Nabard Project on Rural Development.

CHAPTER 1 NATIONAL AGRICULTURE AND RURAL DEVELOPMENT BANK 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 programmed 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 to be based on increasing the productive employment opportunities in the process of growth itself. Elimination of poverty, ignorance, diseases and inequality of opportunities and providing a better and higher quality of life were the basic premises upon which all the plans and blue-prints of development were built. NABARD implies both the economic betterment of people as well as greater social transformation. In order to provide the rural people with better prospects for economic development, increased participation of people in the rural development programmes, decentralization of

planning, better enforcement of land reforms and greater access to credit are envisaged. 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, besides 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 programs related to rural credit. Objectives NABARD was established in terms of the , "for providing credit for the promotion of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promoting IRDP and securing prosperity of rural areas and for matters connected therewith in incidental thereto". The main objectives of the NABARD as stated in the statement of objectives while placing the bill before the Lok Sabha were categorized as under: o 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. o The Bank will also provide direct lending to any institution as may approved by the Central Government. o The Bank will have organic links with the Reserve Bank and maintain a close link with in.

Mission Promoting sustainable and equitable agriculture and rural development through effective credit support, related services, institution building and other innovative initiatives. In pursuing this mission, NABARD focuses its activities on

o 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 o Development functions, concerning reinforcement of the credit functions and making credit more productive o Supervisory functions, ensuring the proper functioning of cooperative banks and regional rural banks Current Position of NABARD o In a journey spanning 30 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. o 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.

o 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. o 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. o Farmers now enjoy financial access and security through 925.17 lakh Kisan Credit Cards that have been issued through a vast rural banking network.

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

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

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

constraints in development of potentials available in agriculture and allied sectors in the State.

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

2.3 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 Structure Banks, operative

(State District

Co-operative

Short-term (crop and other loans)………

Co-operative

Medium-term (conversion) loans…………

Central

Banks,

Co-

Primary

Agricultural Credit Societies)

Term loans for investment purposes…….. Financing

WCS

marketing

for

production

and

purposes

Financing State Handloom Development Corporations for working capital by State Co-operative Banks

Long-term Structure

Co-operative (State

Agriculture

Term loans for investment purposes

Co-operative and

Rural

Development

Banks,

Primary

Co-operative

Agriculture

and

Rural Development Banks) Regional Rural Banks (RRBs)

Short-term (crop and other loans)……….. Term loans for investment purposes

State Governments

Long-term loans for equity participation in co-operatives Rural Infrastructure Development Fund (RIDF) loans for infrastructure projects

Non-Governmental

Revolving Fund Assistance for various

Organisations (NGOs) - Informal

micro-credit delivery innovations and

Credit Delivery System

promotional projects under 'Credit and Financial Services Fund' (CFSF) and 'Rural Promotion Corpus Fund' (RPCF) respectively

INTEREST RATES 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. Special focus Promote sustainable and equitable agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives 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 refinance offered on liberal terms and other supportive measures so that the rural credit delivery system in the region is strengthened.

Achievements of Nabard I am delighted to be a part of NABARD‘s celebrations of its completion of thirty years. This is a special occasion for NABARD, of course; but also a special occasion for the Reserve Bank, for NABARD was incubated in the Reserve Bank before it rolled out as an independent development financial institution in 1982. The bondage between our two institutions has not only remained strong but is getting stronger. We share a common goal of furthering inclusive growth. We also share significant professional domain because of our joint responsibility for the flow of agricultural credit. I.NABARD 2. Over the last three decades, NABARD has grown and evolved from a uni-dimensional apex financing agency into a multi-dimensional institution for shaping and implementing the country‘s overall rural credit policy. NABARD has been a leader in promoting microfinance through the SHG-Bank linkage programme. By investing huge energies and manpower into this programme and drawing upon its myriad roles, NABARD has reached nearly 97 million households, making India‘s microfinance programme the fastest, if not also the largest, in the world. All of you - management and staff of NABARD - including those who have retired can be proud of this very credible record of achievement of NABARD. My congratulations to all of you for serving this great institution so competently.

