42493608-NABARD

National Bank for Agriculture & Rural Development

A PROJECT REPORT Under the guidance Of

______________________________Submitted by

______________________________in partial fulfillment o f the requirement for the award of the degree

Of

MBAIN

[Finance/Marketing/Human Resource Management/Information Systems/ Banking/Retail Operations/ Operations Management/ Project Management/ Total Quality Management]

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Acknowledgement: Acknowledgment is the regards given to the people and organization who have helped you in completing the project undertaken. Mainly it must consist of Acknowledgement towards the organization you study and to the company where you have done your project followed by the people who have helped you in the process.

Bonafide Certificate:

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BONAFIDE CERTIFICATECertified that this project report titled .. is the bonafide work of ... who carried out the project work under my supervision.SIGNATURE HEAD OF THE DEPARTMENT SIGNATURE FACULTY IN CHARGE

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Table of contentsCHAPTER NO. TITLE PAGE NO.

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INTRODUCTION TO NABARD 1.1 ESTABILSHMENT OF THE BANK 1.2 GENISIS &HISTORICAL BACKGROUND 1.3 OBJECTIVES 1.4 1.5 MISSION STATEMENT CUTTENT POSITION OF NABARD WHAT IS NABARD? 2.1 MAJOR ACTIVITIES 2.2 REGIONAL OFFICE OF NABARD ALL OVER INDIA 2.3 ORGANISATIONAL STRUCTURE 2.4 MILE STONES IN NABARD 2.5 NABARDS ROLE IN TRAINING

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3 3

FUNCTIONS OF NABARD CREDIT ROLE

FUNCTIONS OF NABARD4


3.1

CREDIT OPERATIONS

PERFORMED BY THE BANK 3.2 CREDIT PLANNING BY NABRD 3.3 RESOURCES FOR THE OPERATION 3.4 CREDIT STRUCTURE OF NABARD 3.5 TYPES OF REFINANCE FACILITIES 3.6 INTREST RATE 4 3.7 DIRECT CREDIT PROMOTIONAL ROLE OF NABARD 4 INTRODUCTION 4.1DEVELOPMENT PROMOTIONAL FUNCTION 4.2 SWAROJGAR CREDIT CARD 4.3 FARMERS CLUB PROGRAMME 4.4 SELF HELP GROUPS 5 4.5 KISSAN CREDIT CARDS DEVELOPMENTAL ROLE NABARD 5 INTRODUCTION 5.1 WATERSHED DEVELOPMENT FUND(WDF) 5.2 CO-OPERATIVE DEVELOPMENT FUND (CDF)5

&

OF


5.3

RURAL

INFRASTRUCTURAL

DEVELOPMENT FUND (RIDF)5.4 DISTRICT RRAL INDUSTRIES PROJECT (DRIP) 5.5 5.6 MAHARASHTRA RURAL RURAL CREDIT PROJECT (MRCD) ENTERPRUNERSHIP DEVELOPMENT PROGRAMME (REDP) 5.7 RURAL MARKETING 5.8 REVIVAL OF SHORT TREM RURAL COOPERATINE STRUCTURE 5.9 RURAL INNOVATION FUND 5.10 NABARD CONSULTANCY SERVICES 5.11 CO-FINANCING LATEST SCHEMES OF NABARD 6.1 MILLION SHALLOW TUBEWELLS PROGRAMME 6.2 OFWAMS 6.3 RIF 6.4 FUNDS FOR SWAROJGAR AWWARNESS SCHEME 6.5 NABARDS REFINANCE SCHEME FOR KERELA CO-OP BANK 6.6 LPG CONNECTION FINANCE SCHEME FROM UNITED BANK 6.7 NEW SCHEME TO INCREASE PRODUCTION OF CROPS

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GENDER DEVELOPMENT 7.1 WOMEN DEVELOPMENT 7.2 GENDER SENSITIZATION PROGRAMMES 7.3 WDC 7.4 ARWIND 7.5 MAHIMA6


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7.6 DEWTA 7.7 ADIVASI DEVELOPMENT PROGRAMME IN GUJRAT 7.8ADIVASI DEVELOPMENT PROGRAMME IN MAHARASHTRA SUPERVISORY ROLE OF NABARD 8 INTRODUCTION

NABARD AN OVERVIEW7


Twenty four years ago, to be precise on July12,1982, by an Act of the parliament ,NABARD came into being with the avowed objective of providing focused and undivided attention to the development of rural India which was, and even now is, crucial to the countrys economic progress. Naiads mandate touches practically every aspect of rural life. As its mission statement underscores, NABARD is to promote sustainable and equitable agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives. As its core business is the credit support that suits every activity in rural India. Today it has a tremendous reach through 28 regional offices at the state capitals, a sub-office. It refinances commercial, co-operative and regional rural banks for lending to on farm and non-farm activities like minor irrigation, animal husbandry, farm mechanization ,forestry, fisheries, land development, horticulture, plantation and medicinal corps and non-farm like rural industries, artisans, handicrafts, handlooms, rural housing, rural tourism and so on. Refinance is provided by NABARD for both long term investment credit as well as short term production credit for crop rearing and working capital for non-farm activities. Clearly NABARD has been silently working for supporting diversified activities and its stakes are quite awesome. The figures speak for themselves. It has channelised whopping

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Rs 8622crore disbursed during 2005-2006. under production credit the bank sanctioned limits of Rs 11,889 crore during 2005-2006. NABARD has effectively brought in a number of innovations in the rural credit domain. To quote a few: SELF HELP GROUPS, FARMER CLUBS, RURAL INFRASTRUCTURE DEVELOPMENT FUND, WATERSHED DEVELOPMENT,

KISSAN CREDIT CARD,

DISTRICT RURAL INDUSTRIES PROJECT CLUSTER DEVELOPMENT PROGRAMME AND RURAL INNOVATION FUND.

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Table of contents:

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CHAPTER 1 CONCEPT OF NABARD 1. INTRODUCTION"Rural India which comprises 5.5 lakh villages and encompasses three fourths of the Country's population is Characterized by low income levels, inadequate to ensure a quality of life compatible with physical well being. The Ministry of Rural Development, spearheading the frontal attack on rural poverty, through its various programmes endeavored to reach out to the last and most disadvantaged sections of society, provide them with avenues of employment, be it self-employment or wage-employment, and to improve infrastructure relating to their life support systems." India has been a welfare state ever since her Independence and the primary objective of all governmental endeavors has been the welfare of its millions. Planning has been one of the pillars of the Indian policy since independence and the country's strength is derived from the achievement of planning. The policies and programmes have been designed with the aim of alleviation of rural poverty which has been one of the primary objectives of planned development in India. It was realized that a sustainable strategy of poverty alleviation has to11


be based on increasing the productive employment opportunities in the process of growth itself. Elimination of poverty, ignorance, diseases and inequality of opportunities and providing a better and higher quality of life were the basic premises upon which all the plans and blue-prints of development were built. NABARD implies both the economic betterment of people as well as greater social transformation. In order to provide the rural people with better prospects for economic development, increased participation of people in the rural development programmes, decentralization of planning, better enforcement of land reforms and greater access to credit are envisaged.

1.1 Establishment of the Bank:The Bill for setting up the Bank was passed by the Parliament in December, 1981 and National Bank came into existence on 12th July, 1982.The review committee envisaged that the new apex bank would be an organizational device for providing undivided attention, forceful direction and pointed focus to the credit problems arising out of the integrated approach to rural development. The Committee recommended that the new bank take over from the Reserve Bank the overseeing the entire rural credit system, including credit for rural artisans and village industries, and the statutory inspection of co-operative banks and Regional Rural Banks on an agency basis, the Bank continuing to retain its essential control. The new bank was to have organic links with the Reserve Bank by virtue of the latter contributing half of its share capital ( the other half being contributed by the Central Government), and three members of the Central Board of Directors of the Reserve Bank being appointed on its board, besides12


Deputy Governor of Reserve Bank being appointed as its Chairman. On the establishment, the National Bank has taken over the entire undertaking of the Agriculture Refinance and Development Corporation, and has taken over from the Reserve Bank its refinancing functions in relation to the State Co-operative Banks and the Regional Rural Banks. The bank is now coordinating agency in relation to the Central Government, Planning Commission, State Governments and institutions at all-India level and State-level engaged in the development of small-scale industries, rural crafts, etc. for giving effect to the various policies and programmes related to rural credit.

