Executive Summary 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 project contains information about the agricultural finance operations of NABARD. NABARD for the smooth running of the organization has developed many committees and departments of inspection, which enables for the efficient and effective running of the organization. NABARD plays various roles and functions in various fields related to agricultural and rural promotion and development. Credit financing one of the major functions of NABARD is further subdivided into different types of refinance facilities, lower interest rates, production credit, investment credit, and farm sector schemes. The second major function is promotional under which NABARD has come up with the Kisan Credit Card and other promotional schemes which is of great convenience to 1
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Executive Summary
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 project contains information
about the agricultural finance operations of NABARD.
NABARD for the smooth running of the organization has developed many
committees and departments of inspection, which enables for the efficient
and effective running of the organization.
NABARD plays various roles and functions in various fields related to
agricultural and rural promotion and development.
Credit financing one of the major functions of NABARD is further
subdivided into different types of refinance facilities, lower interest rates,
production credit, investment credit, and farm sector schemes.
The second major function is promotional under which NABARD has come
up with the Kisan Credit Card and other promotional schemes which is of
great convenience to farmers and banks. They have also developed a
research and development fund with the objective of acquiring new insights
into the problem of agriculture and rural development.
Their fourth major function development deals with credit planning, which is
of great significance. The Watershed Development Fund development by
NABARD is a great achievement by NABARD as it has become very
successful. Other than this NABARD has undertaken various special
projects such as Adivasi Development Programme etc.
Last but not the least under the supervisory role NABARD has been
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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.
Thus, in conclusion we can say that,
NABARD is established as a development Bank, 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.
It is an apex refinancing agency for the institutions providing investment
and production credit for promoting the various developmental activities
in rural areas.
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 for 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.
Introduction
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Agricultural Scenario:
Finance is an essential requirement for every productive activity.
Agriculture is an exception to it. Its importance in India needs no stressing
with agricultural being the most predominant sector in the economy eve
today. India agricultural is the largest private sector enterprise in the
country of over 100 million farmers. It contributes 24% of country’s gross
domestic product and provides food to 1 billion people of the country. The
sector produces 51 major crops, provides raw materials to country’s agro-
based industries and contributes nearly 1/6th of the total export earning of
the country.
Credit supports the farmer as the hangman’s rope supports the hanged.
Agricultural credit is indispensable to the cultivators. Agriculturist cannot
carry on his business without outside finance is a fact proved by history and
evidenced by the appealing indebtedness of the persons engaged in the
business of agriculture. Therefore agricultural credit is a problem when it
cannot be obtained. In India, there is a two-fold problem of inadequacy and
unsuitability.
With a view to fulfill the credit needs of the farmers and to ensure that it
serves the national economy as a dynamic factor it is essential that a
sound system of credit should built up. Such system should be able to
convert the present static credit into dynamic credit.
NABARD National Bank for Agricultural and Rural Development is set up as an apex
institution, accredited with credit flow for promotion and development of
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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 India.
The Committee to Review Arrangements for Institutional Credit for
Agricultural and Rural Development (CRAFICARD) set up by the RBI under
the Chairmanship of Shri. B. Sivaraman, conceived and recommended the
establishment of the National Bank for Agricultural and Rural Development
(NABARD) or the National Bank. The Hon’ble Prime Minister, Smt. Indira
Gandhi on 5 November 1982, dedicated the Bank, which came into
existence on 12July 1982, to the service of the Nation.
It discharges its role as a facilitator for rural prosperity NABARD is
entrusted with:
Providing refinance to lending institutions in rural areas.
Bringing about or promoting institutional development.
Evaluating, monitoring and inspecting the client’s banks.
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.
Some of the milestones in NABARD's activities are:
1. With its effective overseeing and monitoring of the implementation of
the Government of India's programme to double the flow of credit 4
to agriculture over a three-year period from 2004-2005, the total
disbursement of credit reached Rs 1,25,309 during 2004-2005.
Ground level credit flow to agriculture and allied activities reached Rs
1, 57,480 crore in 2005-2006.
2. Refinance disbursement to commercial banks, state cooperative
banks, state cooperative agriculture and rural development banks,
RRBs and other eligible financial institutions aggregated Rs 8,622.37
crore.
3. As on 31 January 2007 through the Rural Infrastructure Development Fund (RIDF), Rs,59,795.35 crore have been
sanctioned for 2,31,702 projects covering irrigation, rural roads and
bridges, health and education, soil conservation, drinking water
schemes, etc. Developing among hosts of other infrastructures, RIDF
will create 20971 schools, 6239 primary health centers and provide
drinking water supply in 7267 villages
4. Watershed Development Fund , with cumulative sanctions of
Rs.578.95 crore for 427 projects in 124 districts of 14 states, has
created a People’s Movement in rural India.
