Of total grants of Rs 7.88 crore disbursed to 303 NGOs in Uttar Pradesh in 2012-13, Janhit Foundation alone secured Rs. 6.01 crore. A meagre Rs. 1.87 crore accounting for an average grant size of between Rs. 8,000 to Rs. 80,000 was disbursed to the remaining 302 NGOs.

New evidence reveals a pattern of grants by the National Bank for Agriculture and Rural Development (Nabard) to dubious NGOs that are profiting from the rural poor instead of uplifting them. These NGOs have all been found to be connected to those managing Nabard’s affairs, either in the board room or in the Finance Ministry.

Janhit Foundation, Lucknow, and its banking partner Shivalik Mercantile Cooperative Bank (SMCB), which are linked to former Secretary, Department of Financial Services (DFS), Ministry of Finance, D.K. Mittal — who, in his official capacity, was a strong influence in Nabard’s decisions until recently — have been found to be the biggest beneficiaries.

Investigation reveals that Mr. D. K. Mittal’s brother, Dr. Sanjeev Kumar Mittal is on the Board of Shivalik Bank. During his tenure as DFS Secretary, Nabard, Mr. Mittal permitted Urban Cooperative Banks, which are under the RBI’s supervisory jurisdiction, to promote and finance Joint Liability Groups (JLGs) in rural areas. Shivalik Bank went on to become the lone beneficiary of this concession.

Of total grants of Rs 7.88 crore disbursed to 303 NGOs in Uttar Pradesh in 2012-13, Janhit Foundation alone secured Rs. 6.01 crore. A meagre Rs. 1.87 crore accounting for an average grant size of between Rs. 8,000 to Rs. 80,000 was disbursed to the remaining 302 NGOs.

Janhit-Shivalik’s abnormal commercial appetite is laid bare by a Nabard Inter Office Memorandum which documents the fact that Shivalik Bank mobilises the savings of the poor at a meager interest rate of 3%-4% while lending this money to an urban clientele at a whopping 24%.

Despite its lucrative business model, loans to its associated and poor Self Help Groups (SHG’s) which are collectively called Joint Liablility Group (JLGs ) – are disbursed at a high 18%, while its group members bear a staggering 24% interest rate, including the 6% service charge paid to Janhit.

Nabard not consulted, says Memorandum

“This arrangement has been made without consulting Nabard and the clients concerned,” the memorandum states. It further observes that “99% of the groups promoted and credit linked has been with SMCB only, limiting the clients choices with such overdependence on one bank” and that the members are not even aware that they are being charged unnaturally high interest rates.

Documents and Nabard file notings relating to requests for grant of funds by Janhit Foundation, further reveal an inexplicable urgency to fastrack the approval process and release funds to the NGO, admitting that the “office was kept open on Saturday in view of the urgency of the matter”.

Objections overruled

Overlooking this exploitation, as well the serious discrepancies documented in the claims made by Janhit, funds were still released to the NGO. “Photographs, as an evidence of conduct of programmes not submitted for all the programmes for which the claims have been made. The dates of the photographs and the date of programme conducted differ. NGO has been advised. Name of the district also does not match with the claim…. There seems to be a contradiction in the claims as the NGO has submitted claims for training of Group leaders of SHGs, which far exceeds number of SHG formed by the agency so far in the district. If SHG’s have not been formed, training for their group leaders cannot be conducted”.

The Memorandum further observes, “that the quality of group functioning, viz, book keeping, credit decision by groups and other operations needs close attention of the partner NGO”.

Reversing credit flow

While charging crippling interest rates from the rural poor, being an urban mercantile bank, Shivalik Bank, onlends those funds to an urban clientele at lucrative interest rates, further reversing the flow of funds from rural to urban areas. The Nabard report itself acknowledges that while its performance in mopping up rural savings is high (saving linkages were 64% in Unnao and 100% & 76% in projects of Saharanpur, U.P.), it is very slow to provide loans to the groups (credit linkages were 2.5% in Unnao and 8.6% & 55% in Saharanpur).

Responding to detailed questions by The Hindu, emailed to its Chairman, Prakash Bakshi, Nabard said it “is working with 460 NGOs including Janhit Foundation for promotion of SHGs in UP. Janhit Foundation has been partnering with Nabard since 2010”.

Documents additionally establish a clear rise in Janhit’s fortunes since 2010, after Mr. Bakshi took over as Chairman in June 2010 and D.K. Mittal took over as Secretary, DFS. Nabard granted Rs 5.85 crore to Janhit within 18 months of Mr. Mittal’s tenure (August 2011 to January 2013). The discovery of other major sources of funding to Janhit from grants and contributions under Corporate Social Responsibility schemes of companies like IOC, ONGC, Petronet, SAIL and NHPC, in the Nabard report, are further co-terminus with Mr. Mittal’s stint in the Ministry of Corporate Affairs, Department of Commerce and other ministries.

Mr. Mittal did not respond to either SMSs or a detailed email sent by The Hindu.

Conflict of interest

Another case of conflict of interest arises from grant of funds by Nabard to the Centre for Collective Development (CCD), Hyderabad. The NGO, which provides support to farmers engaged in groundnut cultivation in Andhra Pradesh, has IIM Bangalore Professor and Independent Director, Nabard, Trilochan Sastry as its secretary.

Interestingly, CCD, which has a turnover of just Rs 3 crore, was sanctioned soft loans with a subsidy for two projects worth Rs 2 crore each during 2011-12 and 2012-13 for procurement and marketing of agricultural commodities by Cooperatives.

Nabard told The Hindu, “Prof. Sastry came on the Board of Nabard in October 2011. As per information with us, Prof. Sastry is an ‘Authorised Signatory’ for the NGO and does not draw any financial benefits from it. A loan was sanctioned to the NGO for 2012-13 by the Projects Sanctioning Committee and the fact that Prof. Sastry is associated with the NGO was brought to the notice of the Board of Directors of Nabard and duly recorded. All these loans were sanctioned at an interest of 10% per annum as per UPNRM guidelines. Nabard has no business relation with CCD based at Hyderabad”.

When contacted, Professor Sastry did not deny that CCD was getting funds from Nabard but stated that he “agreed to join the Board because of some initiatives which one is trying to get Nabard to take that will help all small and marginal farmers, not CCD”.

Regarding the conflict of interest represented by his being a member of the Nabard Board, Professor Sastry added, “I read through the documents and did not find any conflict of interest since there is no personal or organizational financial benefit to CCD. Even if you get technical, the written terms show there is no conflict of interest. Then I informed Nabard. They also asked the Ministry of Finance and they cleared it”.

Keywords: Nabardrural poor

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