Executive Summary

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 in
India. The project contains information about the agricultural
finance operations of NABARD.
NABARD for the smooth running of the organization has
developed many committees and departments of inspection,
which enables for the efficient and effective running of the
organization.
NABARD plays various roles and functions in various fields
related to agricultural and rural promotion and development.
Credit financing one of the major functions of NABARD is further
subdivided into different types of refinance facilities, lower
interest rates, production credit, investment credit, and farm
sector schemes.
The second major function is promotional under which NABARD
has come up with the Kisan Credit Card and other promotional
schemes which is of great convenience to farmers and banks.
They have also developed a research and development fund
with the objective of acquiring new insights into the problem of
agriculture and rural development.
Their fourth major function development deals with credit
planning, which is of great significance. The Watershed
Development Fund development by NABARD is a great
achievement by NABARD as it has become very successful.
Other than this NABARD has undertaken various special
projects such as Adivasi Development Programme etc.
Last but not the least under the supervisory role NABARD has
been entrusted with the statutory responsibility of conducting
inspections of State Cooperative Banks (SCBs), District Central
Cooperative Banks(DCCBs) and Regional Rural Banks(RRBs)
under the provision of the Banking Regulation Act, 1949.

Thus, in conclusion we can say that,

NABARD is established as a development Bank, Act, for

providing and regulating Credit and other facilities for the
promotion and development 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 integrated rural development and
securing prosperity of rural areas and for matters connected
therewith.

It is an apex refinancing agency for the institutions

providing investment and production credit for promoting the
various developmental activities in rural areas.

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 for 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.
Introduction

Agricultural Scenario:

Finance is an essential requirement for every productive

activity. Agriculture is an exception to it. Its importance in India
needs no stressing with agricultural being the most

predominant sector in the economy eve today. India agricultural

is the largest private sector enterprise in the country of over
100 million farmers. It contributes 24% of countrys gross
domestic product and provides food to 1 billion people of the
country. The sector produces 51 major crops, provides raw
materials to countrys agro-based industries and contributes
nearly 1/6th of the total export earning of the country.
Credit supports the farmer as the hangmans rope supports the
hanged. Agricultural credit is indispensable to the cultivators.
Agriculturist cannot carry on his business without outside
finance is a fact proved by history and evidenced by the
appealing indebtedness of the persons engaged in the business
of agriculture. Therefore agricultural credit is a problem when it
cannot be obtained. In India, there is a two-fold problem of
inadequacy and unsuitability.
With a view to fulfill the credit needs of the farmers and to
ensure that it serves the national economy as a dynamic factor
it is essential that a sound system of credit should built up.
Such system should be able to convert the present static credit
into dynamic credit.

NABARD
National Bank for Agricultural and Rural Development is set up
as an apex institution, accredited with 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 India.
The Committee to Review Arrangements for Institutional Credit
for Agricultural and Rural Development (CRAFICARD) set up by
the RBI under the Chairmanship of Shri. B. Sivaraman,
conceived and recommended the establishment of the National
Bank for Agricultural and Rural Development (NABARD) or the

National Bank. The Honble Prime Minister, Smt. Indira Gandhi

on 5 November 1982, dedicated the Bank, which came into
existence on 12July 1982, to the service of the Nation.

It discharges its role as a facilitator for rural prosperity NABARD

is entrusted with:

Providing refinance to lending institutions in rural areas.

Bringing about or promoting institutional development.

Evaluating, monitoring and inspecting the clients banks.

NABARD operates throughout the country through its 28

Regional Offices and one sub-office, located in the capitals of all
the states/union territories. It has 336 District offices across the
country, one Sub-office at Port Blair and one special Cell at
Srinagar. It also has 6 training establishments.

Some of the milestones in NABARD's activities are:

1.
With its effective overseeing and monitoring of the
implementation of the Government of India's programme to
double the flow of credit to agriculture over a three-year period
from 2004-2005, the total disbursement of credit reached Rs
1,25,309 during 2004-2005. Ground level credit flow to
agriculture and allied activities reached Rs 1, 57,480 crore in
2005-2006.

2.
Refinance disbursement to commercial banks, state
cooperative banks, state cooperative agriculture and rural
development banks, RRBs and other eligible financial
institutions aggregated Rs 8,622.37 crore.

3.
As on 31 January 2007 through the Rural Infrastructure
Development Fund (RIDF), Rs,59,795.35 crore have been
sanctioned for 2,31,702 projects covering irrigation, rural roads
and bridges, health and education, soil conservation, drinking
water schemes, etc. Developing among hosts of other
infrastructures, RIDF will create 20971 schools, 6239 primary
health centers and provide drinking water supply in 7267
villages

4.
Watershed Development Fund , with cumulative sanctions
of Rs.578.95 crore for 427 projects in 124 districts of 14 states,
has created a Peoples Movement in rural India.

5.
Farmers now enjoy financial access and security through
582.50 lakh
Kisan Credit Cards that have been issued through a vast rural
banking network.

Agricultural Role and Functions

Credit functions
A.

Interest Rates:

Margin money

The beneficiary's contribution to the project cost is

necessary in order to ensure his stake in the investment. Such

margin money varies from 5% to 25% depending on the type of

investments and the category of the beneficiaries. The margin
money can be by way of contribution in cash or own or family
labour. Large farmers, firms, corporate borrowers including
state-owned corporations, forest development corporations
provide margin money up to 25% p.a. of the investment cost.

