Functions of NABARD: All You Need to Know!

By BYJU'S Exam Prep

Updated on: September 11th, 2023

On 12th July 1982, a parliamentary act created the National Bank for Agriculture and Rural Development (NABARD). As a Development Bank, NABARD has the responsibility of providing and regulating credit and other facilities for the development of agriculture, small-scale industries, cottage industries, handicrafts and other rural crafts, and other related economic activities in rural areas with a view to promoting integrated rural development and securing the prosperity of rural areas, as well as for matters related to or incidental to these activities.

Table of content


Functions of NABARD

NABARD aims at building an empowered and financially inclusive rural India through specific goal-oriented departments which can be categorized broadly into three heads: Financial, Developmental, and Supervision. 

  • Over the years NABARD initiatives have touched millions of rural lives across the country.
  • The SHG Bank Linkage Project launched by NABARD in 1992 has blossomed into the world’s largest microfinance project.
  • Kisan Credit Card has become the source of comfort for crores of farmers.

Financial Functions

The management of a company’s financial resources is referred to as the finance function. The tasks are focused on gathering and controlling financial assets in order to make money.

Loans for Food Parks and Food Processing Units in Designated Food Parks

  • Development of the food processing industry in the country is accorded top priority by the Government of India as it is one of the most critical links in the Agri value chain.
  • In 2014, a Special Fund of Rs. 2,000 crore was provided to NABARD for providing direct term loans at affordable rates of interest to Designated Food Parks (DFPs) and food processing units in the DFPs. 

Loans to Warehouses, Cold Storage, and Cold Chain Infrastructure

  • 5,000 cr to NABARD in the 2014-15 budget for supporting the creation of infrastructure for the storage of agricultural commodities.
  • Reserve Bank of India (RBI) issued guidelines for the creation of the Warehouse Infrastructure Fund (WIF 2014 -15) in NABARD.

Credit Facilities to Marketing Federations

  • Marketing federations and cooperatives are playing a very important role in agribusiness and value/supply chain management of the various agricultural commodities. Major activities undertaken by these institutions are:
    • Procurement of agricultural commodities including milk.
    • Aggregation, storage, and value addition in a few select commodities like milk, etc.
    • Marketing
  • A large number of farmers, producer’s organizations, and primary societies depend upon these institutions for marketing their products and for value-added services like input supply, value addition, and storage facilities.
  • The marketing operations of these federations and cooperatives require seasonal and timely short-term credit facilities to support their day-to-day operations. 

Rural Infrastructure Development Fund

  • The government of India created the RIDF in NABARD in 1995-96, with an initial corpus of Rs. 2,000 crore.
  • At present, there are 36 eligible activities under RIDF as approved by GoI. (Annexure I). The eligible activities are classified into three broad categories i.e. 
    • Agriculture and related sector
    • Social sector 
    • Rural connectivity

Direct Refinance Assistance to Co-operative Banks 

  • Vaidyanathan Committee recommendations enabled District Central Co-operative Banks (DCCBs) to borrow funds directly from any financial institution regulated/approved by RBI.
  • NABARD developed a progressive product titled ‘Short Term Multipurpose Credit Product’ (STMPCP) to provide financial assistance to Co-operative Banks (StCBs/DCCBs). The primary objective here was to expand their lendable resources and enable their diversification into a variety of business operations. 

Long-Term Irrigation Fund

  • A Long-Term Irrigation Fund (LTIF) with an initial corpus of `20,000 crores for funding and fast-tracking the implementation of incomplete major and medium irrigation projects. 

Financing and supporting Producer Organizations

  • NABARD has set up the “Producers Organization Development Fund” (PODF) in 2011 with an initial corpus of Rs. 50 crore.
  • The Fund supports the formation and financing of producer organizations by adopting a flexible approach to meet the needs of producers.

Investment Credit

  • Investment Credit for capital formation in the agriculture and related industries, non-farm sector, and services sector to commercial banks, RRBs, and cooperative banks reached a level of 17,674.2croresre as of March 31, 2013, indicating a rise of 14.6% over the previous year.

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