Beruflich Dokumente
Kultur Dokumente
Project Report On
RURAL FINANCE OF INDIAN ECONOMY
SUBMITTED IN PARTIAL FULFILLMENT OF THE DEGREE OF BACHELORS OF
MANAGEMENT STUDIES (V)
AFFILIATED TO THE UNIVERSITY OF MUMBAI
SUBMITTED BY
NOEL HERALD KARKADA
07
RESEARCH GUIDE
PROF.
S.I.C.E.S
DEGREE COLLEGE OF SCIENCE & COMMERCE
AMBERNATH (WEST) 421 502
2015-2016
Prof.
(Research Guide)
DECLARATION
I, NoEL Herald Karkada, studying at S.I.C.E.S Degree college of Science &
Commerce, Ambernath (west), 421 202 student of T.Y. BMS, (BACHELORE
OF MANAGEMENT STUDIES) , HEREBY DECLARE THAT I HAVE DULY
COMPLETED MY PROJECT ON RURAL FINANCE OF INDIAN ECONOMY IN
THE ACADEMIC YEAR 2015-2016 UNDER THE GUIDANCE OF PROF.
THE INFORMATION SUBMITTED BY ME IS TRUE AND ORIGINAL TO
THE BEST OF MY KNOWLEDGE
ACKNOWLEDGEMENT
METHODOLOGY
The project is based on various references taken from book & reports
mentioned in the bibliography at the end of the assign project
SCOPE
OBJECTIVES
EXECUTIVE SUMMARY
INDEX
SR.NO
TOPICS
PAGE NO.
1-2
DEFINATION
1-2
1.1
4-6
1.2
SR.NO.
TOPICS
PAGE NO.
2.0
6-7
2.1
6-7
2.2
7-8
2.2.1
8-9
2.3
2.3.1
9-10
SR.NO.
TOPICS
PAGE NO.
3.0
11-12
SR.NO.
TOPICS
PAGE NO.
4.0
15-16
4.1
16-18
4.2
18-19
SR.NO.
TOPICS
PAGE NO.
5.0
19
5.1
19-20
5.2
20-22
5.3
22
5.4
AGRICULTURAL PRODUCTION
22
5.4.1
23
3.1
3.2
3.3
13-14
13-14
14-15
5.4.2
23-24
5.4.3
5.4.4
AGRICULTURAL MARKETS
24-25
5.5
25
5.5.1
25-26
5.5.2
26-27
SR.NO.
TOPICS
PAGE NO.
6.0
27-29
6.1
29
6.2
29-30
6.3
30-31
SR.NO.
TOPICS
PAGE NO.
7.0
31-32
SR.NO.
TOPICS
PAGE NO.
8.0
32-33
SR.NO.
TOPICS
PAGE NO.
9.0
33
9.1
33-34
9.1.1
34-36
9.1.2
36
9.2
36-38
9.3
COMMERCIAL BANKS
38-41
9.4
REGIONAL BANKS
41-43
9.5
43
9.5.1
NABARD AN OVERVIEW
43-44
SR.NO.
TOPICS
PAGE NO.
10.0
24
10.1
10.2
44-54
54-57
INTRODUCTION
There is a big difference between underdeveloped and developed countries.
The United Nations group of experts states, We have had some difficulty in
interpreting the term underdeveloped countries. We frankly consider that, per capita
real income is low when compared with the per capita real incomes of the United
States of America, Canada, Australia & Western europe. Briefly a poor country.
The term underdeveloped countries is relative. In practical, those countries
which have real per capita incomes less than a quarter of the per capita income of the
United States, are underdeveloped countries. But recently UN publication prefer to
describe them as Developing economies. The term developing economies signifies
that though still underdeveloped, the process of development has been initiated in
these countries. Thus, we have two economies developing economies & developed
economies. The World Bank issued in its World Development Report (1991)
classified the various countries on the basis of Gross National Product (GNP) per
capita. Developing countries are divided into: (a) Low income countries with GNP per
capita of $580 and below in 1989; and Middle income countries with GNP per capita
ranging between $ 580 and $ 6,000. As against them, the High-income Countries
which are mostly members of the Organisation for Economic Co-operation and
development (OECD) and some others have GNP per capita of more than $ 6,000.
The above data given in the table noted that in 1989 low income
countries comprise nearly 57 percent of the world population (2,948 million),
but account for only 5 percent of total world GNP. The middle income
countries, which are less developed than the highly developed than the low
income countries comprise about 21 percent of world population but account
for 11 percent of world GNP. Taking these two groups which are popularly
described as developing economies or underdeveloped economies, it may be
stated that they comprise over three-fourths of the world population but
account for about one-sixth of the world GNP. Most countries of Asia, Africa,
Latin America and some countries of Europe are included in them.
