Rural Distress, Farmer Suicides, Drought Measures

[oped snap] A boost to rural entrepreneurship

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Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Particulars of the amendment bill

Mains level: Objects and reasons behind the amendment bill


Amendments passed by Parliament to the National Bank for Agriculture and Rural Development (NABARD) Act, 1981

  1. The amendment will support the government’s push to boost the rural and agricultural sector
    Importance of the amendment
  2. The amendments recognise the vital role of micro, small and medium enterprises (MSMEs) in rural entrepreneurship and are intended to make financing easier for them
  3. The NABARD (Amendment) Bill, 2017 provides for empowering the Central government to increase the authorised capital of NABARD from Rs. 5,000 crore to Rs. 30,000 crore in consultation with the RBI

Background of the act

  1. The 1981 Act was enacted to establish a development bank to provide and regulate credit and other facilities in order to promote and develop
    (1) agriculture, (2) small-scale industries, (3) cottage and village industries, (4) handicrafts, and (5) allied economic activities in rural areas

Objects and reasons for the National Bank for Agriculture and Rural Development (Amendment) Bill of 2017

  1. The government explained that with its expanding activities, NABARD needed to be provided with additional equity from time to time
    Why: to enable it to meet its objectives of promoting rural development and sustainable rural prosperity
  2. It said certain existing commitments of NABARD relating to the long-term irrigation fund and enhanced refinance support to cooperative banks required urgent infusion of equity
  3. The government reasoned that the current authorised capital of NABARD is fully paid-up
  4. Therefore, there was a need to increase it to enable the Central government to infuse additional equity as and when required
    Confusion between the RBI and Government
  5. The RBI holds 0.4% of the paid-up capital of NABARD
  6. The remaining is held by the Central government
  7. This causes conflict in the RBI’s role as banking regulator and shareholder in NABARD,
  8. The amendments primarily seek to transfer the RBI’s balance equity of Rs. 20,000 crore in NABARD to the Central government
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