Course Title: Agri Finance

Course Instructor: Mr.Anish Buche

Continuous Evaluation No.

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Date of Allotment: 27/01/2023 Date of Submission: 29/01/2023
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NABARD ( National Bank for Agricultural and Rural Devlopement )

History

 On July 12, 1982, NABARD was established by transferring the agricultural credit
functions of the RBI and the refinance functions of the then Agricultural Refinance
and Development Corporation (ARDC).
 On November 5, 1982, late Prime Minister Smt. Indira Gandhi dedicated it to the
service of the nation. It was founded with an initial capital of Rs.100 crore and had a
paid-up capital of Rs.17,080 crore as of March 31, 2022.
 Following a change in the composition of share capital between the Government of
India and the Reserve Bank of India, NABARD is now entirely owned by the
Government of India.

Function of NABARD

 The NABARD scheme aims to provide funds for rural infrastructure in India in order
to enable long-term irrigation practices.
 Providing general financial services and assistance for the development and
improvement of rural India.
 Planning, implementing, and managing any farming and agricultural funding
programs.
 Providing a variety of funding services to designated areas for the development and
growth of food processing units and food parks.
 The NABARD scheme can provide credit to marketing federations.
 Developing new policies for rural financial institutions in India.
 NABARD also provides guidelines for the promotion of group activities through its
program, as well as 100% refinance support.
 It is establishing links between Self-help Groups (SHG) organized by volunteer
agencies for the poor and needy in rural areas.
 It provides full financing for projects carried out under the 'National Watershed
Development Program and the 'National Mission of Wasteland Development'.
 10. It also has a system of District Oriented Monitoring Studies, through which a
cross-section of schemes sanctioned in a district to various banks is studied.

Interest of NABARD Scheme

NABARD Scheme: Interest Rate on Refinance to Banks (per annum) – 2022.

Interest charged by NABARD on refinancing to banks and other NBFCs under different
schemes as of 2022:
 4.50% onwards:

Short Term refinance assistance  State Cooperative Banks for financing

crop loans
 RRBs to finance crop loans

Long Term refinance assistance 8.50% onwards

Regional Rural Banks (RRBs) and State 8.50% onwards

Cooperative Banks (StCBs

Direct Lending 1.50% onwards

State Cooperative Agriculture and Rural 8.50% onwards

Development Banks (SCARDBs)

Source:https://www.bajajfinservmarkets.in/loans/business-loan/nabard-scheme

NABARD Schemes for Farming Sector and Dairy Sector

In order to aid the farming sector, the NABARD loan scheme also offers specially developed
schemes like the Dairy Entrepreneurship Development Scheme. This NABARD dairy
loan aims to help potential entrepreneurs of the dairy market and enable them to enlarge
their businesses by setting up dairy farms and boosting growth.

Main Objectives of NABARD for Farming Sector

The main objectives of NABARD for dairy farming are - 

 Increasing the number of modern-day farms for milk production.

 Technological upgrades increase the production of milk and promote it on a

commercial scale.

 Promoting self-employment and making infrastructural improvements.

 Conserving breeding stock and encouraging heifer calf-rearing.

Other Farming Schemes Introduced under NABARD

 Agri-clinic and Agribusiness Centers Scheme

 National Livestock Mission

 GSS – Ensuring End-Use of Subsidy

 Interest Subvention Scheme

  Credit-Linked Capital Subsidy Scheme (CLCSS) under NABARD

Capital Investment Subsidy Scheme for Commercial Production Units for

Organic/Biological Inputs

Another scheme, the Credit-Linked Subsidy Scheme, was launched in 2000 to help small-
scale industries (SSIs) upgrade their units. These units must be included in the scheme's
defined sub-sectors. Through consistent support, NABARD has significantly aided India's
agricultural and rural development.

The assistance is provided through both financial and non-financial systems, with the
schemes typically provided by rural cooperative banks and regional rural banks. Agricultural
farmers, fish farmers, cattle farmers, and others can also benefit from these tax breaks.

