Guidelines for Banks issued by NABARD

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National Bank For Agriculture And Rural Development

C-24, ‘G’ BLOCK
Bandra – Kurla Complex
P.B. No. 8121
Bandra (East)
Mumbai- 400 051

Tel: 26530094
Fax: 26524877


Ref. No. NB.CPD.GCD/Psf/297/2003-204
16 August 2003

To all Public Sector Banks

Dear Sir

Price Stabilisation Fund – Operationalisation

As you may be aware, the Hon’ble Union Finance Minister in his Budget speech for the year 2003-04 had announced the establishment of Price Stabilisation Fund Scheme for the growers of coffee, tea, rubber and tobacco for providing support to the growers of these commodities. A Scheme has been finalised by a Committee set up by the Ministry of Commerce and the same has been approved by the Cabinet Committee on Economic Affairs.

2. Initially, the Scheme would be open to growers having operational holdings of 4 ha. or less. The eligibility of growers to enroll as members of the Scheme would be certified by the respective Commodity Boards. Other details of the Scheme is furnished in Annexure I.

3. The eligible members would be required to open a bank account for the purpose with a bank branch. On the basis of the discussions the Additional Secretary, Ministry of Commerce and Industry had with the representatives of Reserve Bank of India, NABARD and Commercial banks on 10 June 2003 at NABARD, Mumbai, the guidelines for opening and maintenance of accounts by banks have been drafted and a copy of the same is furnished at Annexure II.

4. The success of the Scheme hinges on enrollment of all the eligible grower farmers. As you will agree officials of the bank branches being in direct contact with the growers would be in a better position to apprise them of the details of the scheme as also the formalities for opening of bank account for the purpose. The concerned bank branches may, therefore, have to interact with the respective Commodity Boards and provide necessary support in making the scheme a success. We, therefore, request you to bring the details of the Scheme to the notice of the officials of the concerned controlling offices/branches of your bank and facilitate in popularising and operationalisation of the Scheme. We seek your cooperation and of all concerned branches of your bank in opening the accounts of eligible members and allowing operations thereon as per the guidelines.

Yours faithfully

( N Srinivasan)
Chief General Manager

Endt. No. NB.CPD.GCD. /Psf / 2003-04 of date


Copy forwarded for information to:

1. The Chief Executive Officer, Price Stabilisation Fund Scheme, Rooms NO. 132&133, ‘C’ Wing, Nirman Bhavan, New Delhi with respect to his letter dated 11 August 2003 on the subject.

2. The Chief General Manager, ICD, NABARD, HO, Mumbai.

3. The Chief General Manager / Officer In-Charge, NABARD, RO, Bangalore / Chennai / Hyderabad / Thiruvananthapuram / Kolkata / Guwahati / Tripura / Agartala / Imphal / Itanagar / Shillong / Aizwal / Kohima.

(J D Bhattacharya)
Asst. Gen. Manager

Modus Operandi for calculation of Contributions from GoI and Members

GoI will announce a price band for each Commodity based on the seven year moving average of international prices as the mid point, the lower bound and upper bound as 20% (-) and 20% (+) respectively.

When the average prices fall below the lower bound of the band in a particular year, GoI will contribute upto Rs.1000/- to the account of the member. In that year the member will not be required to contribute any amount to his/her account.

In those years when the average price pierces the upper bound of the band, the member will have to contribute Rs.1000/- to his/her account while the GoI will not contribute any amount.

In the normal years when the price remains within the price band, the member will be required to deposit Rs.500/- each year to his/her account within a specified date. The GoI will also contribute upto Rs.500/- to the member’s account during the normal year.

During years when the average market price falls below the lower bound of the price band, the member would be allowed to draw Rs.1000/- from the account.

At the end of ten year period the balance outstanding can be withdrawn by the grower including the GoI’s contribution and the interest earnings. The initial contribution of Rs.500/- as entry fee however, will not be refunded.

The Scheme will be implemented through a Trust Fund to be set up jointly by Ministry of Commerce and NABARD and the operations will be monitored by a High Powered Committee set up by the Ministry of Commerce.


In case a member defaults in making his/her contribution within the stipulated date he will be deemed as defaulter. The PSF account maintained with the bank would be closed and no further deposits of either from the GoI and the member would be credited to the account.


New Membership

New growers willing to subscribe to the Scheme during the period of operation of the Scheme may be admitted in place of dropouts, however, the benefits of the Scheme will be restricted to the remaining period of the Scheme.


