Govt moves bill in Lok Sabha to raise Nabard's capital to Rs 30K cr

RBI currently holds 0.4% of paid-up capital of Nabard and remaining 99.6% is held by central govt

A bill to enable exit of RBI from Nabard and increase authorised capital of the development institution six times to Rs 30,000 crore was introduced in the Lok Sabha on Wednesday.

The National Bank for Agriculture and Rural Development (Amendment) Bill, 2017 introduced by Finance Minister Arun Jaitley also seeks to amend certain clauses in the light of reference of the Micro, Small and Medium Enterprises Development Act, 2006 and the Companies Act, 2013 in the proposed legislation.

As per the statement of objects and reasons, the bill proposes to empower the central government to increase authorised capital of the National Bank for Agriculture and Rural Development Bank (Nabard) from Rs 5,000 crore to Rs 30,000 crore.
 

Increase in authorised capital will happen in consultation with the Reserve Bank of India (RBI) as deemed necessary from time to time, it said.

Besides, it would also enable the transfer the RBI's balance equity of Rs 22 crore in the bank to the central government.

RBI currently holds 0.4 per cent of the paid-up capital of Nabard and the remaining 99.6 per cent is held by the central government and this causes conflict in the central bank's role as banking regulator and shareholder in Nabard.

RBI sold almost all its holding in Nabard to the central government in 2010.

The National Bank for Agriculture and Rural Development Act was enacted in 1981 for setting up of a development bank to be known as Nabard for providing and regulating credit and other facilities for the promotion and development of agriculture, small-scale industries, handicrafts in rural areas for promoting integrated rural development.

The proposed increase in authorised capital would enable Nabard to respond to commitments it has undertaken, particularly in respect of the Long Term Irrigation Fund and the recent Cabinet decision regarding on-lending to cooperative banks.

Further, it will enable Nabard to augment its business and enhance its activities which would facilitate promotion of integrated rural development and securing prosperity of rural areas including generation of more employment.