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

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:

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

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.

Objectives The rural financial system in the country calls for a strong and efficient credit delivery system, capable of taking care of the expanding and diverse credit needs of agriculture and rural development. More than 50% of the rural credit is disbursed by the Co-operative Banks and Regional Rural Banks. NABARD is responsible for regulating and supervising the functions of Co-operative banks and RRBs. In this direction NABARD has been taking various initiatives in association with Government of India and RBI to improve the health of Co-operative banks and Regional Rural Banks.

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:

NABARD's Roles and Functions are summarized below:

Credit Functions

Developmental and Promotional Functions

Supervisory Functions

Institutional and Capacity building

Role in Training

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

Developmental and Promotional Functions

Credit is a critical factor in development of agriculture and rural sector as it enables investment in capital formation and technological upgradation. Hence strengthening of rural financial institutions, which deliver credit to the sector, has been identified by NABARD as a thrust area. Various initiatives have been taken to strengthen the cooperative credit structure and the regional rural banks, so that adequate and timely credit is made available to the needy.

In order to reinforce the credit functions and to make credit more productive, NABARD has been undertaking a number of developmental and promotional activities such as:-

Help cooperative banks and Regional Rural Banks to prepare development actionsplans for themselves

Enter into MoU with state governments and cooperative banks specifying their respective obligations to improve the affairs of the banks in a stipulated timeframe

 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

Monitor implementation of development action plans of banks and fulfillment of obligations under MoUs

Provide financial assistance to cooperatives and Regional Rural Banks for establishment of technical, monitoring and evaluations cells

Provide 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.

Provide financial support for the training institutes of cooperative banks

Provide training for senior and middle level executives of commercial banks, Regional Rural Banks and cooperative banks

Create awareness among the borrowers on ethics of repayment through Vikas Volunteer Vahini and Farmers clubs

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

Undertakes inspection of Regional Rural Banks (RRBs) and Cooperative Banks (other than urban/primary cooperative banks) under the provisions of Banking Regulation Act, 1949.

Undertakes inspection of State Cooperative Agriculture and Rural Development Banks (SCARDBs) and apex non-credit cooperative societies on a voluntary basis

Undertakes portfolio inspections, systems study, besides off-site surveillance of Cooperative Banks and Regional Rural Banks (RRBs)

 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)

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

Periodic on-site inspection of SCBs, DCCBs, SCARDBs and RRBs and other Apex level Cooperative institutions

Supplementary Appraisal

Off-site Surveillance System ( OSS )

Portfolio inspection/System study

Monitoring through returns including CMA and Frauds

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 timebound 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 non-compliant 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.

RO set up

Suitable and adequate officers are placed in DoS units at RO level to undertake inspection of banks, issue inspection reports and take other follow up measures including review, monitoring of compliance, OSS, etc., in conformity with DoS, HO guidelines.

Institutional and Capacity building

Help cooperative banks and RRBs to prepare development actions plans for themselves

Enter into MoU with state governments and cooperative banks specifying their respective obligations to improve the affairs of the banks in a stipulated timeframe

Help RRBs and the sponsor banks to enter into MoUs specifying their respective obligations to improve the affairs of the RRBs in a stipulated timeframe

Monitor implementation of development action plans of banks and fulfillment of obligations under MoUs.

 Provide financial assistance to cooperatives and RRBs for establishment of technical, monitoring and evaluations cells.

Provide organisation development intervention (ODI) through reputed training institutes like Bankers Institute of Rural Development (BIRD), Lucknow, National Bank Staff College, Lucknow, College of Agriculture Banking, Pune, etc.

Provide financial support for the training institutes of cooperative banks

Provide training for senior and middle level executives of commercial banks, RRBs and cooperative banks

Create awareness among the borrowers on ethics of repayment through Vikas Volunteer Vahini/farmer's clubs

Provide financial assistance to cooperative banks for building improved management information system, computerisation of operations, development of human resources, etc.

Role in Training

NABARD and its Role in Training

National Bank Staff College, Lucknow

National Bank Training Centre, Lucknow

Zonal Training Centre, Hyderabad

Bankers Institute of Rural Development (BIRD), Mangalore

Bankers Institute of Rural Development (BIRD), 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.