The future of India lies in its Villages
, said by Mahatma Gandhi
Introduction to the history of NABARD:
After the independence there was a large increase in number of banks and Indian
banking sector spur growth with many institutions that were coming up. The All
India rural Survey Committee that was set up in the year 1951 to 1954 questioned
the Agricultural finance committee headed by Gadgil saying that there was no
separate need of an establishment by public to manage the agricultural credit of
the country as there were already many cooperatives and banks lending for the
Then the V.L.Mehta Committee was formed in 1960 and also did not supported
the idea of a separate institution instead focused on widening the scope of RBI
in relation to this. Also post independence Government of Indian formed the
planning commission in the year 1950 and they started with the 5 year plan
concept in which different issues were laid and worked on in a course of 5
The first 5 year plan took place from 1951-1956 and its major aim was to
work on the agricultural sector as this was a main occupation and source of
income for many people. But it was in the third 5 year plan (1961-1966) that the
legislature recommended the formation of agriculture finance cooperation. Thus
the Agricultural Refinance Corporation was formed in 1963. Also the idea to
set-up a separate agriculture bank was again given by Mirdha Committee.
again during the fourth 5 year plan in 1969 Indira Gandhi nationalized 14 banks
this was done to stop corrupt practices done by the already existing banks
against the poorer section of society. Under a series of events 6 more banks
were also nationalized. Thus the idea was simple to provide the poor and the
needy loan or money on a low interest rate and by introducing schemes through
these banks so that people take loans from them too.
On March 30th 1979 the RBI
formed a Committee to Review arrangements for Institutional Credit for
Agriculture and Rural Development (CRAFICARD) which reviewed the
credit-structure and the loan giving methods at national, state and local level.
The committee came to an conclusion after reviewing various anomalies in the
already existing structure. There were discrepancies in giving of short term
loans and no proper awareness was inculcated among the farmers of the country so
that they can better use the banking system.
The committee also stated that as
the rural regions are not so developed and that hinders the working of the
credit system in the country. Also if one organisation like the RBI was that
looked after the agricultural credit by way of ARDC then it cannot completely
focus and help in the enhancement of the rural development which is related to
the agricultural sector of country.
Thus CRAFICARD suggested the concept of a
National agricultural credit bank again and also suggested a name NABARD
(National Bank for Agricultural and Rural Benefit) by submitting its report on
28th November 1979 seeking for undivided attention for the growth of
agricultural sector. Thus during 1978-1980 when the Rolling Plan was in action
due to the political instability in the country, finally NABARD was formed on
this committee's recommendations whose chairman was Shri B. Sivaraman.
On 12th July 1982 NABARD came into existence the agricultural credit was shifted
from RBI and ARDC. It started its functioning with an initial capital of Rs.100
crore as a vision of Indira Gandhi. According to the data available on the
official website its present paid up capital is about Rs.14,080 crore on
31st March 2020. It is a department which is government owned as it is a
statutory body formed after the Parliament Act of NABARD 1981.
Why was NABARD needed?
The bank was formed to inculcate into itself both developmental and financial
role in this sector:
- Need of a single body to completely focus on the agricultural credit and
manage its finances.
- To avoid divided attention by RBI reducing the effectiveness
- Rural Development which includes letting people know about the nuances
of banking and lending schemes.
- Manage Agricultural Credit for rural area upliftment specially the
farmers and new investors.
- To fulfill the credit needs both long-term and short-term needs.
Basically the functions of RBI run departments on this sector like ACD
(Agriculture Credit Department), RPCC (Rural Planning and Credit Cell) and ARDC
(Agriculture Refinance Corporation) was all transferred to NABARD.
Governance body of NABARD
It is governed by a Board of Directors who are chosen by the Government under
the NABARD Act, there is one chairperson, 3 directors from experts, 3 directors
not falling under the ambit of RBI, 3 directors from the central government
officials and 4 directors from the state government officials. The experts are
to taken from the concerned field like rural economics, rural development, small
and large industries etc. also there shall be a managing director. All the
appointments made by the government including the chairperson must be in
consonance with the RBI.
Objective of setting up NABARD
- To increase the development activities in rural area they provided
refinance to State land Development Banks, Scheduled commercial banks,
cooperative banks and other rural banks. Specially in the local and village
- Form a more powerful and efficient credit giving system.
- To achieve the motive policies are formed by it but also it aims to keep
it familiar with the central, state and local governmental bodies as well as
- Refinancing is a major objective just to serve the purpose of increasing
agricultural production with development.
- As everything related to this sector now falls with the NABARD it can aim
at reducing the variance or contrast in different regions or states.
- To form a Credit absorptive capacity i.e. bring people into the formal
credit system and introduce them to its scope.