GNP
Total
GNP Per
(Billion
Population Capita
US $)
981 (4.7)
(million)
2,948
(US $)
330
2,253
(56.6)
1,105
2,040
(10.9)
15,230
(21.2)
831 (16.0) 18,330
(73,4)
___
323 (6.2)
___
20,736
5,206
3,980
(100.0)
283 (1.4)
(100)
832 (15.9) 340
India with its population of 832 million in 1989 and with its per capita income of
$340 is among poorest of the economies of the world. It had a share of 15.9
per cent in world population, but a little more than 1 percent of world GNP.
Three observation made here regarding the U.N. classification of
developed and developing countries on the basis of per capita income. First, there
is gross inequality of incomes between the rich and the poor countries. Second,
the gap in per capita income (and naturally in the level of living) between the rich
and poor countries is even widening over the yearsthe annual rate of growth of
per capita income of the rich countries was higher during 1965-89 as compared
with the poor countries. More recently, the growth rate among low-income
countries has also shown an increase and if this is sustained, the gap may show a
decline over a period. Third, all the high income countries are not necessarily
developed countries. For instance, the high income oil-exporting countries have
high per capita income but this is mainly due to their exports of oil; really
speaking, they are not developed economies. Recently, with a decline in world oil
prices, the GNP per capita has started showing a decline in this group.
1 . Definition:
A country which has good potential prospects for using more capital or more
labour or more available natural resources, or all of these, to support its present
population on a higher level of living or if its per capita income level is already fairly
high, to support a large population on a not lower level of living. As per this definitions
the problem of development is mainly the problem of development is mainly the
problem of poverty and prosperity. The basic criterion then becomes whether the
country has good potential prospects of raising per capita income, or of maintaining
an existing high level of per capita income for an increased population.
a very large share in the national income. In India, in 1981, about 71 per
cent of the working population was engaged in agriculture and its
contribution to national income was 36 per cent. In Asia, Africa and Middle
East countries countries from two-thirds to more than four-fifths of the
population earn their livelihood from agriculture, and in most Latin
American countries from two-thirds to three-fourths of population engaged
in agriculture in developed countries is much less than the proportion of
population engaged in agriculture in underdeveloped countries.
3. Heavy Population pressure:- The main problem in India is the high level of
birth rates coupled with a falling level of death rates. The rate of growth of
population which was about 1.31 per cent per annum during 1941-50 has
risen to 2.11 per cent during 1981-91. The chief cause of this rapid spurt to
population growth is the steep fall in death rate from 49 per thousand during
1911-20 to 9.6 per thousand in 1990; as compared to this, the birth rate has
declined from about 49 per thousand during 1911-20 to 29.9 per thousand in
1990. The fast rate of growth of population necessitates a higher rate of
economic growth in order to maintain the same standard of living of the
population. To maintain a rapidly growing population, the requirements of food,
clothing, shelter, medicine, schooling, etc. all rise. Thus, a rising population
imposes greater economic burdens and, consequently, society has to make a
much greater effort to initiate the process of growth.
first, the amount of capital per head available is low; and secondly, the
current rate of capital formation is also low. Following table reveals that
gross capital formation in India is less than that of developed countries.
1.2 Gross Domestic Investment and Saving (As per cent of Gross Domestic
Product)
Gross Domestic
Gross Domestic
Investment
Saving
1965
1989
1965
1989
Japan
28
33
30
34
Australia
Germany
26
23
26
22
23
23
23
27
U.S.A.
U.K.
12
13
15
21
12
12
13
18
India
17
24
15
21
As per Colin Clark to maintain the same level of living a country requires an additional
investment of 4 percent per annum if its population increases at the rate of 1 percent
per annum. In a country like India where the rate of population growth is 2.11 percent
(during 1981-91), about 8 percent investment is needed to offset the additional
burdens imposed by a rising population. Thus, India required as high as 14 percent
level of gross capital formation in order that it may cover depreciation and maintain
same level of living. A still higher rate of gross capital formation alone can give a way
for economic growth to improve living standard of the population.
The Indian economy in the pre-British period consisted of isolated and selfsustaining villages on the one hand, and towns, which were the seats of
administration, pilgrimage, commerce and handicrafts, on the other. Means
transport &
7
of Bengal, the sarees of Banaras and other cotton fabrics were known to the
foreigners. The chief industry spread over the whole country was textile handicrafts.
The textile handicrafts includes chintzes of Lucknow, dhotis and dopattas of
Ahmedabad, silk, bordered cloth of Nagpur and Murshidabad. In addition to cotton
fabrics, the shawls of Kashmir, Amritsar and Ludhiana were very famous. India was
also quite well-known for her artistic industries like marble-work, stone-carving,
jewellery, brass, copper and bell-metal wares, wood-carving, etc. The cast-iron pillar
near Delhi is a testament to the high level of metallurgy that existed in India. In this
way Indian industries, Not only supplied all local wants but also enabled India to
export its finished products to foreign countries.
