Credit Planning and Delivery for Financial Inclusion PDF 2023-24

6 6.1 Credit planning 6.2 Refinance activities 6.3 Refinance trends 6.4 Other credit expansion instruments 6.5 New initiatives in refinance during FY2024 6.6 Improving efficiency in the credit delivery ecosystem 6.7 Strengthening financial inclusion...

6 6.1 Credit planning 6.2 Refinance activities 6.3 Refinance trends 6.4 Other credit expansion instruments 6.5 New initiatives in refinance during FY2024 6.6 Improving efficiency in the credit delivery ecosystem 6.7 Strengthening financial inclusion 6.8 Way forward Credit Planning and Delivery for Financial Inclusion `  Annual Report 2023–2­4 A s an apex institution promoting rural development in India, one of NABARD’s primary responsibilities is to enable the flow of ground-level credit (GLC). Its objective is to ensure that the smallest and most marginalised economic actors at the grassroots gain access to institutional credit to invest into diversifying, expanding, and scientifically modernising their farm and off-farm activities. They can, thus, simultaneously ‘contribute to’ and ‘enjoy’ the fruits of inclusive and sustainable rural development in the long term. On the one hand, NABARD fulfils its role in expanding credit availability and supply through credit planning and monitoring, and last-mile credit delivery through both refinance and direct finance products. And on the other, it also seeks to stimulate credit demand through greater financial inclusion. 6.1 CREDIT PLANNING Credit planning is important for estimating credit demand (potential) in the rural economy and trying to meet it. NABARD has placed 479 district development managers pan India with the prime responsibility of credit planning, monitoring of credit flow, and coordination with channel partners. Under credit planning, NABARD prepares potential-linked credit plans (PLPs) on an annual basis for all the districts of the country. These PLPs estimate credit potential under the priority sector at the district level and present holistic interventions required in infrastructure and other support services. During FY2024, 729 PLPs for FY2025 have been prepared covering 758 districts which further guide the banks in preparation of annual credit plans, ensuring credit supply in the rural economy. Assessment of credit potential in PLPs under the priority sector for all districts in a state leads to the compilation of state focus papers (SFPs), highlighting the credit potential, gaps, and strategies for sector and infrastructure development of the state. The SFP also outlines the support to be provided by government departments. The SFPs are launched at state credit seminars (SCSs) wherein infrastructure gaps and major sectoral issues relating to credit flow are deliberated on with relevant stakeholders, namely, senior officials of state governments, banks, research institutions, etc. Suggestions emanating in the SCSs help state governments in framing suitable policies/schemes and making budgetary provisions, as required. During FY2024, SFPs were launched in SCSs across 30 states. The SFP projection for FY2025, under the priority sector, is estimated at ₹61 lakh crore, of which the share of agriculture is NABARD expands ₹26.3 lakh crore i.e., 43%. credit availability The government has been fixing annual targets for GLC for the agriculture sector by scheduled and supply while also stimulating commercial banks (SCBs), regional rural banks (RRBs), and rural cooperative banks (RCBs). During credit demand FY2024, ₹25.1 lakh crore (provisional) has been disbursed, against the target of ₹20 lakh crore, thus through greater overachieving the target by 25% (Figure 6.1). Significantly, much of the incremental agricultural financial inclusion. GLC was extended by SCBs. 80  ` Credit Planning and Delivery for Financial Inclusion Figure 6.1: Agricultural GLC by agency during FY2024 (provisional data) (₹ lakh crore) 25.1 Proposed agriculture credit target 19.8 20.0 (FY2025): 25 lakh crore 10.3 14.4 7.8 9.5 7.1 14.8 10.3 12.2 2.6 2.3 3.0 3.0 7.3 0.5 0.6 0.2 0.2 2.4 2.1 2.5 2.4 Target Achieved Target Achieved Target Achieved Target Achieved Commercial banks Cooperative banks Regional rural banks Total Crop loan T erm loan Total GLC = Ground-Level Credit. 6.2 REFINANCE ACTIVITIES Encompassing the diverse credit needs of rural clients, NABARD extends refinance to rural financial institutions (RFIs), SCBs, and non-banking financial companies (NBFCs) against their loan portfolio. Loans to governments and state-owned corporations for procurement (short-term or ST) and infrastructure projects (long-term or LT) are extended directly. RFIs and SCBs extend GLC to agriculture consisting of both ST working capital and LT funds for capital formation. NABARD extends concessional refinance with support of the Government of India (GOI) and the Reserve Bank of India (RBI) under Short-Term Cooperative Rural Credit Fund (STCRCF), Short-Term Regional Rural Bank Fund, and Long-Term Rural Credit Fund, resulting in augmentation of credit, both for agriculture and allied activities, and affordable credit at ground level. 6.3 REFINANCE TRENDS Total ST refinance disbursement of ₹1.8 lakh crore was 121% of the target for FY2024, a remarkable achievement (Figure 6.2). The disbursement under LT refinance has been moderate with 76% achievement of the target of ₹1.7 lakh crore in FY2024. 