Special focus

Removal of regional and sectoral imbalances is one of the

thrust areas and hence preference is given to the needs of the
underdeveloped areas. For example, the development of the
north-eastern region has been a key programme and special
efforts have been made through refinance offered on liberal
terms and other supportive measures so that the rural credit
delivery system in the region is strengthened.

Monitoring

District-oriented monitoring studies are conducted to

evaluate the performance of the ongoing agricultural
development schemes sanctioned. Specific sector studies are
also undertaken like floriculture, mushroom, aqua culture, agroprocessing, etc. to get an insight into the problems and
prospects of these sectors.

Guidelines are often issued for formulation of high-tech

and export-oriented projects in farm and non-farm sectors.
Besides, even consultancy is also offered for projects, including
appraisal of projects even in cases where refinance is not
secured from the bank.

B.

Production Credit:

This is a short-term refinance facility, aimed at supporting:

Agricultural production operations and marketing of crops

by farmers and farmers cooperatives

Marketing and distribution of inputs like fertilizers, seeds

and pesticides

Production and marketing activities of village cottage

industries, handicrafts, handlooms, power looms, artisans,
small scale and tiny industries and other rural non-farm
enterprises.

1.

Seasonal Agricultural Operations (SAO)

In order to ensure availability of timely credit to farmers, banks

follow production-oriented system of lending. The system has
features like assessment of credit, needs based on area brought
under cultivation, crop wise scales of finance, provision of credit
for purchase of inputs like fertilizers and pesticides.

Refinance is provided for production purposes at concessional

rate of interest to state cooperative banks (SCBs) and regional
rural banks (RRBs) by way of sanction of credit limits. Each
withdrawal against the sanctioned credit limit is repayable
within 12 months.
Rate of interest on NABARD refinance will be linked to NPA
levels as under: Level of NPAs
ROI (%)
p.a.
Up to 20%
>20%

5.25
5.75

2.
Refinance support in the form of consolidated limit to SCBs
on behalf of eligible DCCBs for financing approved short term
agricultural/allied and marketing activities which are not
covered under normal credit covering secured advances.
Refinance is expected to provide liquidity to co-operative banks
and enable them to effectively leverage their high cost funds to
boost credit flow to the agricultural sector. R.O.I 6.50% p.a.

3. Refinance of SCBs on behalf of DCCBs and RRBs for financing

Marketing of Crops for affording reasonable opportunities for
remunerative price to growers for their produce by enabling
them to hold on to the produce for time being. Such advances
are permitted against pledge of agricultural produce kept in
own godowns also.
Ceiling of Rs. 5 lakh per borrower.
Maximum period of credit up to 12 months. R.O.I 6.00% p.a.
4. Refinance to SCBs/DCCBs and RRBs for providing Medium
term (Non schematic) loans for 22 approved agricultural
investment purposes.
R.O.I 5.75% p.a.

5. Distribution of Agri inputs

With a view to ensuring timely supply of agri inputs like

fertilizers, pesticides etc. a line of credit is made available to
cooperative banks for financing Apex/Primary Societies for
stocking and distribution of agri inputs by way of sanction of
yearly limits. Each drawal is repayable within a period of 120
days.

6. Pisciculture Activities

Refinance facilities is extended to cooperative banks and RRBs

for meeting the working capital requirements of farmers in
pisciculture activities by way of sanction of ST credit limits.
Each drawal is repayable within 12 months.
Special Initiatives

Special line of credit for oilseeds and pulses production

Special line of credit for development of tribals in

predominantly tribal areas

Liquidity support to cooperative banks and RRBs for

providing relief to farmers in distress and farmers in arrears

Revision in methodology for fixing scale of finance.

C.

Investment functions:

a.

Purpose :

Investment in agriculture and allied activities such as minor

irrigation, farm mechanization, land development, soil
conservation, dairy, sheep rearing, poultry, piggery, plantation/
horticulture, forestry, fishery, storage and market yards, biogas and other alternate sources of energy, sericulture,
apiculture, animals and animal driven carts, agro-processing,
agro-service centers, etc.
b.

Loan Period: Up to a maximum of 15 years.

c.

Criteria for Refinance:

Technical Feasibility of the project

Financial viability and bankability

Organizational arrangements for credit supervision.

d.

Disbursement:

Minor Irrigation:

The disbursement of Rs. 8514.33 crore with 30,440 projects

under minor irrigation accounted for a share of 32.6 percent of
the total disbursement, NABARD continue to make the largest
drawal under this sector with a share of 74 percent. The
disbursement for minor irrigation during the year under
government sponsored programmes like IRDP, SC/ST Action
plan, etc. amounted to Rs. 44 crore, bringing the total
disbursements under the sector to Rs. 588 crore.

Farm Mechanization:

The share of farm mechanization constituted about 30 percent

of the total disbursements, SCARDBs, accounted for about 50
percent of the disbursements. Five States, viz. U.P, Rajasthan,
Gujarat, Punjab and Haryana accounted for about 62 percent of
the total disbursement.

Plantation and Horticulture:

The SCARDBs have been promoting investment in Plantation

and Horticulture activities on a significant scale, out of total
disbursement of Rs. 182 crore, SCARDBs accounted for 65
percent, followed by CBs16%.

