NABARD : 25 YEARS OF DEDICATION TO RURAL PROSPERITY

NABARD completed 25 years of its eventful and trailblazing existence on 12 July 2007. Established in 1982, by an Act of Parliament, NABARD's mandate was to provide focused and undivided attention to the development of rural India by facilitating credit flow for promotion of agriculture and rural non farm sector. Emphasizing this in no uncertain terms, its mission statement underscores NABARD's goal to "promote sustainable and equitable agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives". NABARD's functions can be classified into 4 major categories viz. Credit Planning, Financial Services, Promotion and Development, and Supervision. Under Credit Planning NABARD prepares Potential Linked Credit Plan (PLP) annually for each district of the country by assessing potential available in agriculture and rural sector. This serves as a guide for banks and Government agencies to prepare their own investment and credit plans in the district and state. Under its Financial services, it refinances commercial, co-operative and regional rural banks for lending to on farm and non-farm activities. This includes farm activities like minor irrigation, animal husbandry, farm mechanization, forestry, fisheries, land development, horticulture, plantation and medicinal crops and non-farm like rural industries, artisans, handicrafts, handlooms, rural housing, rural tourism and agro processing. Refinance is provided by NABARD for both long term investment credit as well as short term production credit for crop loans and working capital for non-farm activities. A nationwide network of 28 regional offices at the state capitals, a sub-office at Port Blair and 391 district development offices are at hand to cater to this awesome task. Clearly NABARD's benevolent hand has been silently at work in supporting rural resurgence in various ways and its stakes are quite enormous. A glance at the figures will give a fair idea. It has channelised a whopping Rs. 1,21,000 crore under its investment credit programme and RIDF since inception, which includes Rs. 8795 crore disbursed during 2006-07. Under production credit the Bank sanctioned limits of Rs. 12570 crore during 2006-07. NABARD has effectively brought in a number of innovations in the rural credit domains. To quote a few: Formation and Linkage of Self Help Groups, Farmers Clubs, Rural Infrastructure Development Fund, Watershed Development, Kisan Credit Card, District Rural Industries Project, Cluster Development Programme and Rural Innovation Fund.

Self Help Groups (SHGs) Farmers Clubs Rural Infrastructure Development Fund (RIDF) Watershed Development Tribal Development and WADI approach Women and Development District Rural Industries Project (DRIP) Rural Entrepreneurship Development Programme (REDP) Rural Marketing Revival of Short-Term Rural Co-operative Structure (STCCS) Rural Innovation Fund NABARD Consultancy Services (NABCONS) Co-Financing

Self Help Groups (SHGs): One of the major success stories of NABARD, the SHG Bank linkage programme started as a pilot project in 1992 with 500 SHGs. SHGs comprise homogeneous groups of poor people who have voluntarily come together mainly with the idea of overcoming their common problems of low social and economic status. SHGs enable the poor, especially the women from the poor households, to collectively identify, prioritize and tackle the problems they face in their socio economic environment. By pooling their meager resources and using them for lending among themselves, they develop the habit of thrift and the skill of credit appraisal, before getting mature enough to access a loan from banks, which is called credit linkage. Starting with small loans for consumption they soon graduate to bigger loans for setting up of income generating micro-enterprises. Today, NABARD's SHG Bank Linkage Programme boasts of over 26 lakh SHGs and 3.9 crore households influencing the lives of over 16 crore poor population. During the year 2006-07 alone, as many as 458591 groups were credit linked.

Farmers Clubs A popular intervention among both farmers and Bankers, the farmers Club concept was envisaged as an experiment in social engineering, a forum to bring the rural banker and the borrower closer and to propagate the principles of development through credit. Farmers Club is an informal group of 15-20 farmers, one per village, which acts as a medium for accessing and disseminating awareness of modern methods of farming and technological advancements in agriculture in its area. Financial support is provided by NABARD for opening and maintenance of Clubs as well as for organizing training programmes in the respective villages. With corporates and food chains looking for supply chain linkages of farm produce, Farmers Clubs may have an important role to play in joint production and marketing of farm produce. As on 31 March 2007 , there were Farmers Clubs in 534 districts covering 48763 villages.

