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Interview with Nabard chairman
Mumbai | March 2017
With the government initiating several steps on the rural front, the National Bank for Agriculture and Rural Development (Nabard) is getting ready to raise around Rs 60,000 crore from the market, almost 50 per cent more than last year. “While we seek that farmers should get benefits, we’re not in favour of waivers,” Nabard chairman Harsh Kumar Bhanwala said in an interview to George Mathew. Excerpts:

What will be the additional investments in the rural sector? There seems to be a change in the strategy…

The long-term irrigation fund has been augmented by Rs 20,000 crore taking the corpus to Rs 40,000 crore. An allocation of Rs 5,000 crore has been made for setting up a dedicated fund for enhancing irrigation efficiency which will bring us closer to the ‘More crop per drop’ idea. The Rs 8,000 crore allocation for dairy development is a vindication that agricultural income can be made resilient only when we couple crop and animal husbandry. We will raise money from the market and there will be subventions. The government wants to do everything quickly. One way is you do small, small things each year. Or you bring the investment upfront and then keep repaying. They have chosen the second route, which to me looks good. If you spread Rs 20-20 for five years, then the initial Rs 20 may vanish. So you complete the project and recover Rs 20-20.

What’s your fund requirement next year? Will you be able to raise the money?

Normally we raise around Rs 35,000-40,000 crore on an average from the market…. for three to five years. Last year was different. As the long-term irrigation fund came, we are about to raise Rs 15,000 crore additional funds. We will raise around Rs 50,000 crore. The additional Rs 11,000 crore is for a 15-year period. We are deepening the bond market. Normally the business in the bond market is up to five years or maximum ten years.
We will be raising around Rs 60,000-65,000 crore from the market in 2017-18. Two things are required to raise this money. One is you should have capital funds to raise money. I have to raise Rs 30,000-35,000 crore more next year. This additional money I will get from my accruals. The profit after tax this year would be around Rs 2,600-2,700 crore which will allow me to additionally raise Rs 27,000 crore. If this additional money has to come, the first requirement is additional capital. There’s a provision… Rs 3,500 crore is the capital they have provided for. While the current capital is Rs 5,800 crore, Rs 3,500 crore budget provision this year and retained profit of Rs 2,700 crore should be sufficient to raise the money from the market. The second requirement is our standing in the market. We are AAA rated institution. My financial performance this year would be better than last year. We’re very confident of raising the money.

What’s the status of the irrigation fund? Who is monitoring it?

Out of Rs 20,000 crore earmarked for the current year, we have already disbursed Rs 5,600 crore. By the year end, probably we will be able to lend around Rs 11,000 crore. This is based on the projects in the states. This is being monitored on mission mode by Niti Aayog and Ministry of Water Resources. It is milestone-based funding. We will not disburse the next amount unless the earlier fund has been utilised.

Do you think the Budget has treated the rural sector fairly?

The government made sizeable announcements for rural sector in the budget. Some of them are such that there will be long-term impact. It may not be immediate payment to somebody, but overall allocations are higher. The credit to go is Rs 10 lakh crore compared to Rs 9 lakh crore.

Agriculture requires long-term soil health. It requires investments. On the public part of agriculture, there’s significant thrust. With this investments, irrigation is priority for the government. They have established a fund this time – Irrigation Efficiency Fund. Regarding the announcement relating to PM’s Fasal Bima Yojana higher coverage, it’s a good acknowledgment that it can’t be extended in one go. They have come out with a three-year plan and realistically they said 28-30 per cent now and then 40 and 50 per cent. This can be enhanced.

For some of the farmers who lost out during demonetisation, interest waiver is there. There’s some relief. But it’s not outright waiver which some quarters were expecting. Omnibus waiver is not good for the banking industry. Giving monetary help, subventions and others are fine but outright waiver may not be in the long-term health of financial institutions. While we seek that farmers should get benefits, we’re not in favour of waivers.
 
After demonetisation, will agriculture sector see a degrowth?
Agriculture growth has to be seen in two separate phases. One is cereals, pulses etc which are six months crop. Probably there, the sowing area has not declined… at least in Rabi. That’s the story that we are hearing. However, the production is contingent on a number of other factors. If drought is there in Tamil Nadu, production will be less but not because of demonetisation. Or if the winter ends prematurely in northern areas and wheat production falls, it can’t be attributed to demonetisation. So sowing has not been affected. Yes, temporarily production of certain vegetable crops saw a hit. To that extent they have been compensated by way of interest waiver etc by the government. As of now sowing has been robust. That’s a positive thing. We don’t have estimates for how much loss on account of drought in TN or adjoining areas or on account of variations in weather conditions. We will have to wait for another one month or so. By and large good Kharif… monsoon was not as bad. It was normal. On that count, they are expecting a good performance.
 
Primary Agriculture Credit Societies (PACS) are in bad shape. What are your plans to make PACS a game changer on the financial inclusion front?
 
One of the limitations of PACS is that they are not computerised. If you have seen the demonetisation exercise, why DCCBs were not covered? There was full KYC at DCCBs. But they have deposits of PACS… and PACS are not computerised and they are not having KYC norms. There’s a Rs 1,900 crore allocation, a corpus to be made, for PACS computerisation. This will be operationalised in association with states. There will be some ratio like the Centre will give 50 or 60 per cent, states will give 35 per cent and 5 per cent by co-operative institutions. That scheme is being operationalised. If provided the required tech support in the form of computers and web connectivity, PACS hold a huge potential for being a game changer in the financial inclusion space.