2.3 Indian Population an Overview:India is one of the most populated countries in the world, next only to
China. Although India occupies only 2.4% of the total area of the world it supports
over 15% of the world population, as revealed by statistics. India is land of
diversity, spread across its cultures, landscape, languages and religion. India has
been invaded from the Iranian plateau, Central Asia, Arabia, Afghanistan, and the
West. The Indian people have absorbed these influences producing a remarkable
racial and cultural synthesis. Religion, caste, and language are major
determinants of social and political organization in India today. The government
has recognized 16 languages as official; Hindi is the most widely spoken.
Although Hinduism is the popular religion, comprising 83% of the population,
India is also home to one of the largest population of Muslims in the world--- more
than 120 million. The population also includes Christians, Sikhs, Jains, Buddhists, and
Parsis. The caste system reflects Indian historical occupation and religiously defined
hierarchies. Traditionally, there are four castes identified, plus a category of outcastes,
earlier called "untouchables" but now commonly referred to as "dalits," the oppressed.
In reality, however, there are thousands of sub-castes and it is with these sub-castes
that the majority of Hindus identify. Despite economic modernization and laws
countering discrimination against the lower end of the class structure, the caste
system remains an important factor in Indian society. Poverty is one of the major
problems facing India. An estimated 30-40 percent of the population lives in poverty.
Four out of five of India's poor live in rural areas. About 70% of the people live in more
than 550,000 villages, and the remainder in more than 200 towns and cities.
11
1. Land Resources: The total geographical area of India is about 329 million
hectares, but statistical information regarding land classification is
available for only about 305 million hectares; this information is based
partly on village papers and partly on estimates. We can explain land
utilization pattern from the following table:Land utilization pattern, 1986-87 (million hectares)
Particulars
1. Total geographical area
Area
329
Percent
--
305
100
41
13
67
22
12
19
7. Fallow lands
26
140
46
37
12
177
58
3. Water Resources: India is one of the wettest countries in the world, with
average annual rainfall of 1100 m.m. Indias water policy, since
Independence, has mainly concentrated on highly visible large dams,
reservoirs and canal systems, but has ignored minor water works such
as tanks, dugwells and tubewells.
4. Fisheries: Broadly speaking, fishery resources of India are either inland or
marine. The principal rivers and their tributaries, canals, ponds, lakes,
reservoirs comprise the inland fisheries. The rivers extend over about 17,000
miles, and other subsidiary water channels comprise 70,000 miles. The
marine resources comprise the two wide arms of the Indian Ocean and a large
number of gulf and bays along the coast. About 1.8 million fishermen draw
their livelihood from fisheries, though they generally live on the verge of
extreme poverty. Out of a total catch of 3 million tones of fish in 1988-89, over
1 million tones came from inland fisheries and nearly 2 million tones from
marine sources. India is the seventh largest producer of fish in the world and
is second in inland fish production, which contributes 45 per cent of total
production in the country. Fish production reached the level of 5.4 million
tonnes in 1997-98, comprising 3.0 million tonnes of marine fishery and 2.4
million tonnes of inland fishery and is expected to reach 5.6 million tonnes in
1998-99 with 3.0 million tonnes of marine fishery and 2.6 million tonnes of
inland fishery, respectively. During 1998-99, the export of marine products
came down to US$ 1,038 million from US$ 1,208 million during 1997-98
3. Transport: If agriculture and industry are regarded as the body and the bones of the
economy, which help the circulation of men and materials. The transport system helps
to broaden the market for goods and by doing so, it makes possible large-scale
production through division of labour. It is also essential for the movement of raw
materials, fuel, machinery etc., to the places of production. The more extensive and
continuous the production in any branch of activity the greater will be the need for
transport facilities. Transport development helps to open up remote regions and
resources for production.
14
Regions may have abundant agricultural, forest and mineral resources but
they cannot be developed if they continue to be remote and inaccessible.
15
4.0 Microfinance In An Indian Context:Microfinance institutions (MFIs), specialised financial institutions that serve the
poor, derive from the success of some micro enterprise credit programmes performed
mainly by practitioners in developing countries. microFinance (mF) is being practiced
as a tool to attack poverty the world over. During the last two decades, substantial
work has been done in developing and experimenting with different concepts and
approaches to reach financial services to the poor, thanks mainly to the
16
17
intermediaries. Consequently,
18
Therefore, formal sector finance institutions could form a joint venture with
informal sector institutions in which the former provide funds in the form of equity
and the later extends savings and loan facilities to the urban poor. Another form of
partnership can involve the formal sector institutions refinancing loans made by
the informal sector lenders. Under these settings, the informal sector institutions
are able to tap additional resources as well as having an incentive to exercise
greater financial discipline in their management. Microfinance institutions could
also serve as intermediaries between borrowers and the formal financial sector
and on-lend funds backed by a public sector guarantee.