5. Farmers now enjoy financial access and security through 582.50 lakh
Kisan Credit Cards that have been issued through a vast rural
schemes have to be formulated for availing bank loans.
Repayment period: The repayment period of loan for drip irrigation system
would be 10 to 15 years. (minimum 10 years and maximum 15 yrs. including
gestation period of 11 months) for small and marginal farmers.
Rate of Interest: As applicable from time to time.
Dug wells
The scheme aims to provide financial assistance for construction of 150 dug
wells with pump sets to individual farmers for irrigation development through
groundwater sources. These wells would mostly benefit small and marginal
farmers in the area where at present irrigation facilities either by surface or
groundwater sources are inadequate. Infrastructural facilities like road, power
lines and extension services by the state government are available for
successful implementation of the minor irrigation programme. Majority of
beneficiaries (70%) are in the small and marginal farmers’ category.
Repayment Period: For small and marginal farmers, the loan repayment
period of a dug well would be 11 years excluding a gestation/grace period of 23
months and for pump set 9 years.
Rate of Interest: The present (2003-04) refinance rate to the financing bank for minor irrigation investments is 5.50%. The minimum down payment would be 5%.
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Land Development
Biopesticide Unit
Pest problem is one of the major constraints for achieving higher production in
agriculture crops. India loses about 30% of its crops due to pests and diseases
each year. The damage due to these is estimated to be Rs.60,000 crores
annually. The use of pesticides in crop protection has certainly contributed for
minimizing yield losses. The pesticides, which are needed to be applied
carefully, only when the threshold limits of the pest population is exceeded.
The indiscriminate and unscientific use of pesticides has led to many problems,
such as pests developing resistance, resurgence of once minor pest into a
major problem besides environmental and food safety hazards.
The projects on manufacturing biopesticide products would be considered for
refinance support by NABARD Therefore, all participating banks may consider
financing this activity subject to their technical feasibility, financial viability and
bankability.
Interest Rate: Interest rate will be determined by RBI/NABARD from time to
time. However, at present banks may decide interest rate. .
Repayment Period: 7 years as repayment period with one year grace.
Refinance Assistance: NABARD provides refinance assistance @ 90% of bank
loan. However, it may vary from time to time.
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Animal Husbandry
Dairying is an important source of subsidiary income to small/marginal farmers
and agricultural laborers. Since agriculture is mostly seasonal, there is a possibility of finding employment
throughout the year for many persons through dairy farming. Thus, dairy also provides employment throughout the year.
The main beneficiaries of dairy programmes are small/marginal farmers and landless laborers.
Margin Money:
NABARD had defined farmers into three different categories and where
subsidy is not available the minimum down payment as shown below is
collected from the beneficiaries.
Sr.No. Category of Farmer
Level of predevelopment return to resources
Beneficiary's Contribution
(a) Small Farmers Up to Rs.11000 5%
(b) Medium Farmers Rs.11001 - Rs.19250 10%
(c) Large Farmers Above Rs. 19251 15%`
Interest Rate: As per the RBI guidelines the present rate of interest to the
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ultimate beneficiary financed by various agencies are as under :
No. Loan Amount CB's and RRB's SLDB/SCB(a) Up to and inclusive
of Rs.25000
12% As determined by
SCB/SLDB subject
to minimum 12%
(b) Over Rs. 25000 and
up to Rs. 2 lakhs
13.5% -do-
(c) Over Rs. 2.0 lakhs As determined by
the banks
-do-
Repayment Period of Loan: The loans will be repaid in suitable
monthly/quarterly installments usually within a period of about 5 years. In case
of commercial schemes it may be extended up to 6-7 years depending on cash
flow analysis.
Insurance: The animals may be insured annually or on long term master policy,
where ever it is applicable. The present rate of insurance premium for scheme
and non scheme animals are 2.25% and 4.0% respectively.
Small Road and Water Transport Operators Scheme (SRWTO)
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Borrowers:
Individuals, groups of individuals including partnership / proprietary firms
and co-operative enterprises would be eligible for assistance under the
scheme. The borrowers should be from the “rural areas” and should utilize
the vehicle mainly for transportation of rural farm and non farm products
and inputs and passengers to/from marketing centers.