Animal Husbandry:

The disbursement under dairy development registered a sharp

increase of 29 percent over the previous year and reached a
level of Rs. 2345 crore accounting of the total refinance
disbursement of the ninth plan.

Special Focus

Removal of regional / sectoral imbalance:

NABARD considers removal of regional and sectoral imbalance

as one of the thrust areas and gives preference to the needs of
less developed areas in terms of allocation of resources,
quantity of refinance etc.

Special focus for North Eastern state:

For the development of the north eastern region, the bank has
been making special efforts through refinance on liberal terms
and other supportive measures for strengthening the rural
credit delivery system.

ADFCs:

Agricultural Development Finance Companies (ADFCs) for

financing hi-tech/commercial ventures, with NABARD as chief
promoter, holding 26% equity, have been set up in Andhra
Pradesh, Tamil Nadu and Karnataka.

Agricultural Operations of NARBAD

REFINANCE OPERATIONS OF NABARD

Contribution of Beneficiaries:

The borrowers have to contribute a sum of money to the total

investment cost. The limit of contribution depends upon the
status of the borrower, such as, small, medium or large farmers
and the nature of investment. In the cases of small farmers, the
beneficiaries contribution (including obligatory purchase of
shares, own labour and other contribution in cash or kind) is a
minimum of 5 percent of investment cost for all purpose. In the

case of medium farmer it is a minimum of 10 percent (7

percent for two or more farmers in a group loan). But, for the
purpose of pump sets under minor irrigation the beneficiaries is
10 percent. In the cases of corporate bodies, a still higher down
payment is stipulated which is not less than 20 percent. It
depends on, the type of project, viability etc. In the cases of
schemes which capital subsidy, particularly, for small and
marginal farmers and landless laborer, the subsidy is treated as
down payment of the borrower, thus, providing relief of the
weaker sections. Similarly, in the cases of all such schemes
financed by LDBs, the down payment by the ultimate
beneficiaries is included in the mandatory share capital
contribution as per roles of the Bank.

Refinance Amount:

The financing banks/State Governments are required to make

certain stipulated level of contribution for financing the project.
The amount of refinance sanctioned by the NABARD ranges
between 50 percent of the bank loans. For priority sectors, like,
minor irrigation, land development. Integrated Rural
Development Programme (IRDP) and other programmes for the
benefit of weaker sections, the higher amount of refinance is
available. The NABARD has also fixed the higher rate of
refinance in the cases where advances are made by the SLBs.
Backward entire North Eastern and eastern regions will also be
benefitted through this type of arrangement.

Refinance Security:

State Government, or the financing bank should, guarantee the

refinancing of the bank and at the same time, furnish other
security to the satisfaction of the National Bank. There is a

provision of waivement if the security or Government

guarantee for any eligible institution or any class of eligible
institution on the merits of each case. Generally, the National
Bank waives security in the cases of CBs including RRBs
because of the operational problems in creating sub-mortgage
or hypothecation of security in the case of SCBs, the refinance
should be guaranteed by the State Government. This guarantee
can be waived by the National Bank if the SCBs fulfill certain
conditions. In the case of LDBs, the special development
debentures should be guaranteed by the concerned State
Government. Under the provision of the NABARD Act, 1981,
this is also provided that all the securities obtained by the
borrowing institution from the ultimate borrowers should be
held in trust on behalf of the National Bank according to section
29(2), provided therein.

Evaluation Fee and Period Loan:

The banks are allowed to charge 0.5 percent evaluation fee of

the cost of investment foe processing charges of loan
applications under the provisions of the NABARD Act,1981, the
NABARD is authorized to fix the maximum period of loan up to
25 years. This maximum period of loan fixed by the National
Bank depends upon the nature of development and economics
of the investment. Under the IRDP advances the minimum
period of loans and the grace period required for each type
investment has beep specified to ensure that too short maturity
periods are not fixed. The maturities of loans are fixed on the
basis of repaying capacity but not exceed the useful life of the
assets financed. Generally such, loan maturities do not exceed
15 years.
In the cases of financing to small farmers maximum repayment
period fixed is 9 years for the pump sets and 15years for all
other minor irrigation loans. In the cases of other farmers this
period is fixed 9 years for the same purpose mentioned above.
For lending for diversified purposes repayment periods are

based on repaying capacity of the beneficiaries but in case it

will exceed 15 years.
In some cases the gestation or grace period is allowed before
repayment starts. In the case of minor irrigation and land
development purposes, generally, the grace period is given up
to where 23 months investments like, plantation, horticulture
and forestry where the gestation period is longer, a suitable
grace period is provided which is based on type of investment
keeping the fact, in the view that the beneficiary is not called
upon to repay till the plantations reach economic bearing stage.
In such cases the provision to defer the interest is allowed
during gestation period if it is warranted and the financing bank
is agreeable to defer the interest in the general interest of
farmers.

Repayment of Loans:

The repayment from different to NABARD is drawn up at the

time of each drawal of refinance, if the refinance from above
mentioned banks is more or less coincide with the agreed dates
for collection from ultimate borrowers as per the schedule given
below:

All repayment of loans eligible for refinance and due from

borrowers.
Repayment of finance on or before.
1)
From January to 30 June of each year.
year.

