CHAPTER

INTRODUCTION OF BANKING
In simple words, Banking can be defined as the business activity of accepting and safeguarding
money owned by other individuals and entities, and then lending out this money in order to earn
a profit. However, with the passage of time, the activities covered by banking business have
widened and now various other services are also offered by banks. The banking services these
days include issuance of debit and credit cards, providing safe custody of valuable items, lockers,
ATM services and online transfer of funds across the country / world.
It is well said that banking plays a silent, yet crucial part in our day-to-day lives. The banks
perform financial intermediation by pooling, ordinary people dreaming for a new car or house
would not be able to purchase cars or houses.

HISTORY OF BANKING
The history of banking refers to the development of banks and banking throughout history, with
banking defined by contemporary sources as an organization which provides facilities for
acceptance of deposits, and provision of loans. savings and channelizing them into investments
through maturity and risk transformations, thereby keeping the economys growth engine reving.
Banking business has done wonders for the world economy. The simple looking method of
accepting money deposits from savers and then lending the same money to borrowers, banking
activity encourages the flow of money to productive use and investments. This in turn allows the
economy to grow. In the absence of banking business, savings would sit idle in our homes, the
entrepreneurs would not be in a position to raise the money.
The history begins with the first prototype banks of merchants of the ancient world, which made
grain loans to farmers and traders who carried goods between cities. This began around 2000 BC
in Assyria and Babylonia. Later, in ancient Greece and during the Roman Empire, lenders based
in temples made loans and added two important innovations: they accepted deposits and changed
money. Archaeology from this period in ancient China and India also shows evidence of money
lending activity.
Many histories position the crucial historical development of a banking system to medieval and
Renaissance Italy and particularly the affluent cities of Florence, Venice and Genoa. The Bardi
and Peruzzi families dominated banking in 14th century Florence, establishing branches in many
other parts of Europe. Perhaps the most famous Italian bank was the Medici bank, established by
Giovanni Medici in 1397. The oldest bank still in existence is Banca Monte dei Paschi di Siena,
headquartered in Siena, Italy, which has been operating continuously since 1472.

The development of banking spread from northern Italy throughout the Holy Roman Empire, and
in the 15th and 16th century to northern Europe. This was followed by a number of important
innovations that took place in Amsterdam during the Dutch Republic in the 17th century, and in
London in the 18th century. During the 20th century, developments in telecommunications and
computing caused major changes to banks' operations and let banks dramatically increase in size
and geographic spread. The financial crisis of 20072008 caused many bank failures, including
some of the world's largest banks, and provoked much debate about bank regulation.

EVALUATION OF BANKING
The word bank is used in the sense of a commercial bank. It is of Germanic origin though some
persons trace its origin to the French word Banqui and the Italian word Banca. It referred to a
bench for keeping, lending, and exchanging of money or coins in the marketplace by money
lenders and money changers.
There was no such word as banking before 1640, although the practice of safe-keeping and
savings flourished in the temple of Babylon as early as 2000 B.C. Chanakya in his Arthashastra
written in about 300 B.C. mentioned about the existence of powerful guilds of merchant bankers
who received deposits, and advanced loans and issued hundis (letters of transfer). The Jain
scriptures mention the names of two bankers who built the famous Dilware Temples of Mount
Abu during 1197 and 1247 A.D.
The first bank called the Bank of Venice was established in Venice, Italy in 1157 to finance the
monarch in his wars. The bankers of Lombardy were famous in England. But modern banking
began with the English goldsmiths only after 1640. The first bank in India was the Bank of
Hindustan started in 1770 by Alexander & Co., an English agency house in Calcutta which
failed in 1782 with the closure of the agency house. But the first bank in the modern sense was
established in the Bengal Presidency as the Bank of Bengal in 1806.
History apart, it was the merchant banker who first evolved the system of banking by trading in
commodities than money. Their trading activities required the remittances of money from one
place to another. For this, they issued hundis to remit funds. In India, such merchant bankers
were known as Seths.
The next stage in the growth of banking was the goldsmith. The business of goldsmith was such
that he had to take special precautions against theft of gold and jewellery. If he seemed to be an
honest person, merchants in the neighbourhood started leaving their bullion, money and
ornaments in his care. As this practice spread, the goldsmith started charging something for
taking care of the money and bullion.
As evidence for receiving valuables, he issues a receipt. Since gold and silver coins had no marks
of the owner, the goldsmith started lending them. As the goldsmith was prepared to give the

holder of the receipt and equal amount of money on demand, the goldsmith receipt became like
cheques as a medium of exchange and a means of payment.
The next stage in the growth of banking is the moneylender. The goldsmith found that on an
average the withdrawals of coins were much less than the deposits with him. So he started
advancing the coins on loan by charging interest. As a safeguard, he kept some money in the
reserve. Thus the goldsmith-money- lender became a banker who started performing the two
functions of modern banking, that of accepting deposits and advancing loans.

DEFINATION OF BANKING
In simple words, Banking can be defined as the business activity of accepting and safeguarding
money owned by other individuals and entities, and then lending out this money in order to earn
a profit. However, with the passage of time, the activities covered by banking business have
widened and now various other services are also offered by banks. The banking services these
days include issuance of debit and credit cards, providing safe custody of valuable items, lockers,
ATM services and online transfer of funds across the country / world.

CHAPTER 2
WHAT IS NABARD?
National Bank for Agriculture and Rural Development (NABARD) is an apex development bank
in India, having headquarters in Mumbai (Maharashtra) and other branches are all over the
country. The Committee to Review Arrangements for Institutional Credit for Agriculture and
Rural Development (CRAFICARD), set up by the Reserve Bank of India (RBI) under the
chairmanship of Shri B. Sivaraman, conceived and recommended the establishment of National
Bank for Agriculture and Rural Development (NABARD). It was established on 12 July 1982 by
a special Act of parliament and its main focus was on upliftment of rural India by increasing the
credit flow for elevation of agriculture & rural non farm sector and completed its 34 years on 1
Jan 2016. It has been entrusted with "matters concerning policy, planning and operations in the
field of credit for agriculture and other economic activities in rural areas in India". RBI sold its
stake in NABARD to the Government of India, which now holds 99% stake. NABARD is active
in developing financial inclusion policy and is a member of the Alliance for Financial Inclusion.

HISTORY OF NABARD
NABARD was established on the recommendations of Shivaraman Committee, (by Act 61, 1981
of Parliament) on 12 July 1982 to implement the National Bank for Agriculture and Rural
Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural
Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and
Development Corporation (ARDC). It is one of the premier agencies providing developmental
credit in rural areas. NABARD is India's specialised bank for Agriculture and Rural
Development in India.
The initial corpus of NABARD was Rs.100 crores. Consequent to the revision in the
composition of share capital between Government of India and RBI, the paid up capital as on 31
March 2015, stood at Rs.5000 crore with Government of India holding Rs.4,980 crore (99.60%)
and Reserve Bank of India Rs.20.00 crore (0.40%).
International associates of NABARD include World Bank-affiliated organizations and global
developmental agencies working in the field of agriculture and rural development. These
organizations help NABARD by advising and giving monetary aid for the upliftment of the
people in the rural areas and optimizing the agricultural process. The NABARD was initally
started with an ordinance (U/A-123,it is a temprory law which is passed by our president and
then its become law).This thing happened because parliament session was not fully in action and
monsoon had already passed,if in that time our G.O.I would have waited for parliament then it
would have been considered as a big loss to our agriculture expectations.
4

