted a loan or line of credit to
manage the acquisition and upgrade of an existing farm operation, or the establishment of
a new one. Farmers and ranchers are sometimes extended credit of this type when some
sort of natural disaster has ruined crops and threatens the ongoing operation of the ranch
or farm. Some lenders specialize in farm loans that offer highly competitive fixed and
variable mortgage rates which make it possible to refinance a farming operation for the
purpose of acquiring new machinery or meet some other pressing need relevant to the
operation.

Businesses can also secure rural credit under specific situations. This includes
the acquisition or establishment of a commercial farming operation, or a commercial
ranch. A business may also obtain funds earmarked for development, assuming that the
project concerned will benefit the rural community where it is based.

8


Definition

'Agricultural Credit'

Any of several credit vehicles used to finance agricultural transactions,
including loans, notes, bills of exchange and banker's acceptances. These types of
financing are adapted to the specific financial needs of farmers, which are determined by
planting,

harvesting

and

marketing

cycles.

Short-term credit finances operating expenses, intermediate-term credit is used for farm
machinery, and long-term credit is used for real-estate financing.

9


History of rural credit

In the 1950s, a network of rural credit cooperatives was created. At this time,
they were not commercial enterprises similar to banks, but rather channeled credit
between the state and the people's communes in rural areas.[1]
In

the

late

1970s,

after economic

reforms enabled

some

individual entrepreneurialism and the creation of collective enterprises, the RCCs began
to function as grassroots banks that provided credit and savings accounts to families and
collective enterprises. In the reform era, the RCCs were intended to serve as a means for
the Agricultural Bank of China to funnel credit into rural areas. However, the RCCs were
insufficient to meet the high demand for credit in these areas.
Individual and enterprises often turn to other sources of credit, which range
from Rotating Savings and Credit Associations to pawn shops. However, these other
forms are all illegal (although some are tolerated to a greater degree than others, and are
tolerated in some locations more than in others). Commercial banks are legal, but since
fewer than one percent of loans from state banks go to private entrepreneurs, they do not
meet the credit needs of rural areas.
Until 1996, the RCCs were supervised by the Agricultural Bank of China. In
1996, they were transferred to the People's Bank of China. In July 1998, the rural
credit foundations were banned when the State Council of the People's Republic of
China issued the “Provisions on the Cancellation of Illegal Financial Institutions and
Activities.” This left the RCCs as the only legal financial institution (other than banks)
that served rural enterprises and individuals. As of 1998, when the RCFs were banned,
there were approximately 44,000 township-level RCCs and 280,000 village-level RCC
branches

10


Evolution of the Rural Credit System in India

Rural financial market development is a complex process. The creation of the
formal credit structure for financial agriculture and other rural activities commenced in
India in the early part of this century with the introduction of co-operatives. It received a
big push during the plan era. The All India Rural Credit Survey Committee (AIRCS)
1954, forms the edifice for the policy towards the development of the Institutional credit
structures. The committee highlighted the awful inadequacy in the supply of institutional
credit to the rural sector and proposed an integrated scheme of reorganization many more
committees and recommendations. Priority sector lending, lead bank scheme, services
area approach, setting up of NABARD, are some of the outcomes of the repeated scrutiny
of the system.
Coming to the recent committees, the Agriculture Credit Review Committee
(ACRC) 1989, examined the existing rural credit system in detail. It highlighted the
yawning gap between income generated and costs incurred by rural credit institutions,
necessitating external assistance. The committee recommended greater autonomy for
commercial banks; the weakness of RRBs were seen as endemic to the system with nonviability built into them. Co-operatives were sought to be strengthened through thrust on
deposit mobilization and reduction of political interference. The Narsimham Committee
on Financial Sector Reforms 1991, among other things, recommended a redefinition of
priority sector, gradual phasing out of directed credit programmes to 10% of aggregate
bank credit and deregulation of interest rates.

11


Looking at the situation today, the excercises seems to have resulted in a
scenario where "an imposing superstructure of credit institutions has been built which
one committee after another has kept reshuffling or adding to" (Dandekar, 1993).
Commenting broadely on the exercise in developing countries (to which the India
experience seems to be no exception), Braveman and Guasch, 1986, see most of the
changes in institutional design as largely superficial, window dressing type rather than
substantial. "the institutions have been perceived more like a welfare agency than a
commercial undertaking. There seems to be little effort to integrate deposit taking
activities or to generate saving mobilization-a vital activity for the long run success of a
credit institution. No provisions were made to deal with non-compliance, or to implement
a reasonable system of incentives to both lenders and borrowers to induce the desired
objectives."

12


The major problems of the rural credit system thus evolved
are as follows:
1. It has not produced desired results in terms of the direction, quantum and quality of the
flow of credit.
2. It is afflicted by alarming high overdues, bad debts, loan defaults, unviability, low
profitability, overburdening of staff, declining control and deteriorating customer
services. It is estimated that the over dues of credit institutions have increased from Rs.
2,818 crores to Rs. 9,661 crores during 1983-93.
3.The complex tiering of funds through RBI-NABARD-Commercial Banks-State
Cooperative Banks (SCBs)-District Co-operative Banks (DCBs)-Primary Agricultural
Credit Societies (PACS), has tended to unduly increase the cost of banking.
4. Features of rural credit markets in developing countries may be understood as
responses to the problems of adverse selection, moral hazard and enforcement. Imperfect
information in this sense creates problems from the perspective of constrained Pareto
efficiency. In Indian case too, information imperfactions have contributed to
inefficiencies like high transaction costs and low recycling of credit.
5. From the institutional perspective, role of an appropriate institution as an enforcer and
transmitter of incentives and motivator and inducer of saving is essential for
development. The institutional design should serve to promote and facilitate functioning
at the levels of both the leaders and borrowers. This factor seems to have been largely
overlooked in the Indian case. Motivating to perform has not been given due importance.
6.Directed credit programmes and subsidized lending have badly affected viable
functioning of credit disturbing units. The entire exercise has largely come to be
characterized by tiering of funds from above to borrowers who often tale as a gift that
need not be returned.