31st July each

2)
From 1st July to 31st December of each year. 31st January
to subsequent year.

Eligible Refinancing Institutions:

The eligible institutions for the purpose of obtaining refinance

facilities from NABARD are SLDBs, SCBs, CBs and RRBs
(Grameen Banks). Various types of refinances accommodations
are provided by the NABARD.
The short term (ST) refinance is provided to SCBs on behalf of
CCBs in such states with three-tier co-operative credit
structure. In such states where three tier structure does not
exist, refinance is provided to SCBs the purpose for which ST
refinance facility is provided are crop loans, marketing crops,
inputs distribution, working capital requirements of cooperative sugar factories, procurement of raw materials,
production and marketing, activities of weavers and other
industries societies and production and marketing activities of
rural artisans. But the period of such type of refinance does not
exceed 18 months.
The medium term (MT) refinance facility for the purpose of
approved agricultural purposes and conversion of ST crop loans
into MT loans due to natural calamities and enemy actions is
provided by NABARD to SCBs. But for the purpose of purchase
of shares of processing societies refinance is available to SCBs
only. This type of MT refinance accommodation is provided from
18thmonth to 7 years. Some other medium and long term (not
exceeding 25 years) accommodations are provided to SCBs,
LDBs, RRBs, CBs for the purpose of fixed investment in
agricultural and non-farm rural activities under schematic
lending. Composite credit is also sanctioned by NABARD to
RRBs for all the purposes as discussed earlier other than
working capital requirements of co-operative sugar factories
and purchase of shares of processing societies.
Purposes of Refinance
Purposes, for which the NABARD provides refinance support,
are given below:

Farm Activity
Short Term
a.

Seasonal agricultural operations (SAO),

b.

Marketing of Crops,

c.

Stocking and distribution of Agri-inputs,

d.

Pisciculture Activities,

e.

Other than SAO.

Medium to Long Term

a.

Approved agricultural purposes,

b.

Conversion loans,

c.
Purchase of shares in the co-operative sugar factories and
other proceeding societies,
d.
Various minor irrigation investment, such as, construction
of dugwells, dug-cum-bore wells, filter points, shallow/ medium/
deep tube-wells, lift irrigation units, agricultural pump-sets,
sprinkler irrigation, living of water coursed etc.
e.
Farm mechanization, including tractors, power tilters,
threshers, etc.
f.
Land development soil conservation, shaping of land for
irrigated or dry land farming,
g.
Plantation and horticulture crops, such as, coffee, tea,
rubber, cashew, coconut, grapes, spices etc.
h.
Animal husbandry programmes covering dairy, poultry,
sheep, goat, piggery, etc.
i.

Inland and marine fisheries,

j.

Storage godowns and market yards,

k.
Forestry including growing specified varieties of timber for
paper, pulp and fiber,
l.

Activities under IRDP,

m.

Work animals, animal driven carts, etc. and

n.
Other purposes like, dry land farming, common are
development projects, export oriented agricultural project etc.
And other various Non- Farm Activities.

Mechanization of agricultural

Mechanization of agricultural has two forms mobile

mechanization and the stationery types of mechanization. The
former attempts to replace animal power in which agriculture
has been based for very many centuries; while the latter aims
at reducing the drudgery of certain operations which have to be

performed either by human labour or by a combined effort of

human beings and animals.

Mechanization may be either partial or complete. It is partial

when only a part of the farm work is done by machine. When
animal or human labour is completely dispensed with by power
supplying machines, it is termed as complete.

It not only includes the use of machines whether mobile or

immobile, small or large, run by power and used b village
operations, harvesting and thrashing but also includes power
lifts for irrigation, trucks for haulage of farm produce,
processing machines, dairy appliances for cream separation,
butter making, oil pressing cotton ginning, rice hulling and even
various electrical home appliances like radios, irons, washing
machines, vacuum clearness and not plates.
The importance of Agro service Centers has been recognized
and GOI has given emphasis to make it a success. The scheme
aims at supporting 5000 ventures annually for individuals or on
joint group basis.

Benefits of Mechanization:

It increases production. Mechanization increases the

rapidity and speed of work with which farming operations can
be performed.

It increases efficiency of labour in agricultural and raises

productivity per worker. By its nature it reduces the quantum of
labour required to produce a unit of output.


Mechanization increases in the yield of crops per unit of
area, has been traced from 40 to 50 percent in the case of
maize; 15 to 20 percent in bajra and paddy; 30 to 40 percent in
jowar, ground nut and wheat.

It results in low cost of work. The unit cost is reduced by

large size of farms and by more intensive farming.

It brings in other improvements in agricultural technique,

sphere of irrigation, land reclamation and the prevention of soil
erosion, irrigation of crops in India can be obviated by a more
scientific approach.

It solves the problem of labour shortage; use of machines

can be easily replaced by human and animal power.

It results in better use of agricultural lands. The

substitution of gasoline tractor for animal power means
reduced demand. The use of machine energy, therefore, leads
to good agricultural production.

