Cabinet approves proposal for Amendments to the NABARD Act, 1981

• Union cabinet has approved the proposals regarding amendments to the NABARD Act, 1981. These amendments are: 
• The Amendments include provisions that enable Central Government to increase the authorized capital of NABARD from Rs. 5,000 crore to   Rs. 30,000 crore and to increase it beyond Rs. 30,000 crore in consultation with RBI, as deemed necessary from time to time.
• Transfer of 0.4 per cent. equity of RBI in NABARD amounting to Rs. 20 crores to the Government of India.
• The proposed amendments in NABARD Act, include, certain other amendments including changes in long title and certain Sections to bring Medium Enterprises and Handlooms in NABARD’s mandate.  
• The proposed increase in the authorized capital would enable NABARD to respond to the commitments it has undertaken, particularly in respect of the Long Term Irrigation Fund and the recent Cabinet decision regarding on-lending to cooperative banks.
• Further, it will enable NABARD to augment its business and enhance its activities which would facilitate promotion of integrated rural development and securing prosperity of rural areas including generation of more employment.
• The transfer of entire shareholding in NABARD held by RBI to the Central Government will remove the conflict in RBI's role as banking regulator and shareholder in NABARD.   

About NABARD:

• The National Bank for Agriculture and Rural Development (NABARD) is a development bank with the highest importance in the rural improvement.
• The bank works for the planning and development of credit policies to the agriculture and other rural activities of economic value. Achieving financial inclusion is one of the major goal of the bank and it is a member of the Alliance for the Financial Inclusion.
• The government of India holds 99% of the bank’s ownership and the rest 1% is held by the Reserve] Bank of India. The headquarters of NABARD is situated in Mumbai.
• The formation of NABARD was initiated through an act of the parliament (National Bank for Agriculture and Rural Development Act 1981) in the year 1981.
•  It came into existence in July 1982 and was functional on 05 November 1982.

Functions

• The bank is associated with three main operations in the rural areas. It provides financial, developmental and supervisory support to the target areas.
• Financial Services: NABARD provides arrangements for credit facilities for modern and traditional agriculture and other activities. It provides customized schemes for different categories under refinance and direct finance.
• Short and medium term loans: It has a dedicated PCD (Production Credit Department) to deal with short term finance and refining facilities. NABARD provides concessional refinance facilities to the State Cooperative Banks and the RRBS for production purposes. It also provides relief to farmers in case of crop damage due to natural calamities.
• Long Term Loans: NABARD promotes capital formation and asset creation through credit investment. It helps farmers in technological up gradation to increase production, productivity and induce incremental income factors. Long term loans are provided for 3 to 15 years. The target sectors are agricultural activities, SMEs and the SHGs in the rural regions.
• Schemes for refinancing under non-farm sector: Loans are given following purposes – Rural Housing, Renewable energy, small road and water transport operators, self-employment schemes for ex-service and loan assistance for margin money.
   

By: Vishal