Chapter 1 1.2. Genesis and Historical BackgroundThe Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) set up by the RBI under the Chairmanship of Shri B Sivaraman in its report submitted to Governor, Reserve Bank of India on November 28, 1979 recommended the establishment of NABARD. The Parliament through the Act 61 of 81, approved its setting up. The Committee after reviewing the arrangements came to the conclusion that a new arrangement would be necessary at the national level for achieving the desired focus and thrust towards integration of credit activities in the context of the strategy for Integrated Rural Development. Against the backdrop of the massive credit needs of rural development and the need to uplift the weaker sections in the rural areas within a given time horizon the arrangement called for a separate institutional set-up. Similarly. The Reserve Bank had onerous responsibilities to discharge in respect of its many basic functions of central banking in monetary and credit regulations and was not therefore in a position to devote undivided

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attention to the operational details of the emerging complex credit problems. This paved the way for the establishment of NABARD. CRAFICARD also found it prudent to integrate short term, medium term and long-term credit structure for the agriculture sector by establishing a new bank. NABARD is the result of this recommendation. It was set up with an initial capital of Rs 100 crore, which was enhanced to Rs 2,000 crore, fully subscribed by the Government of India and the RBI.

Chapter 2 1.3 ObjectivesNABARD was established in terms of the , "for providing credit for the promotion of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promoting IRDP and securing prosperity of rural areas and for matters connected therewith in incidental thereto". The main objectives of the NABARD as stated in the statement of objectives while placing the bill before the Lok Sabha were categorized as under: The National Bank will be an apex organisation in respect of all matters relating to policy, planning operational aspects in the field of credit for promotion of Agriculture, Small Scale Industries, Cottage and Village Industries, Handicrafts and other rural crafts and other allied economic activities in rural areas. The Bank will also provide direct lending to any institution as may approved by the Central Government. The Bank will have organic links with the Reserve Bank and maintain a close link with in.

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Chapter 3 1.4 MissionPromoting sustainable and equitable agriculture and rural development through effective credit support, related services, institution building and other innovative initiatives. In pursuing this mission, NABARD focuses its activities on Credit functions, involving preparation of potential-linked credit plans annually for all districts of the country for identification of credit potential, monitoring the flow of ground level rural credit, issuing policy and operational guidelines to rural financing institutions and providing credit facilities to eligible institutions under various programmes Development functions, concerning reinforcement of the credit functions and making credit more productive Supervisory functions, ensuring the proper functioning of cooperative banks and regional rural banks

1.5 CURRENT POSITION OF NABARD In a journey spanning 25 years, NABARD has paved the way for all-round rural progress and development with 28 regional offices, sub-office at Port Blair and 376 district offices. The Micro Finance programme is the largest of its kind in the world. The programme has helped over 329.90 lakh households through 22.38 lakh SHGs comprising mostly of women members.Women empowerment in rural areas. Rs 872 lakh have been sanctioned by way of assistance to women entrepreneurs.

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Through the infrastructure development fund Rs 51,283 crore have been sanctioned for 2,44,651 projects covering irrigation, rural roads and bridges, health and education, soil conversation, drinking water schemes etc. Watershed development fund, with cumulative sanctions of Rs578.95 crore for 427 projects in 124 districts of 14 states, has created a Peoples Movement in rural India. Farmers now enjoy financial access and security through 582.50 lakh Kisan Credit Cards that have been issued through a vast rural banking network. District Rural Industries Projects (DRIP) has generated employment for 23.34 lakh units in 105 districts.

CHAPTER 2

What is

NABARD?

National Bank for Agriculture & Rural Development2 INTRODUCTION

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NABARD is an apex institution accredited with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas. NABARD is established as a development Bank, in terms of the Preamble of the Act, "for providing and regulating Credit and other facilities for the promotion and development of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promoting integrated rural development and securing prosperity of rural areas and for matters connected therewith or incidental thereto The National Bank for Agriculture & Rural Development (NABARD) : was setup by an act of 1981. The objective of the Bank was to provide credit for promotion of Agriculture, small-scale Industry, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural area with a view to promote integrated rural development and to secure prosperity of rural area and for matters connected therewith or incidental thereto. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with Providing refinance to lending institutions in rural areas

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Bringing about or promoting institutional development and Evaluating, monitoring and inspecting the client banks Besides this pivotal role, NABARD also: Acts as a coordinator in the operations of rural credit institutions Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development Acts as regulator for cooperative banks and RRBs.

Chapter 4 2.1 Major ActivitiesPreparing of Potential Linked Credit Plans for identification of exploitable potentials under agriculture and other activities available for development through bank credit. Refinancing banks for extending loans for investment and production purpose in rural areas. Providing loans to State Government/Non Government Organizations (NGOs)/Panchayati Raj Institutions (PRIs) for developing rural infrastructure. Supporting credit innovations of Non Government Organizations (NGOs) and other nonformal agencies.18


Extending formal banking services to the unreached rural poor by evolving a supplementary credit delivery strategy in a cost effective manner by promoting Self Help Groups (SHGs) Promoting participatory watershed development for enhancing productivity and profitability of rainfed agriculture in a sustainable manner. On-site inspection of cooperative banks and Regional Rural Banks (RRBs) and iff-site surveillance over health of cooperatives andRRBs

2.2 REGIONAL OFFICES OF NABARD ALL OVER INDIA

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NABARD operates throughout the country through its 28 Regional Offices and one Sub-office, located in the capitals of all the states/union territories. It has 336 District Offices across the country, one Sub-office at Port Blair and one special Cell at Srinagar. It also has 6 training establishments.

Chapter 5 2.3 Organization Structure

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2.4 Some of the milestones in NABARD's activities are:Refinance disbursement under ST-Agri & Others and MT-Conversion/ Liquidity support aggregated Rs.16952.83 crore during 2007-08. Refinance disbursement under Investment Credit to commercial banks, state cooperative banks, state cooperative agriculture and rural development banks, RRBs and other eligible financial institutions during 2007-08 aggregated Rs.9046.27 crore. Through the Rural Infrastructure Development Fund (RIDF) Rs.8034.93 crores were disbursed during 2007-08. With this, a cumulative amount of Rs.74073.41 crore has been sanctioned for 280227 projects as on 31 March 2008 covering irrigation, rural roads and bridges, health and education, soil conservation, drinking water schemes, flood protection, forest management etc. Under Watershed Development Fund with a corpus of Rs.613.71 crore as on 31 March 2008, 416 projects in 94 districts of 14 states have benefited. Farmers now enjoy hassle free access to credit and security through 714.68 lakh Kisan Credit Cards that have been issued through a vast rural banking network. Under the Farmers' Club Programme, a total of 28226 clubs covering 61789 villages in 555 districts have been formed, helping farmers get access to credit, technology and extension services.

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Chapter 6 2.5 NABARD and its Role in TrainingNational Bank Staff College, Lucknow National Bank Training Centre, Lucknow Zonal Training Centre, Hyderabad Regional Training Centre, Bolpur Bankers Institute of Rural Development (BIRD), Lucknow The provisions of the Act as stated below very clearly indicate the nature and scope of the developmental mandate of the Bank and its role in training and capacity building with the underlying belief that the process of development cannot be accomplished by credit/refinance alone. Section 38 of the NABARD Act provides that the Bank shall: maintain expert staff to study all problems relating to agriculture and rural development and be available for consultation to the Central Government, the Reserve Bank, the State Governments and the other institutions engaged in the field of rural development. provide technical, legal, financial, marketing and administrative assistance to any person engaged in agriculture and rural development activities; may provide consultancy services in the field of agriculture and rural development and other related matters in or outside India, on such terms and against such remuneration, as may be agreed upon; in this context, the role of training in NABARD and the role played by it for capacity building in client institutions, partner agencies and other developmental agencies is important.23


For maintaining 'Expert Staff', the bank needs to provide continuous exposure to its officers and staff for upscaling their knowledge and skills in core areas. However, in the initial years the Bank had recruited expert staff from various technical disciplines and created a separate cadre of officers. These officers were involved in formulating, appraising, monitoring and evaluating different agricultural projects implemented by different credit agencies.These officers, irrespective of their academic background, were imparted similar type of training as all other officers. Their placements and the regular job rotations helped in grooming them to take up assorted assignments, get involved in a variety of roles and functions including credit, developmental, promotional, supervisory and necessary support and information for decision making. The Bank also had access to their specialised skills which were utilised whenever needed. In pursuance of the Bank's mandate as stated in the Act, the Bank provides training facilities for the RFIs and agencies involved in rural development through BIRD and the two RTCs. With a view to broadbase the training and capacity building efforts, the Bank encourages the RFIs to set up their own training systems and provides these training institutes the necessary support to conduct meaningful and quality training. Options and avenues for strengthening the training interventions at the client level are continuously examined so that the human resources in these institutions are developed to take on the challenges, reckon with the competition, improve customer service, expand outreach, develop suitable products and thereby contribute to rural development. As NABARD primarily functions through other agencies, the needs of the client institutions largely determine the knowledge and skill requirements of NABARD officers. NABARD endeavours to blend the experiences of client bank training with the training for NABARD officers so as to make training meaningful and relevant to their roles. Efforts are24


also made to blend the study findings with the outcome from training to periodically measure the overall impact of the investments made in the training efforts.

