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Changing environment
and banks to enhance their outreach to the rural strata of society. We have demonstrated how rural business can take place. We are rst investing and then catalysing, says Bakshi, who has been with the institution from day one, when it was formed in 1982. Starting his professional career as a lecturer in Raipur, in 1977, he moved on to join Agriculture Renance and Development Corporation (ARDC) as agricultural economist in 1979 and then to NABARD. Bakshi held several important positions in development and micro credit till two years ago, when from an executive directors position, he got elevated to take over as the chief. In the past 31 years, NABARD which has been set up under an act of Parliament by merging the agriculture credit department and rural planning and credit cell of the RBI and the ARDC has been a low prole institution. However, its balance sheet has been growing by leaps and bounds, from a mere `5,000 crore (1982) to `50,000 crore (in 1993), then to `1,00,000 crore in 2003 and now to `2,13,000 crore (2013), Bakshi: as the institutions mandate investing to expanded from development catalyse to the business of renancing and the additional role of superimbalances, we are continvising co-operative banks, RRBs, etc. uously evaluating in terms of introduction of new products and It may sound like a conict of processes, explains Prakash Bakshi, interest, but we maintained clear the 59-year-old chairman of NABARD, demarcations of these roles, till a nancial institution that continues date, says V. Ramakrishna Rao, ED, to extend support to a wide range NABARD. Rao has also been with the of institutions co-operative banks, institution since inception and been regional rural banks (RRBs), commer- one of the key members of the team cial banks, state governments, Cen- that has witnessed its transformatral government, NGOs, voluntary tion from providing pure agriculorganisations and other formal and tural loans to co-nancing activities informal outts at the national, state for projects in the sunrise industries, and village levels through its nan- where major commercial banks have cial and developmental interven- not yet entered. Not many people would know that tions. As the apex body it has been supporting and promoting agricul- in the late 80s, it was NABARD that ture and rural development. created the Self Help Group (SHG) In fact, NABARDs efforts are sup- concept for the poor to save withplementing the nancial system. We out going to the bank. Built on trust, are helping the nancial institutions these groups pool their resources and
PHOTOS: Sa N JaY bOR a DE

NABARD is repositioning itself to face the emerging challenges beyond 2020

n 2012-13, the National Bank for Agriculture and Rural Development (NABARD) disbursements crossed the `1 lakh crore mark at `1,06,562 crore, as against `81,000 crore during 2011-12, registering a growth rate of 31.55 per cent. During the same period, the aggregate assets held by NABARD increased to `2,13,000 crore from `1,82,075 crore as on 31 March 2012, an increase of 17 per cent. Once an institution hits a particular milestone, it has to reposition itself and its range of products. This is also true for NABARD. Particularly, when the environment in which we operate is undergoing dramatic changes. Agriculture in 2020 will change and we need to change the way we work. To remove the

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Corporate Reports
gave small loans within the group with no transaction costs. Later on as the corpus grew, these SHGs were linked to the banks and the money is deposited in the groups name. In 1992, we linked 500 groups to the banks as a pilot project. Today there are 9 lakh groups (average size of 15 members). Banks have started lending to these SHGs in multiples which has gone up to around `16,000 crore annually, adds Bakshi. Over the years, RBI and the government, the two main contributors to NABARD have been slowly distancing themselves from the nancing side and allowing it to function and ourish on its own, particularly since reforms were initiated. For instance, NABARD was getting `500 crore for its long-term operational fund for investment credit. This stopped in 1993. Revamping business NABARDs current business restructuring plans are based on developing its own funding sources. It has been borrowing around `15,00020,000 crore annually from the market after RBI stopped its support from the general line of credit (GLC) in 2007 and from the rural credit (longterm operation) fund in 1992. It used to receive `6,000 crore a year from RBI under the general line of credit. Besides this, the institution enjoyed a tax exemption status, which was also withdrawn. The old guards (previous chairmen), who have been contributors in NABARDs journey had recognised this fact. We were compelled to look for new avenues to raise resources from the market. And once we started to do that, the whole functioning of the institution has undergone a change, explains A.D. Ratnoo, CGM, department of renance, who currently handles `1,00,000 crore (50 per cent of the total business). Renancing of co-operatives and RRBs is still the biggest business of NABARD which continues to grow year-on-year (Y-o-Y), as it penetrates. The renance under short term loans (production credit) to these entities, during 2012-13 was `66,180 crore, up by 37.87 per cent on a y-o-y basis. The State Co-operative Banks (SCBs)

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Rao: eyeing rural infra projects

and RRBs in Punjab, Rajasthan, Madhya Pradesh, Maharashtra, Andhra Pradesh, Uttar Pradesh and Karnataka received major share of this renance. Then the investment credit for capital formation in agriculture and allied sectors, non-farm sector activities and services sector to commercial banks, RRBs and co-operative banks stood at `17,674 crore during 2012-13, as against `15,424 crore in the previous year. The share of commercial banks was 49 per cent of the total disbursement, followed by RRBs (27 per cent), SCBs (12 per cent) and balance of another 12 per cent.

