-PROF OBEROI

TABLE OF CONTENT

SR NO.
01 02 03

TOPIC
INTRODUCTION ROLE FUNCTIONS SUBSIDARIES MODEL BANKABLE PROJECTS CONCLUSION

04
05 06

Introduction
NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with 1. Providing refinance to lending institutions in rural areas 2. Bringing about or promoting institutional development and 3. Evaluating, monitoring and inspecting the client banks Besides this pivotal role, NABARD also: 1. Acts as a coordinator in the operations of rural credit institutions 2. Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development 3. Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development 4. Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development 5. Acts as regulator for cooperative banks and RRBs 6. Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development 7. Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development 8. Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development 9. Acts as regulator for cooperative banks and RRBs Some of the milestones in NABARD's activities are: 1. Total production credit disbursed at end March 2011 was 34196 crore.

2. Refinance disbursement under Investment Credit to commercial banks, state cooperative banks, state cooperative agriculture and rural development banks, RRBs and other eligible financial institutions during 2010-11 aggregated 13485.87 crore. Through the Rural Infrastructure Development Fund (RIDF) 12060.04 crores were disbursed during 2010-11. A cumulative amount of 121488.40 crore has been sanctioned for 444162 projects as on 31 March 2011 covering irrigation, rural roads and bridges, health and education, soil conservation, drinking water schemes, flood protection, forest management etc. Under Watershed Development Fund which has a balance of 1847.69 crore as on 31 March 2011, 579 projects in districts of 14 states have benefited. Farmers now enjoy hassle free access to credit and security through 1009.30 lakh Kisan Credit Cards that have been issued through a vast rural banking network. During 2010-11, 72.6 lakh KCC were issued by banks with a sanctioned limit of 43370 crore. Under the Farmers' Club Programme, during the year 21903 clubs were launched, taking the total to 76708 clubs as on 31 March 2011 helping farmers get access to credit, technology and extension services. Village Development Programme (VDP) is being implemented in 801 villages across 25 states. Under Tribal Development Fund, cumulative sanction amounted to 917.60 crore for 317 projects covering 2.5 lakh families. During 2010-11 financial assistance of 373.97 crore was sanctioned for 126 projects benefiting 94,163 tribal families. Under Farm Innovation and Promotion Fund (FIPF), cumulatively 123 projects in various states, involving financial support of 11.65 crore were sanctioned as on 31 March 2011. Farmers Technology Transfer Fund (FTTF) 512 innovative projects in 27 states with grant assistance of 44.97 crore were sanctioned during 2010-11. There were more than 69.53 lakh savings linked SHGs and more than 48.51 lakh credit linked SHGs covering 9.7 crore poor households as on 31 March 2011, under the microfinance programme.

Overview
NABARD is set up by the Government of India as a development bank with the mandate of facilitating credit flow for promotion and development of agriculture and integrated rural development. The mandate also covers supporting all other allied economic activities in rural areas, promoting sustainable rural development and ushering in prosperity in the rural areas. With a capital base of Rs 2,000 crore provided by the Government of India and Reserve Bank of India , it operates through its head office at Mumbai, 28 regional offices situated in state capitals and 391 district offices at districts. Contact NABARD It is an apex institution handling matters concerning policy, planning and operations in the field of credit for agriculture and for other economic and developmental activities in rural areas. Essentially, it is a refinancing agency for financial institutions offering production credit and investment credit for

promoting agriculture and developmental activities in rural areas.

NABARD today
Initiates measures toward institution-building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc. Coordinates the rural financing activities of all the institutions engaged in developmental work at the field level and maintains liaison with the government of India , State governments, the Reserve Bank of India and other national level institutions concerned with policy formulation Prepares, on annual basis, rural credit plans for all the districts in the country. These plans form the base for annual credit plans of all rural financial institutions Undertakes monitoring and evaluation of projects refinanced by it promotes research in the fields of rural banking, agriculture and rural development Functions as a regulatory authority, supervising, monitoring and guiding cooperative banks and regional rural banks.