19
agrarian during lean seasons it becomes impossible for them to repay the loan.
Pressure for high repayment drives members to money lenders. Credit alone cannot
alleviate poverty and the Grameen model is based only on credit. Micro-finance is
time taking process. Haste can lead to wrong selection of activities and beneficiaries.
Another model is Kerala model (Shreyas). The rules make it difficult to give
adequate credit {only 40-50 percent of amount available for lending). In Nari
Nidhi/Pradan system perhaps not reaching the very poor. Most of the existing
microfinance institutions are facing problems regarding skilled labour which is not
available for local level accounting. Drop out of trained staff is very high. One
alternative is automation which is not looked at as yet. Most of the models do not
lend for agriculture. Agriculture lending has not been experimented.
All the models lack in appropriate legal and financial structure. There is
a need to have a sub-group to brainstorm on statutory structure/ ownership
control/ management/ taxation aspects/ financial sector prudential norms. A
forum/ network of micro-financier (self regulating organization) is desired.
5.1 Profile of Rural people:If we classify the rural people by their occupation, we find cultivators as the
predominant occupation group who account 72% of rural households.
Distribution of rural households by their profession or business activity
20
Rural Finance In Indian Economy
Occupation
Cultivators
Agricultural labourers
Other non-cultivators
Artisans
All house holds
Percentage of Households
72
15
11
2
100
Unit #
1979-80
1984-85
1985-86
1990-91
1995-96!
M.Sq.Mtres
56.00
82.00
103.98
108.58
1088.8
1052.63
Value
(Rs. crores)
33.00
92.00
157.62
186.30
285.95
353.49
122.00
348.00
807.06
900.38
1994.06
356216
7020
Traditional
Industries:
Khadi
Village
Value
Industries
(Rs. crores)
Handlooms
Mill Meters
2100.00
2900.00
3600.00
3692.00
4888
Value
(Rs. crores)
840.00
1740.00
2880.00
2953.60
3633
Lakh Kgs. of
29.00
48.00
76.70
78.97
12836
Sericulture
21
13909
Industry
Ha
ndi
cra
fts
Traditional
Industries:
Khadi
Village
Coi
r
Industries
Handlooms
Sericulture
Su
btot
al
(A)
Mo
der
n
Ind
ust
ries
:
Sm
all
Sc
ale
Ind
ust
ries
Po
wer
loo
ms
Su
btot
al
(B)
To
tal
(V
SI)
raw
silk
(value
Rs.crores)
Value
(Rs. crores)
Lakh tonnes
of
fibre
Value
(Rs. crores)
Value
(Rs. crores)
Value
(Rs. crores)
Mill Meters
Value
(Rs. crores)
Value
(Rs. crores)
(Rs.
crores)
M.Sq.Mtres
1979-80
1984-85
8.84
11.20
13.05
9.27
16.13
24.84
52.40
61.50
76.80
12.00
16.00
20.43
Value
(Rs. crores)
Value
(Rs. crores)
Mill Meters
Value
(Rs. crores)
Lakh Kgs. of
raw
22
19
silk
(value
Rs.crores)
Handicrafts
Value
15.00
20.30
27.40
28.00
43.84
5.00
5.59
5.89
8.00
5.46
65.50
(Rs. crores)
Coir
Lakh tonnes of
fibre
N.A.
Value
(Rs. crores)
Value
(Rs. crores)
Sub-total (A)
Modern Industries:
Small Scale
Industries
Value
(Rs. crores)
Powerlooms
Mill Meters
102.21
130.72
168.41
203.80
246.74
253.00
39.65
67.00
90.00
96.00
124.3
152.61
10.00
11.00
32.19
35.32
55.00
N.A.
Value
(Rs. crores)
the damage caused to the cotton crop in Punjab by excessive rains and unexpected
cyclonic storms in Andhra Pradesh in October 1998, cotton production was estimated
to be higher at 13.3 million bales in 1998-99, as against 11.1 million bales produced in
1997-98. Similarly, the sugarcane output is expected to touch 282.7 million tonnes
during 1998-99, compared to 276.3 million tonnes during 1997-98. The production of
oilseeds is also likely to be higher at 25.3 million tonnes during 1998-99, as against
22.0 million tonnes during 1997-98.
23
Crops
1995-96
Achiev-
Target
ement
1996-97
Achiev
Target
ement
change
over
1997-98
Achiev
-ement
change
over
199596
Target
199697
1998-99
Produ-
ction
change
over
(Adv.
