National Bank for Agriculture and Rural Development Act, 1981
Chapter VI: Credit Functions of the National Bank
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 period not exceeding eighteen months, 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 small-scale industries, industries in the tiny and decentralised sector, village and cottage industries or of those engaged in the field of handicrafts 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 326 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 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) 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.