Though traditionally at the forefront of agriculture and rural development financing, National Bank for Agriculture and Rural Development (Nabard), of late, has expanded its mandate to other significant areas of nation building. In an exclusive interview with Sitanshu Swain and Kumud Das of The Financial Express, UC Sarangi, chairman, Nabard explains the way the institution is charting out its new course. Excerpts:
How is the financial health of primary agricultural credit co-operative societies (PACCS) in the country?
So many plans are being implemented for the well being of co-operative banks within the past 3-4 years. The Vaidyanathan committee appointed by the Union finance minister (FM) in 2004 made certain recommendations towards revitalising and recapitalising 3-tier co-operative institutions in the country, comprising state co-op banks, district central co-op banks, and the primary agricultural credit co-op societies (PACCS).
These PACCS, numbering over 100,000, constitute an important outlet for credit delivery to farmers in remote areas. But many of them are suffering from a serious financial health crisis.
Keeping this in mind, the Vaidyanathan committee had recommended various measures for them involving a sum of Rs 15,000 crore. The FM, in consultation with different states, finalised the implementation of the recommendation of the committee’s report two years ago. Beginning last year, the amount has to be exhausted over a period of three years. So far, 21 states have already joined the move by signing MoUs with the government of India as well as Nabard.
Let me add here that we have already released a sum of Rs 3,500 crore towards the recapitalisation of PACCS during last year. This year too, we’ll be releasing Rs 4,000 crore towards the implementation of the Vaidyanathan committee report. On its completion, the process will bring back the financial health of rural credit institutions. Nabard is the implementing agency of the committee’s report.
Are you happy with the process of implementation of the Vaidyanathan committee report?
Yes. We are quite happy. Things are going in the same direction as we had desired. Almost all major states have participated in it by signing MoUs with us. Some of those states include Rajasthan, Madhya Pradesh, Punjab, Haryana, Maharashtra, Gujarat, Andhra Padesh, Karnataka, Uttar Pradesh, Bihar, Jharkhand, Orissa, and Assam. Still, there are few states like Himachal Pradesh, Puducherry, Goa, and Kerala that were yet to sign the MoU. We have given them a timeframe until July-end to sign the same.
Is there any slowdown in the flow of rural credit in remote areas of the country?
No. Rather, I would say that it is just the opposite. In 2004, the FM had said agricultural credit would be doubled in three years. There was credit flow to the tune of Rs 86,000 crore at the end of 2003-04, which is the base year.
In the following three years of 2004-05, 2005-06, and 2006-07, the credit flow has reached Rs 2,29,000 crore. Hence, we can say that the credit flow has tripled during the past three years.
What is the scenario on the crop loan front?
The crop loan sector has witnessed a lot of changes during the past four years. The first thing to come was the FM’s announcement of restructuring of farmers’ loans in 2004. The FM had said that loans taken by farmers that were lying in the form of arrears or defaults will be restructured.
Since then we have been able to restructure Rs 20,000 crore of the same. Second was the appointment and implementation of the Vaidyanathan committee report, which spoke about revamping of co-operative institutions. Next was the loan waiver involving a sum of Rs 71,700 crore.
But liquidity support is something different. Suppose a bank has not been able to recover enough, it means their total available resource was just not enough for their liquidity support. That is why we have kept aside a sum of Rs 2,500 crore as liquidity support for the current fiscal. Apart from this, we have targeted a refinance budget of Rs 22,000 crore by the end of the fiscal, up from Rs 17,000 crore last year.
Moreover, we have projected a target of disbursement of Rs 9,500 crore as investment credit for the current fiscal, as against a sum of Rs 9,000 crore last year. Again, with a view to making low-cost funds available to Nabard, the FM has announced another scheme, which is known as short-term seasonal agricultural operations (STSAO) of Rs 5,000 crore, which is to be made available to Nabard from various banks through the Reserve Bank of India in the manner of the Rural Infrastructure Development fund (RIDF). This system was in existence earlier as well. However, it was for the first time the FM constituted STSAO while presenting his annual budget early this year.
As the kharif season has begun with the onset of monsoon, how has Nabard geared up to tackle the situation?
Since the monsoon has begun, sowing operations have also started in the fields and hence there has been a surge in the demand of loans for the kharif crop. Hence we are aware that there will be an increase in the demand of crop loans for months like June and July. Therefore, at Nabard we have kept ourselves ready to meet that demand. It is evident by the fact that for these two months alone, we have kept aside a sum of Rs 12,000 crore out of our total current year’s refinance budget of Rs 22,000 crore.
How are activities under Bharat Nirman shaping up ?
Nabard supports the Bharat Nirman project through a fund similar to RIDF. Under RIDF, the FM had opened another window a couple of years ago. So far, we have given Rs 4,000 crore from those banks that were able to achieve their agricultural lending targets. And this sum was provided by us to the Rural Road Development Agency, which undertakes big chunks from other resources too. They take care of the construction of rural roads, while Nabard only takes care of the road component to an extent by providing finance to National Rural Road Development Authority.
What are the new initiatives Nabard has taken up?
Our mandate is agricultural and rural development. Since we are supposed to work for both the development of farm as well as non-farm sectors, our primary intervention is development through credit by supporting refinance and innovating the development of rural credit to make farmers take advantage of advanced agricultural technology. We have been doing this through a fund of Rs 31,000 crore. But credit is only one aspect, as there are several other aspects of rural development like irrigation and road development, godown and marketyard building, among others.
They are also a part of agriculture as they are required for agricultural activities. Overall, they form support to agricultural infrastructure and RIDF has enabled Nabard to do exactly that. Therefore, as a third aspect of government initiative, we provide irrigation facilities and then create infrastructure under RIDF. Also, Nabard has undertaken a lot of initiatives in the direction of watershed development. Our watershed development projects in Maharashtra and Andhra Pradesh have been quite successful. Right now, we have taken up the programme in 7-8 states including Maharashtra. Watershed development is a slow, gradual process. And Nabard’s participation involves the people’s participation right from the beginning of the project. We have created a fund of Rs 500 crore for the watershed development programme.
