The Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) set up by the

RBI under the Chairmanship of Shri B Sivaraman in its report submitted to Governor, Reserve Bank of India on November 28, 1979 recommended the establishment of NABARD. The Parliament through the Act 61 of 81, approved its setting up. The Committee after reviewing the arrangements came to the conclusion that a new arrangement would be necessary at the national level for achieving the desired focus and thrust towards integration of credit activities in the context of the strategy for Integrated Rural Development. Against the backdrop of the massive credit needs of rural development and the need to uplift the weaker sections in the rural areas within a given time horizon the arrangement called for a separate institutional setup. Similarly. The Reserve Bank had onerous responsibilities to discharge in respect of its many basic functions of central banking in monetary and credit regulations and was not therefore in a position to devote undivided attention to the operational details of the emerging complex credit problems. This paved the way for the establishment of NABARD. CRAFICARD also found it prudent to integrate short term, medium term and long-term credit structure for the agriculture sector by establishing a new bank. NABARD is the result of this recommendation. It was set up with an initial capital of Rs 100 crore, which was enhanced to Rs 2,000 crore, fully subscribed by the Government of India and the RBI.

NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with 1. Providing refinance to lending institutions in rural areas 2. Bringing about or promoting institutional development and 3. Evaluating, monitoring and inspecting the client banks Besides this pivotal role, NABARD also: Acts as a coordinator in the operations of rural credit institutions

 Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development Acts as regulator for cooperative banks and RRBs Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development Acts as regulator for cooperative banks and RRBs Some of the milestones in NABARD's activities are: Total production credit disbursed at end March 2011 was 34196 crore.

Refinance disbursement under Investment Credit to commercial banks, state cooperative banks, state cooperative agriculture and rural development banks, RRBs and other eligible financial institutions during 2010-11 aggregated 13485.87 crore.
Through the Rural Infrastructure Development Fund (RIDF) 12060.04 crores were disbursed during 2010-11. A cumulative amount of 121488.40 crore has been sanctioned for 444162 projects as on 31 March 2011 covering irrigation, rural roads and bridges, health and education, soil conservation, drinking water schemes, flood protection, forest management etc.

Under Watershed Development Fund which has a balance of 2011, 579 projects in districts of 14 states have benefited.

1847.69 crore as on 31 March

Farmers now enjoy hassle free access to credit and security through 1009.30 lakh Kisan Credit Cards that have been issued through a vast rural banking network. During 2010-11, 72.6 lakh KCC were issued by banks with a sanctioned limit of 43370 crore. Under the Farmers' Club Programme, during the year 21903 clubs were launched, taking the total to 76708 clubs as on 31 March 2011 helping farmers get access to credit, technology and extension services. Village Development Programme (VDP) is being implemented in 801 villages across 25 states.
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 Under Tribal Development Fund, cumulative sanction amounted to 917.60 crore for 317 projects covering 2.5 lakh families. During 2010-11 financial assistance of 373.97 crore was sanctioned for 126 projects benefiting 94,163 tribal families. Under Farm Innovation and Promotion Fund (FIPF), cumulatively 123 projects in various states, involving financial support of 11.65 crore were sanctioned as on 31 March 2011. Farmers Technology Transfer Fund (FTTF) 512 innovative projects in 27 states with grant assistance of 44.97 crore were sanctioned during 2010-11. There were more than 69.53 lakh savings linked SHGs and more than 48.51 lakh credit linked SHGs covering 9.7 crore poor households as on 31 March 2011, under the microfinance programme.

Mission
Promoting sustainable and equitable agriculture and rural development through effective credit support, related services, institution building and other innovative initiatives. In pursuing this mission, NABARD focuses its activities on:
Credit functions,

involving preparation of potential-linked credit plans annually for all districts of the country for identification of credit potential, monitoring the flow of ground level rural credit, issuing policy and operational guidelines to rural financing institutions and providing credit facilities to eligible institutions under various programmes
Development functions,

concerning reinforcement of the credit functions and making credit more

productive
Supervisory functions,

ensuring the proper functioning of cooperative banks and regional rural banks

Objectives NABARD was established in terms of the Preamble to the Act, "for providing credit for the promotion of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promoting IRDP and securing prosperity of rural areas and for matters connected therewith in incidental thereto". The main objectives of the NABARD as stated in the statement of objectives while placing the bill before the Lok Sabha were categorized as under : 1. The National Bank will be an apex organisation in respect of all matters relating to policy, planning operational aspects in the field of credit for promotion of Agriculture, Small Scale Industries, Cottage and Village Industries, Handicrafts and other rural crafts and other allied economic activities in rural areas.

2. The Bank will serve as a refinancing institution for institutional credit such as long-term, short-term for the promotion of activities in the rural areas. 3. The Bank will also provide direct lending to any institution as may approved by the Central Government. 4. The Bank will have organic links with the Reserve Bank and maintain a close link with in.

