Table of Contents
Origin History of National Bank for Agriculture and Rural Development (NABARD):
After independence, in order to improve rural credit, the government and Reserve Bank of India decided to set up a committee which would take up a study of agricultural credit in India. This committee was called All India Rural Credit Survey Committee. It was headed by Mr.Gorewalla. The committee’s recommendations were accepted by RBI and were implemented. Accordingly, RBI has started two major funds for providing loans to State Governments and also to cooperate banks. The role of RBI in agricultural credit was appreciated.
With the increasing role of RBI, it was found too difficult to concentrate on agricultural finance. Even the institution such as Agricultural Refinance Corporation could not provide the required amount of refinance. A decision was taken to delink agricultural finance from RBI and to set up a separate institution to provide agricultural finance. In 1981, a Committee to Review Arrangement For Institutional Credit for Agriculture and Rural Development (CRAFICARD) was set up under the chairmanship of Mr.Sivaraman. The recommendation of the CRAFICARD committee was accepted and NABARD came into existence on July 12, 1982.
Capital source for NABARD
The existing organizations such as Agricultural Credit Department, Rural Planning Credit Cell of RBI, and Agricultural Refinance and Development Corporation were taken over by NABARD. The authorized capital of NABARD was Rs. 500 crores. The subscribed and paid up capital as of March 2015 is Rs. 5000 crores out of which Central Government has contributed 4980 Crores and RBI 20 Crores (source). In addition to this a loan of Rs. 1,200 crores was granted by RBI. All the loans granted by RBI to various State Governments and State Cooperative banks for agriculture were transferred to NABARD. The NABARD has been recognized as the apex institution for agricultural finance. As the name suggests, the bank has been set up not only for agricultural finance, but also for the development of rural areas.
Objectives of NABARD
The main objects of NABARD are as follows:
1. NABARD provides refinance assistance for agriculture, promoting rural development activities. It also provides all necessary finance and assistance to small scale industries.
3. NABARD in coordination with the State Governments, provides agriculture.
4. It improves small and minor irrigation by way of promoting agricultural activities.
5. It undertakes R&D in agriculture, rural industries.
6. NABARD promotes various organizations involved in agricultural production by contributing to their capital.
Thus, the objects of NABARD can be brought under three major heads:
- Credit function.
- Development function.
- Promotional function.
Main functions of NABARD:
1. NABARD provides refinancing facilities to Commercial banks, State co-operative banks, Central Co-operative banks, Regional rural banks and Land Development banks.
2. It provides refinancing to agriculture, small scale industries and other village and cottage industries by lending to commercial banks.
3. It promotes rural industries, small scale and cottage industries including tiny sectors by providing loans to commercial and co-operative banks.
4. Special assistance is given by the bank for the promotion of small scale, cottage and village industries under service area approach.
5. The bills of commercial and co-operative banks are discounted to enable them to finance for agricultural operations.
6. The bank provides funds to State governments for undertaking developmental and promotional activities in rural areas. In order to promote rural development and to help the weaker sections, the bank refinances especially regional rural banks which are set up in backward areas in most of the States.
7. Towards long-term loan, the bank is providing loans to institutions involved in long-term agricultural loan against guarantee of State government.
8. The bank is also financing research and development of agricultural and rural industries.
9. The bank implements the policy of the Central Government and the RBI with regard to agricultural credit.
10. Provides finance for promoting non-form activities and employment in non-farm sectors for the purpose of reducing rural unemployment.
11. It strengthens the co-operative structure in the States by providing loans to both State co-operative banks and also to Land Development Banks.
12.It promotes minor irrigation projects by financing State Government’s sponsored irrigation projects.
13. The bank is undertaking inspection work of Co-operative banks and Regional rural banks.
14. The bank has opened branches at all District headquarters by which it co-ordinates the District development programmes along with the district officials.
15. The bank also helps in the annual credit plan of the commercial banks and co-ordinates the activities of commercial and co-operative banks at the district level.
16. During natural calamities, such as droughts, crop failure and floods, the bank helps by refinancing commercial and cooperative banks so that the farmers tide over their difficult period.
Thus, the bank is providing short-term, medium term and long-term loans for agriculture and rural development
Ever since the setting up of NABARD, there has been a considerable increase in the distribution of agricultural credit both by commercial and co-operative banks. NABARD has also strengthened up the working of Regional rural banks.
Thus, we find that the role of RBI in agricultural finance has been not only taken over by NABARD but it has been discharging it to the atmost satisfaction of all the parties concerned.
Achievements of NABARD
After the setting up of NABARD, there has been considerable increase in the rural finance and development of small scale and cottage industries. By way of short-term credit, nearly Rs. 4,000 crores has been distributed during 90’s compared to Rs. 1,200 crores during 80’s.
By way of medium term finance, nearly Rs. 400 crores have been provided and they have been utilized mainly by States affected by natural calamities. In long-term loan, more than Rs. 240 crores have been sanctioned for contributing to the share capital of co-operative institutions.
NABARD has also played a significant role in improving storage facilities for agricultural commodities in the country. It has also promoted the export of agricultural commodities which include vegetables and fruits. It has played a supplementary role in sustaining Green Revolution in the country.
White Revolution and Blue Revolution in the form of increased milk production and fisheries have also been contributed by the sustained efforts of NABARD. India stands the top most country in the world in production of dairy milk.