'Exploitable Potential ' To 'Credit Potential’: NABARD Shows The Way

By Dr. K. Parameswaran, New Delhi, January 9, 2014 (Washington Bangla Radio): As an annual exercise, NABARD (National Bank for Agriculture and Rural Development) takes up a detailed exercise in all districts across the country for mapping the credit potential that is expected to stimulate balanced growth. Here, the emphasis is mainly on the key stake holders in the development process - the district administration, implementing departments, banks, farmers etc.

NABARD has prepared a carefully designed potential mapping process. This entails constant updating of available infrastructure in the district. On this basis, the potential for Ground Level Credit (GLC) is projected. This exercise, being one of its kind, is vetted by technical experts from different disciplines at the regional offices of NABARD. Finally, the outcome, the Annual Potential Linked Credit Plan document is made available for the development planning domain.

NABARD's Potential Linked Credit Plan (PLP) is a much sought after document by the banks, departments related to development and the academia since it offers them a fair idea as to emerging trends and aids them on focus areas. Quite often, NABARD’s PLP exercise helps all the stake holders to review, re-look and re-draw the road map for development in key sectors of the economy.

Bottom up Approach

True to the spirit of the 'bottom-up' approach, NABARD initiates the painstaking development planning exercise with each district as a unit. This is easy for NABARD as it has officers stationed across almost all districts in the country. These officers, who are designated as the District Development Managers (DDMs) are engaged in constant dialogue with the district administration and banks. They help them in setting the correct priorities for speedy growth.

It is also significant to note that NABARD completes the entire process of finalizing the PLP well in advance. The time bound approach adopted by NABARD ensures that the banks are able to prepare their Annual Credit Plans (ACP) based on the PLP estimates. For example, NABARD has completed the planning exercise for the next fiscal 2014-15 before the end of the December 2013 quarter.

PLP 2014-15

The PLP 2014-15 prepared by NABARD has taken into account the potential available for development in all the sectors as also the infrastructure available for exploiting such potential. The preparation of the PLP document was preceded by a detailed consultative process with the implementing departments in the district for identifying critical infrastructural requirements. The main objective of the entire exercise is to link the development planning process with the credit planning process.

In this context, it is essential to bear in mind the fact that NABARD had prepared a Base PLP document, co-terminus with the 12th Five Year Plan period (2012-13 to 2016-17). The present exercise is aimed at further fine tuning the projections for the year 2014-15 based on priorities laid down by the Government of India, expected improvement in power position, inflationary trends, interest subvention for crop loans, focus on farm mechanization etc. An attempt has been made to give a detailed picture of the exploitable potential which could be translated into credit potential by various banks.

Aggregation at State Levels

The exercise of preparation of PLPs attempted in all the districts of Tamil Nadu, for example, will be followed by the preparation of a State Focus Paper (SFP) document which is essentially an aggregation of credit estimates at the state level. It will be presented at the state level credit seminar which will be convened by NABARD. It is usually attended by senior officials of the state government, RBI, NABARD and the state level Bankers Committee (SLBC).  The forum of the state level credit seminar is also utilized to present the critical interventions required for catalyzing growth in the district to the state government officials.

Critical Infrastructural Interventions

NABARD, as part of the PLP preparation exercise, also identifies the infrastructural requirements for up scaling the Ground Level Credit (GLC) under various sub sectors. These will be presented to the state government for necessary follow up interventions. It is also noteworthy that NABARD even offers funding to state governments under its Rural Infrastructure Development Fund (RIDF) window for some of the incomplete  'last mile projects'  awaiting completion and commissioning for want of crucial funds.

Case Study: Madurai

The Potential Linked Credit Plan for Madurai, for 2014-15, envisages a total outlay of Rs. 6293 crores for various sectors in the district under the Priority Sector category. This indicates a considerable increase over the Annual Credit Plan (ACP) target of Rs. 5520 crore for 2013-14.

The PLP envisages a higher allocation for agriculture and allied activities in tune with the Twelfth Five Year Plan's objective of achieving inclusive growth. The credit plan has projected the share of crop loans at Rs. 1939 crore in tune with the thrust of Government of India to give fillip to agriculture, largely through Kisan Credit Card (KCC) scheme.

Since Term Lending for capital formation is key for sustaining growth in agriculture, special emphasis has been laid in the plan document for term credit for agriculture, with an allocation of Rs. 1 570 crore for lending to activities such as minor irrigation, land development, dairying, farm mechanization, plantation and horticulture and creation of storage space through rural godowns etc.

The importance of MSME sector as a key sector for job and income generation has been recognized with a sizable allocation of Rs. 1244 crores. Since Madurai is a prominent as an upcoming urban destination, under "Other Priority Sector" banks can lend to the order of Rs. 1540 crores in sectors like housing loans, education loans, consumption loans, loans to traders and small road transport operators.

Shri. R. Shankar Narayan, AGM, NABARD, Madurai who formulated the credit plan for Madurai, has informed that the PLP 2014-15 has taken into account the potential available for development in all the sectors as also the infrastructure available for exploiting such potential. He added that the exercise was to arrive at the exploitable potential for credit off take through banking channels during the next fiscal 2014-15.