81  Annual Report 2023–2­4 Figure 6.2: Long- and short-term refinance support (₹ crore) Long-term refinance 15,154 FY2024 Total 1,17,333 1,32,487 14,875 FY2023 92,140 Total 1,07,015 LTRCF a LT refinance Short-term refinance FY2024 Total 65,676 79,463 38,014 1,83,153 FY2023 Total 64,224 65,565 29,117 1,58,905 ST (SAO)b Additional ST(SAO) ST (Others), including weavers Total refinance support FY2023 2,65,920 FY2024 3,15,639 a As against Board approved target of ₹25,000 crore, RBI released ₹15,154.2 crore. b As against Board approved target of ₹75,000 crore, RBI released ₹65,675.7 crore. LT = Long-Term, LTRCF = Long-Term Rural Credit Fund, RBI = Reserve Bank of India, ST = Short-Term, ST (SAO) = Short-Term Credit for Seasonal Agricultural Operations. Note: Figures may not add up to total due to rounding off. Figure 6.3: Disbursement of short-term refinance by agency (₹ crore) StCBs RRBs and SFBs 1,34,286 48,867 1,60,000 1,16,735 1,16,773 42,132 0 50,000 35,401 1,20,000 11,905 Includes SLF 0 26,109 40,000 20,322 19,654 Includes SLF 9,463 15,053 a 80,000 57,659 30,000 8,301 7,746 50,845 47,714 21,804 20,000 17,851 16,973 40,000 45,569 49,405 50,518 10,000 15,158 10,126 14,819 0 0 FY2022 FY2023 FY2024 FY2022 FY2023 FY2024 ST (SAO) Additional ST (SAO) ST (SAO) Additional ST (SAO) ST (Others), including w eavers SLF Total ST (Others), including w eavers SLF Total a ₹32.8 crore disbursed to SFBs. RRB = Regional Rural Bank, SFB = Small Finance Bank, SLF = Special Liquidity Facility, ST = Short-Term, StCB = State Cooperative Bank, ST (SAO) = Short-Term Credit for Seasonal Agricultural Operations. Note: SLF for the FY2022 already included in Additional ST (SAO) and ST (Others); no allocation under SLF by Reserve Bank of India during FY2024. 82  ` Credit Planning and Delivery for Financial Inclusion 6.3.1 Performance of ST refinance For production and working capital requirements of farmers, weavers, and artisans, refinance is provided under the ST facility. During FY2024, of the total ST refinance of ₹1.8 lakh crore, 73.3% was disbursed to state cooperative banks (StCBs) (Figure 6.3). Disbursements under ST credit support of NABARD increased by 15% over FY2023. Short-term facility to cooperatives increased by 15% whereas disbursement to RRBs and SFBs combined, increased by 16% during FY2024. In terms of region-wise trends, the southern region has received the largest proportion of ST refinance at 42.1%, followed by north (18.7%), central (17.1 %), and the east (14.3%). The western region has a very small share (7.5% ) in ST refinance disbursement (Figure 6.4). 1 Figure 6.4: Disbursement and share of short-term refinance by region (₹ crore) Region-wise disbursement of ST refinance Region-wise share of ST refinance (%) 2,00,000 1,83,153 FY2024 18.7 1,58,905 1,60,000 1,52,136 FY2023 18.4 77,012 0.4 FY2022 68,464 19 0.2 1,20,000 63,643 42.1 43.1 0.3 41.8 13,690 11.8 14.9 14.3 80,000 9,365 10,237 31,294 20.9 26,923 6.2 31,815 26,236 16.9 40,000 17,906 23,735 6.4 771 524 356 17.1 28,883 29,191 34,151 7.5 0 FY2022 FY2023 FY2024 North North-East East Central North North-East East West South Total Central West South ST = Short Term. Notes: Figures may not add up to total due to rounding off. For the list of states and Union Territories by region, see Note 1 at the end of Chapter 6. 6.3.2 Performance of LT refinance Disbursements under LT refinance touched ₹1.3 lakh crore during FY2024, registering an increase of 23.8% (Figure 6.5). A sizeable share (67%) of the disbursement went to SCBs including SFBs, followed by StCBs (13%) and RRBs (10%). Regional disparity is visible even in LT refinance as the major share of refinance offtake was in the south (39.6%), followed by the west (21.3%), north (17.5%), central (10.6%), east (9.7%), and the north-east regions (1.4%) (Figure 6.6). 83  Annual Report 2023–2­4 Figure 6.5: Disbursement of long-term refinance by agency (₹ crore) Agency-wise disbursement of LT refinance Agency-wise share of LT refinance (%) 1.9 1,32,487 0 1,40,000 5.3 0 1.2 3.4 FY2024 1,16,136 4,434 7,000 1.6 1,20,000 295 1,07,015 2.7 0 2,101 2.1 FY2023 9,320 1,400 2,080 17,114 0 12.9 12.1 1,00,000 0.3 11,454 2,541 2,941 2,285 13,461 8.0 12,955 2.2 FY2022 80,000 14,389 11,826 9.9 11.1 12.4 60,000 66.1 10.2 88,378 70 40,000 76,736 74,929 66.7 20,000 0 FY2022 FY2023 FY2024 SCBs & SFBs RRBs StCBs SCARDBs SCBs & SFBs RRBs StCBs SCARDBs NABARD subsidiaries NBFCs St ate Govt Total NABARD subsidiaries NBFCs St ate Govt LT = Long Term, NBFC = Non-Banking Financial Company, RRB = Regional Rural Bank, SCARDB = State Cooperative Agriculture and Rural Development Bank, SCB = Scheduled Commercial Bank, SFB = Small Finance Bank, StCB = State Cooperative Bank. Note: Figures may not add up to total due to rounding off. Figure 6.6: Disbursement and share of long-term refinance by region (₹ crore) Region-wise disbursement of LT refinance Region-wise share of LT refinance (%) 1,40,000 1,32,487 FY2024 1,16,136 17.5 1,20,000 1,07,015 FY2023 52,459 16 1,00,000 1.4 42,512 39.6 32.7 FY2022 13.4 2.0 34,937 2.3 80,000 36.6 13.8 9.7 28,207 15.4 60,000 29,439 21,416 8.5 13,997 25.4 40,000 14,882 9,887 10.6 12,900 20 13.9 16,047 16,518 1,801 20,000 2,644 2,163 17,099 23,123 15,607 21.3 0 FY2022 FY2023 FY2024 North North-East East Central North North-East East Central West South Total West South LT = Long Term. Notes: Figures may not add up to total due to rounding off. For the list of states and Union Territories by region, see Note 1 at the end of Chapter 6. 