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| In order to progress further in meeting the credit needs of the agricultural sector, it is proposed to constitute an Advisory Committee to suggest short-term and medium-term measures to enhance credit flow to this sector.
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| While assessing the progress made in implementation of Vyas Committee, the Committee would, inter alia, look into the role of National Bank for Agriculture and Rural Development (NABARD) in the development of the sector; the present structure and deployment of rural infrastructure development fund (RIDF); role of RRBs; and incentive and attitudinal aspects of credit delivery.
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| It would suggest appropriate changes in the institutional and procedural arrangements for the smooth flow of credit to agriculture.
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| The Committee is expected to address the issue of credit delivery to farmers, especially small farmers, tenants, labourers, supplies of inputs to agriculture and purchases of output.
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| The Committee would explore the scope for involving innovative location-specific catalytic agents to bridge the gap between banking institutions and the demand for timely credit in rural areas, for investment in working capital and consumption smoothing.
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| The Committee is also expected to help in capturing new technological developments in the cause of improving credit delivery.
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(c) Working Group on Flow of Credit to SSI Sector
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| The small scale industries (SSI) sector occupies an important position in the Indian economy and provides employment and income generation.
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| Keeping in view the credit needs of this sector, it is proposed to constitute a Working Group to assess the progress made in implementation of Kapur Committee and Gupta Committee recommendations and suggest ways to improve credit flow considering, in particular, the backward and forward linkages of this sector with large corporates.
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| The Group will also look into methods of utilisation of priority sector shortfall deposits with SIDBI and suggest appropriate institutional arrangement for enhancing the credit delivery on a timely basis and in adequate measure to SSIs.
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(d) Micro-finance
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As indicated in the annual policy Statement of April 2003, RBI constituted four informal groups to examine various issues concerning micro-finance delivery. On the basis of the recommendations of the groups, it is proposed that:
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banks should provide adequate incentives to their branches in financing the self help groups (SHGs) and establish linkages with them making the procedures absolutely simple and easy while providing for total flexibility in such procedures to suit local conditions;
the group dynamics of working of the SHGs may be left to themselves and need neither be regulated nor formal structures imposed or insisted upon;
the approach to micro-financing of SHGs should be totally hassle-free and may include consumption expenditures to enable smoothing of consumptions as needed relative to time-profile of income flows;
NABARD should reinforce its commitment to maintaining and enhancing the flow to micro-finance while simplifying the process; and
NABARD should devise mechanisms to ensure sharing of experiences among the bank branches that are closely involved in extending micro-finance.
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(e) Infrastructure Financing
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| As indicated in the annual policy Statement of April 2003, on account of the high priority accorded by the Government to the infrastructure sector, RBI has taken a number of measures with a view to providing incentives to banks to increase their credit flow to the infrastructure sector.
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| These measures have given the initial impetus to the infrastructure sector as evident from a sharp increase in flow of bank credit to this sector during this year.
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| Though financing requirement is large, the long-term potential for larger investments and better credit-recycling would, no doubt, depend on commercial viability based on assured systems of cost recovery. |
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