51 rural development bank

8/3/2019 51 Rural Development Bank

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ROLE OF BANK INAGRICULTURE -1 -

INTRODUCTION

In the last few year, the Indian economy has emerged as one of thefastest growing economics in the world . however, the vulnerability of the

Indian economy with respect to the performance of the agriculture sector

despite other microeconomic indicators and sectors gaining in strength is

well known. For example, the Indian economy grew at an estimated 3.7 per

cent in 2002-03 against 5.6 per cent during 2001-02. this was largely

because of the negative growth of 4.4 per cent in the agriculture sector .

Many economists and policy- makers increasingly believe that the future

growth of the domestics economy , to large extent , will depend on the

robust performance of the agriculture and rural sector . The manufacturing




and service sectors cannot sustain the economy, for growth if the rural sector

underperformance.

The contribution of the banking and financial sector to the current

economics growth of the Indian economy is very significant. This is

reflected in the growth in aggregated deposits and advances for scheduled

commercial banks , which stood at 15.4 per cent and 27.9 per cent during

2004-2005. however the access of banking service to the rural, agriculture

and the common man in general is not as promising.

As Mr. V. Leeladhar(deputy governor, RBI, on the occasion of the

commemorative lecture at the fed bank hormis memorial foundation,

ernakulam) said “despite making significant improvement in all the areas

relating to financial viability, profitability and competitiveness, there are

concerns that banks have not been able to included vast segment of the

population, especially the underprivileged sections of the society, into the

fold of basis banking services.”

The focus of Indian banks on financial inclusion i.e. delivery of

banking services at an affordable cost of the low-in-come groups has been

dismal. In India, the focus of the financial inclusion at present is more or less

confined to ensuring agriculture bare minimum access to agriculture saving

bank account without frill to all. Having agriculture current account/ saving

account on its own, cannot be regarded as an accurate indicators of financial

inclusion.




NEED FOR BANKING IN RURAL AND AGRICULTURE

AREAS

The rural population in India suffer from agriculture great deal of

indebtedness and is subject to exploitation in the credit market due to high

interest rates and the lack of convenient access to credit. Rural household

need credit for investing in agriculture and smoothening out seasonal

fluctuations in earning. Since cash flows and saving in rural areas for the

majority of households are small, rural households typically tend to rely on

credit for other consumption needs like education, food, housing , householdfunction, etc. rural household need access to financial institutions that can

provide them with credit at lower rates and at reasonable terms than the

traditional money-lender and thereby help them avoid debt-traps that are

common in rural India.




Table

Change in farmers reliance on the banking system

Source: statistical tables relating to bank in India

(RBI)

Year Farmer

Deposits

(Rs Crore)

Farmer

Borrowing

(Rs Crore)

Total

(Rs Crore)

1992 26211 17835 273

1993 29825 19493 257

1994 36583 19669 251

1995 43341 21334 198

1996 47433 23813 194

1997 53611 27448 188

1998 57442 29442 173

1999 78881 33094 169

2000 91009 36466 162

2001 99812 43420 195

2002 108233 47430 197

Post reform, the banking system has mobilized more deposits from farmers

and extended less credit to a decline number of farmers, These are

reflected in the figure for farmer borrowing and deposits in the last

decade as in Table

CHALLENGES FOR RURAL AND AGRICULTURE

CREDIT




Agriculture is agriculture matter of livelihood and food security, with

nearly 60 per cent of the population depending on it. At the same time, to

withstand the global competition, enhanced productivity and sustainability

of the agriculture sector has become imperative. In addition, the majority of

the country’s for population, more so marginal and disadvantaged sections

of society, stay in villages. Hence, the role of banks in the enhancement of

agriculture productivity, expansion of rural credit and poverty eradication

assumes high priority.

Despite decades of efforts and experimentation in banking, the

organized financial sector is still not able to meet the credit gap in the rural

sector. The lower levels of per capita income, lack of infrastructure in the

rural areas, focus in the urban sector and lack of proper connectivity were

the main hindrances for banks to venture into rural areas. Directed lending,

cumbersome procedure, delay in sanctioning loans and lack of statutory

backing for recoveries were other major impediments to the growth of

banking in the rural sectors.

The focus in the past has always been to make available cheaper

credit. When bank are forced to lend cheap, there has been agriculture

tendency for a scramble for credit by the non-target group of beneficiaries.

While interest rates of scheduled banks for advances over Rs.2 lakh is

completely deregulated, loans up to Rs.2 lakh are subject to maximum of

prime lending rate (PLR). In the process of recovering the opportunity lost

on income, the banks used to charge a high rate of interest for loans above 2

lakhs. This led to willful defaulting. This has really damaged the credit

culture and structure ion the rural sector resulting in shutting down of non-

viable outlets of rural branches of commercial banks, co-operative banks and

RRBs in last few years.




