NABARD (National Bank for Agriculture and Rural Development) was established on 12 July 1982 on the recommendations of B. Sivaraman Committee (former member of the Planning Commission). The establishment of NABARD has replaced three former institutions. These are the Agriculture Credit Department, Rural Planning and Credit Cell of the RBI and Agricultural Refinance and Development Corporation. The purpose of NABARD is to provide Developmental assistance and to work towards poverty reduction. In addition to this, NABARD also promotes the Financial Inclusion in the rural areas of the country.
NABARD is India’s specialised bank for Agriculture and Rural Development. It is the only institution with the status of Developmental Financial Institution. NABARD is wholly owned by the Government of India & is headquartered in Mumbai. Currently, Dr Harash Kumar Bhanwala is the Chairman of NABARD as in the photo.
Capital of NABARD
Initially, the capital of NABARD was Rs. 100 Crore at the time of its establishment. As per the NABARD Amendment Act 2018, the Government of India has increased the Authorized Capital of NABARD from Rs. 5,000 Crore to Rs. 30,000 Crore. In addition to this as on 31 March 2018, the Paid-up Capital of NABARD stands at Rs. 10,580 Crore.
NOTE: If you don’t know, click here to understand the Difference between Authorized Capital and Paid-up Capital before you proceed further.
Whom NABARD regulates? 🙄
The regulation and supervision of the financial system in India is carried out by different regulatory authorities. The Reserve Bank of India regulates and supervises most of the financial institutions. These entities or institutions are regulated and supervised by the RBI:
- Commercial Banks
- Urban Co-operative Banks
- Non-Banking Financial Companies
- Mutual Funds (in addition to SEBI of course)
- Payment Banks
- Small Finance Banks
- And certain other Financial Institutions
While the NABARD regulates and supervises the Regional Rural Banks, State Co-operative Banks and District Central Co-operative Banks. In addition to this Housing Finance Companies are regulated by National Housing Banks which is wholly owned by the Reserve Bank of India.
If you have listened about the Nidhi Companies, these are regulated by the Ministry of Corporate Affairs, while the Chit Fund Companies are regulated by Respective state government. Remember that Cooperative Banks also comes under the jurisdiction of Registrar of Cooperative Societies of respective state governments in addition to NABARD.
Rural Infrastructure Development Fund (RIDF) of NABARD
You must have listened earlier that if the banks are unable to meet the target of Priority Sector Lending prescribed to them, then the shortfall of funds goes to the RIDF of NABARD. Then the question arises, what the RIDF is at all? Here we have explained the answer.
The Rural Infrastructure Development Fund was set up by the Government in 1995-96 for financing the ongoing rural Infrastructure projects. The Fund is maintained by the National Bank for Agriculture and Rural Development (NABARD). Domestic commercial banks contribute to the Fund to the extent of their shortfall in stipulated priority sector lending to agriculture.
The main objective of the Fund is to provide loans to State Governments and State-owned corporations to enable them to complete ongoing rural infrastructure projects. At present, there are 36 eligible activities under the RIDF as approved by the Government of India. These eligible categories are broadly classified into three categories:
- Agriculture and related sector
- Social Sector
- Rural Connectivity
Eligible Institutions under the RIDF of NABARD
This is the list of eligible institutions under the RIDF but there is a condition for this eligibility. The condition is that the projects are to be submitted through the Nodal Department of the state government i.e. the Finance Department. Let’s take a look at eligible institutions:
- State Governments and Union Territories
- State-owned Corporations & State Government Undertakings
- State Government sponsored or supported organisations
- Panchayati Raj Institutions
- Self Help Groups & NGOs
Do you know about Self Help Groups? 😎
Self Help Group (SHG) is a small voluntary association of poor people, preferably from the same socio-economic background. They come together for the purpose of solving their common problems through self-help and mutual help. The Self Help Group promotes small savings among its members. The savings are kept with a bank.
Self Help Group is a group formed by the community having a specified number of members like 15 or 20. Usually, the number of members in one Self Help Group does not exceed 20. In the Self Help Groups, the poorest people come together for emergency, disaster, social reasons, and to provide economic support to each other.
A Self Help Group can be an all-women group, all-men group, or even a mixed Group. However, it has been the experience that women’s groups perform better in all the important activities of Self Help Groups. A mixed group is not preferred in many of the places, due to the presence of conflicting interests.