21. Production and marketing credit.—(1) The National Bank may provide by way of refinance,
loans and advances, repayable on demand or on the expiry of fixed periods not exceeding eighteen
1. Subs. by Act 55 of 2000, s. 10, for clause (a) (w.e.f. 26-9-2000).
2. Subs. by s. 10, ibid., for clauses (b) to (e) (w.e.f. 26-9-2000).
3. Subs. by s. 11, ibid., for section 20 (w.e.f. 1-2-2001).
14
months, 1
[to State co-operative banks, central co-operative banks], regional rural banks, or to any
financial institution or to any class of financial institutions, which are approved by the Reserve Bank in
this behalf, for financing—
(i) agricultural operations or the marketing of crops, or
(ii) the marketing and distribution of inputs necessary for agriculture or rural development, or
(iii) any other activity for the promotion of or in the field of agriculture or rural development, or
(iv) bona fide commercial or trade transactions, or
(v) the production or marketing activities of artisans or of 2
[village and cottage industries, microenterprises, small enterprises and medium enterprises or of those engaged in the field of handicrafts,
handlooms] and other rural crafts.
(2) The National Bank may make loans and advances under sub-section (1) against the security of—
(i) stocks, funds and securities other than immovable property, in which a trustee is authorised to
invest trust money by any law for the time being in force;
(ii) promissory notes supported by documents of title to goods, such documents having been
transferred, assigned or pledged to the borrowing institution as security for a loan or advance made
for any of the purposes specified in sub-section (1):
Provided that the National Bank may, whenever it considers it necessary so to do, accept, in lieu
of the actual assignment of any such security in favour of the National Bank, a declaration in writing
from the borrowing institution,—
(a) stating that it holds such documents of title to goods as may be set out in the declaration;
and
(b) containing such other particulars as may be required by the National Bank.
(3) Notwithstanding anything contained in sub-section (2), the National Bank may in its discretion
grant a loan or advance—
(a) 3
[to any State co-operative bank or central co-operative bank] if the loan or advance is fully
guaranteed for repayment of principal and interest by Government;
(b) to any State co-operative bank which is a scheduled bank, if the loan or advance is secured
either by a bill of exchange or promissory note executed by the central co-operative bank and
assigned in favour of the State co-operative bank.
(4) Notwithstanding anything contained in sub-sections (2) and (3), the National Bank may also make
loans and advances repayable on demand or on the expiry of fixed periods not exceeding eighteen months
against promissory notes of a State co-operative bank or a regional rural bank or an institution approved
under sub-section (1):
Provided that the borrowing institution furnishes a declaration in writing, setting out the purpose for
which it has made loans and advances and such other particulars as may be required by the National
Bank.
4
[22. Conversion loan for production credit.—Where the National Bank is satisfied that owing to
drought, famine or other natural calamities, military operations or enemy action, any State co-operative
bank, central co-operative bank, regional rural bank or any such financial institution or any financial
institution falling under any such class of financial institutions, as may be approved by the Reserve Bank
in this behalf, requires assistance under this section, it may provide to such bank or institution such
1. Subs. by Act 48 of 2003, s. 2, for “to State co-operative banks” (w.e.f. 19-9-2003).
2. Subs. by Act 7 of 2018, s. 8, for “small-scale industries, industries in the tiny and decentralised sector, village and
cottage industries or of those engaged in the field of handicrafts” (w.e.f. 15-3-2018).
3. Subs. by Act 48 of 2003, s. 2, for “to any State co-operative bank” (w.e.f. 19-9-2003).
4. Subs. by s. 3, ibid., for section 22 (w.e.f. 19-9-2003).
15
financial assistance as it may deem fit by way of making loans and advances repayable on the expiry of
fixed periods not exceeding seven years and on such terms and conditions as may be specified in this
behalf by the National Bank:
Provided that loans and advances may be made under this section only for the purpose of enabling the
borrowing bank or institution,—
(a) to pay any dues to the National Bank for credit extended for financing agricultural operations
or the marketing of crops under clause (i) of sub-section (1) of section 21, or
(b) (i) to make loans or advances to central co-operative banks or primary rural credit societies in
cases where the borrowing bank is a State co-operative bank, and
(ii) to make loans and advances to primary rural credit societies in cases where the borrowing
bank is a central co-operative bank,
and such loans or advances in both the cases being repayable on the expiry of fixed periods not being less
than eighteen months and not exceeding seven years, by way of reimbursement of loans and advances
made by such co-operative banks or societies for agriculture or agricultural operations or for
reimbursement of such loans or advances which have been converted into loans or advances repayable on
expiry of fixed periods not being less than eighteen months and not exceeding seven years from the date
of conversion:
Provided further that no loan or advance shall be made under this section to a State co-operative bank
or a central co-operative bank unless such loan or advance is fully guaranteed as to the repayment of the
principal and payment of interest, by the State Government.]