Obtaining a loan for your agribusiness can assist you in meeting your financial objectives.
You're in luck because applying for a loan has never been simpler. You can complete your
project with the help of Business loans on Bajaj Markets.

RESERVE BANK OF INDIA(RBI)

Establishment

As per the guidelines of the Reserve Bank of India Act, 1934, the Reserve Bank of India was
established on April 1, 1935. When the Reserve Bank was first founded, its central office
was located in Kolkata. However, in 1937, it was moved permanently to Mumbai. The
Governor works out policy decisions from the Central Office.

Despite being once privately owned, the Reserve Bank is now entirely controlled by the
Indian government thanks to its nationalisation in 1949.

Preamble

The Preamble of the Reserve Bank of India describes the basic functions of the Reserve
Bank as:

"To regulate the issue of Bank notes and keeping of reserves with a view to securing
monetary stability in India and generally to operate the currency and credit system of the
country to its advantage; to have a modern monetary policy framework to meet the challenge
of an increasingly complex economy, to maintain price stability while keeping in mind the
objective of growth."

Central Board

A centralised board of directors oversees all operations of the Reserve Bank. According to
the Reserve Bank of India Act, the board is chosen by the Indian government.

Local Boards

comprised of the Western, Eastern, Northern, and Southern regions.

comprise five people on each side.

Members that the Central Government appoints.

The period of office for each member is four years:

Functions:

To provide the Central Board with local advice, to represent the territorial and financial
interests of regional cooperative and indigenous banks, and to carry out any other duties as
may from time to time be assigned by the Central Board.

Chain of Command

 Governor
 Deputy Governor
 Executive Directors
 Principal Chief General Manager
 Chief General Managers
 General Managers
 Deputy General Managers
 Assistant General Managers
 Managers
 Assistant Managers
 Support Staff

Main functions of RBI

 Supervisory and Regulatory Authority

 Monetary Authority
 Currency Authority
 Foreign Exchange Management
 Other Purposes
 To support national banking and other financial goals by promoting and carrying out
promotional activities.
 offering central and state governments banking options
 for the Central and State Governments to serve as a banker.
 to manage all of the scheduled banks' financial accounts as the Chief Banker for
each and every bank in the nation.

Source- https://www.indiafilings.com/learn/reserve-bank-of-india-rbi/
Key offerings by RBI for rural India

 The Department of Rural Planning and Credit develops policies for rural credit and
oversees the timely and adequate supply of credit to the rural population for
agricultural endeavours and rural employment programmes.
 It also develops policies pertaining to the priority sector, which includes agriculture,
small-scale industries, small and village industries, craftsmen and retail traders,
professionals and self-employed individuals, state-sponsored organisations for
Scheduled Castes and Scheduled Tribes, and government-sponsored credit-linked
programmes like Swarnjayanti Gram Swarojgar Yojana (SGSY), Prime Minister's
Rojgar Yojana (PMRY), among others.
 It oversees the Lead Bank Scheme's implementation, which aims to provide a
coordinated strategy for extending bank loans to advance the nation's rural areas
generally.


The role played by RBI in order to improve the living standard of the rural population

The RBI's initiatives to encourage agricultural finance

In a developing economy like ours, the Reserve Bank of India might be thought of as a
growth engine. It actively supports development finance in addition to regulating bank
finance.

It has put extra effort into meeting the nation's expanding financial demands in the
agricultural, industrial, and export sectors.

The backbone of India's rural economy is agriculture. Therefore, agricultural development

and expansion depend on rural loans, or agricultural finance.

The Reserve Bank of India has given promoting rural/agricultural finance special emphasis
ever since planning began in our nation.

1. Agriculture credit department

In fact, the Reserve Bank of India Act of 1934 did charge the Reserve Bank with creating an
institutional credit system for the nation's agricultural sector. As a result, the Bank's
Agricultural Credit Department was established in April 1935 simultaneously with the
founding of the Reserve Bank, with the primary goal of fostering cooperative credit
movements in agricultural financing.