NEW AREAS OF CONTRACT FARMING

1. Jatrophe:




SBI has tied up with growell agro forest Trees Corporation, which

agrees to buy Jatrophe from farmers. The bank will finance 1300 farmers

from 46 villages covering 5,200acres.

2. Seed plantation:

Corporate want one set of farmers to grow hi-grade set of seeds, which are

subsequently purchased and sold to another set of farmers for the cultivation

of high-grade crops. This trend is catching as in oil seeds, groundnuts,

cotton, pulses and vegetables.

3. Farm forest:

The paper industry is banking on this largely due to the restriction on

cutting down of trees. SBI has tied up with ballarapur paper industries

according to which the farmers grow bamboos and eucalyptus trees for the

company. The agreement covers 2000 farmers who are growing the trees in

over 5000 acres.

4. White card scheme:

The RBI has introduced such a scheme in which fund are provided tothe farmer to buy cows or reconstruct a cowshed, provided the farmer ties up

with the milk-collecting agency. The bank has disbursed up to Rs 35 crore

under the white card scheme and covers 10,000 farmers.

The current contract farming corporates include Himalaya Health

Care, Mysore SNC oil company, Sami Labs Pvt. Ltd., Ion Exchange UB,

Satram Overseas (Basmati Rice) Amira Foods, Appachi Cotton

Company/for Mandm, Cadbury, Godrej, ACE Agrotech, Larsen and Toubro,

BECCO, Reliance Group, JK paper, Shakti Sugar, etc.




FARM CREDIT TO FARMERS

NABARD has launched agriculture pilot project in Tamilnadu to

disburse fund through self help groups using the existing post office




network. The bank hopes to initiate the scheme in three districts of the state.

Post office will be used to offer credit to farmers and customer in rural areas.

For post office facing agriculture dwinding shares of activity in recent years,

this offers agriculture chance to re-invest themselves through productive use

of agriculture one lakh plus countrywide network. The NABARD had to

face agriculture services of hiccup in launching the scheme. The stumbling

block appeared in the postal act itself. Since the act does not allowe post

office to take credit risk while post office would act as agents on the fee

basis. This is one way of increasing the banking sectors outreach currently

restricted to only 43.4 million of the 148 million rural households

PROBLEM FACE BY FARMER




1. Moneylenders generally lends on the basis of personal security and is

prepared to adjust his term to the borrower’s needs provided that a

sufficient high rate of interest is paid for the loan

2. The rates of interest are high by standard and accounts are

manipulated frequently without the knowledge of the borrower’s.

3. Loans are available, particularly on the mortgage of crop from traders

and their agents.

4. The traders not only charge a high rate of interest, but also pay an

unusually low price for the crop.

5. Co-operative societies and commercial banks generally have been

relevant to lend for consumptions needs.

6. In short, in spite of the fact that the non-institutions sources of credit

indulge in malpractice and are responsible for quite a few serious

maladies prevailing in agrarian economy.

SOURCES OF AGRICULTURE CREDIT




The various sources from which the peasantry procures loans can be into

two groups.

1. Non-institutional agencies

2. Institutional agencies

Non-institutional agencies

a) Local village moneylenders and their agents

b) Landlords

Institutional agencies

a. Co-operative societies

b. Commercials bank

c. Regional rural bank

d. Land development banks

e. Farmers services societies

f. NABARB, etc.

Sources of agriculture finance

There are two ways of agriculture finance

• Direct finance

• Indirect finance




I. Direct finance to farmers for agriculture purpose

Short- term loans for raising crops, i.e., crops loans.

Institutional additions, advances up to Rs1 lakh to farmers against pledge of

agriculture produce for agriculture period not exceeding 6 months, where the

farmers were given crops loans for raising for produce provided borrowers

draw credit from one bank.

Medium and long-term loans

A. Purchase of agriculture implements and machinery

B. Development of irrigations potential

C. Reclamation and land development scheme

D. Construction of farm building and structures, etc.

E. Construction and running of storage facilities

F. Productions and processing hybrid seeds of crops

G. Payments of irrigation charges, etc.

H. Others types of direct finance to farmers

• Short-term loans




• Medium-term

• Long-term loans

II. Indirect agriculture finance

Indirect agriculture finance include that finance which is not given directly

to the beneficiaries for any agriculture activity but indirectly helps such

beneficiaries, either by getting finance indirectly through agencies like

primary agriculture credit societies (PACS) ,farmers service societies (FSS),

large area multipurpose societies(LAMPS) , etc.

1. Activities cover under indirect agriculture finance:

(a) Credit for financing distributions of fertilizers, pesticides, seeds, etc.

(b) Credit limit up to Rs. 15 lakhs granted for financing distributions of

inputs for allied activities, such as cattle feed, poultry feed, etc.

2. Loans to electricity boards for reimbursing the expenditure already

incurred by them for providing low tension connections from step-

down point to individual farmers for energizing their wells.