3. Completing three decades is an occasion for celebration; it is also an occasion for introspection - to look back on what you have accomplished and to look ahead to the challenges on the way forward. I thought the best way I can add value to NABARD‘s celebrations is to do precisely that - to look back and look ahead on the challenges of agricultural credit - the quintessence of NABARD‘s mandate. II. Importance of Agricultural Credit 4. Starting from Pandit Nehru‘s exhortation soon after independence that ‗everything else can wait, but not agriculture‘, agricultural growth has all along been central to India‘s efforts at poverty reduction. We have come a long way from the chronic food shortages and occasional famines of the immediate post-independence years; even as the population has increased, we have been able to maintain food self-sufficiency through both extensive agriculture and productivity improvement. But in recent years, there has been growing concern about the erosion at the margins of food self-sufficiency. A big challenge for sustaining food self-sufficiency is raising production which, given that available land is fixed if not diminishing, has to come from improved productivity. A host of cash and noncash inputs is necessary to improve productivity, and an important one is agricultural credit.

5. Development experience shows that credit is an important determinant of value added in agriculture. A quick assessment by the Reserve Bank of the relationship between institutional credit to agriculture (from commercial banks, cooperatives and RRBs) evidences positive and statistically significant elasticity - every 1 per cent increase in real agricultural credit results in an increase in real agricultural GDP by 0.22 per cent with a one-year lag.2 Further, the Granger causality test (based on lag length of 1) also indicates that the causality was unidirectional from agricultural credit to agricultural GDP.

CHAPTER 2  ROLE of NABARD IN RURAL DEVELOPMENT Promotion of RNFS has been recognized as an important and necessary adjunct to the refinancing function. The objective of promotional programs 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 : o NABARD Warehousing Scheme (NWS) o Rupay KCC o Swarojgar credit card schemes o Farmer‘s club programme o Self help groups o Kissan credit card schemes

Development and Promotional Functions Credit 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: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 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 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 Farmer‘s clubs

RUPAY KCC:

The Kisan Credit Card (KCC) has emerged as an innovative credit delivery mechanism to meet the production credit requirements of the farmers in a timely and hassle-free manner. As per the revised guidelines for KCC, the KCC should be a smart card cum debit card which could be used in the ATMs/Hand held Swipe Machines etc. RuPay is a new card payment scheme launched by the National Payments Corporation of India (NPCI), has been conceived to fulfill RBI‘s vision to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments. RuPay has come out with its RuPay KCC offering which leverages the benefits of both KCC and RuPay. Advantages of RuPay KCC: 1. Unlike Visa and MasterCard networks, RuPay does not charge an entry fee. 2. RuPay is well equipped to handle both the single message and dual messaging systems. 3. RuPay is a PIN based product so it provides enhanced security. 4. It offers complete web based architecture, so member banks will not have to develop a separate file based interface. 5. RuPay provides advanced features such as processing of adjustment file to enable Tip and Surcharge processing on the SMS platform too. 6. Administration costs & quarterly charges are very low when compared to current international schemes. 7. Unlike normal KCC which serves only as an identity card and facilitate recording of transactions on an ongoing basis, RuPay KCC is actually a smart card that can

be used at the nearest ATM/PoS for withdrawing cash. It removes the necessity of going to PACS or a bank branch to operate the account.