CHAPTER 3 FUNCTIONS OF NABARD CREDIT ROLE

3 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.It is an apex refinancing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas It takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc. It co-ordinates the rural financing activities of all the institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India and other national level institutions concerned with policy formulation. It prepares, on annual basis, rural credit plans for all districts in the country; these plans form the base for annual credit plans of all rural financial institutions It undertakes monitoring and25


evaluation of projects refinanced by it.It promotes research in the fields of rural banking, agriculture and rural development.

3.1 CREDIT OPERATIONS PERFORMED BY THE BANK:The National Bank is empowered to provide short-term refinance assistance for

periods not exceeding 18 months to state Co-operative Banks, Regional Rural Banks and any financial institution approved by Reserve Bank in this behalf; for a wide range of purposes, including marketing and trading, relating to rural economy. These short term loans granted to State co-operative Banks and Regional Rural Banks , in so far as they relate to the financing of agricultural operations or marketing of crops, can be converted by the National Bank into medium-term loans for periods not exceeding seven years under conditions of drought, famine or other natural calamities, military operations or enemy action. The National Bank can grant medium-term loans to the State co-operative Banks and Regional Rural Banks for period extending from 18 months to seven years for agriculture and rural development and such other purposes as may be determined by it from time to time subject to their being fully guaranteed by the State Governments as to the repayment of principal and payment of interest. Such guarantee can however be waived by the National Bank in such circumstances. The National Bank is empowered to provide by way of refinance assistance long-term loans extending upto a maximum period of 25 years including the period of re-scheduling such loans to the State Land Development Banks, Regional Rural Banks, Commercial Banks, State Co-operative Banks or any other financial institutions approved by the Reserve26


Bank for the purpose of making investment loans. It may also give short-term loans alongwith long-terms loans where such composite loans are considered necessary. Loans for periods not exceeding 20 years can be made to the State Governments to enable them to subscribe directly or indirectly to the Share capital of Co-operative Societies. Moreover, the new bank can contribute to the share capital or invest in the securities of any institutions concerned with agriculture or rural development.

3.2 Credit Planning by NABARD :

3.2.1 District Level Planning NABARD prepares Potential Linked Credit Plans (PLPs) for all the districts of the country. It maps the potentials available for development in agriculture and rural sectors in the district and projects credit requirements, taking into account long-term physical potential, availability of infrastructure, extension services and marketing support and the strengths and weaknesses of the RFIs in the district. 3.2.2 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

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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 potentials available in agriculture and allied sectors in the State.

3.2.3National Level Planning NABARD facilitates policy decisions by GoI and RBI in the areas of credit flow to agriculture and rural development.

3.3 RESOURCE FOR THE OPERATIONS :

For its short-term operations, the National Bank will borrow funds from the Reserve Bank in the form of Line of Credit under Section 17 (4E) of the Reserve Bank of India Act which permitted the Reserve Bank to grant short-term loans to the Agricultural Refinance and Development Corporation earlier and which has now been amended suitably by the National Bank for Agriculture and Rural Development Act . For its term-loan operations, the National Bank will draw funds, as the Corporation was doing earlier, from the Central Government, World Bank/IDA, and other multilateral and bilateral aid agencies, the market and National Rural Credits (long-term operations). Fund that it has established. To this Fund has been transferred the balance in the National28


Agricultural Credit (Long term operations). Funds maintained by the Reserve Bank. Further contributions would be made annually to the new Fund by the Reserve Bank in addition to the contributions by the National Bank itself. Provision has been made also for the Central Government and the State Governments to contribute to this Fund from time to time.

3.4 CREDIT STRUCTURE OF NABARD

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Fig 3.4. 1

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3.5 TYPES OF REFINANCE FACILITIES Agency Credit Facilities Commercial Banks Long-term credit for investment purposes Financing the working capital requirements of Weavers' Co-operative Societies (WCS) & State Handloom Development Corporations Short-term Co-operative Structure (State Short-term (crop and other loans) Co-operative Banks, District Central Cooperative Banks, Primary Agricultural Credit Societies) Medium-term (conversion) loans Term loans for investment purposes Financing WCS for production and marketing purposes Financing State Handloom Development

Corporations for working capital by State Cooperative Banks Long-term Co-operative Structure (State Term loans for investment purposes Co-operative Development operative Agriculture Banks, Agriculture and and Rural CoRural Short-term (crop and other loans) Term loans for investment purposes Primary

Development Banks) Regional Rural Banks (RRBs)

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State Governments

Long-term loans for equity participation in cooperatives Rural Infrastructure Development Fund (RIDF)

loans for infrastructure projects Non-Governmental Organisations (NGOs) Revolving Fund Assistance for various micro- Informal Credit Delivery System credit delivery innovations and promotional projects under 'Credit and Financial Services Fund' (CFSF) and 'Rural Promotion Corpus Fund' (RPCF) respectivelyChapter 7

Chapter 8 3.6 Interest Rates3.6.1 Margin money The beneficiary's contribution to the project cost is necessary in order to ensure his stake in the investment. Such margin money varies from 5% to 25% depending on the type of investments and the category of the beneficiaries. The margin money can be by way of contribution in cash or own or family labour. Large farmers, firms, corporate borrowers including state-owned corporations, forest development corporations provide margin money up to 25% pf the investment cost. 3.6.2 Special focus Removal of regional and sectoral imbalances is one of the thrust areas and hence preference is given to the needs of the underdeveloped areas. For example, the development of the north-eastern region has been a key programme and special efforts have been made through

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refinance offered on liberal terms and other supportive measures so that the rural credit delivery system in the region is strengthened. 3.6.3 Monitoring Special attention is paid to monitoring the projects that are offered assistance so that the targets are met and the implementation is properly done. An evaluation of the project is taken up and in the light of the findings the quality of the projects and their implementation methods can be improved. District-oriented monitoring studies are conducted to evaluate the performance of the ongoing agricultural development schemes sanctioned. Specific sector studies are also undertaken like floriculture, mushroom, aqua culture, agro-processing, etc. to get an insight into the problems and prospects of these sectors. Guidelines are often issued for formulation of high-tech and export-oriented projects in farm and non-farm sectors. Besides, even consultancy is also offered for projects, including appraisal of projects even in cases where refinance is not secured from the bank.

Chapter 9 3.7 Direct Credit

3.7.1 Direct credit from NABARD constitutes loans to State Governments.Supporting Cooperatives In order to strengthen the owned funds position of cooperative credit institutions and thereby increasing their capacity to leverage larger resources, NABARD provides loans to State Governments to contribute to the share capital of these institutions.33


3.7.2 Rural Infrastructure Development With the objective of assisting State Governments in the completion of ongoing rural infrastructure projects and to take up new infrastructure projects, the Rural Infrastructure Development Fund (RIDF) was set up with NABARD in 1995-96 with contributions from Commercial banks by way of deposits. The shortfall in agri/priority sector lending was deposited by the commercial banks with NABARD as part of their contribution to the RIDF. The total corpus covering RIDF I (1995-96) to X (2004-05) is Rs. 42,000 crore. Sanctions under all trenches of RIDF as on 31 March 2005 were Rs.42948.51 crore against which the disbursements were Rs. 25384.02 cr.

Chapter 10 Rural InfrastructureWith the objective of assisting State Governments in the completion of ongoing rural infrastructure projects and to take up new infrastructure projects, the Rural Infrastructure Development Fund (RIDF) was set up with NABARD in 1995-96 with contributions from Commercial banks by way of deposits. The shortfall in agri/priority sector lending was deposited by the commercial banks with NABARD as part of their contribution to the RIDF. The total corpus covering RIDF I (1995-96) to X (2004-05) is Rs. 42,000 crore. Sanctions under all trenches of RIDF as on 31 March 2005 were Rs.42948.51 crore against which the disbursements were Rs. 25384.02 cr.

