S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR

money acts as an

intermediate in the exchange

process,it is called a medium of exchange.

S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR

• Credit (loan) refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.

CREDIT

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• Collateral security• Documentation required• Term of the loan• Mode of repayment• Rate of interest

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S.MADAN KUMAR

IMPORTANCE OF CREDIT FOR FARMERS IN RURAL AREAS

• Farmers need credit to buy seeds, fertilizers pesticides, electricity, equipments, etc.

• There is a minimum period of three to four months between the time when the farmers buy these inputs and when they sell the crop.

• Farmers usually take crop loans at the beginning of the season and repay the loan after harvest.

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FORMAL SOURCES OF CREDIT

• Commercial Banks, co-operative societies and Regional Rural Banks constitute the formal sector of credit

• The Reserve Bank of India supervises the functioning of formal sources of loans.

• They collect low rate of interest.• They follow some well defined rules and

procedures

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INFORMAL SOURCES OF CREDIT

• The informal lenders include moneylenders, traders, employers, relatives and friends, etc.

• There is no organisation which supervises the credit activities of lenders in the informal sector.

• They collect high rate of interest• They do not follow any rules or procedures

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S.MADAN KUMAR

CREDIT IN URBAN AREAS

• Poor takes 85% credit from informal sources and only 18% from banks and other formal sources

• Rich takes more than 90% of loans from formal sources

• So formal sources mostly serve the rich people

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WHY ARE THE BANKS NOT ADVANCING LOANS TO THE POOR PEOPLE?

• Poor takes 85% credit from informal sources and only 18% from banks and other formal sources

Rich takes more than 90% of loans from formal sources

So formal sources mostly serve the rich people

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SELF HELP GROUP

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SELF HELP GROUP

• A SHG has 15-20 members, mostly women of a neighborhood

• Each member contributes some money• Members can get small amounts as loans from the

group. Rate of interest is low and it is decided by the members.

• After 2 years the group can get loans from the bank

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IMPORTANCE OF SHGs

• Members can get loans at low rate of interest.• The group will encourage the members to find self

employment• Members can discuss and act on many social issues

such as health, nutrition, domestic violence, etc.• Banks will give loans to SHGs without any collateral

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S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR

S.MADAN KUMAR