Schemes on Farm Machinery

Refinance facility for financing purchase of second hand
tractors was extended to all states and was made available
even in the case of second resale of tractors.
Loans for repairs/renovation of tractors were made available
even during the currency of the earlier loan, irrespective of a
ailment of loan for purchase of tractors. Further, the banks were

allowed to extend loan towards the cost of repairs on account

of damages caused to the tractors due to accidents.
The margin money requirement was reduced for purchase of
new tractors and second hand tractors to 5 and 10 per cent,
respectively, of the investment cost.
The scheme is open to Agriculture Graduates/Graduates in
subjects allied to agriculture like agricultural engineering,
horticulture, animal husbandry and forestry, dairy, veterinary,
poultry farming, pisciculture etc.
Interest rate for ultimate borrowers: Banks are free to decide
the rate of interest within the overall RBI guidelines. However,
for working out the financial viability and bankability of the
model project we have assumed the rate of interest as 12% p.a.
Repayment: The period of loan will vary between 5 years to 10
years depending on the activity. The repayment period may
include a grace period (to be decided by the financing bank as
per the individual scheme) of a maximum of 2 years.

Model Bankable Agricultural Projects.

The Technical Services Department of NABARD is preparing and

bringing model bankable agricultural projects in the areas of
Minor Irrigation, Land Development, Plantation & Horticulture,
Agricultural Engineering, Forestry and Wasteland, Fisheries ,
Animal Husbandry and Biotechnology. Besides these traditional
areas, State specific area development projects and profiles in
the emerging thrust areas of Medicinal & Aromatic Plants,
Processing of Fruits & Vegetables have also been prepared for
dissemination among financing banks
Minor Irrigation

Drip Irrigation

Drip irrigation, also known as "trickle" irrigation, is the latest

method of water management. Under this system, water is
carried to the plant under low pressure, through small diameter
plastic pipes and delivered at the root zone, drop by drop
through drippers. Drip irrigation is widely practiced and
established method of irrigation in developed countries and is
slowly gaining popularity in India. It is most suited for
horticulture crops, vegetables etc. and finds applicability in
hard rock areas where groundwater is scarce and helps in
optimization of the limited water resources.
Govt. of India under Centrally sponsored Scheme for small and
marginal farmers to increase irrigation, provides subsidy to the
extent of 50% of the cost of the equipment, the balance is
available by institutional credit. Bankable schemes have to be
formulated for availing bank loans.
Repayment period: The repayment period of loan for drip
irrigation system would be 10 to 15 years. (minimum 10 years
and maximum 15 yrs. including gestation period of 11 months)
for small and marginal farmers.
Rate of Interest: As applicable from time to time.
Dug wells

The scheme aims to provide financial assistance for

construction of 150 dug wells with pump sets to individual
farmers for irrigation development through groundwater
sources. These wells would mostly benefit small and marginal
farmers in the area where at present irrigation facilities either
by surface or groundwater sources are inadequate.
Infrastructural facilities like road, power lines and extension
services by the state government are available for successful
implementation of the minor irrigation programme. Majority of
beneficiaries (70%) are in the small and marginal farmers
category.
Repayment Period: For small and marginal farmers, the loan
repayment period of a dug well would be 11 years excluding a
gestation/grace period of 23 months and for pump set 9 years.
Rate of Interest: The present (2003-04) refinance rate to the
financing bank for minor irrigation investments is 5.50%. The
minimum down payment would be 5%.

Land Development

Biopesticide Unit

Pest problem is one of the major constraints for achieving

higher production in agriculture crops. India loses about 30% of
its crops due to pests and diseases each year. The damage due
to these is estimated to be Rs.60,000 crores annually. The use
of pesticides in crop protection has certainly contributed for
minimizing yield losses. The pesticides, which are needed to be

applied carefully, only when the threshold limits of the pest

population is exceeded. The indiscriminate and unscientific use
of pesticides has led to many problems, such as pests
developing resistance, resurgence of once minor pest into a
major problem besides environmental and food safety hazards.
The projects on manufacturing biopesticide products would be
considered for refinance support by NABARD Therefore, all
participating banks may consider financing this activity subject
to their technical feasibility, financial viability and bankability.
Interest Rate: Interest rate will be determined by RBI/NABARD
from time to time. However, at present banks may decide
interest rate. .
Repayment Period: 7 years as repayment period with one year
grace.
Refinance Assistance: NABARD provides refinance assistance @
90% of bank loan. However, it may vary from time to time.

Animal Husbandry
Dairying is an important source of subsidiary income to
small/marginal farmers and agricultural laborers. 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 laborers.

Margin Money:
NABARD had defined farmers into three different categories
and where subsidy is not available the minimum down payment
as shown below is collected from the beneficiaries.

Sr.No.
Category of Farmer Level of predevelopment return
to resources
Beneficiary's Contribution
(a)

Small Farmers Up to Rs.11000

(b)

Medium Farmers

(c)

Large Farmers Above Rs. 19251

5%

Rs.11001 - Rs.19250

10%

15%`

Interest Rate: As per the RBI guidelines the present rate of

interest to the ultimate beneficiary financed by various
agencies are as under :

No. Loan Amount

CB's and RRB's SLDB/SCB

(a) Up to and inclusive of Rs.25000

SCB/SLDB subject to minimum 12%

12% As determined by

(b)

Over Rs. 25000 and up to Rs. 2 lakhs

(c)

Over Rs. 2.0 lakhs

13.5%

As determined by the banks

-do-do-

Repayment Period of Loan: The loans will be repaid in suitable

monthly/quarterly installments usually within a period of about
5 years. In case of commercial schemes it may be extended up
to 6-7 years depending on cash flow analysis.

