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INTRODUCTION

In the last few year, the Indian economy has emerged as one of the fastest growing economics in the world . however, the vulnerability of the Indian economy with respect to the performance of the agriculture sector despite other microeconomic indicators and sectors gaining in strength is well known. For example, the Indian economy grew at an estimated 3.7 per cent in 2002-03 against 5.6 per cent during 2001-02. this was largely because of the negative growth of 4.4 per cent in the agriculture sector . Many economists and policy- makers increasingly believe that the future growth of the domestics economy , to large extent , will depend on the robust performance of the agriculture and rural sector . The manufacturing

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and service sectors cannot sustain the economy, for growth if the rural sector underperformance. The contribution of the banking and financial sector to the current economics growth of the Indian economy is very significant. This is reflected in the growth in aggregated deposits and advances for scheduled commercial banks , which stood at 15.4 per cent and 27.9 per cent during 2004-2005. however the access of banking service to the rural, agriculture and the common man in general is not as promising. As Mr. V. Leeladhar(deputy governor, RBI, on the occasion of the commemorative lecture at the fed bank hormis memorial foundation, ernakulam) said despite making significant improvement in all the areas relating to financial viability, profitability and competitiveness, there are concerns that banks have not been able to included vast segment of the population, especially the underprivileged sections of the society, into the fold of basis banking services. The focus of Indian banks on financial inclusion i.e. delivery of banking services at an affordable cost of the low-in-come groups has been dismal. In India, the focus of the financial inclusion at present is more or less confined to ensuring agriculture bare minimum access to agriculture saving bank account without frill to all. Having agriculture current account/ saving account on its own, cannot be regarded as an accurate indicators of financial inclusion.

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NEED FOR BANKING IN RURAL AND AGRICULTURE AREAS

The rural population in India suffer from agriculture great deal of indebtedness and is subject to exploitation in the credit market due to high interest rates and the lack of convenient access to credit. Rural household need credit for investing in agriculture and smoothening out seasonal fluctuations in earning. Since cash flows and saving in rural areas for the majority of households are small, rural households typically tend to rely on credit for other consumption needs like education, food, housing , household function, etc. rural household need access to financial institutions that can provide them with credit at lower rates and at reasonable terms than the traditional money-lender and thereby help them avoid debt-traps that are common in rural India.

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Table
Change in farmers reliance on the banking system
Source: statistical tables relating to bank in India

(RBI) Year Farmer Deposits (Rs Crore) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 26211 29825 36583 43341 47433 53611 57442 78881 91009 99812 108233 Farmer Borrowing (Rs Crore) 17835 19493 19669 21334 23813 27448 29442 33094 36466 43420 47430 273 257 251 198 194 188 173 169 162 195 197 Total (Rs Crore)

Post reform, the banking system has mobilized more deposits from farmers and extended less credit to a decline number of farmers, These are reflected in the figure for farmer borrowing and deposits in the last decade as in Table

CHALLENGES FOR RURAL AND AGRICULTURE CREDIT

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Agriculture is agriculture matter of livelihood and food security, with nearly 60 per cent of the population depending on it. At the same time, to withstand the global competition, enhanced productivity and sustainability of the agriculture sector has become imperative. In addition, the majority of the countrys for population, more so marginal and disadvantaged sections of society, stay in villages. Hence, the role of banks in the enhancement of agriculture productivity, expansion of rural credit and poverty eradication assumes high priority. Despite decades of efforts and experimentation in banking, the organized financial sector is still not able to meet the credit gap in the rural sector. The lower levels of per capita income, lack of infrastructure in the rural areas, focus in the urban sector and lack of proper connectivity were the main hindrances for banks to venture into rural areas. Directed lending, cumbersome procedure, delay in sanctioning loans and lack of statutory backing for recoveries were other major impediments to the growth of banking in the rural sectors. The focus in the past has always been to make available cheaper credit. When bank are forced to lend cheap, there has been agriculture tendency for a scramble for credit by the non-target group of beneficiaries. While interest rates of scheduled banks for advances over Rs.2 lakh is completely deregulated, loans up to Rs.2 lakh are subject to maximum of prime lending rate (PLR). In the process of recovering the opportunity lost on income, the banks used to charge a high rate of interest for loans above 2 lakhs. This led to willful defaulting. This has really damaged the credit culture and structure ion the rural sector resulting in shutting down of nonviable outlets of rural branches of commercial banks, co-operative banks and RRBs in last few years.

