Chapter-1 Introduction

Moreover NABARD also supports sub-contracting and anciallarisation by decentralized rural industrial/non-farm units in the form of proper forward and backward linkages in rural areas under the scheme of Mother Units. This iniative helps in generating additional employment for the rural residents.

NABARD launched District Rural Industries Project (DRIP) in 1993-94 in 5 potential districts of each one in Madhya Pradesh, Andhra Pradesh, Orissa, Rajasthan and Gujarat, to generate sustainable employment opportunities through promotional measures combined with enhanced credit flow to RNFS and coordinating with other agencies in the district. NABARD also formulated and implemented a common action plan in coordination with the Government and NGOs involved in the promotion of rural industrialization in these districts.

The success of the pilot led to expand the project from 2001-02 over a period of 9 years, which resulted in coverage of 106 districts with the aggregated GLC flow of ` 24295 crore facilitating establishment of more than 19 lakh units and generating employment opportunities for over 44 lakh persons, while the amount of refinance availed was ` 3658 crore as at the end of March 2010.

Recognising the innate potential of development through cluster approach in promoting rural industrialisation and realising economies of scale in procurement of raw materials, production and post-production operations by the rural artisans, NABARD in 2005-06 decided to develop 55 clusters (50 partnering with other agencies and 5 intensively on its own) within a period of 3-5 years. During 2011-12, the programme was extended to 120 clusters (57 handloom clusters, 43 handicraft clusters, 7 Rural Tourism, 7 food processing clusters, 2 each of Leather, Blacksmiths and 2 NPRI clusters, and 1 each of Bee-keeping). All these clusters are in different stages of implementation.

Table 4.9: Performance of Cluster Development Programme

Year	Number of clusters	Coverage of the clusters
		State	Districts
2006-07	44	19	NA
2007-08	61	NA	NA
2008-09	101	25	81
2009-10	107	22	84
2010-11	113	22	84
2011-12	120	22	110

Source: NABARD Annual Reports Various Issues

A cluster is defined as a geographically bounded concentration of similar, related, or complementary business transactions, communication, and dialogue, with shared specialized infrastructure, liberal markets and services, and which are faced with common opportunities and threats. The broad sectors identified for development on priority basis under the approach are Farming and Allied Activities, Food Processing, SMEs in rural areas; Traditional arts (handicrafts, handlooms etc). CDP includes interventions related to Social, Technological, Infrastructure, Financial and Marketing. For the smooth implementation and monitoring of CDPs NABARD also organizes capacity building programmes.

To supplement the efforts of Central Government, State Governments, National Housing Board and Banking Sector in augmenting the resources for rural housing, NABARD has included Rural Housing as an eligible activity for extending refinance to CBs, RRBs, SCBs, and SPUCBs for financing extended to rural housing projects since April 2001. The  Ministry  of  Rural  Development  has  formalized  the  following  vision  for  Rural  Housing:  “Ensure  adequate  and  affordable  housing  for  all  and,  facilitate  development  of  sustainable  and  inclusive  habitats  in  rural  areas  by  expanding  government  support,  promoting  community  participation,  self‐help  and  public‐private  partnership  within  the  framework  of  Panchayati  Raj”.  

Following the vision NABARD is refinancing for the activities of construction of new houses, acquisition of new built houses, repairs/ renovation of existing houses, rain water harvesting structures, and sanitary.

Table 4.10: Performance of Rural Housing Scheme

(` in crore)

Year	Investment in Rural Housing scheme
2001-02	501.86
2002-03	769.53
2003-04	1030.23
2004-05	1276.94
2005-06	1242.80
2006-07	1087.63

Source: NABARD Annual Reports

For promoting transportation activities for rural farm and non farm products NABARD launched Small Road and Water Transport Operators Scheme. It assists individuals, groups of individuals including partnership/proprietary firms and co-operative enterprises from rural areas provided that the financing vehicle must be registered with RTA as public transport vehicle not as private carriers.

In this direction NABARD introduced the Environmental Promotional Assistance Scheme (EPA) to support the use of environmental protection activities for demonstrative and replicable purposes of sustainable and eco-friendly agriculture and Rural Development through NGOs, Universities, Research Institutions, Krishi Vigyan/Gyan Kendras in ensuring clean and green environment. This grant is available for training, demonstration, replication of eco-friendly control measure/ technology, awareness campaigns, publicity, and capacity building.