ROLE OF NABARD
1.NABARD is the most important institution in the country which looks after the development of
the cottage industry, small industry and village industry, and other rural industries.
2.NABARD also reaches out to allied economies and supports and promotes integrated
development.
3.NABARD discharge its duty by undertaking the following roles :
Serves as an apex financing agency for the institutions providing investment and production
credit for promoting the various developmental activities in rural areas
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.
Co-ordinates the rural financing activities of all institutions engaged in developmental work at
the field level and maintains liaison with Government of India, state governments, Reserve Bank
of India (RBI) and other national level institutions concerned with policy formulation
Undertakes monitoring and evaluation of projects refinanced by it.
NABARD refinances the financial institutions which finances the rural sector.
NABARD partakes in development of institutions which help the rural economy.
NABARD also keeps a check on its client institutes.
It regulates the institutions which provide financial help to the rural economy.
It provides training facilities to the institutions working in the field of rural upliftment.
It regulates the cooperative banks and the RRBs, and manages talent acquisition through IBPS
CWE.
NABARD's refinance is available to state co-operative agriculture and rural development banks
(SCARDBs), state co-operative banks (SCBs), regional rural banks (RRBs), commercial banks
(CBs) and other financial institutions approved by RBI. While the ultimate beneficiaries of
investment credit can be individuals, partnership concerns, companies, State-owned corporations
or co-operative societies, production credit is generally given to individuals. NABARD has its
head office at Mumbai, India.
Financing and supporting Producer Organisations
5

NABARD has taken an initiative for supporting producer organizations, adopting a flexible
approach to meet the needs of producers. In order to give a special focus, the Producers
Organization Development Fund(PODF) has been set up wef 01 April 2011, with an initial
corpus of 50 crore . Any registered Producers Organization viz, Producers Company( as
defined under Sec 581 A in part IXA of Companys Act 1956), Producers Cooperatives,
registered Farmer Federations, MACS (Mutually aided cooperative society), industrial
cooperative societies, other registered federations, PACS, etc. set up by producers are eligible
under the fund. Support under PODF is provided as under:
Credit Support is provided for financial intervention. Support in the form of grant, loans, or a
combination of these is also available for capacity building & market interventions.
Since most of the Producers Organisations are having low capital base, scope for NABARD's
intervention under PODF has been enhanced to support Producers Organisations for
contribution to share capital. NABARD Regional Office[RO] has a Chief General Manager
[CGMs] as its head, and the Head office has several top executives viz the Executive
Directors[ED], Managing Directors[MD], and the Chairperson.It has 336 District Offices
across the country, one special cell at Srinagar. It also has 6 training establishments.
NABARD is also known for its 'SHG Bank Linkage Programme' which encourages India's
banks to lend to self-help groups (SHGs). Largely because SHGs are composed mainly of
poor women, this has evolved into an important Indian tool for microfinance. By March 2006,
22 lakh SHGs representing 3.3 core members had to be linked to credit through this
programme.
NABARD also has a portfolio of Natural Resource Management Programmes involving
diverse fields like Watershed Development, Tribal Development and Farm Innovation through
dedicated funds set up for the purpose.

1. Introduction

A. Indian producers are unable to realize optimal value from their produce and
progress further due to fragmentation of land holdings and lack of
organization. India has over 12.5 crore farmer households of which over 85%
are small and marginal farmers with land holdings of less than 2 hectares. The
average size of land holding is 1.33 hectare/ farmer household. Due to this
fragmentation and disorganization, it is not economically viable for the farmers
not only to adopt latest technology but also to use high yielding varieties of
inputs like seeds and fertilizers. They are also unable to realize good value
6

from their marketable surplus by individually selling their produce.

B. On the other hand in case of non-farm sector activities,the handloom weavers
& artisans are not able to compete with their products in the market due to
poor quality & obsolete designs.
C. Through better organization,producers can utilize scale to procure inputs at a
lower price, and gain more selling power for their produce/product. Forming a
producer organization can also provide access to timely and adequate finance,
build capacity and provide linkages to markets.
D. NABARD has, therefore, decided to set up a separate fund titled "Producers
Organization Development Fund" (PODF) to tackle the issues of non
availability of timely credit, capacity building of producers & strengthening of
the Producers Organizations and market tie-ups. The Fund has been created in
NABARD with an initial corpus of 50 crores from out of its operating surplus
for the year 2010-11.

2. Title and Commencement

A separate Fund titled Producers Organization Development Fund (PODF) has been
created with an initial corpus of 50 crore with a sanctioning limit of 100 crore out of
NABARDs profits as at the end of the financial year 2010-11 and it will be
operational with effect from 1st April 2011.
3. Producers Organization Definition

A. An organization will be called a Producers Organization if

B. It is formed by a group of producers for either farm or non-farm activities
C. It is a registered body, and a legal entity
D. Producers are shareholders in the organization
E. It deals with business activities related to the primary produce/product
F. It works for the benefit of the member producers
G. Portions of profit are shared amongst the producers and the balance goes to the
7

share capital or reserves.

o Objectives of the Fund

Producers Organization Development Fund (PODF) will be used to support Producers
Organizations across three levers, viz. credit support, capacity building & market
linkage. The objective of the fund is to meet end to end requirements of Producers
Organization as well as to ensure their sustainability & economic viability.
o Guiding
Principle
The guiding principles for the operation of PODF are broadly as indicated
below:

A. a. Producers Organization registered under any Statute of Law are eligible.

B. The activities may fall within the domain of agriculture, allied sectors & Non
Farm Sector only.
C. Producers Organization should be formed by the primary producers of
agriculture & NFS activities.
D. The activities eligible to be funded should relate to production and/or other
related activities like harvesting, storage, processing, packaging and/ or
marketing of the produce/ product or in combination of the above activities.
E. The fund will be used for providing loan to carry out the economic activity and
mix of grant and loan for capacity building market linkages.
F. The Fund could also be used for developing producers organization through
necessary capacity building
G. The activity should result in product improvement and/ or increase in
production.
H. The proposals should lead to creation of sustainable employment opportunities
(direct/ indirect). Policy goal is to improve rural livelihoods through
community based and sustainable interventions
I. The Producers Organization will act for the benefit of the producers.

J. The shares of the producers cannot be sold to non producers at any time. If
existing member desire to leave the organisation, his shares can only be
purchased either by existing producers or by enrolling a new primary producer.
K. Pro-poor (improves employment, reduces poverty, improves access to credit,
information, entitlements)
L. Community participation (ownership/ management/empowerment)
M. Integrated approach (need-based and flexible, convergence with other schemes
/ programmes

6. Eligible
Activities
The following interventions will be undertaken out of the fund:

A. Financial
Producers Organization would be eligible for the following types of loans:

Direct lending to Producers Organization for term loans or

Composite loans comprising of both working capital and term loan

requirements, or

Working Capital as composite loan

Subordinated Debt as tier II capital based on the requirements of the PO

and provided the Memorandum and Articles of Association/byelaws
permit them to accept such a debt.

B. Capacity Building
Capacity building should broadly cover any activity relating to functioning of a
producer organization. Broadly the various types of capacity building initiatives
which can be supported under the fund are as follows:

Skill development in order to enable the members produce goods both in

farm and non-farm sector,

Business planning

Technological extension through classroom training,

Exposure visits, agricultural university tie ups, expert meetings, etc.

Any other capacity building initiative which directly benefits the P.O.

Support for capacity building could be in the form of grant, loans, or a

combination of the two based on the need of the situation. Capacity building
support will not be given in isolation in general. It would essentially be a part of
the overall project having loan component.
C. Market Linkages

Credit and/or grant support for setting up of marketing infrastructure

facilities for sale of produce.