Est.)
1997-98
Rice
77.0
81.0
81.7
6.1
83.0
82.3
0.7
84.2
84.5
2.7
Wheat
62.1
65.0
69.4
11.8
68.5
65.9
(-) 5.0
70.0
70.6
7.1
Coarse
Cereals
29.0
29.0
32.5
34.1
17.6
33.5
31.1
(-) 8.8
34.3
30.6
Pulses
12.3
15.0
14.2
15.4
15.0
13.1
(-) 7.7
15.5
15.2
16.0
Total
Foodgr-
180.4
193.5
199.4
10.5
200.0
192.4
(- 3.5
204.0
200.9
4.4
24
ains
Oilseeds
22.1
23.0
24.4
10.4
25.5
22.0
(-) 9.8
27.0
25.3
15.0
Sugarca
-ne
281.1
270.0
277.6
(-) 1.2
280.0
276.3
(-) 10.5
300.0
282.7
2.3
Cotton*
12.9
13.0
14.2
10.0
14.8
11.1
(-) 21.8
14.8
13.3
19.8
Agricultural imports related to food and other items constituted 5.8 per
cent of the total imports during 1998-99, as against 4.0 per cent during
corresponding period of the previous year. Important agricultural items
imported during the year were vegetable oils (edible), sugar, wheat and fruits &
nuts. During 1998-99, the volume of agricultural imports aggregated US$
2,409 million, as against US$ 1,678 million during the corresponding period of
the previous year, recording a growth of 43.6 per cent.
Agricultural markets:
25
27
The public sector capital investment in agriculture which has been declining
from Rs. 4,970 crore in 1994-95 to Rs.4,776 crore in 1995-96 and further to
Rs.4,347 crore in 1996-97 showed an increase from Rs.4,347 crore in 199697 to Rs.4,416 crore (at 1993-94 prices) in 1997-98.
28
scenario. Over the years it has developed into a multi faceted structure to
service almost the entire cross-section of rural population spread thoughtout
the length and breadth of our country.
In rural areas the indigenous moneylenders continued to be the banker in
need. Since these money-lenders had virtual monopoly in supplying credit in rural
areas, the poor were often subjected to exploitation. With the overriding monopoly the
money-lenders often resorted to usurious practices--- levying the exobirant rate of
interest, demanding gift/contribution to the temple funds out of the amount of credit,
demanding advance interest, etc. Besides, often the money-lenders resorted to
unethical practices like taking thumb impression on a blank paper for inserting some
arbitrary amount, manipulation of account to inflate the balance due. The poor villager
could not escape the clutches of these indigenous bankers as they had to keep on
borrowing from them under distress since they were the only source of credit for all
type of requirements--- production and consumption. The conditions of the poor
peasantry were perpetually so pathetic that an adagethey are born in debt, they
live in debt & die in debt was the usual description of their plight.
To mitigate the sufferings of the poor farmers the infrastructure of cooperative credit was brought into being in the matter of agricultural finance. The
Co-operatives Societies Act of 1904 provided the formation of primary agricultural
co-operatives credit societies. Later in 1912, the co-operative movement was
extended to formation of non-agricultural co-operative credit societies also.
The commercial banks on the other hand were participating in rural banking only
as an alien since they were programmed for meeting the financial requirements of trade
and commerce. In a view of the huge gap in rural credit from institutional sources and in a
bid to meet the growing needs of financial assistance to modernizing farming, the
government adopted the multi-agency approach. This was intended to increase the farm
productivity and thus raise the living standards of the poor farmers. The formation of State
Bank Of India which was formed my taking over the Imperial Bank of India by the
Government was with a objective of extension of banking facilities on a large scale more
particularly in the rural and semi-urban areas and for other diverse purposes. This was
an important milestone in the banking of rural India. Momentum was gained more
prominently after the concept of Social control over
29
commercial banks was propagated in 1967. With the setting up of National Credit
Council in 1968 to asses the demand for bank credit for various sectors of economy
and to determine priorities for the grant of loans, etc. it came to be felt increasingly
that banks should become instruments of economic and social development.
the
Co-operative
and
Commercial
banks
made
substantial
development in providing credit to agricultural and rural economy. The total share
of co-operatives in total borrowing of the rural household grew from 5,204 in july
1964 to 12,065 in Dec 1974. But still it was noticed that two-thirds of the total
credit was taken from non-institutional sources. The demand for rural credit was
on the increase owing to adoption of modern agriculture, which increasingly
required larger amounts of capital both short term & long term.