Rural Infrastructure Development Fund (RIDF): Deficient Rural infrastructure hinders both social and economic development. Economists have explicitly emphasized on the direct correlation between the index of infrastructure development and rural development. NABARD's support to State Governments through RIDF since 1995-96 has brought about a sea change in the shape of upgraded infrastructure in rural areas. Rural roads and bridges under RIDF have improved market access to farmers; check dams and irrigation structures have augmented their water resources. Even drinking water projects and health centres have been supported under the Fund. NABARD so far has sanctioned Rs. 61539 crore for 2,44,025 projects under the Fund. A cumulative position of sector-wise sanctions as on 31 st March 2007 : Irrigation: Rs. 20637 crore, Rural connectivity: Rs. 26935 crore for rural road network and bridges, Power: Rs. 1434 crore Social Sector: Rs. 6988 crore Others: Rs. 5547 crore. A separate window has been created for rural connectivity with villages of population less than 500, with a corpus of Rs. 4,000 crore to support the Bharat Nirman project.

Watershed Development: In a comprehensive effort to enhance productivity of dryland through conserving soil, rainwater and irrigation, NABARD embarked on perfecting its experiments in creating a sustainable cost effective solution to the water harvesting techniques in rural areas. Building on its experience with the KFW funded watershed development programme in Maharashtra , NABARD established a Watershed Development Fund with an initial corpus of Rs. 200 crore in 1999-2000 which now stands at Rs. 602.76 crore. The programme is now being replicated in 124 districts of 14 States.

Tribal Development and WADI approach : With over 8% of the population comprising tribals largely dependent on forests, livestock and agriculture, NABARD found a holistic approach by addressing production, processing and marketing of the produce with WADI as the core of the programme. WADI (small orchard) was found to be an effective tool for arresting migration of tribals from their native habitat. The WADI model evolved out of concerted efforts made in association with Bhartiya Agro Industries Foundation (BAIF). The project also envisages other development interventions like environment, gender and health. Having completed 10 years in Gujarat and 5 years in Maharashtra , the programme has touched 275111 families in 410 villages.

Women and Development Women constitute one third of the labour force. In order to give focus to women in various development activities and increase their access to Bank credit, schemes like Assistance to Rural women in Non-farm Development (ARWIND), Assistance for Marketing of Non- Farm Products of Rural Women (MAHIMA), Development of Women through Area Programme (DEWTA) have been designed to provide exclusive support to women in rural areas.

District Rural Industries Project (DRIP): NABARD launched DRIP, an integrated area-based credit intensification programme, in collaboration with Government, banks and other development agencies with district specific focus. It was introduced in 1993-94 with the objective of creating sustainable employment opportunities in 106 districts all over the country.

Rural Entrepreneurship Development Programme (REDP): In order to generate employment in rural areas, it was felt necessary to develop the entrepreneurial skills of the rural youth. REDP is a promotional programme supported by NABARD to motivate and train educated unemployed rural youth, to set up their own enterprises. So far, 2.32 lakh persons have been trained under the programme under 7792 REDPs.

Rural Marketing: A number of marketing interventions have been made for marketing of rural non-farm products since marketing is a key factor in the sustainability of any such endeavour. With the financial support of NABARD under its promotional programmes like Rural Haats, Rural Marts, participation in fairs, exhibitions and marketing melas, rural artisans and entrepreneurs can get a larger market for their produce and showcase their talent to urban and upcountry markets.

Revival of Short-Term Rural Co-operative Structure (STCCS) NABARD is the implementing agency for the Revival package for the STCCS which mean the State Coop. Banks, District Coop. Banks and the Primary Agricultural Coop. Societies. (PACS). The revival package has been approved by the Govt. of India based on the recommendations of the Vaidyanathan Committee. NABARD has had dialogues with State Govts. and so far 10 states have executed MOU with GoI and NABARD. Apart from being on the national, state and district level implementing committees, NABARD has designed guidelines and training manuals for the special audit of PACS under the Package.

Rural Innovation Fund: In association with Swiss Agency for Development and Cooperation (SDC), NABARD has constituted the “NABARD SDC Rural Innovation Fund (RIF)” to support innovative projects in Farm, Non-Farm and Micro-Finance Sectors leading to creation of livelihood opportunities for the poor. Government and Non-Government Institutions, corporate bodies, financial institutions and individuals can avail funding support for activities involved in development of new products, processes, prototypes, technology etc. which have the poor in their focus.