NABARD's Roles and Functions are summarized below:

1. Credit Functions 2. Developmental and Promotional Functions 3. Supervisory Functions 4. Institutional and Capacity building 5. Role in Training

Subsidaries
Nabcons
NABARD Consultancy Services (Nabcons) is a wholly owned subsidiary promoted by National Bank for Agriculture and Rural Development (NABARD) and is engaged in providing consultancy in all spheres of agriculture, rural development and allied areas. Nabcons leverages on the core competence of the NABARD in the areas of agricultural and rural development, especially

multidisciplinary projects, banking, institutional development, infrastructure, training, etc., internalized for more than two decades. The Company is registered under the Company's Act, 1956, with an authorized capital of Rs 250 million (US $5.75 million) and paid up capital of Rs 50 million (US $1.15 million). In tune with NABARD's mission to bring about rural prosperity, Nabcons has more than just commercial interest in the assignments it undertakes. For more information on what NABCONS can offer you, please visit www.nabcons.com Information under RTI Act.

NAFBINS
NABARD Financial Services Limited, [NABFINS] is a subsidiary of National Bank for Agriculture and Rural Development (NABARD) with equity participation from NABARD, Government of Karnataka, Canara Bank, Union Bank of India, Dhanalakshmi Bank and Federal Bank. It is a non-deposit taking NBFC registered with the Reserve Bank of India and shall operate throughout India. The main objectives of the Company are to provide financial services in two broad areas of agriculture and microfinance. NABFINS provides credit and other facilities for promotion, expansion, commercialization and modernization of agriculture and allied activities. NABFINS shall engage in the business of providing micro finance services (with or without thrift) and other facilities to needy and disadvantageous sections of the society for securing their prosperity in both rural and urban areas. NABARD, which is the world renowned apex development bank of our country and pioneered the worlds largest microfinance movement, while promoting NABFINS has envisaged that NABFINS shall evolve into a Model Microfinance Institution to set standards of governance among the MFIs, operate with exemplary levels of transparency and operate at reasonable / moderate rates of interest.

Associates
NABARD's international associates range from World Bank-affiliated organisations to global developmental agencies working in the field of agriculture and rural development. These agencies offer material and advisory help in implementing schemes that are aimed at uplifting the rural poor and in making agricultural processes effective and yielding.

Model Bankable Projects

Introduction
NABARD's strategies, inter alia, cover formulation and circulation of Model Bankable Schemes and Location Specific Bankable Schemes to the financing banks. NABARD also proposes to identify highly potential zones for undertaking investment activities in various states and organise interactive workshops in these potential zones. The Technical Services Department of NABARD is preparing and bringing model bankable agricultural projects in the areas of Minor Irrigation, Land Development, Plantation & Horticulture, Agricultural Engineering, Forestry and Wasteland, Fisheries , Animal Husbandry and Biotechnology. Besides these traditional areas, State specific area development projects and profiles in the emerging thrust areas of Medicinal & Aromatic Plants, Processing of Fruits & Vegetables have also been prepared for dissemination among financing banks. Of late, organic farming is gaining prominence as a sustainable alternative in reviving Indian Agriculture. To promote this through institutional credit, Model Bankable Schemes on Organic Farming have been formulated. 1. Minor Irrigation 2. Land Development 3. Plantation / Horticulture 4. Agricultural Engineering 5. Forestry / Waste Land 6. Fisheries 7. Animal Husbandry 8. Medicinal & Aromatic Plants 9. Biotechnology 10. State Specific Projects

11. Organic Farming

Credit functions
Introduction
NABARD's credit functions cover planning, dispensation and monitoring of credit. This activity involves: 1. 2. Framing policy and guidelines for rural financial institutions 3. Providing credit facilities to issuing organizations 4. Preparation of potential-linked credit plans annually for all districts for identification of credit potential 5. Monitoring the flow of ground level rural credit

Types of Refinance Facilities

1. Agency 2. Credit Facilities 3. Commercial Banks 4. Long-term credit for investment purposes 5. Financing the working capital requirements of Weavers' Co-operative Societies (WCS) & State Handloom Development Corporations Short-term Co-operative 1. Structure (State Co-operative Banks, 2. District Central Co3. operative Banks, Primary 4. Agricultural Credit Societies) 5. Short-term (crop and other loans