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NEW AREAS OF CONTRACT FARMING 1. Jatrophe:

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SBI has tied up with growell agro forest Trees Corporation, which agrees to buy Jatrophe from farmers. The bank will finance 1300 farmers from 46 villages covering 5,200acres. 2. Seed plantation: Corporate want one set of farmers to grow hi-grade set of seeds, which are subsequently purchased and sold to another set of farmers for the cultivation of high-grade crops. This trend is catching as in oil seeds, groundnuts, cotton, pulses and vegetables.

3. Farm forest:
The paper industry is banking on this largely due to the restriction on cutting down of trees. SBI has tied up with ballarapur paper industries according to which the farmers grow bamboos and eucalyptus trees for the company. The agreement covers 2000 farmers who are growing the trees in over 5000 acres.

4. White card scheme:

The RBI has introduced such a scheme in which fund are provided to the farmer to buy cows or reconstruct a cowshed, provided the farmer ties up with the milk-collecting agency. The bank has disbursed up to Rs 35 crore under the white card scheme and covers 10,000 farmers. The current contract farming corporates include Himalaya Health Care, Mysore SNC oil company, Sami Labs Pvt. Ltd., Ion Exchange UB, Satram Overseas (Basmati Rice) Amira Foods, Appachi Cotton Company/for Mandm, Cadbury, Godrej, ACE Agrotech, Larsen and Toubro, BECCO, Reliance Group, JK paper, Shakti Sugar, etc.

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FARM CREDIT TO FARMERS

NABARD has launched agriculture pilot project in Tamilnadu to disburse fund through self help groups using the existing post office

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network. The bank hopes to initiate the scheme in three districts of the state. Post office will be used to offer credit to farmers and customer in rural areas. For post office facing agriculture dwinding shares of activity in recent years, this offers agriculture chance to re-invest themselves through productive use of agriculture one lakh plus countrywide network. The NABARD had to face agriculture services of hiccup in launching the scheme. The stumbling block appeared in the postal act itself. Since the act does not allowe post office to take credit risk while post office would act as agents on the fee basis. This is one way of increasing the banking sectors outreach currently restricted to only 43.4 million of the 148 million rural households

PROBLEM FACE BY FARMER

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1. Moneylenders generally lends on the basis of personal security and is prepared to adjust his term to the borrowers needs provided that a sufficient high rate of interest is paid for the loan 2. The rates of interest are high by standard and accounts are manipulated frequently without the knowledge of the borrowers. 3. Loans are available, particularly on the mortgage of crop from traders and their agents. 4. The traders not only charge a high rate of interest, but also pay an unusually low price for the crop. 5. Co-operative societies and commercial banks generally have been relevant to lend for consumptions needs. 6. In short, in spite of the fact that the non-institutions sources of credit indulge in malpractice and are responsible for quite a few serious maladies prevailing in agrarian economy.

SOURCES OF AGRICULTURE CREDIT

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The various sources from which the peasantry procures loans can be into two groups. 1. Non-institutional agencies 2. Institutional agencies Non-institutional agencies a) Local village moneylenders and their agents b) Landlords Institutional agencies a. Co-operative societies b. Commercials bank c. Regional rural bank d. Land development banks e. Farmers services societies f. NABARB, etc.

Sources of agriculture finance There are two ways of agriculture finance Direct finance Indirect finance

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I. Direct finance to farmers for agriculture purpose Short- term loans for raising crops, i.e., crops loans. Institutional additions, advances up to Rs1 lakh to farmers against pledge of agriculture produce for agriculture period not exceeding 6 months, where the farmers were given crops loans for raising for produce provided borrowers draw credit from one bank. Medium and long-term loans A. Purchase of agriculture implements and machinery B. Development of irrigations potential C. Reclamation and land development scheme D. Construction of farm building and structures, etc. E. Construction and running of storage facilities F. Productions and processing hybrid seeds of crops G. Payments of irrigation charges, etc. H. Others types of direct finance to farmers Short-term loans