Despite the efforts of Government and NGOs, rural population is facing acute shortage of power and depends on conventional/ unhygienic means for light. Either the power is not available or the supply is erratic. Thus NABARD sanctioned EPA- New Initiative to be implemented by Bharathiya Vikas Trust to conduct 100 user programs for propagation of solar energy in rural areas of 4 districts of Karnataka. The trust has tied up with the equipment manufactures of the solar technology system for providing technical guidance free of cost and also financial tie up with local banks to acquire the equipment at a lesser down payment.

Besides all these promotional schemes NABARD is also providing financial support for imparting training to officers of Primary Lending Institutions (co-operative banks and RRBs) in financing non-farm activities through its training institutes.

Over the last two decades, MF initiatives of NABARD has passed through various phases, viz., pilot testing (1992 to 1995), mainstreaming (1996 to 1998) and expansion (1998 onwards), and has assumed the shape of a MF movement in the country. SBLP model is considered as the largest MFP in terms of outreach in the world and many other countries are keen to replicate this model. The RBI also recognised it as part of priority sector lending and normal banking business. The MFI–bank linkage model of NABARD too has assumed importance on account of credit support extended by banks for on lending to clients by MFIs.

To address the issue of financial exclusion of rural residents, it is essential to ensure that a range of financial services (no-frills banking account; saving product suited to the pattern of cash flows of a poor household; money transfer facilities; small loans and overdrafts for productive, personal and other purposes, and micro-insurance -life and non-life) should available to every individual. NABARD is providing these services financed through FIF and FITF under financial inclusion.

Table 4.12: Micro Finance and Financial Inclusion Initiatives by NABARD

Programmes	Introducing Year/ Associated with / Sponsored by	Description
Financial Inclusion Fund (FIF), Financial Inclusion Technology Fund (FITF)	Set up during 2007-08 with a corpus of 500 crore for each on the recommendations of Rangarajan Committee, to look into the issues & suggest measures for financial inclusion..	FIF supports developmental & promotional activities to secure greater financial inclusion. FITF is to enhance investment in ICT aimed at promoting financial inclusion. FITF finances the cost of technology adoption.
SHG Bank Linkage Programme (SBLP)	NABARD had piloted this project in 1992	Facilitates SHGs to access credit from formal banking channels.
Joint Liability Groups (JLGs)	NABARD had piloted this project during 2004-05 in 8 states	Enables the group members to jointly receive an amount by the banks to pursue individual/ joint activities as found suitable by the group.
Micro-Enterprise Development Programme (MEDP)	NABARD launched MEDP on skill upgradation & development for sustainable livelihoods for members of matured SHGs during 2005-06.	MEDP intends to provide skill development and skill upgradation training and development of sustainable livelihoods for venturing into micro-enterprises by matured SHG members.
Micro-finance Development and Equity Fund (MDEF)	Set up in NABARD with a contribution of `40 crore each from NABARD & RBI & `20 crore from 11 Commercial Banks became operational on 7.03.2003.	Promotes MF activities (formation & linkage of SHGs, training & capacity building of stake holders, capital & soft loan assistance to MFIs, studies, documentation, livelihood propagation)
NABFINS	NABFINS has equity participation from NABARD, Govt. of Karnataka, Canara Bank, Union Bank of India, Dhanalakshmi Bank and Federal Bank.	Provides MF services to disadvantageous & needy people to secure their prosperity in rural/ urban areas to promote, expand, commercialize & modernize farming & allied activities.

NABARD has been providing following micro financing initiatives:

• 
  Till now, 6363 MEDPs had been conducted for 164948 participants.
  
• 
  NABARD forms two types of SHGs; Credit-linked and Savings-linked. As on 31 March 2011, there were more than 70 Lakh savings-linked SHGs and more than 48 Lakh credit-linked SHGs covering 9.7 Crore poor households.
  
• 
  NABARD provides 100% refinance against bank loans for MF activities. During 2011-12, ` 33 crore was released (` 29 crore for promotional activities; ` 5 crore for Capital Support/ Revolving Fund Assistance to MFIs).
  

The huge initiative of SHGs will get a phenomenal boost if SHGs could also be linked to the Banking Correspondents so that SHGs are not required to transact their business only at branches. Reducing transaction costs of the clients, both individual as well as those where the group methodology works better, needs to be a top priority for NABARD and other financial institutions.

In order to initiate national alliance on financial literacy in India NABARD has set up two funds; FIF and FITF. Till now, the contribution to these funds stood at ` 79 crore (FIF) and ` 131 crore (FITF).