23. Rescheduling of loans to artisans, small-scale industries, etc.—Where the National Bank is
satisfied that owing to unforeseen circumstances the rescheduling of any loans and advances made to
artisans, 1
[village and cottage industries, micro enterprises, small enterprises and medium enterprises and
those engaged in the field of handicrafts, handlooms and other rural crafts], by any State co-operative
bank, regional rural bank or any such financial institution or any financial institution falling under such
class of financial institutions as may be approved by the Reserve Bank in this behalf, has become
necessary, it may provide to such bank or institution such financial assistance as it may deem fit by way
of loans and advances repayable on the expiry of fixed periods not being less than eighteen months and
not exceeding seven years against such securities as may be specified in this behalf by the NationalBank:
Provided that no loan or advance shall be made under this section to a State co-operative bank unless
such loan or advance is fully guaranteed as to the repayment of the principal and payment of interest, by
the State Government but such guarantee may be waived by the National Bank if other security to the
satisfaction of the National Bank is furnished, or if, for reasons to be recorded by it in writing, the
National Bank is satisfied that the guarantee or other security is not necessary.
24. Investment credit—medium term.—The National Bank shall provide such financial assistance
as it may consider necessary by way of making to State co-operative banks, regional rural banks, loans
and advances repayable on the expiry of fixed periods not being less than eighteen months and not
exceeding seven years against such securities as may be specified, in this behalf, by the National Bank
and such loans or advances may be made for agriculture, rural development or such other purposes as the
National Bank may, from time to time, determine:
Provided that no loan or advance shall be made under this section to a State co-operative bank unless
such loan or advance is fully guaranteed as to the repayment of the principal and payment of interest, by
the State Government but such guarantee may be waived by the National Bank, if other security to the
satisfaction of the National Bank is furnished, or if, for reasons to be recorded by it in writing, the
National Bank is satisfied that the guarantee or other security is not necessary.
25. Other investment credit.—(1) The National Bank may provide such financial assistance as it
may consider necessary for promoting agriculture and rural development by—
1. Subs. by Act 7 of 2018, s. 9, for “small-scale industries, industries in the tiny and decentralised sector, village and cottage
industries and those engaged in the field of handicrafts and other rural crafts,” (w.e.f 15-3-2018).
16
(a) making loans and advances, by way of refinance, on such terms and conditions as the National
Bank may think fit to impose, to a State land development bank or a State co-operative bank or a
scheduled bank or any other financial institution approved by the Reserve Bank in this behalf, and
also rescheduling the payment of such loans and advances:
Provided that the maximum period for which any such loan or advance may be granted, whether
originally or by rescheduling the payment thereof, shall not exceed twenty-five years;
(b) purchasing or selling, or subscribing to the bonds or debentures issued by any bank or
institution referred to in clause (a) and repayable within a period not exceeding twenty-five years
from the dates on which they are issued;
(c) making loans and advances on such terms and conditions as the National Bank may think fit
to impose, to a State co-operative bank or a scheduled bank for the purpose of enabling such bank to
make loans or advances to artisans, 1
[village and cottage industries, micro-enterprises, small
enterprises and medium enterprises and those engaged in the field of handicrafts, handlooms] and
other rural crafts and also rescheduling the payment of such loans and advances:
Provided that the maximum period for which any such loan or advance may be granted, whether
originally or by rescheduling the payment thereof, shall not exceed twenty-five years;
(d) making, where it is considered necessary so to do in connection with any financial assistance
under clause (a) or clause (b) or clause (c) to a State land development bank or a State co-operative
bank or a scheduled bank, loans and advances repayable on demand or on the expiry of a fixed period
not exceeding eighteen months, by way of refinance 2
[or otherwise] to such bank and also
rescheduling the payment of such loans and advances for such period as the National Bank may deem
fit.
(2) The provisions of this section shall be in addition to, and not in derogation of, the provisions of
section 21 and section 24.
3
[26. Purchase and sale of shares.—The National Bank may subscribe to, or purchase or sell stocks,
shares, bonds or debentures of, or invest in the securities of, any institution or class of institutions
concerned with agriculture and rural development which the Board may approve subject to such terms
and conditions as it may deem fit.]
27. Loans to State Governments for share capital contribution.—The National Bank may make
loans and advances to State Governments, repayable on the expiry of fixed periods not exceeding twenty
years from the date of making such loans and advances, from the National Rural Credit (Long Term
Operations) Fund established under section 42 for enabling them to subscribe directly or indirectly to the
share capital of a co-operative credit society.