Vehicles:
The vehicles should be duly registered with Regional Transport Authority
(RTA) as “public transport” vehicle.
The number of vehicles to be financed shall be subjected to the ceiling
on such number as stipulated by RBI for financing under priority sector
lending (at present 10 vehicles)
Water transport units such as boats, launches, etc. have been brought
within the ambit of SRWTO scheme
Financing small refrigerated vans, bulks carriers for edible oil,
petroleum, etc. would also be eligible for refinance.
Two wheelers are not eligible for refinance under this scheme and can
be covered under service sector activities.
Vehicles registered as ‘private carriers’ will not be covered under the
scheme.
Kisan Credit Card Scheme
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Genes
Hon’ble Union Finance Minister announced in his budget speech for
1998-99 that NABARD would formulate a Model Scheme for issue of
Kisan Credit Cards to farmers, on the basis of their land holdings, for
uniform adoption by banks, so that the farmers may use them to readily
purchase agriculture inputs such as seeds, fertilizers, pesticides, etc.
and also draw cash for their production needs.
NABARD formulated a Model Kisan Credit Card Scheme in consultation
with major banks.
Model Scheme circulated by RBI to commercial banks and by NABARD
to Co-operative banks and RRBs in August 1998, with instructions to
introduce the same in their respective areas of operation.
Objectives
As a pioneering credit delivery innovation, Kisan Credit Card Scheme aims
at provision of adequate and timely support from the banking system to the
farmers for their cultivation needs including purchase of inputs in a flexible
and cost effective manner.
Contents of Credit Card
Beneficiaries covered under the Scheme are issued with a credit card
and a pass book or a credit card cum pass book incorporating the name,
address, particulars of land holding, borrowing limit, validity period, a
passport size photograph of holder etc. which may serve both as an
identity card and facilitate recording of transactions on an ongoing basis.
Borrower is required to produce the card cum pass book whenever he/
she operate the account.
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Salient features of the Kisan Credit Card (KCC) Scheme.
Eligible farmers to be provided with a Kisan Credit Card and a pass book
or card-cum-pass book.
Revolving cash credit facility involving any number of drawals and
repayments within limit.
Limit to be fixed on the basis of operational land holding, cropping pattern
and scale of finance. Entire production credit needs for full year plus
ancillary activities related to crop production to be considered while fixing
limit.
Card valid for 3 years subject to annual review. As incentive for good
performance, credit limits could be enhanced to take care of increase in
costs, change in cropping pattern, etc.
Each drawal to be repaid within a maximum period of 12 months.
Conversion of loans also permissible in case of damage to crops due to
natural calamities.
Security, margin, rate of interest, etc. as per RBI norms.
Operations may be through issuing branch (and also PACS in the case of
Cooperative Banks) through other designated branches at the discretion of
bank.
Withdrawals through slips/ cheques accompanied by card and passbook.
Water Shed Fund
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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 crore 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 of 3
years. The participating states can avail loans out of WDF for
implementing watershed projects through the village level communities,
non-governmental organizations (NGOs) or project 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 31st 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.
Schemes under Pre – sanction procedure:
1) Term Loan to SSI units (through CBs & Scheduled PCBs)
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Borrowers
Individuals, Proprietary / Partnership concerns, Private/ Public Limited
Co’s. Promotional / Developmental Organizations, State level Federations /
Corporations, Joint Sector Undertakings.
Purpose
Setting up of new units and modernization / renovation / expansion /
diversification of existing units (other than agro-industries).
Eligible items for investment:
Land and Site Development (including cost of land up to margin money
required to be brought in by the borrower).
Construction of work shed (including civil structure, godowns for storage,
market outlets and other essential amenities).
Plant and machinery (including machinery / equipment required for
packaging and preservation).
Equipment and tools.
Delivery van.
Project formulation and consultancy charges.
Preliminary and pre-operative expenses.
Margin for working capital.
Repayment Period:
3 to 10 years with moratorium of 12 months.
Project Finance for Agro-Industries (through CBs, Scheduled PCBs & SCBs)
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Borrowers
a) State level corporations such as agro-industries corporations,
forest/tribal development corporations, KVIC/ KVIB, state level co-
operative societies/ federations, co-operative marketing/ processing and
industrial societies, joint sector undertakings registered societies in KVIC
KVIB fold.
b) Public/ private limited companies, partnership firms and proprietary
concerns.
Items eligible for term-loan assistance.