84  ` Credit Planning and Delivery for Financial Inclusion 6.4 OTHER CREDIT EXPANSION INSTRUMENTS Apart from the short-term and long-term refinance support, NABARD also offers special refinance schemes which are summarised below (Figure 6.7). Figure 6.7: Performance of special refinance schemes in FY2024 PACS as MSCs WASH SRS to convert Concessional refinance PACS to MSCs during FY2021–2024 for WASH activities in rural and semi-urban areas. Concessional refinance for WLGSP pilot Cumulative disbursement implemented by Ministry of Cooperation, GOI. till 31 March 2024: Till 31 March 2024: 11 godowns inaugurated 163.5 crore and foundation stones laid for 500 godowns Disbursement in FY2024: 621.8 crore Cumulative disbursement till 31 March 2024: 1,167 crore ST refinance to SFBs Affordable credit to farmers, Micro food processing micro- and small-sized Concessional assistance for micro enterprises, retail trade, small food processing activities businesses, professionals, and being promoted under the other unorganised entities Aatmanirbhar Bharat Abhiyan. FY2024: 79.8 crore to Shivalik SFB Cumulative disbursement Cumulative disbursement till 31 March 2024: 43.5 crore till 31 March 2024: 152.6 crore GOI = Government of India; MSC = Multi-Service Centre; PACS = Primary Agricultural Credit Society; SFB = Small Finance Bank; SRS = Special Refinance Scheme; ST = Short Term; WASH = Water, Sanitation, and Hygiene; WLGSP = World’s Largest Grain Storage Plan in the Cooperative Sector. Notes: The WLGSP entails setting up of grain storage infrastructure, including warehouse and silos, along with other agri-infrastructure, such as procurement centres, custom hiring centres, primary processing centres, grameen haats, etc., through the convergence of various government schemes at PACS level, such as Agriculture Infrastructure Fund, Agricultural Marketing Infrastructure, Sub-mission on Agriculture Mechanization, Mission for Integrated Development of Horticulture, Pradhan Mantri Formalisation of Micro- Food Processing Enterprises, and Pradhan Mantri Krishi Sinchayee Yojana. More details are available in Box A10.1. For details on each of these refinance products, please see NABARD (2023), Annual Report 2022–23, National Bank for Agriculture and Rural Development, Mumbai, p.75. https://www.nabard.org/pdf/2023/annual- report-2022-23-full-report.pdf. Interest subvention, assistance to sugar mills for ethanol production, Kisan Credit Card (KCC) saturation, and credit-linked subsidies are some of the other products that NABARD has been effectively managing for the GOI (Figure 6.8, Box 6.1). NABARD also supports cooperatives through direct refinance to DCCBs and credit facility for federations (Figure 6.8). 85  Annual Report 2023–2­4 Figure 6.8: Performance of other credit products in FY2024 Crop loan IS scheme for RCBs and Interest subvention schemes increasing ethanol production capacity RRBs Financial assistance to sugar mills for IS to loans to small and marginal farmers both for raising crops as well as against NWRs IS towards for repayment incentive to farmers in animal husbandry and FY2024 fisheries IS of 492.3 crore through RCBs, RRBs, and IS on ST loans (for crops, animal husbandry, or fisheries) SCBs, etc. to farmers who have KCCs. 917 quarterly claims settled IS scheme under DAY–NRLM for RCBs and RRBs Cumulatively, till 31 March 2024 Disbursement in FY2024 IS of 930.9 crore 8,297.1 crore under IS scheme for ST crop loans 2,170 quarterly claims settled 1,036.2 crore to WSHGs through RCBs and RRBs under DAY–NRLM Claims settled through the newly developed Cumulative disbursement till 31 March 2024: Sugar Ethanol Portal. 5,638.9 crore. KCC saturation drive Implementation of CSSs of GOI Channelling subsidy for agriculture projects and priority sector activities Performance during FY2024 New Old Particulars ACABC AMI Scheme AMI Scheme No. of units 239 4,679 0 Subsidy released 11.4 915 - ( crore) Phase II (from June 2020 till date) Cumulative performance as on 31 March 2024 Target: KCCs to 2.5 crore farmers No. of units 3,697 7,498 42,260 Subsidy released No. of KCCs (lakh) 146.9 1,385 4,467 146.6 ( crore) Scientific storage - 20,383 60,853 Limits sanctioned (` crore) 1,41,640 capacity (lakh MT) 86  ` Credit Planning and Delivery for Financial Inclusion Credit Facility to Federations DRA to StCBs and DCCBs for ST multipurpose credit DRA for credit to meet needs of working capital, repair ST credit to agricultural marketing federations, and maintenance of farm equipment and other dairy cooperatives, milk unions and federations productive assets, storage/grading/packaging of to support procurement of inputs, processing, produce, marketing activities, food credit consortium, and marketing operations. non-farm activities, working capital loans against pledge limits sanctioned to cooperative and private In FY2024 sugar factories, etc. Sanction 38,700 crore (FY2024); 40,606 crore (FY2023) In FY2024 Disbursement 39,240 crore; 25% higher than Sanction 26,816 crore; 25% higher than FY2023 FY2023 Disbursement 26,869 crore; 48% higher than FY2023 The outstanding position as on 31 March 2024 The outstanding position as on 31 March 2024 20,583 crore against 17,355 crore as on 20,504 crore against 13,956 crore as on 31 March 2023. 31 March 2023. Credit availed by marketing federations and Credit availed by StCBs and DCCBs in Andhra civil supplies corporations in Andhra Pradesh, Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Bihar, Chhattisgarh, Gujarat, Haryana, Madhya Himachal Pradesh, Jharkhand, Karnataka, Madhya Pradesh, Odisha, Tamil Nadu, Telangana, and Pradesh, Maharashtra, Odisha, Rajasthan, Tamil Nadu, Uttarakhand Telangana, Uttar Pradesh, Uttarakhand, and West Bengal 'C' rated DCCBs also eligible for DRA ACABC = Agri-Clinics and Agri-Business Centres, AMI = Agriculture Marketing Infrastructure, CSS = Capital Subsidy Scheme, DAY–NRLM = Deendayal Antyodaya Yojana–National Rural Livelihood Misison, DCCB = District Central Cooperative Bank, DRA = Direct Refinance Assistance, GOI = Government of India, IS = Interest Subvention, KCC = Kisan Credit Card, MT = metric tonne, NWR = Negotiable Warehouse Receipt, RCB = Rural Cooperative Bank, RRB = Regional Rural Bank, SCB = Scheduled