1. National Bank for Agriculture and Rural Development (NABARD)

NABARD is the apex DFI dedicated to building rural and agricultural prosperity. Established on 12 July 1982 under the NABARD Act 1981, it was created by transferring the agricultural credit functions of RBI and the refinance functions of the erstwhile Agricultural Refinance and Development Corporation (ARDC) into a new institution.

NABARD’s formation was the outcome of the Sivaraman Committee recommendations, which recognized the need for a focused institution to drive rural credit and development. It began operations with an initial capital of ₹100 crore (contributed by RBI and Government), and today it is fully owned by the Government of India (the RBI’s stake was gradually transferred to the central government, making NABARD 100% government-owned by 2019).

NABARD operates under the Ministry of Finance (Department of Financial Services). As a development finance institution, NABARD’s primary focus is to strengthen the rural economy by meeting the credit needs of agriculture and rural development.

Mandate and Functions

NABARD’s mandate is broad yet centered on enabling rural development. Its key objectives include:

• Facilitating Credit Flow to Agriculture & Rural Sectors: Serve as the apex agency to ensure adequate credit for agriculture (including farm activities and off-farm rural activities) and other economic activities in rural areas. NABARD works to promote sustainable agriculture and rural prosperity through credit support.
• Refinance Institution for Rural Credit: Provide refinancing facilities to all eligible institutions engaged in extending agricultural and rural credit – this includes cooperative banks, regional rural banks (RRBs), commercial banks and other approved financial institutions. By refinancing, NABARD supplements their resources so that they can lend more to farmers, rural artisans, cottage industries, etc.
• Development & Promotional Functions: Coordinate and promote integrated rural development through initiatives beyond credit – such as developing infrastructure, introducing new technologies, supporting farm innovation, and nurturing microfinance institutions and self-help groups. NABARD is tasked with promoting sustainable rural development models and financial inclusion in villages.
• Supervision of Rural Financial Institutions: Act as a supervisory authority for certain rural financial institutions. NABARD oversees and inspects RRBs and cooperative banks (state and district co-op banks) to ensure the health of the rural credit system. This supervisory role, delegated by RBI, helps maintain confidence and efficiency in institutions that are critical for rural credit delivery.
• Building Rural Financial Infrastructure: Support the establishment and capacity-building of regional rural banks, cooperatives, and other rural financial intermediaries. NABARD provides training to bank staff, helps in the computerization of credit cooperatives, and overall works to strengthen the credit delivery mechanisms in rural areas.

Key Functions of NABARD

Refinance Operations

NABARD’s core function is to refinance smaller banks and financial institutions for lending in priority areas, particularly agriculture. When rural or cooperative banks provide crop loans or agricultural term loans to farmers, NABARD reimburses a large portion of these loans at concessional rates, which replenishes bank funds and encourages increased lending to agriculture.

NABARD provides short-term credit refinance for crop loans and seasonal agricultural operations, and long-term refinance for investments such as tractors, plantation development, irrigation projects, and rural housing.

Direct Finance

Although NABARD primarily functions as a refinancing institution, it also undertakes direct lending in specific cases. It provides loans directly to state governments and rural entities for development projects. A key example is lending under the Rural Infrastructure Development Fund (RIDF) to support rural infrastructure projects such as irrigation canals, rural roads, bridges, and drinking water schemes. NABARD also finances warehousing infrastructure through the Warehouse Infrastructure Fund and may lend directly to district cooperative banks and other approved financial institutions for on-lending when necessary.

Rural Infrastructure Development

Managing funds for rural development is a major function of NABARD. The RIDF , established in 1995, uses contributions from commercial banks that fail to meet priority sector lending targets and channels these funds to state government rural infrastructure projects through NABARD. In addition, NABARD manages specialized funds such as the Long-Term Irrigation Fund, Micro-Irrigation Fund, and Dairy Processing Infrastructure Fund , which support specific government initiatives in rural areas. By financing infrastructure like irrigation, roads, and storage facilities, NABARD helps create an enabling environment for agriculture and rural businesses.

Promotional & Developmental Programs

NABARD plays a significant role in promotional and ...

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