13


India: Priorities for Agriculture and Rural
Development
BACKGROUND
Although agriculture contributes only 21% of India‟s GDP, its importance in
the country‟s economic, social, and political fabric goes well beyond this indicator. The
rural areas are still home to some 72 percent of the India‟s 1.1 billion people, a large
number of whom are poor. Most of the rural poor depend on rain-fed agriculture and
fragile forests for their livelihoods.
The sharp rise in foodgrain production during India‟s Green Revolution of the
1970s enabled the country to achieve self-sufficiency in foodgrains and stave off the
threat of famine. Agricultural intensification in the 1970s to 1980s saw an increased
demand for rural labor that raised rural wages and, together with declining food prices,
reduced rural poverty.
Sustained, although much slower, agricultural growth in the 1990s reduced
rural poverty to 26.3 percent by 1999/00. Since then, however, the slowdown in
agricultural growth has become a major cause for concern. India‟s rice yields are onethird of China‟s and about half of those in Vietnam and Indonesia. With the exception of
sugarcane, potato and tea, the same is true for most other agricultural commodities.
The Government of India places high priority on reducing poverty by raising
agricultural productivity. However, bold action from policymakers will be required to
shift away from the existing subsidy-based regime that is no longer sustainable, to build a
solid foundation for a highly productive, internationally competitive, and diversified
agricultural sector.

14


ISSUES AND CHALLENGES
Slow Down in Agricultural and Rural Non-Farm Growth: Both the
poorest as well as the more prosperous „Green Revolution‟ states of Punjab, Haryana and
Uttar Pradesh have recently witnessed a slow-down in agricultural growth. Some of the
factors hampering the revival of growth are:
Poor composition of public expenditures: Public spending on agricultural subsidies
is crowding out productivity-enhancing investments such as agricultural research and
extension, as well as investments in rural infrastructure, and the health and education of
the rural people. In 1999/2000, agricultural subsidies amounted to 3 percent of GDP and
were over 7 times the public investments in the sector.
Over-regulation of domestic agricultural trade: While economic and trade reforms in
the 1990s helped to improve the incentive framework, over-regulation of domestic trade
has

increased

costs,

price

risks

and

uncertainty,

undermining the

sector‟s

competitiveness.
Government interventions in labor, land, and credit markets: More rapid growth of
the rural non-farm sector is constrained by government interventions in factor markets -labor, land, and credit -- and in output markets, such as the small-scale reservation of
enterprises.
Inadequate infrastructure and services in rural areas.

15


INTRODUCTION

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 in India.

The Committee to Review Arrangements for Institutional Credit for Agriculture and
Rural Development (CRAFICARD), set up by the Reserve Bank of India (RBI) under the
Chairmanship of Shri B. Sivaraman, conceived and recommended the establishment of
the National Bank for Agriculture and Rural Development (NABARD). The Indian
Parliament through the Act 61 of 1981 approved the setting up of NABARD. The Bank
which came into existence on 12th July, 1982, was dedicated to the service of the Nation
by the Hon'ble Prime Minister, Smt Indira Gandhi 5th November, 1982.

NABARD is established as an 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."

NABARD took over the functions of the erstwhile Agricultural Credit Department
(ACD) and Rural Planning and Credit Cell (RPCC) of RBI and Agricultural Refinance
and Development Corporation (ARDC). Its subscribed and paid up Capital was Rs. 100
crore which enhanced to Rs. 500 crore, contributed by the Government of India and RBI
in equal proportions.

16


VISION
"To facilitate sustained access to financial services for the unreached poor in
rural areas through various micro finance innovations in a cost effective and sustainable
manner".

ROLE
 Facilitating credit flow for agriculture, rural infrastructure and rural
development.
 Promoting and supporting policies, practices and innovations
conducive to rural development.
 Strengthening rural credit delivery system through institutional
development.

MISSION
"Promote sustainable and equitable agriculture and rural prosperity through
effective credit support, related services, institution development and other innovative
development.

17


HISTORY OF NABARD

 Reserve Bank of India (RBI) established in 1935 interalia, with a mandate to set
up a Agricultural Credit Department (ACD) with expert staff.
 ACD and RBI, initiated different measures to develop a healthy rural credit
structure and provided guidance to State Governments and Co-operative Credit
Structure.
 Agricultural Refinance Corporation (ARC) was established in 1963 to support
investment credit needs for agricultural development.
 Consequent to undertaking of development and promotional functions, ARC was
renamed as Agricultural Refinance and Development Corporation (ARDC) in
1972.
 RBI, at the instance of Government of India appointed a Committee to Review
Arrangements for Institutional Credit for Agriculture and Rural Development
(CRAFICARD) IN 1979.
 The CRAFICARD reviewed the need of integrating short-term, medium-term and
long-term agricultural credit structure.
 The CRAFICARD recommended the establishment of National Bank for
Agriculture and Rural Development (NABARD).
 National Bank for Agriculture and Rural Development Act, 1981 was passed by
the Indian Parliament and NABARD was established on 12th July 1982 with an
initial of Rs. 100 crore.

18


ORGANIZATIONAL STRUCTURE

19


FUNCTIONS

Serves as an apex financing agency for the institution providing investment
and production credit for promoting the various developmental activities in rural areas.

Takes measures towards institution building for improving absorptive
capacity of the credit delivery, including monitoring, formulation of rehabilitation
schemes, restructuring of credit institutions, training of personnel, etc.

Co-ordinates the rural financing activities of all institutions engaged in
developmental work at the field level and maintains liaison with Government of India,
State Governments, Reserve Bank of India (RBI) and other national level institutions
concerned with policy formulation, and

Undertakes monitoring and evaluation of projects refinanced by it.
NABARD's refinance is available to State Co-operative Agriculture and Rural
Development Banks (SCARDB's), State Co-operative Banks (SCB's), Regional Rural
Banks (RRB's), Commercial Banks (CB's) and other financial institutions approved by
RBI. While the ultimate beneficiaries of investment credit can be individuals, partnership
concerns, companies, State-owned corporations or co-operative societies, production
credit is generally given to individuals.

