The National Bank for Agriculture and Rural Development (NABARD) has introduced a dedicated debt and credit guarantee product to ensure unhindered flow of credit in rural areas hit by the COVID-19 pandemic. 

The product — Structured Finance and Partial Guarantee Programme to NBFC-MFIs — entails providing partial guarantee on pooled loans extended to small and mid-sized micro finance institutions (MFIs).

Highlights of the programme

The programme entails providing partial guarantee on pooled loans extended to small and micro finance institutions (MFIs). 

The partially guaranteed loan facility will catalyse much-needed financing to millions of households, agricultural and business markets to sustain in the post COVID-19 environment.

It will enhance access to sustainable finance for microenterprises and low-income households. 

It will help facilitate Rs 2,500 crore funding in the initial phase and is expected to be scaled up.

The programme is expected to cover over one million households across 650 districts.

The pooled loan issuance (PLI) structure provides the lending bank adequate comfort through NABARD’s partial credit protection, reduces cost of capital as the rating of the loans gets notched up and helps lenders meet priority sector goals. This structure will pool together the risk of multiple borrowers and add a layer of partial first loss credit enhancement from a highly rated guarantor. 

NABARD signed a pact with Vivriti Capital and Ujjivan Small Finance Bank on August 14 to roll out the initiative. 

What is the purpose of NABARD?

NABARD is the premier organisation dealing with policy, planning and operations in the field of credit for agriculture and other activities in rural areas.

NABARD was established in 1982 by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC). 

It’s mission is to promote sustainable and equitable agriculture and rural development through participative financial and non-financial interventions, innovations, technology and institutional development for securing prosperity.

The head office is situated in Mumbai.

Functions of NABARD

Financial, Developmental and Supervision are three broad heads which enable NABARD to touch almost every aspect of rural economy. 

It includes:

* Providing refinance support.

* Building rural infrastructure.

* Preparing district level credit plans.

* Guiding and motivating the banking industry in achieving credit targets.

* Supervising Cooperative Banks and Regional Rural Banks (RRBs) and helping them develop sound banking practices. 

* Designing new projects for rural development.

* Implementing Centre’s development schemes.

* Training handicraft artisans and providing them a marketing platform for selling their articles among others.

Other key points

* Crop loans are extended to farmers for crop production by financial institutions, which support in ensuring food security in the country. During 2018-19, NABARD disbursed Rs 90,088 crore for seasonal agricultural operations to financial institutions.

* NABARD’s long-term refinance provides credit to financial institutions for a wide gamut of activities encompassing farm and non-farm activities with tenors of 18 months to more than 5 years. During 2018-19, NABARD disbursed Rs 90,254 crore to financial institutions. 

* Rural Infrastructure Development Fund (RIDF) was set up by the RBI with NABARD in 1995-96 out of the shortfall in lending to priority sector by scheduled commercial banks for supporting rural infrastructure projects. NABARD disbursed Rs 27,623 crore during 2018-19. RIDF contributes substantially to the rural infrastructure funding in the country today.

* NABARD has been extending loan to National Rural Infrastructure Development Agency (NRIDA) towards part funding of central share under Pradhan Mantri Awas Yojana-Gramin since 2017-18. 

* NABARD Infrastructure Development Assistance (NIDA) is a line of credit support for funding rural infrastructure projects. NIDA is available for state governments and other state-owned organisations.

* The Kisan Credit Card (KCC) scheme was designed by NABARD in association with the Reserve Bank of India (RBI) in August 1998 for providing crop loans. NABARD has been at the forefront of technology revolution by helping rural financial institutions in providing RuPay Kisan  Cards (RKCs) to all their farmer clients.

Manorama Yearbook app is now available on Google Play Store and iOS App Store