Medium-term (conversion) loans 1. Term loans for investment purposes 2. Financing WCS for production and marketing purposes 3. Financing State Handloom Development Corporations for working capital by State 4. Co-operative Banks Long-term Co-operative Structure 1. 2. 3. 4. 5. 6. State Co-operative Agriculture and Rural Development Banks, Primary Co-operative Agriculture and Rural Development Banks

Term loans for investment purposes

Pilot scheme for financing short-term loans in three states Regional Rural Banks (RRBs) Short-term (crop and other loans) Term loans for investment purposes State Governments Long-term loans for equity participation in co-operatives Rural Infrastructure Development Fund (RIDF) loans for infrastructure projects Non-Governmental Organisations (NGOs) - Informal Credit Delivery System Revolving Fund Assistance for various micro-credit delivery innovations and promotional projects under 'Credit and Financial Services Fund' (CFSF) and 'Rural Promotion Corpus Fund' (RPCF) respectively

Criteria for refinance

1. Technical feasibility of the project and adequate response from prospective beneficiaries 2. Financial viability and adequate incremental income to ultimate borrower to repay the loan within a reasonable period

3. Organisational capability to ensure close supervision The refinance is provided to SCARDBs, SCBs, CBs and RRBs. However, the beneficiaries of the programme are partnership concerns, companies, stateowned corporations or cooperative societies. But, finally the assistance reaches the individuals, who are members of the primary credit institutions. The refinance is usually 50% to 95% of the project cost. The balance will be met by the banks and the concerned state governments or the Government of India in the case of SCARDBs. With a view to ensure credit flow to certain thrust areas, the quantum of refinance is enhanced to 100% as in the case of special category beneficiaries like SC/ST members and self help groups.

Interest Rates
Margin money
The beneficiary's contribution to the project cost is necessary in order to ensure his stake in the investment. Such margin money varies from 5% to 25% depending on the type of investments and the category of the beneficiaries. The margin money can be by way of contribution in cash or own or family labour. Large farmers, firms, corporate borrowers including state-owned corporations, forest development corporations provide margin money up to 25% pf the investment cost.

Special focus
Removal of regional and sectoral imbalances is one of the thrust areas and hence preference is given to the needs of the underdeveloped areas. For example, the development of the north-eastern region has been a key programme and special efforts have been made through refinance offered on liberal terms and other supportive measures so that the rural credit delivery system in the region is strengthened.

Monitoring
Special attention is paid to monitoring the projects that are offered assistance so that the targets are met and the implementation is properly done. An evaluation of the project is taken up and in the light of the findings the quality of the projects and their implementation methods can be improved. District-oriented monitoring studies are conducted to evaluate the performance of the ongoing

agricultural development schemes sanctioned. Specific sector studies are also undertaken like floriculture, mushroom, aqua culture, agro-processing, etc. to get an insight into the problems and prospects of these sectors. Guidelines are often issued for formulation of high-tech and export-oriented projects in farm and non-farm sectors. Besides, even consultancy is also offered for projects, including appraisal of projects even in cases where refinance is not secured from the bank.

Direct Credit
Direct credit from NABARD constitutes loans to State Governments.

Supporting Cooperatives
In order to strengthen the owned funds position of cooperative credit institutions and thereby increasing their capacity to leverage larger resources, NABARD provides loans to State Governments to contribute to the share capital of these institutions.

Rural Infrastructure Development

With the objective of assisting State Governments in the completion of ongoing rural infrastructure projects and to take up new infrastructure projects, the Rural Infrastructure Development Fund (RIDF) was set up with NABARD in 1995-96 with contributions from Commercial banks by way of deposits. The shortfall in agri/priority sector lending was deposited by the commercial banks with NABARD as part of their contribution to the RIDF. The total corpus covering RIDF I (1995-96) to X (2004-05) is Rs. 42,000 crore. Sanctions under all trenches of RIDF as on 31 March 2005 were Rs.42948.51 crore against which the disbursements were Rs. 25384.02 cr.

