Introduction

NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with 1. Providing refinance to lending institutions in rural areas 2. Bringing about or promoting institutional development and 3. Evaluating, monitoring and inspecting the client banks Besides this pivotal role, NABARD also: • Acts as a coordinator in the operations of rural credit institutions • Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development • Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development • Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development Acts as regulator for cooperative banks and RRBs

Some of the milestones in NABARD's activities are:
• Refinance disbursement under ST-Agri & Others and MT-Conversion/ Liquidity support aggregated Rs.16952.83 crore during 2007-08. • Refinance disbursement under Investment Credit to commercial banks, state cooperative banks, state cooperative agriculture and rural development banks, RRBs and other eligible financial institutions during 2007-08 aggregated Rs.9046.27 crore. • Through the Rural Infrastructure Development Fund (RIDF) Rs.8034.93 crores were disbursed during 2007-08. With this, a cumulative amount of Rs.74073.41 crore has been sanctioned for 280227 projects as on 31 March 2008 covering irrigation, rural roads and bridges, health and education, soil conservation, drinking water schemes, flood protection, forest management etc. • Under Watershed Development Fund with a corpus of Rs.613.71 crore as on 31 March 2008, 416 projects in 94 districts of 14 states have benefited. • Farmers now enjoy hassle free access to credit and security through 714.68 lakh Kisan Credit Cards that have been issued through a vast rural banking network. • Under the Farmers' Club Programme, a total of 28226 clubs covering 61789 villages in 555 districts have been formed, helping farmers get access to credit, technology and extension services.
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Genesis and Historical Background
The Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) set up by the RBI under the Chairmanship of Shri B Sivaraman in its report submitted to Governor, Reserve Bank of India on November 28, 1979 recommended the establishment of NABARD. The Parliament through the Act 61 of 81, approved its setting up. The Committee after reviewing the arrangements came to the conclusion that a new arrangement would be necessary at the national level for achieving the desired focus and thrust towards integration of credit activities in the context of the strategy for Integrated Rural Development. Against the backdrop of the massive credit needs of rural development and the need to uplift the weaker sections in the rural areas within a given time horizon the arrangement called for a separate institutional set-up. Similarly. The Reserve Bank had onerous responsibilities to discharge in respect of its many basic functions of central banking in monetary and credit regulations and was not therefore in a position to devote undivided attention to the operational details of the emerging complex credit problems. This paved the way for the establishment of NABARD. CRAFICARD also found it prudent to integrate short term, medium term and long-term credit structure for the agriculture sector by establishing a new bank. NABARD is the result of this recommendation. It was set up with an initial capital of Rs 100 crore, which was enhanced to Rs 2,000 crore, fully subscribed by the Government of India and the RBI.

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: Credit functions, involving preparation of potential-linked credit plans annually for all districts of the country for identification of credit potential, monitoring the flow of ground level rural credit, issuing policy and operational guidelines to rural financing institutions and providing credit facilities to eligible institutions under various programmes Development functions, concerning reinforcement of the credit functions and making credit more productive Supervisory functions, ensuring the proper functioning of cooperative banks and regional rural banks

Objectives
NABARD was established in terms of the Preamble to the Act, "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 : 1. 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. 2. The Bank will serve as a refinancing institution for institutional credit such as long-term, short-term for the promotion of activities in the rural areas. 3. The Bank will also provide direct lending to any institution as may approved by the Central Government. 4. The Bank will have organic links with the Reserve Bank and maintain a close link with in.

Major Activities

• Preparing of Potential Linked Credit Plans for identification of exploitable potentials under agriculture and other activities available for development through bank credit. • Refinancing banks for extending loans for investment and production purpose in rural areas. • Providing loans to State Government/Non Government Organizations (NGOs)/Panchayati Raj Institutions (PRIs) for developing rural infrastructure. • Supporting credit innovations of Non Government Organizations (NGOs) and other non-formal agencies. • Extending formal banking services to the unreached rural poor by evolving a supplementary credit delivery strategy in a cost effective manner by promoting Self Help Groups (SHGs) • Promoting participatory watershed development for enhancing productivity and profitability of rainfed agriculture in a sustainable manner. • On-site inspection of cooperative banks and Regional Rural Banks (RRBs) and iff-site surveillance over health of cooperatives andRRBs.