30
Agricultural credit is one of the most crucial inputs in all agricultural development
programmes. From olden days private money-lenders are main sources of credit
towards agricultural or rural products. After independence multi-agency approach
consisting of co-operatives, commercial banks and regional rural banks are
adopted due to its cheaper and adequate credit to farmers. The major policy in the
sphere of agricultural credit has been its progressive institutionalization for
supplying agriculture and rural development programmes with adequate and
timely flow of credit to assist weaker sections and less developed regions.
The basic aim of this Policy are as follows:a. To ensure timely & sufficient flow of credit to the farming sector;
b. To avoid money-lender chain from rural scene.
c. To reduce regional imbalance through their credit facilities.
d. To provide larger credit support to areas covered by special
programmes. e.g. National Oilseeds Development Project.
Need of Credit for Farmers:Farmers need finance mainly for the following thingsto pay current
expenses of cultivation such as the purchase of seed, manures, etc.; the
purchase of cattle, implements and raw materials; acquire new land; or improve
land by irrigation, drainage, wedding and planting; pay up old debts to build and
repair houses, to purchase food stuffs and other personal necessaries; pay land
revenue to the Government; meet expenses connected with marriage and other
social events in the family, but jewellery and conduct law suits. The credit need of
agriculturists can, therefore, be broadly divided into directly productive & indirectly
unproductive expenses. Unfortunately fact is that underdeveloped and old
countries are in need of both the types of credit.
31
Private
agencies
means
relatives,
landlords,
agricultural
Relatives
8.8%,
Landlords
0.6%,
Agricultural
moneylenders
36.0,
Professional private moneylenders 13.2%, traders & commission agents 8.8%, other
32
sources 13.9. that time institutionals sources were 18.7 and the break up was
government 2.6%, Co-operative 15.5%, Commercial banks 0.6%. As per the
All India Debt and Investment Survey (1981), estimated that the share of
private agencies had further slumped to about 37% & share of institutional
credit jumped to 63% break up was 30% of co-operative & 29% of commercial
banks. Government & Reserve Bank of India is supporting commercial bank &
co-operatives to meet the growing demand for agricultural credit.
8.1 Private Agencies Sources:
Money lenders: Though there are drawbacks, moneylenders are by far the
most important source of agricultural credit in India. That we have already seen
before, It is therefore, clear that the basic problem of the agricultural economy of
India is the huge indebtedness of farmers and their exploitation by private
moneylenders. For that government of India make provisions in act as follows a.
maintenance of accounts in prescribed forms, b. furnishing of the receipts and
periodical statements, c. fixing of maximum rates of interest, d. Protection of the
debtors from molestations and intimidations, e. licensing of moneylenders, and f.
penalties for infringement of the provisions. The basic objectives of such
legislative enactments can be stated as: I. To bring about an improvement in the
terms on which private credit was available to agriculturists and to place legal
restrictions on the unreasonable exactions of moneylenders, II. To enable civil
courts to do greater justice as between lenders and borrowers than was possible
in the prevailing circumstances under the ordinary Code of Civil Procedure.
33
III. It does not flow into most desirable channels and to most needy persons.
35
has been rising steadily. In 1950-51, it advanced loans worth Rs.23 crores;
this rose to Rs. 200 crores in 1960-61, and to Rs. 4200 crores in 1988-89.
Financial Strength of PACs.: To make all primary agricultural societies viable and
ensure adequate and timely flow of co-operative credit to the rural areas the Reverse
Bank of India, in collaboration with State governments, had been taking a series of
steps to strengthen weak co-operative banks and to correct regional imbalances in cooperatives development. Steps were taken to reorganize viable PACs and for
amalgamation of non-viable societies with farmers service societies or large sized
multipurpose societies. These efforts are being intensified by providing larger funds to
weak societies to write off their losses, bad debts and overdues.
State Co-operative Bank: This bank forms the apex of the co-operative credit structure
in each state. It finances and controls the working of the central co-operative banks in the
State. It serves as a link between the Reserve Bank of India from which it borrows and
the co-operative central banks and village primary societies. The State Co-operative Bank
obtain its working funds from its own share capital and reserves, deposits from the
general public and loans and advances from the Reserve Bank now
36
NABARDhas formulated a scheme for the rehabilitation of weak central cooperative banks. NABARD is providing liberal assistance to the State
Governments for contributing to the share capital of the weak central co-operative
banks selected for the purpose. The State Co-operative bank is not only
interested in helping the co-operative credit movement but also in promoting other
co-operative ventures and in extending the principles of co-operation.
Apart from these commonly factors normally responsible for a high level of
overdues, intervention of external forces such as loan waivers, concession in
various forms towards repayment of principal and interest has also affected the
recovery performance of credit institutions to a significant extent. The problem
is further aggravated on the account of the state governments in ability to meet
the financial commitments to co-operative banks.
