NABARD, National Bank for Agriculture and Rural Development, provides short, medium- and long-term finance to agriculture and allied activities. It extends assistance to the government and RBI in matters related to rural development.
It also provides research facilities to cooperative banks that are working in the field of rural development. It also coordinates the operations of rural credit institutions.
Credit guarantee fund trust was introduced by the Indian government to provide collateral-free loans to micro and small enterprises (MSEs) in India. The existing, as well as new enterprises, have the eligibility to avail of the scheme.
Generally, loans to MSEs are given against property (acting as collateral) because they do not have enough cash flows. The credit guarantee provided by the government assures the banks that the loans will be paid back even if the enterprises fail to do so.
The banks will be able to provide loans to the MSEs without any hesitation and, the enterprises will have uninterrupted cash flows for their business activities.
Agriculture plays a vital role in economic growth and development. The agriculture sector in India contributes 20.2% of GDP. NABARD has been continuously working to uplift the rural and agriculture sector.
Recently, the government had launched ‘Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs) with a clear motto to establish and promote 10,000 FPOs in India. Under this scheme, a credit guarantee of 1,000 crores will be provided to the farmers.
The farmer Producer organization is a group where the farmers are the members themselves. They provide end-to-end services and support to small farmers, covering technical services, marketing services, etc.
The trust has started in Mumbai. It has been signed by the members of the Ministry of agriculture and farmers welfare and NABSanrakshan.
The Credit guarantee fund trust for farmer producer organization (CGFTFPO) is the second trust in the agriculture sector to provide credit guarantee to farmers. The credit guarantee will improve the creditworthiness of the FPOs.
It will also facilitate cost-effective production and increase productivity that will further boost the revenue of the farmers who are members of FPOs.