Organization Structure

Role and Functions
• NABARD is an apex institution accredited with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas. • It is an apex refinancing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas • It takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation 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

NABARD and its Role in Training
• • • • • • National Bank Staff College, Lucknow National Bank Training Centre, Lucknow Zonal Training Centre, Hyderabad Regional Training Centre, Mangalore Regional Training Centre, Bolpur Bankers Institute of Rural Development (BIRD), Lucknow

The provisions of the Act as stated below very clearly indicate the nature and scope of the developmental mandate of the Bank and its role in training and capacity building with the underlying belief that the process of development cannot be accomplished by credit/refinance alone. Section 38 of the NABARD Act provides that the Bank shall: • maintain expert staff to study all problems relating to agriculture and rural development and be available for consultation to the Central Government, the Reserve Bank, the State Governments and the other institutions engaged in the field of rural development. • provide facilities for training, for dissemination of information and the promotion of research including the undertaking of studies, researches, techno-economic and other surveys in the field of rural banking, agriculture and rural development. • provide technical, legal, financial, marketing and administrative assistance to any person engaged in agriculture and rural development activities; • may provide consultancy services in the field of agriculture and rural development and other related matters in or outside India, on such terms and against such remuneration, as may be agreed upon; In this context, the role of training in NABARD and the role played by it for capacity building in client institutions, partner agencies and other developmental agencies is important. For maintaining 'Expert Staff', the bank needs to provide continuous exposure to its officers and staff for upscaling their knowledge and skills in core areas. However, in the initial years the Bank had recruited expert staff from various technical disciplines and created a separate cadre of officers. These officers were involved in formulating, appraising, monitoring and evaluating different agricultural projects implemented by different credit agencies.These officers, irrespective of their academic background, were imparted similar type of training as all other officers. Their placements and the regular job rotations helped in grooming them to take up assorted assignments, get involved in a variety of roles and functions including credit, developmental, promotional, supervisory and necessary support and information for decision making. The Bank also had access to their specialised skills which were utilised whenever needed. In pursuance of the Bank's mandate as stated in the Act, the Bank provides training facilities for the RFIs and agencies involved in rural development through BIRD and the two RTCs. With a view to broadbase the training and capacity building efforts, the Bank encourages the RFIs to set up their own training systems and provides these training institutes the necessary support to conduct meaningful and quality training. Options and avenues for strengthening the training interventions at the client level are continuously examined so that the human resources in these institutions are developed to take on the challenges, reckon with the competition,

improve customer service, expand outreach, develop suitable products and thereby contribute to rural development. As NABARD primarily functions through other agencies, the needs of the client institutions largely determine the knowledge and skill requirements of NABARD officers. NABARD endeavours to blend the experiences of client bank training with the training for NABARD officers so as to make training meaningful and relevant to their roles. Efforts are also made to blend the study findings with the outcome from training to periodically measure the overall impact of the investments made in the training efforts.

Credit functions

Introduction
NABARD's credit functions cover planning, dispensation and monitoring of credit. This activity involves: • • • • Framing policy and guidelines for rural financial institutions Providing credit facilities to issuing organizations Preparation of potential-linked credit plans annually for all districts for identification of credit potential Monitoring the flow of ground level rural credit

Types of Refinance Facilities

Agency
Commercial Banks

Credit Facilities
Long-term credit for investment purposes Financing the working capital requirements of Weavers' Cooperative Societies (WCS) & State Handloom Development Corporations

Short-term Co-operative Short-term (crop and other loans) Structure (State Co-operative Banks, Medium-term (conversion) loans District Central Cooperative Banks, Primary Agricultural Credit Societies) Term loans for investment purposes Financing WCS for production and marketing purposes Financing State Handloom Development Corporations for working capital by State Co-operative Banks Long-term Co-operative Structure (State Co-operative Agriculture and Rural Development Banks, Term loans for investment purposes Pilot scheme for financing short term loans in three states

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 Revolving Fund Assistance for various micro-credit delivery innovations and promotional projects under 'Credit and Financial Services Fund' (CFSF) and 'Rural Promotion Corpus Fund' (RPCF) respectively

Non-Governmental Organisations (NGOs) Informal Credit Delivery System

Criteria for refinance
1. Technical feasibility of the project and adequate response from prospective beneficiaries 2. Financial viability and adequate incremental income to ultimate borrower to repay the loan within a reasonable period 3. Organisational capability to ensure close supervision The refinance is provided to SCARDBs, SCBs, CBs and RRBs. However, the beneficiaries of the programme are partnership concerns, companies, state-owned corporations or cooperative societies. But, finally the assistance reaches the individuals, who are members of the primary credit institutions. The refinance is usually 50% to 95% of the project cost. The balance will be met by the banks and the concerned state governments or the Government of India in the case of SCARDBs. With a view to ensure credit flow to certain thrust areas, the quantum of refinance is enhanced to 100% as in the case of special category beneficiaries like SC/ST members and self help groups.

Interest Rates

Margin mon
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 northeastern 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.

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

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

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

Anticipated Benefits
It is anticipated that the projects sanctioned upto 31 March 2005 under RIDF would result in: • Creation of additional irrigation potential in 92.47 lakh ha. • Addition of 178000 km of rural road network & 331000 meter bridge length • Contribution to the GDP to the tune of Rs. 11058 crore • Generation of recurring employment of 48.01 lakh jobs and non-recurring employment of 13681 lakh man days due to increased irrigation • Generation of non-recurring employment expected from non-irrigation projects: 23238 lakh person days

Co-financing
To ensure substantial credit flow to agriculture and rural sector and to instill confidence in banks for financing hi-tech/export oriented agriculture projects involving large financial outlays/sunrise technologies, etc., NABARD has entered into agreements for co-financing with 12 Commercial Banks thereby sharing the credit risks with partner banks. Under this arrangement, projects have been sanctioned in areas like floriculture, organic farming, milk processing, ethanol production, infrastructure development and forestry.

