Higher capital to help Nabard access financial market better

Sanjay Jog

The state-run National Bank for Agriculture & Rural Development (Nabard), which is currently undergoing a repositioning exercise, has received a major boost following a slew of proposals by the finance minister (FM) in the Union Budget 2011-12. The FM has increased allocation to Rs 10,000 crore from Rs 5,000 crore for supporting crop loan refinance to cooperatives and regional rural banks (RRBs), and increasing Nabard’s capital base. Besides, a dedicated fund of Rs 2,000 crore has been set up in Nabard for the creation of warehousing facilities.

The proposals come at a time when Nabard will soon launch direct risk-based lending to two cooperative banks, provide long-term financing to Karnataka and Rajasthan for rural infrastructure projects as well as finance and support producer organisations. Besides, Nabard has started preliminary work on centralised accounting and loan management.

Nabard Executive Director Prakash Bakshi told Business Standard that the Budget is building on the expansion in agricultural credit disbursements during the current year. By December last year, banks had already provided agricultural credit of over Rs 2,91,000 crore, which is Rs 42,000 crore higher than what banks had provided for the same period last year. Cooperatives and RRBs, who primarily provide credit to small and marginal farmers, disbursed over Rs 78,000 crore out of this amount. The rabi lending is also showing good disbursements across the country, and the agricultural credit target of Rs 3,75,000 crore for the current financial year is expected to be far exceeded.

“It is in this background that the FM has placed the agricultural credit target for the next year at Rs 4,75,000 crore. Provision of Rs 10,000 crore, as compared with Rs 5,000 crore provided last year, for supporting crop loan refinance to cooperatives and RRBs as well as increasing the capital base of Nabard and will help Nabard access financial market in a larger way. It will also enable Nabard to support the banking system achieve this increased agricultural credit target,” Bakshi said.

According to Bakshi, such agricultural credit flow together with other steps mentioned in the Budget will help farmers adopt good agricultural practices across the country and boost production. Increased production as a requirement to move foodgrains from producer states to consumer states will also need increased storage and warehousing space.

Further, Bakshi said setting-up of a dedicated fund of Rs 2,000 crore in Nabard for creation of warehousing facilities was a step in this direction. “This will enable Nabard to create required warehousing space both for managing central stocks and managing distribution of foodgrains in the next two years. Nabard has recently sanctioned a project to Karnataka Warehousing Corporation for creation of a warehousing space of 1.06 lakh metric ton, and is already in talks with some other states for financing similar projects,” he noted.

Source: Business Standard