20


ROLE OF NABARD

NABARD is the apex institution in the country which looks after the
development of the cottage industry, small industry and village industry, and other rural
industries. NABARD also reaches out to allied economies and supports and promotes
integrated development. And to help NABARD discharge its duty, it has been given
certain roles as follows:

1. Serves as an apex financing agency for the institutions providing investment and
production credit for promoting the various developmental activities in rural areas
2. Takes measures towards institution building for improving absorptive capacity of
the credit delivery system, including monitoring, formulation of rehabilitation
3. Co-ordinates the rural financing activities of all institutions engaged in
developmental work at the field level and maintains liaison with Government of
India, State Governments, Reserve Bank of India (RBI) and other national level
institutions concerned with policy formulation.
4. Undertakes monitoring and evaluation of projects refinanced by it.
5. NABARD refinances the financial institutions which finances the rural sector.
6. The institutions which help the rural economy, NABARD helps develop.
7. NABARD also keeps a check on its client institutes.
8. It regulates the institution which provides financial help to the rural economy.
9. It provides training facilities to the institutions working the field of rural
upliftment.
10. It regulates the cooperative banks and the RRB‟s, and manages talent acquisition
through IBPS CWE.

21


ORGANIZATIONAL ENVIRONMENT

In the constantly changing socio-economic environment, continuous upgradation of
skills and technical expertise coupled with a high degree of professionalism among
employees assumes greater significance. Keeping this in view, NABARD lays emphasis
on capacity building of its employees by refining its existing training modules, introduces
new programmes and enhancing the exposure of employees through visits to various
institutions within the country and overseas. The Bank through its pro-active human
resource management strategies has sought to develop an environment conducive to the
fulfillment of its mission by reinforcing its corporative vision and building a culture that
fosters learning , creativity and adaptability.

OBJECTIVES OF NABARD

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.

22


OVERALL STRATEGY OF NABARD

Forming and nurturing small, homogeneous and participatory self-help
groups (SHGs) of the poor has today emerged as a potent tool for human development.
This process enables then poor, especially the women from the poor households, to
collectively identify and analyse the problems they face in the perspective of their social
and economic environment. It helps them to pool their meager resources, human and
financial, and priortise their use for solving their own problems.

The emphasis on regular thrift collection and its use to solve immediate
problems of consumption and production not only helps to meet their most urgent needs,
but also,trains them to handle larger financial resources more skillfully, prudently and
with a more lasting impact.

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

23


RURAL INNOVATION
NABARD role in rural development in India is phenomenal. National Bank
for Agriculture & Rural Development (NABARD) is set up as an apex Development
Bank by the Government of India with a mandate for facilitating credit flow for
promotion and development of agriculture, cottage and village industries. The credit flow
to agriculture activities sanctioned by NABARD reached Rs 1,57,480 crore in 20052006. The overall GDP is estimated to grow at 8.4 per cent. The Indian economy as a
whole is poised for higher growth in the coming years. Role of NABARD in overall
development of India in general and rural & agricultural in specific is highly pivotal.

Through assistance of Swiss Agency for Development and Cooperation,
NABARD set up the Rural Infrastructure Development Fund. Under the RIDF scheme
Rs. 51,283 crore have been sanctioned for 2,44,651 projects covering irrigation, rural
roads and bridges, health and education, soil conservation, water schemes etc. Rural
Innovation Fund is a fund designed to support innovative, risk friendly, unconventional
experiments in these sectors that would have the potential to promote livelihood
opportunities and employment in rural areas.[11] The assistance is extended to Individuals,
NGOs, Cooperatives, Self Help Group, and Panchayati Raj Institutions who have the
expertise and willingness to implement innovative ideas for improving the quality of life
in rural areas. Through member base of 25 crore, 600000 cooperatives are working in
India at grass root level in almost every sector of economy. There are linkages between
SHG and other type institutes with that of cooperatives.

24


The purpose of RIDF is to promote innovation in rural & agricultural sector
through viable means. Effectiveness of the program depends upon many factors, but the
type of organization to which the assistance is extended is crucial one in generating,
executing ideas in optimum commercial way. Cooperative is member driven formal
organization for socio-economic purpose, while SHG is informal one. NGO have more of
social color while that of PRI is political one. Does the legal status of an institute
influences effectiveness of the program? How & to what an extent? Cooperative type of
organization is better (Financial efficiency & effectiveness) in functioning (agriculture &
rural sector) compared to NGO, SHG & PRIs.

Recently in 2007-08, NABARD has started a new direct lending facility
under 'Umbrella Programme for Natural Resource Management' (UPNRM). Under this
facility financial support for natural resource management activities can be provided as a
loan at reasonable rate of interest. Already 35 projects have been sanctioned involving
loan amount of about Rs 1000 crore. The sanctioned projects include honey collection by
tribals in Maharashtra, tussar value chain by a women producer company ('MASUTA'),
eco-tourism in Karnataka[13]

25


AGRICULTURAL INSURANCE OF NABARD
In pursuance of the announcement made in the Union Budget, 2002-03 for
setting-up of an Agriculture Insurance Corporation for farmers, a new Company, viz.,
Agriculture Insurance Company of India Ltd. (AICI) was established in 2002 with the
authorised and paid up capital of Rs.1,500 crore and Rs.200 crore, respectively.
NABARD and General Insurance Company (GIC) have contributed 30 and 35 per cent,
respectively, and four other Insurance Subsidiaries, at 8.75 per cent each to the equity.
One of the objectives for the formation of AICI was to act as the implementing agency
for the Government's 'National Agriculture Insurance Scheme' (NAIS). The company has
obtained Certificate of Registration from Insurance Regulatory and Development
Authority (IRDA). The Pilot Scheme on Seed Crop Insurance that was implemented
through GIC has also been transferred to AICI.
NAIS is in operation since rabi 1999-2000 and is being implemented by 23
states and 2 UTs. So far, 590.55 lakh farmers have been covered under the scheme.
The salient features of NAIS are as follows;
The premium rates in respect of food crops and oilseeds are determined on
the basis of flat rates of premium or actuarial rates whichever is less as per the scheme in
accordance

with

the

decision

of

GoI.