Insurance: The animals may be insured annually or on long

term master policy, where ever it is applicable. The present
rate of insurance premium for scheme and non scheme animals
are 2.25% and 4.0% respectively.

Small Road and Water Transport Operators Scheme (SRWTO)

Borrowers:
Individuals, groups of individuals including partnership /
proprietary firms and co-operative enterprises would be eligible
for assistance under the scheme. The borrowers should be from
the rural areas and should utilize the vehicle mainly for
transportation of rural farm and non farm products and inputs
and passengers to/from marketing centers.
Vehicles:

The vehicles should be duly registered with Regional

Transport Authority (RTA) as public transport vehicle.

The number of vehicles to be financed shall be subjected

to the ceiling on such number as stipulated by RBI for financing
under priority sector lending (at present 10 vehicles)

Water transport units such as boats, launches, etc. have

been brought within the ambit of SRWTO scheme

Financing small refrigerated vans, bulks carriers for edible

oil, petroleum, etc. would also be eligible for refinance.

Two wheelers are not eligible for refinance under this

scheme and can be covered under service sector activities.

Vehicles registered as private carriers will not be covered

under the scheme.

Kisan Credit Card Scheme

Genes

Honble Union Finance Minister announced in his budget

speech for 1998-99 that NABARD would formulate a Model
Scheme for issue of Kisan Credit Cards to farmers, on the basis
of their land holdings, for uniform adoption by banks, so that
the farmers may use them to readily purchase agriculture
inputs such as seeds, fertilizers, pesticides, etc. and also draw
cash for their production needs.

NABARD formulated a Model Kisan Credit Card Scheme in

consultation with major banks.

Model Scheme circulated by RBI to commercial banks and

by NABARD to Co-operative banks and RRBs in August 1998,
with instructions to introduce the same in their respective areas
of operation.

Objectives

As a pioneering credit delivery innovation, Kisan Credit Card

Scheme aims at provision of adequate and timely support from
the banking system to the farmers for their cultivation needs
including purchase of inputs in a flexible and cost effective
manner.

Contents of Credit Card

Beneficiaries covered under the Scheme are issued with a

credit card and a pass book or a credit card cum pass book
incorporating the name, address, particulars of land holding,
borrowing limit, validity period, a passport size photograph of
holder etc. which may serve both as an identity card and
facilitate recording of transactions on an ongoing basis.

Borrower is required to produce the card cum pass book

whenever he/ she operate the account.

Salient features of the Kisan Credit Card (KCC) Scheme.

Eligible farmers to be provided with a Kisan Credit Card and a

pass book or card-cum-pass book.
Revolving cash credit facility involving any number of drawals
and repayments within limit.
Limit to be fixed on the basis of operational land holding,
cropping pattern and scale of finance. Entire production credit
needs for full year plus ancillary activities related to crop
production to be considered while fixing limit.
Card valid for 3 years subject to annual review. As incentive for
good performance, credit limits could be enhanced to take care
of increase in costs, change in cropping pattern, etc.
Each drawal to be repaid within a maximum period of 12
months.
Conversion of loans also permissible in case of damage to crops
due to natural calamities.
Security, margin, rate of interest, etc. as per RBI norms.
Operations may be through issuing branch (and also PACS in
the case of Cooperative Banks) through other designated
branches at the discretion of bank.
Withdrawals through slips/ cheques accompanied by card and
passbook.
Water Shed Fund
Watershed Development Fund (WDF)
Pursuant to the announcement by the Honble Union Finance
Minister in the Union Budget for the year 1999-2000, a
Watershed Development Fund (WDF) has been set up in
NABARD with a corpus of Rs.200 crore equally contributed by
the Government of India and NABARD, with an objective to

promote participatory watershed development throughout the

country.
The Fund envisaged coverage of 100 priority districts in 14
states over of 3 years. The participating states can avail loans
out of WDF for implementing watershed projects through the
village level communities, non-governmental organizations
(NGOs) or project facilitating agencies (PFAs) in the selected
districts. The loans are repayable over a period of 9 years
(including a grace period of 3 years) and carry a rate of interest
of 4.5% per annum at present.
One third portion of the Fund is earmarked for promotional
efforts, capacity building, replication of Indo German Watershed
Development Programme (Maharashtra) or any other
successful model and Self Help Group (SHG) related activities
particularly targeted at women in the project areas.
As on 31st March 2004, the Rs. 154.61 crore has been added to
the corpus by way of interest on unutilized portion and excess
margin on RIDF loans.

Schemes under Pre sanction procedure:

1)

Term Loan to SSI units (through CBs & Scheduled PCBs)

Borrowers
Individuals, Proprietary / Partnership concerns, Private/ Public
Limited Cos. Promotional / Developmental Organizations, State
level Federations / Corporations, Joint Sector Undertakings.
Purpose
Setting up of new units and modernization / renovation /
expansion / diversification of existing units (other than agroindustries).
Eligible items for investment:


Land and Site Development (including cost of land up to
margin money required to be brought in by the borrower).

Construction of work shed (including civil structure,

godowns for storage, market outlets and other essential
amenities).