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Chapter 11 3.7.3 Farm Sector SchemesVillage Adoption/Village development Plan Backward Blocks Bamboo Farming MACs Bio Fuels Crop Insurance Agriculture Commodities SGSY Farm Mechanisation Land Purchase Scheme for AgriClinic/ Agri-Business Centres (ACABCs) SEMFEX Capacity Building for Adoption of Technology (CAT) Agri Export Zone (AEZ)

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CHAPTER 4 PROMOTIONAL ROLE of NABARD

4 INTRODUCTION

Promotion of RNFS has been recognized as an important and necessary adjunct to the refinancing function. The objective of promotional programmes is to establish replicable models for generating/enhancing opportunities for employment and income generation in rural areas in a sustainable, demonstrative and cost effective manner by providing grant/revolving fund assistance etc., to NGOs,Voluntary Associations(VAs), Trusts and other Promotional Organizations. And trained around 1,51,000 rural youth with grant assistance of Rs. 11.91 crore Here are some of the promotional schemes of NABARD like :

Swarojgar credit card schemes

Farmers club programme Self help groups Kissan credit card schemes36


Many more

Chapter 12 4.1 Development and Promotional

FunctionsCredit is a critical factor in development of agriculture and rural sector as it enables investment in capital formation and technological upgradation. Hence strengthening of rural financial institutions, which deliver credit to the sector, has been identified by NABARD as a thrust area. Various initiatives have been taken to strengthen the cooperative credit structure and the regional rural banks, so that adequate and timely credit is made available to the needy. In order to reinforce the credit functions and to make credit more productive, NABARD has been undertaking a number of developmental and promotional activities such as:Help cooperative banks and Regional Rural Banks to prepare development actionsplans for themselves Enter into MoU with state governments and cooperative banks specifying their respective obligations to improve the affairs of the banks in a stipulated timeframe Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying their respective obligations to improve the affairs of the Regional Rural Banks in a stipulated timeframe Monitor implementation of development action plans of banks and fulfillment of obligations under MoUs

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Provide financial assistance to cooperatives and Regional Rural Banks for establishment of technical, monitoring and evaluations cells Provide financial support for the training institutes of cooperative banks Provide training for senior and middle level executives of commercial banks, Regional Rural Banks and cooperative banks Create awareness among the borrowers on ethics of repayment through Vikas Volunteer Vahini and Farmers clubs Provide financial assistance to cooperative banks for building improved management information system, computerisation of operations and development of human resources

4.2 Swarozgar Credit Card (SCC) Scheme -

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The SCC Scheme formulated by NABARD in consultation with RBI and GoI envisages adequate and timely credit, both working capital and block capital, to small artisans, handloom weavers, service providers, fishermen, self-employed persons, rickshaw owners and other micro entrepreneurs, in rural and urban areas in a flexible, hassle free and cost effective manner from the banking system. The facility also includes a reasonable component for consumption needs. As on 31 March 2004, 28,925 cards were issued by CBs, Coop Banks and RRBs involving credit limit of Rs. 64.26 crore

4.3 Farmers' Club ProgrammeWhat are Farmers' Clubs? Farmers Clubs are grassroot level informal forums. Such Clubs are organised by rural branches of banks with the support and financial assistance of NABARD for the mutual benefit of the banks concerned and rural people.

What is Farmers' Club Programme ? National Bank for Agriculture and Rural Development (NABARD) encourages banks to promote Farmers' Clubs in rural areas under the Farmers Club Programme, earlier known as Vikas Volunteer Vahini (VVV) Programme. The Programme was launched by39


NABARD in November 1982 to propagate the five principles of Development through Credit. Mission Development in rural areas through credit, technology transfer, awareness and capacity building. Membership All villagers except willful defaulters can become members of the club. The club must make endeavour to raise their own resources by way of contribution from members, undertaking certain business services such as bulk procurement of inputs and collective marketing of agricultural produce, etc.

Financial Support from NABARD Sl. No. Name of the Programme Maximum EligibleNorth East Region Grant other than (including NER Andaman 1 Maintenance Farmers' Club of Sikkim & and

Nicobar

Islands) aRs. 3,000 per ClubRs. 3,000 per Club year for per years.40

year

for

35 years


2

Grant if applicable in theRs. Agriculture Universitiesyears.

2,000/-

perRs. 2,000/- per Club per

case of KVKs, NGOs,Club per year for 3year for 3 years. etc. Inauguration Rs. 5000/Basic Level Orientation Training 5 (BLOTP) "Meet with Program Program Experts"Rs. 1,250 per meetRs. 1,250 per meet for 4 for 4 meets for 3meets for 3 years. years. NABARD would provide financial support for the first three years and for the next two years the bank sponsoring the club may provide the support, if necessary. The club is expected to attain self sustainability in a period of 3-5 years.

3 4

Rs. 5000/-

4.4 Self help groups

Self help groups comprise homogenous groups of poor people who have voluntarily come together mainly with the idea of overcoming their financial difficulties. SHGs can rightly be

41


called a potent tool for human development. SHGs enable the poor, especially the women form the poor households, to collectively identify, prioritise and tackle the problems they face in their socio-economic environment. By pooling their meager resources and using them for lending among themselves, they develop the habit of thrift and the skill of credit appraisal, before getting linked to the banks. Staring with small loans for consumption they soon graduate to bigger loans for a wide range of micro-enterprise like vermin-composting, livestock rearing, handicrafts, vending of various commodities in rural areas, running distribution materials, etc. with a modest beginning of just 500SHGs in 1992, today the programme boats over 22 lakh SHGs and 3.3 crore households influencing the lives of over 16 crore poor population. During the year 2005-06 alone, as many as 6,20.109 groups were credit linked.

4.5 KISAN CREDIT CARD SCHEME

42


As a pioneering credit delivery innovation, Kisan Credit Card Scheme aims at provision of adequate and timely support from the banking system to the farmers for their cultivation needs including purchase of inputs in a flexible and cost effective manner. Since launching in August 1998, around 2.38 crore Kisan Credit Cards issued upto 31 March 2002 by Cooperative Banks, Regional Rural Banks and Commercial Banks put together. Scheme implemented in all States and Union Territories (except Chandigarh, Daman & Diu and Dadra & Nagar Haveli) with all Cooperative Banks, RRBs and Commercial Banks participating. Agency-wise/State-wise progress in issue of cards by all banks during 2001-02 and since inception of Scheme. Agency-wise KC Cards issued upto 31 March 2003 ( since inception) (No. of cards) Year Cooperative RRBs 6421 Commercial Banks 445451 Total 607225

Banks 1998-1999 155353

CHAPTER 543


DEVELOPMENT ROLES OF NABARD 5 INTRODUCTIONCredit is a critical factor in development of agriculture and rural sector as it enables investment in capital formation and technological upgradation. Hence strengthening of rural financial institutions, which deliver credit to the sector, has been identified by NABARD as a thrust area. Various initiatives have been taken to strengthen the cooperative credit structure and the regional rural banks, so that adequate and timely credit is made available to the needy. I in order to reinforce the credit functions and to make credit more productive, NABARD has been undertaking a number of developmental and promotional activities such as:Help cooperative banks and Regional Rural Banks to prepare development actionsplans for themselves Enter into MoU with state governments and cooperative banks specifying their respective obligations to improve the affairs of the banks in a stipulated timeframe Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying their respective obligations to improve the affairs of the Regional Rural Banks in a stipulated timeframe Monitor implementation of development action plans of banks and fulfillment of obligations under MoUs

44


provide financial assistance to cooperatives and Regional Rural Banks for establishment of technical, monitoring and evaluations cells create awareness among the borrowers on ethics of repayment through Vikas Volunteer Vahini and Farmers clubrovide financial assistance to cooperative banks for building improved management information system, computerisation of operations and development of human resources

5.1 Watershed Development Fund (WDF)Pursuant to the announcement by the Hon'ble Union Finance Minister in the Union Budget for the year 1999-2000, a Watershed Development Fund (WDF) has been set up in NABARD with a corpus of Rs.200 crores equally contributed by the Government of India and NABARD, with an objective to promote participatory watershed development throughout the country. The Fund envisaged coverage of 100 priority districts in 14 states over a period of 3 years. The participating states can avail loans out of WDF for implementing watershed projects through the village level communities, non-governmental organizations (NGOs) or project45


facilitating agencies ( PFAs) in the selected districts. The loans are repayable over a period of 9 years (including a grace period of 3 years) and carry a rate of interest of 4.5% per annum at present. One-third portion of the Fund is earmarked for promotional efforts, capacity building, replication of Indo German Watershed Development Programme (Maharashtra) or any other successful model and Self Help Group (SHG) related activities particularly targeted at women in the project areas.As on 31 March 2004, the Rs. 154.61 crore has been added to the corpus by way of interest on unutilized portion and excess margin on RIDF loans.

