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NABARD (THE APEX DEVELOPMENT BANK)

National Bank for Agriculture and Rural Developments et up as an apex Development Bank by the
Government of India with a mandate for facilitating credit flow for promotion and development of
agriculture, cottage and village industries etc.

1. National Bank of Agriculture and Rural Development


2. Established – 12 July 1982, Under act of Parliament 1981
3. Headquarter – Mumbai
4. Chairperson – Harsh Kumar Bhanwala
5. It was established under Shri B. Sivaraman committee – The Committee to Review Arrangements
for Institutional Credit for Agriculture and Rural Development (CRAFICARD), set up by the
Reserve Bank of India (RBI)
6. Its apex development bank for promotion and development of agriculture, small-scale industries,
cottage and village industries, handicrafts and other rural crafts and other allied economic
activities in rural areas
7. The initial capital of NABARD was Rs. 100 crore
8. NABARD is a “ MICROFINANCE REGULATORY AUTHORITY”

HISTORY

At the instance of Government of India and Reserve Bank of India (RBI), constituted a committee
to review the arrangements for institutional credit for agriculture and rural development
(CRAFICARD) on 30 March 1979, under the Chairmanship of Shri B.Sivaraman, former member of
Planning Commission, Government of India to review the arrangements for institutional credit for
agriculture and rural development.

The Committee, in its interim report, submitted on 28 November 1979, felt the need for a new organizational
device for providing undivided attention, forceful direction and pointed focus to the credit problems arising
out of integrated rural development and recommended the formation of National Bank for Agriculture
and Rural Development(NABARD).

The Parliament, through Act, 61 of 1981, approved the setting up of NABARD. The bank came
into existence on 12 July 1982 by transferring the agricultural credit functions of RBI and refinance
functions of the then Agricultural Refinance and Development Corporation (ARDC). NABARD was
dedicated to the service of the nation by the late Prime Minister Smt. Indira Gandhi on 05 November 1982.

NABARD was set up with an initial capital of 100 crore. Consequent to the revision in the composition
of share capital between Government of India and RBI, the paid up capital as on 31 March 2015, stood
at 5000 crore with Government of India holding 4,980 crore (99.60%) and Reserve Bank of India 20.00
crore (0.40%).
It has 336 District Offices across the country, one special cell at Srinagar. It also has 6 training
establishments.

MISSION

Promote sustainable and equitable agriculture and rural prosperity through effective credit support, related
services, institution development and other innovative initiatives.

NABARD Refinance Available to-


- State co-operative agriculture and rural development banks (SCARDBs),
- State co-operative banks (SCBs),
- Regional rural banks (RRBs),
- Commercial banks (CBs) and other financial institutions approved by RBI.

While the ultimate beneficiaries of investment credit can be individuals, partnership concerns,
companies, State-owned corporations or co-operative societies, production credit is generally given to
individuals.

NABARD is also known for its 'SHG Bank Linkage Programme' which encourages India's banks to lend
to self-help groups (SHGs). Largely because SHGs are composed mainly of poor women, this has evolved
into an important Indian tool for microfinance. By March 2006, 22 lakh SHGs representing 3.3 core
members had to be linked to credit through this programme.

NABARD also has a portfolio of Natural Resource Management Programmes involving diverse fields
like Watershed Development, Tribal Development and Farm Innovation through dedicated funds set up for
the purpose

IMPORTANT SCHEME UNDER NABARD

1. Solar Scheme

2. Capital Subsidy Schemes for Promoting Solar Photovoltaic Water Pumping Systems for Irrigation
Purpose
3. Capital Subsidy/Refinance Scheme for Installation of Solar Off Grid under Jawaharlal Nehru-
National Solar Mission (JNNSM) of the Ministry of New and Renewable Energy

4. Solar Water Heating System

5. Agricultural Marketing Infrastructure, Grading and Standardization scheme

6. Rural Go-downs Scheme

7. Dairy Entrepreneurship Development Scheme.

Role of NABARD:
 It is an apex institution which has power to deal with all matters concerning policy, planning as
well as operations in giving credit for agriculture and other economic activities in the rural areas.
 It is a refinancing agency for those institutions that provide investment and production credit for
promoting the several developmental programs for rural development.
 It is improving the absorptive capacity of the credit delivery system in India, including monitoring,
formulation of rehabilitation schemes, restructuring of credit institutions, and training of personnel.
 It co-ordinates the rural credit financing activities of all sorts of institutions engaged in
developmental work at the field level while maintaining liaison with Government of India, and
State Governments, and also RBI and other national level institutions that are concerned with policy
formulation.
 It prepares rural credit plans, annually, for all districts in the country.
 It also promotes research in rural banking, and the field of agriculture and rural development.