Commercial Bank, ST = Short-Term, StCB = State Cooperative Bank, WSHG = Women Self-Help Group. Notes: AMI scheme supports the development and upgrading of gramin haats to Gramin Agriculture Markets. ACABC scheme supplements the efforts of public extension by facilitating the setting up of agri-ventures by qualified agricultural professionals. For details on each of these credit products, please see NABARD (2023), Annual Report 2022–23, National Bank for Agriculture and Rural Development, Mumbai, p.76–77. https://www.nabard.org/pdf/2023/annual-report-2022-23-full-report.pdf. 87  Annual Report 2023–2­4 Box 6.1: Increasing KCC penetration Ghar Ghar KCC Abhiyan VBSY and PM-JANMAN AHDF–KCC campaign NABARD spearheaded the Launched by the GOI on Ministry of Fisheries, nationwide campaign targeting 15 November 2023, VBSY and Animal Husbandry and PM-KISAN beneficiaries not PM-JANMAN are nationwide Dairying resumed the yet covered by KCC. The camps initiatives across all gram Nationwide AHDF–KCC conducted under the campaign panchayats, nagar panchayats, Campaign from were monitored by an IT- and urban local bodies that 1 May 2023 to based application especially aimed at spreading awareness 31 March 2024, for developed by NABARD. Under to achieve comprehensive providing KCC facility to all GGKA, 6,361 camps were held coverage of schemes such as eligible farmers engaged in across 490 districts, covering KCC to benefit vulnerable animal husbandry, dairying, 1,998 blocks and 5,914 villages, populations who are eligible for and fisheries. with more than 2.7 lakh various schemes but have not participants. yet availed the benefits. AHDF = Animal Husbandry, Dairying, and Fisheries; GGKA = Ghar Ghar KCC Abhiyaan; GOI = Government of India; IT = Information Technology; KCC = Kisan Credit Card; PM-JANMAN = Pradhan Mantri Janjati Adivasi Nyaya Maha Abhiyan; PM-KISAN = Pradhan Mantri Kisan Samman Nidhi; VBSY = Viksit Bharat Sankalp Yatra. 6.5 NEW INITIATIVES IN REFINANCE DURING FY2024 6.5.1 Policy initiatives Floating rate under Short-Term Credit for Additional Seasonal Agricultural Operations and ST (Others): Keeping in view the requirements of the RCBs and the RRBs, flexibility introduced under these facilities now allows client banks to avail of refinance at floating rates. Floating rate under LT refinance: A floating rate product was introduced under LT refinance for public and private sector commercial banks, small finance banks, NBFCs, and NBFC–microfinance institutions (NBFC–MFIs). Automatic Refinance Facility (ARF) under special refinance schemes (SRS): Since SRS-PACS as MSCs and SRS-AIF have been operational since 2020 and client banks have gained the experience and competency necessary for appraising the projects, ARF mode of refinance was introduced under these schemes in place of pre-sanction procedure.2 Relaxing eligibility criteria to serve greater client base: Eligibility criteria were relaxed to allow RCBs whose internal risk rating category is NBD1 to NBD7 to participate in the pilot project of the World’s Largest Grain Storage Plan in the Cooperative Sector. 6.5.2 Operational initiatives Digitalisation of refinance operations for NBFCs, NBFC-MFIs, and commercial banks was introduced to ease the process of refinance. The documentation procedure for refinance in respect of NBFCs and NBFC-MFIs were revised. The operational guidelines for NBFCs and NBFC-MFIs were revised incorporating the latest industry trends and detailed internal guidelines were issued to the regional offices. The NABPARIKSHAN app was revamped for smooth verification of refinanced assets at ground level. 88  ` Credit Planning and Delivery for Financial Inclusion Initiatives in assessing market requirements and designing refinance products accordingly NABARD has been have attracted new clients into NABARD’s refinance fold, like Indian Overseas Bank, Karnataka responsive to Bank, DBS Bank, Bank of India, etc. emerging options and opportunities within a rapidly and profoundly 6.6 IMPROVING EFFICIENCY IN THE CREDIT DELIVERY ECOSYSTEM transforming Steadfast in its commitment to fostering innovation and catalysing positive change within the financial and rural credit delivery ecosystem, NABARD continues to embrace dynamic strategies and cutting- economic edge technologies to boost efficiency, ensure transparency in operations, and streamline decision- landscape. making. NABARD has been responsive to the emerging options and opportunities within a rapidly and profoundly transforming financial and economic landscape. It has not only taken forward existing initiatives in improving the credit ecosystem in the country but also introduced many new ones in the last year, some of which are listed below. Core Banking Solutions (CBS) in RCBs: NABARD has played a pivotal role in the onboarding of RCBs to CBS since 2012. As on date, as many as 214 banks have benefited from this initiative. NABARD has won the prestigious Association of DFIs in Asia and Pacific Sustainable Development Project Award 2024 in Financial Inclusion Category for this initiative. Centralised Account Aggregator (AA) Platform for RCBs and RRBs: NABARD took the initiative to successfully develop and pilot test a centralised AA platform which will reduce the capital costs for the RCBs and RRBs while onboarding onto the AA framework. This is expected to enhance seamless exchange of financial information between participating banks. Shared Aadhaar Data Vault (ADV) for RCBs: To improve Aadhaar data security, NABARD is facilitating discussions for a shared ADV environment, potentially reducing costs for participating RFIs. Development of digital technology for credit delivery, interest subvention, etc. ◊ eKCC Portal: NABARD has developed an online portal for KCC, which can be accessed by farmers at their doorstep to submit their loan applications to RCBs and RRBs. This portal envisages sanction of KCC loans as the first offering and shall be expanded in phases to cover other types of agri-loans like personal loans or MSME loans.3 The portal will have links to land record systems of state governments, satellite imagery, CIBIL, and Unique Identification Authority of India for Know-Your-Customer authentication to facilitate underwriting of loans by banks.4 From the banks’ perspective, the portal also provides all the functionalities of a loan origination system, enabling banks to scrutinise and convey in- principle sanction of loans immediately. ◊ eNWR Pledge Loan Gateway: The Warehousing Development and Regulatory Authority,5 working closely with NABARD, has developed an eNWR Pledge Loan Gateway on the JanSamarth Portal of Department of Financial Services (DFS), GOI. The portal, ‘e-Kisan Upaj Nidhi’, was launched on 4 March 2024 and is expected to ease the flow of pledge loans to the farming community. NABARD will be disseminating information on the ‘Pledge Loan Scheme based on eNWRs’ through seminars and awareness camps organised at state and district level. ◊ AIF Interest Subvention Portal: NABARD is developing a portal for automating the processing of interest subvention claims as also credit guarantee fee claims submitted by banks under the AIF scheme, enabling quick and accurate claim settlement. This will also motivate the banks to finance more infrastructure projects under AIF by encouraging beneficiaries to set up new units and avail the benefit of interest subvention. The portal is currently undergoing user acceptance testing. ◊ NRLM Interest Subvention Portal: NABARD has developed a web portal for NRLM 89  Annual Report 2023–2­4 FIF has improved interest subvention claims by RRBs and RCBs in respect of WSHGs financed by them under last-mile financing DAY–NRLM.6 The portal was launched on 11 January 2024. As on 31 March 2024, the portal by enabling access has successfully processed interest subvention claims totalling ₹142 crore for FY2024. to formal credit Ghar Ghar KCC Abhiyan campaign monitoring: NABARD developed an IT-based sources, enhancing application for monitoring the camps conducted under the campaign (for details see Box 6.1). financial literacy and awareness, Digitalising Agri-Value Chain Finance (AVCF): This initiative of NABARD would supporting streamline the financing and digitising of input purchase, crop production, and output technology procurement, thereby linking institutions more systematically with agri-value chains. Working adoption and in close collaboration with two start-ups, NABARD launched the AVCF pilot in three states innovation, creating covering 10 farmer producers’ organisations (FPOs) and 16 crops, involving credit support from infrastructure and two banks. Further, NABARD is actively seeking solutions to field-level challenges encountered connectivity, and in these pilots by exploring purpose-bound loans using Central Bank Digital Currency alongside facilitating policy implementation of the FPO accelerator model.7 advocacy. Technology Facilitation Fund (TFF): NABARD has set up a dedicated fund from its profit with a corpus of ₹50 crore to support the development of digital technology with the help of tech start-ups. During the year, two proposals were sanctioned amounting to ₹73.17 lakh under TFF. Shielding RCBs from cyber threats: NABARD, as an ecosystem developer, facilitated collective cyber risk insurance for 75 RCBs by floating a common request for proposal (RFP) on the central public procurement portal, achieving significantly lower premium and higher comprehensive coverage compared to individual policies independently procured by RCBs. The premium at 0.62% of ‘limit of liability‘ for the maximum liability coverage (against market rates of 0.75%–1.25%) would never have been possible without NABARD’s collective cyber risk insurance initiative. Not only does the 12-month policy (effective 1 April 2024) offer more comprehensive coverage on friendlier terms but also relieves the RCBs of the burden of floating individual RFPs. It is, therefore, expected that in the current fiscal, more RCBs will participate in the common RFP process of NABARD to buy into the collective cyber risk insurance for FY2026. 6.7 STRENGTHENING FINANCIAL INCLUSION Initiated in FY2019, NABARD’s differentiated approach to financial inclusion focuses on addressing regional disparities and ensuring equitable access to financial services across the country. Attention is paid to special focus districts, including aspirational districts, left-wing extremism-affected districts, credit-deficient districts as well as districts in hilly states, the North East Region (NER), and the Andaman and Nicobar Islands. Grant support assistance through NABARD’s Financial Inclusion Fund (FIF) has improved last- mile financing in India by enabling access to formal credit sources, enhancing financial literacy and awareness, supporting technology adoption and innovation, creating infrastructure and connectivity, and facilitating policy advocacy for the unserved and underserved segments of the rural population (Figure 6.9). 