Table 4.14: Progress under FIF and FITF

Name of Funds	2008-09		2009-10		2010-11		2011-12		Cumulative*
	S	D	S	D	S	D	S	D	S	D
FIF	1.30	0.36	18.36	7.99	19.00	9.21	75.96	18.90	114.62	36.46
FITF	4.22	0.09	17.08	1.67	101.11	54.01	221.07	128.39	343.48	184.16

Source: NABARD Annual Reports

Note : S= Sanctions, D=Disbursements, *= Upto 31^st March 2011

To include the small and marginal farmers and other poor persons, who lacks collateral for securing the loan, in the ambit of the organized financial system NABARD is financing Joint Liability Groups to develop effective credit products for mid segment clients, which reduces risk and transaction costs for the bank and also introduces a greater degree of flexibility for the credit user to determine credit needs and priorities. Till now an amount of ` 37 crore was sanctioned as grant for promotion of 1.94 lakh JLGs across the country. During the year of 2011-12, banks disbursed a loan of ` 947 crore to 129646 JLGs taking the cumulative loan disbursed to ` 2092 crore for 270691 JLGs. Moreover NABARD has also established UNDP- NABARD Financial Inclusion Fund to provide better access to financial products and services for reducing risks and enhancing livelihood opportunities for the poor, especially SC and ST, minorities and displaced. ` 47 lakh had been utilized during 2011-12.

For the holistic development of the backward villages through an integrated development of farm/ non-farm activities (rural haat, cluster development, skill development, micro enterprise development, EDP) NABARD introduced Village Development Programme in 2007-08. In its Phase-I it covered 877 villages across 25 states through 493 Project Implementing Agencies (PIAs) and in Phase-II, launched in April 2010, it is covering 1026 villages (envisages to cover 1540 villages) across 26 states through 457 PIAs.

For comprehensive development of the selected backward blocks in an integrated manner NABARD has initiated Pilot Project for Integrated Development of Backward Blocks (PPID) in July 2003, for economical and infrastructural development, and other aspects of human development. PPID facilitates convergence of all major schemes/ support in the identified block including watershed development; NFS programmes; micro finance ; farmers' groups; Infrastructure development; capacity building of banks, Government Deptts, NGOs and CBOs; implementation of development programmes of the State Govt., coordination with Govt. Deptts. for social development.

For making timely access of adequate credit to the farmers NABARD introduced Swarojgar Credit Card Scheme (SCC) in September 2003 to provide adequate, formal and timely credit (working capital/ block capital or both) to small artisans, handloom weavers, service sector personnel, fishermen, self employed persons, rickshaw owners, other micro-entrepreneurs, SHGs, etc., in a flexible, hassle free and cost effective manner. It also covers borrowers in urban areas; small business covered under priority sector; any income/ employment generating scheme/ project; farm sector activities (fisheries, dairy, etc); and self-employment activities having regular turn-over/ income on short-interval basis.

SCC is a credit delivery mode and not a purpose. It provides credit as composite loan (term loan/cash credit/both) and includes any income/employment generating scheme/ project. Borrowers in urban areas can also be covered under it. Generally self-employment activities having regular turn-over/ income stream on short-interval basis can be covered under SCC scheme. Till now NABARD has issued 13.06 lakh SCCs involving credit limit of ` 5445 Crore.

For resettlement of retired armed personnel at young age and providing employment to war widows and wives of ex-servicemen NABARD is refinancing the farm activities (minor irrigation, horticulture, farm mechanization, wasteland development, plantation, dairies, nurseries, poultry, fisheries, forestry etc.) and non-farm activities (setting up of tiny/ cottage/ village/ small scale units in rural areas relating to a wide spectrum of approved industrial and service activities) of ex-servicemen, disabled service man, war widows and widows of ex-servicemen under The Self Employment Scheme For Ex-servicemen- "From Arms to Farms" since 1988 to make them able to earn livelihood for a dignified life. In it soft loan assistance for meeting margin money requirements is also provided.

NABARD always supported the innovative ideas. In this direction NABARD-SDC Rural Innovation Fund (RIF) was introduced on October 2005, through merging of the Rural Promotion Corpus Fund and the Credit and Financial Services Fund in terms of MoU executed between NABARD and SDC on September 2005.

Till now ` 33 crore has been disbursed for 375 innovative projects. Through RIF, NABARD supports all innovative, experimental and demonstrative activities in farm, non-farm and micro finance sector leading to replicability and commercial viability and focusing on the rural poor. These activities may involve development of new products, processes, prototypes, technology, patenting and extension support having appropriate action research and studies to have better understanding of rural development issues, policy and process implementation.

Although the best possible efforts have been made to collect the financial data yet the progress of many of the above schemes cannot be quoted as they have not been discussed in each yearly publication of the national bank. When the officials at Regional Offices have been consulted in this respect they were also unable to provide any clear financial information regarding these schemes.

