National Bank for Agriculture and Rural Development Functions, History and Origin

By Jyoti Bisht|Updated : June 29th, 2022

NABARD Functions, History & Origin: National Bank for Agriculture and Rural Development was established in 1982 on the recommendation of B. Sivaraman Committee for the overall regulation and licensing of regional rural banks and apex cooperative banks in India. NABARD is one of the apex regulatory bodies of India. It is essentially a development bank that is authorized for providing and regulating credit and other facilities to the agriculture industry of India. It is under the jurisdiction of the Ministry of Finance.

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NABARD is responsible for the development and promotion of agriculture and allied sectors such as fisheries, animal husbandry, cottage and village industries, and small-scale industries. It also promotes and helps other industries such as handicrafts, artisans and rural crafts, and other allied economic activities in the rural area.

Read here the Full Form of NABARD 

This article deals with the history, origin, and functions of the National Bank for Agriculture and Rural Development (NABARD). Let's dig deep inside:

Origin and History of NABARD

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  • Established: 12 July 1982 on the recommendations of B. Sivaraman Committee (by Act 61, 1981 of Parliament).
  • RBI constituted a Committee to Review the Arrangements For Institutional Credit for Agriculture and Rural Development (CRAFICARD) to look into these very critical aspects to boost the rural economy.
  • The committee was formed under the Chairmanship of B. Sivaraman (former member of Planning Commission of India) on 30 March 1979.
  • Sivaraman Committee submitted an interim report on 28 November 1979 that outlined the need for a new organizational device for providing undivided attention, forceful direction, and pointed focus on credit-related issues linked with rural development.
  • Its recommendation results in the development of a unique financial institution that would address these aspirations and finally the establishment of the National Bank for Agriculture and Rural Development (NABARD) was approved by the Parliament through Act 61 of 1981.
  • NABARD came into existence by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC) on 12 July 1982.
  • It was set up with an initial capital of Rs.100 crore.
  • The balance sheet of NABARD has grown to Rs 6,57,486 crore in size for 2021, as compared to Rs 5,32,075 crore for FY 2020, registering a growth of 24%
  • Presently, NABARD is fully owned by the Government of India.
  • Headquarters of NABARD: Mumbai.
  • Chairman of NABARD: R. Chintala.

Functions of NABARD

The functions of NABARD can be divided into three categories: 

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1. Financial Functions: 

NABARD performs the following functions under this section:

  • Rural Infrastructure Development Fund:
    • GOI created the RIDF in 1995-96 with an initial corpus of Rs. 2000 crore.
    • There are 37 eligible activities under RIDF which can be classified under three categories: 
      • Agriculture and related sector
      • Social sector
      • Rural connectivity
  • Micro Irrigation Fund:
    • NABARD started MIF form 2019-10 with a corpus of Rs. 5000 crore.
    • The objective of the MIF is to provide additional resources for the expansion of micro-irrigation practices. 
  • Provide loans for the development of Food Parks and Food Processing Units in Designated Food Parks.
  • Provide loan to Warehouses, Cold Storage and Cold Chain Infrastructure for the development of storage infrastructure in India. 
  • Provide Credit Facilities to Marketing Federations and cooperatives to create value/supply chain management of the various agricultural commodities.
  • Provided Direct Refinance facility to Cooperative Banks.

2. Supervision Functions:

Banking Regulation Act, 1949 empowers NABARD to conduct an inspection of;

  • State Cooperative Banks (StCBs)
  • District Central Cooperative Banks (DCCBs)
  • Regional Rural Banks (RRBs)
  • State Cooperative Agriculture and Rural Development Banks (SCARDBs)

The objective of Supervision:

Following are the objectives behind the NABARD's supervision practices. 

  • NABARD conducts supervision to protect the interest of present and future depositors.
  • To ensure that these banks conduct business in compliance with the provisions of the relevant Acts, Rules & Regulations.
  • NABARD ensures the compliance and observance of rules, guidelines issued by NABARD/RBI/Government.
  • NABARD also examine the financial soundness of the banks under its supervision.
  • To recommend methods for strengthening the institutions so as to enable them to play a more efficient role in providing rural credit in India. 

3. Development Functions:

NABARD plays a major role in the development of the rural region of our country. It performs the following function:

Institutional Development: 

NABARD is responsible for regulating and supervising the functions of Cooperative banks and RRBs which disburse more than 50% of the rural credit in India. 

Some of the Institutional Development Initiatives of NABARD are:

  • Developing policies in consultation with GOI & RBI related to strengthening Rural Cooperatives & RRBs.
  • NABARD designed and maintains a web-based portal "ENSURE" to review the performance of Cooperative Banks.
  • Track and record the financial status of Cooperative Bank & RRBs.
  • Drafts policies related to business, auditors related and staff related matters of RRBs, also appoint Chairman of RRB. 
  • The appointment of NABARD Officer as Nominee Director in the Board of RRB is done by NABARD.

Other Development functions of NABARD:

  • Provided credit assistant to the farm sector as well as allied economic activities of the rural region. 
  • performs various activities to promote the financial inclusion of the rural society of India. 
  • Through its’ Micro Credit Innovations Department, NABARD has sustained its function as the facilitator and mentor of microfinance initiatives in the rural sector. 
  • Research and Development (R&D) Fund was established under the NABARD Act 1981 to gain new insights into the difficulties of agricultural and rural development through in-depth studies and applied research.
  • NABARD has constituted the Environment and Social Policy of NABARD to eradicate or minimize unnecessary environmental and social harm and to promote sustainable development. 

Also Read: List of Banks with their Taglines, Headquarters, Name of Chairman/CEO 

Other Useful Links
NABARD Grade A Mock TestNABARD Grade A Selection Process
NABARD Grade A Eligibility Criteria
NABARD Grade A booksNABARD Grade A Cut Off
NABARD Grade A Syllabus 2022NABARD Grade A Preparation Tips

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FAQs

  • NABARD is responsible for the development and promotion of agriculture and allied sectors such as fisheries, animal husbandry, cottage and village industries, small-scale industries. It also promotes and helps other industry such as handicraft, artisans and rural crafts, and other allied economic activities in the rural area. 

  • 12 July 1982 on the recommendations of B. Sivaraman Committee (by Act 61, 1981 of Parliament)

    1. Financial Function
    2. Supervision Function
    3. Development Function


  • Following are the objectives behind the NABARD's supervision practices. 

    • NABARD conducts supervision to protect the interest of present and future depositors.
    • To ensure that these banks conduct business in compliance with the provisions of the relevant Acts, Rules & Regulations.
    • NABARD ensures the compliance and observance of rules, guidelines issued by NABARD/RBI/Government.
    • NABARD also examine the financial soundness of the banks under its supervision.
    • To recommend methods for strengthening the institutions so as to enable them to play a more efficient role in providing rural credit in India.
    • Developing policies in consultation with GOI & RBI related to strengthening Rural Cooperatives & RRBs.
    • NABARD designed and maintains a web-based portal "ENSURE" to review the performance of Cooperative Banks.
    • Track and record the financial status of Cooperative Bank & RRBs.
    • Drafts policies related to business, auditors related and staff related matters of RRBs, also appoint Chairman of RRB. 
    • The appointment of NABARD Officer as Nominee Director in the Board of RRB is done by NABARD.


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