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 1
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. 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
2
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. 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
2
development. Introduction
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 agrobased industries and contributes nearly 1/6 th 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.
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NABARD
National Bank for Agricultural and Rural Development is set up as an apex institution, accredited with 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 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 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. establishments. Some of the milestones in NABARD's activities are: 4
1.
With its effective overseeing and monitoring of the implementation of the Government of India's programme to double the flow of credit 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
banking network. 5
Agricultural Role and Functions
Credit functions A. 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% p.a. of the investment cost.
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 refinance offered on liberal terms and other supportive measures so that the rural credit delivery system in the region is strengthened. 6
Monitoring 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.
B.
Production Credit:
This is a short-term refinance facility, aimed at supporting:
• Agricultural production operations and marketing of crops by farmers and farmers cooperatives • Marketing and distribution of inputs like fertilizers, seeds and pesticides • Production and marketing activities of village cottage industries, handicrafts, handlooms, power looms, artisans, small scale and tiny industries and other rural non-farm enterprises.
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1. Seasonal Agricultural Operations (SAO)
In order to ensure availability of timely credit to farmers, banks follow production-oriented system of lending. The system has features like assessment of credit, needs based on area brought under cultivation, crop wise scales of finance, provision of credit for purchase of inputs like fertilizers and pesticides. Refinance is provided for production purposes at concessional rate of interest to state cooperative banks (SCBs) and regional rural banks (RRBs) by way of sanction of credit limits. Each withdrawal against the sanctioned credit limit is repayable within 12 months. Rate of interest on NABARD refinance will be linked to NPA levels as under: Level of NPAs
ROI (%) p.a.
Up to 20%
5.25
>20%
5.75
2.
Refinance support in the form of consolidated limit to SCBs on behalf of eligible DCCBs for financing approved short – term agricultural/allied and marketing activities which are not covered
under normal credit covering secured advances. Refinance is expected to provide liquidity to co-operative banks and enable them to effectively leverage their high cost funds to boost credit flow to the 8
agricultural sector. R.O.I 6.50% p.a.
3. Refinance of SCBs on behalf of DCCBs and RRBs for financing Marketing of Crops for affording reasonable opportunities for
remunerative price to growers for their produce by enabling them to hold on to the produce for time being. Such advances are permitted against pledge of agricultural produce kept in own godowns also. Ceiling of Rs. 5 lakh per borrower. Maximum period of credit up to 12 months. R.O.I 6.00% p.a. 4. Refinance to SCBs/DCCBs and RRBs for providing Medium term (Non schematic) loans for 22 approved agricultural investment
purposes. R.O.I 5.75% p.a. 5. Distribution of Agri inputs
With a view to ensuring timely supply of agri inputs like fertilizers, pesticides etc. a line of credit is made available to cooperative banks for financing Apex/Primary Societies for stocking and distribution of agri inputs by way of sanction of yearly limits. Each drawal is repayable within a period of 120 days.
6. Pisciculture Activities
9
Refinance facilities is extended to cooperative banks and RRBs for meeting the working capital requirements of farmers in pisciculture activities by way of sanction of ST credit limits. Each drawal is repayable within 12 months. Special Initiatives
• Special line of credit for oilseeds and pulses production • Special line of credit for development of tribal’s in predominantly tribal areas • Liquidity support to cooperative banks and RRBs for providing relief to farmers in distress and farmers in arrears • Revision in methodology for fixing scale of finance. C.
Investment functions:
a. Purpose :
Investment in agriculture and allied activities such as minor irrigation, farm mechanization, land development, soil conservation, dairy, sheep rearing, poultry, piggery, plantation/ horticulture, forestry, fishery, storage and market yards, bio-gas and other alternate sources of energy, sericulture, apiculture, animals and animal driven carts, agro-processing, agro-service centers, etc. b.
Loan Period: Up to a maximum of 15 years.
c. Criteria for Refinance: •
Technical Feasibility of the project 10
•
Financial viability and bankability
•
Organizational arrangements for credit supervision.
d. Disbursement: Minor Irrigation:
The disbursement of Rs. 8514.33 crore with 30,440 projects under minor irrigation accounted for a share of 32.6 percent of the total disbursement, NABARD continue to make the largest drawal under this sector with a share of 74 percent. The disbursement for minor irrigation during the year under government sponsored programmes like IRDP, SC/ST Action plan, etc. amounted to Rs. 44 crore, bringing the total disbursements under the sector to Rs. 588 crore. Farm Mechanization:
The share of farm mechanization constituted about 30 percent of the total disbursements, SCARDBs, accounted for about 50 percent of the disbursements. Five States, viz. U.P, Rajasthan, Gujarat, Punjab and Haryana accounted for about 62 percent of the total disbursement. Plantation and Horticulture:
The SCARDBs have been promoting investment in Plantation and Horticulture activities on a significant scale, out of total disbursement of Rs. 182 crore, SCARDBs accounted for 65 percent, followed by CBs16%.
