Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 73
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 74
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Warning (512): Unable to emit headers. Headers sent in file=/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php line=853 [CORE/src/Http/ResponseEmitter.php, line 48]
Warning (2): Cannot modify header information - headers already sent by (output started at /home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php:853) [CORE/src/Http/ResponseEmitter.php, line 148]
Warning (2): Cannot modify header information - headers already sent by (output started at /home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php:853) [CORE/src/Http/ResponseEmitter.php, line 181]
Notice (8): Undefined variable: urlPrefix [APP/Template/Layout/printlayout.ctp, line 8]latest-news-updates/nabard-shifts-blame-for-corporate-warehousing-scheme-to-finmin-rbi-shalini-singh-21067.html"/> LATEST NEWS UPDATES | NABARD shifts blame for corporate warehousing scheme to FinMin, RBI-Shalini Singh | Im4change.org
Resource centre on India's rural distress
 
 

NABARD shifts blame for corporate warehousing scheme to FinMin, RBI-Shalini Singh
-The Hindu


In the eye of the storm for funding corporate warehousing projects on terms far softer than those offered to poor farmers, the National Bank for Agriculture and Rural Development (NABARD) is now blaming the Ministry of Finance (MoF) and the Reserve Bank of India (RBI) for the transgressions.

Following a story in The Hindu, (‘As farmers suffer, NABARD offers soft loans to corporates, ' December 10, 2012), NABARD came under pressure from the RBI and withdrew its controversial Rs. 2,000-crore Rural Infrastructure Development Fund (RIDF) scheme with retrospective effect.

In an April 1, 2013 letter on its warehousing scheme sent to all regional banks, NABARD admitted, "Since the RBI has taken objection to the scheme and also provision of interest incentive of 1.5% per annum on the loans extended to private sector, the scheme stands withdrawn with immediate effect."

On May 6, NABARD advised its Board in a meeting that "the deposits drawn from various banks under RIDF XVII (2011-12), amounting to Rs. 759.09 crore, were also refunded by NABARD to the contributing banks on 8 April 2013, together with the applicable rate of interest."

Denying any wrongdoing on NABARD's part, its Chief General Manager (CGM), Head Office, Mumbai, C.K. Gopalakrishna, and CGM, Delhi, Surya Kumar told The Hindu that the bank was merely implementing the RIDF scheme announced by the Finance Minister in his Budget speech of 2011-12.

However, since the rules do not permit conversion of the RIDF scheme into a refinancing scheme or changes in the interest rates without the RBI's permission, Mr. Gopalakrishna claimed that, "at every stage it was endorsed by the RBI." "GoI has said no to direct financing. What do we do next? Let's go to refinance. GoI has approved it," he added.

When asked why NABARD did not call a press conference to clear its position on the allegations, Mr. Gopalakrishna said, "If we really do precipitate, it will put two important players in a tight spot - the MoF and the RBI which we do not want to do."

It now turns out that the GoI never approved either NABARD's direct financing or refinancing out of the RIDF fund. This is reflected in a November 21, 2012 letter from the Department of Financial Services, MoF, to NABARD Chairman Prakash Bakshi on the warehousing scheme.

The letter, which is signed by Under Secretary, AC section, M.S. Azad, states: "I am directed to refer to your mail dated 4.11.2011 to Secretary (FS) on the above mentioned subject and to say that NABARD should be engaged in the promotion work and should not undertake any direct financing. NABARD should focus on facilitating project financing by banks. NABARD is, therefore, requested to revise the scheme accordingly."

Despite this, NABARD misrepresented the facts in its answer to two separate questions routed via its nodal ministry in the Rajya Sabha and the Lok Sabha on March 19, 2013.

In the Rajya Sabha, the government was asked the details of NABARD's fund diversion and whether this violated existing rules, in reference to The Hindu expose revealing that NABARD had diverted funds meant for creation of warehousing facilities in rural India to rich corporates, including disbursement of Rs. 180.87 crore as refinance of a total Rs. 759 crore refinance to Shubham Logistics, a subsidiary of the over Rs.6,000-crore Kalpataru Group.

NABARD's response was: "NABARD has not provided any direct finance to the corporates out of the funds allocated by the GoI. In the Union Budget 2011-12, the Hon'ble Union Finance Minister announced a separate allocation of Rs. 2000 crore under the Rural Infrastructure Development Fund (RIDF)-XVII for financing warehousing infrastructure. This allocation was utilised by NABARD by providing financial assistance to State governments/UTs by way of loans (amounting to Rs. 1,494 crore) and as refinance to banks (Rs. 759 crore), against the loans disbursed by them for creation of warehousing infrastructure, as per the scheme formulated on the advice of Department of Financial Services, Ministry of Finance, Government of India vide its letter No. F-20/5/2010-AC dated 21 November 2011."

When asked in the Lok Sabha, "Whether it is a fact that NABARD is providing loans to corporates at concessional rates of interest for creation of warehousing facilities," NABARD furnished an identical reply.

No lessons learnt

Meanwhile, following a hike in the fund allocation for the RIDF scheme to Rs. 5,000 crore in the Union Budget 2013-13 for financing the construction of warehouses/godowns/silos/cold storages to store agricultural produce both in the public and the private sectors, the NABARD board has already given the green signal for individual entrepreneurs and corporates to be eligible for access to direct loans under the scheme, apart from refinancing State governments and agencies owned/sponsored by State governments and banks.

NABARD's former Managing Director, Dr. K.G. Karmakar, told The Hindu that NABARD has designed the scheme to benefit select domestic and multinational firms and retail traders that are penetrating rural markets rather than small farmers. "NABARD's skewed sense of priority is a body blow to small farmers since in India, farmers realise just 30% of the value of their produce, with 70% value pocketed by traders, unlike other nations where this ratio is reversed."

The NABARD Officers' Association and the All India NABARD Employees Association are further opposing the passage of the ‘National Bank For Agriculture And Rural Development (Amendment) Bill, 2013' purporting to bring about certain important and pernicious amendments to the NABARD Act, 1981, which is scheduled to be moved in the Lok Sabha by Finance Minister P. Chidambaram.

These associations believe that the proposed amendments will destroy the essence of NABARD's development banking ethos while placing NABARD at the mercy of private equity and profit-oriented market forces which will further their interest at the cost of millions of small & marginal farmers and landless labourers.