Press Information Bureau

Government of India

Ministry of Finance

07-February-2013 13:28 IST

The Union Cabinet today  gave its approval to the amendments to the National Bank for Agriculture and Rural Development (NABARD) Act 1981.

The following amendments to the NABARD Act 1981 are proposed:-

1. Raising the authorized capital of NABARD to Rs. 20,000 crore from Rs. 5,000 crore.

2. The meaning of cooperative society is proposed to be enlarged to include multistate cooperative societies registered under any Central law or any other Central or State law relating to cooperative societies.

3. Change of ownership to facilitate the transfer of the remaining share capital of NABARD from the Reserve Bank to the Central Government.

4. Increasing the scope of operations of NABARD under short term funding purposes and other changes.

The following benefits are projected by this amendment:-

1.  By increasing the authorized capital of NABARD to Rs 20,000 crore from Rs 5,000 crore, the ability of NABARD to mobilize resources from the market will be enhanced thereby new credit products, new credit linkages and new clients will be developed.

2. The amendments allow NABARD to lend to new institutions, mainly Societies covered under multistate cooperative societies act and other central laws, producer organizations or such class of financial institutions which are approved by the Central Government. This is likely to benefit a larger segment of the financially excluded farmers in the country.

3. The amendments allow combination of credit, creation of short term operations fund and swapping of debt of farmers.

4. The decision of the Government to transfer the balance one percent shares to the Govt. of India from Reserve Bank of India (RBI) in NABARD shall be carried out, which will provide for increased public accountability, as the Government will acquire the equity held by RBI.

5. NABARD will combine the post of Chairman and the post of Managing Director, into one, therefore Chairman and Managing Director, under the provisions of the NABARD Act relating to these two posts. This shall ensure a distinct line of command.

Background

NABARD was established on 12 July 1982 to provide sharp focus to agriculture credit and rural development. NABARD adopted, as its mission, the promotion of sustainable and equitable development of agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives.

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SC/SM

Authorized capital increase enhances NABARD's market funding capacity and expands lending scope to new cooperative and producer institutions. Amendments raise NABARD's authorized capital, broaden the meaning of cooperative society to include multistate cooperatives and similar entities, expand NABARD's short term funding and debt swapping powers, permit lending to producer organisations and approved financial institutions, transfer remaining NABARD shares from the Reserve Bank to the Central Government to increase public accountability, and combine the offices of Chairman and Managing Director into a single post to ensure a distinct line of command.