 NABARD Warehousing Scheme (NWS Consequent upon the announcement of an allocation of Rs. 5000 crore to NABARD in the budget for 2013- 14, for supporting creation of infrastructure for storage of agricultural commodities, Reserve Bank of India (RBI) issued guidelines for creation of Warehouse Infrastructure Fund (WIF) in NABARD. With a view to operationalising WIF, NABARD has formulated a scheme viz., NABARD Warehousing Scheme 2013- 14 (NWS), which envisages extension of loans to Public and Private Sectors for construction of warehouses, silos, cold storages and other cold chain infrastructure. The Scheme has been approved by Government of India (Copy enclosed as Appendix). Funds under this scheme would be utilized for meeting the growing demand for storage capacity for agricultural commodities in the entire country and also in the wake of enactment of National Food Security Act 2013. Priority will be given for the projects proposed in Eastern & North Eastern and food grain deficit states. The salient features of the Scheme are indicated below:   

Eligible 1 Institutions/ Entities



State Governments Agencies Owned/ Sponsored by State Govt. Panchayati Raj Institutions (through respective State Governments) Agencies owned/ sponsored by Government of India, Special Purpose Vehicles (SPVs) set up under the projects in PublicPrivate Partnership (PPP) mode, Cooperatives (and their Federations), Farmers‘ Producers‘ Organizations (FPOs), Federations of Farmers‘ Collectives, APMCs, Apex Marketing Boards, Private Companies, Individual

Entrepreneurs, etc. Loans will be provided for projects involving creation of storage infrastructure, with a minimum capacity of 5000 metric tons (MT), for agricultural and allied produce including construction of:

2

Activities Covered

a. Warehouses b. Silos c. Cold storage, Controlled Atmosphere (CA) stores, other cold

chain activities like reefer vans, bulk coolers, Individually Quick Frozen units (IQF), chilling/ freezing infrastructure, etc. Modernization/ improvement of the existing storage infrastructure projects will be considered on merit of each proposal provided it leads to scientific/ additional storage capacity.

3

Registration by WDRA

Loans will be provided in respect of only those storage projects, which not only conform to the norms laid down by Warehousing Development and Regulatory Authority (WDRA), but also give an undertaking for obtaining accreditation/ registration from WDRA on completion of the infrastructure. Funds under this Scheme would be utilized for meeting the growing demand for storage capacity for agricultural commodities and also in the wake of enactment of National Food Security Act 2013 from the following segments: 

4 Priority Segments 



Food grain procurement agencies, like FCI (including under PEG Scheme), Central Warehousing Corporation (CWC), State Warehousing Corporations (SWCs), State Government Departments/ Agencies, etc. Panchayats, PACS and other Co-operative Societies (including modernization/ renovation/ repairs of the existing warehouses) for enabling farmers to store their produce and avail concessional post harvest loans State Civil Supplies Departments/ Corporations for Public Distribution System (PDS) and supply of essential commodities



Private Sector entities for storing food grains as well as other agricultural commodities like pulses, oilseeds, cotton, spices & condiments and perishables, like fruits & vegetables, dairy/ poultry/ meat/ fish products. Priority will be given for the projects proposed in Eastern & North Eastern Regions and in food grain deficit states.

Loans to Public Sector

Loans to State Government, Agencies Owned/ sponsored by State Govt. and Panchayats (through State Governments) will be governed by the extant Rural Infrastructure Development Fund (RIDF) guidelines.

6

Loans to Private Sector

Direct loans to private sector and to the entities owned/ sponsored by the State Govt., which are not covered by mandate/ guarantee, would be governed by the terms of lending indicated in Annexure– I.

7

Implementation Period

The Scheme will be operational during the year 2013- 14.

5

Swarozgar Credit Card (SCC) Scheme –

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. 28,925 cards were issued by CBs, Coop Banks and RRBs involving credit limit of Rs. 64.26 crore

Farmers' Club Programme 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.

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‖.

Financial Support from NABARD Sl.

Name

of

No.

Programme

the

Maximum

North East Region

Eligible Grant

(including

other

and

than

NER 1

Maintenance

of

a

Farmers' Club

Sikkim

Andaman

&

Nicobar Islands)

Rs. 3,000 per

Rs. 3,000 per Club

Club per year

year for 5 years

for 3 years. 2

Grant if applicable in

Rs. 2,000/- per

Rs. 2,000/- per Club

the case of KVKs,

Club per year

per year for 3 years.

