State-run National Bank for Agriculture & Rural Development (Nabard) has justified its restructuring and repositioning exercise, based on the recommendations of the Boston Consulting Group.
Speaking to Business Standard, chief general manager K R Nair said the exercise was aimed at improving the scope of operations by increasing the production credit and investment credit portfolios, as well as their impact. Nabard has said the repositioning initiative did not replace or modify its traditional credit and development functions.
The company's statement follows objections raised by about 35 members of Parliament. They had said Nabard would cease to exist as a development finance institution and become a direct financing institution, competing with commercial banks, cooperative banks and regional rural banks. This would dilute the basic mandate and purpose for which Nabard was formed.
However, Nair said the repositioning was initiated at the highest level and was aimed at increasing the coverage and volume of funding for rural infrastructure to state governments, under the Rural Infrastructure Development Fund (RIDF). "Beyond expanding the current level of operations, the aim is to quickly respond to the evolving needs of clients by offering customised and innovative products and services. Policymakers have positively responded to our requests for a variety of instrumentalities for raising resources. As and when we have made a case for a particular instrument, we have been successful in securing approvals."
The various steps taken by Nabard under the exercise include assisting cooperatives to move to the core banking service platform, supporting producer organisations, professionalising Nabard's supervisory skills and strengthening warehousing infrastructure.
Nair said Nabard has been able to build a Rs 30,000-crore portfolio of funds, nearly 20 per cent of the balance sheet. "Along with this, we have a dedicated, below-the-market-funding source of Rs 82,500 crore comprising RIDF and a short-term cooperative rural credit (refinance) fund, which accounts for 52 per cent of the balance sheet. The direct funding under the repositioning provides two benefits to borrowing agencies. First, for infrastructure, state governments are able to access funds from Nabard without straining their budgetary resources through an 'off-budget' mechanism. Second, many central cooperative banks are able to service their primary agricultural cooperative societies by accessing funds from Nabard at reasonable rates of interest," he said.
Nabard officers decide to go on mass leave
All India Nabard Officers' Association, a representative body of 2,700 officers, have decided to go on a mass casual leave on February 28 to stress on their demand that the company's repositioning exercise be carried out in a transparent manner and through detailed discussions.
The association said it was apprehensive that the Boston Consulting Group's recommendations, if implemented without wide-scale debate, would lead to dilution of Nabard's role.
