Financial Daily from THE HINDU group of publications
Monday, Feb 28, 2005
Money & Banking
Columns - On Mint Street
Why not Nabard be bank for agriculture?
"BEYOND the verbiage of Government reports, nothing much has happened to agriculture," admitted a top banker.
That sums up the "Great Farm Deal" promised by the BJP and Congress Governments in recent years. Never has a farmer been co-opted on any Government committee relating to the farm sector with all the seats grabbed by intellectuals and officials claiming to represent farmer interests.
Recently, the Government has set up a committee to study the status of capital investment in agriculture and no farmer has been co-opted as a member. How can striped-suit bankers share the table with dhoti-clad farmers speaking the local language?
Till today, this writer has not understood why banks price car loans at less than nine per cent per annum and tractor loans at 13 per cent per annum? How many banks have extended the facility of sub-PLR lending (freely offered to 7-star industrialists who invariably default) to farmers? Again, Maruti can sell its car anywhere in the world, but the farmer is bound by market committees and export quotas.
The Tenth Plan (2002-07) talks of a leap in credit flows to agriculture at Rs 7,36,750 crore as against Rs 2,29,956 crore in the Ninth Plan. The Economic Survey admits: "Credit flow to agriculture from all formal sources amounted to Rs 70,810 crore in 2002-03 and Rs 86,981 crore in 2003-04, much below the levels envisaged in the Tenth Plan."
Dr Montek Singh Ahluwalia wants forex reserves to be set apart for infrastructure. It may be useful to remind him that there is a fund styled Rural Infrastructure Development Fund (RIDF) with a corpus of Rs 42,000 crore (RIDF I to X). Cumulative sanctions and disbursements under various tranches stood at Rs 37,718 crore and Rs 22,946 crore, respectively as on December 31, 2004.
Out of 136,486 projects sanctioned under RIDF I to VIII, 84,584 projects have been completed (no quality analysis has been done). In the current year upto December 31, 2004, sanctions and disbursements under RIDF X amounted to Rs 3,048 crore and Rs 52 crore respectively. Is this not a shame when RIDF funds, managed by the National Bank for Agriculture and Rural Development (Nabard), should have been fully utilised as they are meant to build rural roads, set up micro-irrigation and other environment-friendly, rural projects?
The Economic Survey says: "The shortfall in disbursements of RIDF funds as compared to sanctions continues to remain a matter of concern in the implementation of RIDF." And what has Nabard done? Nothing beyond refinancing to which banks have turned allergic and yet gets huge subventions from RBI and the Centre.
During 2003-04, refinance disbursements for investment credit extended by commercial and co-operative banks stood at Rs 7,605.29 crore - a marginal growth of three per cent due to excess liquidity. Should not Nabard look beyond refinance and become an agriculture bank like Rabo and Agricole?
Some two years back, Nabard signed co-financing agreements with banks to fund projects. The idea was banks and Nabard would fund projects on a 50:50 basis with banks doing a bankable analysis. Till date, the scheme has not moved off the files.
Nabard has no critical role to play in the SHG-Banking micro-finance initiative. One wonders whether ever an ordinary farmer has stepped into its glitzy office at the Bandra-Kurla complex.
Nabard could turn its district offices into branches for accepting retail deposits and over a period of time replace the co-operative credit structure, which is as good as dead.
If IDBI could be turned into a bank, there is nothing which should stop Nabard from becoming the numero uno agri bank. Today, there is SIDBI for small-scale sector, commercial banks for industry, Exim Bank for the exporting community and some financial junk for agriculture.
Will Mr P. Chidambaram turn Nabard into an agri bank in Budget?
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