Support could even be in the lines of rural haat and rural mart if the
situation so desires or it could be structured differently based on the need.

NABARD will explore tie ups with buyers for Producers Organization's
produce.

NABARD shall help form partnerships between Producers Organizations

and local and large companies.

Through existing schemes of MoRD and NHM, NABARD will promote

creation of infrastructure wherever possible.

The overall grant inclusive of all components would not exceed 20% of the loan
amount.
D. Other
Areas
Other than the three broad categories stated above, support would be available for

Support for preparation of DPR up to 0.5% of the project cost or 1 lakh

whichever is lower. This support will be given subject to the fact that the
project is sanctioned by NABARD. The grant amount would be within the
overall cap of 20% stated above.

Exclusive grant support for taking forward SHGs/farmers clubs/producer

10

groups to the stage of having a Producers Organization. Separate scheme

would be formulated for this purpose when need arises for such a support.

Any other support felt necessary for enabling a Producers Organization

function in a better and profitable manner subject to the recommendation
of ED Committee and with the approval of Chairman/MD.

7. Eligible
The following institutions will be eligible for assistance from PODF:

Institutions

A. Loan Component: Loans will be given to Registered Producers Organizations

under any statute of law.
B. Grant Component: It would be a part of the overall project. However, money can
be given to either the registered PO or the implementing agency or both
depending on the situation. The PO has to be a Registered Producers Organization
under any Statute of Law. Others could be

VII.

Non-Government
Organisations, registered Community Based
Organisations (CBOs) providing different support services to Agricultural
and allied sector activities/ Non Farm Sector activities.

Other institutions/ organisations whose objectives/ activities are in

conformity with the overall objectives of PODF and are approved by
NABARD in this regard.

Selection Criteria

i.

NGOs/

Producers
Organization
:
ROs may ensure that the Producers Organization is registered and is working for
the benefit of the producer members. In case, the Producers Organization is in
existence for more than one year, the Audited Balance Sheets/ P&L Account with
audited notes for completed financial year (Max. 3 years) of the Producers
Organization has to be analysed while assessing the performance of the
organization.
CBOs:
11

ROs may ensure that they are registered under relevant Acts, have minimum three years' Audited
Balance Sheets/ P&L Account with audited notes, have good track record/ relevant experience in
the field and they will have requisite staff, particularly Technical staff, to look after and monitor
the project. In any case, agencies, which are less than three years in existence, normally should
not be considered for assistance under the Fund, though exception could be made based on the
credentials of the key persons

9. Project Duration:
Generally Projects having duration of around 7 years would be considered under the
Fund. Projects can have a moratorium up to 1-2 years under the Fund. However, in
exceptional cases, subject to genuineness of the requirement, and due to unavoidable
exigencies which may arise during the implementation of the project, the duration may
be extended up to a maximum of 10 years inclusive of moratorium based on cash flow
and viability of the project.
10. Eligible items of Expenditures
Items eligible for assistance broadly include cost of building, machinery, equipments,
specially designed vehicles for transportation etc. and/or working capital requirements
including administrative and other recurring costs connected with the project as
composite loan. Capital expenditures like purchase of land, vehicles for general
transportation & personal use, etc., will not be considered for support under the Fund.
However, support for hiring premises, etc., wherever necessary, may be considered on
a selective basis.
11. Quantum of Assistance
NABARD's assistance will be limited to a maximum of 90% of the total project
outlay. However, the quantum of assistance and the Organization contribution may
vary from project to project depending on the project size, outlay, means of financing
and the resource support available from various agencies/sources, etc. The approach
should be to get maximum involvement from the borrower rather than committing
90% from our side from the beginning.
12. Mode of Assistance
The Fund will be utilised to extend support in the form of loan for taking up the
economic activity along with grant or loan or a blend of both, as may be decided by
NABARD on the merits of each case for capacity building and marketing. It can be
used for grant assistance alone for development of PO if felt necessary.
13. Rate of Interest for Loan

12

The rate of interest for the loan will be decided by ALCO from time to time. Actual
rate would be based on risk analysis using risk tool and collaterals provided.
14. Security
The financial assistance by way of loan will be secured by hypothecation/ mortgage of
assets created out of the assistance (both loan & grant) from the Fund, mortgage of
other immoveable property, hypothecation of other movable property, personal and/ or
corporate guarantee and/ or any other security which may be prescribed by NABARD.
15. Repayment Period
The period of repayment for the loan assistance will be a maximum of 7 to 10 years
with a moratorium of 1-2 years as the case may be depending on case to case basis.
16. Submission of proposals
The Producers Organizations/ NGOs eligible to avail assistance (loan & grant) under
the Fund are required to submit concept note indicating the brief details of the
organization & the proposal. Format for the contents of Concept Note is given in
Annexure-II of the PODF Manual. After the concept note is approved by HO/ RO, the
Organisation will submit Detailed Project Report along with all the required
statements. Structure for DPR is given in Annexure-IV of the PODF Manual.
17. Appraisal and sanction of proposals

a. Concept note from Producers Organization will be sent to RO. The outline for
submission of the concept note is given in Annexure-II of the PODF Manual.
Implementing Agency/ NGO can help by preparing the same on behalf of the
Producer Organisation.
b. The concept note will be appraised by RO & HO, in case of powers vested
with HO and by RO where the proposal is within delegated powers of RO.
c. After the approval of concept note by HO/RO, the agency will be advised to
submit Detailed Project Report, provided the proposal is found to be a feasible
one based on the concept note.
d. RO will scrutinize and undertake desk appraisal of the DPR and based on its
scrutiny/appraisal recommend the same for consideration of PMG at HO
where the proposal is not within the delegated powers of RO.

13

e. On receipt of proposal and based on preliminary scrutiny, if the proposal is

found to be suitable, a joint field visit will be undertaken. In case of proposal
within delegated powers of RO, visit will be undertaken by RO.
f. RO along with HO or RO as per the delegated powers will undertake presanction appraisal and due diligence of Producers Organization and promoting
organization. The team will comment on technical, economic and financial
details of the project, Producers Organization and promoting organization.
g. On completion of due diligence, and techno-economic appraisal, the working
capital and Term Loan assessment has to be undertaken.
h. Risk rating and appraisal tools especially developed to assess the proposals
may be used along with the existing tools like Risk Master for appraisal of the
proposals.
i. After the project is found feasible and viable for lending, until internal risk
management skills are developed, external appraisal will be done by external
experts which could be institutions (CRISIL, CARE, IL&FS, SBI Capital, etc.)
or individuals (Specialists) or Risk Officer appointed by NABARD.
j. After getting these reports, RO team will prepare the draft sanction
memorandum for sanction from the competent authority and forward the same
to HO.

