National Bank for Agriculture and Rural Development (NABARD)

NABARD is a development bank focussing primarily on the rural sector of the country. It is the apex banking institution to provide finance for Agriculture and rural development. Its headquarter is located in Mumbai, the country’s financial capital. It is responsible for the development of the small industries, cottage industries, and any other such village or rural projects. It is a statutory body established in 1982 under the Parliamentary act National Bank for Agriculture and Rural Development Act, 1981.

● specific goal oriented departments which can be categorized broadly into three heads: Financial, Developmental and Supervision.
○ It provides refinance support
○ It prepares district level credit plans to guiding banking industries
● supervises Cooperative Banks and Regional Rural Banks (RRBs) and integrate them to the CBS (Core Banking Solution) platform.
○ Core Banking Solution (CBS) is networking of branches, which enables Customers to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account.
■ The customer is no more the customer of a Branch. He becomes the Bank’s Customer.
● It provides training to handicraft artisans and helps them in developing a marketing platform for selling these articles.
● NABARD has various international partnerships including leading global organizations and World Bank-affiliated institutions
History – How NABARD came into Being:-
● 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 organizational device for providing undivided attention, forceful direction and pointed focus to credit related issues linked with 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
● RBI was an apex body before the 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.

How NABARD Transformed?:-
● The NABARD (Amendment) Bill, 2017 passed in 2018:
○ Increase in capital of NABARD:
○ Transfer of the RBI’s share to the central government:
○ Micro, small and medium enterprises (MSME): providing credit and other facilities to industries having an investment of upto Rs 20 lakh in machinery and plant.

Structure of Governance of NABARD:-
● Board of directors:
○ NABARD’s affairs are governed by a Board of Directors.
○ The Chairperson,
○ 3 directors from amongst experts in
■ rural economics,
■ rural development,
■ village and cottage industries,
■ small-scale industries,
■ or persons having experience in the working of co-operative banks, regional rural banks or commercial banks,
■ or any other matter the special knowledge or professional experience which is considered by the Central Government as useful to the National
○ 3 directors from out of the directors of the Reserve Bank,
○ 3 directors from amongst the officials of the Central Government,
○ 4 directors from amongst the officials of the State Government.
■ such number of directors elected in the prescribed manner, by shareholders other than the Reserve Bank, the Central Government and
other institutions owned or controlled by the Central Government,
○ The Managing Director,
○ The Chairperson and other directors (except elected ones by share-holders and officials of the Central Government) shall be appointed by the Central Government in consultation with the RBI.
Executive Committees:
○ The Board of Directors may constitute an Executive Committee consisting of such a number of directors (called Executive Director) as may be prescribed.
○ The Executive Committee shall discharge such functions as may be prescribed or may be delegated to it by the Board.

How NABARD Contributes to the Development of Rural Economy:-
● Financial Contribution
○ Refinance – Short Term Loans:
■ crop loans
○ Long Term Loans:
■ provides credit to financial institutions
■ encompassing farm and non-farm activities with tenors of 18 months to more than 5 years.
○ Rural Infrastructure Development Fund (RIDF):
■ the shortfall in lending to priority sector by scheduled commercial banks
○ Long-Term Irrigation Fund (LTIF):
■ The LTIF in NABARD was setup with an initial corpus of Rs 20,000 crore for funding 99 irrigation projects
○ Pradhan Mantri Awaas Yojana – Grameen (PMAY-G).
○ NABARD Infrastructure Development Assistance (NIDA): NIDA has been designed to complement RIDF.
○ Warehouse Infrastructure Fund (WIF):
■ to meet the requirements for scientific warehousing infrastructure for agricultural commodities in the country
○ Direct Lending to Cooperative Banks
○ Credit Facility to Marketing Federations (CFF):
○ Producer Organizations Development Fund (PODF) for POs & PACS:
■ Rs 50 crore to support and finance Producer Organizations (POs) and Primary Agriculture Credit Societies (PACS) to operate as Multi Service
● Producer Organisation (PO): it is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural
artisans, craftsmen
● Primary Agricultural Credit Society (PACS) is a basic unit and smallest co-operative credit institution in India.
Developmental Contribution
○ Kisan Credit Card Scheme for Farmers:
○ RuPayKisan Cards (RKCs):
○ the Tribal Development Programme
○ Climate Resilient Agriculture
○ Umbrella Programme on Natural Resource Management (UPNRM):
works at enhancing investments in rural areas, utilizing their natural resources.
○ Microfinance Sector: NABARD had launched the Self Help Group-Bank Linkage Programme (SHG-BLP) in 1992
○ EShakti:
○ Skill Development: Promoting an entrepreneurial culture: rural off-farm sector
○ Marketing Initiatives:
Incubation Centers
○ To commercialize innovations and to shape agricultural entrepreneurship in the country, NABARD extended support to Chaudhary Charan Singh Haryana Agricultural University, Hisar and Tamil Nadu Agricultural University, Madurai for establishing Agri Incubation Centres with a total financial commitment of Rs 23.99 crore.
Challenges faced by NABARD:-
● As an offspring of the RBI, NABARD shares the work culture, ethos and development orientation of its parent institution
● Cost of financing has gone up since market borrowings of NABARD add up to 80 percent of its resources.
○ Member-driven and de-bureaucratised cooperative structures
● The north-eastern states has been getting little share of the NABARD’s credit funds
● The penetration of banks in insurgency-hit state is less and it should be stepped up.
A large population of India is dependent on agriculture. Rural infrastructure investments help in raising the socio-economic status of the rural people through increased income levels and quality of life.
NABARD being an apex institution for providing credit facilities and capacity building to the Indian rural economy, it has a great opportunity for poverty reduction and socio-economic empowerment of rural India.

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