- Also gives guidelines for the promotion of joint activities by providing
them with 100% refinance.
- Also refinances Integrated Rural Development programme.
- Also refinances the projects under National Watershed Development Programme' and the National Mission of Wasteland Development'.
- It also focuses on running of trial and error method on schemes on local
or district level so that its future and larger aspect could be analysed.
- Helps home-grown ventures in this field also self-help groups by
providing them or lending them with capitals. Also helps in guiding them.
- Various plans, schemes and policies are launched keeping the government
and RBI in check for the welfare of people.
- To keep the credit flowing system free and ongoing it also focus on
assisting and training the small rural cooperatives or banks for improving
their credit delivery system.
NABARD and RBI
After the separation of RBI and separating functions to NABARD, the
only involvement remaining was by way of the 3 directors appointed by the RBI.
Also the decisions taken by the government is based on recommendations of RBI
also. But it is an entirely governmental body now, after the amendment bill of
2017 passed in 2018, it was ensured that the government has 51% of shares in the
NABARD capital and before this according to the 1981 Act both government and RBI
owned together the 51% of shares. Now the RBI only supervises it like it does
with other banks whereas NABARD can suggest or recommend on the licensing of the
new cooperative banks and opening of more rural banks and SCB's as well for
Amendment Act 2017, passed in 2018 brought the following changes:
- Increased the authorized capital from 5000 crore to 30,000 crore by the
- RBI's share of 51% that it owned along with the central government was
completely transferred in the hands of central government.
- According to the previous Act NABARD had to provide credit to the MSME's
having investment of upto Rs. 20 lakh. By passing of this bill the scope of
giving credit extended to enterprises with investment of upto Rs. 10 crore in
manufacturing sector and Rs. 5 crore in services sector.
- Also the governance structure was added onto by including experts of
small scale industries. Giving financial assistance to small enterprises and
industries i.e. extending it to all MSME's.
Functions of NABARD
It is the bank to provide credit and support for the agricultural growth and the
rural development. According to the food and agriculture organization of the
United Nations (FAO) almost 59% of the India's population workforce has farming
or agriculture as there occupation and it only accounts for 23% GDP,
therefore for such a large sector not just a single department can be made under
the reserve bank to finance it and thus the NABARD was needed to function as the
only single entity that helps finance the agro-economy of the country and make
policies for it.
This could not have been achieved if there was no network to
reach the rural area therefore the inclusion of rural area upliftment was also
required. Today NABARD finances 7,086 crore to SCB's, 2,594 crore to SCARDB's,
1,228 to subsidiaries, 40,000 crore to schedule commercial banks, 11,537 crore
to regional rural banks and 2,794 to NBFC's. Under the section 35(6) of the
Banking Regulations Act NABARD can ensure supervision over all of the banks by
the Board of supervision it can be both onsite and offsite inspection.
NABARD gives loans on basis of promissory note or bill of exchange to the RRB's
and SCB's which they shall pay back within a period of 18 months of giving the
promissory note it should not exceed that. Such loans and advances shall be paid
in lieu of securities. Even for the rescheduling of loans which are given to
such banks on recommendations of reserve banks are to be repayed in a span of
minimum 18 months to maximum 7 years.
This bank can also purchase and sell share
of the investment in securities of any establishment related to agriculture and
rural development if notified by central government. They can also give loans to
state government for which the repayment deadline is upto 20 years. One can
easily find out the anomalies and causes of banking sector corruption and scams
if such law prevails. Also all such loans given to state government and direct
loans shall be strictly given securities which the central government may keep
check on, where there are no securities or guarantees the board shall take the
reasons in writing and decide in accordance with the schemes.
The bank can issue
guarantee on deferred payment of capital goods taken by cooperative banks by
discussing with the central government. It provides financial assistance to such SCB's to pay dues on extended credit for agricultural purposes and also advising
for the taking up of loans and advances and how to reimburse them. It also has
the power to waive the guarantees on assurance of payment of other securities or
if satisfied that no other guarantee or security is needed.
assistance given by the banks by way of loans and advances to such SCB's and
RRB's shall not exceed a period of 25 years also includes reshechduling of loans
into long-term loans. All the securities which are held by this bank shall be
held in trust with it. The bank can also call for an early re-payment of loan if
it finds out that the borrower bank has mislead it, is unable it pay back the
amount, has gone against the policies of the NABARD or did not comply with any
terms as per the contract.
The validity of any lending or credit which is made
by the NABARD cannot be challenged just on the basis that it is not in
compliance of any other law if such arrangements are not made. The bank has full
freedom to form such conditions whichever are necessary protect its interests
specially because it deals with large amount of financial transactions with
various bodies and thus to accommodate all these it also needs a good set of
Cannot grant loans on its own bonds and debentures as securities
it would simply lead to creating a loss for oneself. Whoever wants to lend from NABARD whether an institution or an individual has to comply with its needs i.e.
the bank can check their background and ask for the relevant documents that are
needed. Thus all the requirements to take such loans are needed to be fulfilled.