5.2 COOPERATIVE DEVELOPMENT FUND (CDF)In pursuance with the recommendations of the Parliamentary Committee on Agriculture, NABARD had created Co-operative Development Fund for providing assistance to Co-operative Credit Institutions for improving their infrastructural facilities for growth. The Fund, which started with an initial corpus of Rs.10.00 crore from the surplus contributed by NABARD, has a balance of Rs.115.68 crore as on 31 March, 2003. The assistance sanctioned to various cooperative institutions from the Fund till 31 March, 2004 aggregated to Rs.62.18 crore against which an amount of Rs.50.87 crore has been disbursed. The Objectives and Purposes of the fund are given below: Objective of the Fund: Supporting the efforts of grass root level institutions (PACS) to mobilize resources etc.

46


Human Resource Development aimed at achieving better working results and improvements in viability and also for improvement in systems in cooperative credit institutions.

Building of better MIS and Conduct of special studies for improving functional efficiency and on subjects referred to above.

5.3 Rural infrastructural development fund :

If there is one development programme that has dramatically helped rural India, it is projects undertaken through RIDF. Economist have explicitly emphasized on the direct correlation between the index of infrastructure development and rural development. Indeed it is far too crucial to have infrastructure for agriculture, industrial and overall economic development. Infrastructure also provides basic amenities that improve the quality of life. Therefore, for supporting State Governments and other development institutions, NABARD opened the window of RIDF in 1995-1996 NABARD so far have sanctioned Rs 51,283 crore for 2,44651 projects under the Fund. A cumulative position of sector-wise sanctions as on 31st March 2006 : Irrigation : Rs 15105,50 crore(107.92 lakh hectares) Rural Connectivity :Rs 20,290,40 crore of rural road network (2.20 lakh km) and bridges (3.69 lakh mtrs) power Rs 1,327.7 crore social sector :47


Rs 4,128.1 crore Other :Rs 3,539 crore. A separate window has been created for rural connectivity with villages of population less than 500, with a corpus of Rs 4000 crore to support the Bharat Nariman project.

5.4

DISTRICT RURAL INDUSTRIES PROJECT

(DRIP)NABARD,launched DRIP, an integrated area based credit intensification programme, in collaboration with government, banks and other development agencies with focus on district. It was introduced in 1993-94 with the objective of creating sustainable employment opportunities in rural areas. Today it is being implemented in 106 districts all over the country.

5.5 Maharashtra Rural Credit Project

48


The project was under implementation since January 1994 and covers 1483 villages in twelve districts of Maharashtra. The primary objective is poverty alleviation through increased access to bank credit for the rural poor. It envisages formation and promotion of Self Help Groups through NGOs. The project has been completed. As against a target of promoting 2600 SHGs, 9000 groups have been promoted, of which 7027 groups have been credit linked with banks. MRCP has provided a window of opportunities, particularly to the poor rural women to enhance their skill and secure credit for income generating activities. The project has helped in empowerment of rural women in addition to providing access to bank credit.

5.6 Rural Entrepreneurship Development Programme (REDP):In order to generate

employment

in rural areas, it was felt necessary to

develop the entrepreneurial skills of the rural youth. REDP is a promotional programme supported by NABARD to motivate and train educated unemployed rural youth, to set up their own enterprises. So far, 2.32 lakh persons have been trained under the programme under 7792 REDPs

5.7. Rural Marketing:49


A number of marketing interventions have been made for marketing of rural non-farm products since marketing is a key factor in the sustainability of any such endeavour. With the financial support of NABARD under its promotional programmes like Rural Haats, Rural Marts, participation in fairs, exhibitions and marketing melas, rural artisans and entrepreneurs can get a larger market for their produce and showcase their talent to urban and upcountry markets.

5.8. Revival of Short-Term Rural Co-operative Structure(STCCS)NABARD is the implementing agency for the Revival package for the STCCS which mean the State Coop. Banks, District Coop. Banks and the Primary Agricultural Coop. Societies. (PACS). The revival package has been approved by the Govt. of India based on the recommendations of the Vaidyanathan Committee. NABARD has had dialogues with State Govts. and so far 10 states have executed MOU with GoI and NABARD. Apart from being on the national, state and district level implementing committees, NABARD has designed guidelines and training manuals for the special audit of PACS under the Package.

5.9. Rural Innovation Fund:In association with Swiss Agency for Development and Cooperation (SDC), NABARD has constituted the NABARD SDC Rural Innovation Fund (RIF) to support innovative projects in Farm, Non-Farm and Micro-Finance Sectors leading to creation of livelihood opportunities for the poor. Government and Non-Government Institutions, corporate bodies, financial institutions and individuals can avail funding50


support for activities involved in development of new products, processes, prototypes, technology etc. which have the poor in their focus.

5.10.NABARD Consultancy Services (NABCONS)NABCONS is a wholly owned subsidiary of NABARD, which has established itself as a dependable and professional consultancy services provider in agriculture and allied activities. As on 31 March 2007 , it has cumulatively contracted 487 national and international assignments involving consultancy fee of Rs.25.49 crores.

5.11.Co-FinancingIt has been the experience that Banks are wary of taking credit risk of financing high tech/large scale/ export oriented agricultural projects or those involving sunrise technologies. To instill confidence in banks and ensure credit flow to such projects, NABARD has entered into agreements for co-financing with 14 commercial banks. During 2006-07, seven projects were sanctioned with bank loan of Rs. 145.03 crore and NABARD's share of Rs. 72.42 crore. Floriculture, organic farming, milk processing, ethanol production and agro processing are among the projects sanctioned so far.

CHAPTER 6 LATEST SCHEMES OF NABARD6.1. MILLION SHALLOW TUBEWELLS PROGRAMME

51


The Million Shallow Tubewells Programme (MSTP) submitted by GoB which was approved by the Planning Commission, Govt. of India in March 2001 for the State of Bihar. The objective of the programme is to install one million shallow tubewells with pumpsets to bring an additional two million hactres of land under irrigation during the next five years and increase the agricultural production and productivity of the State. The Scheme is being implemented by NABARD / GoB through Commercial Banks and Regional Rural Banks that have branches in rural areas in the State. The funding pattern of the scheme is as follows : Margin money contributed - 20% by the farmers Subsidy - 30% Bank Loan - 50% All non-defaulting individual farmers of all categories will be eligible for assistance under the scheme. The total subsidy for the programme is Rs. 45.50 crores which has been released by GoI to GoB. For the year 2001-02, the targets were 33798 and for the year 2002-03, 23313. Thus the overall targets for combined two years is 57111. The Scheme envisages a lock-in period of five years with the subsidy being back ended i.e the borrowers will not be eligible for subsidy if loan is liquidated completely within five years from the date of initial disbursement.

52


6.2 ON FARM WATER MANAGEMENT FOR INCREASING CROP PRODUCTION IN EASTERN INDIA (OFWAMS)The Centrally sponsored programme has been appeared by the Ministry of Agriculture (MOA) GoI for the duration of the 9th Plan Period (2001-02) and 10th Plan Period. The scheme will cover all the districts of 8 Eastern India States viz. Arunachal Pradesh, Assam, Bihar, Chattisgarh, Jharkhand, Manipur, Mizoram and Orissa and 35 districts of Eastern UP and 9 districts of West Bengal. The funding pattern of the schme is as under : Borrowers contribution - 20% Subsidy - 30% Bank Loan - 50% All non-defaulting individuals farmers or groups of farmers will be eligible for assistance under the scheme. Proforma will be given to small and marginal farmers and SC/ST borrowers. The assistance will be available for Shallow Tubewell with pumpsets, Dugwells, Low Lift Irrigation Points and Pumpsets in isolation. The combined targets for 2001-02 and 2002-03 are 48699 Shallow Tubewells with pumpsets, 4571 LLIP, 924 Dugwells and 6252 Pumpsets. The subsidy will be back-ended with a lock in period of 2 years i.e the borrowers will not be eligible for subsidy if the loan is completely liquidated within two years from the date of initial disbursement.53