3. Loans to farmers through PACS, FSS and LAMPS.

4. Deposits held by the bank institutional rural infrastrutural

development fund (RIDF) maintained with NABARB




5. 50 per cent of the amount of refinance granted by the sponsor banks to

RRBs.

6. Subscriptions to bonds issued by rural electrification corporation

(REC) exclusively for financing pump set energination programme

institutional rural and semi- urban areas.

7. Subscriptions to bonds issued by NABARB with the objective of

financing exclusively agriculture activities.

8. Others types of indirect finance

AGRICULTURE ADVANCES: SHORT TERM CROP LOANS:




Till recently, the following schemes were in vogue in the bank to meet short-

term loan requirements of the farmers: -

Agriculture

a) Crop finance: demand loans / annual cash credit

b) India green card scheme to meet requirements of working funds for

crop inputs , inputs for allied agriculture activities and / or other non-

farm activities.

Agriculture advances –interest rate

Size of credit Short term

Upto Rs.25,000 8.75% P.A

Over Rs. 25,000 to Rs. 50,000 8.75% P.A

Over Rs. 50,000 to 2.00 lac 10.00% P.A

Over Rs. 2.00lac to 25.00lac 11.25%P.A

Over Rs. 25.00lac Based on credit

Size of credit Term loans

Upto Rs.25, 000 9.25% P.A

Upto Rs. 2.00lac 10.25% P.A

Over Rs. 2.00lac to 25.00lac 10.50% P.A

Over Rs. 25.00lac Based on credit

Loans to self help groups

Direct loans Upto Rs. 2.00lac to 8.00% P.A




SHGs

Direct loans above Rs. 2.00lac to

SHGs

9.75% P.A

ROLE OF CREDIT

Credit is the financial stimulant for augmenting production and productivity

in agriculture operation and in the process causes rural development in allspheres. Efficient credit delivery system must exit. It was realized around the

60’s(when the concept of priority sectors was born) that provision of rural

finance in the right dose, in right time and the right segment could accelerate

the growth of agriculture and rural development. Hence it was considered




that institutions credit should be increasingly used as an important vehicles

to achieve.

Expansion of institutional structure (by creating new institutions such as

regional rural banks , etc. ) because co-operative credit system was

inadequate.

Directed lending

Cheaper rate of interest (concessional/subsidiary)

Provision of low cost credit in rural areas of their operation compared to

commercial bank

Credit to weaker sections under special programme.

DIFFERENCE BETWEEN INDUSTRIAL BANK AND

AGRICULTURE BANK

Industrial bank provide long-term finance to trade and industry. While

the agriculture bank provide long-term finance to farmers and

agriculture.




The main aim of industrial bank is to help in the development of trade

and industry. The aim of agriculture bank is to help in the

development of land and agriculture.

Industrial bank accepts fixed assets as security. Agriculture bank

accepts land as security.

Industrial bank is given for the promotion of an industrial unit or for

expansion, amalgamation, etc. agriculture banks are given for purchase of machinery, constructions of wells, irrigation, etc.

It operates in the urban areas. it operate in the rural areas.

Agriculture bank charge low interest rate on agriculture advances ascompared to industrial bank .

KISAN CREDIT CARD

This scheme was introduced

by NABARB institutional




1988-99 to help farmers to get credit from banks. Important feature of Kisan

Credit Card are given as follows.

Farmers eligible for productions credit of Rs. 5000 or more are eligible for

issue of Kisan Credit Card

Eligible farmers are to be provided with agriculture Kisan Credit Card and

pass book or card-cum pass- book.

Provision of revolving cash credit facility involving any number of

withdrawal and repayments within the limit.

Entire productions credit needs for full year plus ancillary activities releted

to crops productions considered while fixing limit. Institutional due course,

all activities and non- farm credit needs will also be covereds.

Limit to be fixing on the basis of operational land holding cropping pattern

and scale of finance

Card valid for 3 years subject to annual review.

Each withdrawal to be repaid within 12 months.

As incentive for good performance, credit limit could be enhanced to take

care of increase institutional cost, change institutional cropping pattern etc.

Security, margin, rate of interest as per RBI norms




KISAN CREDIT CARD

A unique scheme for farmers under which they can draw

loan amount in cash for crop production as well as domestic

needs from the card issuing branch within the sanctioned

limit. The details are as under:

1. Eligibility : Farmers having agricultural land &

Pattaholders (i.e. land allotees). Card is also issued in

joint names where land is owned jointly.

2. Loan Limit : Limit is fixed to meet the cost of

cultivation of crops based on land holding and also for

domestic needs. There is no minimum or maximum

loan limit.

3. Card : A common card named “Kisan Credit-cum-Kisan

Shakti Card” is issued to the farmers on fixation of

loan limit.

