NABARD. National Bank for Agriculture and Rural Development (NABARD) was set up pursuant to the recommendations made by the Committee to Review Arrangements for Institutional Credit for Agriculture and Development (CRAFICARD). It was set up on July 12, 1982. The main purpose of NABARD was to te cohesive rural growth and to ensure the provision of production as well as investment credit required for rural and agricultural growth. NABARD is a top development bank and has the mandate to facilitate credit for the purpose of promoting and developing agriculture, village and cottage industry, and small-scale industry. It also ensures the growth of the handicraft industry.
Following is the main tasks entrusted to NABARD:
- Offering refmafiée for the purpose of extending credit to rural area enterprise.
- Develop and promote institutional development.
- Carrying out proper evaluation, monitoring, and inspection of the client banks.
Apart from these, the bank also performs the following tasks:
- It helps in coordinating the activities of several rural credit institutions.
- Extending support to the Reserve Bank of India, the government, and other stakeholders in the process of the rural growth process.
- Providing research and training functions for various participants such as banks and cooperatives working for rural development.
- Assisting state governments in achieving their targets for providing aid to various institutions.
- Carrying out the role of being a facilitator for banks and Regional Rural Banks.
Objectives of NABARD :
Following are the main purposes of NABARD:
- The National Bank will serve as an apex body for the matters related to the policy and planning for extending credit for promoting agriculture, cottage industry, small-scale industries, and rural crafts sector.
- The bank will also have the responsibility to provide refinancing for institutional credit, ranging from short-term to long-term in diverse sectors.
- The bank will also be responsible for providing direct lending as directed by the central government.
- Aid state governments in meeting their target for extending assistance to various institutions engaged in rural-sector development.
- Provide services to regulate co-operative banks and Regional Rural banks and maintain close links with the Reserve Bank of India.
Functions and Working of NABARD
The functions and working of NABARD have been divided into three categories:
- Credit Distribution.
- Development Function.
- Regulatory Function.
1) Credit Distribution:
This bank offers financing solutions to the following institutions:
i) Short-Term Credit:
The firm offers short-duration credit facilities to various institutes such as Regional Rural Banks, State Cooperative Banks, and other RBI-approved institutions for the following intents:
- Seasonal agricultural operations.
- Marketing of various agricultural products.
- Marketing and dispersion of products such as fertilizers and herbicides.
- Other activities pertaining to rural development or agricùltural development.
- Real commercial activities.
- Facilitate production and trade of handicrafts, products from small-scale industries, and artisans.
ii) Medium-Term Credit:
The NABARD offers medium-term credit to vañous approved institutions such as LDBs, RRBs, and SCBs. Such credit may range from a few months to a couple of years. The bank extends medium-term loans for investment schemes for agricultural and rural development schemes.
iii) Long-Term Credit:
The NABARD offers long-term credit facilities to RRBs, SCBs, and State Land Development Banks. It may also extend such services to other approved institutions.
iv) Facilities for Changes and Re-Arrangement:
The NABARD extends refinance facilities to various institutes such as RRBs and SCBs. It can also provide aid in times of political upheaval or natural calamity. However, such a refinacing facility is only extended for 7 years or less.
v) Refinancing of Industries in Rural Areas:
The NABARD offers refinancing provisions for small industries, rural industries, and cottage industries.
2) Development Functions:
The NABARD carries out the following development functions:
- Coordinating the institutions offering rural credit.
- Work towards improving the capacity and efficiency of the credit delivery system.
- Work towards developing solutions for problems faced by villagers and the agricultural system.
- offering help to the government. RBI and other such organizations for improving their rural improvement programs.
- Represent the government as well as RBI for keeping a watch on the agricultural sector.
- Offer research and training to the human resources of various institutions such as RRBs, LDBs, and ” SCBs. It also works towards enhancing research activities in different areas.
- It also provides training facilities through its banker rural development institute and national bank staff colleges at Lucknow, Bolpur, and Mangalore, and College of Agriculture Banking (CAB) at Pune. The training is imparted to people working in the field of rural banking and development sector.
- Disseminating information related to rural development and banking.
- Aid state governments in subscribing to the shares of state cooperative banks.
- Offering direct credit for agricultural and rural development upon getting approval from the central government.
- Create a credit fund for the purpose of providing funds to the entrepreneurs engaged in the rural and agricultural sectors.
Such aid is provided on an interest-free basis and is recovered through yearly installments after the repayment of the loan.
3) Regulatory Functions :
Following are the main functions of NABARD:
- The Banking Regulation Act, 1949 allows NABARD to carry out inspection of RRBS and other cooperative banks (excluding primary cooperative banks).
- RRBs and other cooperative banks are required to get NABARD approval for seeking RBI permission for the purpose of opening new branches.
- RRBs and other cooperative banks are bound to file returns and other documents with NABARD as well as to RBI, pursuant to the provisions of the Banking Regulation Act, 1949.
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