The rates are ranging from 1.5-3.5% of sum insured in respect of these crops under both
kharif and rabi.
1. In respect of annual commercial / horticulture crops, the premium rates
are charged on actuarial basis.
2. The actuarial premium rates are worked out on the basis of yield of the
past ten years as per the data provided by the State Government
concerned.
The variation is high due to high variation in the yield during the
specified period i.e. ten years. The premium rates, for example, are high
in the case of groundnut and cotton (risky crops) because of high

26


variation in yield whereas in case of sugarcane and wheat, the rates are
comparatively low since these are stable crops.
3. The scheme stipulates transition of premium rates from flat to actuarial
in case of cereals, millets, pulses and oilseeds in a period of five years
and till such periods, claims beyond 100% of premium are borne by the
Government.
4. In the case of annual commercial / horticulture crops, the implementing
agency is to bear all normal losses i.e. claims up to 150% of premium in
the first three years and 200% of premium thereafter subject to
satisfactory claim experience.
5. The small and marginal farmers are entitled to a subsidy of 50% of the
premium charged.
6. The scheme provides for compulsory coverage in respect of loanee
farmers whereas non-loanee farmers may opt for insurance cover on
voluntary basis.
7. The AICI has introduced, on a pilot basis, a new rainfall index based
insurance product called Varsh Bima in four states, viz., Andhra Pradesh,
Karnataka, Rajasthan and Uttar Padesh covering 21 rain gauge stations
and crops like cereals, pulses and oilseeds during kharif 2004.
NABARD is actively involved through its concerned ROs and DDMs in
successful launching and marketing of the scheme.

27


SUBSIDIARY
NABCON

NABARD Consultancy Services (Nabcons) is a wholly owned subsidiary
promoted by National Bank for Agriculture and Rural Development (NABARD) and 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.
The Company is registered under the Company's Act, 1956, with an
authorized capital of Rs 250 million (US $5.75 million) and paid up capital of Rs 50
million (US $1.15 million).
In tune with NABARD's mission to bring about rural prosperity, Nabcons has
more than just commercial interest in the assignments it undertakes.

ASSOCIATES
NABARDs 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.

28


NAFBINS

NABARD Financial Services Limited, [NABFINS] is a subsidiary of National Bank for
Agriculture and Rural Development (NABARD) with equity participation from
NABARD, Government of Karnataka, Canara Bank, Union Bank of India, Dhanalakshmi
Bank and Federal Bank. It is a non-deposit taking NBFC registered with the Reserve
Bank of India and shall operate throughout India.

The main objectives of the Company are to provide financial services in two broad areas
of agriculture and microfinance. NABFINS provides credit and other facilities for
promotion, expansion, commercialization and modernization of agriculture and allied
activities. NABFINS shall engage in the business of providing micro finance services
(with or without thrift) and other facilities to needy and disadvantageous sections of the
society for securing their prosperity in both rural and urban areas.

NABARD, which is the world renowned apex development bank of our country and
pioneered the world‟s largest microfinance movement, while promoting NABFINS has
envisaged that NABFINS shall evolve into a Model Microfinance Institution to set
standards of governance among the MFIs, operate with exemplary levels of transparency
and operate at reasonable / moderate rates of interest.

29


ROLE AND FUNCTIONS
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
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

30


MANAGEMENT OF RESOURCES

N
F
und

2
013

012

et 2

N
U

2

Accretio ses of Funds 013

012

n

et 2
Utilisatio
n

C
C
apital

4
,000

,000

3
,000

ash and
1

8

Bank

,466

,313

8

1

53

Balances
C
R
eserves &

1
5,234

Surplus

3,408

1
,826

ollateralised
1
Borrowing
and Lending

5
32

31

2

3

01

Obligation
I
nvestments
in
a
) GOI

N
4,481

Fund

1

2

4,479

Securities
2

,414

,147

94

36

2

67

b) ADFC

RC(LTO)

1

2

58

Equity
N
RC
(Stabilisation

1
,581

,579

1

c

1

1

0

)2
AFC
Equity

31


) Fund

48

48

48

d) SIDBI
Equity
e
) AICI Ltd.
D
eposits

3
02

91

2
1

6

1

0

6

0

5

0

0

f)NCDEX
Ltd. & MCX 34

34

0

Ltd.
g
)Nabcons

B
onds and

4
7,666

Debentures

8,584

3
098

5

9
h) Biotech
Venture

40

26

14

Fund
i
) Treasury
B
orrowings

4
3

from GoI

5

8
-)42

0

Bills
(

5

8

j)
Commercial

58

1,037

-989

3

48

-

3

Paper
k
) Non

B

Convertible

orrowings
JNN
Solar
Mission

3
6

3

3

Bonds
3

85

75

0

l) Equity

1

1

1

0

Shares of
Other
32


Institution

m
) Debentures

F
oreign

4

Currency

63

03

5
40

Loan

in Nature of
0,249
Advance

1

1

2,344

2,095

2,334

2,038

296

n) Certificate

-

of Deposits
C
ertificate of

0
,281

Deposits

1
1,281

oans and

L

Advances
a
) Production
& Marketing
Credit

C
ommercial

1
,936

Paper

,245

2
309

6
5,176

Conversion
of

8,338

6,838

64

b)

4

129

-65

3

1

3

Production
Credit into
MT Loans
C
BLO

4
93

Borrowings

93
c

T
erm Money

4

1
38

82

1
44

)-MT & LT

8,255

0,762

,493

0

2

7

-2

Project
Loans

33


d) Interim
finance
e
) LT Non
R

7

IDF Deposits 8,758

5,107

7
,651

1

Project
3
Loans

1

09

31

6,270

2,323

3,947

7

f) Other

40

-

7

Loans
g
) RIDF
S

2

TCRC Fund 5,000

0,000

2
,000

Loans
5

5,061

h) Cofinance (Net

0,860

,201

37

72

4

-35

of Provision)
S T RRB

F

Credit

1

Refinance

0,000

0
0,000

Fund

15

Other Assets 3,172
7

Other

,781

Liabilities
O
ther Funds

,345
5

,258
T

otal

ixed Assets
1

3

,953
2

6

2

25

0

2,470

9

702

1

,436
4

3

05
1

,13,170 ,82,075 1,095

3
otal

T

2

1

3

,13,170 ,82,075 1,095

34


FUNCTIONS ANDS PRODUCTS

A) Credit Planning
Preparation of district-wise credit plans annually that indicate exploitation
potential available for development through bank credit under agriculture, allied
activities, Rural Non-Farm Sector etc.
Preparations of State Focus Paper based on district credit plans. Monitoring the
flow of ground level credit. Issuing policy and operational guidelines to rural financial
institution (RFIs)

1. District Level Planning
NABARD prepares Potential Linked Credit Plans (PLPs) for all the
district of the country. It maps the potentials available for development in agriculture and
rural sectors in the district and projects credit requirement, taking into account long term
physical potential, availability of infrastructure, extension services and marketing support
and the strengths and weaknesses of the RFIs in the district.

