National Financial Institutions and their role to play in the modern Indian economy

Role and functions of National Bank for Agriculture and Rural Development (NABARD)

NABARD is a Development Bank which came into existence post the enactment of the NABARD Act of 1981 and is regulated by the RBI. The ownership of these banks lies in the hands of the Government of India. It is a National Financial Institution (NFIs) with the key function of facilitating rural prosperity[1]. It provides as well as regulates funds for the development of the handicraft, small scale industries, village and cottage industries, agricultural sector, and other such rural sectors.[2]

It plays a regulatory role by being the apex institution for all policy and planning matters pertaining to the rural and agricultural sector. It further plays a supervisory role by frequently inspecting the Regional Rural Banks as well as the cooperative Banks for purposes of ensuring that there has been adequate development in matters of farmers welfare and rural financing. Moreover, it plays the role of a refinancing agency for institutions that produce credit and procure investment to carry out developmental plans that NABARD has made for the rural economic sector. It further comes up with credit plans. Since the absorption capacity of rural credit delivery is not as efficient, it also formulates developmental schemes to improve it. It also facilitates research in fields of agriculture, rural banking, and development.[3]

Role and functions of Export-Import Bank of India (EXIM)

Similar to NABARD, EXIM banks are also the apex institution in their sector. These were established under the Export-Import Bank of India Act of 1981 and regulated by the RBI. The ownership of these banks lies in the hands of the Government of India.[4] Its mission is to facilitate globalisation of the businesses in India.

Its credit functions include, providing certain kind of monetary assistance to importers and exporters of India. With financing, it also helps in the development of export related industries etc. It also plays a regulatory role as well as a supervisory role. Being the apex financial institution for this sector, it helps in the collection and coordination of work done all institutions in this sector, with the overall aim to increase international trade of the nation.[5]

If they should continue existing

NFIs such as NABARD and EXIM, fill the gap provided by the commercial Banks. Each of these banks are the apex institution in specific sectors. They don’t just aim to fulfil the commercial obligations but also ensure an overall growth and development of the specific sector. Rather than simply focusing on collateral-based financing, they aim to provide long term financing. Since, the risk is generally higher is these sectors, Commercial banks do not find it feasible to invest in this. The NFIs are like a helping hand to the commercial banks for better regulation and functioning of these sectors, and an overall growth of the economy. Therefore, even in the modern economy their continuation as institutions plays a massive role in crediting, developing, and regulating such sectors where the commercial banks cannot extend their services to. 

[1] “National Bank for Agriculture and Rural Development.” NABARD, n.d., 

[2] Patel, Rajeshkumar. “Role of Financial Institutions in India –” Role of Financial Institutions in India, n.d., 

[3] “National Bank for Rural and Agricultural Development.” n.d., 

[4] “Citizen Charter – Home – Exim Bank.” The Citizens Charter of the Export-Import Bank of India , n.d.,

[5] “Citizen Charter – Home – Exim Bank.” The Citizens Charter of the Export-Import Bank of India , n.d.,

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.


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