The operation of the Scheme is illustrated below. Let us presume that the 7 years moving average price of the commodity is Rs.43/-. The lower bound of the band would be Rs.34.40/- and the upper bound of the band would be Rs.51.60/-. If the prevailing price of the commodity is Rs.31/- per kg, the position will be as under:

Price of Commodity Contribution to the A/c Withdrawal from the A/c
Price say Rs.31 per kg
(below lower bound)
Rs.1000/ by GoI.
No contribution by member
Rs.1000/- can be withdrawn by member.
Rs.45 per kg (within the price band) Rs.500/- by GoI
Rs.500/- by member
No drawals
Rs.52 per kg (above upper bound) Rs.1000/- by member
No contribution by Govt.
No drawals





Deeply concerned with the problems being faced by the growers of coffee, tea, rubber and tobacco due to continued low prices of these commodities for quite some time, Government of India (GoI) has taken a series of measures to ameliorate the hardships being faced by the growers of these crops. The Price Stabilisation Fund Scheme is yet another step in the direction of the GoI to demonstrate its commitment to safeguard the interests of these growers.

Objective of the Scheme

The PSFS aims at providing financial relief to the growers when prices of these commodities fall below a specified level without resorting to the practice of procurement operations by the Government agencies.

Duration of the Scheme

The Scheme will be operational for a period of ten years subject to a review after five years.

Mode of Intervention

Under the Scheme, a fund called the Price Stabilisation Fund will be established with contributions from the GoI and entry fee @ Rs.500/- from each grower desirous of participating in the Scheme. The corpus of the Fund shall remain undisturbed and interest earnings alone will be utilized for operationalising the PSFS.

Who can participate in the Scheme

Initially, the Scheme will be open to growers of tea, coffee, rubber and tobacco having operational holdings of 4 hectares or less. Subsequently, coverage of other growers could be considered.

How to become a member

Growers of aforementioned commodities desirous of participating in the Scheme, shall apply to the respective Commodity Board in the prescribed form within the date stipulated therefor.

The Commodity Boards shall select the members on first come first serve basis with preference being given to the members with the least holding size.

The Commodity Boards shall thereafter enroll the eligible grower as member who will be required to deposit an amount of Rs.500/- with the Commodity Board.

Opening and maintenance of bank account

The member would be provided with an application form to enable him/her to open the ‘PSF’ account with the designated bank branch.

The Commodity Board shall also inform the concerned bank branch for opening the account in the name of the member.

The account will be maintained as Savings Bank Account and would be entitled for payment of interest at rates applicable for Savings Bank Account. No service charges of any kind would be levied.

Members have to deposit their annual contributions to the account by 31 March every year.

GoI contributions to the account would be made not later than 31st May every year.

At the end of the duration of the Scheme the entire balance in the account would be payable to the member.



Price Stabilisation Fund Account-
Guidelines for opening and maintenance of Account by Banks





I wish to enroll as a Grower Member in the Price Stabilisation Fund Scheme introduced by the Government of India. My details are as under :

1. Name :

2. Father’s Name :

3. Full address :

4. Regn. No. with the Board as a :
grower (TBRG No.)

5. Particulars of holdings of :
agricultural land (in hectares)
a) Name of the Village, taluka/mandal, district &
state where the land is situated
b) Survey No.
c) Holding of Agri. Land (Hect.)

6. Name & Address of the :
bank with Account No.

7. Remarks :

8. Details of entry fee of Rs.500/- by way of cash/D.D. :

I do solemnly declare that to the best of my knowledge and belief, the above stated information is true, complete and correct. Further, I have read, understood and hereby agree to the terms and conditions of the Price Stabilisation Fund Scheme.

Signature of the applicant








The Manager
(Name of the Branch) Passport size photograph
(Name of the Bank) with signature/thumb impression
Date :

I wish to apply for opening of a bank account in your branch under the Price Stabilisation fund Scheme. My details are as under :

1. Name :

2. Father’s Name :

3. Date of Birth :

4. Address :

5. Telephone No. :

6. Registration No. with the :
Commodity Board

7. Name and address of nominee :

8. Relationship with Nominee :

9. Details of existing bank account, if any :

I have been enrolled as a member under the Price Stabilisation Fund Scheme by the __________ Board (Name of the Commodity Board). I have read , understood and hereby agree to the terms and conditions of the Price Stabilisation Fund Scheme. Further all the particulars and information given above are true, correct, complete and upto date in all respect.


Certificate by the _____________ Board

Date :

We certify that Shri/Smt. has been enrolled as a member under the Price Stabilisation Fund Scheme and he/she has paid the entrance fee. He/she may be allowed to open a bank account under the Price Stabilisation Fund Scheme in your branch.