In recent years, the farmers are getting organized and one of their chief
demands of the farmer union is to cancel their debts to the co-operative societies
and banks. States have meekly surrended to such demands to write off the debts
in a matter of extreme concern, as it hampers the recovery of dues from the
farmers. The problem of loan overdues is a matter of serious concern, as it affects
the recycling of funds and credit expansion on one hand and economic viability of
the lending institutions, specially the co-operatives and RRBs, on the other.
2. Land development banks[9.2]: The need for long-term loan is being satisfied
by land development banks (formerly the were called land mortgage banks).
The objective of such banks is to provide long-term credit to the cultivators
37
against the mortgage of their lands. The loans from the land development banks
are quite cheap and are spread over a long period of 15 to 20 years. It is,
therefore, convenient ot borrow from these banks if previous debts have to be
cancelled or if additional land is to be purchased or if improvements have to be
made. Though land development banks have been making considerable
progress in recent years in this country, they have not really contributed much to
the financial need of the farmers. Most farmer are not even aware about this
bank & 70% of the land development banks are located in the three South
Indian States of Tamil Nadu, Andhra Pradesh & Karnataka. The loan sanction
by this bank has been increase annually from Rs. 3 crores to Rs. 770 crores
between 1950-51 and 1989-90. major drawback of this bank is they lend against
the security of land, and big landlords have taken advantage of them and, by
and large, small peasants have not benefited from them.
The Structure of LDBs:- The long term credit structure consists of the central
land development banks (generally one for each State) and primary land
development banks. In some States, there are no primary land developments
banks but in their place, there are branches of central land development banks.
38
Commercial Banks & Small Farmers: It has been estimated that nearly 70
percent of farmers owning less than 2 hectares of land are not getting bank
credit; only large landowners have been found creditworthy and suitable for
banks advances. But such a situation cannot continue for long. Under the
direction of the Planning Commission, Small farmers Development Agencies
have been set up to identify small farmers and work out economically viable
schemes of agricultural development. Commercial banks have to group them
40
41
implementation of Agricultural and Rural Credit Debt Relief Schemes, 1990 has
further adversely affected the viability of rural branches of commercial banks.
42
43
c. The sponsoring banks are also running their own rural branches in the
very area of operations of the RRBs; this has given rise to certain
anamolies and to avoidable expenditure on controls and administration.
promise for generating employment and increased income in the rural areas.
Hence, NABARD has identified financing, development and promotion of
RNFS as one of its thrust areas.
Schemes from NABARD for non-farming sector:
46
utilise the vehicle mainly for transportation of Rural Farm and Non-Farm Products
and inputs and passengers to/ from marketing centres. The borrower or his
employee should possess a valid driving licence and the vehicle should be duly
registered with the Regional Transport Authority as public transport vehicle.
2.
47
48
need be, and report such norms evolved by them to the concerned RO of
NABARD.
(b) Banks have also been advised to give focused attention on financing
power tillers by preparing a three year banking plan for a compact area for the
benefit of the small farmers.
C) Swarnajayanti Gram Swarozgar Yojana (SGSY)
SGSY, formed by restructuring ongoing self employment programmes, viz.
IRDP, TRYSEM, DWCRA, etc., is under implementation from 01 April 1999.
The programme envisages formation of SGSY Groups and their linkage with
the banks. Individuals as also SGSY group members, below poverty line are
assisted under the programme
D) Scheme for setting up of Agriclinic and Agribusiness centers
In pursuance of the announcement made by the Union Finance Minister in the
budget speech for the year 2001-02, National Bank in consultation with the
Ministry of Agriculture, GOI and select banks formulated a scheme for financing
Agriculture Graduates for setting up Agriclinics and Agribusiness Centres The
scheme aims at supplementing the existing Extension Network to accelerate the
process of technology transfer to agriculture and supplement the efforts of State
Agencies in providing inputs and other services to the farmers.
E) Scheme for financing farmers for purchase of land for Agricultural purposes
49
The objective of the Scheme is to finance the farmers to purchase, develop and
cultivate agricultural as well as fallow and waste lands as also consider financing
purchase of land for establishing or diversifying into other allied activities.
Eligibility (i) Small and marginal farmers i.e.. those who would own maximum of
5 acres of non- irrigated land or 2.5 acres of irrigated land including purchase of
land under the scheme and (ii) Share croppers / Tenant farmers are eligible.
