National Bank for Agricultural And Rural Development

Introduction :-

National Bank for Agriculture and Rural Development (NABARD) is an apex regulatory body for overall regulation and licensing of regional rural banks and apex cooperative banks in India. It is under the jurisdiction of Ministry of Finance , Government of India.  The bank has been entrusted with “matters concerning policy, planning, and operations in the field of credit for agriculture and other economic activities in rural areas in India”. NABARD is active in developing & implementing Financial Inclusion .

Predecessor  :-  Development Corporation , Formation  :- July 12, 1982; 39 years ago ,Type :- Regulatory Body  , Purpose :- agriculture Development , Rural Development ,Credit Planning , Refinance , Regulatory Body for Regional Rural Bank , Regulatory Body for Apex Cooperative Banks ,  Headquarters  :- Mumbai, India , Owner :-   Ministry of Finance , Government of India  ,  Chairman  :- Govinda Rajulu Chintala  , Website  :-  http://www.nabard.org.

Mainly NABARD came into existence on 12 July 1982 by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC). It was dedicated to the service of the nation by the late Prime Minister Smt. Indira Gandhi on 05 November 1982. Set up with an initial capital of Rs.100 crore, its’ paid up capital stood at Rs.14,080 crore as on 31 March 2020. Consequent to the revision in the composition of share capital between Government of India and RBI, NABARD today is fully owned by Government of India.

  1. It’s vision is :- Development Bank of the Nation for Fostering Rural Prosperity.
  • It’s mission is :- Promote sustainable and equitable agriculture and rural development through participative financial and non-financial interventions, innovations, technology and institutional development for securing prosperity.
  • Ownership :- NABARD is wholly owned by Government of India.
  •  Ownership setup :- NABARD, with its Head office at Mumbai, has NABARD, with its Head office at Mumbai, has 31 Regional Offices located in States and Union Territory, a cell at Srinagar, 04 Training Establishments in the Northern, Eastern & Southern parts of India and 414 District Development Managers functioning at district level. NABARD has 2243 professionals supported by 1130 other staff. (Data pertains to 31 March 2021 ) .

Background :-

NABARD was established on the recommendations of B.Sivaramman Committee (by Act 61, 1981 of Parliament) on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premier agencies providing d Rs.14080 crore (100% share). The authorized share capital is Rs.30,000 crore.

International associates of NABARD include World Bank-affiliated organisations and global developmental agencies working in the field of agriculture and rural development. These organisations help NABARD by advising and giving monetary aid for the upliftment of the people in the rural areas and optimising the agricultural process

History :-

The importance of institutional credit in boosting rural economy has been clear to the Government right from its early stages of planning. The Reserve Bank of India (RBI) at the insistence of the Government of India, constituted a Committee to Review the Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) in 1979, under the Chairmanship of Shri B. Sivaraman, former member of Planning Commission. The Committee’s report (1979) outlined the need for a new organisational device for providing undivided attention, forceful direction and pointed focus to credit related issues linked with rural development.  It resulted in foundation of NABARD (National Bank for Agriculture and Rural Development) in 1982 as a statutory body under Parliamentary act-National Bank for Agriculture and Rural Development Act, 1981. Its initial paid up capital was Rs. 100 cr. contributed with 50: 50 by government of India and Reserve bank of India. It stood at Rs. 10,580 cr. as on 31 March 2018. To support Indian Rural economy with credit facility, RBI was apex body before formation of NABARD. It resulted in making NABARD as an apex development financial institution in India. The NABARD’s role is basically a continuation of the RBI role in the sphere of Agriculture and Rural Development. The functions of the 3 institutes of RBI (1) the Agricultural Credit Department (ACD), (2) Rural Planning and Credit Cell (RPCC), (3) and Agricultural Refinance and Development Corporation (ARDC) were transferred to NABARD.

ACD: RBI provided through its ACD short term refinance to cooperatives.

RPCC: It was dealing with the Regional Rural Banks (RRBs) since 1979.

ARDC: RBI set up the Agricultural Refinance Corporation (ARC) in 1963 to work as a refinancing agency in providing medium term and long term agricultural credit to support investment credit needs for agricultural development. In 1975, ARC was renamed as Agriculture Refinance and Development Corporation (ARDC) to give focussed attention to credit off-take, development and promotion of the agricultural sector.