NABARD FUNCTIONS –
1. It is financing agency for the rural institutions to provide investment & production credit.
2. NABARD helps& regulates the institutions which help the rural economy.
3. NABARD refinances the financial institutions which finance the rural sector.
4. Takes measures towards institution building for improving absorptive capacity. of the credit
delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of
credit institutions, training of personnel, etc.
5. Co-ordinates the rural financing activities of all institutions engaged in developmental work at the
field level and maintains liaison with Government of India, State Governments, Reserve Bank of
India (RBI) and other national level institutions concerned with policy formulation.
6. Undertakes monitoring and evaluation of projects refinanced by it.
7. NABARD also prepares guidelines for promotion of group activities under its programs and
provides 100% refinance support for them.
8. It is making efforts to establish linkages between Self-help Group(SHG) that are organized by
voluntary agencies for poor and needy in rural areas and other official credit agencies.
9. It refinances to the complete extent for those projects that are taken under the “National Watershed
Development Programme” and the “National Mission of Wasteland Development”.
10. It also supports Vikas volunteer Vahini programs which offer credit and development activities to
poor farmers.
11. It also inspects and supervises the cooperative banks and RRBs to periodically ensure the
development of the rural financing and farmers’ welfare.
12. NABARAD also recommends about licensing for RRBs and Cooperative banks to RBI.
13. NABARD also provides assistance and support for the training and development of the staff of
various other credit institutions that are engaged in credit distributions.
14. It also runs programs for agriculture and rural development.
15. It is engaged in regulations of the cooperative banks and the RRB’s, and manages their talent
acquisition through IBPS CWE conducted across the country.

Reserve Bank of India (RBI)


I. RBI established on April 1, 1935 under RBI Act 1934 (recommendations of John Hilton Young
Commission 1926 – called Royal Commission on Indian Currency and Finance), is the central bank of the
country and was nationalized w.e.f Jan 01,1949.

II. Originally it was a shareholders’ bank which was taken over by the Central Govt. under Reserve Bank
(Transfer of Public Ownership) Act 1948 (paid up capital Rs. 5 cr).

III. RBI’s central office is in Mumbai.

IV. Urjit R. Patel is the current and 24th Governor of Reserve Bank of India.

V. Presently, 3 Deputy Governors of RBI. These are-


 R.Gandhi
 SSMundra
 N.S Vishwanathan

FUNCTIONS OF RBI:

Issuance of currency: RBI is the authority in India to issue currency notes (called bank notes) under
signatures of Governor. (One rupee note called currency note is issued by the Central Govt. and signed by
Finance Secretary). The stock of currency is distributed with the help of currency chests spread all over
the country.

Banker to Govt.: RBI transacts govt. business and manages public debt. SBI or any other bank is appointed
Agent where RBI does not have office. It provides Ways & Means advances to Govt.

Bankers’ bank: It keeps a part of deposits of commercial banks (as CRR) and acts as lender of last resort
by providing financial assistance to banks. It provides export credit refinance, Liquidity Adjustment Facility
and Marginal Standing Facility.

Controller of Banks: An entity which is to conduct banking business in India has to obtain license from
RBI. It acts as controller of banks by including the banks in 2nd Schedule of the Act. It issues directions,
carries inspection (on-site as well as off-site) and exercises management control.

Controller of credit: RBI can fix interest rates (including Bank Rate) and exercise selective credit controls.
Various tools such as change in cash reserve ratio, stipulation of margin on securities, directed credit
guidelines etc. are used for this purpose. It also carries sale and purchase of securities which are known as
open market operations.

Maintenance of external value: RBI is responsible also for maintaining external value of Indian currency
as well as the internal value. Foreign exchange reserves are held by RBI and it has a wide power to regulate
foreign exchange transactions under Foreign Exchange Management Act (FEMA).
POLICY RATES
Repo Rate
Repo rate is the rate of interest which is levied on Short-Term loans taken by commercial banks from RBI.
Whenever the banks have any shortage of funds they can borrow it from RBI.

Reverse Repo Rate


This is exact opposite of Repo rate. Reverse repo rate is the rate at which commercial banks charge on their
surplus funds with RBI. RBI uses this tool when it feels there is too much money floating in the banking
system.

SLR Rate
SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or
gold or government approved securities (Bonds) before providing credit to its customers.
It is determined as the percentage of total Net Demand and Time Liabilities (NDTL).

Bank Rate
It is defined in Sec 49 of RBI Act 1934 as the ‘standard rate at which RBI is prepared to buy or rediscount
bills of exchange or other commercial papers eligible for purchase under this act’.

Cash Reserve Ratio (CRR)


CRR refers to the ratio of bank’s cash reserve balances with RBI with reference to the bank’s net demand
and time liabilities to ensure the liquidity and solvency of the scheduled banks.

CURRENT RESERVE RATIOS AND POLICY RATES

Bank Rate: 7.00%


Repo Rate: 6.50%
Reverse Repo Rate: 6.00%
CRR: 4%
SLR: 21.00%
MSF: 7.00%

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