2. State Level Planning
NABARD prepares a State Focus Paper for every state. This presents a
comprehensive picture of potentials available in the State for development of agriculture
and allied sectors. It also provides a road map of the opportunities available for further
investments in these sectors. It can be used by bankers and other agencies for preparing
their action plans for making these investments
State Credit Seminars are convened by NABARD annually where all
agencies concerned viz., the State Government, banks , NGOs, etc. participate and
discuss policies and operational measures required to be taken for tackling constraints in
development of potential available in agriculture and allied sectors in the State.

35


3. National Level Planning
NABARD facilitates policy decisions by GOI and RBI in the areas of
credit flow to agriculture and rural development.

 Promotion and Development
1.

Institutional development of client organizations.

2. Capacity building in partner institutions.
3. Supporting experimentation with new development models and practices in credit
delivery.
4. Dissemination of innovative products and ideas.Supporting Research and
Development.
5. Assisting RBI/GOI in formulation of policies relating to rural credit.
6. Promotion of rural non-farm sector.
7. Promotion of Kisan Credit Card Scheme
8. Promotion of micro-credit innovations.
9. Consultancy services.

 Supervision
1. On-site inspection of co-op banks and RRBs.
2. Off-site surveillance of the health of co-op banks and RRBs.

36


 Financial Services
Refinancing RFIs for providing loans for investments and
production purposes in rural areas.
Loans to State Governments for strengthening for cooperatives and also
developing physical and social infrastructure in rural areas.
Support for micro-credit innovations of Non-Government Organisations (NGOs)
and other non-formal agencies.
Monitoring and Evaluation of financed projects.

1. Short Term Credit
Seasonal Agricultural Operations
In order to ensure availability of timely credit to farmers, banks follow
production-oriented system of lending. The system has features like
assessment of credit needs based on area under cultivation and crop wise
scales of finance, extending credit for purchase of agricultural inputs, etc.
Refinance is provided for production purposes at concessional rates of
interest to SCBs and RRBs by way of sanction of credit limits. Each
drawal against the sanctioned credit limit is repayable within 12 months.

Marketing of Crops
Refinance facility is extended to co-op banks and RRBs for meeting the
marketing credit requirement of farmers with a view to reducing
incidences of distress sale and enhancing their holding capacity. Each
drawal against the sanctioned credit limit is repayable within a maximum
period of 12 months.

37


Distribution of agricultural inputs
In order to ensure timely supply of agricultural inputs a line of credit is
made available to Co-op Banks and RRBs for financing Primary Societies
for stocking and distribution of agricultural inputs by a way of sanction of
yearly limits. Each drawal is repayable within a period of 120 days.

Financing industrial societies
Refinance is provided to Co-op Banks for financing production and
marketing activities of industrial cooperative societies engaged in one or
more of the 22 approved groups of cottage and SSIs.

Weavers finance
Given the importance of handloom sector in rural employment generation,
refinance is extended to meet the working requirement of primary weavers
societies and procurement, stocking, distribution and marketing activities
of Apex Weavers Societies and SHDCs.

Financing handicraft sector
Rural craftsmen are provided support by financing through SCBs and CBs
for production, procurement and marketing of handicraft goods.

Pisciculture
Refinance is extended to Co-op Banks and RRBs for meeting working
capital requirements of fishermen engaged in Inland and Marine fishery
activities.

38


New line of credit for allied and marketing activities
A new line of credit is extended to Co-operative Banks for financing allied
and marketing activities against security of gold / security other than
charge on crops.

Special Initiatives
Direct Short Term Refinance to District central Co-op Banks for financing SAO.
Special line of credit for oilseeds and pulses production.
Special line of credit for development of tribals in pre-dominantly tribal areas
which is in crores.

2. Medium Term Credit
a. MT conversion Loans (on account of crops loss due to natural calamities) to Coop Banks and RRBs.
b. MT (Non Schematic) loans for agriculture and allied activities to Co-op Banks
and RRBs.

3. Investment Credit
Refinance to State Co-op and Rural Development Banks (SCARDBs),
SCBs, Scheduled Banks such as CBs, and RRBs for:
a.

Agriculture and allied activities.

b.

Financing artisans/ Khadi Village Industries/ Rural Non

Sector, etc.
c.

Rural housing.

39


4.

Direct Credit

a. Loans to State Governments for share capital contribution
to co-op credit institutions.
b. Loans under Rural infrastructure Development Fund
(RIDF)

for

rural

infrastructure

projects

to

State

Governments, Panchayati Raj institutions, SHGs and
NGOs, etc.
c. Co-financing of hi-tech, export oriented agriculture projects
involving large outlays/ sunrise technology etc. with CBs.
d. Bulk lending for micro finance activities and promotional
projects to NGOs.

40


Other miscellaneous functions of NABARD are as follows

1. Conduct inspections of the RRBs and the co-operative societies, without any
prejudice to the authority of the RBI.

2. All the applications for opening a branch by RRBs or co-operative societies
should be forwarded to the RBI through the NABARD.

3. Copies of all returns submitted by the RRBs and co-operative societies to the RBI
should also be furnished to the NABARD.

4. NABARD is also empowered to obtain any information or statement from the
RRBs and the co-operative societies.

5. NABARD should undertake research and training programs. These
comprehensive training programs should be targeted towards NABARD's own
staff and the staff of SCBs and RRBs as well. The R&D department of NABARD
should take the lead in promoting research concerning problems associated with
India's agriculture and rural development and also other allied aspects. For this
purpose the NABARD has been authorized to maintain and R&D fund out of
profits earned by it every year.