90  ` Credit Planning and Delivery for Financial Inclusion Figure 6.9: Activities supported by FIF Financial literacy Connectivity and Camps power infrastructure Demo van VSAT A/V infra Signal booster Kiosk outlets Solar power/UPS Saturation campaigns for social security schemes Technology adoption Micro-ATMs POS/MPOS machines Regulatory Onboarding BHIM UPI infra support Onboarding PFMS Membership of BBPS AUA/KUA Green PIN Onboarding to CKYCR Positive payment system ATM = Automatic Teller Machines, AUA = Aadhaar User Agency, A/V = Audio Visual, BBPS = Bharat Bill Payment System, BHIM UPI = Bharat Interface for Money Unified Payments Interface, CKYCR = Central ‘Know Your Customer’ Record Registry, FIF = Financial Inclusion Fund, KUA = KYC User Agency, MPOS = Mobile Point of Sale, PFMS = Public Financial Management System, POS = Point of Sale, UPS = Uninterruptible Power Supply, VSAT = Very Small Aperture Terminal. 6.7.1 Financial literacy and capacity building Financial literacy with awareness and understanding of financial products, particularly digital services, has been a primary focus area for NABARD. Initiatives supported by NABARD include financial and digital literacy camps, reimbursement of examination fees for banking correspondents, and the deployment of demonstration vans and kiosks in unbanked villages. Extensive outreach efforts have included over 8.1 lakh awareness programmes reaching 35 crore households, significantly contributing to the adoption of technology and promoting financial inclusion among rural populations. 6.7.2 Technology adoption and infrastructure support NABARD plays a crucial role in advancing financial inclusion through technology, particularly for RRBs and RCBs. This includes facilitating the adoption of CBS, enabling services like Any Branch Banking, NEFT, RTGS, and ATM access across rural areas.8 NABARD supports initiatives such as revised KCC through cooperatives to ensure timely credit for farmers, and promotes digital infrastructure like PFMS, BHIM UPI, and AUA/KUA, thereby expanding banking touch points such as CSPs and kiosks in remote areas.9 Addressing challenges such as erratic power supply and connectivity issues, NABARD provides funding support for VSAT,10 mobile boosters, and solar Over 8.1 lakh units. The deployment of 77,219 micro-ATMs, 72,552 POS/MPOS machines,11 and nearly 14 lakh financial literacy and awareness BHIM Aadhaar Pay devices, along with mobile vans conducting hands-on training for over 5 lakh programmes households, has significantly increased access to digital financial services in the underserved areas. reaching 35 crore households, have significantly 6.7.3 New activities supported under FIF during FY2024 improved Support for the deployment of micro-ATMs: Grant assistance to district central technology cooperative banks (DCCBs) under a pilot project of the Ministry of Cooperation, GOI adoption and (Showcase 6.1). financial inclusion. 91  Annual Report 2023–2­4 Micro-ATMs were given to Showcase 6.1: Promoting ‘Cooperation among Cooperatives’ the bank mitra dairy cooperative societies with Project: Pilot project under the Sahakar se Samriddhi Scheme to promote ‘Cooperation among support from Cooperatives’ NABARD to ensure Purpose: ease of doing business through To promote financial transactions of primary dairy cooperative societies with cooperative banks digital financial To strengthen cooperative sector and increase its self reliance transactions and to To ensure easy access of rural customers to banking services promote financial inclusion by Location: Five districts of Gujarat offering doorstep financial services to Implemented by: Banaskantha DCCB and Panchmahal DCCB dairy farmers even at remote locations. Grant support: ₹367 lakh Challenges faced: Poor access to banking services with distant bank branches Interventions Primary dairy cooperative societies were made business correspondents/bank mitras of DCCBs. Micro-ATMs were given to the bank mitra dairy cooperative societies with support from NABARD to ensure ease of doing business through digital financial transactions and to promote financial inclusion by offering doorstep financial services to dairy farmers even at remote locations. Financial and digital literacy campaigns were organised to create awareness among the members of dairy cooperative societies on the capabilities of micro-ATMs and the services offered under the campaign. Opening of bank accounts of dairy societies and their members with DCCBs was promoted. KCCs were promoted and distributed by DCCBs to members of dairy cooperative societies. Output>>Outcomes>>Impact Geographical coverage ◊ Micro-ATMs deployed in PACS: 465 (440 with NABARD support) ◊ Micro-ATMs deployed in cooperative milk societies: 1,271 (1,191 with NABARD support) Financial inclusion and new accounts ◊ New savings accounts opened: 3.9 lakh ◊ Financial transactions increased 50 times compared to 6 months prior Agricultural financing facilitation: 77,995 RuPay KCCs issued/reissued Special efforts by the banks: Panchmahal DCCB and Banaskantha DCCB deployed additional micro-ATMs using internal resources, showcasing commitment to long-term financial inclusion initiatives. Benefits for DCCBs: ◊ Micro-ATMs at dairy societies helped banks improve their customer engagement by providing financial services to those living far away from bank branches, saving travel costs and time. ◊ The DCCBs witnessed increase in deposits as well as expansion of the loan portfolio. ◊ Many cooperative milk societies shifted their accounts from other banks to these DCCBs. Benefits for cooperative societies: ◊ Dairy farmer members of primary dairy cooperative societies were able to get affordable and timely credit through Rupay KCC from DCCBs. 