Tap RBI channels to sustain National Rural Credit Fund, demands AINBEA 

All India Nabard Employees Association (AINBEA) has demanded Government of India channelise 8-9 per cent of the income of the Reserve Bank of India to the National Rural Credit (Long-Term Operations) [NRC (LTO)] and NRC Stabilisation Funds as per Sections 42 and 43 of National Bank for Agriculture and Rural Credit (NABARD) Act. 

This translates into ₹22,000-₹25,750 crore per annum, taking on an RBI income at ₹2.75 lakh crore in 2023-24 as denominator. Demand for earmarking of this money formed part of a resolution the AINBEA passed at a meeting of office-bearers held recently in Mumbai.

It would help provide cheaper credit flow to rural farm and non-farm sector through cooperatives and regional rural banks (RRBs). 

• Also read: Dependency on single vendor for critical services can create lock-in situations, cautions Deputy Governor Rao

Balancing of budget

Allocation of 8-9 per cent of the RBI income as assistance to NRC funds was the practice till 1992, when it was stopped. Since then, it has been directed to Government of India to balance its growing fiscal deficit.

“This directly contravenes Sections 42 and 43 of NABARD Act, 1981, and Section 46A of RBI Act, 1935, in substance and spirit,” said Rana Mitra, General Secretary, AINBEA. 

The NRC fund (LTO) is utilised to provide financial assistance by way of loans and advances to RRBs, cooperative banks and others by way of refinance for long-term loans issued for agriculture, allied activities and rural non-farm sector.

The NRC (stabilisation) fund helps NABARD provide medium-term loans to approved financial institutions by converting short-term crop loans to enable farmers obtain fresh loans in case of natural calamities such as drought or floods.

Dwindling rural credit

According to Mitra, the dwindling share of rural credit from the cooperative sector (around 12 per cent of the total ground-level agri-credit distributed in the country in 2022-23) has forced poor farmers to depend on informal channels such as money lenders and high interest-charging NBFCs.

He recalled NABARD is mandated to strengthen rural credit delivery mechanism in the agriculture sector, especially to small and marginal farmers, for sustainable development. 

AINBEA has also demanded that the Centre exempt NABARD from paying Income Tax so it may utilise the amount to ensure cheaper credit to the rural agriculture sector.

• Also read: Banks, NBFCs should treat customer complaints with due gravitas: RBI Deputy Governor M. Rajeshwar Rao

It resolved to take forward this long-pending demand with the Union Finance Ministry and RBI. AINBEA will also push organisational actions with a view to ‘enhancing low-cost credit, saving farmers and strengthening NABARD.’