NABARD, NaBFID sign MoU for funding rural infrastructure projects

• The National Bank for Agriculture and Rural Development (NABARD) and the National Bank for Financing Infrastructure and Development (NaBFID) have signed an initial pact to strengthen collaboration in financing infrastructure projects with significant rural impact.

• The Memorandum of Understanding (MoU) provides a framework for joint financing, knowledge sharing and the development of innovative financing solutions, with a focus on expanding access to long-term, competitively priced finance for projects that can strengthen rural infrastructure and value chains.

• The MoU seeks to cover Public Private Partnership (PPP) projects and agri-value chains as well as infrastructure with strong rural linkages.

• Key areas include water and sanitation, irrigation, post-harvest storage and cold-chain facilities, terminal markets, rural roads and bridges, warehousing and compressed biogas.

• The partnership aims to facilitate greater availability of long-term finance for rural infrastructure and allied value chains, supporting commercially viable projects, improving connectivity and market access, and contributing to higher rural incomes.

What is the role of NABARD?

• The National Bank for Agriculture and Rural Development (NABARD) is the premier organisation dealing with policy, planning and operations in the field of credit for agriculture and other activities in rural areas.

• NABARD was established in 1982 by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC).

• It was set up under an Act of Parliament for supporting and promoting agriculture and rural development. 

• NABARD has been playing a crucial role in the development of various activities in the farm and non-farm sector in the country. 

• In its journey of more than four decades, the premier development financial institution has transformed lives in Indian villages through agri-finance, infrastructure development, banking technology, promotion of microfinance and rural entrepreneurship.

• Headquartered in Mumbai, NABARD has a very strong regional presence with 31 offices, 355 district offices and 29 cluster offices across the country. 

Functions of NABARD:

Financial, Developmental and Supervision are three broad heads which enable NABARD to touch almost every aspect of rural economy. 

It includes:

i) Providing refinance support.

ii) Building rural infrastructure.

iii) Preparing district level credit plans.

iv) Guiding and motivating the banking industry in achieving credit targets.

v) Supervising Cooperative Banks and Regional Rural Banks (RRBs) and helping them develop sound banking practices. 

vi) Designing new projects for rural development.

vii) Implementing Centre’s development schemes.

viii) Training handicraft artisans and providing them a marketing platform for selling their articles among others.

• This strategic initiative not only reinforces NABARD’s commitment to environmental stewardship but also positions it as a pivotal player in India’s transition towards a resilient and sustainable economy.

What is NaBFID?

• The National Bank for Financing Infrastructure and Development (NaBFID) is a specialised Development Finance Institution (DFI) in India aimed at supporting the country’s infrastructure sector, which can significantly gain from an enabling credit flow by means of attractive instruments and channelised investment.

• NaBFID was set up in 2021, by the National Bank for Financing Infrastructure and Development Act, 2021, with the essential objectives of:

i) Addressing the gaps in long-term non-recourse finance for infrastructure development.

ii) Strengthening the development of bonds and derivatives markets in India.

iii) Sustainably boosting the country’s economy.

• NaBFID will play a crucial role in driving the development of innovative financing instruments and deep bond and derivatives markets, further supporting infrastructure funding as well as promoting best practices in financing and data-driven risk management.