National Bank for Agriculture Act Overview

Questions and Answers

What is the maximum term for a director appointed under clause (b) or clause (c) of sub-section (1) of section 6?

Exclusively renewable term

2 years

3 years (correct)

5 years

Which of the following is NOT a valid reason for disqualification of a director?

Adjudicated insolvent

Declaring unsound mind by a competent court

Convicted of a financial crime (correct)

Absence from Board meetings

What happens to a director who is elected or nominated as a Member of Parliament or a Member of Legislative Assembly?

He immediately ceases to be a director (correct)

He becomes a special adviser

He may retain his position through a vote of confidence

He remains a director until his term ends

Which of the following committees is established under Sec. 13?

Risk Management Committee of the Board Signup and view all the answers

For which of the following is the National Bank empowered to grant loans without immovable property as security?

For marketing and distribution of agricultural inputs Signup and view all the answers

What is the primary purpose of the National Bank as stated in the functions outlined?

Supporting agricultural operations and rural development Signup and view all the answers

What must the borrowing institution provide when obtaining a loan or advance from the National Bank?

A declaration specifying the purpose of the loan Signup and view all the answers

Which funds are transferred to the National Bank under section 18?

National Agricultural Credit (LTO) Fund and National Agricultural Credit (Stabilisation) Fund Signup and view all the answers

What type of bonds or financial instruments is the National Bank authorized to issue for borrowing purposes?

Bonds, debentures, and other financial instruments Signup and view all the answers

Who has the authority to appoint a new Managing Director during the MD's absence?

The Central Government after consulting with the RBI and the Board Signup and view all the answers

What is the maximum time period within which a member of the RBI staff can apply for appointment to NABARD if not appointed under subsection (3)?

Six months Signup and view all the answers

Which of the following statements about the transfer of staff between NABARD and RBI is NOT true?

RBI can transfer any member of its staff at any time after six months. Signup and view all the answers

What obligation do staff members of NABARD have regarding fidelity and secrecy?

They are required to make a declaration of fidelity and secrecy. Signup and view all the answers

Which provision protects NABARD and its employees from legal suits for actions taken under the act?

Section 53 Signup and view all the answers

In terms of staff transfer from RBI to NABARD, which condition regarding service is established?

Staff are entitled to the same gratuity pension as RBI staff. Signup and view all the answers

What was the initial capital of NABARD as stated in the establishment provisions?

₹ 100 crore Signup and view all the answers

Which body has the authority to determine the increase of NABARD's capital?

The Central Government Signup and view all the answers

How many directors from the RBI are part of the Board of Directors (BoD) of NABARD?

Three Signup and view all the answers

In what manners are additional directors elected based on equity subscription in NABARD?

Equity subscribed more than 10% and less than 25% elects 3 directors. Signup and view all the answers

What is the current authorized capital of NABARD as mentioned in the establishment provisions?

₹ 30000 crore Signup and view all the answers

Which of the following does NOT comprise the composition of the BoD in NABARD?

Experts in corporate finance Signup and view all the answers

What is the maximum repayment period for conversion loans for production credit under Sec. 22?

7 years Signup and view all the answers

Which of the following locations can NABARD's offices be established?

Any place in India with previous approval of the CG Signup and view all the answers

What description matches the role of NABARD as outlined in the preliminary chapter?

To support agriculture and rural development Signup and view all the answers

What percentage of support is provided to RRBs under the NRC (Stabilisation Fund)?

70% Signup and view all the answers

Which of the following institutions is NOT eligible for loans without security according to Sec. 28?

Non-Governmental Organization Signup and view all the answers

What is the minimum repayment period for loans rescheduled for small-scale industries under Sec. 23?

18 months Signup and view all the answers

Under Sec. 24, what is the maximum duration for loans provided for agriculture or rural development?

7 years Signup and view all the answers

What percentage of support is provided by the state government to StCBs under the NRC (Stabilisation)?

15% Signup and view all the answers

Which section prohibits the National Bank from granting loans against its own bonds?

Sec. 37 Signup and view all the answers

According to Sec. 25, what condition must be met for a StCB to receive a loan guarantee?

Full government guarantee Signup and view all the answers

What is the repayment period for direct loans as per Sec. 30?

Not exceeding 25 years Signup and view all the answers

What is the primary function stated in Sec. 38 for the National Bank?

Coordinating operations in rural credit Signup and view all the answers

What does Sec. 38 (A) specifically relate to?

Promotion of subsidiaries in consultation with the Reserve Bank Signup and view all the answers

Which of the following is a function that the National Bank is permitted to perform under Sec. 39?

Executing functions necessary for discharging its powers Signup and view all the answers

What is the major focus of the Research and Development Fund established under Sec. 44?

Funding agricultural and rural development initiatives Signup and view all the answers

Under what condition does Sec. 47 state that the National Bank shall transfer surplus funds?

After making provisions for bad debts and depreciation Signup and view all the answers

Which section describes the auditing process of the National Bank?

Sec. 48 Signup and view all the answers

What additional contribution is expected from the RBI and CG annually as stated in Sec. 43?

