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Corporation for agriculture, crop insurance being planned -- Nabard likely to take part in project

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The four General Insurance Corporation subsidiaries are also likely to be part of the new corporation.

KOLKATA, May 12

THE Union Finance Ministry is actively pursuing the idea of creation of a corporation for agriculture and crop insurance.

Mr Y.C. Nanda, Chairman of National Bank for Agriculture and Rural Development (Nabard), told Business Line here that Nabard would formally be asked to participate in the project.

The four General Insurance Corporation subsidiaries are also likely to be part of the new corporation. Some of the commercial banks may also participate in the equity. The initial equity of the proposed corporation will be around Rs 750 crore.

Mr Nanda was here to meet bankers and State Government officials to have feedback on the recommendations of the Expert Committee on Rural Credit (ECRC), constituted by Nabard.

Mr Nanda said the growth in agriculture was expected to be around 4 per cent in 2002-03 compared to over six per cent during the last fiscal.

The rural credit target for the current year is Rs 75,000 crore as against Rs 64,000 crore in the previous year. "It has been found that calculation of an appropriate capital-output ratio for the agriculture sector was proposition, but it has been estimated that a steady growth of four per cent throughout the 10th Plan period will require a credit worth Rs 7,36,000 crore compared to a credit flow of Rs 2,40,000 crore during the 9th Plan period'', he added.

Nabard's refinancing activity is targeted to be of Rs 16,000 crore and Rs 4,000-5,000 crore will be meant for rural infrastructure project credit.

The bank plans to raise around Rs 3,200 crore. "Nearly half of it would be through the capital gains bonds and the rest would be tax-free bonds and priority sector bonds. The Finance Ministry is positively inclined to allow issue of tax-free bonds. However, the quantum of it has not yet been decided'', he added.

Mr Nanda said the growth in micro-credit had been phenomenal in the country in the recent years. "The cumulative figure of the self-help groups linked to the micro-credit system stood at 4.7 lakh at the end of 2001-2002. The last year's addition was Rs 1.25 lakh '', he pointed out.

By the sheer number of people benefited from the initiative, it was the largest in the world, he observed. However, he admitted that in terms of geographical spread, it was mostly concentrated in the southern States. Around 70 per cent of micro-credit availers belong to the southern zone by virtue of being early starters.

In terms of spread of micro-credit cult among banking institutions — commercial banks led the pack with 52 per cent share of the total credit provided followed by regional rural banks (42 per cent) and co-operative banks (8 per cent).

Regarding regulating co-operative banks, he felt that the current regime of dual control (by the RBI and the State Government) had to yield to a single authority. The administrative control should also be shifted to professionals from political appointees.

The Chairman of ECRC, Prof V.S. Vyas, said with Nabard, the committee was currently "sensitising the four main stakeholders in the agricultural credit mechanism — co-operative banks, RRBs, commercial banks and State Governments in the context of changing contours of the rural credit''. Prof Vyas expected the exercise would be complete in all the regions by the end of the current fiscal.

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Corporation for agriculture, crop insurance being planned -- Nabard likely to take part in project


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