NABARD

CREDIT TO PRIORITY SECTOR AND

NEGLECTED SECTOR
 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
 Nabard’s Priority Sector Lending:
Direct Credit:
Direct credit from NABARD constitutes loans to State Governments.

 Supporting Cooperatives:
In order to strengthen the owned funds position of cooperative credit institutions and
thereby increasing their capacity to leverage larger resources, NABARD provides
loans to State Governments to contribute to the share capital of these institutions.  

 Rural Infrastructure Development:

With the objective of assisting State Governments in the completion of ongoing rural
infrastructure projects and to take up new infrastructure projects, the Rural
Infrastructure Development Fund (RIDF) was set up with NABARD in 1995-96 with
contributions from Commercial banks by way of deposits. The shortfall in
agri/priority sector lending was deposited by the commercial banks with NABARD as
part of their contribution to the RIDF. The total corpus covering RIDF I (1995-96) to
X (2004-05) is Rs. 42,000 crore. Sanctions under all trenches of RIDF as on 31 March
2005 were Rs.42948.51 crore against which the disbursements were Rs. 25384.02 cr.
 Co-financing
  To ensure substantial credit flow to agriculture and rural sector and to
instill confidence in banks for financing hi-tech/export oriented
agriculture projects involving large financial outlays/sunrise technologies,
etc., NABARD has entered into agreements for co-financing with 12
Commercial Banks thereby sharing the credit risks with partner banks.
Under this arrangement, projects have been sanctioned in areas like
floriculture, organic farming, milk processing, ethanol production,
infrastructure development and forestry.

 Bulk-lending/ Revolving Fund Assistance:

NABARD provides bulk-lending facilities to NGOs.  As on 31.3.2005, 30
agencies have been sanctioned assistance of Rs 27.07 crore against which
Rs.15.18 crore has been disbursed. 
 Production Credit

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

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, powerlooms, artisans, small scale and tiny
industries and other rural non-farm enterprises

Eligible institutions for this facility are State Cooperative Banks (SCBs)
and Regional Rural Banks (RRBs). The period of credit is 12 months.
 Investment Credit
This is a long-term refinance facility. It is intended to create income
generating assets in the following:

• Agriculture and allied activities

• Artisans, small scale industries, tiny sector, village and cottage
industries, handicrafts, handlooms, powerlooms, etc.
• Activities of voluntary agencies and self help groups working among the
rural poor
The credit is normally provided for a period of 3 to 15 years.
  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.
 
 Rural Infrastructure Development Fund
   A major policy initiative for rural infrastructure development has
been the setting up of Rural Infrastructure Development Fund
(RIDF) in mid-Nineties for financing rural infrastructure projects.
The fund was set up against the backdrop of :  
• Decline in public investment in agriculture and rural
infrastructure. The State Governments, which need to develop and
maintain rural infrastructure, were experiencing severe resource
crunch.
• The Commercial Banks were unable to channelise 18 percent of
their total lending to agriculture as required under priority sector
guidelines due to inadequate infrastructure in rural and agricultural
sector.  
 The Government of India, therefore, announced in the budget of 1995-96,
a scheme for setting up of Rural Infrastructure Development Fund
(RIDF), to be operationalised by NABARD towards financing of, at that
point of time, the ongoing rural infrastructure projects in irrigation sector.
 Rural Farm Sector
Farm Sector Schemes
 Village Adoption/Village development Plan

 Backward Blocks

 Bamboo Farming

 MACs

 Bio Fuels

 Crop Insurance

 SGSY

 Land Purchase

 Scheme for AgriClinic/ Agri-Business Centres (ACABCs)

 SEMFEX

 Capacity Building for Adoption of Technology (CAT)

 Farmer's Club
 Non – Farm Sector Schemes
Rural Non Farm Sector (RNFS) holds the key to faster economic
development of the country. It has potential and promise for
generating employment and increased income in the rural areas.
Hence, NABARD has identified financing, development and
promotion of RNFS as one of its thrust areas.

NABARD has evolved several refinance and promotional schemes

over the years and has been making constant efforts to liberalise,
broad base and refine/ rationalise the schemes in response to the
field level needs. The focus has been on greater credit flow and
provision of linkages for small, cottage and village industries,
handicrafts and other rural crafts and service sector in the
decentralised sector in the rural areas.
 Rural Housing
  With a view to supplementing the efforts of Government of India, State Governments,
National Housing Bank and Banking Sector in augmenting the resources for the Rural
Housing segment, NABARD has included Rural Housing as an eligible activity for
extension of refinance (investment credit) to the eligible banks w.e.f. 01 April 2001.
The broad terms and conditions for the refinance scheme are as under :
Area of Operation   Refinance will be provided to all eligible Banks for finance
extended by them to housing projects in the 'rural' areas only. As per NABARD Act,
Rural area means the area comprised in any village and includes the area comprised in
any town, the population of which does not exceed 50000 or such other figure as the
RBI may specify from time to time.  
Eligible Borrowers   • Individuals • Co-operative Housing Societies • Public Bodies •
Housing Boards/ Housing Development Authorities/ Improvement Trusts • Local
Bodies • Voluntary agencies and NGOs • Housing Finance Companies registered, with
NHB     Financing made under Golden Jubilee Rural Housing Scheme and Schemes of
the Govt. of India, Ministry of Rural Development shall also be eligible for NABARD
refinance
 Recent Activities of NABARD
 NABARD into Venture Capital Fund
 Funding commercial infrastructure from March
2011
 RBI divest 71.5% stake in NABARD to
Government of India
 Releases disbursement figure for MFIs
 Boston Consultancy Group to create to avatar for
NABARD
 SDC rural innovation fund
 Conclusion
 360 degree rural development
 Reality is different – default in repayment
 Organization of borrowers is required
THANK YOU