18. Release of Assistance

Release of funds and collection of repayments will be managed by RO according to the
guidelines of the fund. RO will ensure proportionate contribution of margins by the
borrowers/ company while disbursement. Absolute care needs to be taken by the RO for
looking into the special terms and conditions if any, in the sanction letter before the first
release of funds. Wherever necessary, a pre-disbursement visit should be undertaken for
the purpose. Detailed guidelines for post-sanction procedures given in Annexure-X of the
PODF Manual may be followed.
All releases under the fund shall invariably be made by Regional Offices concerned after
obtaining due approval from the CGM/OIC concerned, based on HO/RO sanction letter/s.
ROs will debit the releases from the Producers Organisation Development Fund (PODF)
Account. The assistance shall also be disbursed in suitable instalments as arrived at on the
basis of a mutual consultation/ understanding with the Organisation.
19. Monitoring and Submission of Progress Reports
14

A. Monitoring by NABARD:
Monitoring on a regular basis has to be done by the RO and DDM.. Copies of
monitoring reports of Nodal Officers have to be sent to HO while reports by the
DDMs may be reviewed by RO.
B. Monitoring by Organization:
The organization will undertake to monitor the projects closely with a view to
achieving and realising the objectives and goals and keep NABARD informed of
the same through constitution of a Project Monitoring Committee (PMC)
depending on the size and nature of project by nominating NABARD
representative on the same.
The organization seeking assistance under the Fund, may also submit Half Yearly
Progress Reports to NABARD, RO and HO in the format, to be prescribed for the
purpose at the time of sanction of proposal. This may be obtained by ROs and
submitted to HO before 15th of the month succeeding to the half year to which it
relates.
20. Utilisation of Assistance :
Eligible institutions availing of financial assistance would be required to give an
undertaking for proper utilisation of assistance received from NABARD. Where the
assistance received from NABARD has not been utilised for the purpose for which it was
released and no satisfactory explanation is forthcoming, NABARD will recall the entire
amount of grant/loan at once, along with interest or any other penal charge, to be levied
on the same.
Eligible schemes for Refinance under Non-farm Sector
Automatic

Refinance

Scheme

(ARF)

The various schemes formulated over the years have been categorized into five distinct and
co.mpact schemes.
i.

Composite Loan Scheme (CLS)

Under this scheme refinance is given to meet the block and /or working capital
requirements of small/micro enterprises. Max. refinance of 10 lakh per unit.

ii.

Integrated

Loan

Scheme

(ILS)

Under this scheme refinance is given to block capital and working capital for one
15

operating cycle. Max. Refinance of 15 lakh per borrower.

iii.

Self Employment Scheme for Exservicemen (SEMFEX)

The scheme has been in operation since 15 January 1988 which is specially designed
to provide a comprehensive package of credit for encouraging ex-servicemen to
undertake agricultural and allied activities or to set up non-farm units in rural areas to
earn their livelihood for leading a dignified life. NABARD provides refinance
assistance under Automatic Refinance Facility (ARF) to eligible banks for a wide
spectrum of manufacturing, processing and service sector activities under RNFS
(Investment Credit).

iv.

Soft Loan Assistance for Margin Money (SLAMM)

The scheme is to provide financial assistance to the prospective entrepreneurs who

have the requisite talent and skill of entrepreneurship but lack necessary monetary
resources to meet the margin requirements stipulated under relevant NABARD
refinance schemes.
v.

Small Road and Water Transport Operators (SRWTO)

Under this scheme the facilities for acquisition of transport vehicles, which are to be
used for transportation of farm produce/industrial products to rural/urban marketing
centers including passenger transport vehicle and water transport units. Margin
money assistance will be extended on a very selective basis up to 10% of the cost of
the vehicle.

Rural Housing
Housing in the rural areas, both agriculturist and non-agriculturists, combine the business as
well as dwelling needs and thereby leads to overall rural development, NABARD is giving
refinance (investment credit) to the eligible banks.
Renewable Energy
While addressing Indias energy security challenges, Ministry of New and Renewable Energy
(MNRE), Government of India and the Jawaharlal Nehru National Solar Mission (JNNSM).
In order to achieve this objective, the MNRE has launched a capital cum interest subsidy
scheme for creation of off-grid, decentralised solar powered energy harvesting devices
through application of photo voltaic technology for the purpose of lighting, heating, etc. at the
16

level of domestic and mini commercial applications. NABARD is the nodal agency for
giving feasibility and Refinance for eligible projects.

SHORT AND MEDIUM TERM LOANS

Modern agriculture, as distinguished from traditional cultivation, involves substantial investment
of recurring nature for using high yielding varieties of seeds, fertilisers, insecticides and costly
agricultural implements. In such a situation, arrangements for credit should go much beyond the
simple provision of credit and must be linked operationally with productivity and other services.
Production and productivity, marketing and raising the level of surplus and savings must,
therefore, be the major functions of credit. The benefit of modern technology, the advantages of
institutional credit, infrastructural arrangements etc., should accrue to all classes of farmers.
Besides, on the supply side, there must be an arrangement for assessing the requirements of
funds on the basis of actual cost and raising the resources therefor. It was in this context, the crop
loan system or the production oriented system of lending was evolved and concerived as the
most appropriate mechanism for mass disbursement of production credit.
Production Credit Department (PCD) deals with short term refinance facilities, for various types
of production, marketing and procurement activities, being provided to client institutions, as
detailed below:
Short Term (Seasonal Agricultural Operations

)
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.
Short Term Refinance to RRBs, PSBs and CCBs (directly) for financing PACS for their
Seasonal Agricultural Operations
A new refinance product for financing of PACS through PSBs & RRBs, whereever
Cooperative Banks are weak or not in a position to lend to PACS adequately, was introduced
during last year. (2011-12)
Short Term ( Others )
The ST ( Others ) limit would consist of different purposes viz. ST- Agriculture and Allied
Activities, ST - Marketing of crops, ST- Fisheries Sector,ST- Industrial Cooperative Societies
(other than weavers), ST- Labour Contract and Forest Labour Cooperative Societies including
collection of Minor Forest produce. ST- Rural artisan including weavers members of
17

PACS/LAMPS/FSS, ST- Purchases, Stocking and Distribution of Chemical Fertilisers and

other Agricultural Inputs on the basis of bank wise RLP for respective purposes. The limit is
sanctioned to SCBs and RRBs.

MT Conversion.
NABARD provides relief to farmers whose crops are damaged due to natural calamities, by
way of conversion of current short term agricultural loans into medium term loans and
rephasement / reschedulement of existing MT (Conversion) loans. Consolidated limit will be
sanctioned to RRBs and SCBs in respect of eligible DCCBs.
ST (Weavers)
Refinance support is available under ST (Weavers) as under :
1. Working Capital requirement of Primary/Apex/Regional Weavers Coop Society through State Coop Banks/DCCBs
2. Working Capital requirement of Primary Weavers Coop Society through Scheduled
Commercial Bank
3. Working Capital requirement of State Handloom Development Corporation through
Scheduled Commercial Banks & State Cooperative Banks
4. Working Capital and Marketing requirement of Individual Weavers, Handloom
Weavers Groups, Master Weavers, Mutually aided Coop Societies, Societies outside
Coop fold and Producer Group Companies through Scheduled Commercial Banks &
RRBs

Long Term Loans

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.This is a long-term refinance facility. The credit is normally provided for a
period of 3 to 15 years. It is intended to create income generating assets in the following sectors:

18

1. Agriculture and allied activities

2. Artisans, small scale industries, Non-Farm Sector (Small and Micro Enterprises),
handicrafts, handlooms, powerlooms, etc.
3. Activities of voluntary agencies and self help groups working among the rural poor

I.

Eligible Institutions
The Institutions Eligible for Refinance are :

II.

1.

State Co-operative Agriculture & Rural Development Banks (SCARDBs)

2.

Regional Rural Banks (RRBs)

3.

State Co-operative Banks (SCBs)

4.

Commercial Banks (CBs)

5.

State Agricultural Development Finance Companies (ADFCs)

6.

Scheduled Primary Urban Co-operative Banks (PUCBs)

7.

North East Development Finance Corporation (NEDFC)

8.