NGOs,

for 3 years.

Agriculture

Universities etc. 3

Inauguration

Rs. 5000/-

Rs. 5000/-

4

Basic

"Meet with Experts"

Rs. 1,250 per

Rs. 1,250 per meet

Program

meet

for

4

for 4 meets for 3

meets

for

3

years.

Level

Orientation Training Program (BLOTP) 5

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.

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 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 socioeconomic 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 microenterprise 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, 6,20.109 groups were credit linked.

KISAN CREDIT CARD SCHEME

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 9.25 crore Kisan Credit Cards issued upto 31 March, since inception. An amount of Rs. 4,17,326 Crores has been sanctioned under KCCs till 31 March 2010, since the inception 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.

CHAPTER3 CONCLUSTION A Refinancing institution in strengthening the rural credit system of India. Credit 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.

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, nongovernmental organizations (NGOs) or project facilitating agencies ( PFAs) in the selected districts. The loans are repayable over a period of 9 years (including a grace period of 3 years) and carry a rate of interest of 4.5% per annum at present. One-third portion of the Fund is earmarked for promotional efforts, capacity building, replication of Indo German Watershed Development Programme (Maharashtra) or any other successful model and Self Help Group (SHG) related activities particularly targeted at women in the project areas.As on 31 March 2004, the Rs. 154.61 crore has been added to the corpus by way of interest on unutilized portion and excess margin on RIDF loans. COOPERATIVE DEVELOPMENT FUND (CDF) In pursuance with the recommendations of the Parliamentary Committee on Agriculture, NABARD had created Co-operative Development Fund for providing assistance to Co-operative Credit Institutions for improving their infrastructural facilities for growth. The Fund, which started with an initial corpus of Rs.10.00 crore from the surplus contributed by NABARD, has a balance of Rs.115.68 crore as on 31 March, 2003. The assistance sanctioned to various cooperative institutions from the Fund till 31 March, 2004 aggregated to Rs.62.18 crore against which an amount of Rs.50.87 crore has been disbursed.

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 : 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.

DISTRICT RURAL INDUSTRIES PROJECT (DRIP)

NABARD, launched DRIP, an integrated area based credit intensification program, 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. Maharashtra Rural Credit Project

The project was under implementation since January 1994 and covers 1483 villages in twelve districts of Maharashtra. The primary objective is poverty alleviation through increased access to bank credit for the rural poor. It envisages formation and promotion of Self Help Groups through NGOs. The project has been

completed. As against a target of promoting 2600 SHGs, 9000 groups have been promoted, of which 7027 groups have been credit linked with banks. MRCP has provided a window of opportunities, particularly to the poor rural women to enhance their skill and secure credit for income generating activities. The project has helped in empowerment of rural women in addition to providing access to bank credit. 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 program under 7792 REDPs

Rural Marketing: 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 program 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. 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 NonGovernment Institutions, corporate bodies, financial institutions and individuals can avail funding support for activities involved in development of new products, processes, prototypes, technology etc. which have the poor in their focus. 4.9 Co-Financing It 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.

SUPERVISORY ROLE OF NABARD

Apart from the role of a development bank, NABARD undertakes certain supervisory functions in respect of Coop Banks and RRBs under the Banking Regulation Act. The objective of NABARD‘s supervision is to assess financial and operational soundness and managerial efficiency of these banks and their compliance with banking regulations. NABARD has constituted a Board of Supervision as an Advisory Committee to the Board of Directors of NABARD, which gives directions and guidance in respect of policies and on matters relating to supervision and inspection. NABARD undertakes on-site inspection of RRBs, SCBs and DCCBs on a two-year cycle basis. Inspection of SCARDBs and apex non-credit cooperatives are undertaken on a voluntary basis. Off-site surveillance of Coop Banks and RRBs are also undertaken on an on-going basis. Core Functions NABARD has been entrusted with the statutory responsibility of conducting inspections of State Cooperative Banks (SCBs), District Central Cooperative Banks (DCCBs) and Regional Rural Banks (RRBs) under the provision of the Banking Regulation Act, 1949. In addition, NABARD has also been conducting periodic inspections of state level cooperative institutions such as State Cooperative Agriculture and Rural Development Banks (SCARDBs), Apex Weavers Societies, Marketing Federations, etc. on a voluntary basis.