6.3 NABARD SDC Rural Innovation Fund (R I F). A new fund named as "NABARD SDC Rural Innovation Fund" has been created by merging the erstwhile Rural Promotion Corpus Fund (RPCF), Credit and Financial Services Fund (CFSF) and Interest on RPCF and the new fund came into being on 01 October 2005. It is envisaged that the entire fund will be utilised in a period of 5 years. National Bank for Agriculture and Rural Development (NABARD) in association with Swiss Agency for Development and Cooperation (SDC) has constituted the "NABARDSDC Rural Innovation Fund (RIF)" to, inter alia, support innovative projects in Farm, NonFarm and Micro-Finance Sectors leading to creation of livelihood opportunities for the poor. NABARD invites proposals for funding support to innovative projects having the above objective. An illustrative list of areas is given below : Biological and Engineering measures/techniques which improve productivity of water. Design of economic and efficient water harvesting structures. Efficient water use systems : low cost micro-irrigation technology/ micro tube irrigation technology, etc. Diversification of farm activities - agro-forestry, silvipasture, agro-horticulture and animal husbandry etc. Organic farming - bio-fertilisers and pesticides. Development of location specific crops and agronomic practices.54


Extension of technology - Agri-clinics, Agro Service Centres & e-Service Centres. The e-Service Centres may include the feasibility of commodity trading/ Village Knowledge Centres. Community farming. Contract farming. Insurance products for rainfed agriculture. Banking through SHGs, VWCs and user teams, Joint Liability Groups, etc. Innovative rain water harvesting for rural dwellings. Rural energy from biomas, agri waste. Techniques for increasing value of crop residues and non-crop bio mass. Community regulation of distribution and use of waste and energy. Storage devices for agricultural and rural products. Innovative methods of managing Common Property Resources. Materials and designs for rural roads. Rural sanitation and waste disposal. The list is illustrative and new ideas/innovations in tune with the objective of the Rural Innovation Fund would be supported.

6.4 Nabard

to

provide

funds

for

Swarojgar

awareness schemeOn NABARD has launched a pilot scheme to provide funds to select banks to create awareness about the Swarojgar credit card scheme. Under the promotional scheme, financial

55


grants will be provided to select regional rural banks and cooperative banks to support publicity programmes on the Swarojgar credit card scheme. The idea is to create greater awareness about the swarojgar credit card scheme, which has been developed by Nabard to provide adequate and timely bank credit to small artisans, handloom weavers, rickshaw owners and other micro-entrepreneurs. The promotional campaign on the Swarojgar credit card scheme is also intended to educate card holders on how to use the cash credit facility optimally and to help the scheme reach out to the maximum number of people, the release adds. In Kerala, one time grant assistance will be provided to three banking entities to create awareness about the Swarojgar credit card scheme. The assistance will be given to North Malabar Gramin Bank, South Malabar Gramin Bank and Kerala State Cooperative Agriculture and Rural Development Bank, according to the press release. The three banks will receive one-time grant assistance up to 60 per cent of their expenditure on publicity, subject to a maximum of Rs 1 lakh per bank, the release adds. Funds from the grant assistance can be used to prepare publicity material on the Swarojgar credit card scheme and also to arrange banker-borrower meets and other promotional activities.

6.5 Nabard's refinance scheme for Kerala co-op bankThe Regional Office of Nabard has released schematic refinance to the tune of Rs 15.29 crore to the Kerala State Cooperative Agricultural and Rural Credit Bank (KSCARDB). An official spokesman said here that, of this, Rs 9.47 crore was directed to the rural housing sector while the rest would go into various non-farm sector activities, including road56


transport operators. The applicable rates of interest ranged from 5.5 per cent to 6.5 per cent per annum. So far during this financial year, Nabard has released schematic refinance aggregating to Rs 102.78 crore to various agencies in the State. This includes Rs 57.33 crore advanced to the apex Kerala State Cooperative Bank (KSCB), Rs 29.51 crore to the two Regional Rural Banks (RRBs) in the State and Rs 0.64 crore to commercial banks

6.6 LPG connection finance scheme from United BankON 1ST June, 2006 UNITED Bank of India has introduced a special scheme under Nabard's refinance facility for financing LPG connections in rural areas. The scheme covers the cost of supplying a regulator, a cylinder and accessories and a burner stove. The maximum amount of loan to be available under the scheme is Rs 3,500 at 7.5 per cent rate of interest with quarterly rest, payable between three and five years, according to a bank release

6.7 NEW SCHEME TO INCREASE PRODUCTION OF CROPSThe centre has launched a new scheme "On-Farm Water Management for increasing crop production in Eastern India" in 10 states of Eastern India. The scheme will be implemented in all districts of Arunachal Pradesh, Assam, Bihar, Chattisgarh, Jharkhand, Manipur,57


Mizoram and Orissa besides 35 districts of Eastern Uttar Pradesh and nine districts of West Bengal. An amount of Rs.15 crore has been released during 2001-02 to NABARD as the share of the Government of Indias assistance under the scheme. An allocation of Rs.115 crore has been proposed during 2002-03. The scheme aims at developing irrigation facility at the command of the farmers by tapping ground water resources of the region in a plananed manner with proper spacing. Thus, there will be a substantial increase in agricultural production and productivity and per capita income.

CHAPTER 7. GENDER DEVELOPMENT

7.1 Women Development:

Women constitute almost half the population and make up one third of the labour force in India. Various schemes for financing farm and non-farm sector activities through banking system are available both to men and women. In order to give focus to women in58


various developmental activities and to increase their access to institutional credit, NABARD has formulated various programmes -

7.2 Gender Sensitization Programmes With the objective of facilitating internalization of gender concerns in credit as also to improve the outreach of the banks in respect of women clients, NABARD has been conducting gender sensitization meets/ workshops for various levels of bankers at the district and state level. 330 such programmes covering over 6000 bank personnel have been conducted till 31 March 2004.

7.3 Women Development Cells (WDC) With a view to strengthening institutional capabilities for addressing gender issues in credit and support services and accelerating credit flow to women through relationship banking, NABARD has extended grant support for setting up of Women Development Cells in RRBs and Coop Banks. NABARD has so far supported 100 such cells in Coop Banks and RRBs. The credit flow to women through these banks is Rs.3595.79 crore covering 27.94 lakh women since inception of WDCs. Based on a review of their performance a modified incentive based scheme was formulated under which 8 banks have been sanctioned assistance.

7.4 Assistance to Rural Women in Rural Non Farm Development (ARWIND) 59


ARWIND, a single window scheme comprising credit as well as promotional components, has been formulated with the objective of entrepreneurial development among rural women. Under the scheme, assistance is available for activities like Escort Services (help in actual setting up of units), Common Facility Centres/Service Centres, setting up of Mother Units, Product Design, Quality Control, Organising Women etc. NABARD provides 100% refinance to banks under the Scheme. As on 31 March 2004, Rs. 3 crore has been sanctioned for 128 projects covering 9813 rural women in 22 states.

7.5 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. NABARD provides 100% refinance to banks under the scheme. As on 31 March 2004, 26 projects in 11 states were supported with assistance of Rs.59 lakh.

7.6

Development

of

Women

through

Area

Programme (DEWTA)Responding to the need for an integrated and holistic approach to development of women entrepreneurs, this scheme is being implemented in three RRBs on a pilot basis. Under the programme the WDCs of select banks will identify the skill upgradation, capacity

60


building, and credit needs of women and fulfill the same over a period of three years. A grant of Rs.32 lakh has been sanctioned to the WDCs.

Support to Weaker Sections:NABARD, has designed special programmes for upliftment of weaker sections of society, viz. the Small and Marginal farmers, Scheduled Castes and Scheduled Tribes (SCs/STs) and people living below the poverty line (BPL).

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

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.

Special Lines of Credit for Tribals In consonance with the policy to step up credit to tribal population, a separate line of credit on liberal terms known as Development of Tribal Population is being extended in predominantly tribal areas. Short Term credit limits are also sanctioned to cooperatives for financing collection and marketing of various types of minor forest produce. SUCH AS 7.7 Adivasi

Development programme in Gujarat

The programme has been under implementation with grant support from KfW, Germany, since 1994-95 in Dharampur Taluka of Valsad district through BAIF

61


Development Research Foundation, Pune. The focus is on development of wadi (small orchard) while other supportive interventions viz, water resource development, agriculture development, women development, health and sanitation are also addressed. Small and marginal farmers, including women, are selected under the programme. The landless are supported by providing them micro-enterprises in farm and non-farm sectors and employment opportunities in processing units. The establishment of village level people's organisations (POs) called Village Ayojan Samitis (VAS) have been the strongest tool and nuclei for planning and implementation of the programme. The programme has been a great success in converting 5,140 ha wastelands into orchards of cashew, mango and forestry plants by 13,663 adivasi families from 162 villages.

