MICROCAPITAL BRIEF: National Bank for Agriculture and Rural Development (NABARD) Launches $807m Long-Term Rural Credit Fund

The National Bank for Agriculture and Rural Development (NABARD), a development bank in India that formulates certain credit and banking policies, recently announced the launch of the long-term rural credit fund, which will provide INR 5,000 crores (USD 807 million) for refinancing agricultural loans disbursed by cooperative banks and regional rural banks (RRBs).The repayment period will extend over five years at interest rates of 7.85 percent per year. NABARD will also provide technical assistance to the banks. The fund is expected to increase long-term investments in the agricultural sector and to increase the 13-percent share of credit investments that cooperative banks and RRBs have directed to the agriculture sector.

As of March 2014, NABARD had total assets of INR 254,000 crores (USD 41 billion), an increase of 19 percent compared with March 2013. Lending by NABARD amounted to INR 127,000 crores (USD 21 billion) out of which IRN 21,000 crores (USD 3.4 billion) were distributed to the banking sector for agricultural investments.

By Simon Pfanner – Research Associate

About National Bank for Agriculture and Rural Development (NABARD)

The National Bank for Agriculture and Rural Development (NABARD) is a development bank in India that formulates the credit and banking policy for the rural sector, supervises and conducts on-site inspections of cooperatives and regional rural banks (RRBs) and promotes the development of microfinance activities in the rural sector. NABARD is charged with the oversight of the Microenterprise Development Programme, which focuses exclusively on the development of microenterprises. Through this program and the Microfinance Development and Equity Fund, an INR 2 billion (USD 44.6 million) fund designed to support the growth of microfinance, NABARD provides loans to nongovernmental organizations, nonprofit microfinance institutions (MFIs) and agricultural lending outfits. NABARD was formed by an act of the Indian Parliament in 1979 based on the recommendation of the Reserve Bank of India (RBI), which originally owned a controlling interest in NABARD but as of 2010 owns a 1-percent stake in the bank. While MFIs and non-banking financial companies still operate under RBI regulations, the responsibility for inspecting nonprofit MFIs, agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD upon its formation in 1979. As of March 2014, NABARD had total assets of INR 254,000 crores (USD 41 billion), an increase of 19 percent compared with March 2013. Lending by NABARD amounted to INR 127,000 crores (USD 21 billion) out of which IRN 21,000 crores (USD 3.4 billion) were distributed to the banking sector for agricultural investments.

About Long-Term Rural Credit Fund (India)

The long-term rural credit fund is a tool of the Indian government providing refinancing for loans from cooperative banks and regional rural banks in the agriculture sector. It was established in 2014 by the National Bank for Agriculture and Rural Development (NABARD). As of October 2014, the long-term rural credit fund was allocated INR 5,000 crores (USD 807 million).

Sources and Additional Resources

[1] NABARD Press Release, NABARD launches Long-Term Rural Credit Fund

MicroCapital, December 7, 2012, National Bank for Agriculture and Rural Development (NABARD): Non-Performing Assets (NPAs) Owed by Self-Help Groups (SHGs) in India Rise 50% to $400m

MicroCapital, June 11, 2011, New Draft Bill From Ministry of Finance Would Expand Role of Reserve Bank of India (RBI) to Regulate Entire Indian Microfinance Sector, Cutting Roles of NABARD, State Governments

MicroCapital, January 24, 2011, India’s National Bank for Agriculture and Rural Development (NABARD) Looking to Invest in Venture Capital Funds

MicroCapital Universe Profile: National Bank for Agriculture and Rural Development (NABARD)

MicroCapital Universe Profile: Long-Term Rural Credit Fund (India)

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