There was no institutional credit arrangement for Agriculture and Rural credit in India till the 1970s. Reserve Bank of India and Agricultural Refinance and Development Corporation (‘ARDC’) looked after this need. Therefore, the Reserve Bank of India (RBI) formed a Committee on 30 March 1979 to Review the Arrangements For Institutional Credit for Agriculture and Rural Development (CRAFICARD) to look into these aspects. The Committee was formed.
The interim report of the Committee outlined the need for a new institutional arrangement for providing attention, direction, and focus to credit-related issues linked with rural development. It recommended the formation of a development financial institution that would address these aspirations and this led to the formation of the National Bank for Agriculture and Rural Development (NABARD) as approved by the Parliament through Act 61 of 1981.
NABARD came into existence in July 1982 by transferring the agricultural credit functions of RBI and refinance functions of the then ARDC. It was dedicated to the service of the nation by the then Prime Minister in November 1982.
Set up with an initial capital of Rs.100 crore. 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. NABARD is involved directly and indirectly in the financing of agriculture, rural development apart from extension activities, and supervisory roles. A brief on the same is as follows:
- Direct Finance in the form of Loans for Food Parks and Food Processing Units in Designated FoodParks.
- Loans to Warehouses, Cold Storage, and Cold Chain Infrastructure.
- Credit Facilities to Marketing Federations, Rural Infrastructure Development Fund.
- Direct Refinance Assistance to Co-operative Banks.
- Financing and supporting Producer Organisations.
- More Direct Finance in the form of Infrastructure Development Assistance.
- Financing and developing Primary Agricultural Co-operative Societies and Umbrella Programme for Natural Resource Management.
- Short term and long-term refinancing of agriculture loans to various banks and other agencies apart from refinancing under the off-farm sector.
NABARD in its developmental role is involved in an efficient credit delivery system to service the needs of agriculture and rural development. More than 50% of rural credit is disbursed by the Co-operative Banks and Regional Rural Banks (RRBs); NABARD is responsible for regulating and supervising Co-operative banks and RRBs. In this direction, NABARD has taken various initiatives in association with the Government of India and RBI to improve the health of Co-operative banks and Regional Rural Banks. Apart from this, NABARD is also involved in financial inclusion, Microcredit and Microcredit innovation, Core Banking Solution to Co-operative Banks, Climate change, to name a few.
In its supervisory role as empowered by Section 35(6) of the Banking Regulation Act, 1949, NABARD inspects State Cooperative Banks, Central Cooperative Banks, and RRBs. On its own, voluntarily, NABARD conducts periodic inspections of state-level cooperative institutions such as State Cooperative Agriculture and Rural Development Banks (SCARDB), Apex Weavers Societies, Marketing Federations, etc.