6. NABARD is responsible for coordinating with the Government of India, the
Planning Commission, State Governments and other agencies concerned with the
development of rural industrialization. It is also responsible for ensuring the
implementation of various policies and programs meant for providing finance to
the rural industries.
41


SUPPORT TO
1. To Weaker Section
NABARD, has designed special programmes for upliftment of weaker
sections of society, viz. the Small and Marginal farmers, Scheduled Castes and Scheduled
tribes and people living below poverty line.

2. Small and Marginal Farmers
As per NABARDs refinance policy for production credit, the banks are
required to earmark a certain percentage of their lending to small and marginal farmers.

3. 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 co-operatives for financing collection and marketing of various types of minor forest
produce.

4. SC/ST Action Plan
Investment credit is made available to the SC/ST population by identifying
investment potential and preparing a banking plan with allocation of credit to banks.
NABARD provides 100% refinance under the plan.

42


In addition, NABARD has established a special “Tribal Development Fund” with a
corpus of Rs. 50 crore to replicate successful sustainable models in Tribal Areas.

5. 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.

6. Development of Women through Area Programme

Responding to the need for an integrated and holistic approach to
development of women entrepreneurs, this scheme is being implemented in the RRBs on
a pilot basis. Under the programme the Women Development Cells 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.

7. Comprehensive Tribal Development Programme (Wadi Project)
„Wadi‟ (orchard) project is being implemented for upliftment of tribals in
Gujarat and Maharashtra with grant support from KFW, Gremany.
Two NGOs viz., DHRUVA and MITRA, promoted by BAIF, Pune acts as the principal
implementing agencies in Gujarat and Maharashtra respectively.
Wadi project has resulted in:
i.

Rise in employment opportunities.
43


ii.

Reduction in migration.

iii.

Increased production of fruits and cashew nuts.

iv.

New avenues for processing activities.

v.

Enhanced entrepreneurial skill and empowerment of women.

8. Transfer of Technology for Sustainable Development
The project assisted by Commission of European Community and
implemented by BAIF aims at achieving sustainable development through family
oriented approach for poverty alleviation by adopting simple but appropriate
technologies. The major activities covered are orchard development, cattle development,
sericulture and sustainable off farm activities. The participants families are now
generating sizable income from the intervention undertaken by them and the project has
effectively checked the migration of rural poor by providing employment opportunities
locally.

9. Swarnjayanti Gram Swarozgar Yojana (SGSY)
SGSY has been conceived as a holistic poverty alleviation programme by
GOI which aims at bringing every assisted BPL family above the poverty line in 3 years
by providing them with income generating assets through a mix of bank credit and
government subsidy.

44


Operations of NABARD in Parbhani District

Potential Linked Credit Plans (PLPs) :The potentials available for the rural economic activities in the
district were assessed and presented in physical and financial terms, as Potential
Linked Credit Plan(PLP), which is now accepted as the reference document useful
for Bankers, Govt. Officials and others involved in rural development. Bankers
used it as the basis for preparation of Annual Credit Plan of the district and Govt.
agencies for initiating action to fulfill infrastructure gaps. Potentials assessed
under priority sector, for the last few years is as under :

Year

Priority sector potentials (In lakh Rs)

2003-04

27767.95

2004-05

27142.43

2005-06

31971.58

Refinance Support :NABARD is providing refinance support to the Banks for their
financing in rural areas of the district, for investment purposes to support private
capital formation. Besides this, NABARD has been supporting banks (DCCB and
RRB) for financing production credit also.

45


Kisan Credit Cards (KCC) :Kisan Credit Card is very useful instrument which takes into account
various production needs of a farmer. NABARD is continuously monitoring the
progress in this regard and facilitated issuance of around 3 lakh KCCs, to the
farmers in the district, for timely and adequate availability of credit.

Rural Infrastructure :NABARD supported the efforts of the State Govt. for creating rural
infrastructure, by supporting from it Rural Infrastructure Development Fund
(RIDF) created for the purpose. So far NABARD has sanctioned an amount of Rs
44 crores for 110 road projects and 17 bridge projects, with the help of which
roads of around 625 KM could be constructed connecting 225 villages.

NABARD has also assisted State Govt. for completing Minor
Irrigation Project at Kodri (tal Gangakhed) which has created irrigation potential of 450
Ha.

Micro Credit :To reach unreached is motto of NABARD. Empowerment of rural
poor , especially rural women is one of the thrust areas of NABARD. Under SHG
Bank Linkage Programme, NABARD is instrumental in credit linking 216 SHGs
(Other than SGSY) to the banks with a credit of around Rs 52 Lakh, during 200405.

46


NABARD has supported 5 NGOs and Mahila Arthik Vikas Mahamandal (MAVIM), with
grant assistance for promotion and linkage of SHGs in Parbhani district.

These NGOs have so far promoted around 450 SHGs, covering nearly 4600 rural people,
with this support.

NABARD has also organised Sensitisation Meets for Bankers, Training for
NGO workers, Exposure Visits to BLBC Members etc, for furthering SHG Bank
Linkage programme and SHG movement in the district.

Farmers Clubs :Under NABARD's Vikas Volunteer Vahini programme, so far 25
farmers clubs have been established in the district, with the help of Marathwada
Gramin Bank, Bank of Baroda and Bank of Maharashtra. These clubs propagate
the principles of "Development through Credit" and are supported with grant
assistance from NABARD for initial few years.

Watershed Development Programme :Indo-German

Watershed

Development

Programme

is

being

implemented by NABARD in Maharashtra in around 125 watersheds. In Parbhani
district watershed development work under this programme has been successfully
completed in Belwadi (tal. Gangakhed) watershed and work will shortly enter in
main phase in Kundgirwadi watershed (Tal. Gangakhed).

47


Non farm Sector :NABARD has taken a number of initiatives for development of NonFarm sector in the district, like organising Orientation Meets for Bankers, Govt.
Agencies

and

NGOs,

organising

Rural

Entrepreneurship

Development

Programmes by assisting MCED, MITCON.

At district level, NABARD through the DDM office, continues to appreciate
ground level situation and expectations of rural population in a better way and through
representation on various important district level forums and other initiatives , it is
playing an important role in bringing about the rural prosperity in the district.

