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NABARD, History, Functions, Development & Challenges


The National Bank for Agriculture and Rural Development was founded to provide financing to the agricultural and rural development sectors. With the goal of coordinating the activities of all rural credit institutions and serving as the national apex institution for the entire rural credit system, NABARD was created. NABARD started up with a share capital of Rs. 100 crore, and then received an additional Rs. 1400 crores from the RBI’s Agricultural Credit Funds.

NABARD History

The Indian government knew from the start of its planning process how crucial institutional credit was to strengthening the rural economy. As a result, the Reserve Bank of India (RBI) established the Committee to Review the Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) at the Government of India’s request to look into these crucial concerns.

The Committee was founded on March 30, 1979, with B. Sivaraman serving as its chairman. Sivaraman was a previous member of the Planning Commission of the Government of India. The Committee’s interim report, submitted on November 28, 1979, emphasised the need for a new organisational structure to give credit-related concerns associated to rural development undivided attention, powerful direction, and keen focus.

Its solution was to create a unique development financial institution to satisfy these ambitions, and Parliament subsequently approved the creation of the National Bank for Agriculture and Rural Development (NABARD) by Act 61 of 1981. On July 12, 1982, NABARD was created by transferring the RBI’s agricultural credit and Agricultural Refinance and Development Corporation’s (ARDC) refinancing duties.

The late Prime Minister Smt. Indira Gandhi dedicated it to the service of the country on November 5, 1982. As of March 31, 2020, it had a paid-up capital of Rs. 14,080 crore after being created with an initial capital of Rs. 100 crore. Due to a change in the composition of the share capital between the Government of India and the Reserve Bank of India, the Government of India now owns all of NABARD.

NABARD Functions

Financial Functions

Through refinancing for various agricultural and related operations like land development, plantation and horticulture, minor irrigation, farm mechanisation, and animal husbandry, NABARD offers financial support to the agricultural industry. Refinancing is available to commercial banks, state cooperative banks, regional rural banks, and state land development banks. Additionally, NABARD has the authority to make loans and advances using stocks and promissory notes as security.

In addition to refinancing, NABARD also provides State Cooperative Banks and Regional Rural Banks with short-term loans to finance seasonal agricultural operations, crop marketing, and the acquisition of agricultural inputs.

Developmental Functions

NABARD engages in a range of developmental initiatives, such as creating institutions, creating credit programmes, and promoting science and technology. Additionally, it creates expertise to handle agricultural and rural concerns and coordinates rural credit agencies. To support and advance agricultural and rural development research, including the provision of research and training facilities, NABARD has established the Research and Development Fund (RDF). The NABARD Central Board may also create a “Reserve Fund” or any other funds it considers necessary.

Supervisory Functions

The Regional Rural Banks and Co-operative Banks were subject to inspections by NABARD under the Banking Regulation Act of 1949. The RBI must receive NABARD’s recommendation before granting permission to open a new branch.

NABARD Governance

The management of NABARD is handled by a board of directors. The Board of Directors is selected in accordance with the NABARD Act by the Indian government. The Central Government will choose the Chairperson and all other directors (except from those chosen by shareholders and Central Government representatives) after consulting with the RBI.

An Executive Committee made up of the required number of directors (referred to as Executive Directors) may be chosen by the Board of Directors. The Executive Committee is responsible for carrying out any tasks that the Board assigns or prescribes for it. The Union Government was able to enhance NABARD’s authorised capital from Rs. 5,000 crore to Rs. 30,000 crore by passing the NABARD (Amendment Bill) 2017 in 2018.

NABARD Contribution/Achievements

  • Refinance – Short Term Loans: Financial institutions offer crop loans to farmers to help them produce crops, which helps to ensure the nation’s food security.
  • Long-Term Loans: With tenors ranging from 18 months to more than 5 years, NABARD’s long-term refinance offers banking institutions loans for a broad range of activities, including both farm and non-farm businesses.
  • The Rural Infrastructure Development Fund (RIDF) was established by the RBI in collaboration with NABARD in 1995–1996 to make up for the lack of lending to priority sectors by scheduled commercial banks for the purpose of assisting rural infrastructure projects.
  • Long-Term Irrigation Fund (LTIF): After being announced in the Union Budget, the LTIF at NABARD was established with an initial corpus of Rs 20,000 crore for supporting 99 irrigation projects during 2016–17.
  • PMAY-G, the Pradhan Mantri Awaas Yojana for Grameen.
  • NABARD Infrastructure Development Assistance (NIDA): NIDA is a programme that was created to work in conjunction with RIDF.
  • The Warehouse Infrastructure Fund (WIF) was established by the Union government in 2013–14 in partnership with NABARD, and it has a corpus of Rs. 5,000 crore. Its purpose is to provide loans to meet the country’s needs for scientific warehouse infrastructure for agricultural commodities.
  • Direct lending to cooperative banks; Food Processing Fund;
  • CFF, or Credit Facility for Marketing Federations:

PODF for POs & PACS: Producer Organisations Development Fund To assist and provide funding for Producer Organisations (POs) and Primary Agriculture Credit Societies (PACS) to function as Multi Service Centres, NABARD established the Producer Organisations Development Fund (PODF) with an initial corpus of Rs 50 crore.

Farmers, milk producers, fishers, weavers, rural artisans, and craftspeople make up the Producer Organisation (PO), a legal organisation. A PO can be a producer business, a cooperative organisation, or any other type of legal entity that allows members to share in earnings and benefits.

The smallest co-operative credit organisation in India is called the Primary Agricultural Credit Society (PACS). It functions at the local level (village and gramme panchayat). It offers term loans to farmers as a type of credit, recovering the money from the cultivator once the crop is harvested.

  • Kisan Credit Card Scheme for Farmers: In August 1998, NABARD and the RBI created the Kisan Credit Card (KCC) scheme to offer crop loans.
  • RuPayKisan Cards (RKCs): By assisting rural banking institutions in offering RuPayKisan Cards (RKCs) to all of their farmer clients, NABARD has been at the forefront of the technological revolution.
  • The Tribal Development Programme promotes tribal development.
  • Climate-resilient farming
  • The UPNRM, which was established in 2007 and strives to increase investments in rural regions, provide commercial possibilities, and empower rural communities to sustainably utilise their natural resources
  • The Self Help Group-Bank Linkage Programme (SHG-BLP) was introduced by NABARD in the microfinance sector in 1992. During the 2017–18 fiscal year, credit was linked to more than 23 lakh SHGs.
  • Project EShakti, which aims to digitise SHGs, was introduced on March 15, 2015.
  • Skill Development: For more than 30 years, NABARD’s strategy has focused on encouraging rural youth to adopt an entrepreneurial mindset and launch businesses in the rural off-farm sector.
  • Marketing Initiatives: Historically, NABARD has encouraged the participation of rural artisans and producers in exhibitions across the nation to provide them with marketing possibilities.

NABARD Challenges

As a child of the RBI, NABARD shares the ethos, work culture, and development focus of its parent organisation. Both the RBI and NABARD have suffered significantly as a result of the severing of this link (the transfer of the RBI’s 0.4 percent share in NABARD to the Union Government under the NABARD Act 2017).

As a result, the RBI is now less able to contribute to or take part in its operations. At a crucial point in the nation’s agrarian crisis, a solid partnership between the central bank and the development institution will boost agriculture and rural development. Since 80% of NABARD’s resources come from market borrowings, financing has become more expensive. The institutional credit holes left by commercial banks must be filled by decentralized, member-driven cooperative institutions.

The NABARD credit money was distributed to the northeastern states in a limited amount. Farmers in the northeast are caught in a web of moneylenders since they only obtain 1% of credit. States afflicted by insurgency have low bank penetration, which needs to be expanded.


More than 75% of Indians work in agriculture. Investments in rural infrastructure raise income levels and improve quality of life for rural residents, hence enhancing their socioeconomic standing. NABARD offers a tremendous chance for poverty reduction and socioeconomic empowerment of rural India as it is the leading institution for credit and capacity building to the Indian rural economy.

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What is NABARD and its function?

NABARD, as a Development Bank, is mandated for providing andregulating credit and other facilities for the promotion and development ofagriculture, small scale industries, cottage and village industries.

What is NABARD in full?

NABARD - National Bank For Agriculture And Rural Development.

Is NABARD under rbi or govt?

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

What are the main objectives of NABARD?

NABARD is supporting capital formation in agriculture and allied activities, thereby promoting growth of Agriculture, AH, Fishery, Forestry etc. sectors.

Who regulates NABARD?

The regulatory powers continue to be vested with the Reserve Bank of India. The Department of Supervision functions under the overall supervision and guidance of Chairman and CGM (Shri K S Raghupathi, CGM).


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