Rural credit plays a pivotal role in the economic development of agrarian societies, particularly in countries like India, where agriculture remains a significant contributor to the national economy. At the heart of rural credit facilitation stands the National Bank for Agriculture and Rural Development (NABARD), a cornerstone institution established in 1982 by the Government of India. NABARD operates as a developmental financial institution, tasked with the dual mandate of fostering rural prosperity and financial inclusion by extending credit facilities, promoting sustainable agriculture, and nurturing rural infrastructure. With its strategic interventions and innovative financial instruments, NABARD acts as a catalyst for empowering rural communities, enhancing agricultural productivity, and fostering inclusive growth across the rural landscape.
Rural Credit and NABARD:
- National Bank for Agricultural and Rural Development (NABARD):
- Establishment: Founded in 1982 as the apex development bank for agriculture and rural development under an Act of Parliament.
- Functions:
- Took over agriculture credit functions of RBI.
- Assumed refinance functions of the Agricultural Refinance and Development Corporation (ARDC).
- Mission: To promote sustainable and equitable prosperity in rural India through effective credit support, related services, institution development, and innovative initiatives.
- Prime Function: Refinancing and supplementing resources of co-operative banks, Regional Rural Banks (RRBs), and commercial banks for agriculture and rural development.
- Supervisory Functions: Entrusted with certain supervisory functions regarding co-operative banks and RRBs under the Banking Regulation Act, 1949.
- Capacity Building: Plays a crucial role in promoting self-help groups, showcasing NABARD’s capabilities in capacity-building and nurturing the rural credit delivery system.
- Role in Rural Credit:
- Refinancing: NABARD refinance supports co-operative banks, RRBs, and commercial banks in providing credit at the grassroots level for agriculture and rural development.
- Supervisory Oversight: NABARD has supervisory functions to ensure the stability and soundness of co-operative banks and RRBs under its purview.
- Capacity Building: NABARD actively promotes and supports the formation and functioning of self-help groups (SHGs) as part of its capacity-building initiatives.
- Innovation: Engages in innovative initiatives to enhance rural credit delivery, ensuring sustainability and equity in the process.
- Institution Development: Focuses on the development of institutions involved in rural credit delivery, fostering a robust and efficient credit ecosystem.
- Credit Support: Provides effective credit support to various entities involved in rural credit delivery, contributing to the overall development of rural areas.
NABARD’s multifaceted role encompasses financing, supervision, capacity building, and innovation, with a central focus on supporting agriculture and rural development in India.
Rural Credit Institutions:
1. Co-operative Credit Structure:
- Components:
- Short-Term Credit:
- Managed by: State Co-operative Banks (SCBs) and District Central Co-operative Banks (DCCBs).
- Primary Level: Primary Agricultural Credit Societies (PACSs) directly engage with individual borrowers for short-term credit.
- Long-Term Credit:
- Managed by: State Co-operative and Agriculture Rural Development Banks (SCARDBs) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs).
- Short-Term Credit:
- Role: Crucial role in providing credit for agriculture and rural development.
2. Regional Rural Banks (RRBs):
- Establishment: Set up in 1975 under an Act of Parliament.
- Objective: Exclusive catering to the credit needs of the rural population, especially small and marginal farmers.
- Ownership Structure:
- Central Government (50%)
- State government concerned (15%)
- Sponsor commercial bank (35%)
- Management: The sponsor bank manages the respective RRB.
- Focus: Primarily on rural credit requirements.
3. Local Area Banks (LABs):
- Establishment: Initiated in 1996.
- Objective: Provide institutional mechanisms for rural savings and offer credit for viable economic activities in local areas.
- Type: Private sector banks.
- Regulation: Registered as a public limited company under the Companies Act, 1956. Licensed under the Banking Regulation Act, 1949.
- Capital Requirements:
- Minimum paid-up capital: ₹5 crore.
- Promoters’ contribution: At least ₹2 crore.
- Area of Operation: Limited to a maximum of three geographically contiguous districts in one or more states, focusing on backward and less developed districts.
These institutions collectively contribute to the rural credit framework, addressing the diverse credit needs of farmers and the rural population.
FAQs
1. What is NABARD and its role in rural credit?
NABARD, or the National Bank for Agriculture and Rural Development, is an apex development financial institution in India that focuses on rural credit and agriculture. Its role involves providing financial assistance and support to rural development projects, including credit facilities for agriculture, rural industries, cottage industries, handicrafts, and other allied activities.
2. How does NABARD facilitate rural credit access?
NABARD facilitates rural credit access through various means such as refinancing, direct lending, and development programs. It refinances lending institutions like cooperative banks, regional rural banks, and commercial banks for on-lending to agriculture and rural sectors. Additionally, it implements various schemes and initiatives aimed at promoting rural credit availability and financial inclusion.
3. What are the key schemes offered by NABARD to support rural credit?
NABARD offers several schemes to support rural credit, including the Rural Infrastructure Development Fund (RIDF), Dairy Entrepreneurship Development Scheme (DEDS), and the Self Help Group Bank Linkage Programme (SHG-BLP). These schemes aim to enhance rural infrastructure, promote dairy farming, and empower rural communities through self-help groups, respectively.
4. How does NABARD ensure the effective utilization of rural credit funds?
NABARD ensures the effective utilization of rural credit funds through rigorous monitoring, evaluation, and capacity-building initiatives. It conducts regular inspections and audits of lending institutions to ensure compliance with prescribed guidelines and standards. Furthermore, it provides technical assistance and training to stakeholders to enhance their skills and knowledge in rural credit management.
5. What impact does NABARD have on rural development through its credit initiatives?
NABARD has a significant impact on rural development through its credit initiatives by fostering agricultural productivity, rural employment generation, and income enhancement. It promotes sustainable farming practices, rural infrastructure development, and entrepreneurship opportunities, leading to overall socio-economic growth and prosperity in rural areas.
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