Credit Delivery System In Rural Areas

SAURABH JAIN08 BS 000 3005

2

The Unfolding India Story

India –The Economy

Rural banking

Rural India

…a global giant in making

Rural bankingFinancing value

chain

The Rural EconomyGDP

(Rs. 28.3 Tn)

GDP(Rs. 28.3 Tn)

Urban(Rs. 13.9 Tn)

Urban(Rs. 13.9 Tn)

Rural(Rs. 14.4 Tn)

Rural(Rs. 14.4 Tn)

Agri(Rs. 6.0 Tn)

Agri(Rs. 6.0 Tn)

Non-Agri(Rs. 8.4 Tn)

Non-Agri(Rs. 8.4 Tn)

Share of non-agricultural output has exceeded agricultural output in the rural economy

Share of non-agricultural output has exceeded agricultural output in the rural economy

Source: CERG (Consumer & Economic Research Group – Based on research by Omkar Goswami & Rama Bijapurkar)

Increasing Rural & Agri Credit

6560 Cr

1,44,233 Cr

2008-092008-091999-001999-00

4940 Cr

64,972 Cr

2008-092008-091999-001999-00

Agri Credit (O/s)

Agri Credit (O/s)

Source: RBI

Rural Credit

(O/s)

Rural Credit

(O/s)

Institutional Credit extended in rural India has grown by 19% p.a. (compounded)

Institutional Credit extended in rural India has grown by 19% p.a. (compounded)

The Unfolding India Story

India –The Economy

Rural banking

Rural India

…a global giant in making

Credit Delivery System in Rural

Areas

Rural Planning and Credit Department

Credit Delivery Policy

Category of advances Domestic banks Foreign banks in India

(i) Aggregate advances to priority sector

40 per cent of net bank credit

32 per cent of net bank credit

(ii) Advances to agriculture

18 per cent of net bank credit

No target

(iii) Advances to weaker sections

10 per cent of net bank credit

No target

(iv) Advances to SSI No target 10 per cent of net bank credit

(vi) Export Finance Export finance does not form part of priority sector for domestic banks

12 per cent of net bank credit

NABARD

NABARD • Framing policy and guidelines for rural financial

institutions • Providing credit facilities to issuing organizations• Preparation of potential-linked credit plans annually

for all districts for identification of credit potential• Monitoring the flow of ground level rural credit

NABARD Credit Facilities • Refinance Facilities • Direct Credit • Investment Credit • Rural Infrastructure • Farm Sector Schemes • Rural Non Farm Sector • Rural Housing • Others

Regional Rural Banks(RRB)

• The government of India set up Regional Rural Banks (RRBs) on October 2, 1975. The banks provide credit to the weaker sections of the rural areas, particularly the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs.– South Malabar Gramin Bank– North Malabar Gramin Bank– Pragathi Gramin Bank– Shreyas Gramin Bank

And individual loans - both Farm and Non-Farm

The current rural banking has prohibitive cost

High Transaction Costs

Low tech

nology

usage

High risk ch

argeLow profitability

Branch centric High Manual intervention

Branch centric High Manual intervention

Diversion of Funds

Non Deliveryof Crop

Farmer Payment Risk

Price RiskPrice Risk Yield RiskYield Risk

Crop Risk

Corporate Payment Risk

Liquidity ConstraintsLiquidity

Constraints

No Sale Trans.by Farmer

No Sale Trans.by Farmer

Risk Elements

… with varied risks

Some Loan Products in Rural Areas

Canara Bank

• Kisan Credit Card• Loans for Agri clinics / Agri business Centres• Minor Irrigation / Pumpset Loans• Farm Machinery Loans• Farm Development Loans• Vehicle Loan for Agriculturists• Loan for Cold Storage and Rural Godown• Canara Kisan OD

State Bank of India

• CROP LOAN (ACC)• PRODUCE MARKETING LOAN

SCHEME• LOAN AGAINST WAREHOUSE

RECEIPTS / COLD STORAGE RECEIPTS

• KISAN CREDIT CARD SCHEME (KCC)

• AGRICULTURAL TERM LOANS (ATL)

• LAND DEVELOPMENT SCHEMES• MINOR IRRIGATION SCHEMES• BROILER PLUS SCHEME

• FARM MECHANISATION SCHEMES

• FINANCING OF COMBINE HARVESTERS

• KISAN GOLD CARD SCHEME• LAND PURCHASE SCHEME• KRISHI PLUS SCHEME• ARTHIAS PLUS SCHEME• DAIRY PLUS SCHEME• FINANCE TO HORTICULTURE• LEAD BANK SCHEME• AGRI BUSINESS HEADS

Co-Operative Bank(KSCARDB)

• Ordinary Loans• OL - FS (Ordinary loan)• Scheme Loans• ARF-FS (Scheme Loan - Farm

Sector)• ARF-FM (Scheme Loans - Farm

Mechanisation)• ARF-BG (Scheme Loan - Bio Gas)• ARF-SGSY/IRDP• ARF-FLEXI CREDIT• ARF-Fin. TWO WHEELERS• ARF-Agri. Clinics & Business• ARF-Land Purchase

• Non - Farm Loans• NFS-CLS (Composite loan scheme)• NFS-SRWTOS (Small Road and Water

Transport Operators Scheme)• NFS-ILS (Integrated Loan Scheme)• NFS-SGSY/IRDP• NFS-SEMFEX II• NFS-NABARD HOUSING• NFS- Education Loan• Housing Loans• NHB HOUSING• HDFC HOUSING• Gold Loan• GL-Gold Loan

Thanks

• www.nabard.com• www.sbi.co.in• www.canarabank.com• www.rbi.org

References:-