Credit a key challenge before Farmer Producer Organisations: G R Chintala, chairman, Nabard

The National Bank for Agriculture and Rural Development (Nabard) has a major role to play, as the government has set a target to form 10,000 FPOs by 2027-28. The key challenge being faced by Farmer Producer Organisations (FPOs) is inadequate access to institutional credit due to low capital base, absence 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 a target to form 10,000 FPOs by 2027-28. In an interview with Nanda Kasabe and Sandip Das, G R Chintala, chairman, Nabard stresses that FPOs are going to play an important role in making Indian agriculture globally competitive and remunerative to farmers. Excerpts: How is Nabard supporting FPOs and catalysing their proliferation?Apart from extending financial support as credit and grants, Nabard has also been engaged with the FPO ecosystem by providing policy support, facilitating credit linkages and other developmental support. During 2014-15, the government had created a ‘PRODUCE Fund’ with us for promotion of new FPOs. Under this scheme itself, Nabard has promoted 2,154 FPOs so far. In all, we have so far promoted over 6,000 FPOs and provided grant support of Rs 103.99 crore. We are also a major implementing agency under the Central Sector Schemes. We have developed a guidance note on financing of FPOs by banks and set up a Credit Guarantee Fund Trust for providing credit guarantee for loans given by banks to the FPOs. What are the challenges faced by FPOs in terms of getting credit from the financial institutions?The key challenges faced by FPOs in accessing finance include low capital base, absence of credit history, non-availability of collateral, inadequate capacity building of board members and CEO and lack of professionalism. Besides, there are factors such as low level of active member participation in business and meeting the various compliance requirement by the FPOs. What would be Nabard’s approach in ensuring that FPOs get access to cheaper credit under priority sector lending norms?We provide grants for building capacities of FPOs. A grant of Rs 5 lakh per FPO is provided as seed money per FPO. Since FPOs consist of mostly small and marginal farmers, they get interest subvention on crop as well as allied activities under Kisan Credit Card. They also get interest subvention under Agri Infrastructure Fund. How many FPOs have been financed by Nabard so far?We do not provide direct credit to FPOs. Nabard facilitates credit linkages through Banks, NBFCs and Nabard subsidiaries. Around Rs 1,000 crore has been availed by 1,600 FPOs as bank credit from financial institutions, majority of the FPOs financing have been extended by NABKISAN Finance. As on date, NABKISAN has sanctioned loan of Rs 278.8 crore to 926 FPOs. Your view on the FPO ecosystem in the country?FPOs will play a decisive role in shaping Indian agriculture in the years ahead. The state governments must also support FPOs by creating basic infrastructure, common service centres, storage etc so that they are in a position to expand their business activities and generate sufficient revenue for their member farmers. Sustainable development of FPOs requires an environment which can promote, meet financial needs, ease restrictions and spread awareness amongst the farmers.

Credit a key challenge before Farmer Producer Organisations: G R Chintala, chairman, Nabard

The National Bank for Agriculture and Rural Development (Nabard) has a major role to play, as the government has set a target to form 10,000 FPOs by 2027-28.

The key challenge being faced by Farmer Producer Organisations (FPOs) is inadequate access to institutional credit due to low capital base, absence 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 a target to form 10,000 FPOs by 2027-28. In an interview with Nanda Kasabe and Sandip Das, G R Chintala, chairman, Nabard stresses that FPOs are going to play an important role in making Indian agriculture globally competitive and remunerative to farmers. Excerpts:

How is Nabard supporting FPOs and catalysing their proliferation?
Apart from extending financial support as credit and grants, Nabard has also been engaged with the FPO ecosystem by providing policy support, facilitating credit linkages and other developmental support. During 2014-15, the government had created a ‘PRODUCE Fund’ with us for promotion of new FPOs. Under this scheme itself, Nabard has promoted 2,154 FPOs so far. In all, we have so far promoted over 6,000 FPOs and provided grant support of Rs 103.99 crore. We are also a major implementing agency under the Central Sector Schemes. We have developed a guidance note on financing of FPOs by banks and set up a Credit Guarantee Fund Trust for providing credit guarantee for loans given by banks to the FPOs.

What are the challenges faced by FPOs in terms of getting credit from the financial institutions?
The key challenges faced by FPOs in accessing finance include low capital base, absence of credit history, non-availability of collateral, inadequate capacity building of board members and CEO and lack of professionalism. Besides, there are factors such as low level of active member participation in business and meeting the various compliance requirement by the FPOs.

What would be Nabard’s approach in ensuring that FPOs get access to cheaper credit under priority sector lending norms?
We provide grants for building capacities of FPOs. A grant of Rs 5 lakh per FPO is provided as seed money per FPO. Since FPOs consist of mostly small and marginal farmers, they get interest subvention on crop as well as allied activities under Kisan Credit Card. They also get interest subvention under Agri Infrastructure Fund.

How many FPOs have been financed by Nabard so far?
We do not provide direct credit to FPOs. Nabard facilitates credit linkages through Banks, NBFCs and Nabard subsidiaries. Around Rs 1,000 crore has been availed by 1,600 FPOs as bank credit from financial institutions, majority of the FPOs financing have been extended by NABKISAN Finance. As on date, NABKISAN has sanctioned loan of Rs 278.8 crore to 926 FPOs.

Your view on the FPO ecosystem in the country?
FPOs will play a decisive role in shaping Indian agriculture in the years ahead. The state governments must also support FPOs by creating basic infrastructure, common service centres, storage etc so that they are in a position to expand their business activities and generate sufficient revenue for their member farmers. Sustainable development of FPOs requires an environment which can promote, meet financial needs, ease restrictions and spread awareness amongst the farmers.