NABARD: National Bank for Agriculture and Rural Development

In this article, we will be talking about NABARD. We will also discuss its roles and functions and what are the operations that are handled by NABARD.

Let us first start with its full form and then proceed with more details on the topic.


The full form of NABARD is National Bank for Agricultural and Rural Development.



It is a development bank that is focused primarily on the rural sectors of the country. It is the apex bank to provide financial aid for agricultural and rural development.

NABARD is the main body responsible for the development of small industries, cottage industries, and other rural projects being carried out in different villages.


Its headquarter is located in the financial capital of the country i.e. Mumbai.

It is a statutory body under the Government of India, established in 1982 by the Parliamentary Act of National Bank for Agricultural and Rural Development Act, 1981.

What are the functions of NABARD?

The main aim of the development of this bank was to make our country’s rural areas more inclusive and provide them financial assistance to cope up in the developing era.

There are specific goals oriented departments created under NABARD which can be broadly categorized as Financial, Development, and Supervision.

Main functions of NABARD are:

* It provides support and finances for building rural infrastructures.

* It prepares credit plans at the district level and provides sufficient guidance to the banking industry in achieving these goals.

* It is the super visionary head of Cooperative Banks and Regional Rural Banks (RRBs).

* It is involved in designing the Central government’s development schemes and implicating them at the ground level.

* It provides training programs for handicrafts artisans and provides them financial assistance to be able to sell the items in the market.

* NABARD has various international affiliates too such as a partnership with the World Bank in the development of the rural areas in India.

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Institutional Credit systems have proven a major step towards rural area development since the early planning schemes in India.

The Reserve Bank of India (RBI) at the insistence of GOI, created a committee to review Arrangements for Credit for Agricultural and Rural Development in 1979.

The committee’s report mentioned the creation of the new authority for providing undivided attention and complete dedication to rural development.

NABARD is the outcome of that committee’s report which was headed by Shri B. Sivaraman, a former member of the Planning Commission.

In the year 1982, NABARD was founded as the statutory body as we have mentioned earlier in this article.

The initial capital of NABARD stood at Rs. 100Cr. with 50:50 contributions by the Government of India and Reserve Bank of India.  Presently it has reached up to Rs 10,580 Cr.

RBI was the apex body for the formation of NABARD so that the financial aid was provided to the rural areas in a systematic format. The role of NABARD is similar to RBI but concentrated on agricultural and rural development.

The functions of three main bodies were transferred to NABARD after its creation.

1. Agriculture Credit Department

2. Rural Planning and Credit Cell

3. Agriculture Refinance and Development Corporation

The NABARD Amendment Bill, 2017

This amendment enabled the Union Government to increase the capital limit of the bank from Rs. 5000 crore to Rs. 30,000 crore.

Increase in capital of NABARD

In the 1982 statutory act, there was the capital of Rs. 100 crore provided for NABARD to disperse it in different developmental activities in the agricultural sector and rural areas developments.

This capital could further be increased to Rs. 5000 crore by Union government along with consultation of RBI. The bill allows the capital limit to be at Rs. 30,000 crore.

RBI’s share transfer to Central Government

Under the previous act of 1981, the Central Government and RBI together must hold 51% of the bank. The amendment provides that the central government alone must hold at least 51% of the capital shares of NABARD.

The bill transfers the capital share of the RBI to the central government.

Micro Small and Medium Enterprise

In the 1981 act, NABARD was bound to help small enterprises with a capital limit of 20 lakhs. The amendment bill extends this limit to the industries with a capital venture of 10 crores.


Reserve Bank of India is the central bank of the country. It has the sole right to regulate the banking industry in the country and supervise them. It also has the supervision of the institutions and banks similar to NABARD and all other that are defined under the Banking Regulation Act of 1949.

Many developmental works are done by RBI and NABARD in co-operation. RBI has its 3 Directors in NABARD’s Board of Directors.

NABARD provides recommendations to RBI in the procedure of issuing licenses to the Co-operative Banks. It also provides assistance in opening new branches by state co-operative banks and Regional Rural Banks (RRBs).


NABARD’s affairs and functions are governed by a committee or you can say Board of Directors. This Board of Directors is appointed from the Centre i.e. they are appointed by the central government.

Board of Directors is a group that consists of the following members:

The Chairperson

3 Directors from the specified expertise- Rural Economics,

Rural Development,

Village & Cottage Industries,

Small Scale Industries,

Persons having experience in Co-operative Banks, Commercial Banks and RRBs,

or any other special knowledge which is considered by the central Government as useful to the National Bank.

3 Directors from the directors of the RBI

3Directors from the officials of Government of India

4 Directors from the officials of State Government

Number of directors elected by the share holders other than RBI, Government of India, and institutions under GOI

The Managing Director

The chairperson and other directors that are under Central Government institutions shall be appointed by the Government in consultation with RBI.

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NABARD has hold of almost the functionaries that are linked to finances in terms of Rural and Agricultural Development. It provides crop loans to farmers so that they can purchase the best seed, plow their fields with the latest available technology, and do not compromise on the production for the best possible yield.