4
[27A. Loans to State Government, undertakings, etc.—The National Bank may make loans and
advances to any State Government or a corporation owned or controlled by the State Government or to
any other person or class of persons, as may be approved by the Board, repayable on the expiry of a fixed
period not exceeding twenty-five years from the date of making of such loans and advances and subject to
such terms and conditions, as may be approved by the Board, for the purpose of development of
infrastructure facilities for promotion of agriculture and rural development.]
28. Security for credit.—(1) No accommodation shall be granted by the National Bank under
clause (a) or clause (c) of sub-section (1) of section 25 or section 30 or section 32 to any institution other
than a scheduled bank unless it is fully and unconditionally guaranteed by the Government as to the
repayment of principal and payment of interest:
1. Subs. by Act 7 of 2018, s. 10, for “small-scale industries, industries in the tiny and decentralised sector, village and cottage
industries and those engaged in the field of handicrafts” (w.e.f. 15-3-2018).
2. Ins. by Act 55 of 2000, s. 12 (w.e.f. 1-2-2001).
3. Subs. by s. 13, ibid., for section 26 (w.e.f. 1-2-2001).
4. Ins. by s. 14, ibid. (w.e.f. 1-2-2001).
17
Provided that no such guarantee shall be required in cases in which security to the satisfaction of the
Board is furnished by the borrowing institution.
(2) No accommodation shall be granted by the National Bank under clause (a) or clause (c) of subsection (1) of section 25 or section 32 to any scheduled bank unless security to the satisfaction of the
Board is furnished by such scheduled bank.
1
[(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), no guarantee or
security referred to therein shall be required in cases in which the Board, for reasons to be recorded in
writing, decides that no such security or guarantee is necessary in respect of a scheduled bank, a State cooperative bank or any person or class of persons, specifically approved by the Board or in respect of any
scheme or class of schemes, having regard to the nature and scope of the scheme or schemes for which
accommodation is proposed to be granted by the National Bank.]
29. Amounts and securities to be held in trust.—(1) Any sums received by a borrowing institution
in repayment or realisation of loans and advances refinanced either wholly or partly by the National Bank
shall, to the extent of the accommodation granted by the National Bank and remaining outstanding, be
deemed to have been received by the borrowing institution in trust for the National Bank, and shall
accordingly be paid by such institution to the National Bank, as per the repayment schedule fixed by the
National Bank.
(2) Where an accommodation has been granted to a borrowing institution, all securities held, or which
may be held, by such borrowing institution, on account of any transaction in respect of which such
accommodation has been granted by the National Bank, shall be held by such institution in trust for the
National Bank.
2
[(3) Notwithstanding anything to the contrary contained in any law for the time being in force, where
a liquidator is appointed for winding up a borrowing institution, it shall be the duty of the liquidator to
forthwith pass on to the National Bank the sums recovered by the borrowing institution or the liquidator,
as the case may be, in repayment or realisation of the loans and advances refinanced either wholly or
partly by the National Bank to the extent the refinance is outstanding and the National Bank shall be
entitled to enforce the securities held by the borrowing institution in trust for the National Bank as if
every reference to the borrowing institution in any contract, security or other document obtained by
borrowing institution is a reference to the National Bank and accordingly, the National Bank shall be
entitled to recover the balance sums due under such loans and advances from the constituents of
borrowing institution and any discharge given by the National Bank to such constituent shall be a valid
discharge and the liquidator shall, on demand made by the National Bank, deliver to it all such contracts,
securities and other documents, for due enforcement thereof by the National Bank.
Explanation.—For the purposes of this sub-section, the word “liquidator” shall include liquidator or a
provisional liquidator or any person or authority entrusted with the duty of liquidating the borrowing
institution.]
3
[30. Direct loans.— The National Bank may, in exceptional circumstances to be recorded in writing
by the Board, by itself or in association with other financial institutions or scheduled banks, make loans
and advances, otherwise than by way of refinance to any person or class of persons or body corporate, on
such terms and conditions, including security and repayable within such period not exceeding twenty-five
years, as the National Bank may deem fit.
30A. Bills rediscounting.—The National Bank may rediscount bills of exchange and promissory
notes made, drawn, accepted or endorsed by any company or body corporate concerned with agriculture
and rural development presented by a scheduled bank, a State co-operative bank, State land development
bank, regional rural bank or any other institution or class of institutions approved by the Board.]
1. Subs. by Act 55 of 2000, s. 15, for sub-section (3) (w.e.f. 1-2-2001).
2. Ins. by s. 16, ibid. (w.e.f. 1-2-2001).
3. Subs. by s. 17, ibid., for section 30 (w.e.f. 1-2-2001).
18
31. Commission.—The National Bank may receive, for the rendering of any of the services
mentioned in this Chapter or Chapter VII, such commission or other consideration as may be agreed
upon.
