NABARD Full Form

Imagine that you run a business and require money to invest into the business to in turn generate revenue. You will approach the bank to provide you with the requisite loan sanctions. The money you require could be in lakhs or crores. The bank will run a credit score check on you, and ask for collateral security against the loan, for which you’ll probably provide a business asset.

In this situation, you do not even have to think twice about which bank to approach. The choice of your bank will be influenced by where your current account is set up or which bank is located closer to you. However, the same is not the case with agriculturists and rural small-scale industries. The seed capital they require is usually in a few thousands, and for shorter periods such as one crop season. They do not have any collateral to provide to the bank and may not have an appetite to pay the higher interest rates asked by banks of loans.

This is where NABARD comes into the picture, where credit facilities are provided to agriculturists and other rural small-scale industries so that they do not have to shut shop due to the unavailability of money to run it.

History

The functions of NABARD were earlier carried on by the Agriculture Refinance and Development Corporation (ARDC) of the Reserve Bank of India. NABARD is a statutory body, i.e. established under an Act of the Parliament – The National Bank for Agriculture and Rural Development Act, 1982, on July 12, 1982, on the recommendation of B. Sivaraman Committee.  It is the apex body in India for credit requirements and regulations for the agriculture industry, rural small-scale and cottage industries, and other rural industries. It is headquartered in Mumbai and the current chairman is Dr. G.R. Chintala. 

Role of NABARD

NABARD has been an important part of the growth of the rural industries and was a much-needed measure to bridge the gap between banks and rural industries. The main functions of NABARD are financing and refinancing, promotion, development, planning, monitoring and controlling, and supervision.

The following are the roles and functions of NABARD in detail:

• Providing financing facilities to the rural industries, including agriculturists and farmers, cottage industries, and other similar small-scale businesses. As discussed earlier, it is the apex body for the financing needs of these industries. It could also be in the form of investments.
• NABARD acts as a bridge between the traditional banking system, RBI, and the rural industries. The primary responsibility of rural financing is that of NABARD, but it has to be in constant touch with RBI and banks to regulate and control such financing requirements.
• The promotion of the rural industry is also a prime objective of NABARD. In the case of urban industries, accessibility is not an issue, whether it is to credit, suppliers, or customers, The urban industries are well-connected. NABARD tries to ensure that this does not prove to be a setback for rural industries. It helps the presence of these industries be felt.
• Improving the absorbing capacity of the credit delivery system. It includes the flow of credit to the sections of the society who historically did not have access to it. It is important to make the financing business also more sustainable and make the traditional banking systems accessible to the rural sectors. In 2016, The Narendra Modi administration had set a target to double the income to farmers by 2022. The absorption can be improved by a restructuring of credit, flexible or customized credit facilities, rehabilitation, etc.
• Refinancing is also an important role of NABARD. This means that any institution which provides financing facilities towards rural industries and their development can be refinanced by NABARD. This improves the accessibility of the rural industry to the credit and financial sector and removes the worry and doubt of non-payment and removes the uneasiness of transacting with smaller businesses for the financial institutions. Further, it is the primary role of NABARD to undertake rural financing, hence in this manner, they can keep track of these activities.
• NABARD invests or finances rural projects, and ensures the performance of the project and that the end-utilization of funds is giving results, by constant monitoring of activities.
• NABARD also undertakes various programs, some of which are discussed below. They could also be in affiliation with the RBI or the government.

Popular Initiatives

The following are a few of the successful projects initiated by NABARD, which also helps us understand its contribution to the Indian economy:

• Rural Infrastructure Development Fund, created by the government of India in 1995-96 with a corpus of Rs. 2,000 crores. The funds are managed and maintained by NABARD. Money is allocated towards the funds from budget to budget. The main purpose of this fund is to provide the state governments with credit facilities to finance rural infrastructure projects.
• Kisan Credit Card, the model for which was prepared by NABARD and is implemented by Indian public sector banks, in 1998. It helps farmers meet the short-term requirements for purposes such as purchase of inputs.
• Self-Help Group Bank Linkage Programme (SHG-BLP), which is a microfinancing programme started in 1992 with the objective to link the unorganised sector with the financial sector and increase accessibility.

Conclusion

NABARD, or National Bank for Agriculture and Rural Development, is clearly an important source of credit for the rural sector. As we know, a majority of India lies in the rural sector, and if the citizens residing in the rural areas do not have access to monetary sanctions, we lose out on a huge chunk of the possible industries. Further, India is an agricultural country, and farmers who are often unaware of how to operate banks are in dire need of an institution like NABARD which will help them obtain short-term credit. NABARD is an important contributory to the Indian economy.