SCARDB

SCARDB stands for State Cooperative Agricultural and Rural Development Bank. It is a long-term cooperative credit institution operating at the state level in India, primarily engaged in providing medium- and long-term loans for agricultural and rural development activities. SCARDBs form a crucial component of India’s cooperative credit structure, working alongside Primary Cooperative Agricultural and Rural Development Banks (PCARDBs) and other cooperative financial institutions to support rural credit delivery and development financing.

Historical Background

The cooperative credit movement in India began in the early 20th century to meet the financial needs of farmers who were largely dependent on moneylenders. Initially, short-term agricultural credit was provided by State Cooperative Banks (SCBs), while the need for long-term investment credit for land development, irrigation, and farm mechanisation led to the establishment of Land Development Banks (LDBs).
Over time, these institutions evolved into State Land Development Banks (SLDBs) and later, with expanded functions beyond land-related financing, were renamed State Cooperative Agricultural and Rural Development Banks (SCARDBs). The new name reflects their broader mandate to finance both agricultural and non-agricultural rural development activities.

Structure and Organisation

SCARDBs operate within a two-tier or unitary cooperative structure, depending on the state:

1. Two-Tier Structure:
   • State Cooperative Agricultural and Rural Development Bank (SCARDB) at the state level.
   • Primary Cooperative Agricultural and Rural Development Banks (PCARDBs) at the district or taluk level, affiliated to the SCARDB.Examples include states such as Karnataka, Tamil Nadu, and Andhra Pradesh.
2. Unitary Structure:
   • The SCARDB operates directly through its branches across the state without separate primary-level institutions.Examples include Maharashtra and Gujarat.

The SCARDB acts as the apex institution, coordinating, supervising, and providing financial and technical assistance to the lower-tier PCARDBs.

Objectives and Functions

The main objective of the SCARDB is to promote long-term rural credit and support the development of the agricultural and rural economy. Its functions include:

• Providing Long-Term Loans: For purposes such as land improvement, irrigation, farm mechanisation, horticulture, dairy farming, and rural industries.
• Financing Non-Farm Activities: Supporting small-scale industries, rural artisans, agro-based industries, and rural infrastructure.
• Refinancing: Mobilising resources through borrowing from higher financial institutions such as NABARD (National Bank for Agriculture and Rural Development) and lending them to PCARDBs or directly to farmers.
• Resource Mobilisation: Raising funds by issuing debentures, bonds, and other financial instruments guaranteed by state governments.
• Technical Assistance: Providing guidance, project evaluation, and capacity building to primary banks and borrowers.
• Monitoring and Supervision: Ensuring effective credit delivery, recovery, and adherence to cooperative principles.

Sources of Funds

SCARDBs mobilise funds from multiple sources, including:

• Share Capital contributed by the state government and member institutions.
• Borrowings from NABARD, Life Insurance Corporation of India (LIC), and other financial institutions.
• Debentures and Bonds issued on the open market, often backed by state government guarantees.
• Deposits from members and the public (in some states).
• Internal Resources generated through retained earnings and loan recoveries.

The debenture system of financing, introduced in the 1950s, remains a major source of long-term funds, enabling SCARDBs to access large-scale capital for rural development projects.

Types of Loans Provided

SCARDBs provide medium- and long-term credit for diverse agricultural and rural development activities:

• Agricultural Development Loans: For land reclamation, well construction, irrigation, farm mechanisation, and plantation development.
• Allied Sector Loans: For dairy, poultry, fisheries, animal husbandry, and horticulture.
• Agro-Industrial Loans: For processing, storage, and marketing of agricultural produce.
• Rural Infrastructure Loans: For roads, drainage, electrification, and water supply projects.
• Non-Farm Sector Loans: For small and cottage industries, rural crafts, and service enterprises.

Loan repayment periods range from 3 to 20 years, depending on the project nature and profitability.

Role of NABARD

The National Bank for Agriculture and Rural Development (NABARD) plays a crucial role in the functioning of SCARDBs by providing refinance assistance, policy guidance, and capacity development. NABARD supports the long-term credit operations of SCARDBs through its Long-Term Rural Credit Fund (LTRCF) and other financial schemes aimed at strengthening cooperative rural credit institutions.

Performance and Challenges

Contributions and Achievements:

• SCARDBs have played a pivotal role in financing capital formation in agriculture and promoting rural entrepreneurship.
• They have supported the diversification of the rural economy by funding irrigation, mechanisation, and value-added processing industries.
• In several states, SCARDBs have helped implement government-sponsored schemes, promoting inclusive development.

Challenges:

• High Overdues: Loan recovery rates remain suboptimal in many states, leading to financial stress.
• Limited Resource Base: Dependence on external borrowings makes them vulnerable to liquidity constraints.
• Weak Governance: Some cooperative banks face managerial inefficiencies and inadequate professional supervision.
• Competition: The emergence of commercial banks, regional rural banks (RRBs), and microfinance institutions has reduced their share in rural credit.
• Technological Gaps: Slow adoption of digital banking and management systems limits efficiency and outreach.

Reforms and Modernisation

To revitalise SCARDBs, several reform measures have been initiated by NABARD and state governments:

• Recapitalisation and Restructuring: Financial assistance for clearing accumulated losses and strengthening capital adequacy.
• Computerisation: Implementing digital loan tracking, MIS (Management Information Systems), and e-governance.
• Capacity Building: Training staff and board members in financial management, credit appraisal, and recovery.
• Diversification of Operations: Expanding into non-farm and service sectors to enhance income sources.
• Regulatory Oversight: Strengthening auditing, supervision, and accountability under state cooperative acts.

Importance in Rural Development

SCARDBs continue to hold strategic importance in India’s rural credit delivery system. They serve as a bridge between institutional finance and grassroots-level borrowers, particularly in semi-urban and rural areas where access to credit remains limited.
Their focus on long-term investments distinguishes them from other institutions that primarily offer short-term working capital. By promoting agricultural productivity, infrastructure development, and rural entrepreneurship, SCARDBs contribute directly to rural prosperity and poverty alleviation.