Plant and machinery (including machinery / equipment

required for packaging and preservation).

Equipment and tools.

Delivery van.

Project formulation and consultancy charges.

Preliminary and pre-operative expenses.

Margin for working capital.

Repayment Period:
3 to 10 years with moratorium of 12 months.
Project Finance for Agro-Industries (through CBs, Scheduled
PCBs & SCBs)
Borrowers
a)
State level corporations such as agro-industries
corporations, forest/tribal development corporations, KVIC/
KVIB, state level co-operative societies/ federations, cooperative marketing/ processing and industrial societies, joint
sector undertakings registered societies in KVIC KVIB fold.
b)
Public/ private limited companies, partnership firms and
proprietary concerns.
Items eligible for term-loan assistance.
Cost of land for agriculture, site development, construction of
work sheds/ building, plant and machinery, equipment and
tools, cost of technology up gradation, technical know-how and
engineering, preliminary and pre-operative expenses, project

formulation and consultancy fees, acquisition of transport

vehicle, preservation including cold storage, packaging and
marketing, etc.
Repayment Period:
3 to 10 years with moratorium of 12 months.
Debt Equity Ratio 3:1.

Scheme for setting up of Agriclinic and Agribusiness centers

A scheme for setting up agriclinics and agribusiness centers by

agriculture graduates has been launched by GOI with the
support of NABARD. These centers will provide a package of
input facilities, consultancy and other services. They will
strengthen transfer of technology and extension services and
also provide self employment opportunities to technically
trained persons. MANAGE is the nodal agency for imparting
training under the scheme. List of trained graduates is sent to
various banks in the region for financial assistance. As on
31.08.2006, 10856 agri graduates have received training and
3386 ACABC units have been set up across the country, of
which 2123 units have been set up with financial assistance
from banks.
Initiatives taken for promotion of the Scheme:

RBI has classified loans to agri-clinics and agribusiness

centers as direct agricultural loans, even though input supply is
normally classified as indirect loans to agriculture.

Margin money/collateral requirement has been waived for

loans upto Rs.5 lakh.


Refinance support under ARF is being allowed. Shortfall in
margin money/down payment by the borrower can be
supported out of soft loan margin money assistance fund of
NABARD subject to a maximum of 50% of margin prescribed by
banks. Such soft loan assistance for margin money from
NABARD to banks would be without interest, but the banks may
levy service charge which is 2% p.a.

Soft loan assistance for margin money may be availed

irrespective of a ailment of refinance from NABARD.

Rate of interest on refinance from NABARD has been fixed

at 5.5% irrespective of the size of the loan.

A target of financing at least 10 units of Agriclinics &

Agribusiness Centers in each district has been set. Concerted
efforts have been initiated to increase the credit flow for the
activity.

Crop Insurance
In pursuance of the announcement made in the Union Budget,
2002-03 for setting-up of an Agriculture Insurance Corporation
for farmers, a new Company, viz., Agriculture Insurance
Company of India Ltd. (AICI) was established in 2002 with the
authorized and paid up capital of Rs.1,500 crore and Rs.200
crore, respectively. 624.37 lakh farmers have been covered
under the scheme. The main objective of the NAIS is to protect
the farmers against losses suffered by them due to crop failure
on account of natural calamities, such as, drought, flood,
hailstorm, cyclone, fire, pest / diseases, etc., so as to restore
their credit worthiness for the ensuing season.
The premium rates in respect of food crops and oilseeds are
determined on the basis of flat rates of premium or actuarial
rates whichever is less as per the scheme in accordance with
the decision of GOI. The rates are ranging from 1.5 -3.5% of
sum insured, under both kharif and rabi crops.
The AICI has introduced Varsha Bima in a few districts. The
basic objectives of Varsha Bima are to guarantee financial
compensation to the insured in the event of rainfall adversity,
to facilitate ready flow of financial liquidity in rural sector
through expeditious claim settlements in adverse years, to
enhance confidence level of the insured by insulating him
against weather risks and to help stabilize farm income
particularly in disaster years. The Govt. of India had set up a
Working Group to examine various aspects related to Crop
Insurance. The Working Group in its report has suggested
several refinements to make the insurance product more
farmer friendly.
Swarojgar Credit Card

Swarojgar Credit Card Scheme (SCC Scheme) was introduced in

September 2003 consequent upon the announcement made by
Honorable Prime Minister in his Independent Day Speech on 15
August 2003.

SCC is a credit delivery mode and not a purpose. Coverage of

SCC will not make a unit ineligible for subsidy. Banks can issue
SCCs to target borrowers of SCC scheme for disbursing credit
under any schemes whether they are covered under subsidy or
not.

Objective:

SCC Scheme aims at providing adequate and timely credit

i.e. working capital or block capital or both to small artisans,
service sector, fishermen, self employed persons, rickshaw
owners, other micro-entrepreneurs, SHGs, etc from the banking
system in a flexible, hassle free and cost effective manner.

Farm sector activities like fisheries, dairy, etc. can also be

covered under the scheme. Generally such of the selfemployment activities which have regular turn over/income
stream on short-interval basis can be covered under SCC
scheme.

Vikas Volunteer Vahini (VVV)

It is launched to spread the message of development through
credit. The VVV consist essentially of small farmers, rural
artisans and other persons of small means who have
successfully put into practice the five principles of credit. The
five principles of credit are :


The credit must be used in accordance with suitable
methods of science and technology.

