ANNUAL REPORT 2 0 1 5 – 1 6 I 08 June 2016 Photo credit (all photos other than the front cover photo): NABARD Custom publishing for NABARD: Lucid Solutions, www.lucidsolutionsonline.com Printing and production for NABARD: ALCO Corporation Board of Directors Chairman appointed under Section 6(1)(a) of the NABARD Act, 1981 Shri Harsh Kumar Bhanwala Chairman Director appointed under Section 6(1)(b) of the NABARD Act, 1981 Dr Satyanarayana Dash Directors appointed under Section 6(1)(c) of the NABARD Act, 1981 Shri Harun. R. Khan Dr Nachiket Mor Directors appointed under Section 6(1)(d) of the NABARD Act, 1981 Smt. Snehlata Shrivastava Shri S.K.Pattanayak Shri S.M.Vijayanand Directors appointed under Section 6(1)(e) of the NABARD Act, 1981 Smt. G. Latha Krishna Rao Smt. Upma Chawdhry Shri M. Srinivas Rao Shri Dinesh Kumar Jain Directors appointed under Section 6(3) of the NABARD Act, 1981 Shri H. R. Dave Shri R. Amalorpavanathan From the Chairman… NABARD continued its efforts towards enabling the achievement of sustainable rural prosperity in right earnest. With back-to-back poor monsoons and drought like conditions in several parts of the country,Government of India’s primary focus has been on massive investment in irrigation through the Pradhan Mantri Krishi Sinchai Yojana (PMKSY). The Hon’ble Union Finance Minister, during his Budget Speech 2016–17, announced the institution of a dedicated Long Term Irrigation Fund (LTIF) in NABARD with an initial corpus of `20,000 crore for fast tracking the implementation of incomplete major and medium irrigation projects under PMKSY. Accordingly, operationalising LTIF with an initial focus on 23 identified irrigation projects in nine states, having a potential to irrigate 18.6 lakh hectares, is a high priority area for NABARD. VI NABARD’s refinance disbursement under investment credit touched `48,064 crore during 2015–16, marking a growth of 53 per cent over the previous year, facilitating acceleration of capital formation in the rural economy. This includes an amount of `14,997 crore disbursed to cooperative banks and RRBs under the Long Term Rural Credit Fund. Creation of rural infrastructure is an enabler for the achievement of inclusive and sustainable rural development. In this context, Rural Infrastructure Development Fund (RIDF) has been an important project financing option for state governments for the creation of rural infrastructure. The year 2015–16 witnessed sanction of projects with loan of `28,830 crore under RIDF XXI, with the share of irrigation and agriculture sectors being 50 per cent of the total sanction. The state governments availed loans amounting to `23,510 crore during the year, which was an all-time high. Also, loans aggregating `1,361 crore were disbursed under Warehouse Infrastructure Fund (WIF). In addition, 11 Mega Food Park projects spread over nine states were accorded sanction of term loan of `477 crore, under the Special Food Processing Fund. Further, a loan amount of `5,919 crore was sanctioned for 12 projects under NABARD Infrastructure Development Assistance (NIDA), which included bridges, drinking water, roads, electricity transmission, and renewable energy. Climate change has emerged as an important challenge to agriculture and rural livelihood sectors. NABARD as the National Implementing Entity (NIE) under three funding mechanisms, viz. Adaptation Fund (AF) and Green Climate Fund (GCF) of the United Nations Framework Convention for Climate Change (UNFCCC) and Government of India’s National Adaptation Fund for Climate Change (NAFCC), has channelled funds for building climate change resilience of rural livelihoods. Five projects amounting to $7.3 million have been sanctioned by the AF. Further, 12 projects with a loan amount of `235.2 crore were sanctioned by the National Steering Committee on Climate Change (NSCCC) under NAFCC. Government of India’s decision to create a Producers’ Organisation Development and Upliftment Corpus (PRODUCE) Fund with a corpus of `200 crore in NABARD for the promotion of 2,000 farmer producer organisations (FPOs) by March 2016, was a major intervention aimed at facilitating aggregation of input supplies and output marketing, besides village level value addition. During the financial year 2015–16, 1,371 FPOs have been approved taking the total to 2,173 FPOs under PRODUCE Fund as on 31 March 2016, in various parts of the country. NABARD had launched a pilot project for digitisation of all SHGs in Ramgarh (Jharkhand) and in Dhule (Maharashtra) districts. Based on the encouraging results, the pilot project is being extended to cover another 22 districts across the country during 2016–17. Thus, NABARD attained greater heights in all its endeavours during the year 2015–16. Going by numbers, NABARD’s balance sheet stood