Understanding Local Self Governance in Nagaland

October 10, 2017 27030 Views No Comment

5.2 Sources of funds for Village Development Boards

The activities of the VDB are mainly supported through state sponsored schemes such as the Grant-in-Aid to Village Development Boards, the Matching Cash Grant, and the Post Office Term Deposits Scheme

5.2.1 Grant-in-aid – Grant-in-aid to the Village Development Boards is a state sponsored scheme introduced during 1980-81 for the creation of minimum infrastructure and special employment programme in every recognized village in Nagaland. The Grant-in-aid is allotted each year to the Village Development Boards on the basis of the tax paying households. This is the only assured fund provided for taking up development activities best suited to their requirements for the villagers. This programme ensures participation of women by earmarking 25% of the Grant-in-aid allotted to each VDB for their development programmes. Another 20% and 55% of the fund is also meant for the youth and general welfare in all the villages. To ensure that the benefits under the programmes are not deprived to small villages, a minimum cut off ceiling at 66 household for all small villages has been fixed.

5.2.2 Matching Cash Grant (MCG) Scheme – This is prerequisite compulsory scheme to be implemented by every Village Development Board. Village Development Boards which don’t implement this scheme are not recognized. Each Village Development Board is expected to mobilize Rupees five lakh which includes states’ contribution of Rupees two lakh fifty thousand. The deposit is used as collateral security for loans required for Village Development Boards to implement income generating schemes where funds are not sufficient.

5.2.3 Post Office Term Deposit (POTD) Scheme – Each Village Development Boards is required to maintain a minimum of ` 10,000 for Village Development Boards with 50 households or less and ` 200 for every additional household as term deposits in Post Offices.

The deposit under the title of “VDB Welfare Fund” is locked period of five years. After maturity, the matured amount is transferred and deposited to Matching Cash Grant/Fixed Deposit.

Given the poor state of banking and loan infrastructure in the state, support for the VDBs have also come in as financial intermediaries or non banking financial intermediaries. The state government contributes rupees one lakh to each VDB to help them access revolving fund assistance from participating banks in this scheme. The VDBs then after availing the loan use the money as revolving fund by providing loans at minimum rates of interests thus integrating the ever important credit mechanism in the rural areas for fostering economic development.