92  ` Credit Planning and Delivery for Financial Inclusion ◊ Digital transactions through micro-ATMs improved transparency in operations of dairy societies. ◊ Their miscellaneous income improved through commission/fee income as bank mitras. In view of the success of the pilot project, the campaign on ‘Cooperation amongst Cooperatives’ was launched in all districts of Gujarat by the Chief Minister of Gujarat on 15 January 2024. Conclusion: The project is a beacon of the transformative potential of digital banking. By fostering financial inclusion and cooperation among cooperatives, it has breathed new life into rural economy, paving way for sustainable growth and prosperity. ATM = Automated Teller Machine, DCCB = District Central Cooperative Bank, KCC = Kisan Credit Card, PACS = Primary Agricultural Credit Societies. Incentive scheme for CSPs/business correspondents (BCs) of banks operating in NER states: A scheme has been launched to provide incentive from FIF to CSPs and BCs of banks operating in the hilly and NER states. This assistance aims to offset high transportation costs in these areas and increase the net income of service providers. The incentive, set at ₹1,000 per month per BC, is in addition to the fixed and variable commissions already paid by the banks. To qualify, BCs must achieve a monthly average of 50 transactions. This initiative aims to motivate and empower BCs to actively contribute to financial inclusion efforts. The incentive is to be paid directly to the BC agents or CSP operators. Scheme to develop Learning Management System for Rural Self Employment Training Institutes (RSETIs): The project, being implemented in collaboration with the National Academy of RUDSETI and IIT Madras,12 aims to improve skills training towards greater financial inclusion, by building an e-learning platform for RSETIs. This platform will offer 64 courses in 11 languages, providing 4,400 hours of video content for skill development. It aims to enhance the capabilities of approximately 6 lakh rural trainees annually, fostering entrepreneurship and contributing to economic prosperity. Partnership with Women’s World Banking (WWB): NABARD and WWB have formalised a partnership which aims to replicate the successful JanDhan Plus programme in the context of RRBs in India. The JanDhan Plus programme has already made a significant impact by increasing the adoption of basic financial services among 80 million JanDhan account holders. Capital expenditure support to RSETIs/RUDSETIs: A one-time grant support up to a maximum of ₹4.5 lakh per RSETI/RUDSETI is provided for the purchase of training equipment and maintenance. Support can also be provided to banks for running business and skill development centres, including RSETIs/RUDSETIs. Special Campaign 3.0: As directed by DFS, GOI, NABARD coordinated with all RRBs for To promote digital the successful implementation of the programme. RRBs conducted special financial literacy payments in camps during October 2023, resulting in the opening of new Pradhan Mantri Jan Dhan Yojana mandis, NABARD (PMJDY) accounts and fresh enrolments under Pradhan Mantri Suraksha Bima Yojana organised financial (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), and Atal Pension Yojana and digital literacy (APY) (Showcase 6.2). Through collective efforts of all RRBs, 640 financial literacy awareness camps, deployed POS machines camps were organised across the country, contributing to the opening of 1.1 lakh new PMJDY and collaborated accounts and fresh enrolments of 1.8 lakh under PMSBY, 94,209 under PMJJBY, and 34,279 with payment under APY. aggregators to Promotion of digital payments in Agricultural Produce & Livestock Market facilitate QR code- Committees/mandis: GOI has assigned NABARD the task of promoting digital payments based payments. 93  Annual Report 2023–2­4 Showcase 6.2: Paradigm shift through financial literacy, Bihar Project: Running a Special Financial Literacy Programme and enabling access to banking services for rural communities Location: Bihar Implemented by: Dakshin Bihar Gramin Bank Grant assistance: ₹140.1 lakh Challenges faced: The communities faced lack of awareness about banking services and had limited access to livelihood opportunities. Intervention: Implementation of extensive awareness generation programmes Output>> Outcomes>>Impact Geographical coverage: 46,366 participating beneficiaries from 1,046 villages across 20 districts Accounts opened: ◊ PMJDY new accounts opened: 13,039 ◊ PMSBY enrolments: 23,255 ◊ PMJJBY enrolments: 17,267 ◊ APY enrolments: 7,700 ◊ Savings bank accounts opened: 11,480 ◊ Debit cards issued: 1,403 ◊ Credit cards issued/reactivated: 977 Spotlight on Aropur Aropur village is located in Bihar’s agricultural heartland. Previously lacking in financial literacy, now nearly half the villagers have opted for banking services, resulting in over 1,920 new accounts being opened. As a result: The utilisation of crucial government initiatives (PMSBY, PMJJBY, and APY) has improved significantly. Over 150 small farmers are receiving support from programmes such as KCC and PM-KISAN. The establishment of 50 self-help groups has fostered financial independence of women and their sense of empowerment and community cohesion. Entrepreneurs have leveraged PM Mudra Yojana loans to grow their businesses, generating incomes and employment locally through the establishment of new production units. Additionally, under PMAY–G, four villagers are now proud owners of permanent homes. Conclusion: Through collaborative efforts and targeted interventions, Dakshin Bihar Gramin Bank, with NABARD’s support, has significantly improved financial literacy, access to banking services, and digital awareness among rural communities, paving the way for inclusive growth and development in rural Bihar. APY = Atal Pension Yojana, KCC = Kisan Credit Card, PMAY–G = Pradhan Mantri Awaas Yojana–Gramin, PM-KISAN = Pradhan Mantri Kisan Samman Nidhi, PMJDY = Pradhan Mantri Jan Dhan Yojana, PMJJBY = Pradhan Mantri Jeevan Jyoti Bima Yojana, PMSBY = Pradhan Mantri Suraksha Bima Yojana. 