It may also act as an agent for the central government or the reserve bank in
case of any business is to be carried out.
It shall also keep an information
database of all its credit and activities which shall be reviewed by the central
government and the RBI. There are short term refinance schemes, long term
refinance schemes and other automatic refinance schemes which help in delivering
of these credits.
In India there are many Farmer Producer Organisations (FPO), they are formed by
the association of the primary producers such as the farmers, artisans,
fisheries, milk producers, craftsman etc. it can be an organisation or a legal
entity or even a cooperative society. Its need mainly arose to bring in better
pay or income for these producers. As they often suffer prejudice in the hand of
intermediary suppliers and end of getting a very small amount for their produce
for which the consumers pay.
An individual might not have the knowledge of the
same or even have impact to ask for their rights but in groups they have better
bargaining skills. Thus they share the benefits among their members. Therefore NABARD grants them credit to expand their market infrastructure, also brought in
the concept of Rural Haat
or Rural Mart
to help them grow. Also by setting
up deals with suppliers or direct producers and then implementing the schemes
they help these organisations.
They provide incentive of 20% grant support to
them. Also for the local and gram level and to avail easy credit to them we have
the Primary Agricultural Credit Society (PACS), its basic role to provide
farmers with loans to start their basic agricultural activity and the returning
of the amount is done once the activity like harvesting of crop for example id
done with. It focuses on remote villages and such panchayat systems.
to fund such PO's and PACS, the NABARD has instituted Producer Organizations
Development Fund (PODF) from which they are financed either taken through CCB or
RRB or directly take loans from CCB or RRB its initial capital set up by the
bank was of Rs. 50 crore and over the time it has facilitated many services.
Developmental Schemes by NABARD
Kisan Credit Card Scheme for Farmers:
was launched by NABARD in 1998 along with
RBI, to avail credit even insurance to farmers, fisheries and
animal husbandry works. They can get short-term loans of upto Rs.3 lakh by this
means. There are some of the top banks that also provide this like the Axis
Bank, ICICI, HDFC, SBI etc. the interest rate can vary though it can be as
minimum as 2% or at an average of 4%.In case of disability or death it also
furnishes insurance upto Rs.50,000. The repayment can be done after the
RuPay Kisan Cards:
after the establishment of KCC the NABARD brought this Kisan
Debit card so that such farmers can directly withdraw money from ATM's and
accounts. According to a report submitted by Odisha Cooperative Bank there were
31.98 lakh KCC holders in 2016 who were to be covered under this scheme as well
and provided with their cards.
Farm Sector Development Department: it has set up watershed development fund,
tribal development fund and the farm sector promotional fund along with the PODF
too. Therefore it facilitates these funds.
Under the Kyoto protocol Adaptation Fund (AF) was setup by the United Nations
Framework Convention on Climate Change (UNFCCC) in 2012. In India NABARD has
been appointed as the National Implementing Entity(NIE) for the same and the
only one in India. Its duty is to include climate adaptation in the agricultural
scheme and techniques and also implementing such projects for the same like,
Conservation and Management of Coastal Resources as a Potential Adaptation
Strategy for sea level rise in Andhra Pradesh, building adaptive capacities in
communities, livelihoods and ecological security in the Kanha-Pench Corridor in
Madhya Pradesh etc.
Umbrella Programme on Natural Resource Management (UPNRM) was established in
2007 to focus on utilizing in an efficient manner the natural resources of that
particular area or state.
There was also in 1992 the Self Help Group- Bank Linkage Programme was launched
in order to link unorganized sector to the formal banking sector. As according
to a report of NABARD in 2018 there were over 23 lakh such linked groups. Main
purpose was to provide social help, investments and debt reduction.
Then Eshakti was also launched in order to digitise and provide micro-credit to
the SHGs by giving them access to wide range of financial services. And
bettering the connection between these groups and banking services. Also
providing them with Aadhar linked identity for the same.
In other developmental programmes NABARD has focused on skill development
programme by promoting and providing assistance and also taking up marketing
expansion initiatives. By setting up Incubation centers in order to aware people
about the schemes, policies and the banks role.