Cost of land for agriculture, site development, construction of work sheds/
building, plant and machinery, equipment and tools, cost of technology up
gradation, technical know-how and engineering, preliminary and pre-
operative expenses, project formulation and consultancy fees, acquisition
of transport vehicle, preservation including cold storage, packaging and
marketing, etc.
Repayment Period:
3 to 10 years with moratorium of 12 months.
Debt Equity Ratio – 3:1.
Scheme for setting up of Agriclinic and Agribusiness centers
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A scheme for setting up agriclinics and agribusiness centers by agriculture
graduates has been launched by GOI with the support of NABARD. These
centers will provide a package of input facilities, consultancy and other
services. They will strengthen transfer of technology and extension
services and also provide self employment opportunities to technically
trained persons. MANAGE is the nodal agency for imparting training under
the scheme. List of trained graduates is sent to various banks in the region
for financial assistance. As on 31.08.2006, 10856 agri graduates have
received training and 3386 ACABC units have been set up across the
country, of which 2123 units have been set up with financial assistance
from banks.
Initiatives taken for promotion of the Scheme:
RBI has classified loans to agri-clinics and agribusiness centers as
direct agricultural loans, even though input supply is normally classified
as indirect loans to agriculture.
Margin money/collateral requirement has been waived for loans upto
Rs.5 lakh.
Refinance support under ARF is being allowed. Shortfall in margin
money/down payment by the borrower can be supported out of ‘soft loan
margin money assistance fund’ of NABARD subject to a maximum of
50% of margin prescribed by banks. Such soft loan assistance for
margin money from NABARD to banks would be without interest, but the
banks may levy service charge which is 2% p.a.
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Soft loan assistance for margin money may be availed irrespective of a
ailment of refinance from NABARD.
Rate of interest on refinance from NABARD has been fixed at 5.5%
irrespective of the size of the loan.
A target of financing at least 10 units of Agriclinics & Agribusiness
Centers in each district has been set. Concerted efforts have been
initiated to increase the credit flow for the activity.
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Crop InsuranceIn 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 authorized and paid up capital of Rs.1,500
crore and Rs.200 crore, respectively. 624.37 lakh farmers have been
covered under the scheme. The main objective of the NAIS is to protect the
farmers against losses suffered by them due to crop failure on account of
natural calamities, such as, drought, flood, hailstorm, cyclone, fire, pest /
diseases, etc., so as to restore their credit worthiness for the ensuing
season.
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, under both kharif and rabi crops.
The AICI has introduced Varsha Bima in a few districts. The basic
objectives of Varsha Bima are to guarantee financial compensation to the
insured in the event of rainfall adversity, to facilitate ready flow of financial
liquidity in rural sector through expeditious claim settlements in adverse
years, to enhance confidence level of the insured by insulating him against
weather risks and to help stabilize farm income particularly in disaster
years. The Govt. of India had set up a Working Group to examine various aspects
related to Crop Insurance. The Working Group in its report has suggested several refinements to make
the insurance product more farmer friendly.
Swarojgar Credit Card
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Swarojgar Credit Card Scheme (SCC Scheme) was introduced in
September 2003 consequent upon the announcement made by Honorable
Prime Minister in his Independent Day Speech on 15 August 2003.
SCC is a credit delivery mode and not a purpose. Coverage of SCC will not
make a unit ineligible for subsidy. Banks can issue SCCs to target
borrowers of SCC scheme for disbursing credit under any schemes
whether they are covered under subsidy or not.
Objective:
SCC Scheme aims at providing adequate and timely credit i.e. working
capital or block capital or both to small artisans, service sector,
fishermen, self employed persons, rickshaw owners, other micro-
entrepreneurs, SHGs, etc from the banking system in a flexible, hassle
free and cost effective manner.
Farm sector activities like fisheries, dairy, etc. can also be covered
under the scheme. Generally such of the self-employment activities
which have regular turn over/income stream on short-interval basis can
be covered under SCC scheme.
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Vikas Volunteer Vahini (VVV)
It is launched to spread the message of development through credit. The
VVV consist essentially of small farmers, rural artisans and other persons
of small means who have successfully put into practice the five principles of
credit. The five principles of credit are :
The credit must be used in accordance with suitable methods of science
and technology.
Optimum productivity and income of the credit issued.
The part of the additional income created by use of credit must be
saved.
The terms and condition of credit must be fully respected. Loan installments must be repaid in time and regularly.