2. All India rural credit survey committee

With the appointment of the All-India Rural Credit Survey Committee in 1951 and the bank's
adoption of its principal recommendations from its Report, the activities of the bank in the
field of rural finance exhibited a noticeable expansion and new vista (1954). The Committee
noted that in 1951–1952, non–institutional sources accounted for over 93% of all agricultural
credit. The document continued, "The agricultural credit fell short of the proper quantity, was
not of the right sort, did not serve the right purpose, and frequently failed to go to the right
persons."

The Committee further noted that the cooperatives' performance in the area of agricultural
finance was not only minimal (accounting for only 3% of the total agricultural credit), but it
was also lacking in a number of different ways. To meet the needs of the cultivators, the
cooperative agency in rural finance is nevertheless thought to be the least unsatisfactory
source of credit. As a result, the Committee made the statement, "Cooperation has failed,
but cooperation must succeed."

3. State bank of India

When the State Bank of India (SBI) was established in 1955, the Reserve Bank of India
became the bank's largest stakeholder. As a commercial bank with a focus on rural areas,
the SBI was vital in supporting the cooperative industry there with funding.

4. Agricultural Credit Board

implementing the All-India Rural Credit Review Committee's advice. The Agricultural Credit
Board was established by the Reserve Bank of India in February 1970. The Board is
considered as a powerful institution for developing and evaluating policy in the area of rural
financing. Additionally, it must make sure that the policies and procedures of the RBI are
closely coordinated with the activities of cooperative credit institutions.

The Board has the authority to provide refinancing facilities to cooperative and commercial
banks for both agricultural and non-agricultural uses.

However, the Board has ceased to exist since the NABARD was established.

(Source-Efforts of RBI toward Promoting Agricultural Finance | Reserve Bank of India

(yourarticlelibrary.c)

KISAN CREDIT CARD

The Kisan Credit Card (KCC) scheme was introduced in 1998 to issue Kisan Credit Cards to
farmers based on their holdings for uniform adoption by banks, so that farmers could use
them to easily purchase agriculture inputs such as seeds, fertilisers, pesticides, and so on,
as well as draw cash for their production needs.

In 2004, the scheme was expanded to meet farmers' investment credit needs for allied and
non-farm activities. The scheme was revisited in 2012 by a working Group chaired by Shri T.
M. Bhasin, CMD, Indian Bank, with the goal of simplifying the scheme and facilitating the
issue of Electronic Kisan Credit Cards. The scheme gives banks broad guidelines for
implementing the KCC scheme. Implementing banks will have the option of adapting the
same to meet the needs of their institution or location.
Objective / Goal

The Kisan Credit Card scheme aims to provide adequate and timely credit support from the
banking system to farmers through a single window with a flexible and simplified procedure,
as indicated below:

 To meet the short-term credit requirements for crop cultivation;

 Post-harvest costs
 Make a marketing loan;
 Farmer household consumption requirements;
 Working capital for farm asset maintenance and agricultural-related activities;
 Agriculture and related activities require investment credit.

FUNCTIONS OF KCC-

 The KCC can be used to purchase seeds, fertiliser, herbicides, and other agricultural
inputs. Fishing and animal rearing.
 The card can be used to purchase feed and other supplies for livestock and fishing.
 Irrigation and land development: The KCC can be used to fund irrigation and land
development systems.
 Purchases of agricultural implements: The card can be used to purchase tractors,
threshers, and other agricultural equipment.
 Construction of godowns and cold storage facilities: The KCC can be used to
construct godown and cold storage facilities for the storage of agricultural produce.
 Fulfilling working capital needs: The card can be used to assist farmers in meeting
their working capital needs, such as purchasing inputs, covering employee salaries,
and other operating costs

Eligibility:

Owner cultivators who are individual or joint debtors, as well as tenant farmers, oral lessees,
and share croppers, are eligible. Farmers' Self-Help Groups (SHGs) or Joint Liability Groups
(JLGs) are also eligible, as are tenant farmers and share croppers. Making a decision on a
credit limit or loan amount

For the first year,

Cultivate X acres plus 10% of the maximum for post-harvest, household, and consumption
needs, plus 20% of the maximum for farm asset repairs and maintenance, plus crop
insurance and/or accidental insurance, such as PAIS, health insurance, and asset
insurance.