94  ` Credit Planning and Delivery for Financial Inclusion across 30 agricultural markets (mandis). In pursuit of this objective, NABARD implemented a range of initiatives. These included organising about 400 financial literacy camps, digital literacy camps, and street plays in market areas and neighbouring villages. Simultaneously, POS machines are being deployed to streamline the digital payments. Collaborations with payment aggregators have also been established to facilitate QR code-based payments. Additionally, strategic placement of banners and hoardings has been undertaken to underscore the benefits of digital transactions. These concerted efforts aim to encourage a shift in behaviour among farmers and stakeholders, thereby enhancing transparency in financial transactions within agricultural markets. 6.8 WAY FORWARD Since its inception, NABARD has focused on augmenting the supply of refinance. As a development institution, however, it has also influenced and laid out policies to effectively address demand side challenges. NABARD monitors refinance to mitigate credit risk and improve access in credit-starved regions through its many products and campaigns. In recent years, NABARD’s initiatives have become more technology-led. NABARD is continuously investing in technology and digitalisation to deploy innovative delivery models to bridge the existing inequities in credit access. In the near future, NABARD will also leverage the advantages offered by big data, artificial intelligence, and quantum computing in achieving cent per cent penetration, saturation, and financial inclusion. And yet, NABARD will never lose sight of the many human catalysts that keep the credit machinery running in rural areas. NABARD’s upcoming initiatives include: A. Connectivity through HTS/SD-WAN A new connectivity technology (providing spot-beam connectivity through satellite) HTS VSAT and Dual LTE, along with SD-WAN, is being provided to banks along with the current wide-beam VSAT for better connectivity.13 HTS VSAT is more reliable and reduces network congestion, making it a valuable upgrade for banks’ communication systems and useful to enhance banking connectivity and services. HTS systems and SD-WAN are significant in the context of regional connectivity disparity due to their potential to enhance connectivity and financial services delivery, especially in underserved areas. B. Scheme for compensating BCs/CSPs operating in the hilly states The scheme for compensating BCs operating in NER was launched in 2023 providing incentives to BCs on achieving a target number of monthly transactions. The scheme is being extended to compensate BCs operating in other hilly areas—Himachal Pradesh, Jammu & Kashmir, Ladakh, and Uttarakhand. C. Automation of Jansuraksha Portal for RRBs NABARD will As a part of the Jan Suraksha schemes—PMJJBY, PMSBY, and APY—the automation of leverage big the Jansuraksha Portal facilitates the issuing of policy and remittance of claims online, data, artificial intelligence, creating a repository of data to avoid duplicate policies. It is crucial for providing social and quantum security coverage and financial protection against unforeseen risks and uncertainties, computing for especially for the unorganised sector. penetration, NABARD’s role in extending Jansuraksha access to all 43 RRBs underscores its commitment saturation, and to financial accessibility and efficiency across rural communities. This initiative will bring financial inclusion. 95  Annual Report 2023–2­4 the RRBs at par with the commercial banks in digital enrolment and claim settlement for Jan Suraksha schemes by aligning with the government’s vision of Digital India. D. Financial Inclusion 2.0 NABARD will collaborate with RBI under the National Strategy for Financial Inclusion 2.0 to prepare a comprehensive strategy to be implemented by leading financial institutions in the next 5 years. NOTES 1. States and Union Territories by region South: Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Puducherry, and Lakshadweep West: Gujarat, Goa, Maharashtra, Dadra & Nagar Haveli, and Daman & Diu North: Haryana, Himachal Pradesh, Punjab, Rajasthan, Jammu & Kashmir, Delhi, and Chandigarh Central: Madhya Pradesh, Chhattisgarh, Uttar Pradesh, and Uttarakhand East: Bihar, Jharkhand, Odisha, West Bengal, and Andaman & Nicobar Islands North East: Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Tripura, Nagaland, and Sikkim 2. AIF = Agriculture Infrastructure Fund, MSC = Multi-Service Centre, PACS = Primary Agricultural Credit Society. 3. MSME = Micro-, Small-, and Medium-Sized Enterprises. 4. TransUnion CIBIL Limited is a credit information company operating in India. 5. The mission of the Warehousing Development and Regulatory Authority is to establish a negotiable warehouse receipt (NWR) system in the country. 6. DAY–NRLM = Deendayal Antyodaya Yojana–National Rural Livelihood Mission, WSHG = Women Self- Help Group. 7. https://www.nabard.org/auth/writereaddata/WhatsNew/2205244306chairman-launches-first-of-its- kind-accelerator-project.pdf. 8. ATM = Automated Teller Machine, NEFT = National Electronic Funds Transfer, RTGS = Real Time Gross Settlement. 9. AUA = Aadhaar User Agency, CSP = Customer Service Point, BHIM = Bharat Interface for Money, KUA = KYC User Agency (KYC = know your customer), PFMS = Public Financial Management System, UPI = Unified Payments Interface. 10. VSAT = Very Small Aperture Terminal. 11. POS/MPOS = point of sale/mobile point of sale. 12. IIT = Indian Institute of Technology, RUDSETI = Rural Development & Self Employment Training Institute. 13. HTS = High Throughput Satellites, LTE = Long-Term Evolution, SD-WAN = Software-Defined Wide Area Network. 96