Credit, a major challenge for agricultural producer organizations: GR Chintala, President, Nabard
The National Bank for Agriculture and Rural Development (Nabard) has a major role to play, as the government has set itself the goal of forming 10,000 OPAs by 2027-28.
The main challenge facing agricultural producer organizations (FPOs) is insufficient access to institutional credit due to weak capital base, lack of credit history and non-availability of collateral. The National Bank for Agriculture and Rural Development (Nabard) has a major role to play, as the government has set itself the goal of forming 10,000 OPAs by 2027-28. In an interview with Nanda Kasabe and Sandip Das, GR Chintala, Chairman, Nabard points out that OPAs will play an important role in making Indian agriculture globally competitive and remunerative for farmers. Excerpts:
How does Nabard support FPOs and catalyze their proliferation?
In addition to providing financial support in the form of credits and grants, Nabard has also engaged with the FPO ecosystem by providing policy support, facilitating credit linkages, and other development support. In 2014-2015, the government created with us a “PRODUCE fund” for the promotion of new FPOs. Under this program itself, Nabard has so far promoted 2,154 FPOs. In total, we have so far promoted more than 6,000 FPOs and provided financial support of Rs 103.99 crore. We are also a major implementing agency for core sector programs. We have developed a guidance note on the financing of FPOs by banks and set up a credit guarantee trust fund to provide credit guarantee for loans granted by banks to FPOs.
What challenges do FPOs face in obtaining credit from financial institutions?
Key challenges faced by FPOs in accessing finance include weak capital base, lack of credit history, unavailability of collateral, insufficient capacity building of board members and CEO and lack of professionalism. In addition, there are factors such as the low level of active participation of members in business and compliance with various compliance requirements by FPOs.
What would be Nabard’s approach to ensure that FPOs have access to cheaper credit according to priority sector lending standards?
We provide grants for capacity building of FPOs. A grant of Rs 5 lakh by FPO is provided as start-up capital by FPO. Since the FPOs mainly consist of smallholders and marginal farmers, they get an interest subsidy on crops as well as related activities under the Kisan credit card. They also get an interest subsidy under the Agricultural Infrastructure Fund.
How many FPOs have been financed by Nabard so far?
We do not provide direct credit to FPOs. Nabard facilitates credit links through banks, NBFCs and Nabard affiliates. About Rs. 1,000 crore was utilized by 1,600 FPOs in the form of bank credit from financial institutions, the majority of the FPO financing was provided by NABKISAN Finance. To date, NABKISAN has sanctioned a loan of Rs 278.8 crore at 926 FPO.
Your opinion on the FPO ecosystem in the country?
OPAs will play a decisive role in shaping Indian agriculture in the years to come. State governments should also support OPAs by establishing basic infrastructure, common service centers, warehouses, etc. so that they are able to expand their business activities and generate sufficient income for their member farmers. The sustainable development of OPAs requires an enabling environment, meeting financial needs, easing constraints and raising awareness among farmers.