Agricultural Finance

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Agricultural Finance

• Department of Economics
• Bapatla College of Arts Science

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Agricultural Finance
Introduction Constraints Structure NABARD
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CREDIT NEEDS OF FARMERS
ON THE BASIS OF TIME
ON THE BASIS OF PURPOSE
PRODUCTIVE agro production CONSUMPTION for
the period between
Marketing harvesting UNPRODUCTIVE customs,
traditions, rituals
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
ON THE BASIS OF SOURCES

• INSTITUTIONAL
• NON-INSTITUTIONAL

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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 00-01
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

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INSTITUTIONAL CREDIT IN INDIAN AGRICULTURE
STRUCTURE OF INSTITUTIONAL CREDIT
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FLOW OF INSTITUTIONAL CREDIT TO AGRICULTURE
PERCENTAGE SHARE
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
Source RBI bulletin, NOV 2004 economic survey
2009-10
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COOPERATIVES RURAL CREDIT AT LOWER COST
Coverage by 2005, 97 villages with almost 900
lakh members
STRUCTURE
SHORT MEDIUM TERM
LONG TERM
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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

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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

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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
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NAME OF RRB
SPONSORED BY
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
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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

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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