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Agriculture finance--Problems,NABARD role

24 November 2010
01:37
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yc Short termG

 



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seeds fertilizers, pesticides, feeds, marketing of agriculture produce, payment of wages of
hired labour,
yc Ôedium termG


 

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purchase of cattle, small agri implements, repair & construction of wells
yc ÿong termG

permanent improvements of land, digging of tube wells , purchase of larger implements,
machinery like tractor and repayments of old debts.





yc Productive
purchase of seeds fertilizers, pesticides, feeds, marketing of agriculture produce, livestock,
repair of wells, payments of wages etc.
yc -onsumption
Between the moment of marketing of agricultural produce and harvesting of next crop there
is long interval of time and most of farmers don͛t have much income to sustain in this period.
Also times of flood drought, damages to crop etc.
yc rnproductive
purposes such as litigation, performance of marriages, birth or death, religious functions,
festivals

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yc Dependence on unpredictable monsoon
yc Jhe instability of farm output and prices
yc Small size of holding
yc Seasonality of operations
yc ÿarge time required in getting loans granted

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c Structural problems (Infrastructure wise)
c Problems of communication and control of rural branches (rnwillingness of better
employees to shift to rural branch)
c -ost and profitability of rural branches
yc -reation of charge on land as there may be many names in land records
yc  aluation of agricultural produce
yc Different laws in different states
 yc ·overnment policies
yc ÿack of knowledge of various schemes
d.c Poor Recovery
yc Required for the flow of credit and credit programs
yc Îorking capital remains frozen
yc Intuitions become a burden rather than incentive
yc Result of overdue volumes of credit gets thinner
yc Number and amounts of loans outstanding may remain the same or increase

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c ^lexible and imaginative policy towards repayment
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c Principle sum of the loan should ordinarily amortized completely during the term of the loan
c Repayment should be scheduled over sufficiently long period of time to enable the farmer to
erect ordinarily the schedule payment without sacrificing
c Jerm of loan should not be long enough to make the interest cost excessive in relation to the
annual principle amortization payment
c Date of principle and interest payment should coincide with the time at which sales of farm
products are likely to be large

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c Difficulties in assessing -redit worthiness in small scale agricultural units
c ^armers don͛t have no other security than land
c ÿong and tedious delays in investigations and classification of title
c ^inance institutions face with the choice of being owner of large areas of land for
administrating or selling the land at loss
c Small farmer have less tangible insecurity, lower technical capacity, and less ability to present
his case.

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c Jerms and conditions relating to security should be flexible.
c ÿending should be production oriented. E.g.. Jhe size of the loan being related to the outlay
on the crops.
c ÿife insurance policies
c -attle insurance policies
c Ôachinery mortgage
c ·roup ·uaranty Scheme
c In the absence of tangible security Personal Security Income ability as security and moral
security(Japanese experiment)

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c ÿoans are given to the farmers who are not in need and farmers who are in need get less
amount of loan or less because of local leaders
c Due to this cost of the agricultural loan becoming overdue
c Îrong channeling of funds reduces the degree of utilization
c Jhis is decreasing the faith of the common man on banking system

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yc meavy dependence on outside funds.
yc Problem of high level of over dues.
yc migh level of NPAs.
yc Substantial losses.
yc PA-S are too small in size to economical and viable.
yc ·reater benefits to ÿarger landowner.

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yc Rapid Expansion and Diversification.(deterioration in quality of scheme preparation)
yc ÿarge no. of small advances.(time consuming and manpower intensive and high cost
proposition)
yc Reduction of margin available.(rise in establishment expenses, increasing nonperforming
advances, decreasing profitability)
yc Bad recovery position.
yc Decline in credit deposit ratio.(deposits mobilized from rural India to elsewhere)
yc Reduction of loan to small farmers.

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yc RRB to supplement the efforts of the commercial banks and cooperatives.
yc Act as an device which combined the local feel and familiarity with the rural problems.
yc Rural credit is to be provided at lower cost.
yc Staff of RRBs was to be recruited from the neighboring area.
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yc ¦rganizational Problem.
Each RRB is sponsored by -ommercial bank. Jhe central government and state govt.
also contribute to its capital. Jhus there is multiagency control. Jhis has contributed to
lack of conformity of its functions. Also lack of proper monitoring of by sponsor bank,
specific area of operation, lack of proper system and procedures within banks, lack of
adequate staff. ¦rganizational problems compounded by unplanned and unwieldy
growth of banks and branches opened under pressure from ·ovt.
yc Problems of recovery.
yc Ôounting losses leading to Non- iability.
yc Ôanagement Problems.
Since RRBs are district level small institution, the sponsor banks have been deputing
only middle management staff to run them. Such staff finds it difficult to take decision
in new environment. Ôeeting of board of directors are not held regularly and large no.
of official members does not show much interest in the working of banks. Ôultiagency
control creates many problems.

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NABARD is set up as an apex Development Bank
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yc ^or facilitating credit flow for promotion and development of agriculture, small-scale
industries, cottage and village industries, handicrafts and other rural crafts.
yc Jo support all other allied economic activities in rural areas,
 ycJo promote integrated and sustainable rural development and secure prosperity of rural
areas.
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yc policy, planning and operations in the field of credit for agriculture and other economic
activities in rural areas.
yc apex refinancing agency for the institutions providing investment and production credit for
promoting the various developmental activities in rural areas
yc takes measures towards institution building for improving absorptive capacity of the credit
delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of
credit institutions, training of personnel, etc.
yc co-ordinates the rural financing activities of all the institutions engaged in developmental
work at the field level and maintains liaison with ·overnment of India, State
·overnments, @ 
 and other national level institutions concerned with
policy formulation.
yc prepares, on annual basis, rural credit plans for all districts in the country; these plans form
the base for annual credit plans of all rural financial institutions
yc undertakes monitoring and evaluation of projects refinanced by it.
yc promotes research in the fields of rural banking, agriculture and rural development.
yc Acts as regulator for cooperative banks and RRBs

Pasted from <http://www.nabard.org/introduction.asp>