48


DEVELOPMENT INITIATIVES

With the objective of facilitating development and ensuring prosperity in the
rural sector, NABARD continued to support initiatives related to watershed development,
integrated development of backward areas, promotion of cultivation of medicinal crops,
Agri-Export Zones, agri-clinics and agri-business centres, contract farming, bio-fuels,
non-farming activities, improving the outreach of the rural credit delivery system through
Micro-finance

institutions/Self-Help

Group

(SHGs),

women

empowerment,

environmental protection, human resource development in the rural banking sector and
research and development activities in the and rural sector. Some of the important
initiatives taken by the banks and support extended by it to various developmental
programmes of GOI and state governments are highlighted inthis section.

 NABARD Supported Holistic Watershed Dev. Prog. At Washim
& Yavatmal
Background
NABARD

Supported

Holistic

Watershed

Development

Programme

(NHWDP) was launched on 2nd October 2006 in six distressed districts of Vidarbha. The
six distressed districts are Yeovatmal, Washim, Wardha, Amravati, Akola and Buldhana.
The Watershed development measures are being taken up in 90,000 ha in these 6 districts
as a participatory programme for micro level infrastructure development with regard to
sustainable management of soil and water resources. The programme is launched with
one day willingness shramdan (Volunteer Labor contribution) by the community. The
project not only aims for soil and water conservation measures but also incorporates
support for overall development of families through integraed activities like livestock
49


development, Wadi (horticulture plantation), women‟s development and
providing improved livelihood options to the landless families. The project is being
implemented on a cluster (2500-3000ha watershed area) basis in order to ensure
efficiency.

Coverage:
MITTRA has been implementing NHWDP programme in 22 villages. In
Washim there are two clusters namely Phalegaon thet in Washim taluka and NayaniBhoyani in Manora block of Washim district. Likewise three cluster of Yeovatmal are
Devdhari cluster of Ralegaon taluka, Shivani cluster of Kalamb taluka and Asoli cluster
of

Ghatanji

taluka.

Total

area

of

these

clusters

is

13124

ha.

Objectives
Improve livelihood of farmers in the cluster (of 5 to 6 villages) through
community participation.
Strengthening village level institution like Village Watershed Committee, Cluster
Level Committee and Self Help Groups to make them capable of undertaking the
planned measures and develop linkages for sustainable management of resources
in the cluster.
Integration of activities to conserve soil and moisture leading to improve the crop
productivity.

50


Programme Approach
The approach consists of participatory planning, management of natural
resources for providing improved livelihood opportunities for the watershed dwellers. A
cluster of five to six villages is considered to be a unit for implementation. Village
Watershed Committees (VWC) are formed for each micro watershed and a Cluster Level
Committee (CLC) is formed for efficient coordination and implementation of
programme. „Sanykta Mahila Samittee (SMS)‟ is also formed to undertake activities
related to women‟s development. The project measure funds are directly transferred to
CLC account by NABARD and overall programme operations are managed jointly by
PIA and committees. MITTRA is facilitating the programme. The monitoring and
training inputs are being provided by BAIF Development Research Foundation Pune, the
Resource

Support

Organisation

(RSO)

for

this

programme.

Community has to contribute 10% of the total project cost which is being deposited
separately in the maintenance fund account for the purpose of post project operations.
The programme has two phases; first phase is called as a Capacity Building Phase (CBP)
and second as Full Implementation Phase (FIP). The project period is three years.

Activities :
1. Measures based on the watershed
2. Livelihood support activities including women and landless
3. Agronomical Interventions
4. Wadi
5. Demonstration and Training

51


 Development of Bamboo Farming
NABARD has accorded special status for development of Bamboo farming in
consonance with the action plan prepared by National Mission on Bamboo
Technology and Trade Development for upgrading the bamboo economy.
NABARD aims at developing bamboo farming, processing and marketing as a
mainstream activity by changing „forestry mindset‟ into „farm mindset‟. It is
envisaged to provide credit support for development of bamboo over 1 lakh
hectare with an estimated investment of Rs.200 crore annually. To streamline
operational and policy issues, NABARD has taken following actions:A National Consultative Meet on Bamboo was organized by NABARD on 12
May, 2005 at HO, Mumbai. The Meet was attended by 170 participants,
experts and major stakeholders including Planning Commission, Ministry of
Forest and Environment, National Mission on Bamboo Application, INBAR,
Bankers, Industries, NGOs and prominent training institutes engaged in bamboo
development.

 Integrated Development of Backward Blocks
NABARD launched the Pilot Project for Integrated Development
(PPID) of ten backward blocks in five states through the convergence of various
credit and development programmes in July 2003.
The planning and review workshop organized for PPID blocks during the
year revealed that PPID as a development model for backward blocks had already
made a mark at the grassroot level and attached the attention of policy planners.
These blocks have achieved better results in respect of poverty alleviation
initiatives such as SHG-bank linkage programme, Swarnajayanti Gram Swarozgar
52


yojana, entrepreneurship development and employment generation through non farm
sector promotional programmes, watershed development, replication of wadi,
promotion of bamboo clusters, infrastructure development for communication and
post harvest handling, formation of farmers clubs and enhanced credit flow.

 ITC‟s e-Choupal
The e-Choupal, promoted by ITC Ltd., a multiproduct agrobusiness corporate, is an information technology enabled initiative aimed at
providing guidance to farmers through readily accessible on-line knowledge on
scientific farm practices, weather conditions and relevant market information
including real time market linkage.
They serve about 4-5 contiguous villages and are managed by leading
farmers in the villages called „Sanchalaks‟. NABARD has been closely associated
with the project since 2002. More than 5200 e-Choupals, covering around 20000
villages in six states, viz., Andhra Pradesh, Karnataka, Madhya Pradesh,
Maharashtra, Rajasthan and Uttar Pradesh have been established so far. Nearly 10
million farmers spread over 1 lakh villages in 15 states will be covered through
20000 e-Choupals in the next few years.
NABARD has supported a project entitled „Diagnostics for eChoupals‟ by ITC Ltd., in Madhya Pradesh with grant assistance of Rs.9 lakh. The
objective of the project is to develop an IT based practical handbook and
diagnostic tools for production and protection of major crops of the region with
the help of experts from Agriculture Universities ITC Ltd, with this support, has
brought out video films in CDs covering best practices on soil sampling, seed
germination test and soyabean cultivation for the benefit of farmers during the
year.

