Department of EconomicsBapatla College of Arts & Science

Agricultural Finance

Introduction

Constraints

Structure

NABARD

CREDIT NEEDS OF FARMERS

ON THE BASIS OF TIME ON THE BASIS OF PURPOSE

SHORT TERM- (less than 15 months) seeds, fertilizers, pesticides, marketing, wage payment, consumption, productive purpose

MEDIUM TERM – (15months – 5yrs.) cattle, small implements, repair & construction of wells

LONG TERM – (more than 5 yrs) permanent land improvement, buying land, repayment of old debts

PRODUCTIVE – agro productionCONSUMPTION – for the period between Marketing & harvestingUNPRODUCTIVE – customs, traditions, rituals

ON THE BASIS OF SOURCES

•INSTITUTIONAL•NON-INSTITUTIONAL

NON-INSTITUTIONAL FINANCE IN INDIAN AGRICULTURE

Money Lenders, Chit Funds, relatives, friendsMain source of Agricultural Finance at the beginning of the planning period Share: 92% in 1951( money lenders – 69.7%) to 25% 00-01

MERITS DEMERITS

EASY TO OBTAINSIMPLE PROCEDURESEASY ACCESSNO RESTRICTIONSCONSUMPTION LOANS

EXORBITANT RATES OF INTERESTINDEBTEDNESSLOSS OF LANDMALPRACTICESEXPLOITATIONBONDED LABOUR

INSTITUTIONAL CREDIT IN INDIAN AGRICULTURE

STRUCTURE OF INSTITUTIONAL CREDIT

FLOW OF INSTITUTIONAL CREDIT TO AGRICULTURE

AGENCY 1970s 1980s 2OOO-O1

2009-10

COOPERATIVES 77.0 55.9 39.0 20

COMMERCIAL BANKS 21.O 38.9 53.0 68

REGINAL RURAL BANKS

2.0 5.2 8.0 12

PERCENTAGE SHARE

Source: RBI bulletin, NOV 2004 & economic survey 2009-10

COOPERATIVES: RURAL CREDIT AT LOWER COST

Coverage: by 2005, 97% villages with almost 900 lakh members

STRUCTURE

SHORT & MEDIUM TERM LONG TERM

IN 1971, LARGE SIZED ADIVASI MULTI PURPOSE COOPERATIVE SOC. LAMPS

PROBLEMS: 1) LOW PROFITABILITY 2) POOR RECOVERY 3) LACK OF PROFESSIONAL MANAGEMENT

COMMERCIAL BANKSGROWTH IN RURAL CREDIT AFTER NATIONALIZATION. 18% net bank credit is for priority Sector

Short term financeMedium & long term financeDirect finance: for expenditure of land development 10%Indirect Finance: finance to coop.s,to FCI (4%)

Lead Bank Scheme: individual commercial bank responsible for development of Individual district

LIMITATIONS:

LOW QUALITY OF LENDING

TIME CONSUMING AND COSTLY OPERATION DUE TO SMALL SIZE OF LOANS

LOW LEVEL RECOVERY

MORE BRANCHES WITH LESS GROWTH POTENTIAL

REGIONAL IMBALANCE

LACK OF COORDINATION

REGIONAL RURAL BANKS

WERE ESTABLISHED IN 1975 ON THE RECOMMENDATIONS OF M.NARSIMHA COMMITTEE regionally based, rurally oriented and generally sposored by scheduled commercial banks and in some cases by private and state cooperative banks.

MAIN OBJECTIVE IS TO SUPPLY CREDIT TO THE AREAS IN WHICH OTHER FINANCIAL INSTITUTES ARE NOT ACTIVE.

LIMITATIONS: POLITICAL INTERFERENCE, LOW RECOVERY

CHAITANYA GODAVARI GR BK ANDHRA BANK

SAPTAGIRI GRAMEENA BANK INDIAN BANK

DECCAN GRAMEENA BANK STATE BANK OF HYDERABAD

ANDHRA PRADESH GR.VIKAS BANK STATE BANK OF INDIA

ANDHRA PRAGATHI GRAMEENA BANK SYNDICATE BANK

NAME OF RRB SPONSORED BY:

NABARD 1982

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

APEX BANK FOR RURAL CREDIT AND DEVELOPMENT.

SHARE CAPITAL CONTRIBUTED BY GOI & RBIHEAD OFFICE AT MUMBAI, 16 REGIONAL OFFICES

FUNCTIONSAPEX BODY FOR RURAL CREDIT

SUPERVISING CO-OPS

SHORT TERM CREDIT TO STATE CO-OPS

MEDIUM & LONG TERM TO STATE CO-OPS AND RRB

SUGGESTIONS TO GOVT.

R & D

CONTRIBUTION OF NABARD TO AGRICULTURAL FINANCE

Refinance to state government & co-op. banks Development of Rural Infrastructure Development Fund Promotion of Micro-finance Bulk Lending Support to NGOs Tribal Development Project in Gujarat (wadi project) Kisan Credit Card Scheme Gender Development through Credit: Assistance to Rural Women in Non-Farm Activities (ARWIND) Refinance under Swarnajayanti Gram Swarojgar Yojna Supervising body Farm Income Insurance Scheme ( FIIS) 2003-04 Differntial Rate of Interest (DRI) 1972