Anticipated Benefits
1. 2. It is anticipated that the projects sanctioned upto 31 March 2005 under RIDF would result in: 3. Creation of additional irrigation potential in 92.47 lakh ha. 4. Addition of 178000 km of rural road network & 331000 meter bridge length 5. Contribution to the GDP to the tune of Rs. 11058 crore 6. Generation of recurring employment of 48.01 lakh jobs and non-recurring employment of 13681 lakh man days due to increased irrigation

7. Generation of non-recurring employment expected from non-irrigation projects: 23238 lakh person days

Co-financing
To ensure substantial credit flow to agriculture and rural sector and to instill confidence in banks for financing hi-tech/export oriented agriculture projects involving large financial outlays/sunrise technologies, etc., NABARD has entered into agreements for co-financing with 12 Commercial Banks thereby sharing the credit risks with partner banks. Under this arrangement, projects have been sanctioned in areas like floriculture, organic farming, milk processing, ethanol production, infrastructure development and forestry.

Bulk-lending/ Revolving Fund Assistance

NABARD provides bulk-lending facilities to NGOs. As on 31.3.2005, 30 agencies have been sanctioned assistance of Rs 27.07 crore against which Rs.15.18 crore has been disbursed.

Production Credit
This is a short-term refinance facility, aimed at supporting
1. Agricultural production operations and marketing of crops by farmers and farmers cooperatives 2. Marketing and distribution of inputs like fertilizers, seeds and pesticides 3. Production and marketing activities of village cottage industries, handicrafts, handlooms, powerlooms, artisans, small scale and tiny industries and other rural non-farm enterprises 4. Eligible institutions for this facility are State Cooperative Banks (SCBs) and Regional Rural Banks (RRBs). The period of credit is 12 months.

Short Term Credit

1. Seasonal Agricultural Operations (SAO)

In order to ensure availability of timely credit to farmers, banks follow production-oriented system of lending. The system has features like assessment of credit, needs based on area brought under cultivation, crop wise scales of finance, provision of credit for purchase of inputs like fertilizers and pesticides. Refinance is provided for production purposes at concessional rate of interest to state cooperative banks (SCBs) and regional rural banks (RRBs) by way of sanction of credit limits. Each withdrawal against the sanctioned credit limit is repayable within 12 months. New line of credit for financing short-term agricultural /allied and marketing activities To provide liquidity to the cooperative banks and to boost credit flow to the agriculture sector, a new line of credit was introduced in 2003-04 encompassing loans for agricultural purposes against security of gold and security other than charge on crops, working capital credit for allied agriculture activities, working capital credit for procurement and distribution of agriculture inputs, marketing of agriculture/allied products, collection and marketing of minor forest produce etc and short-term credit support provided to cultivators for higher scales of finance for commercialisation of agriculture, exports and value addition.

2. Marketing of Crops
With a view to improve the flow of marketing credit to cultivators for augmenting their holding capacity and checking incidence of distress sale, NABARD encourages cooperative banks and RRBs to finance marketing of crops, through its refinance facility for this purpose. Each drawal against the sanctioned credit limit is repayable within a maximum period of 12 months.

3. Distribution of agri inputs

With a view to ensuring timely supply of agri inputs like fertilizers, pesticides etc. a line of credit is made available to cooperative banks for financing Apex/Primary Societies for stocking and distribution of agri inputs by way of sanction of yearly limits. Each drawal is repayable within a period of 120 days.

4. Pisciculture Activities
Refinance facilities is extended to cooperative banks and RRBs for meeting the working capital requirements of farmers in pisciculture activities by way of sanction of ST credit limits. Each drawal is repayable within 12 months.

5. Other than SAO (OSAO)

Refinance is available to cooperative banks for financing the working capital

requirement of PWCS/Apex Weavers' Society, working capital requirements of industrial societies, financing individual rural artisans, etc. Each drawal against the sanctioned credit limit is repayable within 12 months. OSAO refinance is available to RRBs for financing production and marketing activities of artisans, village industries and also for financing persons belonging to weaker sections engaged in trade/business/services. Refinance support is also available to commercial banks for financing the working capital requirements of PWCS. Refinance support is available to SCBs and CBs for meeting working capital requirements of State Handloom Development Corporations (SHnDCs).

