National Bank for Agriculture and Rural Development plans to enhance its focus more refinancing non-banking financial companies and microfinance institutions, a process which was started last year.

Harsh Kumar Bhanwala, Chairman, Nabard, said though refinancing NBFCs and MFIs are small part of the overall assistance provided to reach out to small and marginal farmers it is growing steadily as more companies are now focussing on rural regions.

“The long-term refinance given by Nabard is about ₹85,000 crore, of which, NBFCs account for ₹2,500 crore. This portion of business may be small given our balance sheet size of ₹3.10 lakh crore, but it is growing fast,” he said.

As a word of caution, he said Nabard is lending only to AAA and AA rated companies, most of which would turn into small banks. Rural-focussed finance companies should use latest technology to speed up the process for extending loan, minimise risk and reach funds to marginal farmers when they need them the most, said Bhanwala.

NBFCs should also reduce risk by reaching out to different regions and establishing strong internal checks and balances, he said.

Crop insurance On the recently launched crop insurance scheme, Bhanwala said while farmers would benefit the most, it comes with huge risk for insurance companies and calls for reliable data on weather prediction.

State governments should use rural infrastructure development fund to computerise details on farmland, making it easier for insurance companies to estimate losses when there is a calamity, he said.

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