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). It was dedicated to the service of the nation by the late Prime Minister Smt. Indira Gandhi on 05 November 1982.

The main objectives of NABARD are as follows:

• NABARD provides refinance assistance for agriculture, promoting rural development activities. It also provides all necessary finance and assistance to small scale industries.
• NABARD in coordination with the State Governments provides agriculture.
• It improves small and minor irrigation by way of promoting agricultural activities.
• It undertakes R&D in agriculture, rural industries.
• NABARD promotes various organizations involved in agricultural production by contributing to their capital.

In discharging its role as a facilitator for rural prosperity, NABARD is entrusted with:

1. Providing refinance to lending institutions in rural areas
2. Bringing about or promoting institutional development and
3. Evaluating, monitoring and inspecting the client banks

Besides this pivotal role, NABARD also:

• Acts as a coordinator in the operations of rural credit institutions
• Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development
• Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development
• Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development
• Acts as regulator for cooperative banks and RRBs
Recently the National Bank for Agriculture and Rural Development (Amendment) Bill, 2017 was passed.
• 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).
• The Bill allows the central government to increase this capital to Rs 30,000 crore. The capital may be increased to more than Rs 30,000 crore by the central government in consultation with the RBI, if necessary.
• Under the 1981 Act, the central government and the RBI together must hold at least 51% of the share capital of NABARD. The Bill provides that the central government alone must hold at least 51% of the share capital of NABARD. The Bill transfers the share capital held by the RBI and valued at Rs 20 crore to the central government. The central government will give an equal amount to the RBI.

Practice question:

1) According to the National Bank for Agriculture and Rural Development (Amendment) Act the central government share capital in NABARD is:

a) 51%

b) 75%

c) 25%

d) 49%

Ans: a
Exp: Under the 1981 Act, the central government and the RBI together must hold at least 51% of the share capital of NABARD. The Bill provides that the central government alone must hold at least 51% of the share capital of NABARD. The Bill transfers the share capital held by the RBI and valued at Rs 20 crore to the central government. The central government will give an equal amount to the RBI.