NATIONAL

BANK FOR
AGRICULTUR
E AND
RURAL
DEVELOPME
NT

-PROF OBEROI

TABLE OF CONTENT

SR
N
O.
01
02
03

04
05

TOPIC
INTRODUCTION
ROLE
FUNCTIONS
SUBSIDARIES
MODEL
BANKABLE
PROJECTS

06

CONCLUSION

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:
1. Acts as a coordinator in the operations of rural credit institutions
2. Extends assistance to the government, the Reserve Bank of India
and other organizations in matters relating to rural development
3. Offers training and research facilities for banks, cooperatives and
organizations working in the field of rural development
4. Helps the state governments in reaching their targets of
providing assistance to eligible institutions in agriculture and
rural development
5. Acts as regulator for cooperative banks and RRBs
6. Extends assistance to the government, the Reserve Bank of India
and other organizations in matters relating to rural development
7. Offers training and research facilities for banks, cooperatives and
organizations working in the field of rural development
8. Helps the state governments in reaching their targets of
providing assistance to eligible institutions in agriculture and
rural development
9. Acts as regulator for cooperative banks and RRBs
Some of the milestones in NABARD's activities are:

1. Total production credit disbursed at end March 2011 was 34196

crore.
2. 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 2010-11 aggregated 13485.87 crore.
Through the Rural Infrastructure Development Fund (RIDF)
12060.04 crores were disbursed during 2010-11. A cumulative
amount of 121488.40 crore has been sanctioned for 444162
projects as on 31 March 2011 covering irrigation, rural roads and
bridges, health and education, soil conservation, drinking water
schemes, flood protection, forest management etc. Under
Watershed Development Fund which has a balance of 1847.69
crore as on 31 March 2011, 579 projects in districts of 14 states
have benefited. Farmers now enjoy hassle free access to credit and
security through 1009.30 lakh Kisan Credit Cards that have been
issued through a vast rural banking network. During 2010-11, 72.6
lakh KCC were issued by banks with a sanctioned limit of 43370
crore. Under the Farmers' Club Programme, during the year 21903
clubs were launched, taking the total to 76708 clubs as on 31 March
2011 helping farmers get access to credit, technology and extension
services. Village Development Programme (VDP) is being
implemented in 801 villages across 25 states. Under Tribal
Development Fund, cumulative sanction amounted to 917.60 crore
for 317 projects covering 2.5 lakh families. During 2010-11 financial
assistance of 373.97 crore was sanctioned for 126 projects
benefiting 94,163 tribal families. Under Farm Innovation and
Promotion Fund (FIPF), cumulatively 123 projects in various states,
involving financial support of 11.65 crore were sanctioned as on 31
March 2011. Farmers Technology Transfer Fund (FTTF) 512
innovative projects in 27 states with grant assistance of 44.97 crore
were sanctioned during 2010-11. There were more than 69.53 lakh
savings linked SHGs and more than 48.51 lakh credit linked SHGs
covering 9.7 crore poor households as on 31 March 2011, under the
microfinance programme.

Overview
NABARD is set up by the Government of India as a development
bank with the mandate of facilitating credit flow for promotion and
development of agriculture and integrated rural development. The
mandate also covers supporting all other allied economic activities
in rural areas, promoting sustainable rural development and
ushering in prosperity in the rural areas.

With a capital base of Rs 2,000 crore provided by the Government of

India and Reserve Bank of India , it operates through its head office
at Mumbai, 28 regional offices situated in state capitals and 391
district offices at districts.
Contact NABARD
It is an apex institution handling matters concerning policy, planning
and operations in the field of credit for agriculture and for other
economic and developmental activities in rural areas. Essentially, it
is a refinancing agency for financial institutions offering production
credit and investment credit for promoting agriculture and
developmental activities in rural areas.

NABARD today
Initiates measures toward 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.
Coordinates the rural financing activities of all the institutions
engaged in developmental work at the field level and maintains
liaison with the government of India , State governments, the
Reserve Bank of India and other national level institutions
concerned with policy formulation
Prepares, on annual basis, rural credit plans for all the districts in
the country. These plans form the base for annual credit plans of all
rural financial institutions
Undertakes monitoring and evaluation of projects refinanced by it
promotes research in the fields of rural banking, agriculture and
rural development Functions as a regulatory authority, supervising,
monitoring and guiding cooperative banks and regional rural banks.