For the second and subsequent years

First year limit determined as stated above + 10% of the limit for cost inflation/increase in
scale of financing for each succeeding year + limit towards first year limit projected term loan
for UGC tenure, i.e. five years

Repayment Period

The repayment period may be Period of repayment .The time frame for repayment may be
determined by the anticipated harvesting and selling season for the crops for which the loan
is being issued. The term loan component will typically be repaid within 5 years, depending
on the type of activity or investment and current investment credit regulations. Because crop
loans are included in the volume of finance, there is no distinct margin.

The term loan component's margin will be:

• ZERO up to Rs.1.60 lac

• Over Rs.1.60 lac - 10-15%

Documentation

One-time documentation at the time of initial availment , followed by a simple declaration

(about crops raised/proposed) by the farmer with Composite Debit Balance Confirmation
(DBC) starting with the second year. The system calls for a fixed monetary scale for the first
year, followed by annual increases. As a result, the bank will only document up to the
maximum allowable amount.

MINISTRY OF AGRICULTURE & FARMERS WELFARE

HISTORY-

In June 1871, the Department of Revenue, Agriculture, and Commerce was established to
handle all agricultural issues in India. Agriculture-related issues were under the Home
Department's purview prior to the creation of this ministry.

The Department of Revenue and Agriculture was established in 1881 to handle the
combined portfolios of revenue, health, education, and agriculture. However, the Ministry of
Agriculture replaced the Department of Agriculture in 1947. On August 15, 2015, the Ministry
of Agriculture changed its name to the Ministry for Agriculture and Farmers' Welfare in order
to better serve the needs of the farming community.

The Ministry for Agriculture and Farmers' Welfare consists of the following two departments:

 Department of Agriculture, Co-operation and Farmers Welfare: This

Department's responsibilities are assigned to it in the Government of India
(Allocation of Business) Rules, 1961 as amended from time to time. Co-
operation in this context refers largely to promote farmer co-operative
movements. .
  Department of Agriculture Research and Education:This Department's
responsibilities are basic and operation research, technology development,
improving linkages between various organizations and state governments across
the country. In addition, this department manages the Indian Council of
Agricultural Research.

SCHEMES OF MOAFW-

The Institution or Scheme's Key Highlights/Offers:

Insurance for Agriculture:

Protect yourself financially from natural risks such as natural disasters/calamities, insects,
pests, and diseases, and adverse weather conditions. Take advantage of any crop
insurance schemes that are available in your area. The Pradhan Mantri Fasal Bima Yojana
(PMFBY), Weather Based Crop Insurance Scheme (WBCIS), Coconut Palm Insurance
Scheme (CPIS), and Pilot Unified Package Insurance Scheme (UPIS) are the four insurance
schemes being implemented (45 districts). Non-loanee farmers can opt out of coverage.

Assistance was provided by:

1. PMFBY (Pradhan Mantri Fasal Bima Yojana):

• Insurance protection for state-notified food crops, oilseeds, and annual

horticultural/commercial crops.

• A maximum premium that is the same for all farmers:

i) Kharif season - 2% of insured amount.

ii) Rabi Season 1.5% of insured amount.

iii) Commercial/horticultural annual crops 5% sum insured

2. Weather Based Crop Insurance Scheme (WBCIS)

 Protection from insurance for notified food crops, oilseeds, and annual
horticultural/commercial crops.
 A uniform maximum premium for all farmers, similar to PMFBY:
Kharif season - 2% of insured amount.
Rabi Season 1.5% of insured amount.
Commercial/horticultural crops: 5% of insured amount.
• The difference between the actual premium and the rate of insurance payable
by farmers will be split equally between the Centre and the State.
• If the weather indices (rainfall/temperature/relative humidity/wind speed, etc.)
differ (less or more) from the Guaranteed Weather Index of the notified crops,
the claim payment equal to the deviation/shortfall is payable to all insured
farmers in the notified area.
3. COCONUT PALM INSURANCE SCHEME

• Insurance coverage for coconut palm farmers.

