NABARD – Full Form, Functions & Chairman of NABARD

By Balaji

Updated on: February 17th, 2023

NABARD stands for National Bank for Agriculture and Rural Development. NABARD was established in the year 1982 under the Parliamentary Act- National Bank for Agriculture and Rural Development Act, 1981. NABARD is a development bank primarily focusing on the rural sector and its development in India. NABARD is an apex banking sector that provides finance for rural development and Agriculture.

NABARD comes under the section of Indian Economy and Indian Polity of UPSC Syllabus. That’s why all the UPSC aspirants must be aware of its functions, contributions, challenges, and other vital information related to NABARD.

Table of content

  • 1. What is NABARD? (more)
  • 2. Establishment of NABARD (more)
  • 3. Functions of NABARD (more)
  • 4. Relation between NABARD and RBI (more)
  • 5. Governance of NABARD (more)
  • 6. NABARD’s Contribution (more)
  • 7. NABARD UPSC (more)

What is NABARD?

The NABARD- National Bank for Agriculture and Rural Development was established in July 1982 by combining RBI’s Agriculture Credit Department, Agriculture Refinance and Development Corporation, and Rural Planning and Credit Cell. The headquarter of NABARD is located in Mumbai

  • The objective of NABARD is to meet the rural development and credit needs of agriculture.
  • NABARD was envisioned as the apex baking institution for the entire rural credit system.
  • It also provides funding to rural credit institutions and coordinates with their operations.
  • NABARD started its operations with a share capital of RS. 1400 crores. Further, RBI’s Agricultural Credit Funds transferred 1400 crores.
  • NABARD has several branches across India.

Establishment of NABARD

From the early stages of planning, the Government was aware of the importance of institutional credit to boost the rural economy.

  • The Reserve Bank of India at the insistence of the Indian Government, constituted a Committee to Review the CRAFICARD(Committee to Review the Arrangements For Institutional Credit for Agriculture and Rural Development) in 1979, and it was chaired by Shri B. Sivaraman, a former member of the Planning Commission.
  • CRAFICARD outlined the need for institutions to provide undivided attention, direction, and focus to the credit-related issues related to rural development.
  • As a result, NABARD was founded in 1982 as a statutory body under the Parliamentary Act- National Bank for Agriculture and Rural Development Act, 1981. In July 1982, late PM Smt. Indira Gandhi dedicated it to the service of the nation.
  • Before the formation of NABARD, RBI was the apex body to support the Rural economy of India.
  • After the formation of NABARD, the functions of 3 institutes of RBI, namely, ACD ( Agricultural Credit Department), RPCC (Rural Planning and Credit Cell), and ARDC (Agricultural Refinance and Development Corporation), were transferred to NABARD.
  • Currently, NABARD is fully owned by the Indian government as a result of changes in the share capital composition between RBI and the government of India.

Functions of NABARD

NABARD has three functions, namely- Financial function, Developmental functions, and supervision functions.

Financial Functions of NABARD

  • NABARD offers financial assistance to the farm sector through refinancing a wide range of agriculture and allied activities.
  • State cooperative banks, commercial banks, state land development banks and regional rural banks are eligible for refinancing.
  • NABARD is also empowered to extend loans and advances against the stock security and promissory notes.
  • Additionally, to fund seasonal agricultural operations, NABARD also makes short-term loans to Regional Rural Banks and Co-operative Banks.

Developmental Functions of NABARD

  • NABARD is involved in development activities as well, coordinates rural credit agencies, and helps to address rural and agricultural issues.
  • To assist the boosting rural and agricultural development research, NABARD has RDF (Research and Development Fund)
  • NABARD also has the power to establish a “ Reserve Fund” or any other funds it finds appropriate.

Supervisory Functions of NABARD

  • Banking Regulation Act 1949 gave the power to NABARD to inspect the operations of cooperative banks and Regional Rural Banks.
  • Before granting permission to open a new branch, the Reserve Bank of India must receive a recommendation from NABARD.

Relation between NABARD and RBI

The Reserve Bank of India, or RBI, is the central bank of India. It has the sole right to regulate the baking sector and supervise various banks in the country. It also includes NABARD.

  • Many regulatory and developmental works are done with the cooperation of RBI and NABARD.
  • Reserve Bank of India also provides 3 directors to the Board of Directors of NABARD.
  • NABARD also provides recommendations to RBI on the issue of licenses to Cooperative Banks, Regional Rural Banks, and the opening of new branches by the State Cooperative Banks.