NABARD's Roles and Functions are summarized below:

1. Credit Functions
2. Developmental and Promotional Functions
3. Supervisory Functions
4. Institutional and Capacity building
5. Role in Training

Subsidaries
Nabcons
NABARD Consultancy Services (Nabcons) is a wholly owned
subsidiary promoted by National Bank for Agriculture and Rural
Development (NABARD) and is engaged in providing consultancy in
all spheres of agriculture, rural development and allied areas.
Nabcons leverages on the core competence of the NABARD in the
areas of agricultural and rural development, especially
multidisciplinary projects, banking, institutional development,
infrastructure, training, etc., internalized for more than two decades.
The Company is registered under the Company's Act, 1956, with an
authorized capital of Rs 250 million (US $5.75 million) and paid up
capital of Rs 50 million (US $1.15 million).
In tune with NABARD's mission to bring about rural prosperity,
Nabcons has more than just commercial interest in the assignments
it undertakes.
For more information on what NABCONS can offer you, please visit
www.nabcons.com
Information under RTI Act.

NAFBINS
NABARD Financial Services Limited, [NABFINS] is a subsidiary of
National Bank for Agriculture and Rural Development (NABARD) with
equity participation from NABARD, Government of Karnataka,
Canara Bank, Union Bank of India, Dhanalakshmi Bank and Federal
Bank. It is a non-deposit taking NBFC registered with the Reserve
Bank of India and shall operate throughout India. The main
objectives of the Company are to provide financial services in two
broad areas of agriculture and microfinance. NABFINS provides
credit and other facilities for promotion, expansion,
commercialization and modernization of agriculture and allied
activities. NABFINS shall engage in the business of providing micro
finance services (with or without thrift) and other facilities to needy
and disadvantageous sections of the society for securing their
prosperity in both rural and urban areas.
NABARD, which is the world renowned apex development bank of
our country and pioneered the worlds largest microfinance
movement, while promoting NABFINS has envisaged that NABFINS
shall evolve into a Model Microfinance Institution to set standards of

governance among the MFIs, operate with exemplary levels of

transparency and operate at reasonable / moderate rates of
interest.

Associates
NABARD's international associates range from World Bank-affiliated
organisations to global developmental agencies working in the field
of agriculture and rural development. These agencies offer material
and advisory help in implementing schemes that are aimed at
uplifting the rural poor and in making agricultural processes
effective and yielding.

Model Bankable Projects

Introduction
NABARD's strategies, inter alia, cover formulation and circulation of
Model Bankable Schemes and Location Specific Bankable Schemes
to the financing banks. NABARD also proposes to identify highly
potential zones for undertaking investment activities in various
states and organise interactive workshops in these potential zones.
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.
Of late, organic farming is gaining prominence as a sustainable
alternative in reviving Indian Agriculture. To promote this through
institutional credit, Model Bankable Schemes on Organic Farming
have been formulated.
1. Minor Irrigation
2. Land Development
3. Plantation / Horticulture
4. Agricultural Engineering

5. Forestry / Waste Land

6. Fisheries
7. Animal Husbandry
8. Medicinal & Aromatic Plants
9. Biotechnology
10.

State Specific Projects

11.

Organic Farming

Credit functions
Introduction
NABARD's credit functions cover planning, dispensation and
monitoring of credit.
This activity involves:
1.
2. Framing policy and guidelines for rural financial institutions
3. Providing credit facilities to issuing organizations
4. Preparation of potential-linked credit plans annually for all
districts for identification of credit potential
5. Monitoring the flow of ground level rural credit

Types of Refinance Facilities

1. Agency
2. Credit Facilities
3. Commercial Banks
4. Long-term credit for investment purposes

5. Financing the working capital requirements of Weavers' Cooperative Societies (WCS) & State Handloom Development
Corporations
Short-term Co-operative
1. Structure (State Co-operative Banks,
2. District Central Co3. operative Banks, Primary
4. Agricultural Credit Societies)
5. Short-term (crop and other loans
Medium-term (conversion) loans
1. Term loans for investment purposes
2. Financing WCS for production and marketing purposes
3. Financing State Handloom Development Corporations for working
capital by State
4. Co-operative Banks
Long-term Co-operative Structure
1.
2.
3.
4.
5.
6.