An Analysis of the NABARD Fund Allotment to the Reality of Fund Allotment:This table shows where the NABARD provides its direct finances to and what all
projects and schemes have received this financial credit:
|Loans for Food Parks and Food Processing
Units in Designated Food Parks
||This was setup in 2014 with a special fund of
|Loans to Warehouses, Cold Storage and Cold
||Was setup in 2012-13 with a fund of Rs.5000
crore under RIDF.
|Credit Facilities to Marketing Federations
||This was introduced to meet short term
|Rural Infrastructure Development Fund (RIDF)
||Rs.3,20,500 crore is allocated also includes
BHARAT NIRMAN fund.
|Long Term Irrigation Fund
||All the projects like Polavaram project in
Andhra Pradesh is the recent one sanctioned in 2019, North Koel project
in Bihar and Jharkhand, Relining of Sirhind & Rajasthan Feeders in
Punjab and Shahpur kandi Dam in Punjab fall under this programme for
which huge funds are given.
|Pradhan Mantri Aawas Yojana - Grameen
||Rs. 21,975 crores have been sanctioned to
NRIDA for the same by NABARD.
|Swachh Bharat Mission-Gramin
||Rs. 12,298.20 crore is given to NCDWS&Q.
(the above data has been taken from the official website of NABARD - https://www.nabard.org/default.aspx )
Now let's refer to this table to check how efficient these investments have
|Number of farmers that committed suicide as
per the government report in 2016
||11,379 number of farmers committed suicide
because they could not repay loan.
|Sardha chit fund scam
||Used NABARD to cover their sham schemes
|Sharad Pawar MSC irregularity
||Rs.25,000 crore was resurrected without
NABARD credit authorization.
|The cooperative banks in Gujarat the ADCB (Ahmadabad)
and the RDCB (Rajkot) collected the highest deposits
of demonetized notes whose director was Amit Shah.
||NABARD did a 100% verification and defended
|Pravin Darekar Scam in 2018
||Many fraudulent transactions took place
through Mumbai Rural Cooperative banks.
|RBI expressed displeasure on the working of
RIDF (stated in economic times)
||Projects were launched to finish quickly but
now the practice is like funds are allotted and the projects remain
tagged as on-going.
|For the Irrigation project the fund given by
||In the year 2009-10, Rs. 4,127 crores were
sanctioned by RIDF, only 81% was used.
|In the year 2011-12 NABARD sanctioned
Rs.1,494 crore to the state government for the construction of
warehouses under the RIDF.
||Less than 23% of the amount was used. (state
by financial express)
|Setback to PM Aawas Yojana
||Despite allocation of such large amount of
funds, this schemes as of 2020 faces financial setback and almost nine
states have altogether refused to furnish their share of funds.
|Under the Swachh Bharat Yojana – Bihar Toilet
Scam in 2016.
||Rs. 15 crore that was misappropriated from
the allocated fund by over 200 cheques that were allocated to various
officers, NGO workers and Bankers.
|Between the year 2017-2019 almost 4.5 lakh
Swachh Toilets disappeared in MP.
||It was a Rs.540 crore scam carried out in all
of MP in various districts, government records showed something and the
reality was total opposite of it.
(the above data has been taken from various sources and the statistics may vary)
By now I hope my point has been prove. The NABARD was formed to increase the
development rate of country for which it did exercise all its functions even
regulated and exercised supervisions. There is law prevalent for such fraud and
misappropriations but when the authority who are entrusted with these works only
don't function in accordance then such scams, corruptions and decrease in the
expansion of country's growth will continue to persist.
After knowing about NABARD, its functions and on the basis of our analysis we
can say that it was an institution that was rightly needed by our government.
Specially to regulate the agricultural sector of the country individually and
not with the distributed attention of the RBI. Therefore, this bank has proven
its need and by launching new projects, schemes, loan lending modes it has tried
to resolve the problem of finance and development as much as possible.
In an Agri-based nation it is more important to focus on such jobs and therefore
NABARD ensures that. But this can work better if the administrative officials
cooperate as well and the fund-allotment is not misused. Also, many policies and
schemes are drafted and brought just for the social cause, i.e. upliftment of
the farmers etc. but until and unless they are not made aware about these and
the government does not educate them it becomes useless.
It has always been in
news that farmers commit suicide as they could not pay their loans because of
bad crop season, measures to ensure such security should be taken. Even though
there are many schemes for instance the KCC which could benefit a lot to such
farmers but the problem is they don't have knowledge about it. So, ensuring
efficient disposal of funds and spreading awareness are important aspects to be
(the views are personal)
Award Winning Article Is Written By Varnika Singh
- The data was collected from the official website of FAO, refer to the
link for the same
- The data was collected from the official website of NABARD, refer to the
link for the same- https://www.nabard.org/content.aspx?id=466
- To read more about the projects implemented under NIE by NABARD refer to
the link - https://www.nabard.org/content1.aspx?id=583&catid=8&mid=489
- 4th year law student UWSL Karnavati University.
Authentication No: SP31096151192-11-920