Contribution to the National Rural Credit (Stabilisation) Signup and view all the answers

What types of securities can the National Bank issue based on loans as per Sec. 38 (B)?

Debt obligations, trust certificates, and other instruments Signup and view all the answers

What does Sec. 46 mandate regarding the preparation of the National Bank's balance sheet?

It must be prepared in a prescribed form and manner. Signup and view all the answers

In Sec. 40, what options are provided to the National Bank regarding deposits and investments?

Can deposit with RBI and scheduled banks and invest in various market instruments Signup and view all the answers

What document must the National Bank furnish to the Central Government and Reserve Bank as mentioned in Sec. 49?

Returns as required Signup and view all the answers

Study Notes

National Bank for Agriculture and Rural Development Act, 1981 Overview

The Act establishes the National Bank for Agriculture and Rural Development (NABARD), applicable throughout India.
Key terms defined include agriculture, rural areas, cooperative banks, and management structure.

Establishment and Capital

NABARD can set up offices across India and internationally with approvals from the Central Government (CG) and Reserve Bank of India (RBI).
Initial capital was ₹100 crore, with an authorized capital of ₹500 crore; current authorized capital stands at ₹30,000 crore with ₹17,080 crore paid-up capital.

Management Structure

General management vested in a Board of Directors (BoD) that includes a Chairman, experts in rural economics, directors from RBI, Central and State Governments, and elected directors based on shareholding.
Appointment terms are set, including a 5-year term for the Chairman and Managing Director, eligible for reappointment.
Directors may not hold office if they are declared unsound of mind, convicted of offenses, or in personal insolvency.

Committees and Advisory Council

Various committees are established such as Audit Committee, Risk Management Committee, and Board of Supervision.
An Advisory Council is created to provide additional guidance.

Transfer of Functions and Business

Assets and liabilities from the Agricultural Refinance and Development Corporation (ARDC) are transferred to NABARD.
National Agricultural Credit Funds maintained under the RBI Act are also transferred to NABARD.

Borrowing Powers

NABARD can borrow through multiple channels including bonds, loans from RBI, and grants from the Central Government.
It is authorized to borrow in foreign currency with approvals from CG and in consultation with RBI.

Credit Functions

NABARD provides credit for agricultural production, marketing, and rural development initiatives.
Loans can be guaranteed by the government or secured through promissory notes and other financial instruments.
Significant support ratios exist for state cooperative banks (StCBs) and regional rural banks (RRBs) under National Rural Credit (Stabilisation and Long Term Operations) Funds.

Investment and Direct Loans

Financial assistance is provided for investments in rural infrastructure and development projects, with loans repayable over set periods.
NABARD can grant loans directly in exceptional cases, beyond refinancing arrangements.

Funds and Audit Management

NABARD manages several funds, including Long Term Operations (LTO) and Stabilisation Funds, supported by the annual contributions from the RBI and Central Government.
A Research and Development Fund and Reserve Fund are established for specific purposes aligned with the Act’s objectives.
Annual audits are conducted by qualified auditors, with obligations to report to the Central Government and RBI.

Staff Management

NABARD is authorized to appoint staff and define their terms of service, retaining the ability to utilize RBI staff as necessary.
Employees from ARDC are considered NABARD staff with the same benefits.

Miscellaneous Provisions

The Act establishes obligations surrounding fidelity and confidentiality among NABARD’s staff and functions.

Conclusion

The NABARD Act, 1981 lays a comprehensive framework for the establishment and management of an institution aimed at promoting rural development and agricultural credit through structured governance, diverse funding mechanisms, and strategic financial operations.### Declaration and Appointment
Staff must declare fidelity and secrecy as per the specified schedule in the Act.
Section 52 ensures that defects in the appointment of the Board members do not invalidate their actions or proceedings.

Legal Validity

Proceedings of the Board cannot be questioned based on a director's disqualification or defects in appointment.
Section 52(A) states that any agreement with the National Bank regarding director appointments will take precedence.

Protection and Indemnity

Section 53 offers protection against legal actions for damages resulting from actions taken under this Act by NABARD, its directors, officers, or authorized persons.
Section 54 provides indemnity to Directors, safeguarding them from personal liability during their service.

Penalties and Offences

Section 56 imposes a penalty of up to three years of imprisonment for willfully making false statements.
Section 57 addresses offences committed by companies under this Act.

Financial Regulations

Section 58 confirms that the Bankers’ Books Evidence Act, 1891 applies to the National Bank, ensuring regulatory compliance regarding financial records.

Winding Up Provisions

According to Section 59, the National Bank cannot be placed in liquidation except by directive from the Central Government, overridden by standard company liquidation laws.

Regulatory Authority

Section 60 grants the Board authority to create regulations for operational governance.
Section 61 pertains to amendments of certain existing enactments for consistency with this Act.
Section 62 authorizes measures to resolve any difficulties arising in the application of this Act.

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Description

Explore the foundational aspects of the National Bank for Agriculture and Rural Development Act of 1981 in this quiz. Chapter 1 covers preliminary definitions while Chapter 2 discusses the establishment and capital of the bank. Test your understanding of key terms and concepts related to this significant legislation.