NABARD (National Bank for Agriculture and Rural Development) is a financial institution in India that specializes in the management and provision of credit and other forms of financial assistance to the agricultural and rural sector of the Indian economy.
Established in 1982 during the early years of the technological revolution in the country, its importance in the provision of assistance to meet with the changing demands in agrarian infrastructure was profoundly felt. Being a financial institution of national significance, NABARD operates national schemes and works towards the development of rural infrastructure across the nation. Indian agriculture needs tremendous modernization and development to alleviate farmers’ distress and improve rural incomes. This requires the provision of credit to ensure that farmers reap the fruits of modernization and technological progress. Thus, NABARD has a three-pronged strategy which includes finance, development, and supervision of the agricultural sector in the country.
Operationalization of NABARD Schemes
NABARD is involved in the propagation of its various schemes through various banks and other credit-lending financial institutions across the country, including Non-banking Financial Companies (NBFCs).
The table given below charts the interest rates offered by NABARD for refinance to banks and other credit-lending institutions.
Short Term refinance assistance
Long Term refinance assistance
Regional Rural Banks (RRBs)
State Cooperative Banks (StCBs)
State Cooperative Agriculture and Rural Development Banks (SCARDBs)
The above-mentioned rates of interest are provisional and are subject to change. Besides, the addition of GST rates are also applicable in these cases.
Features of NABARD Schemes
Apart from the agricultural sector, overall improvements in rural areas in the domains of cottage industries, Small scale industries (SSI), etc. is also the onus of this institution. Thus, it offers holistic support not only in the area of farming but in the rural economy. The key features of NABARD schemes are as listed below;
- Constructing infrastructure in underdeveloped areas
- Finding of refinancing the projects, hence providing adequate support
- Making credit plans which are on a district level
- Training and promoting handicraft artisans
- Implementing development schemes developed by the government
- New project designing for development of rural areas
- Overlooking the functions of Cooperative banks and Regional rural banks (RRBs’)
- Instructing the banking sector in achieving their targets.
Functions of NABARD Schemes
In the area of refinancing, NABARD’s overall functioning is related to the holistic and integrated development of rural infrastructure and living conditions across the country. Some of the essential features of NABARD schemes pertaining to the areas of the building rural infrastructure included the following mentioned points.
- Coordination and financing of activities directly related to improvements in agriculture.
- Formulation of policies for various rural credit-lending institutions.
- Credit-lending and institutional support for the development of food parks and food processing technologies in designated areas.
- Credit-lending and support for the building and maintenance of cold storage facilities and warehouses wherever possible.
- Direct provision of both short-term and long-term credit to its borrowers and direct refinancing of Cooperative institutions.
- Specialization in the area of irrigation facilities and corollary rural infrastructure including the provision of support to marketing federations.
It is important to make a distinction between short-term and long-term refinancing activities.
Short-term Refinancing is related to the provision of loans and credit for the production of crops. This ensures the stability of food production in the country while at the same time ensuring the availability of cash crops for export. In the financial year 2017-2018, NABARD had sanctioned short term loans up to an amount of Rs. 55000 across various financial institutions in the country.
Long-term Refinancing refers to the provision of credit for the purpose of the development of farm and farm-related activities in rural areas. The minimum duration for a long-term loan is 18 months while the maximum duration for which it can be availed is 5 years. NABARD has refinanced a gross amount of Rs. 65, 240 crores in the FT 2017-18, including an amount of around Rs. 15000 crores to Cooperative Banks.
Apart from these, there are other avenues for the provision of credit comprising funds and schemes. Some of them are given below:
- Rural Infrastructure Development Fund ( RIDF)
Recognising the shortfall in lending to the priority sector, the RBI developed this fund for the provision of credit to improve rural infrastructure. Under this scheme, NABARD had disbursed an amount of Rs. 24993 crores in FY 2017-18.
- Long term Irrigation Fund ( LTIF)
This fund was instituted to provide support to 99 irrigation projects through the consolidation of an amount of Rs. 22000 crores. Two new projects including the Pollavam National Project in AP and North Now I Reservoir Project in Bihar and Jharkhand were brought under this.