Optimum productivity and income of the credit issued.

The part of the additional income created by use of credit

must be saved.

The terms and condition of credit must be fully respected.

Loan installments must be repaid in time and regularly.

Farmers Club Programme

National Bank for Agriculture and Rural Development (NABARD)

encourages banks to promote Farmers' Clubs in rural areas
under the Farmers Club Programme, earlier known as Vikas
Volunteer Vahini (VVV) Programme. The Programme was
launched by NABARD in November 1982 to propagate the five
principles of Development through Credit.
Farmers Clubs are grass root level informal forums. Such Clubs
are organized by rural branches of banks with the support and
financial assistance of NABARD for the mutual benefit of the
banks concerned and rural people.

The broad functions of the Farmers Clubs would be to :

Coordinate with banks to ensure credit flow among its

members and forge better bank borrower relationship,

Organize minimum one meeting per month and depending

upon the need, there would be 2-3 meetings per month. Nonmembers can also be invited to attend the meetings,

Interface with subject matter specialists in the various

fields of agriculture and allied activities etc., extension

personnel of Agriculture Universities, Development

Departments and other related agencies for technical knowhow
up gradation. For guest lectures, even experienced farmers who
are non members from the village/ neighboring villages could
be invited,

Organize/facilitate joint activities like value addition,

processing, collective farm produce marketing, etc.; for the
benefit of members. They can also sponsor / organize SHGs,

Market rural produce and products.

Credit Planning by NABARD

Credit Planning and Monitoring Support

NABARDs basic approach for agricultural development is aimed

at improving the productive capacity of the agricultural
economy. The share of private sector investment in the Gross
Capital Formation (GCF) in agriculture has been steadily
increasing over the years. Credit is a very important component
of private investment. The productivity of these investments is
dependent on area specific resource endowment, technological
opportunities and infrastructure. Proper planning of investment
activities, keeping these factors in view, is necessary to
improve the capital efficiency.
Credit Planning therefore, assumes great significance. The
variation in the resource potential, strategies relevant for

development and appropriate planning and monitoring

mechanism from region to region necessitates decentralized
micro finance level planning.

Potential Linked Credit Plans (PLPs)

NABARD started preparing PLPs with district as a unit of

planning from 1988-89. These plans give an indication of
potential available for credit supported investment in
agriculture and other rural development activities. The PLPs
also indicate existing infrastructure gaps, anticipated
infrastructure development by way of public investment during
the year that would facilitate credit absorption, development al
programmes of government agencies in the last 3-5 years etc.
Many of these information are furnished block-wise to take care
of micro region variations.
These PLPs are made available to all the banking institutions in
the districts before their planning process starts as also to
government agencies. The ground level bank branches prepare
their annual credit plans keeping in view the potential. The
government agencies are also benefited from the PLPs in
planning public investments in infrastructure development.
Thus the PLPs facilitate improving the productivity of credit
supported private investment.

Conclusion

Initiatives Taken by NABARD

Development Initiatives
20,000 villages in six states. NABARD has supported a project
Diagnostics for e-Choupals by ITC Ltd. In Madhya Pradesh and
sanctioned grant assistance of Rs. 9 lakh. The project aims at
developing an IT-based practical handbook and diagnostic tools
for production and protection of major crops. With a view to
promoting agri-exports, NABARD extended refinance facilities
at soft interest rates to all clients, institutions and for all
activities covered under AEZs. In order to give a fill to the
implementation of the programme, NABARD has taken
initiatives, such as preparation of banking plans, bringing out
publications for the benefit of stakeholders and financial
interventions like developing loan, products, etc. This has
resulted in refinance disbursement of Rs.437crore under AEZs
during 2004-05.
Other Initiatives
NABARD through its refinance support continue to supplement
the resources of co-operative banks, commercial banks and
RRBs for enhancing credit flow to the agriculture and rural
sector. During the bank was also entrusted with responsibility of
overseeing the implementation and monitoring of GOI
programme of doubling the flow of credit to agriculture over a
period of three years effective from 2004-05.

Agricultural Credit
The total ground level credit (GLC) flow of agriculture and allied
activities was estimated at Rs.86, 981crore during 2003-04. The
disbursement of short term production credit (crop loans)

increased at an annual compound growth rate of 17 percent,

while that of investment credit (term loans) increased 15
percent under investment credit land development, hi-tech
agriculture, fisheries and plantation and horticulture witnessed
growth, while for other sectors, viz. minor irrigation and farm
mechanization, credit flow remained stagnant.

NABARD Consultancy Service.

NABARD Consultancy Service (P) Ltd. (Nabcons), a subsidiary of
NABARD was set=up in November 2003, for providing
consultancy in the sphere of agriculture development and allied
areas. In order to have experienced professionals, the Board of
Nabcons has been restricted during the year to include
bankers, academicians and corporate executives.

BIBLIOGRAPHY
Reference books:
Agricultural Credit and NABARD

By Tapan Kumar & Shandilya

Umesh Prasad
Co-operative Banking in India
By R.Thirunarayana
Annual Report of NABARD.

Webliography
www.nabard.com
www.investopedia.com
www.wikiepedia.com
www.economicexpressindia.com