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. Supervisory Strategy In the wake of the banking sector reforms, new set of international norms/practices were made applicable to Commercial Banks (CBs) to make them more competitive and sustainable in the changing scenario. The co-operative banks and RRBs were also to function in the general banking environment, emerging out of the financial sector reforms, introduced by the GOI/RBI. Accordingly, the prudential norms were extended to them in phases. While the capital adequacy norm has not yet been made applicable to these banks, the other prudential norms viz. income recognition, asset classification and provisioning, which were made applicable by RBI to the commercial banking sector had been extended to cover RRBs in 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.

MODEL BANKABLE PROJECTS Dairy Farming Dairying is an important source of subsidiary income to small/marginal farmers and agricultural labourers. The manure from animals provides a good source of organic matter for improving soil fertility and crop yields. The gober gas from the dung is used as fuel for domestic purposes as also for running engines for drawing water from well. The surplus fodder and agricultural by-products are gainfully utilised for feeding the animals. Almost all draught power for farm operations and transportation is supplied by bullocks. 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 labourers. A farmer can earn a gross surplus of about Rs. 12,000 per year from a unit consisting of 2 milking buffaloes. The capital investment required for purchase of 2 buffaloes is Rs. 18,223/-. Even after paying a sum of Rs. 4294/per annum towards repayment of the loan and interest the farmer can earn a net surplus of Rs. 6000 - 9000/- approximately per year. (For details see model scheme enclosed). Even more profits can be earned depending upon the breed of animal, managerial skills and marketing potential. According to World Bank estimates about 75 per cent of India's 940 million people are in 5.87 million villages, cultivating over 145 million hectares of cropland. Average farm size is about 1.66 hectares. Among 70 million rural

households, 42 per cent operate upto 2 hectares and 37 per cent are landless households. These landless and small farmers have in their possession 53 per cent of the animals and produce 51 per cent of the milk. Thus, small/marginal farmers and land less agricultural labourers play a very important role in milk production of the country. Dairy farming can also be taken up as a main occupation around big urban centres where the demand for milk is high. Scope for Dairy Farming and its National Importance. The total milk production in the country for the year 2001-02 was estimated at 84.6 million metric tonnes. At this production, the per capita availability was to be 226 grams per day against the minimum requirement of 250 grams per day as recommended by ICMR. Thus, there is a tremendous scope/potential for increasing the milk production. The population of breeding cows and buffaloes in milk over 3 years of age was 62.6 million and 42.4 million, respectively (1992 census) Central and State Governments are giving considerable financial assistance for creating infrastructure facilities for milk production. The nineth plan outlay on Animal Husbandry and Dairying was Rs. 2345 crores. Modern and well established scientific principles, practices and skills should be used to obtain maximum economic benefits from dairy farming. Some of the major norms and recommended practices are as follows : State Specific Projects The Uttarakhand State is strategically located and forms part of the Northern boundary of the country sharing its borders with Nepal in the East and Tibet (China) in the North, Himachal in the West and Northwest, Gangetic plains of UP in the South. It extends between 77o 43‘and 81o 02‘E Longitude and 28o 43‘ to

