NABARD: EMPOWERING RURAL INDIA

“Examining the role of NABARD in promoting rural development”

INTRODUCTION

The National Bank for Agriculture and Rural Development (NABARD) is a vital institution in fostering economic growth and social progress in India's rural sector. It goes beyond just being a financial institution; NABARD acts as a catalyst for rural development through a multifaceted approach. Under the act of Parliament in 1982, to promote sustainable and equitable agriculture it was introduced in India as its apex development bank.

Functions of NABARD include:

• Microfinance and SHGs: NABARD actively promotes microfinance initiatives, supporting Self-Help Groups (SHGs) that provide access to credit, particularly for women in rural areas. This financial inclusion empowers rural households to invest in livelihoods, improve living standards, and contribute to the local economy.
• Refinancing and Rural Banks: NABARD doesn't directly lend to farmers. Instead, it acts as a financial intermediary. It provides refinance facilities to cooperative banks, regional rural banks (RRBs), and commercial banks operating in rural areas. This allows these institutions to offer loans at concessional rates, making credit more accessible to farmers and rural businesses.
• Rural Infrastructure Development: NABARD supports the development of vital rural infrastructure like roads, irrigation systems, storage facilities, and market linkages. This improves connectivity, reduces post-harvest losses, and facilitates better marketing of agricultural produce.
• Watershed Management: NABARD recognizes the importance of sustainable resource management. It promotes watershed development projects to conserve water, minimize soil erosion, and improve land productivity.
• Credit for Farmers: By providing affordable credit through refinancing, NABARD helps farmers invest in inputs like fertilizers, seeds, irrigation equipment, and technology adoption. This can lead to increased agricultural productivity, improved farm incomes, and overall agricultural growth.
• Skill Development and Market Access: NABARD supports initiatives for skill development in rural areas, empowering individuals to improve their employability or entrepreneurial ventures. Additionally, it promotes market access for farmers' produce to ensure better returns.
• Supervision and Regulation: NABARD supervises and regulates cooperative banks and RRBs to ensure they operate with financial prudence and provide effective credit services to their target clientele. This safeguards the financial system and promotes responsible lending practices.
• Capacity Building: NABARD focuses on capacity-building initiatives for rural financial institutions and rural development agencies. This equips them with the knowledge and skills to better serve rural communities.

How is NABARD different from a commercial bank?

Clientele: NABARD doesn't directly serve individual customers or businesses. It focuses on supporting other financial institutions that cater to the rural sector. Loan Products: NABARD doesn't offer its own loan products. It provides refinance facilities that enable other banks to offer loans at lower interest rates for agricultural and rural development purposes. Profit Motive: Unlike commercial banks that aim to maximize profits, NABARD is a development-oriented institution. Its primary focus is on promoting rural development and agricultural growth.

ACHIEVEMENTS OF NABARD

The 2018-19 Union Budget introduced a dedicated fund for the development of Fisheries and Aquaculture, with NABARD spearheading the funding of public infrastructure for various fishery-based enterprises. By the close of 2023, NABARD had approved a total of 82 projects across 8 state governments.

1. Advancing Financial Inclusion:

• SHG-Bank Linkage Programme:?
  Launched in 1992, this initiative connects Self-Help Groups (SHGs) with financial institutions. As of March 2023, NABARD has facilitated credit support exceeding Rs. 145,200 crore to 42.96 lakh SHGs. This empowerment initiative particularly benefits rural women in regions like Tamil Nadu and Kerala, offering them credit access for micro-enterprises and income-generating activities.

Example: Lakshmi, a resident of a Maharashtra village, was part of an SHG supported by NABARD's SHG-Bank Linkage Programme. Leveraging this support, her SHG secured a loan from a local bank to establish a pickle-making venture. This not only provided Lakshmi with a sustainable income source but also empowered other women within the SHG to achieve financial independence.

2. Strengthening Agricultural Credit:

• Refinancing Facilities:?
  NABARD extends refinancing facilities to cooperative banks, Regional Rural Banks (RRBs), and commercial banks operating in rural areas. This mechanism enables them to offer loans to farmers at preferential rates. For instance, in 2022, NABARD sanctioned a notable Rs. 18.6 lakh crore in refinancing support to these institutions.

Example: Suresh, a farmer in Punjab, sought a loan for acquiring new irrigation equipment. Thanks to NABARD's refinancing facilities, a local cooperative bank provided him with a loan at a reduced interest rate. This enabled Suresh to enhance his farm infrastructure, optimize irrigation practices, and augment his crop yield.

3. Enhancing Rural Infrastructure:

• Rural Infrastructure Development Fund (RIDF):?
  This fund bolsters projects aimed at developing essential rural infrastructure such as roads, irrigation systems, warehouses, and market yards. An instance is a recent RIDF-backed endeavor in Odisha focusing on rural road network construction, which has amplified farmers' connectivity to markets, curbing post-harvest losses and elevating their income.

4. Watershed Management:

• NABARD Watershed Development Projects (WDPs):
  These initiatives foster soil and water conservation, elevate land productivity, and uplift livelihoods in rural settings. For instance, a WDP in Rajasthan concentrated on rainwater harvesting and the promotion of drought-resistant crops, resulting in heightened agricultural productivity and enhanced water security for the local populace.

5. Micro, small and medium enterprises (MSME):

• Prior to a revision in the act, NABARD's support for industries was limited to those with an investment in machinery and plant of up to Rs 20 lakh. This bill proposes to expand NABARD's reach to include micro, small and medium enterprises (MSME). The bill achieves this by extending the credit and other facilities offered by NABARD to MSMEs in the manufacturing sector with investments up to Rs 10 crore and those in the services sector with investments up to Rs 5 crore. Additionally, the bill ensures that experts from MSMEs are included in NABARD's decision-making bodies and that banks lending to MSMEs can continue to receive financial assistance from NABARD.

CONCLUSION

NABARD plays a pivotal role in advancing rural development in India by ensuring a consistent provision of credit to the agricultural sector, facilitating financial inclusion, and bolstering the creation of crucial rural infrastructure. These efforts significantly enhance agricultural output, elevate rural livelihoods, and foster broader economic progress in rural India. NABARD's comprehensive strategy towards rural development has played a key role in empowering rural communities, enhancing agricultural productivity, and nurturing economic development in India. NABARD remains a vital force propelling a more inclusive and prosperous rural India through its focus on financial inclusivity, infrastructure enhancement, and sustainable practices.

CITATIONS

• NABARD | multimedia | https://www.nabard.org/content.aspx?id=2
• Singh, H. (2016, May 26). NABARD: Functions, Roles & Achievements. Jagranjosh.com. https://www.jagranjosh.com/general-knowledge/nabard-functions-roles-achievements-1448347985-1
• National Bank for Agriculture and Rural Development (NABARD). (n.d.). Drishti IAS. https://www.drishtiias.com/important-institutions/drishti-specials-important-institutions-national-institutions/national-bank-for-agriculture-and-rural-development-nabard

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