Nabard to help fund tiny infrastructure projects in villages

SATYANARAYAN IYER K RAM KUMAR Mumbai | Updated on November 24, 2017

Sanitation, water and power projects will all be funded under the programme

With banks focussing their energies on funding mainstream infrastructure projects, the National Bank for Agriculture and Rural Development (Nabard) is exploring the feasibility of supporting development of micro-infrastructure in villages.

Nabard could support the ‘gram panchayat’ (a local self-government institution at the village level) to develop micro-infrastructure projects in villages in areas such as bore-wells, sanitation, electrification (solar/ biogas/ windmill), warehouse to store farm produce, and farm equipment — power-tillers, combine harvesters, reapers, etc.

According to Harsh Kumar Bhanwala, Chairman, Nabard, while the banks fund mainstream infrastructure projects, there is a need to evolve a framework for meeting the funding requirements of micro-infrastructure projects so that villages prosper.

Nabard is planning to ask the Indian Institute of Management, Ahmedabad, to carry out a detailed study on the feasibility of providing collateral-free finance to micro-infrastructure projects in villages.

“When there is micro-credit, microfinance, and micro-insurance…then why not micro-infrastructure?” asked Bhanwala.

In India, about 80 per cent of the total agriculture land-holding is fragmented and these farmers (with each holding less than two hectares) cannot afford to own mechanised farm equipment.


In such cases, joint-ownership of equipments can be explored through joint liability groups.

Though Nabard has not committed any capital for the micro-infrastructure foray, Nabard chief said his organisation could consider carving out a portion of the RIDF (Rural Infrastructure Development Fund) for micro-infrastructure projects.

RIDF comprises money that banks forfeit in a particular financial year for not meeting their priority sector targets. Banks have to set aside 40 per cent of their total loan portfolio for priority sectors such as agriculture, micro and small enterprises, education and affordable housing. When some banks are unable to meet this target in full, they have to deposit the balance in the RIDF operated by Nabard, which in turn, invests in rural infrastructure development.

The difference between financing for regular rural infrastructure and micro-infrastructure is that for the latter, funds will be made available for small and highly-localised projects, mostly on an individual basis.

Published on February 27, 2014

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