Bill to enable exit of RBI from NABARD passed

  • A bill to enable exit of RBI from Nabard and increase authorised capital of the development institution six times to INR 30,000 crore was passed by the Lok Sabha on 3rd Aug, 2017.
  • The National Bank for Agriculture and Rural Development (Amendment) Bill, 2017 also seeks to amend certain clauses in the light of reference of the Micro, Small and Medium Enterprises (MSMEs) Development Act, 2006 in the proposed legislation.
  • Minister of State for Finance Santosh Kumar Gangwar indicated this law is one of the “major step” towards doubling farmers’ income by 2022.
  • This is a small bill but irrespective of that, 28 members put their views on this legislation, which reflects the interest of members’s on agriculture related issues. 
  • As this is a short bill, suggestions made by members would be considered when the detail bill will come.
  • This law would benefit farmers.
  • On concerns being raised on including MSMEs in place of SSIs (small scale industries), he said Nabard would always support agriculture and not corporates.
  • Earlier while moving the bill for consideration and passage, the ruling party representative said of The NABARD (Amendment) Bill, 2017 said National Bank for Agriculture and Rural Development (NABARD) is a premier organisation which was established in 1982.
  • It provides loans for agriculture, small scale industries among others.
  • In the last three decades, there has been diversification in the functioning of Nabard and in the last three years, after the BJP government came to power, the bank has underwent a lot of changes.
  • There has been changes in its priority and policies in the area of agriculture and rural development. 
  • Now Nabard is refinancing and providing direct loan in the agriculture and rural areas, he added.
  • The balance sheet of Nabard has increased from INR 1.82 lakh crore in March 31, 2012 to INR 3.10 lakh crore in March 31, 2016, he said adding that means, there has been an increase of around 70 percent in the activities of Nabard.
  • Nabard plays an important role for doubling the income of farmers and increasing the infrastructure in the rural areas. 
  • At present the authorised capital of Nabard is INR 5,000 crore and there is a proposal to increase it to INR 30,000 crore, Gangwar said.
  • According to the need, the government can increase the authorised capital from time to time.
  • If there is a need to increase this authorised capital above INR 30,000 crore, then after discussions with RBI it can be increased.
  • There is another suggestion that at present in Nabard, the centre has a share of 99.6 percent and the RBI has the remaining share, adding a conflict in the role of the RBI.
  • As RBI is also a regulator, its 0.4 percent equity will be transferred to Centre, as a result, 100 percent equity will come to the Centre.
  • Another suggestion was that NABARD can have an authentic data bank on rural credit.
  • Agriculture credit is a major issue and that disbursement is dominated by private banks in certain states. 
  • Another suggestion was functioning of Regional Rural Banks (RRBs) should be looked into and the government could look at appointing an RBI Deputy Governor as chairman of the NABARD.
  • Three members from the Lok Sabha and two from the Rajya Sabha should be appointed to the NABARD board for a period of two years, according to another suggestion.

Source: PRS India

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