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Medium-term Long-term loans II. Indirect agriculture finance Indirect agriculture finance include that finance which is not given directly to the beneficiaries for any agriculture activity but indirectly helps such beneficiaries, either by getting finance indirectly through agencies like primary agriculture credit societies (PACS) ,farmers service societies (FSS), large area multipurpose societies(LAMPS) , etc. 1. Activities cover under indirect agriculture finance: (a) Credit for financing distributions of fertilizers, pesticides, seeds, etc. (b) Credit limit up to Rs. 15 lakhs granted for financing distributions of inputs for allied activities, such as cattle feed, poultry feed, etc. 2. Loans to electricity boards for reimbursing the expenditure already incurred by them for providing low tension connections from stepdown point to individual farmers for energizing their wells. 3. Loans to farmers through PACS, FSS and LAMPS. 4. Deposits held by the bank institutional rural infrastrutural

development fund (RIDF) maintained with NABARB

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5. 50 per cent of the amount of refinance granted by the sponsor banks to RRBs. 6. Subscriptions to bonds issued by rural electrification corporation (REC) exclusively for financing pump set energination programme institutional rural and semi- urban areas. 7. Subscriptions to bonds issued by NABARB with the objective of financing exclusively agriculture activities. 8. Others types of indirect finance

AGRICULTURE ADVANCES: SHORT TERM CROP LOANS:

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Till recently, the following schemes were in vogue in the bank to meet shortterm loan requirements of the farmers: Agriculture a) Crop finance: demand loans / annual cash credit b) India green card scheme to meet requirements of working funds for crop inputs , inputs for allied agriculture activities and / or other nonfarm activities.

Agriculture advances interest rate Size of credit Upto Rs.25,000 Over Rs. 25,000 to Rs. 50,000 Over Rs. 50,000 to 2.00 lac Over Rs. 2.00lac to 25.00lac Over Rs. 25.00lac Short term 8.75% P.A 8.75% P.A 10.00% P.A 11.25%P.A Based on credit

Size of credit Upto Rs.25, 000 Upto Rs. 2.00lac Over Rs. 2.00lac to 25.00lac Over Rs. 25.00lac

Term loans 9.25% P.A 10.25% P.A 10.50% P.A Based on credit

Loans to self help groups Direct loans Upto Rs. 2.00lac to 8.00% P.A

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SHGs Direct loans above Rs. 2.00lac to SHGs

9.75% P.A

ROLE OF CREDIT
Credit is the financial stimulant for augmenting production and productivity in agriculture operation and in the process causes rural development in all spheres. Efficient credit delivery system must exit. It was realized around the 60s(when the concept of priority sectors was born) that provision of rural finance in the right dose, in right time and the right segment could accelerate the growth of agriculture and rural development. Hence it was considered

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that institutions credit should be increasingly used as an important vehicles to achieve. Expansion of institutional structure (by creating new institutions such as regional rural banks , etc. ) because co-operative credit system was inadequate. Directed lending Cheaper rate of interest (concessional/subsidiary) Provision of low cost credit in rural areas of their operation compared to commercial bank Credit to weaker sections under special programme.

DIFFERENCE BETWEEN INDUSTRIAL BANK AND AGRICULTURE BANK

Industrial bank provide long-term finance to trade and industry. While the agriculture bank provide long-term finance to farmers and agriculture.

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The main aim of industrial bank is to help in the development of trade and industry. The aim of agriculture bank is to help in the development of land and agriculture. Industrial bank accepts fixed assets as security. Agriculture bank accepts land as security. Industrial bank is given for the promotion of an industrial unit or for expansion, amalgamation, etc. agriculture banks are given for purchase of machinery, constructions of wells, irrigation, etc.

It operates in the urban areas. it operate in the rural areas.

Agriculture bank charge low interest rate on agriculture advances as compared to industrial bank .

KISAN CREDIT CARD

This scheme was introduced by NABARB institutional

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1988-99 to help farmers to get credit from banks. Important feature of Kisan Credit Card are given as follows. Farmers eligible for productions credit of Rs. 5000 or more are eligible for issue of Kisan Credit Card Eligible farmers are to be provided with agriculture Kisan Credit Card and pass book or card-cum pass- book. Provision of revolving cash credit facility involving any number of withdrawal and repayments within the limit. Entire productions credit needs for full year plus ancillary activities releted to crops productions considered while fixing limit. Institutional due course, all activities and non- farm credit needs will also be covereds. Limit to be fixing on the basis of operational land holding cropping pattern and scale of finance Card valid for 3 years subject to annual review. Each withdrawal to be repaid within 12 months. As incentive for good performance, credit limit could be enhanced to take care of increase institutional cost, change institutional cropping pattern etc. Security, margin, rate of interest as per RBI norms

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KISAN CREDIT CARD

A unique scheme for farmers under which they can draw loan amount in cash for crop production as well as domestic needs from the card issuing branch within the sanctioned limit. The details are as under:
1.

