Posted on by

NABARD: Rules and Regulation

The National Bank for Agriculture and Rural Development (NABARD) is a apex body which is developing finance institution body which is fully owned by government. It entrust this policies basically upon the field of credit for agriculture and economic activities in rural area.

NABARD was 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 the National Bank for Agriculture and Rural Development (NABARD) is in Mumbai but it has many branches and regional divisions

NABARD thus emerged as the apex institution to play a pivotal role in the sphere of policy planning and provides refinance facilities to rural financial institutions. NABARD has also been playing a catalytic role in micro-credit through the channel of Self-Help Groups (SHGs)

The National Bank for Agriculture and Rural Development (NABARD) is a apex body which is developing finance institution body which is fully owned by government. It entrust this policies basically upon the field of credit for agriculture and economic activities in rural area.

NABARD was 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 the National Bank for Agriculture and Rural Development (NABARD) is in Mumbai but it has many branches and regional divisions

NABARD thus emerged as the apex institution to play a pivotal role in the sphere of policy planning and provides refinance facilities to rural financial institutions. NABARD has also been playing a catalytic role in micro-credit through the channel of Self-Help Groups (SHGs)

Background

  • The importance of institutional credit in boosting rural economy has been clear to the Government right from its early stages of planning.
  • The Reserve Bank of India (RBI) at the insistence of the Government of India, constituted a Committee to Review the Arrangements For Institutional Credit for Agriculture and Rural Development (CRAFICARD) in 1979, under the Chairmanship of Shri B. Sivaraman, a former member of Planning Commission.
  • The Committee’s report (1979) outlined the need for a new organisational device for providing undivided attention, forceful direction and pointed focus to credit-related issues linked with rural development.
  • It resulted in the foundation of NABARD (National Bank for Agriculture and Rural Development) in 1982 as a statutory body under Parliamentary act-National Bank for Agriculture and Rural Development Act, 1981.
  • It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC).
  • Its initial paid-up capital was Rs. 100 cr. contributed with 50: 50 by the government of India and Reserve bank of India. 
  • To support Indian Rural economy with a credit facility, RBI was apex body before the formation of NABARD.
  • It is one of the premier agencies providing developmental credit in rural areas. All major issues related to rural credit until then dealt with by the RBI and the Agricultural Refinance and Development Corporation moved under the control of NABARD
  • It resulted in making NABARD as an apex development financial institution in India.
  • The NABARD’s role is basically a continuation of the RBI role in the sphere of Agriculture and Rural Development.
  • The functions of the 3 institutes of RBI (1) the Agricultural Credit Department (ACD), (2) Rural Planning and Credit Cell (RPCC), (3) and Agricultural Refinance and Development Corporation (ARDC) were transferred to NABARD.
  • ACD: RBI provided through its ACD short term refinance to cooperatives.
  • RPCC: It was dealing with the Regional Rural Banks (RRBs) since 1979
  • ARDC: Reserve Bank of India set up the Agricultural Refinance Corporation (ARC) in 1963 to work as a refinancing agency in providing medium-term and long term agricultural credit to support investment in credit needed for agricultural development especially in rural area.

Rules and Regulation of NABARD ACT 1982

Composition

The Board of Directors of the National Bank shall consist of the following, namely:- 

  • A Chairman;
  • Three directors from amongst experts in rural economics, rural development village and cottage industries or persons having experience in the working of co-operative banks, regional rural banks or commercial banks or any other matter the special knowledge or professional experience in which is considered by the Central Government as useful to the National Bank for Agriculture and Rural Development ; 
  • Three directors from out of the directors of the Reserve Bank; 
  • Three directors from amongst the officials of the Central Government
  • Four directors from amongst the officials of the State Government;
  • such number of directors elected in the prescribed manner, by shareholders other than the Reserve Bank, the Central Government and other institutions owned or controlled by the Central Government whose names are entered on the register of shareholders of the National Bank ninety days before the date of the meeting in which such election takes place on the following basis, namely:- 

(i) Where the total amount of equity share capital issued to such two directors; holders is ten percent. or less of the total issued equity capital

(ii) Where the total amount equity share capital issued to such three directors; shareholders is more than ten percent but less than twenty-five and per cent and of the total issued equity capital

(iii) Where the total equity share capital issued to such shareholders four directors: is twenty-five percent or more of the total issued equity capital

  • A Managing Director

Appointment of Board of Director

The Chairman and other directors, excluding the directors referred to in clause (f) of section 6 of the NABARD Act, shall be appointed by the Central Government in consultation with the Reserve Bank

Ø  Term of office of Chairman and other directors, retirement and payment of fees.

  1. The Chairman shall hold office for such term not exceeding five years and shall receive such salary and allowances as the Central Government may, at the time of appointment
  2. a director appointed under clause (b) or clause (c) of sub-section (1) of section 6, shall hold office for such term, not exceeding three years
  3. The Managing Director and any whole-time director appointed under subsection (3) of section 6 shal1,- 

(a) hold office for such term not exceeding five years as the Central Government may, at the time of appointment, specify 7 [and shall be eligible for re-appointment]; 

(b) receive such salary and allowances and be governed by such terms and conditions of service as the Board may, with the previous approval of the Central Government and in consultation with the Reserve Bank

Disqualification of Directors

No person shall be a director who- 

(a) Is of unsound mind and stands so declared by a competent court; or

 (b) Is or has been convicted of any offence which, in the opinion of the Central Government, involves moral turpitude; or 

(c) Is, or at any time has been, adjudicated insolvent or has suspended payment of his debts or has compounded with his creditors.