Bulk-lending/ Revolving Fund Assistance
NABARD provides bulk-lending facilities to NGOs. As on 31.3.2005, 30 agencies have been sanctioned assistance of Rs 27.07 crore against which Rs.15.18 crore has been disbursed.

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, powerlooms, artisans, small scale and tiny industries and other rural non-farm enterprises Eligible institutions for this facility are State Cooperative Banks (SCBs) and Regional Rural Banks (RRBs). The period of credit is 12 months.

Short Term Credit 1. Seasonal Agricultural Operations (SAO) New line of credit for financing short-term agricultural /allied and marketing activities
To provide liquidity to the cooperative banks and to boost credit flow to the agriculture sector, a new line of credit was introduced in 2003-04 encompassing loans for agricultural purposes against security of gold and security other than charge on crops, working capital credit for allied agriculture activities, working capital credit for procurement and distribution of agriculture inputs, marketing of agriculture/allied products, collection and marketing of minor forest produce etc and short-term credit support provided to cultivators for higher scales of finance for commercialisation of agriculture, exports and value addition.

2. Marketing of Crops
With a view to improve the flow of marketing credit to cultivators for augmenting their holding capacity and checking incidence of distress sale, NABARD encourages cooperative banks and RRBs to finance marketing of crops, through its refinance facility for this purpose. Each drawal against the sanctioned credit limit is repayable within a maximum period of 12 months.

3. 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.

4. Pisciculture Activities
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.

5. Other than SAO (OSAO)
Refinance is available to cooperative banks for financing the working capital requirement of PWCS/Apex Weavers' Society, working capital requirements of industrial societies, financing individual rural artisans, etc. Each drawal against the sanctioned credit limit is repayable within 12 months. OSAO refinance is available to RRBs for financing production and marketing activities of artisans, village industries and also for financing persons belonging to weaker sections engaged in trade/business/services. Refinance support is also available to commercial banks for financing the working capital requirements of PWCS. Refinance support is available to SCBs and CBs for meeting working capital requirements of State Handloom Development Corporations (SHnDCs).

Special Initiatives

Special line of credit for oilseeds and pulses production • Special line of credit for development of tribals 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

Refinance against Investment Credit This is a long-term refinance facility. It is intended to create income generating assets in the following:
Agriculture and allied activities • Artisans, small scale industries, tiny sector, village and cottage industries, handicrafts, handlooms, powerlooms, etc. • Activities of voluntary agencies and self help groups working among the rural poor The credit is normally provided for a period of 3 to 15 years. Investment credit leads to capital formation through asset creation. It induces technological upgradation resulting in increased production, productivity and incremental income to farmers and entrepreneurs.

Eligible Institutions
SCARDBs, SCBs, RRBs, CBs, Scheduled Primary Urban Cooperative Banks, North East Development Finance Corporation Ltd. (NEDFI) and NBFCs are eligible from NABARD for their investment credit in the rural sector.

Eligible Purposes
Some of the major purposes covered under Investment credit are Minor Irrigation, farm mechanisation, plantation/ horticulture, animal husbandry, storage/market yards, fisheries, post-harvest management, food/agro processing, non-farm sector including rural industries, microfinance, purchase of land (for small/marginal Farmers, share croppers etc.), rural housing and disbursements under poverty alleviation programmes like SGSY and SC/ST Action Plan etc. Hi-tech projects and agri-export zones are identified as thrust areas and NABARD helps in techno-financial appraisal of such projects besides providing refinance. In recent years, refinance support has been extended to new activities like financing of diesel generator sets in Madhya Pradesh and LPG kits to rural households all over the country.

Criteria
The technical feasibility of the project, financial viability and generation of incremental income to ultimate borrowers thereby enabling them to have a reasonable surplus after repayment of the loan installments are the necessary conditions to be satisfied for sanctioning investment credit. The period of loan ranges between 3 and 15 years depending on the purpose for which it is provided.

The beneficiaries of the programme are individuals / group of individuals, SHGs, proprietory / partnership concerns, companies, state-owned corporations or cooperative societies. The refinance is usually 90% to 100% of the loan amount. The balance, wherever applicable, will be met by the banks or the concerned state governments or the Government of India in the case of SCARDBs. With a view to ensure credit flow to certain thrust areas, such as special category beneficiaries like SC/ST members, self help groups, etc., the quantum of refinance is enhanced to 100%.

Interim Finance
SCARDBs are being extended interim finance in order to enable them to provide investment credit to ultimate borrowers for eligible purposes and avail refinance within 3 months against the same.
http://www.nabard.org/creditfunctions/investmentcredit.asp

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