4. Rate of interest :




i) Upto Rs.50,000/- 8.50% (fixed)

ii) Above Rs.50,000/- & upto

Rs.2.00 lacs

2% below PLR (i.e

11.25% p.a)

iii) Above Rs.2.00 lacs & upto

Rs.5.00 lacs

0.50% below PLR (i.e

12.75% p.a)

iv) Above Rs.5.00 lacs 0.50% above PLR (i.e

13.75% p.a )

5. Security :

a. For loans upto Rs.50,000/- :

Hypothecation of crops & movable assets.

b. For loans above Rs.50,000/-:

i. Hypothecation of crops &

movable assets.

ii. Mortgage of land or charge on

land as per Agricultural Credit

Operation Act of the states

concerned.

or

Charge/ lien over liquid securities in the

form of Fixed Deposit/ NSC/ Kisan




Vikash Patra etc. providing full cover to

the limit granted.

6. Repayment :

i. The aggregate credit into the KCC

account during the 12 months period should

at least be equal to the maximum

outstanding in the account

And

ii. No drawal in the account shall remain

outstanding for more than 12 months

1. Validity : Card is valid for 3 years subject to annual

review.

2. Features :

• No admission/membership fee is levied by the Bank.

• A pass book is issued along with card to record

transactions.

• Cardholders are covered under Personal Accident

Insurance Scheme with sum assured for Rs.50,000/-

against death/permanent total disability/loss of two

limbs/eyes or one limb & one eye and Rs.25,000/- for




loss of one limb/eye on payment of premium of Rs.5/-

p.a. by the cardholder.

•

Specified crops in notified areas grown under KisanCredit Card is covered under Rashtriya Krishi Bima

Yojna subject to notification issued by the State

Government concerned. 1

Kisan Shakti Yojana

A new scheme designed & launched by the Bank on

24.04.2004 (Bank’s 140th Establishment Day), envisages to

provide farm investment credits as well as

personal/domestic loans including repayment of debt to

money lenders. The details are as under:

1. Eligibility : All existing Kisan Credit Card holders and

all other farmers who are eligible for Kisan Credit

Cards.

2. Loan Limit : The permissible loan limit will be 50% of

the value of land OR 5 times of net Farm Income

whichever is lower, LESS outstanding amount, if

1




any, in Agril. Term Loan account(s) subject to

maximum Rs.5.00 lacs.Maximum 50% of the loan

limit may be utilised for personal/domestic

purposes.

3. Issuance of Card : After fixation of the loan limit, a

“Kisan Credit – cum – Kisan Shakti Card” along

with a loan pass book is issued to the borrowers.

4. Margin : No margin is required.

5. Rate of interest :

i) Upto Rs.50,000/- 8.50% (fixed)

ii) Above Rs.50,000/- & upto

Rs.2.00 lacs

1% below PLR (i.e

10.00% p.a)

iii) Above Rs.2.00lacs & upto

Rs.5.00lacs

0.25% below PLR (i.e

10.75% p.a)

6. Security :

a. For aggregate limit under Kisan Credit Card,

Kisan Shakti Yojana & existing Agril. Term Loan

upto Rs.50,000/-:

Hypothecation of farm as well as household

assets to be purchased out of the loan

amount.

b. For aggregate limit under Kisan Credit Card,

Kisan Shakti Yojana & existing Agril. Term Loan

above Rs.50,000/-:




i. Hypothecation of farm as well

as household assets to be

purchased out of the loan amount.

ii. Creation of charge/Mortgage

of lands.

7. Repayment Period : 7 years.

8. Mode of Disbursement : Loan amount is credited to

Savings Bank account of the borrower maintained with

the financing branch. A maximum period of one year will beallowed to the borrowers to avail the sanctioned loan under the

scheme.

9. Restoration of Term Loan limit : The borrowers under the

scheme are allowed to deposit surplus fund in the loan

accounts and to draw funds within the sanctioned limit

to meet their urgent requirements after adjustment of

loan instalment(s) & interest due, if any, upto the date

of drawing.

10. Special features of the scheme :

• Farmers are free to utilize the

loan under the scheme at their own

choice/ options/discretion.

• No margin is required.




• Granting of loan under the

scheme is simple and hassle free.

•

50% of the loan amount maybe utilized for personal/domestic

purposes including repayment of

debt to money lenders.

• Facility of restoration of Term

Loan limit is available on advance

repayment of loans.

Kisan ATM

As technology is spreading its wings across the length and breadth of the

country,

Agriculture need was felt by bank to provide its customer in rural areas with

an ATM

Which is easy to operate, does not warrant high level of literacy,

remembering PINS and can read out instructions on screen to get cash or

services. As agriculture solutions to this bank plans to deploy kisan ATM in

rural arrears to serve the customers remote rural branches. The first such




ATM is installed at sivagangai branch Tamilnadu and inaugurated by

the Hon’ble finance Shri P. chidambaram.