 The appointment as director of any person who is a Member of Parliament or the Legislature of any State shall, unless within two months of the date of his appointment he ceases to be such member, be void on the expiry of the said period of two months and if any director is elected or nominated as a Member of Parliament or of any State Legislature he shall cease to be a director as from the date of such election or nomination, as the case may be.

Board Meetings

  • According to the Act, the board shall conduct its meeting once a quarter in a year
  • Meetings of the Board shall be convened by the Chairman, and, in his absence, by Managing Director
  • A copy of the proceedings of the meeting of the Board shall be circulated for the information of the directors as soon as possible after it is signed by the Chairman.

Committee to Be Formed For NABARD ACT

(1) The Board may constitute an Executive Committee consisting of such number of directors as may be prescribed. 

(2) The Executive Committee shall discharge such functions as may be prescribed or may be delegated to it by the Board. 

(3) The Board may constitute such other committees, whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons as it thinks fit.

(4) The Executive Committee shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed by the act.

(5) The times and places at which any committee constituted under sub-section (3) shall meet, the rules of procedure which such committee shall observe in regard to the transaction of business at its meetings, and

(6) the fees and allowances which may be paid to the members of such committee for attending the meetings of the committee and for attending to any other work of the National Bank shall be such as may be specified by that Bank.

Functions Of  National Bank For Agriculture and Rural Development (NABARD)

  • NABARD’s initiatives are aimed at building an empowered and financially inclusive rural India through specific goal-oriented departments which can be categorized broadly into three heads: Financial, Developmental and Supervision.
  • It provides refinance support for building rural infrastructure.
  • It prepares district-level credit plans to guide and motivating the banking industry in achieving these targets.
  • It supervises Cooperative Banks and Regional Rural Banks (RRBs) and helping them develop sound banking practices and integrate them to the CBS (Core Banking Solution) platform.
  • Core Banking Solution (CBS) is networking of branches, which enables Customers to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account. The customer is no more the customer of a Branch. He becomes the Bank’s Customer.
  • It is involved in designing Union government’s development schemes and their implementation.
  • It provides training to handicraft artisans and helps them in developing a marketing platform for selling these articles.
  • NABARD has various international partnerships including leading global organizations and World Bank-affiliated institutions that are breaking new ground in the fields of rural development as well as agriculture.
  • These international partners play a key consultant’s role in providing advisory services as well as financial assistance designed to ensure uplifting of rural peoples as well as optimization of various agricultural processes.

Conclusion

More than 75 per cent people of India depend on agriculture. Rural infrastructure investments help in raising the socio-economic status of the rural people through increased income levels and quality of life. NABARD is an apex institution for providing credit facilities and capacity building to Indian rural economy, it has a great opportunity for poverty reduction and socio-economic empowerment of rural India. Nabard should continue its proactive role in policymaking, advocacy and implementation, especially in the context of emphasis on food security and stagnation in farm sector productivity

Frequently Asked Questions (FAQs)

Q1 What was the main purpose of establishing NABARD?

ANS: NABARD was established on 12th July 1982, it had an initial capital of 100 crores. It is one of the premier agencies providing developmental credit in rural areas. All major issues related to rural credit until then dealt with by the RBI and the Agricultural Refinance and Development Corporation moved under the control of NABARD

NABARD thus emerged as the apex institution to play a pivotal role in the sphere of policy planning and providing refinance facilities to rural financial institutions. NABARD has also been playing a catalytic role in micro-credit through the channel of Self-Help Groups (SHGs)

Q2 What is main functions of the National Bank for Agriculture and Rural Development (NABARD)?

ANS: NABARD was established as a development bank to perform the following functions:

  1. To serve as an apex financing agency for the institutions providing investment and production credit for promoting various developmental activities in rural areas;
  2. To take measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions and training of personnel;
  3. To coordinate the rural financing activities of all institutions engaged in developmental work at the field level and liaison with the Government of India, the State Governments, the Reserve Bank and other national level institutions concerned with policy formulation; and
  4. To undertake monitoring and evaluation of projects refinanced by it.
  5. NABARD gives high priority to projects formed under Integrated Rural Development Programme (IRDP).
  6. It arranges refinance for IRDP accounts in order to give highest share for the support for poverty allevia­tion programs run by Integrated Rural Development Programme.
  7. NABARD also gives guidelines for promotion of group activities under its programs and provides 100% refinance support for them.
  8. It is setting linkages between Self-help Group (SHG) which are organized by voluntary agencies for poor and needy in rural areas.
  9. It refinances to the complete extent for those projects which are operated under the ‘National Watershed Development Programme‘and the ‘National Mission of Wasteland Development‘.
  10. It also has a system of District Oriented Monitor­ing Studies, under which, study is conducted for a cross section of schemes that are sanctioned in a district to various banks, to ascertain their performance and to identify the constraints in their implemen­tation, it also initiates appropriate action to correct them.

Reference

Published by Ashi Jain

Leave a Reply

Your email address will not be published. Required fields are marked *