Kerala seeks loan from NABARD


  • G.S. Paper 2
  • NABARD- role and functions
  • CBS platform

Why in news?

  • Kerala has approached the National Bank for Agriculture and Rural Development (NABARD) seeking a special revival package, including a Rs 2,000-crore loan under Rural Infrastructure Development Fund.
  • Seeking assistance in view of the ongoing financial crisis, the state also demanded to reduce the interest rate of refinance of various loans, so as to enable banks to reduce interest rates.

About National Bank for Agriculture and Rural Development

  • It is a statutory body established in 1982 under Parliamentary act-National Bank for Agriculture and Rural Development Act, 1981.
  • NABARD is a development bank focussing primarily on the rural sector of the country. It is the apex banking institution to provide finance for Agriculture and rural development.
  • It is responsible for the development of the small industries, cottage industries, and any other such village or rural projects.
  • Its headquarter is located in Mumbai, the country’s financial capital.

Functions of NABARD

  • NABARD also supervises the Regional Rural Banks (RRBs) and Cooperative Banks along with developing their banking practices and integrating them to the Core Banking Solution (CBS) platform.
  • In order to build an empowered and financially inclusive rural India, NABARD has specific departments that work towards the desired goals. These departments can be collectively categorized into three majors units:
    • Financial
    • Developmental
    • Supervision
  • Preparation of district-level credit plans by NABARD are used to guide and motivate the banking industry to achieve required targets.
  • The financial support necessary to build rural infrastructure is provided by NABARD.


  • RBI and the Government of India, constituted a Committee to Review the Arrangements for Institutional Credit for Agriculture and Rural development in 1979
  • The committee was formed under the Chairmanship of Shri B. Sivaraman, former member of Planning Commission.
  • The 1979 Committee’s report outlined the need for a new organisational device for providing forceful direction, undivided attention and pointed focus to credit related issues linked with rural development.
  • Thus laid the foundation of NABARD (National Bank for Agriculture and Rural Development) in 1982 as a statutory body under Parliamentary act i.e. National Bank for Agriculture and Rural Development Act, 1981.
  • Its initial paid up capital was Rs. 100 cr. contributed equally (50:50) by government of India and RBI.
  • The functions of the 3 institutes of RBI were transferred to NABARD.
    • The Agricultural Credit Department (ACD) : RBI provided through its ACD short term refinance to cooperatives.
    • Agricultural Refinance and Development Corporation (ARDC): RBI 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 credit needs for agricultural development.
    • Rural Planning and Credit Cell (RPCC): It was dealing with the Regional Rural Banks (RRBs) since 1979

What is Core Banking Solution (CBS)  platform?

  • CBS is a networking of branches, which enables customers to operate their accounts, and avail banking services from any branch of the Bank on the CBS network, regardless of where he maintains his account.
  • The customer is no longer the customer of a Branch.
  • He becomes the Bank’s Customer.


  • RBI have sole right to regulate the banking industry and supervise the various institutions/banks that also include NABARD defined under Banking Regulation Act of 1949.
  • RBI provides 3 directors to NABARD’s Board of Directors.
  • NABARD provides recommendations to Reserve Bank of India on issue of licenses to Cooperative Banks, opening of new branches by State Cooperative Banks and Regional Rural Banks (RRBs).

Contribution of NABARD

Financial Contribution

  • Direct Lending to Cooperative Banks
  • Pradhan Mantri Awaas Yojana – Grameen (PMAY-G)
  • Food Processing Fund
  • Credit Facility to Marketing Federations (CFF)
  • Refinance – Short Term Loans: Crop loans are extended to farmers for crop production by financial institutions, which support in ensuring food security in the country.
  • Long Term Loans:NABARD’s long-term refinance provides credit to financial institutions for a wide gamut of activities encompassing farm and non-farm activities with tenors of 18 months to more than 5 years.
  • Long-Term Irrigation Fund (LTIF):The LTIF in NABARD was setup with an initial corpus of Rs 20,000 crore for funding 99 irrigation projects during 2016-17 following announcement in the Union Budget.
  • Rural Infrastructure Development Fund (RIDF):It was set up with NABARD in 1995-96 by the RBI out of the shortfall in lending to priority sector by scheduled commercial banks for supporting rural infrastructure projects.
  • Producer Organisation (PO):it is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members.
  • Warehouse Infrastructure Fund (WIF):Union government created WIF in the year 2013- 14 with NABARD with a corpus of Rs 5,000 crore for providing loans to meet the requirements for scientific warehousing infrastructure for agricultural commodities in the country.
  • NABARD Infrastructure Development Assistance (NIDA):NIDA has been designed to complement RIDF.
  • Primary Agricultural Credit Society (PACS)is a basic unit and smallest co-operative credit institution in India. It works on the grassroots level (gram panchayat and village level). It provides credit to farmers in the form of term loans and recovers the amount after harvesting of crop from the cultivator.
  • Producer Organizations Development Fund (PODF) for POs & PACS: NABARD set up Producer Organizations Development Fund (PODF) with an initial corpus of Rs 50 crore to support and finance Producer Organizations (POs) and Primary Agriculture Credit Societies (PACS) to operate as Multi Service Centres.

Developmental Contribution

  • Kisan Credit Card Scheme for Farmers:The Kisan Credit Card (KCC) scheme was designed by NABARD in association with the RBI in August 1998 for providing crop loans.
  • RuPayKisan Cards (RKCs):NABARD has been at the forefront of technology revolution by helping rural financial institutions in providing RuPayKisan Cards (RKCs) to all their farmer clients.
  • Tribal Development: the Tribal Development Programme
  • Climate Resilient Agriculture
  • Umbrella Programme on Natural Resource Management (UPNRM):The UPNRM started in 2007, works at enhancing investments in rural areas, creating business opportunities and enabling rural communities to sustainably utilise their natural resources.
  • Microfinance Sector: NABARD had launched the Self Help Group-Bank Linkage Programme (SHG-BLP) in 1992. Over 23 lakh SHGs were credit-linked during 2017-18 financial year.
  • EShakti: In a bid to digitise SHGs, project EShakti was launched on 15 March 2015.
  • Skill Development: Promoting an entrepreneurial culture among the rural youth and encouraging them to start enterprises in the rural off-farm sector has been NABARD’s strategy for over three decades.
  • Marketing Initiatives:For providing marketing opportunities to rural artisans and producers, NABARD has traditionally facilitated their participation in exhibitions across the country.
  • Incubation Centres: To commercialise innovations and to shape agricultural entrepreneurship in the country, NABARD extended support to Chaudhary Charan Singh Haryana Agricultural University, Hisar and Tamil Nadu Agricultural University, Madurai for establishing Agri Incubation Centres with a total financial commitment of Rs 23.99 crore.