NABARD Consultancy Services Pvt. Ltd. (NABCONS): As a result of the need of a subsidiary, to provide consultancy services in farm and allied activities and rural development to the client agencies, NABCONS was registered on November 2003 as a wholly owned subsidiary of NABARD. During 2011-12 NABCONS contracted 88 assignments for the contract value of ` 27 crore. The company executed 125 assignments including 6 international visitor’s programmes. NABCONS has set for itself an ambitious target of contracting assignments of ` 100 crore during 2012-13.

With a view to achieve this target NABCONS has embarked upon an exercise of re-engineering its business processes by establishing verticals for its key business activities. As per announcement made by the Honourable Prime Minister during the Africa India Forum Summit held in Addis Ababa in May 2010 NABCONS is selected to establish the India Africa Institute of Agriculture and Rural Development in the country. This institute will cater to the training needs of Bankers, Govt. Officials, RFIs, MFIs, NGOs and other stakeholders in agriculture and rural development. NABARD is expected to establish the institute and manage it for 3 years before handing it over to the host country.

NABCONS should prepare on its own area development/ individual projects and market them to individuals/ the corporates. NABCONS should not only involve itself in formulation and appraisal of projects but also should arrange funding support, help in implementation and monitoring of the projects.

Research and Development Activities- Recognising the importance of research as a policy input in agriculture and rural development in general and its business operations in particular, NABARD established R & D fund u/s 44 (1) of act in 1982-83, with a corpus of ` 50 crore, to gain insight into the problems of agriculture and rural development and to grant support to select agencies for promoting applied research through projects/in-depth studies; experimenting innovative approaches backed by technical and economic studies; disseminating the information, research findings, commercialisation, and transfer of technology at the field level for achieving sustainable use of natural resources; and training and upgrading skills of personnel of client institutions.

The fund includes any such sums of money as are transferable to it in accordance with sec. 47; such sums of money as the Board may contribute every year to the fund from out of its annual profits; and such gifts, grants, donation/benefactions which the bank may receive and which the Board may earmark for this purpose. NABARD has been pursuing its R & D objectives with a view to gain insights into the operational areas of the Bank so as to reorient its policies to match field level realities. In this direction the national bank utilizes the fund as follows:

• 
  for conducting various research projects/studies related to the issues of agricultural and rural development;
  
• 
  for capacity building of the staff of Rural Financial Institutions (RFIs);
  
• 
  for various universities, research institutes and other agencies to organise Seminars, Conferences, Symposia and Workshops covering subjects/ areas related to agriculture and rural development in order to enables them to document the proceedings and publish background papers, thus, facilitating wider dissemination of the recommendations/ action points and initiate suitable policy interventions by concerned agencies;
  
• 
  for Occasional Papers to seek increased dissemination of research findings on relevant issues in the realm of agricultural and rural development authored by independent experts and officials of NABARD;
  
• 
  for setting up of Training, Evaluation & Monitoring Cells in co-operative banks and RRBs to promote diversification in lending through new and innovative schemes/ projects, to organize training programmes for dissemination of information among banks’ field staff, to facilitate the effective formulation, appraisal and implementation of schemes and to launch effective methods for better recycling of credit;
  
• 
  for enabling the students selected from reputed agriculture and management institutes, to be associated with various projects/studies taken up by NABARD in farm and rural sectors under Summer Placement Scheme since 2005-06. The students are assigned tasks/ projects of relevance to the Bank for generating new ideas, products and services, which could be introduced for the benefit of its constituents;
  
• 
  for encouraging applied and empirical research of high standards on subjects which will cater to the research needs of NABARD in promoting agriculture and rural development to gain insights and broadening perception in these areas under NABARD Chair Professor Scheme;
  
• 
  for providing grant for a period of 5 years for appointment of Tribal Credit Specialists since 1996-97 in co-operative banks operating in tribal areas to help them identify and finance those activities which could be taken up by members of tribal communities.
  

During the year of 2011-12, ` 18 crore was utilized from the fund. Till now a cumulative disbursement of ` 154 crore has been made.

NABARD should create close networking with ICAR; Agriculture Universities for R & D in farm technology areas and especially in bio technology. Grant for research projects in farm technology must also be extended. In this direction, NABARD has to cover up the gaps where private sector is not coming forward by funding the research and studies. NABARD must take up a study of couple of villages where regular credit flow has taken place in the past five years to a large number of families and must document this with the effect of the credit on the NFS; and experiences of the beneficiaries and work experiences of the staff in relation to various schemes. This will not only provide a better analysis of the prevailing schemes but also emphasize the defects and attitudes of the beneficiaries towards these defects and its remedial measures.