National Bank for Agriculture and Rural Development (NABARD)

National Bank for Agriculture and Rural Development (NABARD)

Subject – Economy

Context – Encourage entrepreneurship in agriculture: NABARD chief

Concept –

• NABARD is a development bank focussing primarily on the rural sector of the country. It is the apex banking institution to provide finance for Agriculture and rural development.
• Its headquarter is located in Mumbai, the country’s financial capital.
• It is responsible for the development of the small industries, cottage industries, and any other such village or rural projects.
• It is a statutory body established in 1982 under Parliamentary act- National Bank for Agriculture and Rural Development Act, 1981.
• It provides refinance support for building rural infrastructure.
• It prepares district level credit plansto guiding and motivating the banking industry in achieving these targets.
• It supervises Cooperative Banks and Regional Rural Banks (RRBs) and helping them develop sound banking practices and integrate them to the CBS (Core Banking Solution) platform.
• It provides training to handicraft artisans and helps them in developing a marketing platform for selling these articles.
• NABARD has various international partnerships including leading global organizations and World Bank-affiliated institutions that are breaking new ground in the fields of rural development as well as agriculture.
• Reserve Bank of India is the central bank of the country with sole right to regulate the banking industry and supervise the various institutions/banks that also include NABARD defined under Banking Regulation Act of 1949.
• NABARD 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).

The NABARD (Amendment) Bill, 2017 passed in 2018:

Increase in capital of NABARD: Under the 1981 Act, NABARD may have a capital of Rs 100 crore. This capital can be further increased to Rs 5,000 crore by the central government in consultation with the Reserve Bank of India (RBI). The Bill allows the central government to increase this capital to Rs 30,000 crore.

Transfer of the RBI’s share to the central government: Under the 1981 Act, the central government and the RBI together must hold at least 51% of the share capital of NABARD. The Bill provides that the central government alone must hold at least 51% of the share capital of NABARD. The Bill transfers the share capital held by the RBI and valued at Rs 20 crore to the central government. The central government will give an equal amount to the RBI.

Micro, small and medium enterprises (MSME): Under the 1981 Act, NABARD was responsible for providing credit and other facilities to industries having an investment of upto Rs 20 lakh in machinery and plant. The Bill extends this to apply to enterprises with investment upto Rs 10 crore in the manufacturing sector and Rs five crore in the services sector.