Objectives and Functions of NABARD

NABARD is an apex Development Bank authorised for providing and regulating credit and other facilities for the promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promote integrated rural development and prosperity and for matters connected therewith.

Table of Contents

History

Reserve Bank of India (RBI), constituted a committee (Shivaraman committee) to review the arrangements for institutional credit for agriculture and rural development (CRAFICARD) on 30 March 1979, under the Chairmanship of Shri B.Sivaraman, former member of Planning Commission, Government of India to review the arrangements for institutional credit for agriculture and rural development. NABARD was established with an initial capital of 100 cr., on 12 July 1982 by a special act of parliament 1981, by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC). NABARD replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC)

NABARD’s activities are governed by a Board of Directors. The Board of Directors are appointed by the Government of India in harmony with NABARD Act 1981. It has its headquarters in Mumbai. Government of India holds 99% stake and RBI holds 1% (initially 72.5%) stake in NABARD.

Objectives

More than 50% of the rural credit is disbursed by the Co-operative Banks and Regional Rural Banks. NABARD is responsible for regulating and supervising the functions of Co-operative banks and RRBs. NABARD works towards providing a strong and efficient rural credit delivery system, capable of taking care of the expanding and diverse credit needs of agriculture and rural development.

Functions of NABARD

Credit Functions:

Framing policy and guidelines for rural financial institutions.
Providing credit facilities to issuing organizations
Monitoring the flow of ground level rural credit.
Preparation of credit plans annually for all districts for identification of credit potential.

Development Functions:

Help cooperative banks and Regional Rural Banks to prepare development actions plans for themselves.
Help Regional Rural Banks and the sponsor banks to enter into MoUs with state governments and cooperative banks to improve the affairs of the Regional Rural Banks.
Monitor implementation of development action plans of banks.
Provide financial support for the training institutes of cooperative banks, commercial banks and Regional Rural Banks.
Provide financial assistance to cooperative banks for building improved management information system, computerisation of operations and development of human resources.

Supervisory Functions:

Undertakes inspection of Regional Rural Banks (RRBs) and Cooperative Banks (other than urban/primary cooperative banks) under the provisions of Banking Regulation Act, 1949.
Undertakes inspection of State Cooperative Agriculture and Rural Development Banks (SCARDBs) and apex non- credit cooperative societies on a voluntary basis.
Provides recommendations to Reserve Bank of India on issue of licenses to Cooperative Banks, opening of new branches by State Cooperative Banks and Regional Rural Banks (RRBs).
Undertakes portfolio inspections besides off-site surveillance of Cooperative Banks and Regional Rural Banks (RRBs).