Nabard - Indian Economy
Introduction
NABARD, or the National Bank for Agriculture and Rural Development, is the nation's top source of funding for rural and agricultural development.
What Is Nabard?
• It was created in July 1982 by fusing the Reserve Bank of India's Rural Planning and Credit Cell, the whole Agriculture Refinance and Development Corporation, and the Agriculture Credit Department.
• To satisfy the credit demands of agriculture and rural development, the National Bank for Agriculture and Rural Development was founded.
• In order to augment funding for all rural credit institutions and to coordinate their activities, NABARD was intended to serve as the national apex institution for the whole rural credit system.
• NABARD started out with a share capital of 100 crores, and 1400 crores from the RBI's Agricultural Credit Funds were transferred to it. Historical Background
• The Indian government knew from the start of its planning process how crucial institutional credit was to strengthening the rural economy.
• As a result, the Reserve Bank of India (RBI) established the Committee to Review the Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) at the Government of India's request to look into these crucial concerns.
• The Committee was created on March 30, 1979, with B serving as its head. Sivaraman, a former official with the Planning Commission of the Indian government.
• The interim report of the Committee, submitted on November 28, 1979, underlined the need for a new organizational structure to give credit-related concerns associated to rural development undivided attention, powerful direction, and pointed focus.
• Its solution was to create a unique development financial institution to satisfy these ambitions, and Parliament subsequently approved the creation of the National Bank for Agriculture and Rural Development (NABARD) by Act 61 of 1981.
• On July 12, 1982, NABARD was created by transferring the RBI's agricultural credit and Agricultural Refinance and Development Corporation's (ARDC) refinancing duties.
• On November 5th, 1982, the late Prime Minister Smt. It was given to the nation's service by Indira Gandhi.
• As of March 31, 2020, it had a paid-up capital of Rs. 14,080 crore after being created with an initial capital of Rs. 100 crore.
• Because of a change in the share capital composition between the Government of India and the Reserve Bank of India, the Government of India now owns all of NABARD.
Functions
Financial Activities
• Through refinancing for various agricultural and related operations like land development, plantation and horticulture, minor irrigation, farm mechanization, and animal husbandry, NABARD offers financial support to the agricultural industry.
• Refinancing is available to commercial banks, state cooperative banks, regional rural banks, and state land development banks.
• Additionally, NABARD has the authority to make loans and advances using stocks and promissory notes as security.
• In addition to refinancing, NABARD also provides State Cooperative Banks and Regional Rural Banks with short-term loans to finance seasonal agricultural operations, crop marketing, and input purchases.
• Developing Activities
• NABARD engages in a range of developmental initiatives, such as creating institutions, creating credit programmes, and promoting science and technology.
• Additionally, it creates expertise to handle agricultural and rural concerns and coordinates rural credit agencies.
• To support and advance agricultural and rural development research, including the provision of research and training facilities, NABARD has established the Research and Development Fund (RDF).
• The "Reserve Fund" or any other fund that the NABARD Central Board considers necessary may also be established.
Supervisory Roles
• The Regional Rural Banks and Co-operative Banks were subject to inspections by NABARD under the Banking Regulation Act of 1949.
• The RBI must receive NABARD's recommendation before it will allow the opening of a new branch.
Governance
• The management of NABARD is handled by a board of directors. The Board of Directors is selected in accordance with the NABARD Act by the Indian government.
• The Central Government will choose the Chairperson and all other directors (except from those chosen by shareholders and Central Government representatives) after consulting with the RBI.
• An Executive Committee made up of the required number of directors (referred to as Executive Directors) may be chosen by the Board of Directors.
• The Executive Committee is responsible for carrying out any tasks that the Board assigns or prescribes for it.
• The Union Government was able to enhance NABARD's authorized capital from Rs. 5,000 crore to Rs. 30,000 crore thanks to the NABARD (Amendment Bill) 2017, which was enacted in 2018.
Contribution/Achievements of Nabard
Financial Activities
• Refinance: During the 2020–21 fiscal year, NABARD disbursed a total of 1, 30,964 crores and 92,786 crores to assist banks' ST and LT financing, respectively.
• Short Term Loans - Financial institutions offer agricultural loans to farmers to help them produce crops, which helps to ensure the nation's food security.
• NABARD has given Cooperative Banks and RRBs a total of 95,731 crores for seasonal agricultural operations and 11,733 crores for non-seasonal agricultural activities during the 2020–21 fiscal year.
• Additionally, NABARD opened a fresh window of support for SFBs, and North East SFB was given access to a 49 crore short-term refinancing facility through this facility.