Role and objectives  of NABARD

 NABARD has been instrumental in grounding rural, social innovations and social enterprises in the rural hinterlands. As of May, 2020, NABARD operates at 32 Regional Offices country. b has in the process partnered with about 4000 partner organisations in grounding many of the interventions be it, SHG-Bank Linkage programme, tree-based tribal communities’ livelihoods initiative, watershed approach in soil and water conservation, increasing crop productivity initiatives through lead crop initiative or dissemination of information flow to agrarian communities through Farmer clubs . Despite all this, it pays huge taxes too, to the exchequer – figuring in the top 50 tax payers consistently. NABARD virtually ploughs back all the profits for development spending, in their unending search for solutions and answers. Thus the organisation had developed a huge amount of trust capital in its 3 decades of work with rural communities.

1.NABARD is the most important institution in the country which looks after the development of the cottage industry, small scale industry and village industry, and other rural industries.

2.NABARD also reaches out to allied economies and supports and promotes integrated development.

3.NABARD discharge its duty by undertaking the following roles :

  1. Serves as an apex financing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas
  2. Takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc.
  3. Co-ordinates the rural financing activities of all institutions engaged in developmental work at the field level and maintains liaison with Government of India, state governments, Reserve Bank of India (RBI) and other national level institutions concerned with policy formulation
  4. Undertakes monitoring and evaluation of projects refinanced by it.
  5. NABARD refinances the financial institutions which finances the rural sector.
  6. NABARD partakes in development of institutions which help the rural economy.
  7. NABARD also keeps a check on its client institutes.
  8. It regulates the institutions which provide financial help to the rural economy.
  9. It provides training facilities to the institutions working in the field of rural upliftment.
  10. It regulates and supervise the cooperative banks and the RRB’s, throughout entire India.

NABARD has its head office at Mumbai, India and regional offices in all states and one special cell at Srinagar J&K. The Regional Office[RO] is headed by a Chief General Manager [CGMs] as Officer Incharge, and the Head office has several top executives viz. the Directors, Deputy Managing Directors[DMD], and the Chairperson. The Board of Directors are appointed by the Government of India in consonance with NABARD Act. It has 336 District Offices across the country which are staffed by District Development Managers (DDMs). It also has 6 training establishments.

NABARD is also known for its ‘SHG Bank Linkage Programme’ which encourages India’s banks to lend to self-help groups (SHGs). Largely because SHGs are composed mainly of poor women, this has evolved into an important Indian tool for microfinance. By March 2006, 22 lakh SHGs representing 3.3 crore members had to be linked to credit through this programme.

NABARD also has a portfolio of Natural Resource Management Programmes involving diverse fields like Watershed Development, Tribal Development and Farm Innovation through dedicated funds set up for the purpose.

Bank Regulation :-

NABARD supervises State Cooperative Banks (StCBs), District Cooperative Central Banks (DCCBs), and Regional Rural Banks (RRBs) and conducts statutory inspections of these banks.

Refinancing :-

NABARD’s refinance fund from World Bank and Asian Development Bank to state co-operative agriculture and rural development banks (SCARDBs), state co-operative banks (SCBs), regional rural banks (RRBs), commercial banks (CBs) and other financial institutions approved by RBI. While the ultimate beneficiaries of investment credit can be individuals, partnership concerns, companies, State-owned corporations or co-operative societies, production credit is generally given to individuals.  

Objectives of NABARD

1. To give undivided attention and purposeful direction to integrated rural development.

2. To act as a centre piece for the entire rural credit system at the national level.

3. To act as a provider of supplemental funding to rural credit institutions.

4. To arrange for investment credit to small industries, village and cottage industries, handicrafts and other rural crafts, artisans, and farmers.

5. To improve the credit distribution system by institution building, rehabilitation of credit institutions and training of bank personnel.

6. To provide refinance facilities to SLDBs, SCBs, RRBs and commercial banks for development purposes in rural areas.

7. To coordinate the working of different agencies engaged in development work in rural areas at the regional level, and to have liaison with Government of India, RBI, State Governments and other policy making institutions at the national level.