Non-Banking Financial Companies (NBFCs)

Purposes :

1.

Farm Sector :
Agriculture and allied activities such as minor irrigation, farm mechanisation,
land development, soil conservation, dairy, sheep/goat 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 centres, etc.

2.

Non-Farm Sector :

19

Artisans, Small & Micro Enterprises, handicrafts, handlooms, powerlooms, etc

b. Loan Period :
The loan period is upto a maximum of 15 years.
IV.

Refinance Window :

a.

Automatic Refinance Facility (ARF) :

Automatic Refinance Facility (ARF) will be extended to the Commercial
Banks/State Coop Banks/ Regional Rural Banks/Primary Urban Coop
Banks/ADFCs/NEDFi/NBFCs without any upper ceiling on quantum of
refinance, bank loan or TFO for all kinds of projects under Farm Sector (FS) &
Non Farm Sector (NFS). However, ARF will be extended to the SCARDBs for
projects with TFO up to 50.00 lakh for all kinds of projects under Farm
Sector (FS) and Non- Farm Sector (NFS).

b.

Pre-sanction Procedure :
In case, any bank intends to avail refinance under pre-sanction procedure, they
may submit projects to NABARD for project based lending (Subject to
Appraisal & Prior Sanction by NABARD ).

V.

Extent of Refinance :
The extent of refinance will be upto 100% of eligible bank loans depending upon the
purpose, location of the investment and agency applying for refinance.

VI.

Criteria for Refinance :

Technical
Feasibility
of
Financial
viability
Organisational arrangements for credit supervision

VII.

the
and

project
bankability

Ultimate Borrowers :
Although refinance is provided to SCARDBs / SCBs / CBs / RRBs / ADFCs /
PUCBs / NEDFC the ultimate borrowers of investment finance may be individuals,
proprietory/partnership concerns, companies, state-owned corporations or cooperative societies.

20

VIII.

Interim finance :
SCARDBs are being extended interim finance in order to enable them to tide over the
temporary liquidity problem, for a period of three months, which can be converted
into regular refinance.

Eligible schemes for Refinance under Non-farm Sector

Automatic

Refinance

Scheme

(ARF)

The various schemes formulated over the years have been categorized into five distinct
and co.mpact schemes.
i.

Composite Loan Scheme (CLS)

Under this scheme refinance is given to meet the block and /or working capital
requirements of small/micro enterprises. Max. refinance of 10 lakh per unit.

ii.

Integrated

Loan

Scheme

(ILS)

Under this scheme refinance is given to block capital and working capital for one
operating cycle. Max. Refinance of 15 lakh per borrower.

iii.

Self Employment Scheme for Exservicemen (SEMFEX)

The scheme has been in operation since 15 January 1988 which is specially
designed to provide a comprehensive package of credit for encouraging exservicemen to undertake agricultural and allied activities or to set up non-farm
units in rural areas to earn their livelihood for leading a dignified life. NABARD
provides refinance assistance under Automatic Refinance Facility (ARF) to
eligible banks for a wide spectrum of manufacturing, processing and service sector
activities under RNFS (Investment Credit).

iv.

Soft Loan Assistance for Margin Money (SLAMM)

The scheme is to provide financial assistance to the prospective entrepreneurs who
have the requisite talent and skill of entrepreneurship but lack necessary monetary
resources to meet the margin requirements stipulated under relevant NABARD
refinance schemes.

21

v.

Small Road and Water Transport Operators (SRWTO)

Under this scheme the facilities for acquisition of transport vehicles, which are to
be used for transportation of farm produce/industrial products to rural/urban
marketing centers including passenger transport vehicle and water transport units.
Margin money assistance will be extended on a very selective basis up to 10% of
the cost of the vehicle.

Rural Housing
Housing in the rural areas, both agriculturist and non-agriculturists, combine the business
as well as dwelling needs and thereby leads to overall rural development, NABARD is
giving refinance (investment credit) to the eligible banks.
Renewable Energy
While addressing Indias energy security challenges, Ministry of New and Renewable
Energy (MNRE), Government of India and the Jawaharlal Nehru National Solar Mission
(JNNSM). In order to achieve this objective, the MNRE has launched a capital cum
interest subsidy scheme for creation of off-grid, decentralised solar powered energy
harvesting devices through application of photo voltaic technology for the purpose of
lighting, heating, etc. at the level of domestic and mini commercial applications.
NABARD is the nodal agency for giving feasibility and Refinance for eligible projects.
Financing and supporting Producer Organisations
NABARD has taken an initiative for supporting producer organizations, adopting a
flexible approach to meet the needs of producers. In order to give a special focus, the
Producers Organization Development Fund(PODF) has been set up wef 01 April
2011, with an initial corpus of 50 crore . Any registered Producers Organization viz,
Producers Company( as defined under Sec 581 A in part IXA of Companys Act 1956),
Producers Cooperatives, registered Farmer Federations, MACS (Mutually aided
cooperative society), industrial cooperative societies, other registered federations,
PACS, etc. set up by producers are eligible under the fund. Support under PODF is
provided as under:
Credit Support is provided for financial intervention. Support in the form of grant,
loans, or a combination of these is also available for capacity building & market
interventions.
Since most of the Producers Organisations are having low capital base, scope for
NABARD's intervention under PODF has been enhanced to support Producers

22

Organisations for contribution to share capital.

A. .

23

NABARD Infrastructure Development Assistance (NIDA)

NIDA is a new line of credit support for funding rural infrastructure projects. NIDA is
designed to fund State owned institutions/ corporations on both on-budget as well as offbudget for creation of rural infrastructure outside the ambit of RIDF borrowing. The
assistance under NIDA is available on flexible interest terms with longer repayment period
upto 15 years ( 2-4 years repayment holiday).
Objectives

of

the

NIDA

Programme

NABARD is deeply committed to rural development, and infrastructure is an integral part of

this development. Traditionally, NABARD has been closely working with State Governments
through RIDF to fund various infrastructure initiatives. However, this channel for creation of
rural infrastructure faces certain issues:
Borrowing power of State Governments is limited under Article 293, thus limiting the offtake of RIDF
Prioritizing infrastructure to be created through RIDF funds is often dictated by the political
environment
In the course of multiple interactions with State Governments, it was understood that State
Governments would like a wider range of financial products to support creation of rural
infrastructure. In addition, State Governments are looking for avenues to borrow off-budget
(eg. through corporations) to avoid exceeding their borrowing power limits.
Based upon this, the NABARD Infrastructure Development Assistance programme was
designed for State Governments and other state-owned organizations. NIDA aims to fund
rural infrastructure creation by providing assistance to state governments, outside of RIDF
borrowing, and other state-owned organizations (eg. Corporations), through direct financing
based upon risk appraisal of the specific project.
Overview of the NIDA offering
The following are the key features of the current NIDA credit offering. The unique feature of
NIDA is that the terms will be customized as per the borrowers requirements, based upon the
project and borrowers risk profile.
Key feature
i.

