Farmers would now be able to have better agricultural growth with the support of National Bank for Agriculture and Rural Development ( Nabard).  The bank is aiming at facilitating agricultural lending among small and marginal farmers. Nabard would be helping the needy farmers by setting up directly self-help groups (SHGs), which would be directly credit-linked with banks.

The announcement was made by the chairman of Nabard Mr. U.C. Sarangi on Tuesday at the Banking Conclave 2008, organized by the Federation of Indian Chambers of Commerce and Industry (Eastern Region). To begin with, the bank would launch the project in five to six states. The advantage of the project is that this scheme will ensure timely repayment of loan through group liability basis of extending agricultural finance for the small and marginal farmers.

Initially lot of small and marginal farmers were usually left out of the purview of banking facilities because banks were not sure about their repayment capacities. Mr. Sarangi said, “The recovery rate in case of SHG lending is as high as 95-98 per cent in almost all States. Forming such groups of farmers will therefore help banks lend money without worrying about defaults.”

The bank would also be providing counseling sessions for farmers in order to ensure proper utilization of the credit. As far the perspective of growth is regarded, the chairman of Nabard said, “The credit deployment in the agriculture sector in 2007-08 was Rs 2,40,000 crore and we expect it to grow it to Rs 2,80,000 crore in 2008-09.”

The refinance provided by the bank to various financial institutions to grow by 33 % at Rs 32,000 crore in 2008-09, up from Rs 24,000 crore last year. The bank, to provide liquidity support to the financial bank, has also earmarked Rs 7,000 crore.

Mr Sarangi also informed that the bank would consider raising money through bonds in order to meet its loan growth. The bank currently has a kitty of Rs 13,000 crore. In this kitty, Rs 5,000 crore is obtained from Government, Rs 5,000 crore from internal accruals and the remaining Rs 3,000 crore has been raised from the markets this year.