NEW DELHI: After months of suspense, the National Bank for Agriculture and Rural Development (NABARD) finally has a new chairman in ED Prakash Bakshi .
He is assuming charge at a difficult time. Nabard was set up to ensure credit flows for agriculture and rural development, a vitally important role in this country. But, over the years, agricultural production has come to lag behind agricultural credit, raising questions about how the credit flows are being used. There are other challenges. Some of which are well known -- like the Microfinance Bill that Nabard is drafting. And some others that are less known.
ET spoke to a cross-section of rural finance professionals and officials in the finance ministry and Nabard to get a sense of the key questions that Bakshi will have to find answers to.
REFORMING INDIA'S COOPERATIVES
This is one major task before Bakshi. The share of the Primary Agricultural Credit Societies (PACS) in the delivery of rural credit is falling. In large part due to local politicians grabbing control of the co-ops.
To fix matters, Nabard has been trying to get states to change their cooperative laws -- especially clauses on how the board of directors, etc, will be chosen. Now, says a Nabard official, speaking on the condition of anonymity, "While almost all the states have amended these Acts, they have not been implemented yet."
In its 2005 report, the Vaidyanathan Committee, set up to study the problems facing India's co-operative credit societies, had also suggested that PACS be delinked from state cooperative banks, and left free to borrow from commercial banks. But state co-op banks and district co-op banks are resisting this proposal. They do not want to lose their PACS.
"If there is one person who can do this well, it's Bakshi. He was involved in the drafting of the Vaidyanathan committee report and he has field experience," says ex-IIM-A professor MS Sriram, who has worked on co-operatives.
FURTHERING FINANCIAL INCLUSION
According to a finance ministry official, Nabard has to pursue the financial inclusion agenda with regional rural banks (RRBs). "There is a need for RRBs, sponsor banks and Nabard to work in close coordination for achievement of targets of RRBs," the official said.
Further, Finance Minister Pranab Mukherjee has directed the RRBs to reduce the level of non-performing assets, or bad loans, to below 5% of their assets by the year-end and also finalise a roadmap for financial inclusion. Another important area for the Nabard chief will be to oversee agriculture credit delivery and issuance of Kisan Credit Cards (KCC). At present, only 50% farmers are covered under the banking system.
He is assuming charge at a difficult time. Nabard was set up to ensure credit flows for agriculture and rural development, a vitally important role in this country. But, over the years, agricultural production has come to lag behind agricultural credit, raising questions about how the credit flows are being used. There are other challenges. Some of which are well known -- like the Microfinance Bill that Nabard is drafting. And some others that are less known.
ET spoke to a cross-section of rural finance professionals and officials in the finance ministry and Nabard to get a sense of the key questions that Bakshi will have to find answers to.
REFORMING INDIA'S COOPERATIVES
This is one major task before Bakshi. The share of the Primary Agricultural Credit Societies (PACS) in the delivery of rural credit is falling. In large part due to local politicians grabbing control of the co-ops.
To fix matters, Nabard has been trying to get states to change their cooperative laws -- especially clauses on how the board of directors, etc, will be chosen. Now, says a Nabard official, speaking on the condition of anonymity, "While almost all the states have amended these Acts, they have not been implemented yet."
In its 2005 report, the Vaidyanathan Committee, set up to study the problems facing India's co-operative credit societies, had also suggested that PACS be delinked from state cooperative banks, and left free to borrow from commercial banks. But state co-op banks and district co-op banks are resisting this proposal. They do not want to lose their PACS.
"If there is one person who can do this well, it's Bakshi. He was involved in the drafting of the Vaidyanathan committee report and he has field experience," says ex-IIM-A professor MS Sriram, who has worked on co-operatives.
FURTHERING FINANCIAL INCLUSION
According to a finance ministry official, Nabard has to pursue the financial inclusion agenda with regional rural banks (RRBs). "There is a need for RRBs, sponsor banks and Nabard to work in close coordination for achievement of targets of RRBs," the official said.
Further, Finance Minister Pranab Mukherjee has directed the RRBs to reduce the level of non-performing assets, or bad loans, to below 5% of their assets by the year-end and also finalise a roadmap for financial inclusion. Another important area for the Nabard chief will be to oversee agriculture credit delivery and issuance of Kisan Credit Cards (KCC). At present, only 50% farmers are covered under the banking system.
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