Chapter-1 Introduction

Functions of NABARD-

While discharging its functions under the NABARD Act, the bank shall be guided by such directions on matters of policy involving public interest as the Central Government in consultation with RBI may give in writing.

The primary functions of NABARD can be classified under following heads:

NABARD provides various credit facilities to Short Term Cooperative Institutions; like SCBs, DCCBs, and PACS in form of Short-term credit for agricultural and allied activities (for crop and seasonal agricultural operations, marketing of crops, pisciculture activities, purchase and distribution of fertilizers etc); Medium-term credit for conversion of loans; and Term loans for investment purposes. NABARD also provides finance to production/procurement and marketing of Weavers’ Cooperative Society Industrial Cooperatives, and State Handloom Development Corporations for working capital by SCB’s, and individual rural artisans PACS.

NABARD also provides term loans for investment purposes to long term cooperative institutions also; like SCARDB’s, PCARDBs. NABARD provides short-term loans for crop and other purposes and term loans for investment purposes to RRBs. NABARD helps the State Governments also by providing long-term loans for equity participation in co-operatives and RIDF loans for infrastructure projects. NABARD facilitates the credit delivery of NGOs by revolving fund assistance for various micro-credit delivery innovations and promotional projects. NABARD also refinances the cottage/village/SSIs located in rural areas.

Developmental and Promotional functions: NABARD provides institutional and capacity development assistance to its client banks. NABARD coordinates operations of rural credit institutions; and develops expertise to deal with agricultural and rural problems and assists the Government, RBI and other institutions in rural development efforts. It provides facilities for training, research and dissemination of information in rural banking and development. It assists the State Governments in contributing to the share capital of eligible institutions and provides direct loans in cases approved by Central Government. 

In order to reinforce the credit functions and to make credit more productive, NABARD has been undertaking a number of developmental and promotional activities. NABARD helps cooperative banks and RRB’s to prepare development action plans; helps RRB’s and the sponsor banks to enter into MoUs specifying their respective obligations to improve the affairs of the RRB’s in a stipulated timeframe; monitors implementation of development action plans of banks and fulfillment of obligations under MoUs; provides financial assistance to cooperatives and RRB’s for establishment of technical, monitoring and evaluations cells; provides organization development intervention through its reputed training institutes; provides financial support for the training institutes of cooperative banks ; and provides training for senior and middle level executives of CBs, RRB’s and cooperative banks.

Besides it NABARD creates awareness among the borrowers on ethics of repayment through VVV and Farmer’s clubs; and provides financial assistance to cooperative banks for building improved MIS, computerization of operations and development of human resources. NABARD also provides financial support for the training institutes of cooperative banks.

Supervisory functions- As an apex bank involved in refinancing credit needs of major financial institutions in the country engaged in offering financial assistance to agriculture and rural development operations and programmes, NABARD has been sharing with the RBI certain supervisory functions. These functions include inspection of RRB’s and cooperative banks (other than urban/primary cooperative banks) under the Banking Regulation Act, 1949; inspection of SCARDBs and apex non-credit cooperative societies as Apex Weavers Societies, Marketing Federations, etc. on a voluntary basis; and portfolio inspections, systems study, besides off-site surveillance of Cooperative Banks and RRBs.

NABARD also administers the credit monitoring arrangements in SCBs and CCBs. RRB’s and SCB’s have to obtain the recommendation of NABARD for seeking permission of RBI to open new branches. Besides it RRB’s and cooperative banks are required to file returns and documents with NABARD in addition to the RBI under the provision of Banking Regulation Act, 1949.

NABARD’s objective for client bank training is to provide professional training, advisory service and to guide them in making training more effective; to deliver specific training programmes in case of lack of necessary resources; to develop the capabilities of the client banks’ internal training centres; and to monitor and evaluate their overall effectiveness for the training of rural credit.

For training of client banks, various professional training support activities should be used such as, developing curricula for client banks’ training centers; identifying their organizational training needs; and assisting them in developing methodologies for the analysis of training needs, in selection and development of the faculty of their training centers, in evaluating the effects of training programmes and in monitoring and evaluating its overall effectiveness for rural credit. It should be carried out in a participate manner to ensure that NABARD’s assistance can ultimately be replicated by the banks using their own resources. NABARD may conduct more workshops and seminars on rural credit for the benefit of senior officials of client banks and government agencies.