The guidelines, sent for consideration by the Reserve Bank of India (RBI), expect land development banks, also known as agriculture and rural development banks in some states, to formulate their own schemes for raising deposits. These should be based on the guidelines and the freedom to offer attractive terms to compete effectively in the market.
The study group, headed by Nabard executive director M C Bhandari, says land development banks will face acute resource constraints while expanding their loan portfolio, unless earnest efforts were made by them to tap savings in rural areas.
The group, however, observed that the premier position of the land development banks in term lending for agriculture during the last 50 years and a membership of 20 million would enable them to raise deposits of Rs 1,000 crore in a short span for supplementing their growing need for resources.
The recommendations include introduction of yet another instrument of rural bonds by these banks, and tax concessions for augmenting the much-needed resources for rural lending, according to a Nabard release.