Governance of NABARD

The affairs of NABARD are governed by the Board of Directors, and these Board of Directors are appointed by the Government of India.

  • The chairperson and other directors( excluding those who are elected by central government officials, and shareholders) will be appointed by the Central Government in consultation with the Reserve Bank of India.
  • The NABARD Amendment Bill 2017 was passed in 2018, and it gives power to the Union Government to increase NABARD’s capital from Rs. 5,000 crores to Rs. 30,000 crores.
  • The Board of Directors constitutes the Executive Committee which includes a prescribed number of directors. These directors will be referred to as Executive Directors.
  • The Executive Committee will perform functions as prescribed or delegated to it by the Board.

NABARD’s Contribution

NABARD has been able to touch every aspect of the rural economy in terms of Developmental, Financial, and Supervision functions. Below we have discussed its contribution to each function.

Financial Contribution of NABARD

  • Short-Term Loans- Crop Loans are provided to the farmers by financial institutions for crop production, which ensures food security in the country. During the year 2020-2021, NABARD paid out ₹95,731 crores for Seasonal Agricultural Operations and ₹11,733 crores for other than seasonal agriculture operations to Cooperative Banks and RRBs.
  • Long-term Loans- long-term refinance by NABARD provides credit to financial institutions for a wide range of activities. It encompasses non-farm and farm activities with 18 months to 5 years of the tenor.
  • Pradhan Mantri Awaas Yojana – Grameen (PMAY-G)- NABADRD sanctioned an amount of ₹20,000 crores and released ₹19999.80 crores during 2020-21 to NRIDA under PMAY-G.
  • RIDF (Rural Infrastructure Development Fund ) was set up with NABARD in 1995–96 by the Reserve Bank of India to support infrastructure projects in rural areas.
  • NIDA (NABARD Infrastructure Development Assistance) has been established to complement RIDF
  • Union Government created Warehouse Infrastructure Fund (WIF) in the year 2013-14 with NABARD with a corpus of Rs 5,000 crore. It provides loans to meet the needs for agricultural commodities and scientific warehousing infrastructure in India.

Developmental Contribution of NABARD

Let’s take a look at some achievements of NABARD.

  • Kishan Credit Card (KCC) Scheme for farmers was designed by NABARD with the association of RBI in August 1998 to provide crop loans.
  • RuPayKisan Cards(RKCs) have proven to be revolutionary technology by helping rural financial institutions in providing RKSs to all farmer clients.
  • Providing marketing opportunities to the rural artisans and producers, facilitated has facilitated their participation in various exhibitions in India.
  • Self Help Group-Bank Linkage Programme (SHG-BLP) was launched by NABARD in 1992 to empower self-help groups.
  • The EShakti project was launched on March 15th in 2 districts to digitize Self Help Groups. This project was a success.
  • Micro-Enterprise Development Programme (MEDP) and Livelihood and Enterprise Development Programme (LEDP) were launched by NABARD to boost the micro-entrepreneurship movement.
  • NABARD has promoted many skill development programs among the rural youth and encouraged them to start an enterprise in the rural off-farm sector. It has tried to address the skill in rural India through many skill development programs.

Challenges for NABARD

Being an offspring of the Reserve Bank of India, NABARD shares its parent institution’s ethos, work culture, and development orientation.

  • The transfer of 0.4 equity of RBIs to NABARD has resulted in a significant disadvantage for both NABARD and RBI.
  • Due to this, the role of RBI or participation in NABARD’s operation has weakened.
  • NABARD borrowings account for 80% of its resources, so the cost of financing has risen.
  • A small portion of the NABARD credit fund goes to the northeastern state.
  • The Bank penetration in insurgency-affected states should be increased, as currently, it is low.


Every year, a few questions are asked about this particular topic in the UPSC Exam. That is why every UPSC aspirant must be aware of the functions, objectives, history, contribution, and other crucial facts related to NABARD. The National Bank for Agriculture and Rural Development is a vital part of the Indian Economy and Indian Polity of the UPSC Syllabus. So candidates preparing for UPSC Prelims and UPSC Mains must give their best efforts to have an in-depth understanding of NABARD.

>> Download NABARD UPSC Notes

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