Kisan ATM are users friendly cash dispensing machine, which are voice

enabled and work on bio-metric authentcations like finger print verifications.

Kisan ATM can communicate with the users in local language . To make the

operations easier kisan ATMs are provided with touch screen monitor. The

screen options glow as the instructions are read out to the customer and the

customer needs only to touch the options desired by him. The ATM also

have dip-type card reader and hence ensure that the machine never capture

the card inserted by the customer. All the above features make these

ATMs so easy and convenient that people with practically no exposure to

technology can use it comfortably.

Kisan ATM cards

Banks has issued agriculture new series of cards for the kisan ATMs. The

cards have an attractive design.

ATM function

The ATM will support the following functions:

• Cash withdrawal

• Balance enquiry




ATM operation

Kisan ATM are meant to bring in 24*7 banking facilities with the state of art

technology, which was so far available only to metro and urban population

now within the reach of rural masses and thus providing an much needed

fillip for financial inclusion.

FREQUENTLY ASKED QUESTION/ AGRICULTURE

ADVANCES

1. What is Kisan Credit Card Scheme?

Scheme is in the nature of revolving cash credit.

2. What are the extra benefit/facilities extended through KCC

as compared to usuaql crop loan?

The credit needs of the farmer for entire year with his consumption

needs are taken into accounts at his option and as per his needs within

the limit.

3. Is it working satisfactory?

The scheme is working satisfactory, we have issued 3,23.000 Kisan

Credit Card so far.




4. What are the benefit under PAIS and amount of premium

to be borne by a farmer?

• The risk covered under PAIS are as under:

• Death due to accident-claim at Rs 50,000

• Permanent total disability Rs50,000

• Loss of two limbs or two eyes or

• One limbs and one eye Rs50,000

• Loss of one limbs or one eyes Rs25,000

• The farmer has to pay Rs5/-per annum whereas the bank

bears Rs10/-p.

5. PAIS is covering KCC holders. Is there any other scheme to

cover all other farmers ?

SBI life scheme cover other farmer, where yearly premium is Rs480/-

and amount of claim of Rs2.00lacs for death due to accident are

covered, for Rs50,000claim amount a premium of Rs

6. Is there any other scheme like KCC to take care of farmers

investment credit requirements?

Kisan Star Card scheme where farmer can be sanctioned a maximum

loan upto Rs3.00lacs within.

7. What is the Kisan star Card Scheme and facilities offered to

farmers?

Kisan star card scheme which is a hassle free scheme were farmers

can purchase agri Implements including his consumption requirement.

Maximum number of accounts permitted are 50.




8. What are the post harvest scheme available to avoid distress

sale?

Produce market loan for constructing rural godowns, cold storage,

smaller size farm receipts are also given.

9. How rural godowns scheme beneficial to farmers?

rural godowns scheme. The NABARD is giving subsidy upto25%.

The farmer can substitute to farmer can keep his own produce in the

godowns and avail produce market loan.

10.What are the margin for agriculture loan?

• No margin upto Rs 10,000

• For crop loans if scle of finance are determined taking into

account margin. Then no margin.

• For term loans above Rs 10,000/-15%to25% depending upon

the quantum of loans

11.Whether bank is giving collateral free loan to farmer, if so

to what extent?

• Upto Rs25,000/-No collateral security is asked, above Rs

25,000equitable mortgage of farm land not possible.

• For sugarcane growers with tie up arrangements with sugar factories

upto Rs 1.00lacs no collateral

12.Whether bank are giving relief to drought-affected people,

if so what are they?




The existing short term loans are converted into term loan with

suitable instalments

Fresh crop loan are giving to rejuvenate existing crops or take

fresh crops.

Term loan instalments are postponed.

Loan are given for purchase of droght animals, milch animals.

Loan are given for repairs of farm machinery, seeds, wells etc.

13.What type of transportation loan are available from the

bank to the farmers?

Loan are given for purchase of tractors, power tiller, trailer,

harvesters, two wheelers ,,bullock.

14.What type of minor irrigation loan are available to

farmers?

1. What are the interest rate to agriculture loans under low interest rate

regime?

2. Bank is giving loans to farmers upto Rs25,000below PLR and

uptoRs2.00lacs at PLR rates that no farmers. Will have to pay more

than 2%above PLR for any type of loans.

15.Are banks giving produce marketing loans?

Yes, the produce marketing loans are given to avoid distress sale of farm

produce

16.What are the benefit to the farmers?




The crop loan borrower are given loans t\at the same interest rate at which

he was given crop loan

NATIONAL BANK FOR AGRICULTURE AND RURAL

DEVELOPMENT (NABARD)

In the light of recommendations of the Committee to Review

Arrangement for institutional Credit for Agriculture and Rural Development

the Government of India set-up the National Bank of Agriculture and Rural

Development (NABAD) on July 10,1982, to act as agency for promoting

integrated rural development and to provide all sorts of production and

investment credit for agriculture and rural development.