State Co-operative
Agriculture and Rural
Development Banks,
Primary Co-operative
Agriculture and Rural
Development Banks

Term loans for investment purposes

Pilot scheme for financing short-term loans in three states
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 Organisations (NGOs) - Informal Credit Delivery
System
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

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 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
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 exportoriented 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
1.
2. It is anticipated that the projects sanctioned upto 31 March 2005
under RIDF would result in:
3. Creation of additional irrigation potential in 92.47 lakh ha.
4. Addition of 178000 km of rural road network & 331000 meter
bridge length
5. Contribution to the GDP to the tune of Rs. 11058 crore
6. Generation of recurring employment of 48.01 lakh jobs and nonrecurring employment of 13681 lakh man days due to increased
irrigation
7. Generation of non-recurring employment expected from nonirrigation 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 cofinancing 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
1. Agricultural production operations and marketing of crops by
farmers and farmers cooperatives
2. Marketing and distribution of inputs like fertilizers, seeds and
pesticides
3. Production and marketing activities of village cottage industries,
handicrafts, handlooms, powerlooms, artisans, small scale and
tiny industries and other rural non-farm enterprises
4. 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)
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.
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
1. Special line of credit for oilseeds and pulses production
2. Special line of credit for development of tribals in predominantly
tribal areas
3. Liquidity support to cooperative banks and RRBs for providing
relief to farmers in distress and farmers in arrears
4. Revision in methodology for fixing scale of finance

Refinance against Investment Credit

1.
2. This is a long-term refinance facility. It is intended to create
income generating assets in the following:
3. Agriculture and allied activities
4. Artisans, small scale industries, Non-Farm Sector ( Small and
Micro Enterprises), handicrafts, handlooms, powerlooms, etc.
5. Activities of voluntary agencies and self help groups working
among the rural poor
6. The credit is normally provided for a period of 3 to 15 years.
7. 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
State Cooperative Agriculture and Rural Development Banks
(SCARDBs), State Cooperative Banks (SCBs), Regional Rural Banks
(RRBs), Scheduled Commercial Banks, Scheduled Primary Urban
Cooperative Banks, North East Development Finance Corporation

Ltd. (NEDFI), ADFCs (ADFT, ABFL & NABFINS) and NBFCs are eligible
for refinance from NABARD for 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 PMRY, 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.

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 beneficiaries of the programme are individuals / group of
individuals, SHGs, proprietory / partnership concerns, companies,
state-owned corporations or cooperative societies.

The extent of refinance will be as under (except

SCARDBs):
i. States in Eastern Region, North Eastern Region including Sikkim,
Hilly States, Chhattisgarh and Lakshwadeep: 100% of eligible bank
loans for all purposes.
ii. For Other Regions: 100% for all thrust areas as explained in Policy
Circulars.
iii. 95% for all other diversified purposes and 80% for Krishak Sathi
Yojana.
iv. 70% to NBFCs for all eligible purposes.
For SCARDBs: The extent of refinance would be 90% across the
country Disbursements for 2011-12, Disbursement Agency Wise

Disbursement State Wise & Read more about Investment Credit

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 XVI (2010-11) was Rs.1,16,000 crore
for State Governments and Rs.18500 crore for National Rural Roads
Development Agency (NRRDA). Sanctions under all tranches of RIDF
as on 31 March 2011 were Rs.140,388.40 crore against which the
disbursements were Rs.98,999.75 crore. This includes sanction and
disbursement of Rs.18,500 crore for NRRDA.

Anticipated Benefits
It is anticipated that the projects sanctioned upto 31 March 2011
under RIDF would result in:
1. Creation of additional irrigation potential in 164.78 lakh ha.
2. Addition of 3,30,855 km of rural road network & 6,67,306 meter
bridge length
3. Contribution to the GDP to the tune of Rs. 23811.00 crore
4. Generation of recurring employment of 8540.45 lakh jobs and
non-recurring employment of 26396.78 lakh man days due to
increased irrigation
5. Generation of non-recurring employment expected from nonirrigation projects: 55247.39 lakh person days

Farm Sector Schemes

1.
2.
3.
4.
5.
6.
7.
8.

Village Adoption/Village development Plan

Backward Blocks
Bamboo Farming
MACs
Bio Fuels
Crop Insurance
Agriculture Commodities
SGSY

9. Farm Mechanisation
10. Land Purchase
11. Scheme for AgriClinic/ Agri-Business Centres (ACABCs)
12. SEMFEX
13. Capacity Building for Adoption of Technology (CAT)
14. Agri Export Zone (AEZ)
15. Contract Farming
16. Farmer's Club

Rural Housing
With a view to supplementing the efforts of Government of India,
State Governments, National Housing Bank and Banking Sector in
augmenting the resources for the Rural Housing segment, NABARD
has included Rural Housing as an eligible activity for extension of
refinance (investment credit) to the eligible banks w.e.f. 01 April
2001. The broad terms and conditions for the refinance scheme are
as under:

I.