31o 27‘ N Latitude. Starting from the foothills in the South it extends to the snow clad mountains in the North. The elevation extends from approximately 300 to 7000 m above mean sea level. The highest peak is Nanda Devi (7817 m) in the Chamoli district. The entire State of Uttarakhand forms a part of the Central Himalayas. The State is interspersed with rivers, deep valleys, glaciers, Alpine meadows and high peaks; the state presents a very pristine, pure and picturesque environment. In view of Uttarakhand's advantage as a major horticulture crops producing state, the state Govt. has taken various steps to tap the resources for integrated development of horticulture sector ensuring nutritional security, utilization of wastelands and capture of foreign market. With a holistic approach to improve the quality and productivity of horticultural crops by integrated implementation of viable, eco-friendly, refined technologies, and the centrally sponsored scheme on Technology Mission for Integrated Development of Horticulture in Uttarakhand was launched on 16th December 2003 in the state. The technology mission was focused to bring significant increase in production and productivity of horticultural crops through area expansion under various horticultural crops incorporated with creation of water sources to ensure availability of water for irrigation and launch modern and scientific systems of irrigation like Drip/Micro irrigation as water scarcity in hills and Bhabar areas of Uttarakhand is the major constraint which influence the crop yield badly. As a policy to encourage use of such systems, the Govt. of India under centrally sponsored scheme for small and marginal farmers to increase the irrigation efficiency, provides subsidy to the extent of 50% of the cost of the equipment, the balance would be provided by banks as a bank loan.

Keeping in view the declaration of Litchi Export Zone in Uttarakhand the use of micro irrigation systems like drip has become all the more essential to improve the yield and quality of Litchi to compete with the world market. In this context, an attempt has been made to prepare a Model Drip Irrigation Scheme for cultivation of one hectare of Litchi in Uttarakhand State. Biotechnology The success of Horticulture development hinges on selection of desired types of plants and their multiplications. Selection of desired types is based on evaluation of the quantitative and qualitative performance of plants and also in some cases their aesthetic appeal. Over the years, the horticulturists have developed various techniques for selection of desired types of plants and their multiplication. Recently interesting developments have taken place in the field of plant multiplication which involves culture of cells or tissues in laboratory. Traditionally, horticultural plants are multiplied by means of seeds (sexual propagation) or organs other than seeds (asexual or vegetative propagation). These organs are usually stems, leaves or roots. Though multiplication by seeds is the cheapest method, it suffers form certain disadvantages. Plants raised from seeds may not repeat good performance of mother plants. Many horticultural plants take a long time to produce seeds/fruits and many of them do not produce viable seeds or desired quality of seeds. Plants propagated vegetative do not suffer from these disadvantages. However, vegetative propagation is rather a slow, time and space consuming process. Besides, it is usually infected with latent diseases. Some plants are also not amenable to vegetative method of propagation, for example, coconut, papaya, oil palm, clove etc.

Therefore, scientists started a quest for an alternative method of plant propagation which could overcome the disadvantages of both the methods described above. After many trials and errors in the sixties, plant propagation by tissue culture method, which could overcome disadvantages of propagation by seeds or vegetative organs, was found commercially successful in the case of orchids. Subsequently, the method has been perfected for many other plants (Annexure A). The method (also known as micro-propagation) involves the culture of whole organism from cells or tissues or plant parts in glass (in vitro) on a defined medium under germ free conditions (sterile or aseptic), whereas conventional method of vegetative propagation (macro-propagation) involves culture of parts into whole organisms in natural conditions (in vitro).

SET BACKS OF NABARD FARMERS COMITTING SUICIDE The principal agriculture development bank has to witness unprecedented crisis in the agricultural front with hundreds of farmers committing suicides in at least 31 districts spanning over five states. A study conducted by the Indira Gandhi Institute of Development Research (IGIDR)says the small and marginal farmers(holding lands up to 5 acres)were more vulnerable to suicide. Another category of NABARD clientele, landless laborers who leased in land constituted 19 percent of the suicide cases .In spite of NABARD and public sector banks glorious existence for the more than two and three decades respectably, 51 percent of cultivator household is outside the ambit of any form of credit at all and out of 49 percent of the indebted cultivator households, only 27 percent are indebted to the formal sources. National Sample Survey Organization (NSSO)data show that in regard to very small land holdings of 25 percents; the formal credit delivery‘s outreach is only 23 percent, while in regard to farm holdings of between 5 and 10 acres, it is around 65 percent. CRISIS IN MOBILIZING RESOURCES In the third decade of its existence, NABARD is facing a crisis of sort in mobilizing resources from the market with its cost of resource mobilization shooting up to around 8.17 percent so far, as against 5.76 percent in 2005-06.The government‘s abolition of long term capital gains tax has, in turn, deprived NABARD of a comparatively cheap source of fund by way of capital gains bond, the average interest burden of which in 2005-06 being 5.45 percent .In addition,