53


 Bio-Fuels
On account of constantly rising demand for energy and the
prohibitive cost of

importing fossil fuels, bio-fuel from Jatropha and other Tree

Borne Oil Seeds as an alternative resource, is gaining acceptance both globally and
locally. With a view to promote the production of eco-friendly, renewable energy
crops, Planning Commission, GOI and NABARD have decided to promote
Jatropha cultivation on wasteland in forest and non-forest areas through
institutional credit. It is planned to support 1hectare of wasteland annually under
Jatropha plantation, involving institutional finance of Rs. 200 crore.

NABARD is developing a policy framework and bankable models to
promote bio-fuels. The bank is also closely associated with National Oilseeds and
Vegetable Oil Development Board, the nodal agency of GOI for promoting biodiesels. Besides undertaking fields studies in area having different agro-climatic
conditions and interacting with scientists from ICAR and CSIR working in the
field, NABARD provided a platform for interacting among concerned stakeholders.

 National Level commodity Exchange

In an increasingly liberalized environment, commodity market
offers a market based instrument to the farming community for managing risk and
uncertainty. NABARD is keen to participate actively in fostering efficient spot
and futures agriculture markets. NABARD has become a partner and is
participating in the management and equity of major national level commodity
exchanges, so as to strengthen further the marketing infrastructure in the country.
Accordingly, NABARD has contributed Rs. 4.50 crore and Rs. 1.25 crore to the
equity of National Commodities and Derivatives Exchange (NCDEX) and MultiCommodity Exchange.
54


 Initiatives for Tribal Development
Owing to the historical, socio-cultural and geographical situation of
tribals and the complexities of their way of life, the generalized approach adopted
by various agencies for achieving sustainable development of the tribal population
has not been successful. The experience of the Adivasi Development Programme
through „wadi‟ (small orchard) approach, first launched in Gujarat in 1995 and
extended to Maharashtra in 2000, was however, found to be very effective in
creating sustainable livelihood for tribals families.
With a view to replicating the programme and spreading the message
of wadi in other tribal dominated areas of the country through various agencies,
NABARD has created a Tribal Development Fund (TDF) with an initial
contribution of Rs. 50 crore.
Projects under TDF would be implemented through NGOs. Financial
support would be provided out of TDF to enable tribal families to wadi and other
sustainable micro-enterprises. In case of participation by state governments, they
would be tribal women engaged in minor work required to contribute 50 percent
of the project cost.

 Cattle Development Projects
Ministry of Rural Development, GOI has sanctioned two projects
for setting-up of 100 Cattle Development centres (CDCs) each in Bihar and Uttar
Pradesh to be implemented through BAIF, Pune with financial support of Rs.
26.52 crore for a period of 5 years. NABARD has been designated „facilitator‟ of
the project for providing guidance, channelizing funds and monitoring.

55


 Contract Farming and Agriculture Marketing
Contract farming arrangement for different types of crops, viz.,
sugarcane, cotton, vegetables, coffee, tea and food grains are already in vogue. In
order to harness this potential, NABARD took the important initiative of
supporting contract farming arrangement by the banking sector. It extended
financial support for conducting a comprehensive study by Maharashtra
Economic Development Council (MEDC), Mumbai on contract farming and
suitable follow-up action on the findings of the study is initiated. The National
Agricultural Policy of the GOI and the Inter-Ministerial Task Force on
Agricultural Marketing Reforms have recognized the increasing importance off
contract farming in agri-business and its significance to small farmers.

NABARD has developed a special refinance package for contract
farming arrangements aimed at promoting increased production of commercial
crops and creation of marketing avenues for farmers. NABARD will continue to
support for sensitization initiatives.
NABARD is represented in the Working Group on Warehouse
Receipts and Commodity Futures set up by RBI and national level task forces set
up by the confederation of Indian Industries on:

a. Contract farming and
b. APMC Act / Private Mandies.

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 Agro-Processing
NABARD was actively involved in national level policy
initiatives for the agro-processing sector. The Sub-Group on Investment Credit
and Marketing Support set up by Ministry of Food Processing Industries
(MOFPI), GOI was chaired by NABARD. The Bank also participated in national
consultations organized by the MOFPI to firm up the draft National Processing
Policy.

 Farm Innovation and Promotion Fund
In order to extend financial support for promoting various
innovative initiatives being taken up in the field of agriculture and related areas
by NGOs, research institutes, Agriculture Fund with an initial corpus of Rs 5
crore. The fund envisages supporting initiatives to bring about innovations in farm
technology, develop new concept in agriculture and prototypes, undertake market
survey for potential assessment of new activities, acquire patents for innovative
technology, disseminate information relating to new products, innovation in IT ,
innovative ideas technological and managerial in farmsector.

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NABARD a 100% CSR Company

NABARD has been instrumental in grounding rural,social innovations and
social enterprises in the rural hinterlands. This endeavour is perhaps unparalleled in the
country, it has in the process partnered with about 4000 partner organisations in
grounding many of the interventions be it, SHG-Bank Linkage programme, tree-based
tribal communities‟ livelihoods initiative, watershed approach in soil and water
conservation, increasing crop productivity initiatives through lead crop initiative or
dissemination of information flow to agrarian communities through Farmer clubs.
Despite all this, it pays huge taxes too, to the exchequer – figuring in the top 50 tax
payers consistently. NABARD virtually ploughs back all the profits for development
spending, in their unending search for solutions and answers. Thus the organisation had
developed a huge amount of trust capital in its 3 decades of work with rural communities.

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CONCLUSION

NABARD has played a very vital role in the development of Indian commodity market.
It has a wide scope of services through which it has helped various sectors for its
development. Some of the important functions are crediting, housing, supervision, etc.
but one of its most important function is micro-finance. MICRO-FINANCE includes
functions such as giving loans for setting up business relating to agriculture and helping
self-help groups {SHGs}. It also helps in savings functions. The main objective of microfinance is to promote sustainable and equitable agriculture and rural prosperity through
effective credit supply, related services, institutional development and other innovative
initiatives. Micro-finance has developed from micro-savings to micro-credit then to
micro insurance, micro remittance and micro pension.

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Bibliography

www.nabard.com
The Financial Express
Business Standard
www.wikipedia.com
www.goggle.com

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