NABARD: India’s Apex Bank for Rural Credit

India’s largest microfinance programme did not come from a private bank or an NGO. It came from a rural development bank most people have barely heard of.

India’s Apex Rural Bank

NABARD stands for the National Bank for Agriculture and Rural Development. It is India’s apex development bank for agriculture and rural credit.

The government set it up on 12 July 1982, under the NABARD Act, 1981. It followed the 1979 Shivaraman Committee’s recommendations.

NABARD was formed by merging two RBI units, the Agricultural Credit Department and the Rural Planning and Credit Cell. The Agricultural Refinance and Development Corporation also merged into it. Its headquarters sits in Mumbai, Maharashtra.

The SHG-Bank Linkage Programme

In 1992, NABARD launched the SHG-Bank Linkage Programme. It connects women’s Self-Help Groups to formal bank credit.

That programme went on to become the world’s largest microfinance programme, measured by outreach. Under the related DAY-NRLM programme, over 19.83 lakh Self-Help Groups were active as of 10 July 2026. Their cumulative loan disbursements reached ₹13.28 lakh crore since inception.

Refinancing, Not Lending

NABARD does not lend directly to individual farmers. Instead, it refinances other institutions. These include commercial banks, Regional Rural Banks, and cooperative banks. Those institutions then lend to farmers themselves.

NABARD is distinct from SIDBI, which refinances small industries rather than agriculture. It is also distinct from NaBFID. NaBFID is newer. It finances long-term infrastructure, not agriculture.

RIDF and Kisan Credit Cards

In 1995, NABARD launched the Rural Infrastructure Development Fund, or RIDF. It finances rural roads, bridges, and irrigation. RIDF loans are funded partly through banks’ own shortfalls in meeting priority-sector lending targets.

NABARD also helped design the Kisan Credit Card scheme in 1998. Both schemes target rural credit access, but through different channels. The SHG programme works through group-based microfinance. The Kisan Credit Card works through individual farmer credit lines.

• Two Channels NABARD’s own SHG-Bank Linkage Programme is one of two main channels for Indian microfinance. The other is private, for-profit NBFC-MFIs, such as SKS Microfinance.
• Post-Crisis Rule The 2010 Andhra Pradesh microfinance crisis followed. After that, the RBI created a distinct NBFC-MFI regulatory category, from December 2011.

The SHG Origin Trap

UPSC CSP 2023 tested three statements about the SHG-Bank Linkage Programme. Only two of them were correct.

The programme was initiated by NABARD, not the State Bank of India. Students sometimes credit SBI instead, since SBI is India’s largest bank and runs its own separate SHG-support work. The statements on joint liability among SHG members, and on both RRBs and Scheduled Commercial Banks supporting SHGs, were both correct. See UPSC CSP 2023 GS Paper I, Q74.

Current Affairs

• 16 Jul 2026 PIB published a report on strengthening rural credit. As of 8 July 2026, Kisan Credit Card applications reached about 739 lakh under commercial banks. Over 365 lakh came under RRBs, and over 1,178 lakh under cooperative banks.
• Rural Sentiment NABARD’s Rural Economic Conditions and Sentiments Survey (May 2026) found about 77.2% of rural households reported higher consumption. Around 51% now rely exclusively on formal credit sources.