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Recognising NABARD’s Preeminent Function


To highlight the significance of cooperatives, a panel led by ex-Union Minister Suresh Prabhu has proposed the National Cooperative Policy.Concern has been voiced by the All-India Nabard Employees Association (AINBEA) over rumoured proposals that fail to recognise the National Bank for Agricultural and Rural Development’s (Nabard) important role in India’s economic development.


GS Paper-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Mains Question

Analyse how India’s National Bank for Agricultural and Rural Development (Nabard) has helped to foster long-term growth and fortify the country’s cooperative economy. Identify ways in which Nabard’s role can be strengthened in supervising the cooperative sector and expanding access to financial services for farmers in India. (250 words)

Giving Nabard a Key Function

  • The General Secretary of AINBEA has stated that since its inception in 1982, Nabard has been instrumental in bolstering cooperatives.
  • Despite this, Nabard’s knowledge and experience in regulating cooperatives, both primary agricultural credit societies (PACS) and other types of co-ops, seem to be ignored in the National Cooperative Policy.
  • He proposes that Nabard can oversee the entire cooperative sector, much like the Reserve Bank of India (RBI) oversees commercial banks.He also praises Nabard for implementing the Vaidyanathan Committee’s suggestions to revive the short-term agri-finance cooperative sector and the SHG Bank linkage programme.Nabard could strengthen its development banking at low cost if the Central Government transferred some of the CRR and SLR from commercial banks, RRBs, and cooperative banks to its development fund.

NABARD’s Overreliance on Credit

  • Nabard has been one of the largest borrowers from the money market since the early 1990s, when it was forced to begin doing so.
  • The transfer of almost the entire annual surplus by the RBI to the Centre has resulted in an increase in interest rates for farmers, the cooperative sector, and rural development. o Own funds account for only 10% of the total balance sheet size of 7,57,472 crore in end-March 2022. The rest is borrowed resources.
  • In accordance with the applicable provisions of the Nabard and RBI Acts, these funds could have been used to meet the long-term, low-cost investment needs of cooperatives and RRBs.

Threat of Losing NABARD’s Preeminent Position

  • The National Cooperative Policy suggests establishing a new Development Financial Institution to fund the proposed National Cooperative Bank, but the General Secretary of AINBEA has pointed out that this goes against the principles of the RBI-appointed Committee to Review the Arrangements for Institutional Credit for Agriculture and Rural Development (Craficard).
  • Nabard, according to the Craficard, is merely an extension of the Reserve Bank of India.
  • India’s Central Bank has a long and distinguished history of nurturing and developing the country’s development banking sector.
  • Since Nabard is the preeminent development finance institution (DFI), it is imperative that all cooperative sector funding be directed through it.

The Next Steps

  • The National Cooperative Policy must acknowledge Nabard’s preeminent position in and importance to the cooperative movement.
  • The proposed centralization of a sector that essentially falls under the State list of the Constitution needs to be rethought in light of Nabard’s unparalleled expertise and experience in supervising the cooperative sector and making financial services more accessible to the farmers in India.
  • Finally, the AINBEA asks that all funds earmarked for the cooperative sector be channelled through Nabard, which can play a crucial role in ensuring that these funds are used effectively. o The AINBEA urges the Centre to strengthen Nabard’s basic mandate and DFI character with a low-cost fund flow from the Centre and the RBI.
  • Any proposals to form a National Cooperative Bank bypassing Nabard should be reviewed.


NABARD has been instrumental in the country’s rural development. It has accomplished much that is praiseworthy and repeatedly demonstrated its proficiency in rural areas.Because of its importance to the cooperative sector, the Centre must work to boost Nabard’s standing; otherwise, the rural economy could suffer.Nabard’s knowledge can help India become more self-sufficient in the agricultural and rural sectors.

February 2024