Special Initiatives
1. Special line of credit for oilseeds and pulses production 2. Special line of credit for development of tribals in predominantly tribal areas 3. Liquidity support to cooperative banks and RRBs for providing relief to farmers in distress and farmers in arrears 4. Revision in methodology for fixing scale of finance

Refinance against Investment Credit

1. 2. This is a long-term refinance facility. It is intended to create income generating assets in the following: 3. Agriculture and allied activities 4. Artisans, small scale industries, Non-Farm Sector ( Small and Micro Enterprises), handicrafts, handlooms, powerlooms, etc. 5. Activities of voluntary agencies and self help groups working among the rural poor 6. The credit is normally provided for a period of 3 to 15 years. 7. Investment credit leads to capital formation through asset creation. It induces technological upgradation resulting in increased production, productivity and incremental income to farmers and entrepreneurs.

Eligible Institutions
State Cooperative Agriculture and Rural Development Banks (SCARDBs), State Cooperative Banks (SCBs), Regional Rural Banks (RRBs), Scheduled Commercial Banks, Scheduled Primary Urban Cooperative Banks, North East Development Finance Corporation Ltd. (NEDFI), ADFCs (ADFT, ABFL & NABFINS) and NBFCs are eligible for refinance from NABARD for investment credit in the rural sector.

Eligible Purposes
Some of the major purposes covered under Investment credit are Minor Irrigation, farm mechanisation, plantation/ horticulture, animal husbandry, storage/market yards, fisheries, post-harvest management, food/agro processing, non-farm sector including rural industries, microfinance, purchase of land (for small/marginal Farmers, share croppers etc.), rural housing and disbursements under poverty alleviation programmes like PMRY, SGSY and SC/ST Action Plan etc. Hi-tech projects and agri-export zones are identified as thrust areas and NABARD helps in techno-financial appraisal of such projects besides providing refinance.

Criteria
The technical feasibility of the project, financial viability and generation of incremental income to ultimate borrowers thereby enabling them to have a reasonable surplus after repayment of the loan installments are the necessary conditions to be satisfied for sanctioning investment credit. The beneficiaries of the programme are individuals / group of individuals, SHGs, proprietory / partnership concerns, companies, state-owned corporations or cooperative societies.

The extent of refinance will be as under (except SCARDBs):

i. States in Eastern Region, North Eastern Region including Sikkim, Hilly States, Chhattisgarh and Lakshwadeep: 100% of eligible bank loans for all purposes. ii. For Other Regions: 100% for all thrust areas as explained in Policy Circulars. iii. 95% for all other diversified purposes and 80% for Krishak Sathi Yojana. iv. 70% to NBFCs for all eligible purposes. For SCARDBs: The extent of refinance would be 90% across the country

Disbursements for 2011-12, Disbursement Agency Wise Disbursement State Wise & Read more about Investment Credit

Rural Infrastructure Development

With the objective of assisting State Governments in the completion of ongoing rural infrastructure projects and to take up new infrastructure projects, the Rural Infrastructure Development Fund (RIDF) was set up with NABARD in 1995-96 with contributions from commercial banks by way of deposits. The shortfall in agri/priority sector lending was deposited by the commercial banks with NABARD as part of their contribution to the RIDF. The total corpus covering RIDF I (1995-96) to XVI (2010-11) was Rs.1,16,000 crore for State Governments and Rs.18500 crore for National Rural Roads Development Agency (NRRDA). Sanctions under all tranches of RIDF as on 31 March 2011 were Rs.140,388.40 crore against which the disbursements were Rs.98,999.75 crore. This includes sanction and disbursement of Rs.18,500 crore for NRRDA.

