Capacity Building of Client Institutions-

Capacity Building of Client Institutions-

Moreover a scheme for the ‘Revitalization of co-operatives’ has been prepared. To be eligible to avail assistance under the scheme state governments would be required to implement co-operative reforms to improve their functioning, performance and governance. NABARD is also providing support to cooperative banks in Core Banking Solutions under Application Service Provider model. Under the project, NABARD plays the role of an advisor and facilitator and ensure that the interests of the banks are protected throughout the implementation process. Assistance provided for computerization helps in improving MIS, generating statutory and other returns, better maintenance of the records, faster disposal of cases, exchange of information etc. NABARD is also trying to develop PACs as multi service centres. Special auditing is also done to increase their efficiency.

Keeping in view the viability of the banks on sustainable basis, the process of preparing institution specific Development Action Plans ((DAPs) and executing MoUs began in 1994-95. Three phases of it have been completed and the fourth phase is for the period upto March 2012. It has been observed that the banks seriously following the targets under DAPs have grown financially stronger.

NABARD also conducts Organisation Development Initiatives since 1994-95, as a re-engineering process, to facilitate RRBs and Co-operative Banks in achieving sustainable viability and financial inclusion. NABARD also works for legal and institutional reforms of these institutions for securing their democratic character and autonomy of co-operatives and for their regulatory control by RBI.

Due to these initiatives the performance of LTCBs, STCBs, PACs and RRBs has been improved a lot (Table: 4.22, 4.23). The number of these institutions and most especially number of the institutions earning profit have shown a remarkable growth during the last decade. However the decreasing number of RRBs is due to the amalgamation. The increasing rate of recovery and decreasing percentage of Non-Performing Assets (NPA) to total loans and advances outstanding (O/S) also showed an improvisation during the last decade.

Considering the nature of these institutions, the supervisory role of NABARD, apart from ensuring conformity with banking regulations and prudential norms, is very comprehensive and holistic, encompassing inspections, portfolio studies, monitoring, guiding and facilitating functions. The inspections are now more focused on core areas like CAR, Asset Quality, Management, Earnings, Liquidity, Systems and Compliance. NABARD through its supervision strategy has been facilitating these banks to internalize the stipulation of prudential norms.

Statutory inspections of all SCBs, DCCBs and RRBs not complying with minimum capital requirements as stipulated under the B.R. Act, 1949 (as applicable to Cooperative Societies)/ RBI Act 1934 and voluntary inspections of all SCARDBs continue to be annual. Statutory inspections of those DCCBs and RRBs with positive net worth and voluntary inspections of Apex Co-operative Societies/ Federations are conducted biennially. Quick inspections have been started from 2003-04 for selected financially weak banks.

A separate department for supervision has been made. The officers of the Deptt. are equipped with latest developments so as to improve the effectiveness of supervision. To supervise the institutions Supplementary Appraisal; Monitoring through returns; periodic on-site inspection; Portfolio inspection/ System study; Off-site Surveillance System (OSS); and attending to complaints are used. OSS since 1998-99 is gaining importance as a supplement to On-site inspection.

Board of Supervision (BoS), constituted in 1999 u/s 13(3) of the act, reviews the inspection findings and give directions and guidance in respect of policies and matters thereon; suggests measures for strengthening of the Deptt. Of Supervision and reviews their follow-up action; identify the emerging supervisory issues; recommends appropriate training measures for Inspecting Officers; reviews the information generated through supplementary vehicles and action taken thereon; oversees the quality of inspections and the reports issued; reviews the financial position of institutions based on the inspections, impact of supervision on banks performance, and impact of amalgamation of RRBs. Based on the observations of the BoS, authorities concerned are apprised of the weaknesses of the banks for necessary remedial measures and recommendations made to the RBI for suitable regulatory action.

The inspection should be unannounced without any advance warning, other than general intimation at the time of beginning of the year. The inspection team should, if appropriate, put forward and assist the bank’s management to implement any immediate remedies identified during the inspection. To analyze the condition of actual borrowers NABARD should visit them randomly and should verify the records and should also take their views and attitudes towards the bank. Without following the implementation of the findings, inspections will not be fruitful. Therefore the findings should be better utilized to strengthen the client institutions. NABARD should analyze the causes and should detail the recommendations and proposals for the defects highlighted in their inspection reports. This analysis and recommendations will assist banks to take corrective action to improve and will also help the NABARD to monitor and evaluate the capacity building programmes and policies.

As part of new initiatives and expansion of its developmental and promotional roles, NABARD is also supporting producers through Producer’s Organisation Development Fund (introduced with an initial corpus of ` 50 crore). The cumulative sanction under the fund was ` 40 crore.

Though the achievements of NABARD in the past 30 years have been remarkable yet there is a need to draw a road map to face the upcoming challenges of the economy. Persisting poverty, unemployment, rural distress and regional disparities are some of the challenges faced by rural India in general and NABARD in particular. The destination is still far away. However the chairman of NABARD stated that, leveraging its growth as a financial institution, NABARD closely aligns itself with the objectives of the Twelfth Five Year Plan, which is faster, more inclusive and sustainable growth.

India happens to be a rich country inhabited by very poor people. Therefore our Honourable Prime Minister Dr. Manmohan Singh quoted that“Our vision is not just of economic growth, but also of a growth which would improve the life of the common man,” NABARD should also follow the vision strictly.

Unfortunately India is a ‘booming economy with an ailing agriculture’. There are concerns regarding the food security, technology fatigue, yield gaps, degradation of resources, increasing budgetary subsidies and its adverse impact on public investment, unfavorable terms of trade and farm price volatility. This eventually has a direct/ indirect negative impact on others sectors of economy too.

NABARD should co-finance the projects (under sunrise sectors where banks are not comfortable to finance on their own) identifying the institutions fit to serve a particular block/area and provide them required leadership to avoid the multitude of agencies adding confusion and conflict of interest giving room for unhealthy practices, corruption and abuse of facilities.

NABARD should work in improving its visibility and image in rural areas. For this purpose it can use the existing network of RRBs. RRBs should be seen as an extended arm of NABARD. NABARD has to consider more sponsoring programmes i.e., weather bulletin; farmers’ education programmes; bulletin regarding upcoming market trends, rural haats, craft marts, melas, and exhibitions etc. on Television and All India Radio to publicize its name in remote rural areas.

Besides this, NABARD has to play a constructive role in ensuring smooth and result-oriented coordination between the States and the institutions involved in rural development. NABARD has to focus different approach for each State in identifying the gaps, deficiencies and problems in the development of agriculture and rural industries and providing the needed coordination, support, guidance and encouragement to the agencies involved therein.

The State Government and NABARD have to jointly change the rural face by introducing incentives and awards for the retention of interest in agricultural and rural activities both among providers of credit and borrowers. The involvement of top management institutes and social workers can be thought of to activate the rural economy and realize enduring real benefits to the whole economy.