The National Bank for Agricultural and Rural Development (NABARD) is India’s specialised bank that was set up after the recommendation from the CRAFICARD (Committee to Review Arrangements for Institutional Credit for Agricultural and Rural Department), arranged by the Reserve Bank of India (RBI). On 12th July of 1982, NABARD came into existence and replaced the ACD (Agricultural Credit Department), ARDC (Agricultural Refinance and Development Corporation and RBI’s RPCC (Rural Planning and Credit Cell). The apex development bank was established with an intention to provide focus and undivided attention to the credit problems rooting out of integrated rural development.
NABARD provides various refinance and direct finance options.
There are three categories of refinancing options from NABARD:
Agriculture in this modern age requires a huge recurring investment for seeds, insecticides, fertilisers and expensive agricultural machinery and equipment. For these needs, farmers require more than just credit arrangement should extend beyond such provision of credit. The crop loan or the production based lending was devised to analysing the requirements of funds based on the real cost and productivity.
The PCD or the Production Credit Department provides short term refinance facilities to clients for production, procurement and marketing activities. The details are as follows:
NABARD provides refinancing options to State Cooperative Banks and Regional Rural Banks for the purpose of production. Credit limits are sanctioned to these banks at concessional interest rates. The repayment tenure of the sanctioned credit limit is 12 months.
For times in which Cooperative Banks do not have the capacity to sufficiently fund PACS, a new product for refinancing was introduced in 2011-12. The refinance product can be used to finance PACs via RRBs and PSBs.
The loan limit is sanctioned to RRBs and SCBs.
Short Term refinance support is provided to weavers associations and societies through various banks:
|Entity & Requirement||Bank|
|Primary or Apex or Regional Weavers Coop Society – working capital||State Cooperative Bank or DCCBs|
|Primary Weavers Coop Society – working capital||Scheduled Commercial Bank|
|State Handloom Development Corporation – working capital||Scheduled Commercial Banks & State Cooperative Banks|
|Individual weavers, mutually aided cooperative societies, producer group companies, handloom weavers groups, master weavers – working capital and marketing||RRBs and Scheduled Commercial Banks|
Farmers whose crops get damaged owing to natural calamities can also look at getting financial support from NABARD. In this case, farmers can convert current short term agricultural loans into medium term loans. They can also reschedule or rephrase an existing MT loan. The total loan limit is sanctioned to SCBs and RRBs.
Long term loans are provided by NABARD as an investment credit that results in generating capital by the way of upgraded technology or improved techniques. The asset creation leads to an increase in productivity, production and income of entrepreneurs and farmers. This is referred to as long term loan as it is given for a duration of 3 to 15 years.
Long term loans are provided to the following sectors:
The institutions eligible for medium term refinance are:
There are various schemes under the ARS that can be broadly classified into five unique and compact schemes:
The MNRE (Ministry of New and Renewable Energy) has introduced a capital cum interest subsidy scheme for creating renewable sources of energy at small and domestic commercial level. NABARD serves as the agency that offers feasibility and refinance to the projects that are eligible.
NABARD provides investment credit to the eligible banks offering housing as well as business loans to the agriculturist and non-agriculturists of the rural areas.
NABARD had been granted Rs. 2000 crore as a special fund by RBI for providing credit to Food Parks, also known as agro-processing units. The fund is referred to as the Food Processing Fund – 2014-15. The fund is provided either directly or through other financing agencies via consortium arrangements.
The purpose of this fund is to aid in the development of the food processing sector in the country, create job opportunities and reduce wastage of agricultural produce.
Features of Food Processing Fund:
NABARD was allocated Rs. 5000 crore in 2014-15 to aid in building an infrastructure for the storage of agricultural commodities. The fund was labelled as the Warehouse Infrastructure Fund of 2014-15. The fund gives loans to private and public sectors for construction of cold storages, silos, warehouses and other cold chain infrastructure.
Features of Warehouse Infrastructure Fund:
Marketing federations and cooperatives are involved in procurement of agricultural products such as milk, etc. The federations carry out activities such as aggregation, value addition, storage and marketing of the agricultural commodity. NABARD provides timely short term financial support to meet the day to day requirements of these cooperatives and federations.
RIDF or Rural Infrastructure Development Fund was established at NABARD with an intention to provide low cost credit support to State Governments and corporations owned buy them. The loans could be availed for the purpose of expediting ongoing projects including soil conservation, medium to minor irrigation, watershed management and other rural infrastructure related projects.
NABARD offers loans or credit to Co-operative Banks (StCBs or DCCBs) through their product called the Short Term Multipurpose Credit Product or STMPCP. This lending scheme enables the above mentioned financial institutions to profit more by diversifying business operations by expanding their lendable resources.
NABARD has set up the Producers Organisation Development Fund (PODF) in an attempt to support producer organisations. NABARD offers credit support in the form of loans, grants, or both.
NIDA has been designed for financially supporting State Governments and organisations owned by the state government. NIDA provided credit support for longer repayment tenures and flexible terms. The NIDA funding is a term loan and provides up to a repayment tenure of 15 years.
PACS provides facilities such as agro-storage, processing, service, transportation and marketing to the farmers. NABARD supports some PACS who are identified by PODF’s committee.
The UPNRM project was launched to streamline NRM related interventions by integrating existing as well as future Indo-German NRM efforts of the NABARD. The initiative enables NABARD’s possibility to specialise in the country’s NRM issues.