Area of Operation

Refinance will be provided to all eligible Banks for finance extended

by them to housing projects in the 'rural' areas only. As per NABARD
Act, Rural area means the area comprised in any village and
includes the area comprised in any town, the population of which
does not exceed 50000 or such other figure as the RBI may specify
from time to time.

II.

Eligible Borrowers

1.
2.
3.
4.

Individuals
Co-operative Housing Societies
Public Bodies
Housing Boards/ Housing Development Authorities/ Improvement
Trusts
5. Local Bodies
6. Voluntary agencies and NGOs
7. Housing Finance Companies registered, with NHB
Financing made under Golden Jubilee Rural Housing Scheme and
Schemes of the Govt. of India, Ministry of Rural Development shall
also be eligible for NABARD refinance.

III.

Eligible Purposes

Construction of New Houses as well as Repairs/Renovation of

existing houses in rural areas/ Rainwater Harvesting Structures/

Sanitary Latrines, etc.

IV.

Security/ Margin

As per RBI / NHB guidelines issued from time to time.

V.

Ceiling on the cost

The cost of the dwelling unit may not exceed Rs 20 lakh. In case
land is being acquired, the land cost may be reckoned as Margin
Money. Otherwise the cost of land should not be included in the
project cost.
Quantum of bank loan for individual (maximum)
For new houses Rs. 15 lakh
For repairs/renovation Rs. 5 lakh

VI.

Refinance Disbursements

Rate of interest on NABARD Refinance, Repayment period

1. For new houses - not more than 15 years
2. For Repairs/ Renovation - not more than 7 years

Quantum of NABARD Refinance

Sr no.Purpose/Region. Quantum of refinance (% to bank loan)Automatic Refinance
North Eastern Region and Sikkim

100% to all Agencies

Other Regions
1. Commercial Banks and Scheduled Primary (Urban) Cooperative
Banks 90%
2. State Cooperative Banks 90%
3. Regional Rural Banks
90%
4. State Cooperative Agriculture and Rural Development Banks

100%
All the Districts covered by District Rural Industries Project (DRIP)
100%

Others
1. Loans to State Governments for funding equity of Co-operative
Credit Institutions
2. NABARD provides long-term loans to state governments for
contribution to the share capital of co-operative credit
institutions subject to certain condition
3. This is to facilitate strengthening of equity base of these credit
institutions and improve their viability
4. The maturity period of such loans is 12 years with a moratorium
period of initial 2 years and repayment in 10 annual instalments
Development and Promotional Functions
Developmental Functions
Promotional Functions
Micro Finance in India 2009-10
Best Farmers' Club

Directory of Farmers Club

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:Help cooperative banks and Regional Rural Banks to prepare
development actionsplans for themselves
1. Enter into MoU with state governments and cooperative banks
specifying their respective obligations to improve the affairs of
the banks in a stipulated timeframe
2. Help Regional Rural Banks and the sponsor banks to enter into
MoUs specifying their respective obligations to improve the
affairs of the Regional Rural Banks in a stipulated timeframe
3. Monitor implementation of development action plans of banks
and fulfillment of obligations under MoUs
4. Provide financial assistance to cooperatives and Regional Rural
Banks for establishment of technical, monitoring and evaluations
cells
5. Provide organisation development intervention (ODI) through
reputed training institutes like Bankers Institute of Rural
Development (BIRD), Lucknow www.birdindia.org.in, National
Bank Staff College, Lucknow www.nbsc.in and College of
Agriculture Banking, Pune, etc.
6. Provide financial support for the training institutes of cooperative
banks
7. Provide training for senior and middle level executives of
commercial banks, Regional Rural Banks and cooperative banks
8. Create awareness among the borrowers on ethics of repayment
through Vikas Volunteer Vahini and Farmers clubs
9. Provide financial assistance to cooperative banks for building
improved management information system, computerisation of
operations and development of human resources

Supervisory Functions
Overview
As an apex bank involved in refinancing credit needs of major
financial institutions in the country engaged in offering financial
assistance to agriculture and rural development operations and
programmes, NABARD has been sharing with the Reserve Bank of
India certain supervisory functions in respect of cooperative banks

and Regional Rural Banks (RRBs).