8. To inspect, monitor and evaluate projects getting refinance from the NABARD.

NABARD   in rural development :-

 NABARD role in rural development in India is phenomenal. National Bank For Agriculture & Rural Development (NABARD) is set up as an apex Development Bank by the Government of India with a mandate for facilitating credit flow for promotion and development of agriculture, cottage and village industries. The credit flow to agriculture activities sanctioned by NABARD reached Rs 1,57,480 crore in 2005–2006. The overall GDP is estimated to grow at 8.4 per cent. The Indian economy as a whole is poised for higher growth in the coming years. Role of NABARD in overall development of India in general and rural & agricultural in specific is highly pivotal.

Through assistance of Swiss Agency for Development and Cooperation, NABARD set up the Rural Innovation Fund. Rural Infrastructure Development Fund (RIDF) is another noted scheme for the bank for rural development. Under the RIDF scheme Rs. 51,283 crore have been sanctioned for 2,44,651 projects covering irrigation, rural roads and bridges, health and education, soil conservation, water schemes etc. Rural Innovation Fund is a fund designed to support innovative, risk friendly, unconventional experiments in these sectors that would have the potential to promote livelihood opportunities and employment in rural areas.  The assistance is extended to Individuals, NGOs, Cooperatives, Self Help Group, and Panchayati Raj Institutions who have the expertise and willingness to implement innovative ideas for improving the quality of life in rural areas. Through member base of 25 crore, 600000 cooperatives are working in India at grass root level in almost every sector of economy. There are linkages between SHG and other type institutes with that of cooperatives.

The purpose of RIDF is to promote innovation in rural & agricultural sector through viable means. Effectiveness of the program depends upon many factors, but the type of organisation to which the assistance is extended is crucial one in generating, executing ideas in optimum commercial way. Cooperative is member driven formal organisation for socio-economic purpose, while SHG is informal one. NGO have more of social color while that of PRI is political one. Does the legal status of an institute influences effectiveness of the program? How & to what an extent? Cooperative type of organisation is better (Financial efficiency & effectiveness) in functioning (agriculture & rural sector) compared to NGO, SHG & PRIs.

Recently in 2007–08, NABARD has started a new direct lending facility under ‘Umbrella Programme for Natural Resource Management’ (UPNRM). Under this facility financial support for natural resource management activities can be provided as a loan at reasonable rate of interest. Already 35 projects have been sanctioned involving loan amount of about Rs 1000 crore. The sanctioned projects include honey collection by tribals in Maharashtra, tussar value chain by a women’s producer company (‘MASUTA’), eco-tourism in Karnataka etc.

Functions and Achievement of NABARD

The four central functions that NABARD performs to keep up with its roles are as below:

*Credit Functions * These are the functions that the bank undertakes as the provider of credit facilities in rural areas. Under this, NABARD provides, regulates, monitors the credit flow of rural India. It further consists of many departments that perform the specified functions.

*Financial Functions * These include providing  term loans to client banks, artisans, handicraft industries, food parks, processing units, etc.

*Supervisory Functions * It involves all those tasks that the bank performs to supervise all the banks, credit, and non-credit societies.

*Development Functions * Under these functions, NABARD helps other rural banks in preparing their action plans. It also helps the farm and non-farm sectors.