Anticipated Benefits
It is anticipated that the projects sanctioned upto 31 March 2011 under RIDF would result in: 1. Creation of additional irrigation potential in 164.78 lakh ha. 2. Addition of 3,30,855 km of rural road network & 6,67,306 meter bridge length 3. Contribution to the GDP to the tune of Rs. 23811.00 crore 4. Generation of recurring employment of 8540.45 lakh jobs and non-recurring employment of 26396.78 lakh man days due to increased irrigation 5. Generation of non-recurring employment expected from non-irrigation projects: 55247.39 lakh person days

Farm Sector Schemes

1. 2. 3. 4. 5. 6. 7. 8. 9. Village Adoption/Village development Plan Backward Blocks Bamboo Farming MACs Bio Fuels Crop Insurance Agriculture Commodities SGSY Farm Mechanisation

10. Land Purchase 11. Scheme for AgriClinic/ Agri-Business Centres (ACABCs) 12. SEMFEX 13. Capacity Building for Adoption of Technology (CAT) 14. Agri Export Zone (AEZ) 15. Contract Farming 16. Farmer's Club

Rural Housing
With a view to supplementing the efforts of Government of India, State Governments, National Housing Bank and Banking Sector in augmenting the resources for the Rural Housing segment, NABARD has included Rural Housing as an eligible activity for extension of refinance (investment credit) to the eligible banks w.e.f. 01 April 2001. The broad terms and conditions for the refinance scheme are as under:

I.

Area of Operation
Refinance will be provided to all eligible Banks for finance extended by them to housing projects in the 'rural' areas only. As per NABARD Act, Rural area means the area comprised in any village and includes the area comprised in any town, the population of which does not exceed 50000 or such other figure as the RBI may specify from time to time.

II.
1. 2. 3. 4. 5. 6. 7.

Eligible Borrowers
Individuals Co-operative Housing Societies Public Bodies Housing Boards/ Housing Development Authorities/ Improvement Trusts Local Bodies Voluntary agencies and NGOs Housing Finance Companies registered, with NHB

Financing made under Golden Jubilee Rural Housing Scheme and Schemes of the Govt. of India, Ministry of Rural Development shall also be eligible for NABARD refinance.

III.

Eligible Purposes
Construction of New Houses as well as Repairs/Renovation of existing houses in rural areas/ Rainwater Harvesting Structures/ Sanitary Latrines, etc.

IV.

Security/ Margin

As per RBI / NHB guidelines issued from time to time.

V.

Ceiling on the cost

The cost of the dwelling unit may not exceed Rs 20 lakh. In case land is being acquired, the land cost may be reckoned as Margin Money. Otherwise the cost of land should not be included in the project cost. Quantum of bank loan for individual (maximum) For new houses Rs. 15 lakh For repairs/renovation Rs. 5 lakh

VI.

Refinance Disbursements
Rate of interest on NABARD Refinance, Repayment period 1. For new houses - not more than 15 years 2. For Repairs/ Renovation - not more than 7 years

Quantum of NABARD Refinance

Sr no. Purpose/Region. Quantum of refinance (% to bank loan)- Automatic Refinance North Eastern Region and Sikkim 100% to all Agencies Other Regions 1. Commercial Banks and Scheduled Primary (Urban) Cooperative Banks 90% 2. State Cooperative Banks 90% 3. Regional Rural Banks 90% 4. State Cooperative Agriculture and Rural Development Banks 100% All the Districts covered by District Rural Industries Project (DRIP) 100%

Others
1. Loans to State Governments for funding equity of Co-operative Credit Institutions 2. NABARD provides long-term loans to state governments for contribution to the share capital of co-operative credit institutions subject to certain condition 3. This is to facilitate strengthening of equity base of these credit institutions and improve their viability 4. The maturity period of such loans is 12 years with a moratorium period of initial 2 years and repayment in 10 annual instalments Development and Promotional Functions Developmental Functions Promotional Functions Micro Finance in India 2009-10 Best Farmers' Club

Directory of Farmers Club

Credit is a critical factor in development of agriculture and rural sector as it enables investment in capital formation and technological upgradation. Hence strengthening of rural financial institutions, which deliver credit to the sector,has been identified by NABARD as a thrust area. Various initiatives have been taken to strengthen the cooperative credit structure and the regional rural banks, so that adequate and timely credit is made available to the needy. In order to reinforce the credit functions and to make credit more productive, NABARD has been undertaking a number of developmental and promotional activities such as:Help cooperative banks and Regional Rural Banks to prepare development actionsplans for themselves 1. Enter into MoU with state governments and cooperative banks specifying their respective obligations to improve the affairs of the banks in a stipulated timeframe

2. Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying their respective obligations to improve the affairs of the Regional Rural Banks in a stipulated timeframe 3. Monitor implementation of development action plans of banks and fulfillment of obligations under MoUs 4. Provide financial assistance to cooperatives and Regional Rural Banks for establishment of technical, monitoring and evaluations cells 5. Provide organisation development intervention (ODI) through reputed training institutes like Bankers Institute of Rural Development (BIRD), Lucknow www.birdindia.org.in, National Bank Staff College, Lucknow www.nbsc.in and College of Agriculture Banking, Pune, etc. 6. Provide financial support for the training institutes of cooperative banks 7. Provide training for senior and middle level executives of commercial banks, Regional Rural Banks and cooperative banks 8. Create awareness among the borrowers on ethics of repayment through Vikas Volunteer Vahini and Farmers clubs 9. Provide financial assistance to cooperative banks for building improved management information system, computerisation of operations and development of human resources

Supervisory Functions
Overview
As an apex bank involved in refinancing credit needs of major financial institutions in the country engaged in offering financial assistance to agriculture and rural development operations and programmes, NABARD has been sharing with the Reserve Bank of India certain supervisory functions in respect of cooperative banks and Regional Rural Banks (RRBs). As part of these functions, it 1. Undertakes inspection of Regional Rural Banks (RRBs) and Cooperative Banks (other than urban/primary cooperative banks) under the provisions of Banking Regulation Act, 1949. 2. Undertakes inspection of State Cooperative Agriculture and Rural Development Banks (SCARDBs) and apex non-credit cooperative societies on a voluntary basis

3. Undertakes portfolio inspections, systems study, besides off-site surveillance of Cooperative Banks and Regional Rural Banks (RRBs) 4. Provides recommendations to Reserve Bank of India on issue of licenses to Cooperative Banks, opening of new branches by State Cooperative Banks and Regional Rural Banks (RRBs) 5. Administering Credit Monitoring Arrangements (CMA) in SCBs and CCBs.

Core Functions
NABARD has been entrusted with the statutory responsibility of conducting inspections of State Cooperative Banks (SCBs), District Central Cooperative Banks (DCCBs) and Regional Rural Banks (RRBs) under the provisions of Section 35(6) of the Banking Regulation Act (BR Act), 1949. In addition, NABARD has also been conducting periodic inspections of state level cooperative institutions such as State Cooperative Agriculture and Rural Development Banks (SCARDBs), Apex Weavers Societies, Marketing Federations, etc., on a voluntary basis.

Objectives of Inspection
To protect the interest of the present and future depositors To ensure that the business conducted by these banks is in conformity with the provisions of the relevant Acts/Rules, regulations/Bye-Laws, etc To ensure observance of rules, guidelines, etc., formulated and issued by NABARD/RBI/Government To examine the financial soundness of the banks To suggest ways and means for strengthening the institutions so as to enable them to play more efficient role in rural credit

Instruments of Supervision
1. Periodic on-site inspection of SCBs, DCCBs, SCARDBs and RRBs and other Apex level Cooperative institutions 2. Supplementary Appraisal 3. Off-site Surveillance System ( OSS ) 4. Portfolio inspection/System study 5. Monitoring through returns including CMA and Frauds

6. Attending to complaints in respect of Cooperative Banks (excluding Urban Cooperative Banks) and RRBs

Supervisory Strategy
In the wake of the banking sector reforms, new set of international norms/practices were made applicable to Commercial Banks (CBs) to make them more competitive and sustainable in the changing scenario. The cooperative banks and RRBs were also to function in the general banking environment, emerging out of the financial sector reforms, introduced by the GOI/RBI. Accordingly, the prudential norms were extended to them in phases. While the capital adequacy norm has not yet been made applicable to these banks, the other prudential norms viz. income recognition, asset classification and provisioning, which were made applicable by RBI to the commercial banking sector had been extended to cover RRBs in 1995-96, SCBs and DCCBs in 1996-97 and by NABARD to SCARDBs in 1997-98. NABARD, through a concrete and timebound supervision strategy, facilitate these banks to adjust to the new financial discipline so as to internalize prudential norms stipulated.

