The establishment of NABARD marked a turning point in the evolution of India’s rural credit and development system. With a mission to promote sustainable and equitable agriculture and rural prosperity, NABARD short for National Bank for Agriculture and Rural Development was created as a development financial institution focused on the needs of rural India. Understanding when NABARD was established, the historical context surrounding its creation, and the role it continues to play in rural development is key to grasping its significance in India’s financial and agricultural landscape.
When Was NABARD Established?
Official Date of Establishment
NABARD was officially established on12th July 1982by an Act of Parliament. This Act, known as the NABARD Act 1981, came into effect to provide focused attention on the credit needs and developmental activities in the agricultural and rural sector. The formation of NABARD was a result of the recommendations made by the Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) headed by Shri B. Sivaraman.
Legislative and Institutional Background
Before NABARD was formed, two primary institutions were responsible for rural credit in India: the Agricultural Refinance and Development Corporation (ARDC) and the Rural Planning and Credit Cell (RPCC) of the Reserve Bank of India. These organizations were merged to form NABARD, which was entrusted with more comprehensive powers and responsibilities in financing and supporting rural development.
Purpose Behind NABARD’s Creation
Need for a Dedicated Rural Development Institution
The early 1980s saw India struggling with fragmented and insufficient rural credit systems. Farmers, rural entrepreneurs, and cooperatives lacked adequate financial support to carry out agriculture-related projects. NABARD was created to bridge this gap and offer a holistic approach to credit planning, policy support, and development initiatives targeting rural areas.
Objectives of NABARD
- To serve as a refinancing institution for institutions providing investment and production credit for agriculture and rural development
- To coordinate with state governments, the Reserve Bank of India (RBI), and other financial institutions
- To provide direct lending support to agriculture and rural development projects
- To facilitate the credit flow for the promotion of rural infrastructure and livelihoods
Key Functions of NABARD
Refinancing Support
NABARD extends refinancing to various financial institutions such as cooperative banks, regional rural banks, and commercial banks that lend to the agriculture and rural sectors. This refinancing helps these institutions maintain liquidity and ensure the smooth flow of credit to the final beneficiaries.
Developmental Role
Beyond financing, NABARD plays a vital developmental role. It helps build institutional capacity, strengthens rural financial infrastructure, and supports innovations in agriculture and rural livelihoods. NABARD also undertakes research and promotes rural entrepreneurship through training and knowledge dissemination.
Supervisory Function
NABARD is entrusted with the task of inspecting, supervising, and guiding rural financial institutions, particularly cooperative banks and regional rural banks (RRBs). Its supervisory role ensures that credit is used efficiently and institutions remain financially sound.
Milestones in NABARD’s Journey
Initial Years and Expansion
In the initial years after its establishment in 1982, NABARD focused primarily on building a strong refinance portfolio and streamlining rural credit delivery systems. Over time, it expanded its activities to include direct financing and large-scale infrastructure support through programs like RIDF (Rural Infrastructure Development Fund), launched in 1995.
Innovative Programs
Over the years, NABARD has introduced innovative programs that have had a meaningful impact on rural India:
- Self Help Group Bank Linkage Program (SHG-BLP): A groundbreaking initiative to connect informal women-led savings groups with formal banking institutions.
- Producer Organizations: NABARD supports Farmer Producer Organizations (FPOs) that empower farmers to collectively produce, process, and market their goods.
- Tribal Development Programs: Special focus on uplifting tribal communities through sustainable agriculture and livelihood development.
NABARD’s Role in Modern Rural India
Digital Transformation
Recognizing the importance of technology, NABARD has embraced digital platforms to improve service delivery. From promoting digital financial literacy to supporting technology-enabled infrastructure projects, NABARD is adapting to the changing needs of rural India.
Climate Resilience and Sustainability
In the context of climate change, NABARD plays a crucial role in promoting climate-resilient agriculture. It funds projects that address environmental concerns, promote water conservation, and support renewable energy in rural areas.
Microfinance and Inclusive Growth
By nurturing microfinance initiatives and facilitating financial inclusion, NABARD ensures that even the smallest entrepreneurs and marginalized communities have access to capital and resources for growth.
Structure and Governance of NABARD
Ownership and Capital
NABARD is fully owned by the Government of India, having taken over the RBI’s stake in 2010. The bank has a defined capital structure and receives budgetary support for various initiatives and refinance schemes.
Board of Directors
NABARD is governed by a Board of Directors, including a Chairperson and members representing the central government, state governments, RBI, and experts in rural development. This ensures broad oversight and policy alignment.
Impact of NABARD Over the Years
Improvement in Rural Credit Access
Since its inception in 1982, NABARD has significantly enhanced the availability of credit for rural infrastructure, agriculture, small industries, and rural housing. It has played a pivotal role in strengthening India’s rural banking ecosystem.
Support for Livelihood Projects
By financing dairy development, irrigation schemes, rural roads, and skill development programs, NABARD has improved the livelihoods of millions in rural India. Its efforts have led to better income security, improved quality of life, and enhanced economic participation of rural communities.
The establishment of NABARD on 12th July 1982 marked a transformative moment for India’s rural and agricultural development. Over four decades, it has evolved from a refinance institution to a comprehensive rural development agency. By providing financial, developmental, and supervisory support, NABARD continues to play a vital role in shaping a self-reliant and inclusive rural economy. As India moves toward modernization, the importance of NABARD in ensuring equitable growth and supporting the needs of rural citizens remains more critical than ever.