As we all know, the development in the rural areas has always been a lot slower than the urban areas, given the lack of resources and the lack of proper institutions. In an effort to improve the financial operations, promote sustainable agriculture, and enhance rural development, the government of India established NABARD. To understand the concept behind NABARD and to know about its roles and functions, let’s go through it in a little more detail.
What is NABARD?
National Bank for Agriculture and Rural Development or NABARD is the main regulatory body in the country’s rural banking system and is considered as the peak development finance institution which is established and owned by the government of India. This bank aims to provide and regulate credit to the rural areas, which will be a first step towards enhancing the rural development in the country.
NABARD has been given many responsibilities related to the formulation of policies, planning, and operations in agriculture and financial development. NABARD carries these responsibilities efficiently and works towards promoting and developing man industries in the rural areas like the agriculture industry, cottage industries, other small scale industries, and rural crafts in an effort to create better infrastructure and better employment opportunities for the people living in these regions.
The Government of India established this bank considering all the guidelines of the National Bank for Agriculture and Development Act of 1981. To put it in simple terms, you can say that the National Bank for Agriculture and Rural Development or NABARD is the main and specific bank of the country for agriculture and rural development.
Formation of NABARD
NABARD's establishment took place on 12 July 1982 as a central regulating body for agriculture financing and rural section. The government of India established NABARD under the outlines of the National Bank for Agriculture and Rural Development Act 1981.
What is the role of NABARD?
Being the main regulatory body for agriculture and rural development, the National Bank for agriculture and rural development or NABARD has many important roles to play. These roles are as follows:
The National Bank for Agriculture and Rural Development or NABARD provides investment and production credit for various developmental activities and projects taking place in rural areas, which will help enhance rural development and facilitate rural prosperity. As this bank is the center or the main financing agency for all such developmental projects, the responsibility falls on the bank to ensure that the projects receive the proper financing and promotion.
The responsibility of coordinating all the financing activities in the rural areas with all institutions involved in the developmental projects falls on the NABARD. It has to stay in touch with all major institutions, including the Indian government, Reserve Bank of India or RBI, state governments, or any other major institutions that may be a part of the ongoing agriculture or rural development activities.
NABARD takes action towards monitoring, formulating strategies for the rehabilitation schemes, restructuring credit institutions and training personnel, etc., through making an improvement in the credit delivery system’s absorptive capacity and building a strong institution with an aim to achieve the same.
The National Bank refinances all the financial institutions that finance the rural development projects for Agriculture and Rural Development or NABARD as it is the specific bank for looking after all agriculture and rural developments in the country.
After the bank has refinanced a developmental project or activity taking place in the rural region, the responsibility of monitoring and evaluating the project or activity also falls on the NABARD.
NABARD keeps all the client institutions in check and provides training facilities to all the institutions that are working towards rural upliftment or want to work for rural development in the future.
Along with all the above roles, the National Bank for Agriculture and Rural Development also keeps the portfolio of the Natural Resource Management Programmes.
NABARD also helps Self-Help Groups or SHGs through its SHG bank linkage programme that will boost the activities of SHGs in the rural areas and will be a helpful step in the rural development.
Functions of NABARD
Now that we have seen what NABARD stands for and the roles that it has to perform, let us go through the functions performed by the bank. In an effort to keep up with its roles, the National Bank for Agriculture and Rural Development undergoes four central functions. These four central functions performed by the NABARD are—credit functions, financial functions, supervisory functions, and development functions. To understand all these four functions performed by the NABARD, let’s go through all of them one by one.
Credit functions As the main provider of credit facilities in rural areas, the National Bank for Agriculture and Rural Development or NABARD performs the credit functions. Under these functions, the bank provides, regulates, and monitors the credit flow in the rural parts of the nation.
Financial functions NABARD has many client banks and institutions that help and assist in the developmental activities in rural areas. By performing the financial functions, the National Bank for Agriculture and Rural Development or NABARD provides loans to these client banks and institutions like handicraft industries, food parks, processing units, artisans and many more.
Supervisory functions As already discussed above, NABARD is the apex institution that looks after agriculture and rural development. This is why the responsibility of monitoring and regulating all the development activities and projects fall on this institution. Given this role, the NABARD performs supervisory functions in which it has to keep a check on all the client banks, institutions, credits and non-credits societies that are a part of the developmental tasks taking place in the rural areas.
Development Functions As you must be pretty much aware by now that the primary role of the National Bank for Agriculture and Rural Development or NABARD is to focus on developing sustainable agriculture and promote rural development, the bank performs development functions in an effort to stay true to this role. Under developmental functions, the NABARD helps rural banks prepare action plans for the developmental activities.
The National Bank for Agriculture or Rural Development or NABARD performs all the above roles and functions efficiently and has a great impact on the agricultural progress and rural development in the country.