Other functions of NABARD ate as follows :-

  • To serve as an apex financing agency for the institutions providing investment and production credit for promoting various developmental activities in rural areas;
  • To take measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions and training of personnel;
  • To coordinate the rural financing activities of all institutions engaged in developmental work at the field level and liaison with the Government of India, the State Governments, the Reserve Bank and other national level institutions concerned with policy formulation; and
  • To undertake monitoring and evaluation of projects refinanced by it.                                                                    
  • NABARD gives high priority to projects formed under Integrated Rural Development Programme (IRDP).
  • It arranges refinance for IRDP accounts in order to give highest share for the support for poverty allevia­tion programs run by Integrated Rural Development Programme                          
  • NABARD also gives guidelines for promotion of group activities under its programs and provides 100% refinance support for them.
  • It is setting linkages between Self-help Group (SHG) which are organized by voluntary agencies for poor and needy in rural areas.
  • It refinances to the complete extent for those projects which are operated under the ‘National Watershed Development Programme ‘and the ‘National Mission of Wasteland Development‘.
  • It also has a system of District Oriented Monitor­ing Studies, under which, study is conducted for a cross section of schemes that are sanctioned in a district to various banks, to ascertain their performance and to identify the constraints in their implemen­tation, it also initiates appropriate action to correct them.
  • It also supports “Vikas Vahini” volunteer programs which offer credit and development activities to poor farmers.
  • It also inspects and supervises the cooperative banks and RRBs to periodically ensure the development of the rural financing and farmers’ welfare.
  • NABARAD also recommends about licensing for RRBs and Cooperative banks to RBI.
  • NABARD gives assistance for the training and development of the staff of various other credit institutions which are engaged in credit distribution.
  • It also runs programs for agriculture and rural development in the whole country.
  • It is engaged in regulations of the cooperative banks and the RRB’s, and manages their talent acquisition through IBPS CWE conducted across the country.

Achievements of NABARD :-

The NABARD is an apex institution in the organised rural credit structure. It plays an important role in reducing regional disparities and helps small farmers, marginal farmers and the weaker sections of the society. It channelizes its refinance facilities for agricultural and rural development in the country through major financial intermediaries like SCBs, SLDBs, RRBs, commercial banks, etc.

1. Short Term Credit:

During 2002-03, it sanctioned Rs.8,764 crores as short term credit to SCBs and RRBs for financing seasonal agricultural operations, marketing of crops, purchase and distribution of fertilisers, and working capital requirements of cooperative sugar factories.

2. Medium Term Credit:

The NABARD sanctioned Rs.496 crores in 2002-03 as medium term credit to SCBs and RRBs for approved agricultural purposes.                                                                      

3. Long Term Credit:

The NABARD provides long term loans not exceeding 20 years to State Governments to enable them to contribute to the share capital of the cooperative credit institutions. In 2002-03 it sanctioned Rs.62 crores to State Governments for this purposes.

4. Schematic Lending:

The NABARD provides refinance facilities relating to minor irrigation, land development, farm mechanisation, plantation, horticulture, poultry, sheep breeding, piggery, fisheries, dairy development, storage, market yards, IRDP, etc.

5. Assistance to Non-Farm Sector:

The NABARD provides financial assistance to the non-farm sector. The ceiling on individual loans under Composite Loan Scheme is Rs.50,000 and under Integrated Loan Scheme Rs.7.5 lakhs to enable the financing banks to meet the credit requirements of entrepreneurs for setting up cottage, tiny, village and small scale industries. Further, State Cooperative Banks have been permitted to get refinance on an automatic basis from the NABARD through CCBs for financing industrial cooperative societies up to Rs. 7.5 lakhs. The Integrated Loan Scheme has also been extended to Land Development Banks for financing non-farm activities up to Rs. 7.5 lakhs. SCBs have been permitted to draw refinance on automatic basis for loans to industrial cooperative Societies for modernisation of existing units up to Rs. 7.5 lakhs. With the introduction of Swarnajayanti Gram Swarozgar Yojna from April 1999 in rural areas, the NABARD provides refinance to commercial banks for loans extended by them under the scheme. A wide spectrum of activities covering agricultural allied activities, industries, services and business that are bankable and viable are eligible for refinance..                

6. Other Types of Assistance: The NABARD has started the following types of assistance recently:

(a) It undertakes on a modest scale co-financing/direct financing of hi-tech and other special projects.

(b) Beginning 1995-96, it has started sanctioning a separate Short Term (Seasonal Agricultural Operations) Credit limit to each of the SCBs/RRBs operating in the 114 identified districts in the country.                                                                                                                          

(c) To step up credit flow to weaker sections including SCs/STs, the NABARD has earmarked a sum of Rs. 150 crores for refinance under the “SC/ST Action Plan” for allocation among commercial and cooperative banks. The level of refinance is 100 per cent.

7. Institutional Development: One of its important function is institutional development. In addition to inspection of cooperative banks and RRBs, it helps in their rehabilitation, reorganisation and re-establishment.