at `3,10,385 crore as on 31 March 2016, registering a growth of 8.5 per cent over the previous year, scaling higher levels of productivity and ability to generate surplus for developmental purposes. Moving forward, we have greater challenges in hand. The foremost of these challenges is policy and strategy formulation to enable the achievement of Government of India’s target of doubling farmers’ income by 2022. I am confident that NABARD will rise to the occasion to meet all emerging challenges successfully. HARSH KUMAR BHANWALA VII Contents NABARD at a Glance xiii Key Data References xiv Principal Officers xvi ANNUAL REPORt 2015–16 1. The Year in Retrospect … and the Way Forward 3 1.1 The State of the Economy 2015–16 3 1.2 The Global Viewpoint 4 1.3 Macroeconomic Challenges 4 1.4 Agriculture in 2015–16: An Assessment 6 1.5 Doubling Income of Farmers 7 1.6 Capital Formation in Agriculture 8 1.7 National Agriculture Market 9 1.8 Income from Allied and Ancillary Activities 9 1.9 Pradhan Mantri Fasal Bima Yojana 10 1.10 Promotion of Pulses 11 1.11 Agriculture Credit 11 1.12 Agricultural Trade 13 1.13 Agriculture Policy: Critical Issues 14 1.14 NABARD: Highlights of 2015–16 and the Way Forward 16 References 18 2. Financing Small and Marginal Farmers: Strategies for Enhanced Institutional Finance 21 2.1 Background 21 2.2 Status of SF/MF in India 22 2.3 Features of SF/MF in India 23 2.4 Institutional Credit to SF/MF 24 2.5 Constraints to Financing SF/MF 27 2.6 The Way Forward: Strategies for Financing SF/MF 28 References 31 3. Supporting Rural Financial Institutions 35 3.1 Short-Term Credit 35 3.2 Refinance Support to RFIS for Increasing Flow of Long Term Credit 39 VIII 3.3 Direct Lending for ST Multipurpose Credit 44 3.4 Credit Facility to Federations 45 3.5 Financial Support to Develop PACS as Multi Service Centres 45 3.6 Government of India Sponsored Schemes 46 3.7 Status of Rural Financial Institutions and Efforts at Strengthening Them 50 3.8 Supervising RFIS 63 3.9 Credit Planning Functions 66 4. Inclusive Growth For Sustainable Rural Prosperity 69 4.1 NABARD’s Climate Change Actions 69 4.2 Farm Sector Promotion Fund—Policy Initiatives 72 4.3 Support to Producer Organisations 72 4.4 Watershed Development Programmes 74 4.5 Tribal Development Fund 78 4.6 Adivasi Development Programme 79 4.7 Umbrella Programme for Natural Resource Management 80 4.8 Scaling Up Microfinance Initiatives 83 4.9 Towards Greater Financial Inclusion 88 4.10 Off-Farm Sector 91 4.11 Promoting Research and Development 94 4.12 Offering Consultancy: NABARD Consultancy Services 98 5. Financing Rural Infrastructure 101 5.1 Rural Infrastructure Development Fund—Genesis and Coverage 101 5.2 RIDF Operations 103 5.3 RIDF XXI 105 5.4 Cumulative Sanctions (RIDF I–XXI) 106 5.5 Disbursements Under RIDF (Tranche I–XXI) 108 5.6 Economic and Social Benefits 110 5.7 RIDF Impact Evaluation 111 5.8 Monitoring of RIDF Projects 112 5.9 Process Improvements during 2015–16 112 5.10 NABARD Infrastructure Development Assistance 113 5.11 Warehouse Infrastructure Fund 116 5.12 Special Fund for Food Processing 116 6. Organisation and Initiatives 119 6.1 Management 119 6.2 Human Resource Development Initiatives in 2015–16 120 6.3 Right to Information (RTI) Act, 2005 and Resolution of Grievances 122 6.4 Vigilance Sensitisation 123 6.5 Information Technology Initiatives 123 6.6 Corporate Communications 124 6.7 Visits of Parliamentary Committees 124 6.8 Promotion of Rajbhasha 125 7. Resource Management and Financial Performance 127 7.1 Sources of Funds 127 7.2 Uses of Funds 130 7.3 Income and Expenditure 132 IX 7.4 Capital Adequacy 134 7.5 Inspection and Concurrent Audit 134 7.6 Risk Management 134 7.7 Subsidiaries of NABARD 135 7.8 Strategic Investments of NABARD 139 7.9 Investments in Venture Capital Funds 139 ANNUAL ACCOUNTS 2015–16 Balance Sheet Profit & Loss Account & Cash Flow 2015-16 of NABARD Independent Auditors’ Report 145 Balance Sheet 148 Schedule 18: Significant Accounting Policies and Notes forming Part of Accounts for the year ended March 31, 2016 173 Cash flow 207 Consolidated Balance Sheet Profit & Loss Account & Cash Flow 2015-16 of NABARD & Subsidiaries (NABCONS, NABKISAN, ABFL, NABFINS) Independent Auditors’ Report 213 Consolidated Balance Sheet 216 Schedule 18 : Significant Accounting Policies and Notes forming Part of Accounts for the year ended March 31, 2016 240 Consolidated Cash flow 257 E-Mail Address of NABARD Head Office Departments at Mumbai 261 Regional Offices/Cell/Training Establishments 262 Abbreviations 265 TABLES 1.1 Foodgrains Production (MT) 6 1.2 GVA and GCF in Agriculture and Allied Sector 8 1.3 Agency-wise Ground Level Credit Flow 12 1.4 Ground-level Disbursement to Agricultural Sector 13 2.1 Share of SF/MF in Total Number of Holdings