As part of setting about a change in our business model, we have realised the need to nance infrastructure loans related to agriculture and rural areas. We have begun lending directly to infrastructure projects at commercial rates as part of this transformation. The idea is to support the development of rural infrastructure besides increase the revenue of NABARD, says Bakshi. Besides budget allocations by the government under various schemes, NABARD receives funds from banks that fail to meet priority sector targets, as investments in NABARDs Rural Infrastructure Development Fund (RIDF). Under RIDF in 2012-13, NABARD has disbursed to state governments alone `16,292 crore, as against `14,970 crore in the previous year. RIDF was instituted in NABARD out of shortfall in priority sector lending by banks with an announcement in the 1995-96 Union Budget with an initial corpus of `1,000 crore. The sole objective was to give support to states and state-owned corporations for quick completion of ongoing projects related to irrigation, soil conservation, watershed management and other rural infrastructure. Every year, the allocation to RIDF is being met through the Union Budget. Since its inception, 18 tranches of RIDF have been implemented and in the current year (2013-14), a corpus worth `20,000 crore has been allocated. The project proposals received from the state governments are appraised by NABARD. By nancing incomplete infrastructure

Business restructuring plans

Direct loan 2010-11 Sanctioned Disbursed 2011-12 Sanctioned Disbursed 2012-13 Sanctioned Disbursed 2013-14 Sanctioned Disbursed Total Sanctioned Disbursed 100 0 1,547 938 3,385 2,363 400 208 5,432 3,509 NABARD Infra Producers Org Credit Facity Total Devp Assistance Devp Fund to Federations (` crore) 42 0 891 423 2,819 860 495 75 4,247 1,357 0 0 40 7 186 78 70 7 296 93 0 0 0 0 3,039 2,500 200 60 3,239 2,560 142 0 2,478 1,368 9,429 5,801 1,166 350 13,214 7,519

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have been looking at supporting and nancing producers organisations, explains Rao, who has set up the Producers Organisation Development Fund (PODF). Producers Organisation and Primary Agricultural Credit Societies (PACS) as multi-service centres were nancially supported to the extent of `78 crore during 2012-13, as against `7 crore during 2011-12. A total of 28 producer organisations and 728 PACS have been supported, of which 279 have been assisted for creation of godowns alone. After producing, they need to store to get the best rate from the market. NABARD has helped PACS to convert into one-stop-shops dealing in farm inputs and helping them to take up new businesses, such as warehousing, leasing out farm equipment and providing e-enabled services for dissemination of information on weather, market prices, technical advices and land records. NABARD in consultation with the Andhra Pradesh State Cooperative Bank (APCOB) and select Central Cooperative Banks (CCBs) in the few districts has taken the initiative to launch a scheme to transform PACS into MSCs. The regional ofce of NABARD together with APCOB conducted regional workshops in a few districts, namely, in Krishna, Guntur, Kakinada and Visakhapatnam, initially to create awareness among the PACS staff and to build their capability for multi-tasking benetting their members and building their business, says Nethi Muralidhar, general manager (loans department), APCOB.
farmers, Dilasa is also facilitating IDE drip irrigation technology wherein with total investment ranging from `5,000 `10,000 the participants could grow vegetables on one acre land. The evaluation study of UPNRM, revealed that the average yield of cotton with drip irrigation was 14 qu. per acre as against 6/7 qu. per acre without drip. This has given additional benet of approximately `28,000 per acre to farmers. u

projects, RIDF has unlocked sunk investments already made by the state governments, points out Ratnoo. Currently, every year between `15,000 and 16,000 crore is being disbursed with the current outstanding on the balance sheet standing at `75,000 crore. So far all the money has come back and there are zero NPA on the book. A new league The entry of NABARD into direct infrastructure lending brings it in competition with commercial banks and specialised infrastructure lending companies, says an analyst. Banks invest in RIDF at a certain per cent, we just add a small 0.5 basis point and we lend to state governments to fund agriculture related infrastructure projects like irrigation, power etc, says M.I. Ganagi, CGM-corporate planning, NABARD. NABARDs entry into this has been a positive for the infrastructure funding starved industry. It can compete with conventional lenders as the institution (NABARD) has deep pockets, lower cost of funds and enjoys a higher credibility, adds an analyst. While RIDF has benetted the farming community by laying down roads which have boosted their ability to market their produce, the irrigation works have allowed the farmers to undertake crop diversication and enhance both production and productivity. Interestingly, in the past 2-3 years, NABARD has set up NIDA (NABARD Infrastructure Development
s a part of sustainable cotton initiative programme, Dilasa Janvikas Pratishthan, an NGO, took up the initiative for promoting economic use of water through drip irrigation technology for cotton cultivation in Aurangabad, district of Maharashtra. The project, basically a watershed plus activity is supported under UPNRM. The interventions included installation of micro irrigation units, short-term crop loan to 1,400 farmers,

