RBI Governor's Speech - Some stray thoughts by GS

Message from Hon;ble Governor RBI as I understood as a Lay Man (NABARDian)

1.      As per the speech of the Governor the first and foremost things come out that the Agriculture credit remains, or rather has acquired greater proposition. Of importance in this era when GoI & RBI are chasing an ever elusive mandate of INCLUSIVE GROWTH (with 3/4^th of farmer household still out of formal credit ambit). It inter alia means that the directed credit , monitored credit and credit support system for RFIs remain as important as it was in the yester years Hence mandate assigned to NABARD in its Act remains topical , relevant and worthy of perusing.

2.      The problems infesting the development of Agri sector , with more specific relation to Agri Credit sector (as enumerated in para 31 page 22 of the speech) , more or less remain the same as they were say in 1982-the degree variance may have changed to better side-but fact remains they (problem factors) are yet to be tackled and vanished. Hence the objective of setting up of NABARD is yet to be achieved. Reduced Long term credit in agriculture manifested in lower capital augmentation in rural areas.

3.      That poverty cannot be eradicated without a robust growth in Agriculture sector , for which agri credit is pivotal (pl see paragraph 39 page 26 of the speech ). However the demand for credit is overstepping supply of credit by an average 14 % and was as high as 33 % in 2007-08.

So NABARDs' role is cut out to-

A) FUND BASED BUSINESS:

        i.            Provide enough Refinance support to RFIs so that the Demand supply gap in Agri Credit gets reduced. So refinance as a fillip to boost agri credit remains the top tool for ensuring development through credit.

      ii.            Strengthen business operation under SPD so as to boost Rural Infrastructure development so that demand for sustainable long term credit is evolved and adequately met too. Like any Infrastructure project the rural infrastructure projects too will be of long gestation period and will require low interest bearing funding.

B) NON FUND BUSINESS

        i.            Provide SHG-bank Linkage and KCC like innovations to CBs so that their outreach in rural areas is increased and they are able to provide more agri credit-direct and indirect-to the sector.

      ii.            Provide policy support to Rrbs so that they are able to leverage their comparative advantage of being a true RFI-both in corporate cuture and corporate mandate.

    iii.            Strengthen the corporate Governance methodology and functions in Cooperative structure through institutional Development initiatives.

    iv.            Effectively Monitor end use of credit and implementation of Agri credit Policy through an effective supervision and policy control. It would help in containing the Weighted Average lending rates of agri credit in RFIs as also will help in reduction of NPAs in the sector concerned.

All in all, NABARD to remain an Apex DFI primarily to promote and safeguard the interest of Small & marginal farmers and rural Poor. SO, NABARD JUST REQUIRES TO REPOSITION ITSELF IN TERMS OF EFFECTIVE DELIVERY MECHANISM, NOT IN TERMS OF ITS MANDATE AND BUSINESS OPERATIONS.

FOR ACCOMPLISHING THE ABOVE NABARD SHALL REQUIRE ACCESS TO LOW COST FUNDS , TECHNOLOGICAL UPGRADATIONS AND GREATER AUTONOMOSITY- UNFORTUNATELY HON'BLE GOVERNOR HAS NOT SHED ANY LIGHT ON THESE ASPECT S AND OFF COURSE RBI AND GoI ROLE IN EVOLVING NABARD INTO A STRONGER INSTITUTION.