the near total discontinuation of RBI contribution to NABARD behind national rural credit—long term operations fund, national rural credit—stabilization fund(in spite of statutory obligations of RBI under sections 42 and 43 of NABARD Act,1981)to support long and medium—term agri-credit needs and behind general line of credit for short term agri-credit operations have aggravated the problem of cheap resources .This, in turn, has accentuated the problem of cheap credit for farmers, even during distress,(as NRC-STAB fund is utilized to res7chedule loans during calamities like flood, drought, and farmers‘ suicide).The RBI‘s surplus, instead, is diverted to balance the government of India‘s fiscal deficit especially after operationalisation of Fiscal Responsibility And Budget Management (FRBM) Act. CONTRIBUTION OF NABARD IN RURAL BANIKING It is a quiet admission of poor credit flows to the needy in the rural and urban centers despite many government-subsidised programmes. The poor and the needy in the unorganized sector cannot put up any collaterals against bank loans and bankers should get rid of the habit of demanding security from the poorest who have nothing but themselves to offer. Anyway bankers do okay big size corporate loans on a call from New Delhi. Reports are the Government and the RBI could be looking afresh at flow of bank funds into agriculture and rural development in general. Priority sector funding has become a farce with software and information technology being classified as priority.

The Lead Bank Approach and the Service Area Approach exist for the records, with bank chairmen not overly worried over defaulting on the 18 per cent agriculture norm. An excellent idea like the Rural Infrastructure Development Fund (RIDF) has gone cold, with State Governments pleading absence of rural projects. The Fund is presently being used by banks to earn a good return. Banks have to place any fund shortfall in agriculture lending with RIDF. The scheme is structured in a manner which deters banks from going into rural areas and a view being taken is to scrap interest payments. The rate of interest on the entire deposit to be made in RIDF is prevailing Bank Rate plus 1.5 per cent when the shortfall in lending to agriculture in terms of percentage to net bank credit (i.e., target minus achievement) is less than two percentage points; it is Bank Rate plus 0.5 per cent if the drop varies between two percentage and 4.99 percentage points; Bank Rate minus 0.5 per cent if the default varies between 5 percentage and 8.99 percentage points; and Bank Rate minus 1.5 per cent if the default is 9 percentage points and above. Only RBI and the Finance Ministry can evolve a scheme which pays a fixed return to banks refusing to fund the priority sector. It may be best to knock off all incentives at one go and make it mandatory on errant banks to cough up funds free. And the rule should cover foreign and new private banks, which have only contempt for rural India. Parallely the government could be sending the appointment papers to

Ms Ranjana Kumar as Chairman of NABARD

effective November 3, going by talk on Mint Street. That should provide a head to the lead rural credit agency which today is doing little, as there are no takers for its refinance facility.