• The premium rate per palm ranges from Rs. 9.00 (for plants aged 4 to 15 years) to Rs.
14.00. (in the plant age group of 16-60 years).

• All types of farmers receive a premium subsidy of 50-75%.

• When the palm is damaged, the insured receives a claim payment equal to the input cost
loss damage in notified areas.

4. Piloting the Unified Package Insurance Scheme (UPIS) in notified districts.

• To provide farmers with financial protection and comprehensive risk coverage for crops,
assets, life, and student safety.

Crop Insurance (PMFBY/WBCIS), Loss of Life (PMJJBY), Accidental Death & Disability
(PMSBY), Student Safety, Household, Agriculture Implements & Tractor will be included in
the pilot.

• Crop insurance will be required. Farmers, on the other hand, can select at least two
sections from the remaining sections.

• Farmers may be able to obtain all necessary insurance products through a single simple
proposal/application Form and a single window.

• In addition to asset insurance, the government's two flagship schemes, PMSBY and
PMJJBY, have been included.

• The pilot scheme will be implemented through a single point of contact.

• Claims processing (other than crop insurance) on an individual basis

5. Irrigation:

Pradhan Mantri Krishi Sinchai Yojana (PMKSY): On July 1, 2015, the Cabinet Committee on
Economic Affairs approved the PMKSY, which has a five-year budget of Rs. 50,000 crore
(2015-16 to 2019-20). PMKSY's vision is to provide all agricultural farms in the country with
access to some form of protective irrigation, allowing them to produce more crop per drop.
As a result, much-needed rural prosperity will be realised. Based on a comprehensive
planning process at the district/state level, PMKSY is strategized by focusing on end-to-end
solutions in the irrigation supply chain, such as water sources, distribution networks, efficient
farm level applications, extension services on new technologies and information, and so on.

Assistance was provided by:

• Drip Irrigation: Up to 55% financial assistance for small and marginal farmers and Other
farmers will pay 45%. The approximate cost of a drip irrigation system ranges from Rs.
21643 to Rs. 112237 per hectare, depending on drip lateral pipe spacing and land size. The
maximum allowable assistance will be limited to 5 hectares per beneficiary.

• Community Water Harvesting System: 100% of the cost limited to Rs. 20 lakhs/unit in plain
areas, Rs. 25 lakhs/unit in hilly areas, for 10 ha of command area or any other smaller size
on a pro rata basis depending on the command areas. Non-lined ponds/tanks will be 30%
less expensive.

Source : https://agricoop.nic.in/#gsc

PRIORITY SECTOR LENDING

The categories under priority sector are as follows:

 Agriculture
 Micro, Small and Medium Enterprises
 Export Credit
 Education
 Housing
 Social Infrastructure
 Renewable Energy
 Others

 The agricultural lending categories will include Farm Credit (Agriculture and Allied
Activities), Agriculture Infrastructure, and Ancillary Activities. Loans to individuals who
are directly involved in agriculture and related activities, such as dairy, fishery, animal
husbandry, poultry, beekeeping, and sericulture, including loans to Self Help Groups
(SHGs) or Joint Liability Groups (JLGs), which are groups of individual farmers. The
following will be part of this:
 Long-term and medium-term loans for agricultural and related operations are
available for both traditional and non-traditional plantations, horticulture, and allied
businesses (e.g. purchase of agricultural implements and machinery and
developmental loans for allied activities).
 Pre- and post-harvest loans to help farmers with tasks like spraying, harvesting,
sorting, and transporting their own agricultural produce.