Type of loan : Term loan

ii. Tenure

: Long term, upto 15 years

24

iii. Interest rate : Will vary based upon project and risk profile of
borrower. Interest rates will be linked to NABARDs
market borrowings. As of now, NIDA products offer
fixed interest rate over the tenure of the loan; however
this can be reviewed in future
iv. Moratorium : Based upon the specific project and borrower,
moratorium of upto 2to 4 years can be considered
v. Security

: Appropriate security will have to be provided by

borrower, based upon risk profile and nature of project.
State Govt. guarantee is not mandatory, but can be
requested based upon the risk profile and nature of
project

vi. Repayment : Repayment schedule can be designed based upon

borrowers requirements, nature of project and risk
profile.Eg. based upon borrowers cash flows, a
ballooning repayment schedule can be designed, with
the greater share of principle repayment structured
towards the later tenure of the loan
The NIDA credit offering can be further refined, and additional products (eg. annuity based
products, mezzanine capital, PPP etc.) Can be structured based upon borrower requirements and
market demand.
In addition, NIDA also aims to leverage NABARDs existing development schemes as well as
technical expertise by offering Credit+ support to infrastructure projects. The following areas
have been identified as potential credit+ support that can be offered with NIDA projects. The aim
is to offer credit+ support for a fee, in order to ensure it is a sustainable venture for NABARD.
Project evaluation and monitoring :
NABARD can support the borrower from the initial stages of DPR (Detailed Project Report)
preparation, to monitoring of the progress of the project to ensure efficient use of funds for
infrastructure creation. Going ahead, appropriate IT tools may be developed (similar to World
Bank, Andhra Pradesh govts project monitoring tools) to monitor progress of infrastructure
creation

25

Technical advisory support :

NABARD can provide technical advisory support to the borrower, through internal expertise as
well as NABCONS. The technical advisory support can help borrowers in designing the
project,as well as ensuring successful operationalization of the project.
Linkage with existing development schemes:
NABARD has a host of development schemes that can be offered, as per the requirements of the
infrastructure project. The aim of offering these schemes would be to enhance the utility of the
infrastructure. Eg. POs and Farmer Clubs can be created in the area where warehouse is being
constructed, and encouraged to utilize the new warehouse.

DAIRY FARMING
1. Introduction
Dairying is an important source of subsidiary income to small/marginal farmers and agricultural
labourers. In addition to milk, the manure from animals provides a good source of organic matter
for improving soil fertility and crop yields. The gobar gas from the dung is used as fuel for
domestic purposes as also for running engines for drawing water from well. The surplus fodder
and agricultural by- products are gainfully utilised for feeding the animals.products are gainfully
utilised for feeding the animals. Almost all draught power for farm operations and transportation
is supplied by bullocks. Since agriculture is mostly seasonal, there is a possibility of finding
employment throughout the year for many persons through dairy farming. Thus, dairy also
provides employment throughout the year. The main beneficiaries of dairy programmes are
small/marginal farmers and landless labourers.

2. Scope for Dairy Farming and its National Importance

India is endowed with the largest livestock population in the world. It accounts for about 57.3 per
cent of the worlds buffalo population and 14.7 per cent of the cattle population. The value of
output of milk is Rs. 3,05,484 crore in 2011-12. The total milk production in the country is 127.9
million tones per annum at the end of the Eleventh Plan (2011-12) and the demand is expected to
be 180 million tonnes by 2020. To achieve this demand annual growth rate in milk production
has to be increased from the present 2.5 % to 5%. The Annual growth rate for production of milk
is about 5% in 2011-12. Thus, there is a tremendous scope/potential for increasing the milk
production through profitable dairy farming.

3. Financial Assistance Available from Banks for Dairy Farming

For dairy schemes with large outlays, detailed project reports will have to be prepared. The items
of finance would include capital asset items such as purchase of milch animals, construction of
sheds, purchase of equipment etc. The feeding cost during the initial period of one/two months is
26

capitalized and given as term loan. Cost towards land development, fencing, digging of well,
commissioning of diesel engine/pump set, electricity connections, essential servants' quarters,
godown, transport vehicle, milk processing facilities etc. can be considered for loan. For high
value projects, the borrowers can utilise the services of NABARD Consultancy Services
(NABCONS) who are having wide experience in preparation of Detailed Project Reports.

4. Project Formulation for Bank loan

Project can be prepared by a beneficiary after consulting local technical persons of State Animal
Husbandry Department, DRDA, Dairy Co-operative Society / Union / Federation / commercial
dairy farmers. If possible, the beneficiaries should also visit progressive dairy farms and
government / military / agricultural university dairy farms in the vicinity and discuss the
profitability of dairy farming. A good practical training and experience in dairy farming will be
highly desirable. The dairy co-operative societies, if existing in the villages would provide all
supporting facilities particularly for marketing of fluid milk. Nearness of dairy farm to such a
society, veterinary aid centre, artificial insemination centre should be ensured. The project should
include the following information on technical, financial and managerial aspects in detail based
on type of unit and capacity.

PIG FARMING
1. Introduction
The challenges faced by our country in securing the food as well as nutritional security to fast
growing population need an integrated approach in livestock farming. Among the various
livestock species, piggery is most potential source for meat production and pigs are more
efficient feed converters after the broiler. Apart from providing meat, it is also a source of bristles
and manure. Pig farming will provide employment opportunities to seasonally employed rural
farmers and supplementary income to improve their living standards. The advantages of the pig
farming are:
a. Pig has got highest feed conversion efficiency i.e. they produce more live weight gain from a
given weight of feed than any other class of meat producing animals except broilers.
b. Pig can utilise wide variety of feed stuffs viz. grains, forages, damaged feeds and garbage and
convert them into valuable nutritious meat. However, feeding of damaged grains, garbageand
other unbalanced rations may result in lower feed efficiency.
c. They are prolific with shorter generation interval. A sow can be bred as early as 8-9 months of
age and can farrow twice in a year. They produce 6-12 piglets in each farrowing.
d. Pig farming requires small investment on buildings and equipment.

27

e. Pigs are known for their meat yield, which in terms of dressing percentage ranges from 65 - 80
in comparison to other livestock species whose dressing yields may not exceed 65%.
f.Pork is most nutritious with high fat and low water content and has got better energy value than
that of other meats. It is rich in vitamins like thiamin, Niacin and riboflavin.
g. Pigs manure is widely used as fertilizer for agriculture farms and fish ponds.
h. Pigs store fat rapidly for which there is an increasing demand from poultry feed, soap, paints
and other chemical industries.
i.Pig farming provides quick returns since the marketable weight of fatteners can be achieved
with in a period of 6-8 months.
j.There is good demand from domestic as well as export market for pig products such as pork,
bacon, ham, sausages, lard etc.

2. Scope for pig farming and its contribution to national

The pig population of the country is 11.1 million as per the 2012-13 annual report of Animal
Husbandry. Pork production in India is limited, representing only 7% of the countrys animal
protein sources. Production is concentrated mainly in the northeastern corner of the country and
consists primarily of backyard and informal sector producers. According to 18th Livestock
Census of India (2007), there was a marginal decline in total swine population. The Indian
market for processed pork products is small, and the majority of this market is supplied through
imports. Although there are some local companies which manufacture processed products such
as sausages and bacon, quantities are limited and the industry is small. According to MoFPI,
there are 3600 slaughter houses in India, although the majority of these facilities do not export.
There are a small number of abattoirs in India which meet international standards. However,
these facilities do not process pork. The pig farming constitutes the livelihood of rural poor
belonging to the lowest socio-economic strata and they have no means to undertake scientific pig
farming with improved foundation stock, proper housing, feeding and management. Therefore,
suitable schemes to popularise the scientific pigbreeding cum rearing of meat producing animals
with adequate financial provisions are necessary to modernise the Indian pig industry and to
improve the productivity of small sized rural pig farms. In view of the importance of pig farming
in terms of its contribution to rural poor and possible potentials for pig rearing in our country,
Government of India has initiated measures to promote the pig farming on scientific lines under
its five year plans. In order to make available good foundation stock 115 pig breeding farms were
established throughout the country.

