NABARD (National Bank for Agriculture and Rural Development )

NABARD is a development bank focussing primarily on the rural sector of the country. NABARD has an active aim of developing and implementing financial inclusion in the country as well. Read here to learn more about the National Bank for Agriculture and Rural Development (NABARD).

The importance of institutional credit in boosting the rural economy has been clear to the Government of India right from its early stages of planning.

The Reserve Bank of India (RBI) at the instance of the Government of India, constituted a committee to review the Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) to look into these very critical aspects.

• The Committee was formed on 30 March 1979, under the Chairmanship of Shri B. Sivaraman, former Member of the Planning Commission, Government of India.
• The Committee’s interim report outlined the need for a new organizational device for providing undivided attention, and forceful direction, and pointed focus to credit-related issues linked with rural development.

Its recommendation was the formation of a unique development financial institution that would address these aspirations and the creation of the National Bank for Agriculture and Rural Development (NABARD) was approved by the Parliament through Act 61 of 1981.

National Bank for Agriculture and Rural Development (NABARD)

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).

Consequent to the revision in the composition of share capital between the Government of India and RBI, NABARD today is fully owned by the Government of India.

Its vision is to be the “Development Bank of the Nation for Fostering Rural Prosperity.”

The mission is to “Promote sustainable and equitable agriculture and rural development through participative financial and non-financial interventions, innovations, technology and institutional development for securing prosperity.”

Structure

NABARD’s activities are governed by a Board of Directors appointed by the Government of India in consonance with the NABARD Act. It is constituted of the following:

1. The Chairperson
2. Three 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 Bank.
3. Three directors out of the directors of the Reserve Bank
4. Three directors from among the officials of the Central Government
5. Four directors from among 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,

6. The Managing Director

The Chairperson and other directors (except elected ones by shareholders and officials of the Central Government) shall be appointed by the Central Government in consultation with the RBI.

Functions of NABARD

The initiatives are aimed at building an empowered and financially inclusive rural India through specific goal-oriented departments which can be categorized broadly into three heads: Financial, Developmental, and Supervision.

Through these initiatives, the organization touches almost every aspect of the rural economy.

• Providing refinance support
• Building rural infrastructure
• Preparing district-level credit plans and guiding and motivating the banking industry in achieving these targets
• Supervising Cooperative Banks and Regional Rural Banks (RRBs) and helping them develop sound banking practices and onboarding them to the CBS platform
• Providing recommendations to RBI on the issue of licenses to Cooperative Banks, and opening of new branches by State Cooperative Banks and Regional Rural Banks (RRBs).
• Designing new development schemes and the implementation of the Government’s development schemes
• Training handicraft artisans and providing them with a marketing platform for selling these articles.
• Pioneering watershed development as a tool for sustainable climate proofing

The markable initiatives by NABARD over the years are:

• SHG Bank Linkage Project (1992)
• Kisan Credit Card
• RuPayKisan Cards (RKCs)
• Tribal Development Programmme: NABARD has been closely associated with tribal development and sustainable livelihoods through orchard-based farming systems. As an integral component of NABARD’s Natural Resource Management (NRM) policy of providing sustainable livelihoods, NABARD laid special emphasis on providing support for the holistic development of tribal communities with orchard establishment as the core element.
• EShakti: In a bid to digitize SHGs, project EShakti was launched in 2015

NABARD is a channel partner of the Government in some of the schemes shown in this section. Subsidy as and when received from the concerned Ministry is passed onto the financing banks.

• New Agricultural Marketing Infrastructure (AMI)
• Agri Clinics and Agri-Business Centres Scheme (ACABC)
• National Livestock Mission – Entrepreneurship Development & Employment Generation (NLM-EDEG)
• Dairy Entrepreneurship Development Scheme (DEDS)
• Commercial production units of organic inputs – National Project on Organic Farming (NPOF)
• Interest Subvention Scheme

Developments in NABARD

National Bank for Agriculture and Rural Development (Amendment) Bill, 2017

• The Bill seeks to amend the National Bank for Agriculture and Rural Development Act, of 1981.
• Increase in the capital of NABARD: Under the 1981 Act, NABARD may have a capital of Rs 100 crore.  This capital can be further increased to Rs 5,000 crore by the central government in consultation with the Reserve Bank of India (RBI).
• Transfer of the RBI’s share to the central government: The Bill provides that the central government alone must hold at least 51% of the share capital of NABARD.
• Micro, small, and medium enterprises (MSME):  The Bill replaces the terms ‘small-scale industry’ and ‘industry in the tiny and decentralized sector’ with the terms ‘micro enterprise’, ‘small enterprise’ and ‘medium enterprise’ as defined in the MSME Development Act, 2006.
• Consistency with the Companies Act, 2013:  The Bill substitutes references to provisions of the Companies Act, 1956 under the NABARD Act, 1981, with references to the Companies Act, 2013.

Significance of NABARD

NABARD has been playing a crucial role in the development of various activities in the farm and non-farm sectors in the country.

NABARD is already engaged in providing capacity-building support in agriculture and rural development to the officials of Rural Financial Institutions (RFIs), NGOs, Microfinance institutions (MFIs), etc.

NABARD can undertake a training needs assessment to identify performance requirements and the knowledge, skills, and abilities needed by various development agencies. This can lead to:

• Improving production and productivity of agriculture
• Diversification of agriculture
• Improved Credit Planning and Coordination among various agencies
• Poverty Alleviation
• Financial Inclusion & Financial Literacy
• Information Technology in Agriculture & Rural Banking
• Climate Change Issues and Carbon Credit Market

NABARD has played a crucial role in the development of:

• farm sectors like minor irrigation, horticulture & plantation, forestry, land development, animal husbandry, fisheries, farm mechanization, post-harvest management, infrastructure for agricultural marketing, etc.
• non-farm sector activities like rural-based industries, agro-industries including fruits & vegetable processing, artisans, handicrafts, handlooms, etc.

NABARD has been a preferred partner for many international development agencies for conceptualizing and executing development projects in India such as:

• KfW- NABARD Adivasi development programme
• Indo-German watershed development programme
• Indo-German Umbrella Programme for Natural Resource Management
• NABARD- SDC Rural Innovations Programme

Way forward

NABARD can spread its expertise on an international level, especially for capacity building for Least Developed Countries (LDCs).

The countries categorized as Least Developed Countries (LDCs) have enormous natural resources and the potential to attain self-sufficiency in agriculture.

NABARD can offer:

• Training support to banks, Government Departments, Development Agencies, NGOs, and micro-finance institutions in the field of agriculture and rural development
• Technical assistance to banks, Governments, Development Agencies, NGOs, international agencies, and others for evolving technologies & appropriate development models in the fields relating to agriculture, rural development, rural banking, micro-finance, training, etc.
• Collaborative arrangements with other training institutes & research organizations in India & abroad and act as a forum for exposure & experience sharing in the field of agriculture and rural development.

-Article written by Swathi Satish