7.8 .Adivasi Development Programme in Tribal Areas of MaharashtraThe successful implementation of Wadi model in Gujarat is being replicated in Maharashtra (Nasik and Thane districts) with grant support from KfW, Germany through Maharashtra Institute of Technology Transfer for Rural Areas (MITTRA), Nasik, an NGO promoted by BAIF, Pune. The programme with a project period of ten years (2000-2010), aims to support 15,000 tribal families by developing wadis on their marginally productive lands. The project which was launched in September, 2000 has covered an area of 2076 ha under wadis belonging to 5676 families from the 160 villages and has been instrumental in bringing about an overall improvement in the quality of li8fe of the families in the project area.

62


CHAPTER 8 SUPERVISORY ROLE OF NABARD

8 INTRODUCTION

Apart from the role of a development bank, NABARD undertakes certain supervisory functions in respect of Coop Banks and RRBs under the Banking Regulation Act. The objective of NABARDs supervision is to assess financial and operational soundness and managerial efficiency of these banks and their compliance with banking regulations. NABARD has constituted a Board of Supervision as an Advisory Committee to the Board of Directors of NABARD, which gives directions and guidance in respect of policies and on matters relating to supervision and inspection. NABARD undertakes on-site inspection of RRBs, SCBs and DCCBs on a two-year cycle basis. Inspection of SCARDBs and apex non-credit cooperatives are undertaken on a voluntary basis. Off-site surveillance of Coop Banks and RRBs are also undertaken on an on-going basis.

63


8.1 Core FunctionsNABARD has been entrusted with the statutory responsibility of conducting inspections of State Cooperative Banks (SCBs), District Central Cooperative Banks (DCCBs) and Regional Rural Banks (RRBs) under the provision of the Banking Regulation Act, 1949. In addition, NABARD has also been conducting periodic inspections of state level cooperative institutions such as State Cooperative Agriculture and Rural Development Banks (SCARDBs), Apex Weavers Societies, Marketing Federations, etc. on a voluntary basis.

Objectives of Inspection.To protect the interest of the present and future depositors To ensure that the business conducted by these banks is in conformity with the provisions of the relevant Acts/Rules, regulations/Bye-Laws, etc To ensure observance of rules, guidelines, etc. formulated and issued by

NABARD/RBI/Government To examine the financial soundness of the banks To suggest ways and means for strengthening the institutions so as to enable them to play more efficient role in rural credit.

Instruments of Supervision

64


Periodic on-site inspection of 31 SCBs , 371 DCCBs, 20 SCARDBs and 82 RRBs and other Apex level Cooperative institutions Supplementary Appraisal Off-site Surveillance System ( OSS ) Portfolio inspection/System study CMA returns

8.2 Supervisory StrategyIn the wake of the banking sector reforms, new set of international norms/practices were made applicable to Commercial Banks (CBs) to make them more competitive and sustainable in the changing scenario. The co-operative banks and RRBs were also to function in the general banking environment, emerging out of the financial sector reforms, introduced by the GOI/RBI. Accordingly, the prudential norms were extended to them in phases. While the capital adequacy norm has not yet been made applicable to these banks, the other prudential norms viz. income recognition, asset classification and provisioning, which were made applicable by RBI to the commercial banking sector had been extended to cover RRBs in 1995-96, SCBs and DCCBs in 1996-97 and to SCARDBs in 1997-98. NABARD, through a concrete and time-bound supervision strategy, facilities these banks to adjust to the new financial discipline so as to internalize prudential norms stipulated.

8.3 Current Focus

65


Under the revised strategy, a sharper focus of the NABARDs inspection was given on the core areas of the functioning of banks pertaining to Capital Adequacy, Asset Quality, Management Earnings, Liquidity and Systems Compliance (CAMELSC). Thus, NABARDs focus in its statutory on-site inspections is on core assessments leaving the collateral appraisals to supplementary inspections. The micro level aspects are to be taken care of by the banks themselves by way of internal inspections or by other agencies such as auditors. In this direction, through a series of workshops and meetings held with the Chief Executives and the Chief Auditors of cooperative banks, NABARD attempted to ensure that the other areas, particularly relating to the internal checks and controls, revenue and income realization by way of interest on loans and deposits and other routine features of carrying out general banking transactions were suitably taken care of by the respective banks and their concurrent/statutory audit systems.

8.4 Off-site SurveillanceAs a part of the new strategy of supervision, a system of `Off-site Surveillance' has been introduced as a supplementary tool to the on-site inspection. Its objectives are to obtain and analyse critical data on a continuous basis, to identify areas of supervisory concern and to identify early warning signals and risky areas requiring further probe. The system basically envisages desk scrutiny of operations of cooperative banks and RRBs through a set of statutory and non-statutory returns. While the periodical statutory on-site inspections attempt an overall evaluation of the performance of the banks with a stipulated period, off-site surveillance envisages continuous supervision supplementing the on-site inspections with additional instruments of supervision.

66


8.5 Board of Supervision (for SCBs, DCCBs and RRBs)Board of Supervision (for SCBs, DCCBs and RRBs) has been constituted by NABARD under Section 13(3) of NABARD Act, 1981 as an Internal Committee to the Board of Directors of NABARD. The broad powers and functions of the Board of Supervision are : Giving directions and guidance in respect of policies and on matters relating to supervision and inspection, reviewing the inspection findings, suggesting appropriate measures Reviewing the follow-up action taken by Department of Supervision (DoS) on matters of frauds and internal checks and control dentifying the emerging supervisory issues in the functioning of cooperative banks/RRBs such as NPAs recovery, investment portfolio, credit monitoring system, management practices, frauds, etc. Suggesting necessary follow-up measures Recommending appropriate training for Inspecting Officers of NABARD for imparting necessary skills and knowledge Recommend issue of directions by RBI Oversee the quality of inspections carried out and the reports issued

67


Review the information generated through off-site surveillance and other supplementary vehicles, action taken thereon Undertake any other functions entrusted from time to time by the Board of Directors of NABARD The Board of Supervision, since its formation on 20 November 1999 , has held 45 meetings till 21 September 2010 and reviewed the financial position of Cooperative Banks and RRBs. Based on the observations of BoS, authorities concerned have been apprised of the weaknesses.

8.6 Other InitiativesThe day-to-day functioning of the supervised banks is being monitored through various statutory returns prescribed by the RBI/NABARD including OSS returns Periodic coordination Meets are conducted with RPCD, RBI to discuss the policy and operational matters relating to supervision State level groups comprising RCS, Apex bank, Cooperation and Finance Department, State Government, Director of Audit and non-compliant banks have been constituted/convened for preparing/discussing suitable strategy for Section 11 non-compliant banks and monitoring the progress of Action Plan prepared by them to facilitate them recompliance with the provision. Periodic discussions are held with the MD, Apex Banks, RCS, State Government etc. to discuss the supervisory concerns.

68


8.7 NABARD Consultancy Services Pvt. Ltd. (NABCONS):NABCONS was set up on 17 November 2003 with an authorized capital of Rs. 25 crore of which Rs. 5 crore has been fully subscribed by NABARD. It provides consultancy services in agriculture, agro processing and infrastructure projects, institutional development, microfinance, watershed development, non-farm enterprises, training, potential identification and related areas. In 2003-04, NABCONS had contracted business to the tune of Rs.10.26 crore. The clients of NABCONS include GoI, State Governments, Banks, International Bodies, Corporate entities and individuals.