• Long Term Loans - The long-term refinance programme of NABARD offers credit to financial institutions for a variety of purposes, including both agricultural and non-agricultural operations, with terms ranging from 18 months to more than 5 years.
• In order to solve the problem of rural migration and support agriculture and the rural sector after the Covid period, NABARD established 4 specific refinance programs.
• Plan for Micro Food Processing Activities, Plan for Beneficiaries of the Watershed and Wadi Project Areas, Plan for Water, Sanitation and Hygiene (WASH), and Plan for PACS as MSC.
• In order to ensure an unrestricted flow of credit to farmers so they could carry out harvesting and production activities during the lockdown, Special Liquidity Facility - NABARD disbursed 16800 crore to Cooperative Banks, 6700 crore to RRBs, and 2000 crore to NBFC-MFIs. As a result, India outperformed in Agriculture production even during the lockdown.
• The Reserve Bank of India established the Rural Infrastructure Development Fund (RIDF) in collaboration with NABARD in 1995–1996 in response to the scheduled commercial banks' inadequate lending to the priority sector for financing rural infrastructure projects.
• Long-Term Irrigation Fund - The Long-Term Irrigation Fund (LTIF), distributed over 18 states, was introduced in the Union Budget 2016–17 with the goal of advancing 99 identified medium and big irrigation projects by December 2019.
The Indian government then authorized funding for four further LTIF projects, including:
• Andhra Pradesh's Polavaram Project, Bihar's and Jharkhand's North Koel Project, Punjab's Relining of Sirhind and Rajasthan Feeder Canal Project, and Punjab's Shahpur Kandi Dam are other examples.
• NABARD approved a sum of 20,000 crores for the Pradhan Mantri Awaas Yojana - Grameen (PMAY-G) and released 19999.80 crores to the National Rural Infrastructure Development Agency (NRIDA) as part of PMAY-G period 2020–21.
• The money was directed towards PMAY-G, which aims to give pucca houses with essential utilities to all homeless households by 2022, including those residing in kutcha and run-down homes.
• Micro Irrigation Fund (MIF): This fund's goal is to assist State Governments. in raising more funds to increase the scope of micro irrigation and encourage its implementation outside the parameters of PMKSY-PDMC.
• NABARD Infrastructure Development Assistance (NIDA) – For the purpose of funding rural infrastructure, NABARD Infrastructure Development Assistance (NIDA) makes flexible, long-term loans available to well-run public sector organizations.
• NIDA provides funding for projects relating to social and commercial infrastructure, renewable energy, power transmission, drinking water and sanitation, and rural connectivity.
• Credit Facility to Federations (CFF) - CFF offers short-term credit support to state government organizations like agricultural marketing federations, civil supply corporations, dairy cooperatives, /milk unions or federations, etc., for input supply, value and supply chain management, as well as procurement, processing, and marketing of agricultural commodities.
• Dairy Processing and Infrastructure Development Fund (DIDF) - The program's goals include infrastructure upgrading and expansion for milk processing and value addition, as well as ensuring that primary producers receive the highest possible price.
• The NABARD-funded Fisheries and Aquaculture Infrastructure Development Fund (FIDF) will provide public infrastructure funding for a variety of facilities, including training infrastructure, modernized State fish seed farms, modern fish markets, disease diagnostic labs, and aquatic quarantine facilities.
• Rural Infrastructure Assistance to State Governments (RIAS): NABARD has introduced a new product with a 15000 crore starting corpus called "Rural Infrastructure Assistance to State Governments (RIAS)".
• Using the 5-J approach—Jan (human being), Jal (water), Jameen (land), Janwar (livestock), and Jungle (forest)—NABARD will offer financial support to State Governments in the Eastern Region for building infrastructure that supports rural livelihoods.
• In order to address the country's needs for a scientific warehousing infrastructure for agricultural commodities, the Government of India established the Warehouse Infrastructure Fund (WIF) in 2013–14 with NABARD with a capital of 5,000 crores.
• Food Processing Fund - The Government of India established the Food Processing Fund (FPF) in NABARD in 2014–15 with a corpus of 2,000 crores with a view to supporting food processing firms in the organized sector on a cluster basis.
• NABARD undertook the task of developing a web-based agricultural storage information system that not only records the specifics of the infrastructure but also records the geospatial coordinates.
• Farmers, traders, and producers can use the Farmers APP (KisanBhandar), which was created for Android and iOS-compatible smartphones, to find the geotagged assets nearby.