3. Financial assistance available from banks / nabard for pig farming

For piggery development schemes with large outlays, detailed project reports will have to be
prepared. The items such as land development, construction of sheds and other civil structures,
28

purchase of the breeding stock, equipment, feed cost up to the point of income generation are
normally considered under bank loan. Other items of investment will be considered on need
basis after providing the satisfactory information justifying the need for such items.

4. Project formulation for bank loan.

The report normally should include information on land, livestock markets, availability of water,
feeds, veterinary aid, breeding facilities, marketing aspects, training facilities, experience of the
farmer and the type of assistance available from State Government Regional Pig breeding
centres. The report should also include information on the number of and type of animals to be
purchased, their breed, production performance, cost and other relevant input and output costs
with theirdescription. Based on this, the total cost of the project, margin money to be provided by
the beneficiary, requirement of bank loan, estimated annual expenditure, income, profit and loss
statement, repayment period, etc., can be worked out and included in the project cost.

POULTRY BROILER FARMING

1.Introduction
Poultry meat is an important source of high quality proteins, minerals and vitamins to balance the
human diet. Specially developed varieties of chicken (broilers) are now available with the traits
of quick growth and high feed conversion efficiency. Depending on the farm size, broiler
farming can be
a main source of family income or can provide subsidiary income and gainful employment to
farmers throughout the year. Poultry manure is of high fertilizer value which can be used for
increasing yield of all crops. The advantages of broiler farming are
a) Initial investment is lower than layer farming
b) Rearing period is 5-6 weeks only
c) More number of flocks can be taken in the same shed
d) Broilers have high feed conversion efficiency i.e. the amount of feed required for unit body
weight gain is lower in comparison to other livestock
e) Faster return from the investment
f) Demand for poultry meat is more compared to sheep/goat meat

2. Scope for broiler farming and its national importance

India has made tremendous progress in broiler production during the last three decades and the
broiler population in the country during 2011-12 stood at 2300 million. Today India is the fifth
29

largest producer of broiler meat in the world with an annual production of 2.47 million MT.
Despite this achievement, the per capita availability of poultry meat in India is only 2.96 kg
which is way below the ICMR recommendation of 11 kg meat per capita per annum. The growth
of the poultry sector is mainly attributed to the interventions of the corporate sector with an
enabling policy environment provided by the Government of India / State Governments from
time to time. The activity provides huge em nt on
their existing land. The Integrator supplies chicks, feed, and medicines, provides technical
guidance
and also buy back / purchase the entire production after 5-6 weeks. The contract farmers are paid
rearing charges usually on per kg Live Weight basis and also as per the set of criteria prescribed
by
the integrators viz., FCR, Mortality etc. Farmer is benefiting ployment opportunities for the rural
poor either under Backyard poultry production system or under small scale commercial broiler
farming units. Over 5 million people are engaged in the poultry sector either directly or
indirectly. Owing to the considerable growth in broiler industry, high quality chicks, equipment,
vaccines and medicines, technically and professionally competent guidance are available to the
farmers. The management practices have improved and disease and mortality incidences are
reduced to a great extent. Many institutions are providing training to entrepreneurs. Increasing
assistance from the Central/ State governments and poultry corporations is being given to create
infrastructure facilities so that new entrepreneurs are attracted to take up this business. Broiler
farming has been given considerable importance in the national policy and has a good scope for
further development in the years to come.

3. Integration in broiler farming

There is a growing trend of integration in broiler farming. In the early nineties, contract farming
for broilers was introduced and in 1995 it spread all over Tamil Nadu. Between 1995 and 2000, it
spread to Karnataka. It gathered momentum and spread its wings to Maharashtra, Andhra
Pradesh in the years 2001 & 2002 and after that, it gained inroads into West Bengal and Gujarat.
The spread is due to in built strengths in integration system. Integrators takes care of all aspects
of production, right from raising of grandparent and parent flocks, production of day old chicks
for rearing, manufacturing and supply of concentrate feed, providing veterinary services and
wholesale marketing of birds. Under integration all the previous profit centres of the broiler
industry viz. chick selling, feed selling, hatching, medicine supply, transportation have become
cost centres for the integrators who work as a single entity and distribute the benefits among the
farmer, consumer and the integration company themselves. Under contract farming, poultry
farmers invest only for poultry sheds / equipme from the lesser investment and production cost
and also higher productivity which are achieved as a result of integration. Moreover he/she is
30

insulated from the market price fluctuations. However, the farmer may be at a disadvantage if the
number of batches supplied in the year by the integrator is less.

4. Financial assistance available from banks for broiler farming

For poultry farming schemes with large outlays Detailed Project Reports (DPR) are required to
be prepared. The items of investment / finance would include construction of broiler sheds and
purchase of equipment, cost of day old chicks, feed, medicine and labour cost for the first cycle.
Cost towards land development, fencing, water and electricity, essential servants quarters,
godowns, transport vehicles, broiler dressing, processing and cold storage facilities can also be
considered for providing credit. For high value projects, the borrowers can utilise the services of
NABARD Consultancy Services (NABCONS) who are having wide experience in preparation of
Detailed Project Reports.

5. Project formulation for bank loan

A project can be prepared by the promoter after consulting local technical persons of State
Veterinary / Animal Husbandry department, Poultry Corporation or private commercial broiler
hatcheries. If possible, they should also visit the progressive broiler farmers in the area and
discuss the profitability of farming. A good practical training and experience on a broiler farm
will be highly desirable, before starting a broiler farm.

SHEEP FARMING
1. Introduction
Sheep with its multi-facet utility for wool, meat, milk, skins and manure, form an important
component of rural economy particularly in the arid, semi-arid and mountainous areas of the
country. It provides a dependable source of income to the shepherds through sale of wool and
animals. The advantages of sheep farming are: economically weaker sections of the society.
Amongst the livestock owners the shepherds are the poorest of the lot.
a. Sheep do not need expensive buildings to house them and on the other hand require less labour
than other kinds of livestock.
b. The foundation stock are relatively cheap and the flock can be multiplied rapidly.
c. Sheep are economical converter of grass into meat and wool.
d. Sheep will eat varied kinds of plants compared to other kind of livestock. This makes them
excellent weed destroyer.
e. Unlike goats, sheep hardly damage any tree

31

f.The production of wool, meat and manure provides three different sources of income to the
shepherd.
g. The structure of their lips helps them to clean grains lost at harvest time and thus convert
waste feed into profitable products.
h. Mutton is one kind of meat towards which there is no prejudice by any community in India
and further development of superior breeds for mutton production will have a great scope in the
developing economy of India.

2. Scope for sheep farming and its national importance

The country has 71.6 million sheep as per 2012-13 annual report of Animal Husbandry
Department and ranks sixth in the world. The contribution of sheep through export of meat is 8
per cent of the total export value of agricultural and processed food products. Sheep skin in the
form of leather and leather products is also exported. Sheep make a valuable contribution to the
livelihood of the economically weaker sections of the society. Amongst the livestock owners the
shepherds are the poorest of the lot.