Functions of the NABARD




The NABARD id essentially a development bank for promoting

agricultural and rural development. Its main function is provide refinance

credit to the state co-operative Banks. The Regional Rural Banks and other

financial institutions as may be approved by reserve Bank.

The NABARD provides refinance assistance to these institutions for

grinding loans for the following purpose:

1. For agricultural operations:

2. For marketing of agricultural produce.

3. For marketing and distribution of agricultural inputs, such as

improved seeds, fertilizers, pesticides etc:

4. For allied activities important for agricultural and rural

development:

For production and marketing activities for rural artisans, small scale

industries in the tiny and decentralized sector, village and cottage industries,handicrafts and other rural craft.

The NABARD may grant refinance credit to the SCBs, RRBs etc,

against the security of stock and securities other than immovable

property and Promissory Notes supported by title to the goods.

In short, the main function of the NABARD is to provide by way

of refinance, credit to the rural sector for the promotion of agriculture,

small scale industrial units, cottage and village industries, and

handicraft other rural crafts and allied productive in the rural Ares.




This is essential for the promotion of integrated rural development and

attainment of rural prosperity.

The NABARD is empowered to give short-term as well long-term

loans in a composite form. It can also make loans make loans and

advances to state Governments for maximum period of 20 years in

order to enable them to subscribe directly or indirectly to the share

capital of Co-operative credit societies.

The NABARD can also provide medium-term loans (for a period between

1 ½ years and 7 years) to the SCBs and RRBs for agricultural and rural

development.

Other miscellaneous functions of the NABARD include:

(1) Inspections of the RRBs and the co –operative societies

(other than primary cooperatives societies0, without any prejudice to the authority of the reserve Bank in this regard.

(2) The application for opening a branch by RRB or co-

operative society (other than a primary Co-operative




society) to be forwarded to the Reserve Bank through the

NABARD.

(3) When the returns are submitted by the RRBs and co-

operatives societies (other than primary Co-operative

societies) to the Reserve Bank, Copies of such returns

should also be furnished to the NABARD.

(4) The NABARD is empowered to obtain any information or

statement form the RRBs and the co-operative societies

(other than primary Co-operatives societies)

(5) The NABARD has to undertake research and training

programmers The R & D Department of the NABARD

should promote research in allied aspects and problems of

agricultural and rural development of the country. The NABARD

is authorized to maintain a R & D Fund for this purpose out of

profits earned by it every year.

The NABARD has to provide comprehensive training

programmers to its own staff as well as to the staff of SCBs, RRBs,

etc the training is to be meant for upgrading the technical skills and

competence of the staff.

(6) The NABARD has to take over from the reserve Bank, the

responsibility of co-ordinating with the Government of

India, the planning Commission, state Government and




other agencies concerned with the development of rural

industrialization, and effectuating various policies and

programmer meant for providing finance to the rural

industries.

Organization and structure of NABARD

The NABARD is managed by b Board of Directors,

consisting of Chairman managing Director, 2 directors from

amongst experts in rural economics, rural development, etc,

3 directors with experience in the working of co-operative

banks, 3 directors from out of the directors of the RBI, 3

directors from amongst the official of government of India

and 2 directors from among the officials of Government of

India and 2 directors from among the officials of state

Government. They are appointed by the central

Government.

Working of NABARD

During 1984-85,NABARD mobilized net resources amounting During

1984-85, NABARD sanctioned Rs. 1,233 crores to SCBs for

financing seasonal agricultural operations (i.e., short-term credit). It

also provided medium-term and long-term credit facilities for the




benefit of the agricultural sector. During 1984-85, its total outstanding

amounted to Rs.1,018 crores and limits sanctioned amounted to Rs.

1,688 crores.

The NABARD also sought to help the development and promotion of

agricultural investments in the less developed and/or underbanked

states:

In these areas, it distributed Rs. 455 crores, amounting to nearly 42

per cent of its total disbursements in 1984-85.

During 1986-87 (July-June), the NABARD mobilized Rs. 887 crores

as its aggregate net resources for providing rural credit.

The NABARD also successfully negotiated with the World Bank

regarding the NABARD Credit Project-I (NCP-I) and obtained a loan

assistance of US $ 375 million from the World Bank for the project

for a period of 3 years from July 1, 1986.

In fact, the NABARD has been associated with the implementation of

42 projects with external aid from the World Bank Group and other

International Aid Agencies, including bilateral assistance. On June

1987, US $ 2,622.1 million of total credit for these projects have been

routed through the NABARD.

During 1989-90, the NABARD sanctioned short-term credit limits

aggregating to Rs. 2,807 crores for financing seasonal agricultural

operations. Its medium-term credit outstanding amounts to Rs. 19

crores at end- December 1989.




