National Bank for Agriculture and Rural Development (NABARD)

13/03/2020 4 By indiafreenotes

The Indian economy post independence was an agricultural economy. After independence, the focus was mainly on manufacturing and trade sector of the economy to boost development. However, a major part of the population in India live in the rural sector and so it is important to develop rural financial activities. This is why the government set up NABARD.

As the name suggests NABARD is a development bank focussing primarily on the rural sector of the country. It is, in fact, India‘s apex development bank. It is one of the most important institutions in the country. NABARD is responsible for the development of the small industries, cottage industries, and any other such village or rural projects.

Established on 12th July 1982, it had an initial capital of 100 crores. The bank is under the supervision of a Board of Directors which the Government of India will appoint. The headquarters of NABARD is in Mumbai but it has many branches and regional divisions.

NABARD is instrumental in the development and efficiency of the current rural credit system. Over half the credit in the rural region comes from Co-operative banks and Regional Rural Banks. NABARD is responsible for regulating and supervising the functioning of such banks. Over the years NABARD has been pushing for development in the credit schemes for rural populations to meet their new credit requirements.

Other than meeting credit requirements of the rural sector NABARD is also instrumental in social innovations and projects. It partners with various organizations for many innovative projects such as SHG-Bank linking, innovative schemes for water and soil conservation. Over the last three decades, the institution has gained goodwill and trust in the farmers and rural communities.

Functions of NABARD

Let us take a look at some of the main functions of this organization. It basically performs three kinds of roles, i.e. credit functions, development functions, and supervisory functions.

  • Frames the policy for rural credit in the country for all financing institutions
  • National Bank for Agriculture and Rural Development will itself provide finance and refinancing facilities to the banks and rural regional banks
  • Identification of credit potential and preparation of the credit plans for all districts
  • It also helps all regional banks and institutes under its governance with the preparation of their own credit plans and policies
  • Helps Regional Rural Banks establish an agreement with State Governments and other Co-op Banks and institutions
  • It will also monitor the implementation of such plans and track their progress
  • Helps banks improve their MIS system, modernize their technology, develop human resources etc
  • As per the Banking Regulation Act 1949, NABARD has to conduct the inspection of Regional Rural Banks and other Co-op banks
  • It communicates and consults the RBI in matters such as issuing of licenses for new banks, the opening of branches of Rural Banks etc.
  • From time to time it will also inspect the investment portfolios of Regional Rural Banks and other State Co-op Banks


NABARD has been instrumental in grounding rural, social innovations and social enterprises in the rural hinterlands. It has in the process partnered with about 4000 partner organizations in grounding many of the interventions be it, SHG-Bank Linkage programme, tree-based tribal communities’ livelihoods initiative, watershed approach in soil and water conservation, increasing crop productivity initiatives through lead crop initiative or dissemination of information flow to agrarian communities through Farmer clubs. Despite all this, it pays huge taxes too, to the exchequer – figuring in the top 50 tax payers consistently. NABARD virtually ploughs back all the profits for development spending, in their unending search for solutions and answers. Thus the organisation had developed a huge amount of trust capital in its 3 decades of work with rural communities.[8]

NABARD is the most important institution in the country which looks after the development of the cottage industry, small scale industry and village industry, and other rural industries.

NABARD also reaches out to allied economies and supports and promotes integrated development.

NABARD discharge its duty by undertaking the following roles:-

  • Serves as an apex financing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas
  • 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.
  • 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
  • Undertakes monitoring and evaluation of projects refinanced by it.
  • NABARD refinances the financial institutions which finances the rural sector.
  • NABARD partakes in development of institutions which help the rural economy.
  • NABARD also keeps a check on its client institutes.
  • It regulates the institutions which provide financial help to the rural economy.
  • It provides training facilities to the institutions working in the field of rural upliftment.
  • It regulates and supervise the cooperative banks and the RRB’s, through out entire India.

NABARD has its head office at Mumbai, India.

NABARD Regional Office[RO] has a Chief General Manager [CGMs] as its head, and the Head office has several top executives viz the Executive Directors[ED], Managing Directors[MD], and the Chairperson. It has 336 District Offices across the country, one special cell at Srinagar. It also has 6 training establishments.

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 crore 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.