The Lok Sabha on 3 August 2017 passed the National Bank for Agriculture and Rural Development (Amendment) Bill, 2017 by voice vote.
The Bill enables exit of the Reserve Bank of India (RBI) from the National Bank for Agriculture and Rural Development (NABARD) and increase authorised capital of the development institution six times to Rs 30000 crore.
The Bill also seeks to amend certain clauses in the light of reference of the Micro, Small and Medium Enterprises (MSMEs) Development Act, 2006 in the proposed legislation.
Key highlights of the Bill
Increase in capital of NABARD: Under the 1981 Act, NABARD may have a capital of Rs 100 crore. This capital can be further increased to Rs 5000 crore by the Union Government in consultation with the RBI.
The Bill allows the Union Government to increase this capital to Rs 30000 crore. The capital may be increased to more than Rs 30000 crore by the Union Government in consultation with the RBI, if necessary.
Transfer of the RBI’s share to the Union Government: Under the 1981 Act, the Union Government and the RBI together must hold at least 51% of the share capital of NABARD. The Bill provides that the Union Government alone must hold at least 51% of the share capital of NABARD. The Bill transfers the share capital held by the RBI and valued at Rs 20 crore to the Union Government. The Union Government will give an equal amount to the RBI.
Micro, small and medium enterprises (MSME): The Bill replaces the terms ‘small-scale industry’ and ‘industry in the tiny and decentralised sector’ with the terms ‘micro enterprise’, ‘small enterprise’ and ‘medium enterprise’ as defined in the MSME Development Act, 2006. Under the 1981 Act, NABARD was responsible for providing credit and other facilities to industries having an investment of upto Rs 20 lakh in machinery and plant. The Bill extends this to apply to enterprises with investment upto Rs 10 crore in the manufacturing sector and Rs five crore in the services sector.
Under the 1981 Act, experts from small-scale industries are included in the Board of Directors and the Advisory Council of NABARD. Further, banks providing loans to small-scale, tiny and decentralised sector industries are eligible to receive financial assistance from NABARD. The Bill extends these provisions to the micro, small, and medium enterprises.
Consistency with the Companies Act, 2013: The Bill substitutes references to provisions of the Companies Act, 1956 under the NABARD Act, 1981, with references to the Companies Act, 2013. These include provisions that deal with: (i) definition of a government company, and (ii) qualifications of auditors.
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