Recently, the NABARD has launched a 15-Point Programme for the

development of 30 Primary Agricultural Societies (PACs) and all

Large-size Adivasi Multi-Purpose Societies (LAMPS) in 15 selected

pilot project districts.

In 1987, the NABARD has also commenced a 10-point Action

Programme for rehabilitation of weak primary land development

banks and branches of state land development banks. The Action

Programme is concerned with: (1) investigation of overdues; (ii)

strengthening of organisation and management; (iii) review of loan

policies and procedures; and (iv) strengthening of the resources of the

LDBs.

During 1986-87 (July-June), the NABARD provided refinance credit

under the IRDP amounting to Rs. 379 crores.

Besides providing credit for agricultural and allied activities, the NABARD also renders financial help to the non-agricultural sector

with the aim of promoting integrated rural development. It provides

financial assistance to small scale industries, cottage and village

industries, industrial co-operative societies etc., for meeting their

working capital and block capital requirements. It also provides

medium-term finance for meeting their investment capital needs. The

NABARD has adopted liberal policies in this regard.

During 1986-87, the NABARD had inspected 178 CCBs, 86 RRBs, 7

SLDBs and 30 other institutions.




During 1986-87, the NABARD approved and assisted 5 research

proposals and 17 seminars and several conferences/symposia from its

R & D Fund, and spent Rs. 33.41 lakhs for these purposes.

Recently in 1988 onwards, the NABARD introduced certain policy

changes and schemes regarding farm short-term credit: (i) Financing

of seasonal agricultural operations; (ii) the scheme of fresh finance;

(iii) National Oilseeds Development Programme (NODP); and (iv)

Product Marketing Loan Scheme. Today, thus, the NABARD has

become a kingpin of rural development.

During 1989-90, the NABARD’s refinance assistance was of the order

of Rs. 549 crores.

The NABARD has been giving uniform scales for all States/Union

Territories for financing working capital and under the refinance

scheme for handlooms and powerlooms in the co-operative sector.

The responsibility of administering the Credit Authorisation Scheme

for co-operative banks rests with the NABARD.

During 1995-96, the total amount of refinance disbursements by

NABARD increased by less than 2 per cent to Rs. 3,064 crore from

that

of the previous year. During 1995-96 a Rural Infrastructural

Development

Fund (RIDF) with an initial corpus of Rs. 2,000 crore was created

within NABARD for facilitating rural infrastructure projects.




During 1996-97, there was a turn around in the resource position of

the ABARD. It increased to Rs. 2,963 in 1996-97 as against Rs. 1,617

crore in the previous year. The NABARD’s and state governments

amounted to Rs. 3,881.15 in 1996-97.

Policy Initiatives by NABARD

Major thrust of NABARD during the year was on strengthening the rural

credit delivery system to support the growing credit needs of the agricultural

and rural sectors. Some of the important policy initiatives taken by

NABARD during the 1998-99 inc1ude (i) Introduction of Kisan Credit

Cards, (ii) augmenting flow of credit in1l areas served by weaker co-

operative banks, (iii) accelerating flow of credit to the handloom weavers

through financing State Handloom Development Corporations, (iv)

stimulating investment in minor irrigation and wasteland development,

lowering of interest rates on refinance, and (vi) giving special thrust on

micro credit development. NABARD also liberalized the terms andconditions for providing long term loans to State Governments for

contributing the share capital of co-operative credit institutions.

The policy initiatives relating to the non-farm sector during the

year included (i) enhancing the ceiling under automatic refinance facility(ARF) and integrated loan scheme(ILS), (ii) liberalized the small road

transport operators’ (SORT) scheme and (iii) enlarging the scope of soft loan

assistance for margin money scheme.




(a) Kisan Credit Card Scheme

Pursuant to the announcement made in the Union Budget for 1998-

99. NABARD formulated a model ‘Kisan Credit Card’ scheme in

consultation with the Reserve Bank and major banks. The scheme aimed at

providing ready credit facilities to the farmers covering their entire

production credit needs for the full year plus an amount for ancillary

activities related to crop production. The model scheme was circulated by

the Reserve Bank to commercial banks and by NABARD to co-operative

banks and RRBs in August 1998. RRBs and co-operative banks together issued 1.61 lakh cards covering credit facility of Rs.836.8 crore during the

year 1998-99.

In addition. NABARD introduced a system of ‘Flexi credit’ on a

pilot basis in three districts of Kerala to take care of the unique needs of the

farmers in the State who raise a wide mix of crops in small holdings around

the)T homes together with rearing of livestock.

(b) Increase in Quantity of P-finance

In order to augment the flow of credit at the ground-level, theceiling for sanction of short-term credit limits by NABARD was enhanced

for different categories (based on audit classification) of CCBs. While the

policy of stipulating minimum levels of involvement (ML!) of own

resources by StCBs and CCBs in short-term agricultural lending was




continued, certain relaxations in the existing norms were made for those

banks which had hardly’ any eligibility for concessional refinance from

NABARD.

