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Wednesday, May 2, 2012

All set for Nabard transition as Bill in final stages of passing

The National Bank for Agriculture and Rural Development (Amendment) Bill, 2012, has entered the final stages of being legislated. The token 1 per cent stake of capital that the Reserve Bank of India holds in Nabard is sought to be vested in the centre, completing the transition.

The Bill states that “the capital…which has been subscribed by the Reserve Bank… shall…stand transferred to, and vested in, the Central Government.The Reserve Bank shall be given…in cash, for transfer to, and vesting in the Central Government of the capital…. an amount equal to the face value…at Rs 20 crore.”

The central bank had sold its majority stake to the centre in 2010. The latter now owns 99 per cent in Nabard. The 2012 Bill will help bring about the complete transfer. Direct lending will replace the function of refinance, until now synonymous with Nabard, as the new theme song.

Nabard…may provide by way of refinance, loans and advances…to state cooperative banks…. primary agricultural credit societies…,” the Bill says.


It may provide loans and advances also....“to any financial institution or to any class of financial institutions…approved by the board…” There is also a notable expansion of the range of entrepreneurial activities the apex agricultural bank can support, including in the SME sector. Agro-industries, small and medium enterprises and handlooms are additions to the list of beneficiaries.

The posts of chairman and managing director are being merged into a single chairman and managing director.

Mr Jose T. Abraham, vice-president, All-India Nabard Employees Association, said all these will push Nabard to a faster path towards commercialisation.


Agriculture finance and rural development have traditionally been a central bank function, carried out through Nabard. The 2012 Nabard bill will sever the umbilical cord of the Reserve Bank with development finance at the ground level.

Direct lending has been strongly opposed by cooperatives all over the country, Mr Abraham told Business Line.


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