Lok Sabha has recently passed a Bill to enable exit of the Reserve Bank of India (RBI) from NABARD (National Bank for Agriculture and Rural Development) as well as to increase the authorised capital to Rs 30,000 crore.
- The authorised capital has been increased to approximately six times in order to increase its lending to the rural economy.
- The National Bank for Agriculture and Rural Development (Amendment) Bill, 2017 introduced by Finance Minister Arun Jaitley.
- The bill proposes to empower the central government to increase authorised capital of the NABARD from Rs 5,000 crore to Rs 30,000 crore.
Key facts
- The increase in authorised capital will enable NABARD to respond to its commitments with respect to the Long Term Irrigation Fund and on-lending to cooperative banks.
- It will help NABARD to augment its business and enhance its activities, thus facilitating promotion of integrated rural development and securing prosperity of rural areas, including generation of more employment.
- RBI currently holds 0.4 per cent of the paid—up capital of NABARD and the remaining 99.6 per cent is held by the central government and this causes conflict in the central bank’s role as banking regulator and shareholder in NABARD.
- RBI sold almost all its holding in NABARD to the central government in 2010.
- In the Budget 2018, corpus of the Rural Infrastructure Development Fund (RIFD) was enhanced by the government to Rs 280 billion with an overall objective of doubling farmers’ income by 2022.
- This Bill is one of the major steps towards doubling the income of the farmers by 2022
- NABARD has been financing a variety of rural infrastructure projects and plays an important role in rural India’s growth.
About NABARD
- NABARD was set up in 1982 on the recommendations of B Sivaraman Committee to promote sustainable and equitable agriculture and rural development through participative financial and non-financial interventions, innovations, technology and institutional development for securing prosperity.
- It is headquartered in Mumbai with branches all over India.
- The formation of NABARD was approved by the Parliament through Act 61 of 1981.
- NABARD refinances as well as regulates the financial institutions which finances the rural sector.
- Undertakes monitoring and evaluation of projects refinanced by it.
- It provides training facilities to the institutions working in the field of rural upliftment.
- It regulates the cooperative banks and the RRB’s (regional Rural Banks).