- Pradhan Mantri Awas Yojana- Grameen ( PMAY-G)
Under this fund, a total amount of Rs. 9000 crores were consolidated with the aim of building pucca houses with all basic amenities in rural regions by the year 2022.
- NABARD Infrastructure Development Assistance ( NIDA)
This is a special program designed to advance credit to financially sound and stable State-owned institutions and corporations.
- Warehouse Development Fund
As the name suggests, this fund has been created to promote the development, building, and maintenance of a sound warehouse infrastructure in the country. A net amount of Rs. 3778 crores was disbursed by the end of the FY 2017-18.
- Food Processing Fund
This is a commitment undertaken to ensure the building of 11 mega food parks, 3 food processing units, and 1 integrated food park project by 31st March 2018.
- Direct Lending to Cooperative Banks
NABARD has given aid to 58 cooperative commercial banks (CCBs’) and 4 state cooperative banks (StCbs’) which are expanded over 14 states in the country for an approved amount of Rs. 4849 crores.
- Credit Facilities to Marketing federations
Under this facility, farm activities and agricultural produce is promoted, which strengthens and encourages marketing federations and cooperatives. As documented since March 2018, Rs. 25436 crores was spent on this cause.
- Credit to Producer Organisations along with Primary Agriculture Societies (PACS)
The organisation launched by NABARD – Producer Organisations Development Fund (PODF) was done so to give financial aid to Producer Organisations (Pos’) as well as Primary Agriculture Societies (PACS). This institution was formed to function as a multi-service centre.
NABARD Scheme for the Farming Sector
NABARD also offers a range of diversified, general, and targeted schemes for the development of the farm sector in the country.
These include various subsidy-schemes as well. Some of them are outlined below:
Dairy Entrepreneurship Development Scheme
Interested entrepreneurs willing to set up small dairy farms and suchlike infrastructure were provided assistance under this scheme. There are many other imperative objectives that this scheme offers to provide assistance for this cause. Some of these areas stated below;
- Encouraging heifer calf rearing and also conservation of the good breeding stock
- Arranging and setting up of modern-day farms to produce organic farm milk
- Up gradation of the required technology that is needed to handle milk production to a commercial level scale
- Creating self-employment to better the quality of worker’s lives
- Working towards improving the infrastructure for the unorganized sector
In addition to the above-mentioned objectives, NABARD also offers other schemes as mentioned here;
- New agricultural marketing infrastructure
- Interest subvention scheme
- National livestock mission
- GSS – Enduring end-use of released subsidies
- Agri-clinic central schemes
- Agribusiness central schemes
- Capital investment subsidy scheme for commercial production units for biological inputs and organic inputs
Credit Linked Capital Subsidy Scheme
This is one of NABARD’s off-the-farm scheme and caters to the betterment of technology required. The credit linked capital subsidy scheme (CLCSS) was incepted by the government of India in 2000. This was introduced keeping in mind the upgradation of technology needed for micro, small and medium enterprises (MSMEs). In addition to this, it was also used to facilitate further improvement of technology that is used for small scale industries (SSIs) in the sub sectors of defined products.
NABARD will also be extending large financial aid to the tune of Rs.30,000 crores as an additional emergency working capital under the Atmanirbhar Bharat Program. This amount will be paid over and above the Rs. 90,000 crores via the normal refinance route in the year. A few key takeaways from this scheme are;
- Benefiting around 3000 crore farmers all over the country
- Meeting post-harvest (Rabi) and current (Kharif) requirements in the months of May and June
- Regional cooperative and rural cooperative banks will be the primary source of credit
Future plans and approaches
While much has been done, the road to full reconstruction still needs to be attained by walking extra miles ahead. Thus many programmes and policies need to be reinvigorated further. Thus under the recently announced Atmanirbhar Bharat programme or Self-Reliant India Scheme, the Government of India, NABARD will be providing hefty financial aid, as mentioned above as an encouraging step towards the agricultural sector.