The 1981 Sivaraman Committee was commissioned by the Government of India to review the institutional credit arrangements for agriculture and rural development. Chaired by B. Sivaraman, former Member, Planning Commission, the committee was tasked with examining the structure of rural credit, focusing particularly on the Agricultural Refinance and Development Corporation and the integration of short-term and long-term credit. Previous committees, such as the All India Rural Credit Review Committee and the Dantwala Committee, had highlighted systemic issues but had not advocated a new national institution to centralize credit efforts. The Sivaraman Committee built on these earlier findings and assessed the effectiveness of credit delivery through cooperatives and commercial banks. Members included G. V. K. Rao; M. Ramakrishnayya; M. R. Shroff; R. K. Kaul; S. Satyabhama; L. C. Jain; K. B. Chore; and H. B. Shivamaggi (Member-Secretary).

The committee found significant inefficiencies in rural credit distribution, particularly for marginalized groups such as small and marginal farmers, agricultural laborers, and rural artisans. Despite reforms such as bank nationalization in 1969, institutional credit remained limited for these groups, with over 60 percent of their borrowing still coming from private moneylenders at high interest rates. Primary Agricultural Credit Societies often functioned solely as credit-disbursing entities without offering supporting services, and overdues exceeded 50% in many states. The committee observed that while sectors such as farm mechanization and dairy development had better loan recovery rates compared to crop production loans, high default rates persisted. It noted that rural artisans require additional support beyond credit, including access to raw materials and skill development programs.

The committee recommended establishing the National Bank for Agriculture and Rural Development (NABARD) as a centralized institution to streamline rural credit distribution, address systemic inefficiencies, and align credit flows with national development goals, ensuring better access for marginalized groups. To improve loan recovery, the committee advocated stricter recovery mechanisms, including legal reforms to penalize willful defaulters, and praised Tamil Nadu’s initiative to publicize the names of defaulters. It also called for professionalizing cooperative banks, depoliticizing rural credit institutions, and shifting toward more efficient loan-identification and -delivery processes. The committee stressed the need to integrate rural credit schemes with broader development plans at the district level to ensure a holistic approach to rural economic growth. Additionally, it supported lessons from previous committees, such as the Narasimham Group’s focus on low-cost rural banking and the Dantwala Committee’s recommendation to transfer control of regional rural banks to the National Bank for Agricultural and Rural Development.

In summary, the Sivaraman Committee highlighted the limited reach of institutional credit to small farmers, agricultural laborers, and rural artisans, and the challenges posed by high loan defaults and poorly functioning cooperatives. It proposed the creation of NABARD to centralize rural credit efforts, strengthen cooperative banking, and align credit distribution with national goals, ensuring better access and support for underserved rural communities.