F) Central Sector Capital Subsidy scheme for Investment Promotion (IPS)
A Central Sector Capital Subsidy scheme (Investment Promotion Scheme)
launched by the Government of India in collaboration with NABARD for development
of privately owned non-forest wastelands in the country is under implementation since
1998. Of the 40 schemes covering about 1500 ha sanctioned till date, the coverage is
mostly confined to the States of Tamil Nadu, Andhra Pradesh and Maharashtra, with
Tamil Nadu accounting for more than 20 schemes. The scheme provides for subsidy
upto 25% of bank loan with a ceiling of Rs. 25 lakh for taking up plantation and other
on-farm developments in private wastelands. In view of the availability of substantial
area under non-forest wasteland in all States and the need to develop them, a
nationwide awareness and publicity campaign was launched by the Government of
India in association with NABARD for popularizing the Investment Promotion Scheme
(IPS). As a part of this effort, workshops are being organized by NABARD in different
States/ regions.
50
Crop Loan
SBI offers financial assistance to meet cultivation expenses for various
crops as short Term Loan. With a repayment period not exceeding 18 months,
the Crop Loan is extended in the form of direct finance to cultivators.
Eligibility-Agriculturists, Tenant farmers and Share Croppers who actually
cultivate the lands are eligible for these loans. All categories of farmers Small/Marginal (SF/MF) and others are included.
Produce marketing loan scheme
The Bank extends financial assistance to help farmers store produce on
their own to avoid distress sale. The repayment period of the produce
marketing loan (PML) does not exceed 6 months. Further, this facilitates
immediate renewal of crop loans for next crop.
Eligiblity-All categories of farmers - Small/Marginal (SF/MF) and others - are
eligible.
The Bank verifies the following aspects before granting the
loan: 1) Service Area Approach.
51
Loan Amount
Upto Rs.25,000
Security to be furnished
DPN, DPN take delivery letter Hypothecation of
stocks.
Above Rs.25,000
52
The SBI gives credit solutions for land development programmes in the
form of direct finance to cultivators aimed at better productivity. Loans under
this head cover various activities like land clearance (removal bushes, trees,
etc.), land leveling and shaping, contour/graded bunding, bench terracing for
hilly areas, contour stone walls, staggered contour trenches, disposal drains,
reclamation of saline/alkaline soils and fencing.
Eligibility:Loans cover various activities like digging of new wells (open/bore
wells), deepening of existing wells (traditional/inwell bore), energisation of
wells (oil engine/electrical pump set), laying of pipe lines, installing
drip/sprinkler irrigation system and lift irrigation system.
Minor Irrigation Schemes
SBI provides credit for creating new source of irrigation by exploiting
underground water, energisation of wells, conveyance of water, judicious use
of available water, etc.
Loans cover various activities like digging of new wells (open/bore wells),
deepening of existing wells (traditional/inwell bore), energisation of wells (oil
engine/electrical pump set), laying of pipe lines, installing drip/sprinkler
irrigation system and lift irrigation system.
Eligibility- is ascertained on the basis of minimum area requirements: Tractors 8 acres of irrigated area Power tiller - 5 -6 acres Combine harvester - 20 acres
54
Sanitary latrine and smokeless chulha are integral part of the house.
Achievement
The scheme has been launched with effect from 1 April, 1999 and is in the
process of implementation.
56
Funding Pattern
Funds are shared by the Centre and State in the ratio of 75:25.
Implementing Agency
The Implementing Agency for the Credit Cum Subsidy Scheme for Rural Housing
may be the State Housing Board,State Housing Corporation, specified Scheduled
Commercial Bank, Housing Finance Institution or the DRDA/ZP.
encourage,
promote
and
assist
voluntary
action
for
the
promote,
plan,
undertake,
develop,
maintain
and
support
promotion
of
self-reliance,
generation
of
awareness,
organisation and improvement in the quality of life of the people in rural areas
through voluntary action.
57
Agriculture and its associated activities are found constituting the economic
base and the main source of livelihood and employment for the people in the state.
However, unprecedented growth of population on one hand and decreasing rate of
available agriculture land along with degradation of supporting natural resources as
required for sustaining crop productivity on the other have been seriously forcing the
problems of sustaining livelihood for farming communities. It is becoming difficult to do
the farming activity without external or internal sources. In this context the significance
of extending non-farm sector becomes only alternative but it also required finance
assistance for its development.
58
As per the above evaluation of the major problems and issues relating to the
rural financial system I can submit the following observations & recommendations:
Interest rates: Interest rates must be different for different categories. First
it should be concessional rate exclusively for small and marginal farmers at
1.5% to 11.5% & Secondly, there should be a higher rate of interest
applicable to the rest of the agricultural borrowers upper limit for it is15.5%
Infrastructure Development: tempo of agricultural lending has been low in the
eastern regional states like Bihar, Orissa and West Bengal & in the North Eastern
States. So Agricultural and Rural Infrastructure Development Corporation should
be setup in these area which will concentrate on building up necessary backward
and forward linkages and supporting services as well as
59
Bibliography
Sr.No.
Name
Author