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Animal Husbandry:
The disbursement under dairy development registered a sharp increase of 29 percent over the previous year and reached a level of Rs. 2345 crore accounting of the total refinance disbursement of the ninth plan.
Special Focus
Removal of regional / sectoral imbalance:
NABARD considers removal of regional and sectoral imbalance as one of the thrust areas and gives preference to the needs of less developed areas in terms of allocation of resources, quantity of refinance etc.
Special focus for North Eastern state:
For the development of the north eastern region, the bank has been making special efforts through refinance on liberal terms and other supportive measures for strengthening the rural credit delivery system.
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ADFCs:
Agricultural Development Finance Companies (ADFCs) for financing hitech/commercial ventures, with NABARD as chief promoter, holding 26% equity, have been set up in Andhra Pradesh, Tamil Nadu and Karnataka.
Agricultural Operations of NARBAD
REFINANCE OPERATIONS OF NABARD
Contribution of Beneficiaries:
The borrowers have to contribute a sum of money to the total investment cost. The limit of contribution depends upon the status of the borrower, such as, small, medium or large farmers and the nature of investment. In the cases of small farmers, the beneficiaries contribution (including obligatory purchase of shares, own labour and other contribution in cash or
13
kind) is a minimum of 5 percent of investment cost for all purpose. In the case of medium farmer it is a minimum of 10 percent (7 percent for two or more farmers in a group loan). But, for the purpose of pump sets under minor irrigation the beneficiaries is 10 percent. In the cases of corporate bodies, a still higher down payment is stipulated which is not less than 20 percent. It depends on, the type of project, viability etc. In the cases of schemes which capital subsidy, particularly, for small and marginal farmers and landless laborer, the subsidy is treated as down payment of the borrower, thus, providing relief of the weaker sections. Similarly, in the cases of all such schemes financed by LDBs, the down payment by the ultimate beneficiaries is included in the mandatory share capital contribution as per roles of the Bank.
Refinance Amount:
The financing banks/State Governments are required to make certain stipulated level of contribution for financing the project. The amount of refinance sanctioned by the NABARD ranges between 50 percent of the bank loans. For priority sectors, like, minor irrigation, land development. Integrated Rural Development Programme (IRDP) and other programmes for the benefit of weaker sections, the higher amount of refinance is available. The NABARD has also fixed the higher rate of refinance in the cases where advances are made by the SLBs. Backward entire North 14
Eastern and eastern regions will also be benefitted through this type of arrangement.
Refinance Security:
State Government, or the financing bank should, guarantee the refinancing of the bank and at the same time, furnish other security to the satisfaction of the National Bank. There is a provision of waivement if the security or Government guarantee for any eligible institution or any class of eligible institution on the merits of each case. Generally, the National Bank waives security in the cases of CBs including RRBs because of the operational problems in creating sub-mortgage or hypothecation of security in the case of SCBs, the refinance should be guaranteed by the State Government. This guarantee can be waived by the National Bank if the SCBs fulfill certain conditions. In the case of LDBs, the special development debentures should be guaranteed by the concerned State Government. Under the provision of the NABARD Act, 1981, this is also provided that all the securities obtained by the borrowing institution from the ultimate borrowers should be held in trust on behalf of the National Bank according to section 29(2), provided therein.
Evaluation Fee and Period Loan:
The banks are allowed to charge 0.5 percent evaluation fee of the cost of investment foe processing charges of loan applications under the provisions of the NABARD Act,1981, the NABARD is authorized to fix the 15
maximum period of loan up to 25 years. This maximum period of loan fixed by the National Bank depends upon the nature of development and economics of the investment. Under the IRDP advances the minimum period of loans and the grace period required for each type investment has beep specified to ensure that too short maturity periods are not fixed. The maturities of loans are fixed on the basis of repaying capacity but not exceed the useful life of the assets financed. Generally such, loan maturities do not exceed 15 years. In the cases of financing to small farmers maximum repayment period fixed is 9 years for the pump sets and 15years for all other minor irrigation loans. In the cases of other farmers this period is fixed 9 years for the same purpose mentioned above. For lending for diversified purposes repayment periods are based on repaying capacity of the beneficiaries but in case it will exceed 15 years. In some cases the gestation or grace period is allowed before repayment starts. In the case of minor irrigation and land development purposes, generally, the grace period is given up to where 23 months investments like, plantation, horticulture and forestry where the gestation period is longer, a suitable grace period is provided which is based on type of investment keeping the fact, in the view that the beneficiary is not called upon to repay till the plantations reach economic bearing stage. In such cases the provision to defer the interest is allowed during gestation period if it is warranted and the financing bank is agreeable to defer the interest in the general interest of farmers.
