NABARD and RBI

The finance minister’s budget speech earlier this year contained a seemingly innocuous statement,

To take forward the process of financial sector legislative reforms, the government would move the following bills in the budget session of the parliament: the Micro Finance Institutions (Development and Regulation) Bill, 2012; the National Housing Bank (Amendment) Bill, 2012; the Small Industries Development Bank of ­India (Amendment) Bill, 2012; the ­National Bank for Agriculture and Rural Development (Amendment) Bill 2012; Regional Rural Banks (Amendment) Bill, 2012; Indian Stamp (Amendment) Bill 2012 and Public Debt Management Agency of India Bill, 2012 (GoI 2012).

While there is a rationale for bringing each bill before Parliament, one is perplexed why amendments are being proposed to the National Bank for Agriculture and Rural Development (NABARD) Act, 1981. The Act in its present form has not hindered the functioning of the insti­tution and has given it enough ­manoeuvrability to expand the scope of its ­activities and facilitate new innovations and developmental interventions. The amendments to the Act carried out in 2000 have cleared whatever technical difficulties or obstacles the institution might have faced in its functioning. The only plausible reason for the proposed amendment is easing out the Reserve Bank of India (RBI) from the shareholding of NABARD to make it a wholly government-owned entity. This step would alter the basic structure of the institution as envisaged by the Sivaraman Committee that conceived and recommended its establishment and the vision the government of the day, led by Indira Gandhi, had for it.