CONTRIBUTION OF NABARD IN RURAL BANIKING Agricultural credit is considered as one of the most basic input for conducting all agricultural development programmes. In India there is an immense need for proper agricultural credit as the economic condition of Indian farmers are very poor. From the very beginning the prime source of agricultural credit in India was money lenders. After independence the Govt. adopted the institutional credit approach through various agencies like co-operatives, commercial banks, regional rural banks etc. to provide adequate credit to farmers, at a cheaper rate of interest. Moreover with growing modernization of agriculture during post-green revolution period the requirement of agricultural credit has increased further in recent years. Now a days the long term and short term credit needs of these institutions are also being met by National Bank for Agricultural and Rural Development (NABARD). It is the evolution of agricultural finance. It was established in the year 1982, with head office at Mumbai and 16 regional offices throughout the country. It has the objective of promoting the health and the strength of the credit institutions which are in the forefront of the delivery system namely, cooperatives, commercial banks and regional rural bank. It is, in brief, an institution for the purpose of refinance; with the complementary work of directing, inspecting and supervising the credit- flows for agricultural and rural development. The scope of the operations of NABARD is large indeed. Besides providing finance to credit institutions, it is providing innovations in regard to formulation of schemes, monitoring of implementation, evaluation of results and evolution of suitable supporting structures of all kinds of agricultural activities. It is performing the various functions assumed by it smoothly and efficiently. A rural infrastructural development fund (RIDF) was established under NABARD in 199596. Every year the resources of RIDE have been augmented to finance rural

infrastructure development project by States. The outstanding refinance from NABARD by State Co-operative Banks, RRBs and State Governments was Rs. 7,075 crore as at end June 2002, which was a little higher than Rs. 6,857 crore as at end June 2001. Farm mechanisation got the highest amount of assistance and the second place went to minor irrigation. The rest of the amount was distributed for forestation/Plantations, Land Development, sheep-rearing, poultry farming, dairy farming etc. The National Bank has vigorously continued its efforts for promoting investments in the agricultural sector in the less developed/under banked states. U.P., Bihar, M.P., Rajasthan and Orissa in that order, have been the biggest beneficiaries. Thus NABARD is taking the necessary steps to revitalise and rejuvenate the rural economy of India by developing agriculture, small scale and cottage industries and trading activities in all possible ways.

Reserve Bank of India (RBI) entrusted NABARD (National Bank for Agriculture and Rural Development) in 1981 to look after agriculture and rural development through all the Cooperative and other Nationalized banks of India. NABARD will observe 30th eventful journey for advancement of Indian agriculture, economy and social structure. Animal husbandry programmes with Rs.2000 crores have been approved. Indian agriculture is dominated by a vast multitude of landless, sub marginal, marginal and small farmers, who are at the bottom of pyramid; consisting 80% of total cultivators having only little above one hector of land. For this NABARD has given stress on animal resource‘s productivity. From the beginning ,NABARD has grown into a unique kind of apex hybrid organization combining best of central and development bank practices like planning, regulation of credit and supervision of rural financial institution like agriculture cooperative banks(both short and long term structures),Regional Rural

Banks(RRB) etc. It also plays a unique institution building role that was instrumental in safe guard of many a loss making RRBs and Cooperative Banks in various parts of the country. The balance sheet of NABARD is above Rs.4 lac crores From the parameter of profitability ,it is one of the best run banks, not only in India, but in the world, as its per employee profitability is Rs.22 lakh(its net per employee profitability is around Rs.17 lakh assuming an income tax of Rs.300 crore).It may not be out of place to mention here that NABARD is the pioneer in the Self Help Group(SHG)—Bank linkage programme in the country that has brought the taste of banking to doorsteps of the poor clientele, especially the women. Beginning with a modest number of 500 groups in 1992, today this flagship programme comprises 2 million groups touching the lives of 150 million people. NABARD support to RIDF behind 2.4 lakh projects has translated into developing irrigation potential of 108 lakh hectres,2 lakh km of roads,370 lakh meters of bridge length, schools benefiting 28 lakh students, rural health centers benefiting 2.47 lakh people, drinking water supply benefiting 5.82 lakh people. In this connection, it may not be out of place to mention here that the declining creditdeposit ratio in backward regions of the country viz. northeastern, eastern and central regions, in wake of concentration of banking business in developed urban, semi-urban centers in the post liberization phase, got improved a bit when the RIDF investment are factored in.

BIBLIOGRAPHY

Magazines Business world News papers Economic Times Internet www.nabard.org http://timesofindia.indiatimes.com/topic/Nabard www.rbi.org.in http://nafcard.org