State-run National Bank for Agriculture & Rural Development (Nabard) has launched a repositioning exercise. Umesh Chandra Sarangi, its chairman, talks to Sanjay Jog on the challenges and opportunities. Edited excerpts:
How is Nabard positioned after RBI’s equity was transferred to the government of India? Critics say it has become an extended arm of the government.
The position of Nabard as a development finance institution remains unchanged. The shares were transferred to the government, respecting the basic principle that a regulator cannot be the owner. Though the shares have been transferred, RBI as a regulator will closely monitor and supervise the progress. And, with the government the full owner, Nabard can look forward to it for greater support to discharge its obligation.
What is the status of the repositioning exercise you’d launched?
During the last decade, subsequent to financial sector reforms, banking in India has undergone a significant transformation. A higher rate of economic growth has opened many opportunities, besides tough competition. Looking into the fast-paced changes, Nabard decided to reposition itself. BCG (The Boston Consulting Group) has been entrusted with this job. They are six months into it and we have decided to implement some of their recommendations in the pilot mode. Experience gained from such pilots will enable us to roll out a successful pilot on a large scale.
What new initiatives were taken by you with regard to RIDF?
Nabard has performed creditably on RIDF in the past three years. The disbursement has tripled. In the past three years, we disbursed Rs 50,000 crore. The outstanding amount with state governments on RIDF is Rs 63,000 crore. Major, medium and minor irrigation projects, roads, bridges, drinking water, schools, hospitals have all been completed in large numbers in different states.
How is the self-help group (SHG) movement shaping up?
It is facing competition from microfinance institutions (MFIs). The number of credit-linked SHGs has doubled during the past three years. Today, 100,000 SHGs have been saving-linked and 4.9 million SHGs have been credit-linked. There are a large number of people awaiting access to capital to improve their livelihood. So, MFIs can chip in and operate. They are growing at a year-on-year rate of 70 per cent. But, of late, MFIs have come in for much adverse comment —- multiple financing, breaking of SHGs over indebtedness, high interest rate, lack of transparency. The MFI sector needs to be regulated through appropriate legislation and a regulator.
What about credit to small and marginal farmers?
In the past three years, we have doubled the number of Farmers’ Clubs. We want to train three to five farmers from every Farmers’ Club on credit, technology and the market and use him as a community extension volunteer who will use technology on his field and advise other farmers. To reduce the risk perception of bankers about such farmers and enhance their confidence, we have decided to promote joint liability groups of farmers and link them to banks. During the current year, we will have 1,00,000 such groups. We are getting good response and I am confident this movement will pick up, like the SHG movement.
You had once said converting to a full-fledged bank was an option in the repositioning exercise? Are you choosing to be a bank?
No. Nabard can take up banking if it chooses to. But other banks cannot do what we do as a development finance institution with 25 years of experience in development banking. Nabard enjoys a unique position in guiding development in agriculture and the rural sector. That is our strength and through refinancing we are planning to strengthen that.
