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In this article, Nritika Sangwan, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses on the services undertaken by NABARD

According to the 2011 Census, 68.84% of the Indian Population resides in rural India and it is no surprise that approximately 70% of this rural population does not possess bank accounts. Consequently, financing in rural India is majorly controlled by informal sources like private moneylenders, traders and commission agents who are known to exploit these debtors. As a result, the Central and State Governments have started to make significant efforts to provide institutional credit to rural areas.


The National Bank for Agriculture and Rural Development (NABARD) is one of the prime financial institutions in India which provides developmental credit in rural areas. Its mission is to “promote sustainable and equitable agriculture and rural prosperity through effective credit support, related services, institution development and innovative initiative.” NABARD has a total of 336 District Offices and six training centres in India and a special cell at Srinagar. It has many branches across India with its headquarters at Mumbai. The head of NABARD Regional Office (RO) is the Chief General Manager (CGMs) and there are various top executives at the head office which include:

  1. The Executive Directors (ED)
  2. Managing Directors (MD) and
  3. The Chairperson.

The main responsibilities of NABARD comprise resolving matters concerning policy and to plan and manage operations for credit in the field of agriculture and other economic activities.


NABARD was set up on July 12, 1982, to execute the National Bank for Agriculture and Rural Development Act 1981. Its establishment was based on the recommendations of B. Sivaraman Committee. It replaced:

  • The Agricultural Credit Department and Rural Planning and Credit Cell of Reserve Bank of India
  • The Agricultural Refinance and Development Corporation

The authorized capital of NABARD was raised six times; it initially maintained only INR 100 crores which was revised to INR 30,000 crore. The Government of India owns 100% share in the paid-up capital, which stands at Rs.6,700 crore.

The International affiliates also advise and provide monetary aid to NABARD. Organizations such as World Bank associated organizations and other rural and agricultural developmental agencies work with it for the upliftment of the rural people.  


NABARD works towards uplifting the rural and agricultural sector and prepares grounds for rural and social innovations. It plays a prime role in framing development initiatives for our country’s rural sector industry, cottage industry, and small-scale industries. It reinvests the profits earned through developmental spending towards research activities to frame better development initiatives for rural and agricultural fields. This has helped NABARD gain trust among rural communities.

For rural and agricultural development, NABARD has partnered with many national and international organizations and has over 4000 partner organisations which assist it to plan and execute rural and social innovation. Some of the initiatives of NABARD include – SHG Bank Linkage program, initiative to improve the living standard of tree-based tribal communities, forming farmer clubs to educate and motivate farmers to incorporate crop productivity initiatives, programs for soil and water conservation,

NABARD has been consistently maintaining its position of the highest taxpayer, and figures among top 50 taxpayers to the exchequer. Together with its associated economies, NABARD carries out and supports integrated development for the rural sector.

Role of NABARD

One of the most important funding agencies to finance the institutions that provide credits for the purpose of investment and production to promote various development activities in rural India is NABARD. Its role is to coordinate rural finance actions of all agencies engaged in developmental work at the field level and maintaining a constant contact with the Government of India, State Governments, the Reserve Bank of India (RBI) and other national institutions interested in policy formulation and refinancing the institutions that finance the rural sector. It adopts measures like framing rehabilitation plans, restricting the credit institutions, etc, for the creation of institutions that improve the absorption capacity of the credit system. It regulates the institutions that financially aid the rural economy and controls its client institutes. Furthermore, training services for the institutions working in the field of rural elevation are also provided by NABARD. It also regulates cooperative banks and RRBs and manages talent acquisition via IBPS CWE.

NABARD undertakes to refinance the following:

    1. State co-operative agriculture and rural development banks (SCARDBs),
    2. State co-operative banks (SCBs),
    3. Regional rural banks (RRBs),
    4. Commercial banks (CBs)
    5. Other financial institutions approved by RBI.

Even though individuals, partnership concerns, companies, State-owned corporations or co-operative societies can be the beneficiaries of investment credit, production credit is more often than not, given to individuals.

NABARD has to its credit and important initiative, which is the ‘SHG Bank Linkage Program’. The purpose of this initiative is to encourage banks to lend funds to self-help groups. Since these self-help groups mainly constitute women, they have become an essential Indian tool for microfinance. Under this program, 3.3 crore members of 22 lakh self-help groups were linked to the credit in March 2006.

In addition to this, NABARD has also undertaken various Natural Resource Management programs which cover several avenues such as watershed development, tribal development and agricultural innovation through dedicated funds created for this purpose.


NABARD is required to supervise and regulate the functions of RRBs, i.e. the Regional Rural Banks and the cooperative banks which account for 50% of the rural credit. NABARD undertakes to make sure that a strong credit distribution system is in place to provide rural credit that can suffice and support the growing and diversifying credit requirements for agriculture and rural development.

Activities and services undertaken by NABARD to perform various functions

Activities to discharge Credit Functions

  • NABARD formulates the guidelines for the functioning of the financial institutions in rural India.
  • It issues credit facilities to these financial institutions
  • Supervises the flow of rural credit at the ground level.
  • It devises annual credit plans for several districts in order to identify credit potential.

Activities to discharge Developmental Functions

  • It assists the rural credit institutions like RRBs and cooperative banks to formulate development actions schemes for themselves.
  • To better the affairs of the Regional Rural Banks, NABARD assists them in signing Memorandums of Understanding with the Governments and cooperative banks.
  • NABARD also keeps a check to ensure that development action plans of banks are being implemented properly.
  • It also extends its support financially to aid the training institutes of commercial banks, RRBs and cooperative banks.
  • For the improvisation of the management information system, development of human resource and to computerize the operations of cooperative banks, NABARD extends its financial support.

Activities to discharge Supervisory Functions

  • As per the provisions of Banking Regulation Act, 1949, NABARD, inspects RRBs and Cooperative Banks.
  • It volunteers to carry out inspections of the non- credit cooperative societies and the State Cooperative Agriculture and Rural Development Banks (SCARDBs).
  • It gives its recommendations and suggestions to the Reserve Bank with regards to licensing of Cooperative Banks and setting up of new branches of RBBs and State Cooperative Banks.
  • Apart from off-site surveillance, it undertakes portfolio inspections of RBBs and Cooperative Banks.


In a nutshell, NABARD for fulfilling its role as a facilitator of rural prosperity and is entrusted with the refinancing of credit institutions in rural areas, stimulating institutional development and evaluation and inspection of customer banks.

NABARD introduced a novel direct lending facility under ‘Umbrella Programme for Natural Resource Management’ in 2007-2008. This Programme offers loans at reasonable rates of interest to provide financial aid for natural resource management projects. Already loan amount of about Rs 1000 crore has been granted to 35 projects. Some of the projects that have been sanctioned are: (i) Collection of honey in Maharashtra by the tribal community (ii) Tussar value chain by a women producer company (‘MASUTA’) (iii) eco-tourism in Karnataka etc.

With regards to rural developments, the contribution of NABARD has been exceptional. NABARD, having been set up as the apex Development Bank mandating the facilitation of credit flow by the Government of India for improving and promoting agriculture and other village industries, sanctioned agricultural credit flow of Rs 1,57,480 crore in 2005-2006. It is expected that the GDP will grow at 8.4%. The Indian economy in its entirety is ready for stronger and faster growth in the coming years. NABARD’s role in the overall development of India in general and rural and agricultural in particular is very vital.

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