NABARD- National Bank for Agriculture and Rural Development - Function , Contribution , Challenges and Conclusion .

What is NABARD?

In the year 1982, CRAFICARD or the Committee to Review Arrangements of Institutional Credit for Agriculture and Rural Development recommended the establishment of a developmental bank and accordingly, NABARD was set up. 

It was formed by a special parliamentary act. The chief focus of the organisation was the advancement of rural India by enhancing the flow of credit for the upliftment of agriculture as well as the rural non-agricultural sector. 

Functions of NABARD

The functions of NABARD are described below.

• In order to build an empowered and financially inclusive rural India, NABARD has specific departments that work towards the desired goals. These departments can be collectively categorized into three majors units:

• Financial
• Developmental
• Supervision
• The financial support necessary to build rural infrastructure is provided by NABARD.
• Preparation of district-level credit plans by NABARD are used to guide and motivate the banking industry to achieve required targets. 
• NABARD also supervises the Regional Rural Banks (RRBs) and Cooperative Banks along with developing their banking practices and integrating them to the Core Banking Solution (CBS) platform.

Contribution

The NABARD has touched almost every aspect of rural economy in terms of Financial, Developmental and Supervision functions

Financial Contribution

§  Refinance - Short Term Loans: Crop loans are extended to farmers for crop production by financial institutions, which support in ensuring food security in the country.

§  Long Term Loans: NABARD's long-term refinance provides credit to financial institutions for a wide gamut of activities encompassing farm and non-farm activities with tenors of 18 months to more than 5 years.

§  Rural Infrastructure Development Fund (RIDF): It was set up with NABARD in 1995-96 by the RBI out of the shortfall in lending to priority sector by scheduled commercial banks for supporting rural infrastructure projects.

§  Long-Term Irrigation Fund (LTIF): The LTIF in NABARD was setup with an initial corpus of Rs 20,000 crore for funding 99 irrigation projects during 2016-17 following announcement in the Union Budget.

§  Pradhan Mantri Awaas Yojana - Grameen (PMAY-G).

§  NABARD Infrastructure Development Assistance (NIDA): NIDA has been designed to complement RIDF.

§  Warehouse Infrastructure Fund (WIF): Union government created WIF in the year 2013- 14 with NABARD with a corpus of Rs 5,000 crore for providing loans to meet the requirements for scientific warehousing infrastructure for agricultural commodities in the country.

§  Food Processing Fund

§  Direct Lending to Cooperative Banks

§  Credit Facility to Marketing Federations (CFF):

§  Producer Organizations Development Fund (PODF) for POs & PACS:

o    NABARD set up Producer Organizations Development Fund (PODF) with an initial corpus of Rs 50 crore to support and finance Producer Organizations (POs) and Primary Agriculture Credit Societies (PACS) to operate as Multi Service Centres.

·         Producer Organisation (PO): it is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members.

·         Primary Agricultural Credit Society (PACS) is a basic unit and smallest co-operative credit institution in India. It works on the grassroots level (gram panchayat and village level). It provides credit to farmers in the form of term loans and recovers the amount after harvesting of crop from the cultivator.

Developmental Contribution

§  Kisan Credit Card Scheme for Farmers: The Kisan Credit Card (KCC) scheme was designed by NABARD in association with the RBI in August 1998 for providing crop loans.

§  RuPayKisan Cards (RKCs): NABARD has been at the forefront of technology revolution by helping rural financial institutions in providing RuPayKisan Cards (RKCs) to all their farmer clients.

§  Tribal Development: the Tribal Development Programme

§  Climate Resilient Agriculture

§  Umbrella Programme on Natural Resource Management (UPNRM):

o    The UPNRM started in 2007, works at enhancing investments in rural areas, creating business opportunities and enabling rural communities to sustainably utilise their natural resources.

§  Microfinance Sector:

o    NABARD had launched the Self Help Group-Bank Linkage Programme (SHG-BLP) in 1992. Over 23 lakh SHGs were credit-linked during 2017-18 financial year.

§  EShakti: In a bid to digitise SHGs, project EShakti was launched on 15 March 2015.

§  Skill Development: Promoting an entrepreneurial culture among the rural youth and encouraging them to start enterprises in the rural off-farm sector has been NABARD’s strategy for over three decades.

§  Marketing Initiatives: For providing marketing opportunities to rural artisans and producers, NABARD has traditionally facilitated their participation in exhibitions across the country.

Incubation Centres

§  To commercialise innovations and to shape agricultural entrepreneurship in the country, NABARD extended support to Chaudhary Charan Singh Haryana Agricultural University, Hisar and Tamil Nadu Agricultural University, Madurai for establishing Agri Incubation Centres with a total financial commitment of Rs 23.99 crore.

Challenges

§  As an offspring of the RBI, NABARD shares the work culture, ethos and development orientation of its parent institution.

o    Snapping of this link (the transfers of 0.4 per cent equity of RBI in NABARD to the Union Government under NABARD Act 2017) has led to a great disadvantage for both the RBI and NABARD.

o    This has weakened any role or participation RBI can have over its activities.

o    A strong relationship between the central bank and the development institution will help the cause of agriculture and rural development at a critical juncture when the country is faced with a serious agrarian crisis.

§  Cost of financing has gone up since market borrowings of NABARD add up to 80 per cent of its resources. Member-driven and de-bureaucratised cooperative structures have to fill-in the gaps of institutional credit left open by commercial banks.

§  The north-eastern states has been getting little share of the NABARD’s credit funds. The northeast gets 1% of the credit, leading to farmers trapping in the net of money-lenders.

§  The penetration of banks in insurgency-hit state is less and it should be stepped up.

Conclusion

More than 75 per cent people of India depend on agriculture. Rural infrastructure investments help in raising the socio-economic status of the rural people through increased income levels and quality of life.

NABARD being an apex institution for providing credit facilities and capacity building to Indian rural economy, it has great a opportunity for poverty reduction and socio-economic empowerment of rural India.