3.Financial assistance for sheep farming

Loan from banks with refinance facility from NABARD is available for starting sheep farming.
For obtaining bank loan, the farmers should apply to the nearest branch of a Commercial, Cooperative or Regional Rural Bank in their area in the prescribed application form which is
available in the branches of financing bank. The Technical officer attached to or the Manager of
the bank can help / give guidance to the farmers in preparing the project report to obtain bank
loan. For sheep development schemes with very large outlays, detailed reports will have to be
prepared. For high value projects, the borrowers can utilise the services of NABARD
Consultancy Services (NABCONS) who are having wide experience in preparation of Detailed
Project Reports.
4. Scheme formulation
A scheme can be prepared by a beneficiary after consulting local technical persons of State
Animal Husbandry Department, DRDA, Sheep Development Corporation, Sheep Co-operative
society / union / federation and commercial farmers. If possible, the beneficiaries should also
visit progressive sheep farmers and government / agricultural university Sheep farms in the
vicinity and discuss the profitability of sheep farming. A good practical training and experience
in sheep farming will be highly desirable. The sheep co-operative societies established in the
villages as a result of efforts by the Animal Husbandry/Sheep Development Department of State
Government / Sheep Development Board would provide all supporting facilities, particularly
marketing of live animals and wool.

32

AUTOMATIC MILK COLLECTION STATION

A. Introduction:
India is endowed with the largest livestock population in the world. It accounts for about 57.3 per
cent of the worlds buffalo population and 14.7 per cent of the cattle population. Indian dairy
industry is the major contributor to the country's economy surpassing rice in amount. The value
of output of milk is Rs. 3,05,484 crore in 2011-12. The total milk production in the country is
127.9 million tonnes per annum at the end of the Eleventh Plan (2011-12) and the demand is
expected to be 180 million tonnes by 2020. In 1970 under the aegis of NDDB, "Operation Flood"
programme was launched to modernize the dairy sector and flood the 4 metro cities with milk
from dairy cooperatives. By the end of 1996-97, 74,383 village milk producers cooperatives
were organised in 264 districts with an average rural milk procurement of 12.26 million liters per
day. Another step was taken in 1989, to augment rural income by launching Technology Mission
on Dairy Development (TMDD), which aims at applying modern technology to improve
productivity, reduce costs of operation and thus ensure greater availability of milk and dairy
products.
With the liberalization of the Indian economy in 1991, the dairy sector was also delicensed. On
June 9, 1992 GOI issued a Milk and Milk Products Order (MMPO), which was later modified in
the year 2002, according to which the dairy units needs to obtain permissions with respect to
sanitary and hygienic aspects only. With the introduction of Food Safety and Standards (licensing
and Registration of Food Business) Regulations, 2011 with effect from 05 August 2011 all the
food processing units including the Dairy processing units comes under the purview of the act.
Even though India is the highest milk producing country, productivity per animal is very poor.
The organized dairy sector (both cooperatives and private) is presently handling only 24-28
percent of total milk production in the country. Thus leaving a wide scope for enhancing the
procurement, processing of milk and manufacture of milk products for domestic consumption as
well as exports. The quality of milk collected is also poor which is acting as the main deterring
factor in preparation/marketing of different value added products. Even today many parts of the
country are not covered with organized milk procurement and at times the milk is procured only
once a day.
Having made significant strides in production and processing, it is the time to upgrade the quality
of milk by increasing the efficiency of procurement as well as the testing of milk for
quality. In India the milk pricing is based on the fat percentage and to some extent Solid Not Fat
(SNF) in milk. The determination of fat is based on the butyrometer method which is one of the
oldest technology adopted by the Milk Collection Centres/Milk Cooperative Societies. Since
1980's many of the societies have been using Milk o testers for testing the fat percentage in milk
as this is a rapid method compared to former one. Of late Milk Collection Centres/Cooperative
Societies are installing Automatic Milk Collection Stations (AMCUs) (PC based milk collection
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stations, smart automatic milk collection stations and automatic milk collection stations) which
measure the weight of milk, fat contents and gives a print out of payment slip to farmers in each
shift. The systems also facilitates storing 10 days/monthly/yearly data and printing of cumulative
summary of shift as and when needed. The state of art equipment is able to perform 120 to 150
operations in an hour. The milk analyser replaced the milk o testers.

B. Objectives:
financial assistance is extended for purchase of various equipments in the Automatic Milk
Collection Stations with the following objectives.
1. To increase the efficiency and accuracy of fat testing in milk. To test for other constituents of
milk like SNF%, Water % etc,.
2. To reduce the staff of the society/collection centre through automation and economise the
operations by avoiding manual registers.
3. To gain confidence of milk producers through transparent systems and thereby increasing the
milk procurement.

C. Potential areas:
Many of the milk processing plants in cooperative as well as private sector introduced the
Automatic Milk Collection Stations in their procurement network. These stations can be
financed in most of the societies/milk collection centres where daily milk procurement is more
than 350 litres.

D. Beneficiaries:
These units can be established by the Milk Cooperative Societies of the Cooperative Milk Union
or Milk Collection Centre of private dairies. Alternatively individuals also can be encouraged to
set up these stations in tie up with organized dairies.

E. Project details:
1. Components:
Automatic Milk Collection Station is a specially designed integrated unit which is a combination
of several units i.e. automatic Milk Weighing System, Electronic Milk Testing, Personal
Computer with printer and battery for data processing and providing the output. The procurement
centres handling higher quantities of milk can go for modern systems wherein automatic milk
analyser can be used in place of milk testing equipment, ( provides Fat%, SNF%, water % etc).
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These higher procuring agencies can also go for web based data management where in the
farmer wise data from the AMCU will be sent to server and the payment details will be sent to
the bank directly by the milk processing plant. The AMCUs can be made to use dairy to bank
concept where farmers bill amount is directly deposited in its bank account and even without
going in bank, he/ she can withdraw money as per requirement directly from Milk collection
center. Some of the model AMCUs are shown in the figure below.

2. Capacity:
The capacity of Automatic Milk Collection Stations is to analyse 120 to 150 samples per hour.
Based on the equipments used, parameters will be varying.

3. Specifications:
The machinery used should be as per BIS specifications and the broad parameters measured are
as under:
a) Fat measurements : 0 - 13% b) Measuring capacity : 120 to 150 operations per hour. c) Power
supply : AC 220 to 240 watts 5O HZ.
In case of milk analysers, in addition to fat content, SNF content from 3 to 15 % and water
content as well as other parameters also will be measured. .

4. Equipment suppliers:
The equipment are being supplied by various agencies which are as follows: IDMC, Ananad,
Gujarat, DSK Milkotronics, Pune, Maharashtra, Kamadhenu, Ahmedabad, Gujarat DODIA
Himmatnagar, Gujarat PROMPT Baroda, Gujarat, OPTEL Anand, Gujarat, CAPITAL
Electronics Anand, Gujarat, REIL Jaipur, Rajashtan. The list is only indicative and suitable
systems can be purchased from any of the reputed agencies.

5. Functioning:
Each milk pouring farmer will be given with a unique number /card by the Collection Centre in
consultation with Milk Processing unit . When the farmer comes for pouring milk his number or
card will be used for identity. After feeding the number, the sample will be collected for analysis.
Simultaneously his milk will be poured into the container where it is weighed automatically and
based on the fat content and quantum of milk poured the rate will be calculated and payment slip
is printed. If a milk analyser is used other parameters of milk also will be analysed and based on
these parameters and quantity of milk the rate will be calculated and displayed. Som
manufacturers had come up with mobile Milk Collection Units which can be fitted on the vehicle
and milk can be procured from different locations.

F. Advantages of amcus:
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1. Saving in quantity of sample milk

2. Saving of chemicals and detergents
3. Saving of expenditure on glassware
4. Saving in stationery and time
5. Saving in expenditure on staff.
6. Gaining confidence of milk producers through transparent system and increased milk
procurement.

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