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The Centre has advised the National Bank for Agriculture and Rural Development (Nabard) against getting into direct financing.
Nabard should instead look at facilitating project financing by banks and their refinancing, according to Namo Narain Meena, Minister of State for Finance.
‘PROMOTIONAL WORK’
He said this while replying to a query by Tapan Kumar Sen in the Rajya Sabha. Sen had sought to know whether the Nabard had sought permission of the Government to diversify business into direct lending.
Nabard should engage itself in ‘promotional work,’ the Minister observed. Rana Mitra, vice-president, All-India Nabard Employees Association, told Business Line that the issue was of paramount importance for all.
Boston Consulting Group (BCG) had recommended diluting the basic Nabard mandate so that it could diversify into the areas of direct financing with a focus on corporate lending, he said.
Employees and officers would now jointly fight to ensure that Nabard continues to get adequate low-cost resources from the RBI and the Centre.
CHEAP FUNDS
Only this would ensure flow of essential credit to the poor farming population, Mitra said. BCG had reportedly favoured Nabard repositioning itself as a direct lender to ‘producer organisations.’
This represented a major shift from its traditional role of refinancing bank loans advanced to the rural sector. The proposed method involved reorienting primary agricultural credit societies (PACs) as producer organisations.
Nabard would lend directly to these organisations for working capital and term loan purposes.
CREDIT-PLUS
In the first phase of the programme, profit-making societies would be identified and their willingness to take up the role as producer organisations ascertained.
Their activities would be ‘mapped’ before deciding on products to handle as also method for profit/loss sharing.
Nabard would also get increasingly active in risk-based financing in priority areas, including infrastructure, agriculture credit and cooperative banks.
The repositioning would have made for a fundamental change in the way the apex farm lender had been operating.
Nabard’s future success was tied to success of the repositioning exercise, the BCG had said.
> vinson.kurian@thehindu.co.in
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