Farmers Club Programme
National Bank for Agriculture and Rural Development (NABARD)
encourages banks to promote Farmers' Clubs in rural areas under the
Farmers’ Club Programme, earlier known as “Vikas Volunteer Vahini (VVV)
Programme”. The Programme was launched by NABARD in November
1982 to propagate the five principles of “Development through Credit”.
Farmers’ Clubs are grass root level informal forums. Such Clubs are
organized by rural branches of banks with the support and financial
assistance of NABARD for the mutual benefit of the banks concerned and
rural people.
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The broad functions of the Farmers’ Clubs would be to :
Coordinate with banks to ensure credit flow among its members and
forge better bank borrower relationship,
Organize minimum one meeting per month and depending upon the
need, there would be 2-3 meetings per month. Non-members can also
be invited to attend the meetings,
Interface with subject matter specialists in the various fields of
agriculture and allied activities etc., extension personnel of Agriculture
Universities, Development Departments and other related agencies for
technical knowhow up gradation. For guest lectures, even experienced
farmers who are non members from the village/ neighboring villages
could be invited,
Organize/facilitate joint activities like value addition, processing,
collective farm produce marketing, etc.; for the benefit of members. They
can also sponsor / organize SHGs,
Market rural produce and products.
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Credit Planning by NABARD
Credit Planning and Monitoring Support
NABARDs basic approach for agricultural development is aimed at
improving the productive capacity of the agricultural economy. The share
of private sector investment in the Gross Capital Formation (GCF) in
agriculture has been steadily increasing over the years. Credit is a very
important component of private investment. The productivity of these
investments is dependent on area specific resource endowment,
technological opportunities and infrastructure. Proper planning of
investment activities, keeping these factors in view, is necessary to
improve the capital efficiency.
Credit Planning therefore, assumes great significance. The variation in the
resource potential, strategies relevant for development and appropriate
planning and monitoring mechanism from region to region necessitates
decentralized micro finance level planning.
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Potential Linked Credit Plans (PLPs)
NABARD started preparing PLPs with district as a unit of planning from
1988-89. These plans give an indication of potential available for credit
supported investment in agriculture and other rural development activities.
The PLPs also indicate existing infrastructure gaps, anticipated
infrastructure development by way of public investment during the year that
would facilitate credit absorption, development al programmes of
government agencies in the last 3-5 years etc. Many of these information
are furnished block-wise to take care of micro region variations.
These PLPs are made available to all the banking institutions in the
districts before their planning process starts as also to government
agencies. The ground level bank branches prepare their annual credit
plans keeping in view the potential. The government agencies are also
benefited from the PLPs in planning public investments in infrastructure
development. Thus the PLPs facilitate improving the productivity of credit
supported private investment.
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Conclusion
Initiatives Taken by NABARD
Development Initiatives
20,000 villages in six states. NABARD has supported a project ‘Diagnostics
for e-Choupals’ by ITC Ltd. In Madhya Pradesh and sanctioned grant
assistance of Rs. 9 lakh. The project aims at developing an IT-based
practical handbook and diagnostic tools for production and protection of
major crops. With a view to promoting agri-exports, NABARD extended
refinance facilities at soft interest rates to all clients, institutions and for all
activities covered under AEZs. In order to give a fill to the implementation
of the programme, NABARD has taken initiatives, such as preparation of
banking plans, bringing out publications for the benefit of stakeholders and
financial interventions like developing loan, products, etc. This has resulted
in refinance disbursement of Rs.437crore under AEZs during 2004-05.
Other Initiatives
NABARD through its refinance support continue to supplement the
resources of co-operative banks, commercial banks and RRBs for
enhancing credit flow to the agriculture and rural sector. During the bank
was also entrusted with responsibility of overseeing the implementation and
monitoring of GOI programme of doubling the flow of credit to agriculture
over a period of three years effective from 2004-05.
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Agricultural Credit
The total ground level credit (GLC) flow of agriculture and allied activities
was estimated at Rs.86, 981crore during 2003-04. The disbursement of
short term production credit (crop loans) increased at an annual compound
growth rate of 17 percent, while that of investment credit (term loans)
increased 15 percent under investment credit land development, hi-tech
agriculture, fisheries and plantation and horticulture witnessed growth,
while for other sectors, viz. minor irrigation and farm mechanization, credit
flow remained stagnant.
NABARD Consultancy Service.
NABARD Consultancy Service (P) Ltd. (Nabcons), a subsidiary of
NABARD was set=up in November 2003, for providing consultancy in the
sphere of agriculture development and allied areas. In order to have
experienced professionals, the Board of Nabcons has been restricted
during the year to include bankers, academicians and corporate