The Hindu Business Line : Nabard mulls arm for micro-finance

Hyderabad, July 4 With a view to addressing a variety of challenges faced by micro-finance institutions, National Bank for Agriculture and Rural Development (Nabard) has decided to evolve a model institution that ensures transparency in accounting disclosure and coercive-free recovery methods.

Announcing this here, Dr Y.S.P. Thorat, Chairman of Nabard, said the bank would formalise the NBFC (non-banking financial company) called Nabard Financial Services or NABFINS. The initiative would be piloted in Karnataka in the next two months.

“After evaluating the model, we will then expand it to other States. The NBFC will have an authorised capital of Rs 100 crore and an issued capital of Rs 20 crore,” he said.

While Nabard subscribed to 51 per cent of this, the rest would be contributed by banks and State Governments. According to him, several banks were keen to join the effort.

The idea behind launching this initiative was to address the key issues such as lack of transparency in accounting disclosure, high transaction costs, poor diversification of products and high rates of interests.

“The objective is to prepare a model that can be emulated by other players,” he said. Dr Thorat was here in connection with the national seminar on agriculture credit to mark the silver jubilee fete of the bank.

Cooperatives revamping

Talking on Prof. Vaidyanathan committee report on revamping of credit cooperatives, he said DCCBs (District Cooperative Central Banks) and primary agricultural cooperatives in Andhra Pradesh would get Rs 460 crore in the first tranche on complying with the set norms.

Nationally, the bank set apart Rs 15,000 crore for cooperatives that met the benchmarks set in recoveries and other parameters. As many as 12 States agreed so far to comply with the committee recommendations.

On co-financing, Dr K.G. Karmakar, Managing Director, said the bank would join banks in financing projects such as biodiesel plantation in order to offer them cushion from risks.

Stating that agriculture growth had dipped from 3.6 per cent during 1984-85 to less than two per cent in 1995-96, he said largest slumps occurred in States that were predominantly rain fed.

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