NABARD to launch ₹1000-crore fund to boost agri-startups

News Excerpt:

The National Bank for Agriculture and Rural Development (NABARD) has announced that it will launch a ₹1,000-crore fund to support technology-driven agri-startups and rural enterprises.

More about the fund:

  • The fund will support startups facing challenges in scaling up their operations due to limited access to equity and debt instruments.
  • It seeks to cultivate new connections within the rural ecosystem, fostering both forward and backward linkages.

Need of the fund:

  • Despite the government's efforts through initiatives like the agri-infra fund scheme, animal husbandry infrastructure development fund, and food processing fund, the credit from these funds primarily benefit traditional farmers and established players.
  • Nearly 8% of NABARD's balance sheet is currently allocated to production credit.
    • There is a need to redirect this allocation towards more investment credit to fund startups who are coming up with new technologies.

Other schemes and programmes for agri-startups:

  • In the budget for FY23 the Finance Minister announced the plans for a blended capital fund, to be raised through co-investments, and facilitated by NABARD. 
    • The fund was to finance startups for agriculture and rural enterprise, relevant for the farm produce value chain.
  • The agriculture ministry has also been executing the 'Innovation and Agri-Entrepreneurship Development' programme under the Rashtriya Krishi Vikas Yojana since 2018-19. 
    • It aims to foster innovation and agri-entrepreneurship by offering financial and technical assistance to nurture the startup ecosystem in India.

Regional disparity in allocation of funds:

  • Southern India has better infrastructure and credit culture compared to eastern and central India. 
    • Because it is a systemic issue, credit distribution favours southern regions.
  • For FY22, 48% of the agricultural credit disbursed, amounting to ₹21 trillion, was directed to five southern statesAndhra Pradesh, Telangana, Karnataka, Tamil Nadu, and Kerala.
    • Despite this substantial allocation, these states collectively only accounted for 17% of India's gross cropped area.
  • In contrast, the northern states of Rajasthan, Punjab, Haryana, Jammu & Kashmir, and Himachal Pradesh, which represent 20% of the gross cropped area, received around 17% of the total credit flow, amounting to ₹3.38 trillion.

Data about agricultural credit:

  • In the first three quarters of FY24, agricultural credit disbursed amounted to ₹16.37 trillion.
  • FY23 witnessed agricultural credit disbursements surpassing the target of ₹18.5 trillion, reaching ₹21.55 trillion.
  • Commercial banks held the largest share of agricultural credit disbursed in 2022-23, accounting for 72% of the total.
    • Cooperative banks followed with a share of 13%, while regional rural banks accounted for 15% of the total credit disbursed.

National Bank for Agriculture and Rural Development (NABARD)

  • NABARD is a premier banking organization for agricultural and rural development financing.
  • It was established in 1982 on the recommendation of the Sivaraman committee and has its headquarters in Mumbai.
  • It is responsible for developing small enterprises, cottage industries, and other village or rural initiatives.
  • It is a statutory body established under the National Bank for Agriculture and Rural Development Act of 1981.
    • NABARD came into existence on 12 July 1982.

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