The National Bank for Agriculture and Rural Development (Nabard) is getting a wider role that will let it offer direct loans to the farm sector, SMEs, state and multi-state cooperatives and credit societies. So far it has been a re-financer.

For this purpose, its paid-up capital is proposed to be raised from Rs 2,000 crore to Rs 10,000 crore. It authorised capital is also being from Rs 5,000 crore now to Rs 20,000 crore.Nabard now operates two long-term funds: the national long-term rural credit fund and the national rural credit stabilisation fund. The bank refinances loans taken by central, state, primary cooperative banks and agriculture credit societies. In its expanded role, Nabard will be able to undertake swapping of farmers’ debt. It will also accept collaterals such as fixed deposit receipts to offer additional loans. The proposal, cleared by finance minister Pranab Mukherjee and sent to the Union cabinet, allows Nabard the flexibility to waive state guarantees on certain loans, provide loan combos, and undertake all operations relating to letters of credit, credit bills.

In effect it will be able to do business like any nationalised bank except get into retail banking, corporate lending, or market operations. But it will be free to develop new credit products, credit linkages and new clients.Its board will restructured to have one chairman and managing director, and two deputy managing directors, as in the State Bank of India.

Ownership of Nabard will be fully in the hands of the government. As of now, it is majority owned by Reserve Bank of India. The ownership change was notified in October 2010 but to give it effect, the government first needs to amend the Nabard Act, 1981.