Role and Functions

NABARD is an apex institution accredited with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas. It is an apex refinancing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas It takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc. It co-ordinates the rural financing activities of all the institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India and other national level institutions concerned with policy formulation. It prepares, on annual basis, rural credit plans for all districts in the country; these plans form the base for annual credit plans of all rural financial institutions It undertakes monitoring and evaluation of projects refinanced by it. It promotes research in the fields of rural banking, agriculture and rural development

NABARD completed 25 years of its eventful and trailblazing existence on 12 July 2007. Established in 1982, by an Act of Parliament, NABARD's mandate was to provide focused and undivided attention to the development of rural India by facilitating credit flow for promotion of agriculture and rural non farm sector. Emphasizing this in no uncertain terms, its mission statement underscores NABARD's goal to "promote sustainable and equitable agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives". NABARD's functions can be classified into 4 major categories viz. Credit Planning, Financial Services, Promotion and Development, and Supervision. Under Credit Planning NABARD prepares Potential Linked Credit Plan (PLP) annually for each district of the country by assessing potential available in agriculture and rural sector. This serves as a guide for banks and Government agencies to prepare their own investment and credit plans in the district and state. Under its Financial services, it refinances commercial, co-operative and regional rural banks for lending to on farm and non-farm activities. This includes farm activities like minor irrigation, animal husbandry, farm mechanization, forestry, fisheries, land development, horticulture, plantation and medicinal crops and non-farm like rural industries, artisans, handicrafts, handlooms, rural housing, rural tourism and agro processing. Refinance is provided by NABARD for both long term investment credit as well as short term production credit for crop loans and working capital for non-farm.

Resources of NABARD

There is a national need to create a National Rural Credit (Short Term Operations) fund with Rs.15000 crore corpus to bring down the cost of credit to the farmers. Secondly, the share capital of NABARD needs to be increased to Rs.10,000 crore to make interventions meaningful. NABARD may be taken as a partner in all the rural development projects by the Central Government. NABARD may be placed on the board of commercial banks to add value to both banks and NABARD. NABARD is the only institution which is mobilizing urban surpluses and investing in rural areas. As such, the resource mobilization efforts of NABARD should be supported with fiscal concessions

Role of NABARD
General aspects

NABARD should be a managing agency of Government of India for public investments in rural India . It should be the chief overseer, grand planner for public investment and ensure that each rupee spent in rural India generates a net positive return for rural India. NABARD should not resort to passive funding. NABARD has to make things happen by organizing people and providing knowledge. The strength of NABARD is its good networking capabilities. It can act as a coordinating agency for all the developmental works taking place at the grass roots level. The greatest comparative advantage of NABARD is its ability to decontaminate the effects of subsidy and making public spending more efficient. It is a folly for NABARD to become a Commercial Bank. It is the only institution which can handle public finance better than the government.

Future role of NABARD

NABARD may document its achievements, failures, aspirations, what contributed to failure and success in the past 25 years. With these ideas on table, five or six ideas may be identified and a clear path may be chalked out and a blue print for the next 25 years may be drawn.

Credit planning

NABARD should actively engage in developing a long term credit policy for rural finance clearly laying role of various agencies in our multi agency approach to bring a role clarity for all the agencies. With the stress on decentralised planning at PRI level, there is a need to strengthen the institution of DDMs and PLP instrument by NABARD.

Credit functions

Refinance has lost its teeth and moreover no organization can borrow at higher rates and lend at lower rates. NABARD should become an important player in retail markets.

Support to agriculture technology

NABARD has to provide more grant-in-aid for research projects in agriculture technology. NABARD has to cover the last mile by funding the gaps where private sector is not coming forward.

Producer companies

NABARD can promote the producer companies.

Educating of farmers

It has to educate farmers on economic climate. NABARD may conduct short duration training programmes for farmers on the basic skills and application of new technology.

New business opportunities

NABARD should take up management role in Regional Rural Banks by taking 50% share holding to reach village people effectively. It can enhance the value of RRBs by bringing in transparency, supply chain credit and insurance.

DRI interest rates for agriculture

Honble Chief Minister of Andhra Pradesh urged that Differential Rate of interest may be extended to the entire rural credit and priority sector lending. In case RBI, NABARD and banks have difficulty in reducing the interest rates to 4%, GoI should come forward to give support to this move.

Formation of subsidiaries

NABARD may create more organizations to fill the critical gaps by forming subsidiaries and see to it that they are supported and nurtured in a manner that they become effective. A subsidiary for funding rural infrastructure may be formed as it has developed expertise in funding of private and public sector infrastructure development. The subsidiary should be given the responsibility of mobilizing funds, if required, from overseas.

Human resources

NABARD should have a strong technical wing with competent people in various disciplines such as commercial agriculture, agro processing, marketing, risk mitigation. The Technical officers should be exposed to the field for constant upgradation of their technical skills. This team may act as brain trust for the nation for deciding what is to be done and what is not to be done. NABARD should be a learning organization. It has strong human resources. Its junior officers should develop 'specialization' and seniors strong perspective'.

SHG-Bank Linkage programme

NABARD needs to focus on the quality of Self Help Groups behind the large numbers. NABARD should evolve a national strategy for sustainable SHG movement in India through a consultative process. Unless NABARD engages actively in creation of larger structures such as federations, a great opportunity will be

missed. NABARD should Commission a country-wide study on SHG Federations to understand their present role and future potentials. NABARD should facilitate common standards, book keeping system and self regulatory mechanism for the SHG members.

Non Farm sector

The non grain crop sector and animal husbandry are clocking faster growth pointing towards the diversification that is taking place in agriculture sector. Eleventh plan preliminary numbers indicate that 2.8% of 4% agriculture growth is going to come from diversification. It is a big business for NABARD and NABARD should see that happen. To build robust NFS so that benefits flow to a large number of rural population, we need to build new institutions such as Producer Organizations or to begin with Farmer Organizations in agro processing sector. NABARD must take up a study of couple of villages where regular credit flow has taken place in the past five years to a large number of families and document the effect of the credit on the non farm sector.