8. Cooperative Development Fund (CDF): NABARD set up CDF in 1993 for strengthening the cooperative credit institutions in the areas of organisational structure, human resource development, resource mobilisation, recovery position, etc. The assistance is provided to SCBs, CCBs, etc. by way of a grant or a soft loan or both. At the end of March 2003, cumulative loans sanctioned from CDF amounted to Rs. 65 crores.

9. Rural Infrastructure Development Fund (RIDF):

KIDF-I was set up in 1995-96 with a corpus of Rs. 2,000 crores for providing funds to State Governments and State owned corporations to enable them to complete various types of rural infrastructure projects. This scheme had been continued in subsequent years as RIDP-II with Rs.2,500 crores in 1996-97, RIDF-III with Rs. 2,500 crores in 1997-98, RIDF-IV with Rs. 3,000 crores in 1998- 99, RIDF-V with Rs. 3,500 crores in 1999-2000, RIDF-VI with Rs. 4,500 crores in 2000-01, RIDF-VIl with Rs. 5,000 crores in 2001-02, RIDF-VIII with Rs. 5,500 crores in 2002-03 and RIDF-IX with Rs. 5,500 crores in 2003-04. The amount mobilised under various RIDF schemes amounted to Rs. 16,145 crores as at ending March 2002. The cumulative sanctions of loans under RIDF were Rs. 29,475 crores as at 31 March, 2003.

10.The NABARD signs MOUs with the’ Cooperative banks and the concerned State Government for revamping and improving the cooperative credit structure. Similar MOUs exist between the RRBs and the sponsor banks.

11. Research and Development: It has been providing financial assistance for research and training to the staff of rural banking structure out of its R & D Fund and for strengthening the technical, monitoring, and evaluation cells of RRBs. Its three staff colleges, CAB, and Banker Rural Development Institute have been providing research and training facilities in rural credit and development to the staff of banks. Despite its manifold achievements, NABARD has yet to become an apex regulator and development bank for farm lending.

Conclusion :-

It is the apex banking institution to provide finance for Agriculture and rural development.  National Bank for Agriculture and Rural Development (NABARD) was established on July 12, 1982 with the paid up capital of Rs. 100 cr. by 50: 50 contribution of government of India and Reserve bank of India. It is an apex institution in rural credit structure for providing credit for promotion of agriculture, small scale industries, cottage and village industries, handicrafts etc. NABARD functions and role are discussed above.  Some of the milestones in NABARD’s activities are

Business Operations: Production Credit: NABARD sanctioned aggregating of 66,418 crore short term loans to Cooperative Banks and Regional Rural Banks (RRBs) during 2012-13, against which, the maximum outstanding was 65,176 crore.  Investment Credit: Investment Credit for capital formation in agriculture & allied sectors, non-farm sector activities and services sector to commercial banks, RRBs and co-operative banks reached a level of 17,674.29 crore as on 31 March 2013 registering an increase of 14.6 per cent, over the previous year. Rural Infrastructure Development Fund (RIDF) : Through the Rural Infrastructure Development Fund (RIDF) 16,292.26 crore was disbursed during 2012-13. A cumulative amount of 1,62,083 crore has been sanctioned for 5.08 lakh projects as on 31 March 2013 covering irrigation, rural roads and bridges, health and education, soil conservation, drinking water schemes, flood protection, forest management etc.

New Business Initiatives : NABARD Infrastructure Development Assistance (NIDA):
NABARD has set up NIDA, a new line of credit support for funding of rural infrastructure projects. The sanctions under NIDA during the year 2012-13 was 2,818.46 crore and disbursement was 859.70 crore.  Direct refinance assistance to CCBs for short term multipurpose credit: Direct refinance assistance to CCBs was conceived and additional line of finance for CCBs in the light of recommendations of the “Task Force on Revival of Short Term Rural Cooperative Credit Structutre, which enables the latter to raise financial resources other than from StCBs. During 2012-13, refinance assistance aggregating 3,385 crore was sanctioned to 42 CCBs and disbursement stood at 2,363.45 crore. Now it can be conclude that the Agricultural & rural development is totally dependent on the efficiency of the NABARD, which is doing its job as per the requirements of the economy.

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