NABARD Consultancy Services (NABCONS) NABCONS is a wholly owned subsidiary of NABARD, which has established itself as a dependable and professional consultancy services provider in agriculture and allied activities. As on 31 March 2007 , it has cumulatively contracted 487 national and international assignments involving consultancy fee of Rs.25.49 crores.

Co-Financing It has been the experience that Banks are wary of taking credit risk of financing high tech/large scale/ export oriented agricultural projects or those involving sunrise technologies. To instill confidence in banks and ensure credit flow to such projects, NABARD has entered into agreements for co-financing with 14 commercial banks. During 2006-07, seven projects were sanctioned with bank loan of Rs. 145.03 crore and NABARD's share of Rs. 72.42 crore. Floriculture, organic farming, milk processing, ethanol production and agro processing are among the projects sanctioned so far.

NABARD : Role in Training

•	National Bank Staff College, Lucknow
•	National Bank Training Centre, Lucknow
•	Zonal Training Centre, Hyderabad
•	Regional Training Centre, Mangalore
•	Regional Training Centre, Bolpur
•	Bankers Institute of Rural Development (BIRD), Lucknow
The provisions of the Act as stated below very clearly indicate the nature and scope of the developmental mandate of the Bank and its role in training and capacity building with the underlying belief that the process of development cannot be accomplished by credit/refinance alone.
Section 38 of the NABARD Act provides that the Bank shall:
•	maintain expert staff to study all problems relating to agriculture and rural development and be available for consultation to the Central Government, the Reserve Bank, the State Governments and the other institutions engaged in the field of rural development.
•	provide facilities for training, for dissemination of information and the promotion of research including the undertaking of studies, researches, techno-economic and other surveys in the field of rural banking, agriculture and rural development.
•	provide technical, legal, financial, marketing and administrative assistance to any person engaged in agriculture and rural development activities;
•	may provide consultancy services in the field of agriculture and rural development and other related matters in or outside India, on such terms and against such remuneration, as may be agreed upon;
In this context, the role of training in NABARD and the role played by it for capacity building in client institutions, partner agencies and other developmental agencies is important.
For maintaining 'Expert Staff', the bank needs to provide continuous exposure to its officers and staff for up scaling 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 specialized skills which were utilized 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 broad base 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 endeavors 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.

NABARD : Role and Functions

Role and Functions
•	NABARD is an apex institution accredited with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas.
•	It is an apex refinancing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas
•	It takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc.
•	It co-ordinates the rural financing activities of all the institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India and other national level institutions concerned with policy formulation.
•	It prepares, on annual basis, rural credit plans for all districts in the country; these plans form the base for annual credit plans of all rural financial institutions
•	It undertakes monitoring and evaluation of projects refinanced by it.
•	It promotes research in the fields of rural banking, agriculture and rural development

NABARD : Organization Structure

To view the NABARD Act and Preamble..Please click the following link:

http://www.nabard.org/pdf/nbact.pdf

NABARD : Major Activities

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

NABARD : Objectives

Objectives

NABARD was established in terms of the Preamble to the Act, "for providing credit for the promotion of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promoting IRDP and securing prosperity of rural areas and for matters connected therewith in incidental thereto".

The main objectives of the NABARD as stated in the statement of objectives while placing the bill before the Lok Sabha were categorized as under :

The National Bank will be an apex organization in respect of all matters relating to policy, planning operational aspects in the field of credit for promotion of Agriculture, Small Scale Industries, Cottage and Village Industries, Handicrafts and other rural crafts and other allied economic activities in rural areas.

The Bank will serve as a refinancing institution for institutional credit such as long-term, short-term for the promotion of activities in the rural areas.

The Bank will also provide direct lending to any institution as may approve by the Central Government.

The Bank will have organic links with the Reserve Bank and maintain a close link with in.

NABARD : Mission

Mission

Promoting sustainable and equitable agriculture and rural development through effective credit support, related services, institution building and other innovative initiatives.

In pursuing this mission, NABARD focuses its activities on:

Credit functions, involving preparation of potential-linked credit plans annually for all districts of the country for identification of credit potential, monitoring the flow of ground level rural credit, issuing policy and operational guidelines to rural financing institutions and providing credit facilities to eligible institutions under various programmes

Development functions, concerning reinforcement of the credit functions and making credit more productive

Supervisory functions, ensuring the proper functioning of cooperative banks and regional rural banks

NABARD : At a Glance..Sources And Application of Funds

NABARD

Introduction

NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with

1. Providing refinance to lending institutions in rural areas

2. Bringing about or promoting institutional development and

3. Evaluating, monitoring and inspecting the client banks

Besides this pivotal role, NABARD also:

• Acts as a coordinator in the operations of rural credit institutions

• Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development


• Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development

• Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development

Acts as regulator for cooperative banks and RRBs

Some of the milestones in NABARD's activities are:

• Refinance disbursement under ST-Agri & Others and MT-Conversion/ Liquidity support aggregated Rs.16952.83 crore during 2007-08.