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Repayment of Loans:
The repayment from different to NABARD is drawn up at the time of each drawal of refinance, if the refinance from above mentioned banks is more or less coincide with the agreed dates for collection from ultimate borrowers as per the schedule given below:
All repayment of loans eligible for
Repayment of finance on or before.
refinance and due from borrowers. 31st July each year.
1)
From January to 30 June of each
2)
year. From 1st July to 31st December of 31st January to subsequent year. each year.
Eligible Refinancing Institutions:
The eligible institutions for the purpose of obtaining refinance facilities from NABARD are SLDBs, SCBs, CBs and RRBs (Grameen Banks). Various types of refinances accommodations are provided by the NABARD. The short term (ST) refinance is provided to SCBs on behalf of CCBs in such states with three-tier co-operative credit structure. In such states where three tier structure does not exist, refinance is provided to SCBs the purpose for which ST refinance facility is provided are – crop loans, 17
marketing crops, inputs distribution, working capital requirements of cooperative sugar factories, procurement of raw materials, production and marketing, activities of weavers and other industries societies and production and marketing activities of rural artisans. But the period of such type of refinance does not exceed 18 months. The medium term (MT) refinance facility for the purpose of approved agricultural purposes and conversion of ST crop loans into MT loans due to natural calamities and enemy actions is provided by NABARD to SCBs. But for the purpose of purchase of shares of processing societies refinance is available to SCBs only. This type of MT refinance accommodation is provided from 18thmonth to 7 years. Some other medium and long term (not exceeding 25 years) accommodations are provided to SCBs, LDBs, RRBs, CBs for the purpose of fixed investment in agricultural and non-farm rural activities under schematic lending. Composite credit is also sanctioned by NABARD to RRBs for all the purposes as discussed earlier other than working capital requirements of co-operative sugar factories and purchase of shares of processing societies. Purposes of Refinance
Purposes, for which the NABARD provides refinance support, are given below: Farm Activity
Short Term a. Seasonal agricultural operations (SAO), b. Marketing of Crops, 18
c. Stocking and distribution of Agri-inputs, d. Pisciculture Activities, e. Other than SAO.
Medium to Long Term a. Approved agricultural purposes, b. Conversion loans, c. Purchase of shares in the co-operative sugar factories and other proceeding societies, d. Various minor irrigation investment, such as, construction of dugwells, dug-cum-bore wells, filter points, shallow/ medium/ deep tube-wells, lift irrigation units, agricultural pump-sets, sprinkler irrigation, living of water coursed etc. e. Farm mechanization, including tractors, power tilters, threshers, etc. f. Land development soil conservation, shaping of land for irrigated or dry land farming, g. Plantation and horticulture crops, such as, coffee, tea, rubber, cashew, coconut, grapes, spices etc. h.
Animal husbandry programmes covering dairy, poultry, sheep, goat, piggery, etc.
i. Inland and marine fisheries, 19
j. Storage godowns and market yards, k.
Forestry including growing specified varieties of timber for paper, pulp and fiber,
l. Activities under IRDP, m. Work animals, animal driven carts, etc. and n.
Other purposes like, dry land farming, common are development projects, export oriented agricultural project etc.
And other various Non- Farm Activities.
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Mechanization of agricultural
Mechanization of agricultural has two forms mobile mechanization and the stationery types of mechanization. The former attempts to replace animal power in which agriculture has been based for very many centuries; while the latter aims at reducing the drudgery of certain operations which have to be performed either by human labour or by a combined effort of human beings and animals.
Mechanization may be either partial or complete. It is partial when only a part of the farm work is done by machine. When animal or human labour is completely dispensed with by power supplying machines, it is termed as complete.
It not only includes the use of machines whether mobile or immobile, small or large, run by power and used b village operations, harvesting and thrashing but also includes power lifts for irrigation, trucks for haulage of farm produce, processing machines, dairy appliances for cream separation, butter making, oil pressing cotton ginning, rice hulling and even various electrical home appliances like radios, irons, washing machines, vacuum clearness and not plates. The importance of Agro service Center’s has been recognized and GOI has given emphasis to make it a success. The scheme aims at supporting 5000 ventures annually for individuals or on joint group basis.
Benefits of Mechanization: 21
It increases production. Mechanization increases the rapidity and speed of work with which farming operations can be performed.
It increases efficiency of labour in agricultural and raises productivity per worker. By its nature it reduces the quantum of labour required to produce a unit of output.
Mechanization increases in the yield of crops per unit of area, has been traced from 40 to 50 percent in the case of maize; 15 to 20 percent in bajra and paddy; 30 to 40 percent in jowar, ground nut and wheat.
It results in low cost of work. The unit cost is reduced by large size of farms and by more intensive farming.
It brings in other improvements in agricultural technique, sphere of irrigation, land reclamation and the prevention of soil erosion, irrigation of crops in India can be obviated by a more scientific approach.