As part of these functions, it
1. Undertakes inspection of Regional Rural Banks (RRBs) and
Cooperative Banks (other than urban/primary cooperative banks)
under the provisions of Banking Regulation Act, 1949.
2. Undertakes inspection of State Cooperative Agriculture and Rural
Development Banks (SCARDBs) and apex non-credit cooperative
societies on a voluntary basis
3. Undertakes portfolio inspections, systems study, besides off-site
surveillance of Cooperative Banks and Regional Rural Banks
(RRBs)
4. Provides recommendations to Reserve Bank of India on issue of
licenses to Cooperative Banks, opening of new branches by State
Cooperative Banks and Regional Rural Banks (RRBs)
5. Administering Credit Monitoring Arrangements (CMA) in SCBs and
CCBs.

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 provisions of Section 35(6) of the Banking
Regulation Act (BR Act), 1949. In addition, NABARD has also been
conducting periodic inspections of state level cooperative
institutions such as State Cooperative Agriculture and Rural
Development Banks (SCARDBs), Apex Weavers Societies, Marketing
Federations, etc., on a voluntary basis.

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

To suggest ways and means for strengthening the institutions so as

to enable them to play more efficient role in rural credit

Instruments of Supervision
1. Periodic on-site inspection of SCBs, DCCBs, SCARDBs and RRBs
and other Apex level Cooperative institutions
2. Supplementary Appraisal
3. Off-site Surveillance System ( OSS )
4. Portfolio inspection/System study
5. Monitoring through returns including CMA and Frauds
6. Attending to complaints in respect of Cooperative Banks
(excluding Urban Cooperative Banks) and RRBs

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 by NABARD to
SCARDBs in 1997-98. NABARD, through a concrete and time-bound
supervision strategy, facilitate these banks to adjust to the new
financial discipline so as to internalize prudential norms stipulated.

Current Focus
Under the revised strategy, a sharper focus of the NABARDs
inspection was given on the core areas of the functioning of banks
pertaining to Capital Adequacy, Asset Quality, Management,
Earnings, Liquidity, Systems and Compliance (CAMELSC). Thus,
NABARDs focus in its statutory on-site inspections is on core
assessments leaving the collateral appraisals to banks. The micro

level aspects are to be taken care of by the banks themselves by

way of internal inspections or by other agencies such as auditors. In
this direction, through a series of workshops and meetings held with
the Chief Executives and the Chief Auditors of cooperative banks,
NABARD has been attempting to ensure that the other areas,
particularly relating to the internal checks and controls, revenue and
income realization by way of interest on loans and advances,
investments and other routine features of carrying out general
banking transactions were suitably taken care of by the banks and
their concurrent/statutory audit systems.

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

Board of Supervision (for SCBs, DCCBs and RRBs)

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

 Recommending appropriate training for Inspecting Officers of

NABARD for imparting necessary skills and knowledge
Suggest measures for strengthening of DoS
Recommend issue of directions by RBI
Oversee the quality of inspections carried out and the reports
issued
Review the information generated through off-site surveillance
and other supplementary vehicles, action taken thereon
Undertake any other functions entrusted from time to time by the
Board of Directors of NABARD
The Board of Supervision reviews the financial position of
Cooperative Banks and RRBs based on the inspections of these
banks by NABARD. Based on the observations of BoS, authorities
concerned are apprised of the weaknesses of the banks.

Other Initiatives
The day-to-day functioning of the supervised banks is being
monitored through various statutory returns prescribed by the
RBI/NABARD including OSS returns
State level groups comprising RCS, Apex bank, Cooperation and
Finance Department, State Government, Director of Audit and noncompliant banks have been constituted/convened for
preparing/discussing suitable strategy for banks not complying with
the provisions of Section 11(1) of BR Act, 1949 [ as applicable to
Cooperative Societies (AACS)] and monitoring the progress of Action
Plan prepared by them to facilitate recompliance with the
provisions.
Periodic discussions are held with the MD, Apex Banks, RCS, State
Government, etc., to discuss the supervisory concerns.

CONCLUSION

NABARD has played a very vital role in the

development of Indian commodity market. It
has a wide scope of services through which it
has helped various sectors for its
development. Some of the important
functions are crediting, housing, supervision,
etc. but one of its most important function is
micro-finance. MICRO-FINANCE includes
functions such as giving loans for setting up
business relating to agriculture and helping
self-help groups {SHGs}. It also helps in
savings functions.
The main objective of micro-finance is to
promote sustainable and equitable
agriculture and rural prosperity through
effective credit supply, related services,
institutional development and other

innovative initiatives.
Micro-finance has developed from microsavings to micro-credit then to micro
insurance, micro remittance and micro
pension.