45[32. Issue of guarantees.— The National Bank may guarantee, subject to such directions as may be
issued by the Board, from time to time, deferred payments in connection with the purchase of capital
goods or for any other purpose for giving effect to the provisions of this Act, due from any person or class
of persons, whether incorporated or not.]
33. Power to impose conditions for accommodation.—In entering into any transaction 46[under this
Act with a borrower], the National Bank may impose such conditions as it may think necessary or
expedient for protecting the interests of the National Bank.
47[34. Power to call for repayment before agreed period.—Notwithstanding anything to the
contrary contained in any agreement or arrangement, the National Bank may, by notice in writing, require
any borrower or assisted person to whom it has granted any loan or other financial assistance including
grants, to discharge forthwith in full, the loan or other financial assistance, including grants, as the case
may be,—
(a) if it appears to the National Bank that false or misleading information in any material
particulars was given in the application for the loan or other financial assistance; or
(b) if the borrower or the person has failed to comply with any of the terms of the contract or
arrangement with the National Bank in the matter of loan or other financial assistance, including
grants; or
(c) if there is a reasonable apprehension that the borrower is unable to pay its debts or that
proceedings for liquidation may be commenced in respect thereof; or
(d) if for any reason it is necessary so to do, to protect the interests of the NationalBank.]
35. National Bank to have access to records.—48[(1) The National Bank shall have free access to all
such records of a borrower seeking to avail of any credit or other facilities from the National Bank under
this Act and also to all such records of any person seeking to avail of any credit or other facilities from
such borrower, perusal whereof may appear to the National Bank to be necessary in connection with the
providing of finance or other assistance to such borrower or the refinancing of any loan or advance made
to such person by the borrower.]
(2) The National Bank may require any institution or person referred to in sub-section (1) to furnish to
it copies of any of the records referred to in that sub-section and the institution or the person, as the case
may be, shall be bound to comply with such requisition.
36. Validity of loan or advance not to be questioned.—Notwithstanding anything to the contrary
contained in any other law for the time being in force, the validity of any loan or advance granted by the
National Bank in pursuance of the provisions of this Act shall not be called in question merely on the
ground of non-compliance with the requirements of such other law as aforesaid or of any resolution,
contract, memorandum, articles of association or other instrument:
Provided that nothing in this section shall render valid any loan or advance obtained by any company
or co-operative society where such company or co-operative society is not empowered by its
memorandum to obtain loans or advances.
37. National Bank not to grant loans or advances against its own bonds or debentures.—The
National Bank shall not grant any loan or advance on the security of its own bonds or debentures.
1. Subs. by Act 55 of 2000, s. 18, for section 32 (w.e.f. 1-2-2001).
2. Subs. by s. 19, ibid., for “under this Chapter with a borrowing institution” (w.e.f. 1-2-2001).
3. Subs. by s. 20, ibid., for section 34 (w.e.f. 1-2-2001).
4. Subs. by s. 21, ibid., for sub-section (1) (w.e.f. 1-2-2001).
19
49[37A. Prohibited business.—(1) The National Bank shall not make any loans or advances under
section 30 or make any grants under this Act to any person or body of persons of which any of the
directors of the National Bank is a proprietor, partner, director, manager, agent, employee or guarantor or
in which one or more directors of the National Bank together hold substantial interest:
Provided that this sub-section shall not apply to any borrower if any director of the National Bank—
(a) is nominated as director of the Board of such borrower by the Government or a Government
company as defined 50[in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013)] or by a
corporation established by any other law;
(b) is elected on the Board of such borrower by virtue of shares held in the borrower organisation
by the Government, or a Government company as defined 2
[in clause (45) of section 2 of the
Companies Act, 2013 (18 of 2013)] or by a corporation established by any other law,
by reason only of such nomination or election, as the case may be.
Explanation.—For the purposes of this sub-section, “substantial interest”, in relation to a borrower,
means the beneficial interest held by one or more of the directors of the National Bank or by any relative
of such director as defined 51[in clause (77) of section 2 of the Companies Act, 2013 (18 of 2013)]
whether singly or taken together, in the shares of the borrower, the aggregate amount paid-up on which
either exceeds five lakhs of rupees or five per cent. of the paid-up share capital of the borrower,
whichever is lesser.
(2) The provisions of sub-section (1)—
(a) shall not apply to any borrower, if the National Bank is satisfied that it is necessary in the
public interest to enter into business with that borrower and entering into any kind of business with
such borrower shall be in accordance with and subject to such conditions and limitations, as may be
approved by the Board;
(b) shall not apply to any transaction relating to the business entered into prior to the
commencement of the National Bank for Agriculture and Rural Development (Amendment)
Act, 2000 (55 of 2000), and all such business and any transaction in relation thereto may be
implemented or continued as if that Act had not come into force;
(c) shall apply only so long as the conditions precedent to such disability as set out in the said
sub-section continue.]