Ratnoo: looking for new avenues

Assistance, a new line of credit support for funding rural infrastructure projects, where NABARD disbursed `860 crore to state-owned and supported entities, as against `423 crore disbursed during 2011-12. Power transmission projects, restoration power distribution network projects, hydro power projects and warehousing projects received the major share. In the past three years `5,000 crore has been sanctioned and these loans are given for a longer period, beyond seven years and the interest is being serviced regularly. RIDF and NIDA have given NABARD ofcers the experience in appraisal and monitoring infrastructure projects. We are now leveraging this experience to nance rural infrastructure projects outside the RIDF and NIDA portfolio, using our own resources. As part of this exercise, we

UPNRM: A success story

dissemination of cultivation technology for new crops/ methods like transplanted cotton, potato and ginger cultivation. At the channel partner level (Dilasa), loan assistance was sanctioned for coal making, biomass briquette making (using waste cotton stalks) and vegetable dehydration units. Total loan sanctioned was to the tune of `44.05 million and grant was of `3.59 million. Dilasa Janvikas Pratishthan is also facilitating certication under Better Cotton Initiative (BCI) in its area of operation. Under this programme, elds of 1,351 farmers (including 288 UPNRM loanee farmers) have received the BCI certication. The ginning mills in the area are offering `200400 extra per quintal of BCI certied cotton. For very poor

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The projects which have been initiated by Bakshi and his team over the last two years will take NABARD into a new league. And these are some extremely bold and futuristic projects which promise to have a huge impact on the entire Indian rural economy, says Bakshi. NABARD has been inuencing the ow of crop loans into the agri sector through the renance route since its very inception. Our target for providing crop loan renance has been enhanced to `80,000 crore for the year 2013-14 which we plan to achieve well in time. During this year we will be provided with an additional `30,000 crore for the short term renance fund for cooperatives, and an additional `20,000 crore for the short-term renance fund for RRPs, says Ganagi. Adding value On the cooperative front, the institution is working towards a fully techenabled environment for cooperative banks by encouraging them to onboard Core Banking Solution (CBS) platform which will allow them, for the rst time ever, to compete with commercial banks by providing similar nancial services. We have already put almost 3,500 branches of SCBs and CCBs on CBS and hope to see all the 7,000-odd branches of SCBs and CCBs to be on CBS and linked to the payment system through RTGS or NEFT by the year end, explains Sanjeev Dalip Singh Rohila, AGM, nancial inclusion. Simultaneously, NABARD has introduced schemes providing nancial support to RRBs and cooperative banks to issue Rupay Kisan Credit Cards to farmer clients and provide point of sales (POS) terminals to agri input suppliers which will allow the farming community to benet from the dynamics of cashless eco system. We are engaging with these banks on a one to one basis and the next two years will see a denite progress in this direction. The next two years, I also see a movement towards mobile banking in rural India and NABARD will be involved in agricultural transactions on this channel of banking, promises Bakshi. Meanwhile, NABARD in

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Ganagi: we lend to states

collaboration with KfW and GIZ (German government-owned enterprises) to augment private investment in the natural resources sector through Umbrella Programme on Natural Resource Management (UPNRM) has initiated many loancum-grant-based programmes (see box) with the aim to support community managed sustainable natural resource management projects.

State-wise sanctions under NIDA

Haryana Uttarakhand

36.2

145.7

Rajasthan*

857.4

295.2
W Bengal Chattisgarh

Bihar

Gujarat

380.3

83.2

111.6

Andhra Pradesh

200

Tamil Nadu

708.9

Term loan (` crore) Total: 2818.5 crore

In addition to scaling up existing approaches (watershed and adivasi development), it also explores other sub-sectors like forestry, farming systems management, agro-processing, natural resource-based livelihoods, etc. The programme envisages a total fund of 30.90 million (19.40 million from KfW, 8.50 million from GIZ and 3 million from NABARD) under Phase-I. An amount of `3.15 crore was received from KfW as Accompanying Measures (AM) and ` 0.52 crore was received from GIZ under Technical Component (TC) during 2012-13. Disbursement under the UPNRM during 2012-13 included loan of `82.50 crore and grant of `3.28 crore. The cumulative disbursement under the programme amounted to `217.57 crore, including, `207.23 crore as loan and `10.34 crore as grant. A small beginning, since NABARD signed agreements with KfW in 2012, for implementation of the second phase of UPNRM, involving nancial assistance of 54 million (approximately `380 crore), including credit lines amounting to 52 million and Accompanying Measures of 2 million, says Bakshi pointing out that UPNRM Phase II would also target rural areas and aims to include socially and economically disadvantaged groups (landless, small/marginal farmers and tribals) for funding viable and ecologically sustainable natural resource management projects. Looking at the near term, for the year 2013-14, NABARDs target for disbursement is placed at over `1,35,000 crore under various business initiatives comprising production credit renance of more than `80,000 crore, investment credit renance of `17,000 crore, while disbursement under RIDF and warehousing are expected to be around `25,000 crore and disbursement under other business initiatives including NIDA are projected at `11,500 crore. The targets for 2018: to have a balance sheet size of `5 lakh crore, raise funds on its own and provide more value added services to the farmers. However, great autonomy from the government could help NABARD grow at a faster pace.
u L A NCELOT JOSEPH

All the states have sanctioned 1 project each. *3 projects

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