Current Focus
Under the revised strategy, a sharper focus of the NABARDs inspection was given on the core areas of the functioning of banks pertaining to Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, Systems and Compliance (CAMELSC). Thus, NABARDs focus in its statutory on-site inspections is on core assessments leaving the collateral appraisals to banks. The micro level aspects are to be taken care of by the banks themselves by way of internal inspections or by other agencies such as auditors. In this direction, through a series of workshops and meetings held with the Chief Executives and the Chief Auditors of cooperative banks, NABARD has been attempting to ensure that the other areas, particularly relating to the internal checks and controls, revenue and income realization by way of interest on loans and advances, investments and other routine features of carrying out general banking transactions were suitably taken care of by the banks and their concurrent/statutory audit systems.

Off-site Surveillance
As a part of the new strategy of supervision, a system of `Off-site Surveillance' has been introduced as a supplementary tool to the on-site inspection. Its objectives are to obtain and analyse critical data on a continuous basis, to identify areas of supervisory concern and to identify early warning signals and risky areas requiring further probe. The system basically envisages desk scrutiny of operations of cooperative banks and RRBs through a set of statutory and nonstatutory returns. While the periodical statutory on-site inspections attempt an

overall evaluation of the performance of the banks with a stipulated period, offsite surveillance envisages continuous supervision supplementing the on-site inspections with additional instruments of supervision.

Board of Supervision (for SCBs, DCCBs and RRBs)

Board of Supervision (for SCBs, DCCBs and RRBs) has been constituted by NABARD under Section 13(3) of NABARD Act, 1981 as an Internal Committee to the Board of Directors of NABARD. The broad powers and functions of the Board of Supervision are: Giving directions and guidance in respect of policies and on matters relating to supervision and inspection, reviewing the inspection findings, suggesting appropriate measures Reviewing the follow-up action taken by Department of Supervision (DoS) on matters of frauds and internal checks and control Identifying the emerging supervisory issues in the functioning of cooperative banks/RRBs such as NPAs recovery, investment portfolio, credit monitoring system, management practices, frauds, etc. Suggesting necessary follow-up measures Recommending appropriate training for Inspecting Officers of NABARD for imparting necessary skills and knowledge Suggest measures for strengthening of DoS Recommend issue of directions by RBI Oversee the quality of inspections carried out and the reports issued Review the information generated through off-site surveillance and other supplementary vehicles, action taken thereon Undertake any other functions entrusted from time to time by the Board of Directors of NABARD The Board of Supervision reviews the financial position of Cooperative Banks and RRBs based on the inspections of these banks by NABARD. Based on the observations of BoS, authorities concerned are apprised of the weaknesses of the banks.

Other Initiatives
The day-to-day functioning of the supervised banks is being monitored through various statutory returns prescribed by the RBI/NABARD including OSS returns

State level groups comprising RCS, Apex bank, Cooperation and Finance Department, State Government, Director of Audit and non-compliant banks have been constituted/convened for preparing/discussing suitable strategy for banks not complying with the provisions of Section 11(1) of BR Act, 1949 [ as applicable to Cooperative Societies (AACS)] and monitoring the progress of Action Plan prepared by them to facilitate recompliance with the provisions. Periodic discussions are held with the MD, Apex Banks, RCS, State Government, etc., to discuss the supervisory concerns.

CONCLUSION

NABARD has played a very vital role in the development of Indian commodity market. It has a wide scope of services through which it has helped various sectors for its development. Some of the important functions are crediting, housing,

supervision, etc. but one of its most important function is micro-finance. MICRO-FINANCE includes functions such as giving loans for setting up business relating to agriculture and helping self-help groups {SHGs}. It also helps in savings functions. The main objective of micro-finance is to promote sustainable and equitable agriculture and rural prosperity through effective credit supply, related services, institutional development and other innovative initiatives. Micro-finance has developed from micro-savings to micro-credit then to micro insurance, micro remittance and micro pension.