• Refinance disbursement under Investment Credit to commercial banks, state cooperative banks, state cooperative agriculture and rural development banks, RRBs and other eligible financial institutions during 2007-08 aggregated Rs.9046.27 crore.

• Through the Rural Infrastructure Development Fund (RIDF) Rs.8034.93 crores were disbursed during 2007-08. With this, a cumulative amount of Rs.74073.41 crore has been sanctioned for 280227 projects as on 31 March 2008 covering irrigation, rural roads and bridges, health and education, soil conservation, drinking water schemes, flood protection, forest management etc.

• Under Watershed Development Fund with a corpus of Rs.613.71 crore as on 31 March 2008, 416 projects in 94 districts of 14 states have benefited.

• Farmers now enjoy hassle free access to credit and security through 714.68 lakh Kisan Credit Cards that have been issued through a vast rural banking network.

• Under the Farmers' Club Programme, a total of 28226 clubs covering 61789 villages in 555 districts have been formed, helping farmers get access to credit, technology and extension services.

RESERVE BANK OF INDIA (RBI)

The Reserve Bank Of India was established on April 1 1935, according to the provision of RBI Act 1934.Initially the Central Office of the RBI was in Calcutta, which was later shifted to Mumbai in 1937.The RBI policies are formulated by the governor at the Central Office. The RBI was nationalized in 1949.

Preamble

The Preamble of RBI states:
"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."

Central Board
The RBI is monitored by a central board of directors. The board is appointed by the Government of India in accordance with the RBI act.

Local Boards

• Local Boards are present in the four metros of Mumbai, Calcutta, Chennai and New Delhi.
• Local Board consists of five members.
• Local Board is appointed by the Central Government.
• Local Board is for a period of four years.

Financial Supervision
The RBI accomplishes the role of financial supervision through the Board For Financial Supervision (BFS).The BFS was initiated in November 1994.

Functions Of BFS

• Streamlining the system of bank inspections.
• Induction of offsite surveillance.
• Consolidating the role of statutory auditors and
• Consolidating the internal defenses of supervised institutions.

Current Focus Of BFS

• Supervise financial institutions.
• Consolidate accounts.
• Deal with legal issues in bank frauds.
• Variance in assessment of nonperforming assets and
• Supervisory rating model for banks.

Legal Framework

Umbrella Acts

• Reserve Bank Of India Act 1934 governs the Reserve Bank functions.
• Banking Regulation Act 1949 governs the financial sector.

Functions of RBI

Monetary Authority:
The RBI is responsible for implementing, formulating and monitoring the monetary policy of India.

Objective: Keeping this authority in mind the RBI is required to maintain price stability and ensure adequate flow of credit to productive sectors.

Regulator And Supervisor Of The Financial System:
The Supreme Financial Body sets down broad parameters of banking operations within which the country's banking and financial system operates.

Objective: This reasonably helps in maintaining public confidence in the system. It in turn protects depositors' interest and provides lucrative banking services to the public.

Manager of Exchange Control:
The RBI is responsible for managing the Foreign Exchange Management Act, 1999.

Objective: It is the nodal agency which facilitates external trade and payment and promotes orderly development and maintenance of foreign exchange market in India.

Issuer Of Currency:
It is the only supreme body which issues and exchanges or destroys currency and coins not fit for circulation.

Objective: This facilitates in giving the public adequate quantity of currency notes and coins and in good quality.

Developmental Role
The RBI since its inception performs a wide range of promotional functions to support national objectives and generate goodwill among the citizens of the country.

Related Functions

Banker to the Government: The RBI performs merchant banking function for the central and the state governments and also acts as their banker. The RBI often advises the Government of the current monetary condition in the state.

Banker to Banks: maintains banking accounts of all scheduled banks. The RBI looks after the functioning of the state banks and grants them license and even cancels the same on account of fraud practice.