Developmental Purposes
• The Kisan Credit Card Scheme was introduced in 1998 in partnership with the RBI to offer crop loans.
• All farmer clients were issued RuPay Kisan Cards in an effort to transform the rural finance sector through technology.
• Watershed Development - As of March 31, 2021, 1,914 of the 3401 watershed development projects that had been approved and covered a total project area of 23.43 lakh hectares had been successfully finished.
• Tribal Development: In 2003–2004, NABARD established the Tribal Development Fund (TDF) with a corpus of 50 crores from its revenues.
• As of March 31, 2021, 835 projects totaling 5.60 lakh families and 5.33 lakh acres of land had been approved.
• Climate Change Adaptation Projects: NABARD distributed 0.97 crores under the Climate Change Fund in 2020–21 for promoting and supporting initiatives aimed at reducing the effects of climate change, implementing adaptation and mitigation strategies, raising awareness of the issue, sharing knowledge, and promoting sustainable development.
• 334 UPNRM projects totaling 10 significant natural resource management sectors have been approved nationwide under the umbrella programme for natural resource management.
• Financial Inclusion: As of March 31, 2021, a total of 4,592.81 crores had been sanctioned, and 2,527.67 crores had been allocated to various programmes carried out under the Financial Inclusion Fund (FIF), which was created to increase demand for banking services and develop physical infrastructure for payments and acceptance.
• NABARD had introduced the Self Help Group-Bank Linkage Programme (SHG-BLP) in the microfinance sector in 1992. As of March 31, 2021, the scheme had empowered 112.23 lakh Self Help Groups (SHGs) and 13.5 crore rural families in India.
• Project EShakti was established as a pilot on March 15, 2015, with the goal of digitising SHGs.
• Due to the project, bankers are now able to offer SHGs online credit based on a built-in grading system on the site.
• As of the end of March 2021, it has led to an increase in credit connection with banks from 38% groups to 53% groups.
• SHG-based Livelihood Interventions - To promote the micro-entrepreneurship movement, NABARD has introduced the Micro-Enterprise Development Programme (MEDP) and the Livelihood and Enterprise Development Programme (LEDP), which both aim to enhance skills and capacity.
• A structured method has been established by NABARD to address the skill gap in rural India through demand- and outcome-based programmes involving several stakeholders in the skill development ecosystem that lead to wage/self-employment, in line with the goal of the Government of India.
• Marketing Initiatives - NABARD has been providing support for the establishment of Rural Haats and Rural Marts, as well as for the participation of artisans and craftsmen in National/Regional level Exhibitions and Melas, in order to help rural producers in the farm and off-farm sector to market their produce successfully.
• Agri-Business Incubation Centers (ABICs) - In order to create a community that supports agribusiness businesses, NABARD began funding their establishment in 2017–18.
• The programme called for providing assistance to qualifying institutions, such as agriculture universities and other institutions of a like nature, in order to help them establish ABICs and cover the costs associated with operating them for a five-year period.
• The promotion of additional agricultural startups, rural entrepreneurs, and businesses is made possible by this.
• Catalytic Capital Fund - NABARD has established a "Catalytic Capital Fund for supporting Rural and Agri Start-ups" to aid in the development of agribusinesses.
• Credit Linked Capital Subsidy Scheme (CLCSS): NABARD is one of the key organisations charged with carrying out the government of India's Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation of Micro & Small Enterprises.
Challenges
• As a child of the RBI, NABARD shares the ethos, work culture, and development focus of its parent organization.
• Both the RBI and NABARD have suffered significantly as a result of the severing of this link (the transfer of the RBI's 0.4 percent share in NABARD to the Union Government under the NABARD Act 2017).
• As a result, the RBI is now less able to contribute to or take part in its operations.
• At a crucial point in the nation's agrarian crisis, a solid partnership between the central bank and the development institution will boost agriculture and rural development.
• Since 80% of NABARD's resources come from market borrowings, financing has become more expensive.
• The institutional credit holes left by commercial banks must be filled by decentralized, member-driven cooperative institutions.
• The NABARD credit money were distributed to the northeastern states in a limited amount. Farmers in the northeast are caught in a web of moneylenders since they only obtain 1% of credit.
• There should be more bank penetration in states impacted by insurgencies because it is currently low.
Conclusion
More than 75% of Indians work in agriculture. Investments in rural infrastructure raise income levels and improve quality of life for rural residents, hence enhancing their socioeconomic standing. NABARD has a huge chance to reduce poverty and promote socioeconomic empowerment in rural India as it is the leading organization for extending credit and creating capacity to the Indian rural economy.