NABARD also provides long term loans to financial institutions that support ensuring food safety to the country.

Rural Infrastructure Development Fund: It was the development fund set up under NABARD in 1995, by the RBI to overcome the shortfall of the funds by the commercial banks in the sector of development of rural infrastructures.

Long Term Irrigation Fund: It was set up under NABARD with an initial vision of funding the 99 irrigation projects with the capital of Rs 20,000 crore during the 2017 union budget announcement.

Pradhan Mantri Awas Yojana (Gramin): NABARD is the bank that also contributes to multiple schemes that are started by the union government for the betterment of rural India such as this particular scheme.

NABARD Infrastructure Development Fund: This has been created on similar lines to RIDF to promote and support rural infrastructure.

Warehouse Infrastructure Fund (WIF): This fund was created by the Union Government in the year 2013. It was created along with NABARD with a corpus of Rs 5000 crore. It helps in providing loans in scientific warehousing infrastructure or agricultural commodities in the country.

Food Processing Fund: NABARD is the main bank providing this fund to the factories and agencies dedicated to the food processing sector that most hold the export surplus from the country.

Direct Lending to Co-operative Banks: NABARD directly provides loans and financial assistance to these banks in the times when they face major NPAs in the bank.

Producer Organisation Development Fund: NABARD is the setting agency of this fund with initial capital funding of Rs. 50 crore to support and finance the Producer’s Organisations and Primary Agriculture Credit Societies (PACs) to be able to operate as multi-service centers.

Producer’s Organisations: It is a legal body formed by primary producers like farmers, fishermen, milk producers, weavers, etc. APO can be a company, co-operative society, or any legal firm which provides sharing of profits among its members.

Primary Agriculture Credit Societies (PACs): It is a small credit union in India. It primarily works on the grass root levels in different villages of the country.

It provides a small number of loans to the farmers and recovers them only after the completion of the cultivation season.

NABARD’s Contribution to Development

NABARD is an agency or you can say an institution that has been formulated to be dedicated towards the rural development initiatives. Some of them are discussed below:

Kissan Credit Card Scheme for Farmers:  It was designed by NABARD in association with RBI in the year 1998 with the strategic aim of providing crop loans to the farmers with these credit cards.

RuPay Kisan Cards:  NABARD has been at the forefront in utilizing the latest technology available for helping farmers and rural development institutions providing these cards to all of their farmer clients.

Tribal Development Programme:  NABARD also participates in the development funding for tribal areas that are located remote to the rest of the country and are bearing a huge fall back of living in forest areas with very least development aspects.

Umbrella Programme on National Resource Management:  This program also works in enhancing investments in rural areas. It was established in 2007 with the vision to create business opportunities and enabling Rural Communities to utilize their natural resources.

Microfinance Sector:  NABARD launched the Self Help Groups Bank Linkage Programmes in the year 1992. Over 23 lakh SHG were linked to this program and have gained financial assistance in their respective fields.

Skill Development:  NABARD has been constantly funding youth development and skill generating programs to promote the feeling of entrepreneurship among the young generation.

Incubation Centres:  In the wake of commercializing innovations and promoting more research in the agricultural sector, NABARD extended its support to the educational institutes like Haryana Agricultural University, Hissar and Tamil Nadu Agricultural University, Madurai for establishing Agri Incubation Centres with total funding of Rs 23.99 crore.

Challenges For NABARD

NABARD can be considered as an offspring of RBI. Just like RBI provides financial assistance to the whole country, NABARD is its subordinate that focuses on providing financial aid for the rural areas of the country.

NABARD also shares the work culture, ethics, and other development orientations with RBI.

Challenges that have been faced by the bank are:

1. Snapping off the partnership in 51% shareholding of NABARD between the Central Government and RBI has led to a great disadvantage to both NABARD and RBI also.

2. This step has weakened the position and hold of RBI in many crucial matters of the bank.

3. A strong relation was the back end between the parent firm and its subordinate institutes that formulate strategies in compliance with any shortcomings. But this amendment led to the breaking point between NABARD and RBI.

4. The cost of financing has increased since the Market borrowings of NABARD are almost 80% of its resources.

5. The North-Eastern states have been receiving a very little share from NABARD. It only gets 1% of the credit from NABARD which makes the farmers bound under the loan of money lenders.

These are just some major highlights regarding the challenges faced by NABARD. If we try to penetrate in the system and the links in different states there will be a whole mountain of challenges that NABARD will have to overcome in order to provide equal and fair financial assistance to rural development projects.


Indian Economy is an agrarian economy. More than 75% of the population depends of agriculture. Rural infrastructure investments aim at raising the socio-economic status of the people living in Rural India.

These investments highly promote to their escalated standards of living as the urban citizens and also help them generate decent incomes from the government schemes specially formulated for them.

NABARD being an apex institution for providing credit facilities to Indian Rural Economy; it can highly contribute to eradicate problems like poverty, socio-economic barriers and also help in empowering rural India. We tried to cover all the important aspects of this topic and provide a deep and thorough knowledge to our readers regarding National Bank for Agricultural and Rural Development.

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