National Bank for Agriculture and Rural Development (NABARD), History, Functions

National Bank for Agriculture and Rural Development (NABARD) is India’s apex financial institution responsible for financing and developing agriculture, rural infrastructure, and allied activities. Established in 1982, NABARD provides credit to rural banks, cooperatives, and other financial institutions to support farmers, rural businesses, and self-help groups. It plays a crucial role in implementing government schemes, promoting rural entrepreneurship, and enhancing financial inclusion. NABARD also focuses on agricultural innovation, rural development projects, and sustainable farming practices. Through policy advocacy, refinancing support, and capacity building, NABARD strengthens India’s rural economy and contributes to long-term agricultural growth.

History of NABARD:

National Bank for Agriculture and Rural Development (NABARD) was established on July 12, 1982, following the recommendations of the Shivaraman Committee. It was created to strengthen rural credit systems and support India’s agricultural and rural development. NABARD was formed by merging the Agricultural Refinance and Development Corporation (ARDC), the Rural Planning and Credit Cell (RPCC) of the Reserve Bank of India (RBI), and the Agricultural Credit Department (ACD) of RBI.

Before NABARD, rural credit was managed primarily by commercial banks and cooperative institutions. However, the need for a dedicated institution to finance agriculture and rural infrastructure led to NABARD’s creation. The Indian government passed the NABARD Act, 1981, to establish it as an autonomous financial institution under the supervision of the RBI.

During its early years, NABARD focused on refinancing rural credit institutions, supporting cooperative banks, and promoting self-help groups (SHGs). Over the years, it expanded its role to include direct lending, financial inclusion, rural entrepreneurship, and sustainable development projects. NABARD played a significant role in implementing government schemes like the Kisan Credit Card (KCC), Rural Infrastructure Development Fund (RIDF), and SHG-Bank Linkage Programme.

Today, NABARD continues to be a key player in India’s rural development, focusing on digital transformation, climate resilience in agriculture, and rural financial empowerment. It remains a crucial institution in strengthening the rural credit system and ensuring inclusive economic growth.

Functions of NABARD:

• Refinance Support to Rural Banks

NABARD provides refinance assistance to rural financial institutions such as regional rural banks (RRBs), cooperative banks, and scheduled commercial banks. This refinancing helps these institutions extend credit to farmers, rural entrepreneurs, and self-help groups (SHGs). By offering long-term and short-term refinance, NABARD ensures that rural credit flows efficiently. It also supports microfinance institutions and NGOs to promote financial inclusion. This function strengthens the rural credit delivery system and enables small and marginal farmers to access affordable financial resources.

• Rural Infrastructure Development

NABARD plays a key role in developing rural infrastructure by financing projects under the Rural Infrastructure Development Fund (RIDF). This fund supports irrigation, roads, bridges, rural markets, warehouses, and sanitation projects. NABARD collaborates with state governments, panchayats, and other rural institutions to improve infrastructure that enhances agricultural productivity and rural livelihoods. By funding essential infrastructure, NABARD boosts economic activities in rural areas, making agricultural and non-agricultural businesses more viable.

• Credit Planning and Monitoring

NABARD is responsible for preparing and monitoring the rural credit plans for each district in India. It formulates Potential Linked Credit Plans (PLPs), which assess credit requirements for different agricultural and rural activities. These plans guide commercial banks, RRBs, and cooperative banks in setting their lending priorities. NABARD ensures that rural credit is effectively distributed and aligned with national development goals. This function helps in credit flow optimization and ensures that funds reach sectors that need them the most.

• Promotion of Sustainable Agricultural Practices

NABARD supports sustainable agriculture through initiatives such as watershed development, organic farming, and climate-resilient agriculture. It finances projects that promote soil conservation, afforestation, and water resource management. NABARD also funds the adoption of modern farming techniques, solar-powered irrigation, and energy-efficient farming equipment. By encouraging environmentally friendly agricultural practices, NABARD contributes to long-term rural prosperity and food security.

• Financial Inclusion and Microfinance

NABARD promotes financial inclusion by supporting the Self-Help Group (SHG) Bank Linkage Programme, which empowers rural women and small entrepreneurs. It also helps in the development of microfinance institutions (MFIs), ensuring that small borrowers can access credit without collateral. NABARD works with banks, NGOs, and cooperatives to enhance rural banking services, digital transactions, and doorstep banking. These efforts help in reducing rural poverty and promoting self-employment.

• Supervision and Regulation of Rural Banks

NABARD regulates and supervises regional rural banks (RRBs) and cooperative banks to ensure their financial health. It monitors their capital adequacy, risk management, and credit disbursement practices. NABARD also provides training and capacity-building programs for rural bank staff to improve their efficiency. By ensuring financial discipline and transparency in rural banking institutions, NABARD strengthens the overall rural credit system.

• Support for Rural Entrepreneurship and Skill Development

NABARD promotes rural entrepreneurship by funding skill development programs and training initiatives. It supports agri-business, handicrafts, dairy farming, poultry, fisheries, and rural industries. NABARD also provides venture capital assistance to startups and small businesses in the rural sector. By encouraging self-employment and rural enterprises, NABARD helps generate income and employment opportunities in villages.

• Policy Advocacy and Research

NABARD conducts research and policy analysis on rural finance, agriculture, and rural development. It collaborates with government agencies, academic institutions, and international organizations to develop policies that benefit the rural economy. NABARD’s studies help in formulating better credit policies, agricultural reforms, and rural development strategies. By influencing policy decisions, NABARD ensures that rural financial systems are well-aligned with national growth objectives.