The stipulation of minimum coverage of small and marginal

farmers was modified with a view to increasing credit flow to sir all and

marginal farmers. Sir nihal’h. higher credit limits were provided to CCBs

operating in nihal areas, with due weightage for loans provided for the

consumption reeds of tribals. Efforts have also been made to increase the

flow of credit to Bihar. Jammu and Kashmir and the North-Eastern Region.

Considering the importance attached to the handloom sector,

NABARD continue to lay special emphasis on meeting the credit

requirements of 94 thrust districts spread over 23 States identified by the

Government of India for special development. With a view to supplementing

the efforts of Handloom Development Corporations set up by some of the

State Governments. NABARD in consultation with the Reserve Bank, has

decided to extend refinance support to commercial banks and StCBs in

respect of their working capital limits to these Corporations.

In order to channelise larger flow of credit to priority sector under

thrust area programmes, an upward revision in the quantum of refinance was

made, inter alia, for dry land and wasteland development and minor p4ation

schemes:

C)Micro-Finance Innovations




NABARD’s efforts towards increasing the access of the rural poorformal

banking services through promotion and credit-linking If Help Groups

(SHGs) of the rural poor, and other micro-finance initiatives gathered

momentum during the last two years. As may as 18,678 additional SHGs

were linked to banks as against the target of linking 10,000 SHGs as

envisaged in the Union Budget, 1998-99. The amount of bank loati

disbursed through SHGs amounted to Rs.33.3 crore. NABARD continued to

provide 100 per cent refinance to banks at the rate of interest of .5 per cent

per annum. Refinance assistance at Rs.30.7 crore under the program during

1998-99 was much higher than that of Rs. 10.7 crore during 1997-98.

During the year, 52 new banks joined the linkage programme. In all, 2021

banks comprising 38 commercial banks, 129 RRBs and 35 co-operative

banks) have participated in the programme covering 24 States and Union

Territories. As many as 550 non-government organizations (NCOs) are

participated in the programme.

Bank yet to tap huge unmet credit card demand

ANNEXURE

Bank yet to Tap huge

unmetcredit card

demand

geographical distribution

61%

12%

12%

12%3%

rurul

super metros

other urban

class 1 town

other metro




income distribution

72%

1%

18%

9% <Rs1lakh

>Rs10 lakh

Rs 1lakh-Rs 2.5

lakh

Rs2.5 lakh-Rs10

lakhj

call it India’s impending boom.Three time as many people who have credit cards now wants to acquire themover the next 12 month. And people who earn less than 1lakh a year accountalmost three-quarters of the demand for new cards. According to surveythere are 321 million paid workers in India. While 17 million people saythey want to get a new credit card in the next year




RECOMMENDATION

1. Establishment of storage facilities by way of godowns and cold

storage can also help the farms in getting better price realizations for

agriculture produce.

2. Adoptions of flexible delivery system

a) Union governments and central bank authorities are not

satisfied with bank effort in lending money to farmers for

agriculture developments. Even now the village money lender

still thrives because of the flexibility of credit that he offers. He

works as the ATM for the villager.

b) We needs rural branches, which can offers flexible working

hours to suit the requirements of the farmers.

3. Future trading through commodity exchange

a) The farmers can protect himself from the price change by

contracting to sell the expected produce in the future market at

agriculture specified price at the time. The resources are

committed for production.

b) The farmers may not understand derivatives and concept of margins and mark-to-market would be cumbersome to graps.

Here banks, could play agriculture lending role by aggregating

the produce for farmers and hedging through their central office




treasuries. Suitable change in the banking regulations Act are

requirements again to enable this scene.

4. Improved competitiveness, high quality and high safety farm.

Products and co-operative marketing scheme are essentials so that the

small produce will be benefited more credit instalments should not

merely focus on primary productions but also on augmentation of the

entire value chain such as food processing or value, additions for

commercial crops.




CONCLUSION

Bank must strengthen their credit delivery system for rural India.

Fortunately, over the last few years, India has been paying special

attention to rural sector to achieve major growth in agriculture and rural

sectors the massive target of over three-fold increase in credit flow to

agriculture during the tenth plan period speaks volumes of the serious. I also

conclude that rapidly falling interest rate have made loans affordable to more

people, which means there’s still plenty room left for growth.




BIBLIOGRAPHY

Website

1. www.State Bank of Hyderabad.com2. www.Union Bank of India.com3. www .SBI .com

Magazines

Journal of the institute of charted accountant

Newspaper

Mint

Books

The Indian banking system

http://www.statebank/

http://www.union/

http://www.sbi.com/

http://www.statebank/

http://www.union/

http://www.sbi.com/

51 rural development bank

Documents