CHAPTER 9 NABARD AND MICRO FINANCE IN INDIAAN OVERVIEW9 Background69


The post nationalization period in the banking sector witnessed substantial amount of resources being earmarked towards meeting the credit needs of the poor. The banking network underwent an expansion phase without comparables in the world. The branch expansion1 was synergised with massive manpower recruitment drive for manning such branches. Credit came to be recognized as a remedy for many of the ills of the poverty. Credit packages and programmes were designed based on the perceived needs of the poor. Programmes also underwent qualitative changes based on the experiences gained. Besides the programmes initiated by the Central Government, a large number of credit-based programmes were introduced by the state governments with large resource allocations. While the underlying objectives were laudable and substantial progress was achieved, credit flow to the poor, and especially to poor women, remained low. This led to initiatives that were institution led, that attempted to converge of the existing strengths of rural banking infrastructure and leverage this to better serve the unbanked poor. The pioneering efforts at this were made by National Bank for Agriculture and Rural Development (NABARD), which was vested with an enviable task of framing appropriate policy for rural credit, provision of technical assistance backed liquidity support to banks, supervision of rural credit institutions and other development initiatives. NABARD during the early eighties conducted a series of research studies in association with MYRADA (a leading NGO from South India) and also independently which showed that despite having a wide network of rural bank branches that implemented specific poverty alleviation programmes and self-employment opportunities through bank credit for almost two decades, a very large number of the poorest of the poor continued to remain outside the fold of the formal banking system. These studies also showed that the existing banking1

70


policies, systems and procedures, and deposit and loan products were perhaps not well suited to meet the most immediate needs of the poor. It also appeared that what the poor really needed was a better access to these services and products, rather than cheap subsidised credit. Against this background, a need was felt for alternative policies, systems and procedures, savings and loan products, other complementary services, and new delivery mechanisms, which would fulfill the requirements of the poorest, especially of the women members of such households. The emphasis therefore was on improving the access of the poor to microFinance (mF) rather than just micro-credit. The launching of its Pilot phase of the SHG (Self Help Group) Bank Linkage programme in February 1992 could be considered as a landmark development in banking with the poor. The SHG-informal thrift and credit groups of poor came to be recognised as bank clients under the Pilot phase. The strategy involved forming small, cohesive and participative groups of the poor, encouraging them to pool their thrift regularly and using the pooled thrift to make small interest bearing loans to members, and in the process learning the nuances of financial discipline. Subsequently, bank credit also becomes available to the Group, to augment its resources for lending to its members. It needs to be emphasised that NABARD sees the promotion and bank linking of SHGs not as a credit programme but as part of an overall arrangement for providing financial services to the poor in a sustainable manner and also an empowerment process for the members of these SHGs. NABARD, however, also took a conscious decision to experiment with other successful strategies such as replicating Grameen, wholesaling funds through NGO-mFIs.

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The NABARD led Pilot Project commenced with the support of the Central Bank of the country, i.e., Reserve Bank of India, from 1992 onwards aimed at promoting and financing 500 SHGs across the entire country, the SHG- bank linkage strategy has come a long way. The strategy includes financing of SHGs promoted by external facilitators like NGOs, bankers, socially spirited individuals and government agencies, as also promotion of SHGs by banks themselves and financing SHGs directly by banks or indirectly where NGOs and similar organisations act as financial intermediaries as well. 9.1 Overall Strategy

Forming and nurturing small, homogeneous and participatory self-help groups (SHGs) of the poor has today emerged as a potent tool for human development. This process enables the poor, especially the women from the poor households, to collectively identify and analyse the problems they face in the perspective of their social and economic environment. It helps them to pool their meagre resources, human and financial, and prioritise their use for solving their own problems. The emphasis on regular thrift collection and its use to solve immediate problems of consumption and production not only helps to meet their most urgent needs, but also trains them to handle larger financial resources more skillfully, prudently and with a more lasting impact Encourage SHGs to become a forum for many social sector interventions.

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SHG-Bank Linkage Programme

Facilitating SHGs to access credit from formal banking channels. SHG-Bank Linkage Programme has proved to be the major supplementary credit delivery system with wide acceptance by banks, NGOs and various government departments

Region-specific Initiatives

NABARD has intensified its efforts for roping in new partners for promotion and linkage of groups in regions where the growth of groups has not been commensurate with potential Priority has been assigned to awareness- building and for identification of NGOs and other partners in 13 priority states, which account for 70% of rural poor in the country.

Capacity Building

NABARD sponsors capacity building programmes for various partners in the field of microFinance to sensitise and equip them with concept & nuances of SHG bank linkage programme. NABARD provides training inputs on SHG financing to training establishments of participating banks, to help them to internalise the training requirements at their level. NABARD gives technical support to banks to evolve suitable intermediate structures like Farmers' Clubs to increase the outreach of their branches in promotion and linking SHGs NABARD supports and helps banking institutions (especially RRBs & cooperative banks) to take on the role of Self Help Promoting Institutions (SHPIs)

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9.2 Support to Governments

Necessary assistance is provided to the governments by NABARD for dovetailing mF practices with the poverty alleviation programmes NABARD also encourages the association of Panchayati Raj Institutions (PRIs ) in adopting group processes for maximization of empowerment. NABARD, in association with Lal Bahadur Shastry National Academy of Administration, Mussoorie conducts tailor made exposure programme on self help group and microFinance for senior and middle level officers of Indian Administrative Services (IAS) who are posted as district collectors/ Chief Executive Offices of local administrative set ups (Zilla Parishad)

9.3 Support to NGO Partners

Several steps have been taken by NABARD for capacity building of NGOs which partner in promotion and nurturing of SHGs. The emphasis is on involving a large number of NGOs. Special focus is on those NGOs participating in watershed development, health, literacy and women development, to encourage them to take up promotion, nurturing and linkage of SHGs as an 'add-on' activity. NABARD has a scheme of part-financing the cost of promotion of groups by NGOs. NABARD has developed specialized programmes for use by CEOs of NGOs for appropriately envisioning this as an add-on concept. Separate programmes have also been designed for NGO field staff to appreciate the nuances of SHG functioning.74


9.4 Alternate mF practices

The NGOs and other local bodies at village, block and district levels in the North Eastern States are encouraged to take up alternative micro-credit delivery mechanisms through direct funding. Formation and operation of SHG Federations is supported and encouraged by NABARD. Similarly, networking of NGOs is also encouraged.

Coordinating mF Efforts in India NABARD coordinates the mF activities in India at international/ national/ state / district levels. These include organizing international/national Workshops, Seminars, etc for experience sharing, Organizing National and State level Meets of Bankers and NGOs etc.Dissemination of best practices in SHG / microFinance. Monitoring and Review Block/district/state level review meetings are organised and/or organised by NABARD. The relative documentation and database is also carried out by NABARD. In addition, periodical Monitoring studies are conducted through NABARD/Bank Officers. Internal Impact Studies and are conducted by NABARD periodically. Other Initiatives: MicroEnterprise Development Programme (MEDP) for Matured SHGs The progression of SHG members to take up micro enterprise involves intensive training and hand holding on various aspects including understanding market, potential mapping and75


ultimately fine tuning skills and entrepreneurship to manage the enterprise. Hence, a separate, specific and focussed skill-building programme Micro Enterprise Development Programme (MEDP) has been formulated. This involves organizing short duration, location specific programmes on skill upgradation / development for setting up sustainable microenterprises by matured SHG members. The duration of training programme can vary between 3 to 13 days, depending upon the objective and nature of training. The training may be conducted by agencies that have background and professional competency in the field of microEnterprise Development with an expertise in skill development. Scheme for Capital/ Equity Support to Micro-Finance Institutions (MFIs) from MFDEF The scheme attempts to provide capital/equity support to Micro Finance Institutions (MFIs) so as to enable them to leverage capital/equity for accessing commercial and other funds from banks, for providing financial services at an affordable cost to the poor, and to enable MFIs to achieve sustainability in their credit operations over a period of 3-5 years. Scheme for financial assistance to banks/ MFIs for rating of Micro Finance Institutions (MFIs) In order to identify MFIs, classify and rate such institutions and empower them to intermediate between the lending banks and the clients, NABARD has decided to extend financial assistance to Commercial Banks and Regional Rural Banks by way of grant. The banks can avail the services of credit rating agencies, M-CRIL, ICRA, CARE and Planet Finance in addition to CRISIL for rating of MFIs. The financial assistance by way of grant for meeting the cost of rating of MFIs would be met by NABARD to the extent of 100% of the total professional fees subject to a maximum of Rs.3,00,000/-/-. The remaining cost

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would be borne by the concerned MFI. The cost of local hospitality (including boarding and lodging) towards field visit of the team from the credit rating Agency, as a part of the rating exercise, would also be borne by the MFI. Those MFIs which have a minimum loan outstanding of more than Rs. 50.00 lakh (Rupees fifty lakh only) and maximum of Rs 10 crore (Rupees Ten crore only) would be considered for rating and support under the scheme. Financial assistance by way of grant would be available only for the first rating of the MFI. MFIs availing Capital Support and/or Revolving Fund Assistance from NABARD are also eligible for re-imbursement of 50% of the cost of professional fee charged by Credit Rating Agency for second rating subject to a maximum of Rs.1.50 lakh (i.e 50% of Rs.3 lakh). This will be in addition to the re-imbursement of professional fee for first rating of the MFI. 9.5

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Documents

development of rural

rural credit domain

rural marketing

rural prosperity

rural housing

rural tourism

gender development

institution development