It solves the problem of labour shortage; use of machines can be easily replaced by human and animal power.
It results in better use of agricultural lands. The substitution of gasoline tractor for animal power means reduced demand. The use of machine energy, therefore, leads to good agricultural production.
Schemes on Farm Machinery 22
Refinance facility for financing purchase of second hand tractors was extended to all states and was made available even in the case of second resale of tractors. Loans for repairs/renovation of tractors were made available even during the currency of the earlier loan, irrespective of a ailment of loan for purchase of tractors. Further, the banks were allowed to extend loan towards the cost of repairs on account of damages caused to the tractors due to accidents. The margin money requirement was reduced for purchase of new tractors and second hand tractors to 5 and 10 per cent, respectively, of the investment cost. The scheme is open to Agriculture Graduates/Graduates in subjects allied to agriculture like agricultural engineering, horticulture, animal husbandry and forestry, dairy, veterinary, poultry farming, pisciculture etc. Interest rate for ultimate borrowers: Banks are free to decide the rate of interest
within the overall RBI guidelines. However, for working out the financial viability and bankability of the model project we have assumed the rate of interest as 12% p.a. Repayment: The period of loan will vary between 5 years to 10 years depending
on the activity. The repayment period may include a grace period (to be decided by the financing bank as per the individual scheme) of a maximum of 2 years.
Model Bankable Agricultural Projects.
23
The Technical Services Department of NABARD is preparing and bringing
model bankable agricultural projects in the areas of Minor Irrigation, Land Development , Plantation & Horticulture, Agricultural Engineering , Forestry and Wasteland , Fisheries , Animal Husbandry and Biotechnology . Besides these
traditional areas, State specific area development projects and profiles in the emerging thrust areas of Medicinal & Aromatic Plants , Processing of Fruits & Vegetables have also been prepared for dissemination among financing banks Minor Irrigation Drip Irrigation
Drip irrigation, also known as "trickle" irrigation, is the latest method of water management. Under this system, water is carried to the plant under low pressure, through small diameter plastic pipes and delivered at the root zone, drop by drop through drippers. Drip irrigation is widely practiced and established method of irrigation in developed countries and is slowly gaining popularity in India. It is most suited for horticulture crops, vegetables etc. and finds applicability in hard rock areas where groundwater is scarce and helps in optimization of the limited water resources. Govt. of India under Centrally sponsored Scheme for small and marginal farmers to increase irrigation, provides subsidy to the extent of 50% of the cost of the equipment, the balance is available by institutional credit. Bankable schemes have to be formulated for availing bank loans. 24
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%.
Land Development 25
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.
Animal Husbandry
26
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.
(a) (b) (c)
Category of
Level of
Beneficiary's
Farmer
predevelopment return
Contribution
Small Farmers Medium Farmers Large Farmers
to resources Up to Rs.11000 Rs.11001 - Rs.19250 Above Rs. 19251
5% 10% 15%`
Interest Rate: As per the RBI guidelines the present rate of interest to the
ultimate beneficiary financed by various agencies are as under : No.
Loan Amount
CB's and RRB's
SLDB/SCB 27
(a)
Up to and inclusive
12%
As determined by
of Rs.25000
SCB/SLDB subject
(b)
Over Rs. 25000 and
13.5%
to minimum 12% -do-
(c)
up to Rs. 2 lakhs Over Rs. 2.0 lakhs
As determined by
-do-
the banks
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) 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. 28
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
Genes
Hon’ble Union Finance Minister announced in his budget speech for
1998-99 that NABARD would formulate a Model Scheme for issue of 29
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. 30
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 31
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) 32
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:
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3 to 10 years with moratorium of 12 months. Project Finance for Agro-Industries (through CBs, Scheduled PCBs & SCBs) Borrowers
a) State level corporations such as agro-industries corporations, forest/tribal development corporations, KVIC/ KVIB, state level cooperative 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 preoperative 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.
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Scheme for setting up of Agriclinic and Agribusiness centers
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 35
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.
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 Insurance
In pursuance of the announcement made in the Union Budget, 2002-03 for setting-up of an Agriculture Insurance Corporation for farmers, a new Company, viz., Agriculture Insurance Company of India Ltd. (AICI) was established in 2002 with the 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. 37
Swarojgar Credit Card
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 microentrepreneurs, 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 39
assistance of NABARD for the mutual benefit of the banks concerned and rural people.
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 43
over a period of three years effective from 2004-05.
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 executives.
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BIBLIOGRAPHY Reference books:
Agricultural Credit and NABARD By Tapan Kumar & Shandilya Umesh Prasad Co-operative Banking in India By R.Thirunarayana Annual Report of NABARD.
Webliography
www.nabard.com www.investopedia.com www.wikiepedia.com www.economicexpressindia.com
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