Department of Economics Bapatla 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 production CONSUMPTION – for the period between Marketing & harvesting UNPRODUCTIVE – customs, traditions, rituals ON THE BASIS OF SOURCES INSTITUTIONAL NON-INSTITUTIONAL

NON-INSTITUTIONAL FINANCE IN INDIAN AGRICULTURE Money Lenders, Chit Funds, relatives, friends Main source of Agricultural Finance at the beginning of the planning period Share: 92% in 1951( money lenders – 69.7%) to 25% MERITS DEMERITS  EASY TO OBTAIN  SIMPLE PROCEDURES  EASY ACCESS  NO RESTRICTIONS  CONSUMPTION LOANS  EXORBITANT RATES OF INTEREST  INDEBTEDNESS  LOSS OF LAND  MALPRACTICES  EXPLOITATION  BONDED LABOUR

INSTITUTIONAL CREDIT IN INDIAN AGRICULTURE STRUCTURE OF INSTITUTIONAL CREDIT GOI & RBI NABARD COMMERCIAL BANKS CO-OP.CREDIT SOC. RRBS

FLOW OF INSTITUTIONAL CREDIT TO AGRICULTURE AGENCY1970s 1980s 2OOO-O COOPERATIVES COMMERCIAL BANKS 21.O REGINAL RURAL BANKS PERCENTAGE SHARE Source: RBI bulletin, NOV 2004 & economic survey

COOPERATIVES: RURAL CREDIT AT LOWER COST Coverage: by 2005, 97% villages with almost 900 lakh members STRUCTURE State co-op banks ( state level) 29 Central co-op banks ( district level) 367 Primary Agricultural Credit Soc.s 98,000 (village Level) State Land Development Bank ( State Level) Primary Lend Development Banks (village Level) 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 BANKS GROWTH IN RURAL CREDIT AFTER NATIONALIZATION. 18% net bank credit is for priority Sector  Short term finance  Medium & long term finance  Direct 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 & RBI HEAD OFFICE AT MUMBAI, 16 REGIONAL OFFICES FUNCTIONS  APEX 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)  Differntial Rate of Interest (DRI) 1972