National Bank for Agriculture and Rural Development (NABARD)
Development bank NABARD focuses mostly on the rural area of the nation. It is the premier banking organisation that finances rural and agricultural development. The nation’s financial capital, Mumbai, is where it has its headquarters.
It is in charge of creating tiny cottage industries and rural or village initiatives.
It was founded as a legislative body in 1982 in accordance with the National Bank for Agriculture and Rural Development Act of 1981.
Functions
Through various goal-oriented departments, which can be broadly divided into three heads: Financial, Developmental, and Supervision, NABARD’s programmes seek to create an empowered and financially inclusive rural India.
It offers assistance with refinancing for developing rural infrastructure.
In order to direct and inspire the banking sector to meet these objectives, it creates district-level credit programmes.
It manages Regional Rural Banks (RRBs) and Cooperative Banks, assists them in establishing ethical banking procedures, and incorporates them into the CBS (Core Banking Solution) platform.
Core Banking Solution (CBS) is a network of branches that allows customers to access and manage their accounts from any branch of the bank that is a part of the CBS network, regardless of where they keep their accounts. The client is no longer a branch’s client. He registers as a client of the bank.
It is involved in the creation and execution of the development programmes of the Union government.
It aids in the development of a marketing platform for handcraft craftsmen so they may sell their products.
NABARD has a number of international collaborations, including those with world-renowned organisations and organisations connected to the World Bank, which are pioneering in the agricultural and rural development sectors.
These overseas partners serve as vital consultants, offering advice and financial support aimed at improving rural peoples’ conditions and various agricultural operations.
RBI and NABARD
The Reserve Bank of India is the country’s central bank and has the only authority to oversee and control various institutions and banks in the financial sector.
NABARD, as outlined in the Banking Regulation Act of 1949, is also included in this.
In collaboration, RBI and NABARD carry out a variety of regulatory and developmental tasks.
The Board of Directors of NABARD is given three directors by RBI.
Regarding the issuance of licences to Cooperative Banks building new branches by State Cooperative Banks and Regional Rural Banks, NABARD makes recommendations to the Reserve Bank of India (RRBs).
Challenges
As a child of the RBI, NABARD shares the ethos, work culture, and development focus of its parent organisation.
A substantial disadvantage has resulted for both the RBI and NABARD as a result of the breaking of this link (the transfers of the 0.4% equity of the RBI in NABARD to the Union Government under the NABARD Act 2017).
Reduced RBI’s ability to participate in its activities in any way.
At a crucial time when the nation is dealing with a severe agrarian crisis, a solid partnership between the Central Bank and the development institution would aid the cause of agriculture and rural development.
Since market borrowings account for 80% of NABARD’s resources, financing costs have increased. Cooperative structures that are member-driven and debureaucratized must fill in the institutional credit gaps that commercial banks have left unfilled.
A limited portion of the NABARD’s credit funds have been allocated to the northeastern states. Farmers in the northeast are ensnared in the web of money lenders since the region only receives 1% of the loans.
Bank penetration in the state affected by the insurgency is low and has to be increased.
Conclusion
More than 75% of Indians are dependent on agriculture. Investments in rural infrastructure improve the standard of living and income of rural residents, which contributes to their socioeconomic advancement.
An good opportunity exists for poverty reduction and socio-economic empowerment in rural India thanks to NABARD, which is the leading institution for providing credit facilities and building capacity for the Indian economy.
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