NABARD to launch ₹1000-crore blended fund for agri-startups: chairman Shaji KV

New Delhi: The National Bank for Agriculture and Rural Development (NABARD) will launch a ₹1,000-crore fund to bolster technology-driven agri-startups and rural enterprises, said chairman Shaji K.V. on Monday.

The fund will back startups facing challenges in scaling up their operations due to limited access to equity and debt instruments, and will seek to foster new linkages in the rural ecosystem, both forward and backward.

“The problem is not the availability of money. About ₹22 trillion is going just for production credit. We are not sure if it is being used for production. Another ₹22 trillion needs to go for investment credit. The solution must focus on when farmers get the money, have the adequate skill to use that money for other production activities, such as processing, and get trained for it," he said at the Startup Mahakumbh event.

According to K.V, the startups should be aware of the necessary technology or machinery required, and this will necessitate numerous activities. "This is where many startups can operate, and we are now trying to incubate such startups. We have already set up a ₹750-crore fund, which will be followed by another ₹1,000 crore.” 

“Thee ₹1,000 crore may not be sufficient, but as a starter, it will be good. Most importantly, for pre-seed investments, we are setting up another ₹750 crore to support new ideas, which have not been tested, or where scalability is not ensured. But we need to support those ideas to welcome solutions." 

While the government has been doing a lot in terms of agri-infra fund scheme, animal husbandry infrastructure development fund, and food processing fund, etc., the money is going to traditional farmers or existing players, he said.

"We need to fund new players who are coming up with new technologies. Almost 8% of our balance sheet is now for production credit. We need to re-orient that towards more investment credit. This is what we will be doing.” 

In the budget for FY23, Nirmala Sitharaman had announced plans for a blended capital fund, to be raised through co-investments, and facilitated by NABARD. “This is to finance startups for agriculture and rural enterprise, relevant for the farm produce value chain.” the finance minister had said.

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.

Furthermore, on credit distribution favouring southern regions, K.V said: “It is a systemic issue. Southern India has better infrastructure and credit culture compared to eastern and central India. To mitigate credit risk and ensure banks in eastern and central India can lend more, we are proposing some form of collateral in terms of social guarantee, or a guarantee fund.”

Data released by the Union Agriculture Ministry reveals that in FY22, 48% of the agricultural credit disbursed, amounting to ₹21 trillion, was directed to five southern states – Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, and Kerala. However, the region accounted for just 17% of India's gross cropped area.

On the other hand, five northern states – Rajasthan, Punjab, Haryana, Jammu & Kashmir, and Himachal Pradesh – received around 17% of the total credit flow, amounting to ₹3.38 trillion, despite representing 20% of gross cropped area. 

In the first three quarters of FY24, ₹16.37 trillion of agricultural credit has been disbursed, surpassing the target of ₹20 trillion. In FY23, disbursements for agricultural credit had surpassed the target of ₹18.5 trillion, to ₹21.55 trillion.

In 2022-23, commercial banks had a share of 72% of the total credit disbursed, followed by cooperatives banks and regional rural banks with a share of 13% and 15%, respectively.