Eligibility : Farmers having agricultural land & Pattaholders (i.e. land allotees). Card is also issued in joint names where land is owned jointly. Loan Limit : Limit is fixed to meet the cost of cultivation of crops based on land holding and also for domestic needs. There is no minimum or maximum loan limit. Card : A common card named Kisan Credit-cum-Kisan Shakti Card is issued to the farmers on fixation of loan limit.

2.

3.

4. Rate of interest :

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i) Upto Rs.50,000/ii) Above Rs.50,000/- & upto Rs.2.00 lacs iii) Above Rs.2.00 lacs & upto Rs.5.00 lacs iv) Above Rs.5.00 lacs

8.50% (fixed) 2% below PLR (i.e 11.25% p.a) 0.50% below PLR (i.e 12.75% p.a) 0.50% above PLR (i.e 13.75% p.a )

5. Security :

a. b. i. ii.

For loans upto Rs.50,000/- : For loans above Rs.50,000/-: Hypothecation of crops & movable assets. Mortgage of land or charge on land as per Agricultural Credit Operation Act of the states concerned. or

Hypothecation of crops & movable assets.

Charge/ lien over liquid securities in the form of Fixed Deposit/ NSC/ Kisan

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Vikash Patra etc. providing full cover to the limit granted.

6. Repayment :

i.

The aggregate credit into the KCC account during the 12 months period should at least be equal to the maximum outstanding in the account And

ii.

No drawal in the account shall remain outstanding for more than 12 months

1. Validity : Card is valid for 3 years subject to annual

review.
2. Features :

No admission/membership fee is levied by the Bank. A pass book is issued along with card to record transactions.

Cardholders are covered under Personal Accident Insurance Scheme with sum assured for Rs.50,000/against death/permanent total disability/loss of two limbs/eyes or one limb & one eye and Rs.25,000/- for

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loss of one limb/eye on payment of premium of Rs.5/p.a. by the cardholder.

Specified crops in notified areas grown under Kisan Credit Card is covered under Rashtriya Krishi Bima Yojna subject to notification issued by the State Government concerned.
1

Kisan Shakti Yojana

A new scheme designed & launched by the Bank on 24.04.2004 (Banks 140th Establishment Day), envisages to provide farm investment credits as well as personal/domestic loans including repayment of debt to money lenders. The details are as under:
1.

Eligibility : All existing Kisan Credit Card holders and all other farmers who are eligible for Kisan Credit Cards. Loan Limit : The permissible loan limit will be 50% of the value of land OR 5 times of net Farm Income whichever is lower, LESS outstanding amount, if

2.

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any, in Agril. Term Loan account(s) subject to maximum Rs.5.00 lacs.Maximum 50% of the loan limit may be utilised for personal/domestic purposes.
3.

Issuance of Card : After fixation of the loan limit, a Kisan Credit cum Kisan Shakti Card along with a loan pass book is issued to the borrowers. Margin : No margin is required.

4.

5. Rate of interest :

i) Upto Rs.50,000/ii) Above Rs.50,000/- & upto Rs.2.00 lacs iii) Above Rs.2.00lacs & upto Rs.5.00lacs 6. Security :
a.

8.50% (fixed) 1% below PLR (i.e 10.00% p.a) 0.25% below PLR (i.e 10.75% p.a)

For aggregate limit under Kisan Credit Card,

Kisan Shakti Yojana & existing Agril. Term Loan upto Rs.50,000/-: Hypothecation of farm as well as household assets to be purchased out of the loan amount.
b.

For aggregate limit under Kisan Credit Card,

Kisan Shakti Yojana & existing Agril. Term Loan above Rs.50,000/-:

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i.

Hypothecation of farm as well as household assets to be purchased out of the loan amount.

ii.

Creation of charge/Mortgage of lands.

7. Repayment Period : 7 years. 8. Mode of Disbursement : Loan amount is credited to

Savings Bank account of the borrower maintained with the financing branch. A maximum period of one year will be allowed to the borrowers to avail the sanctioned loan under the scheme.
9. Restoration of Term Loan limit : The borrowers under the

scheme are allowed to deposit surplus fund in the loan accounts and to draw funds within the sanctioned limit to meet their urgent requirements after adjustment of loan instalment(s) & interest due, if any, upto the date of drawing.
10. Special features of the scheme :

Farmers are free to utilize the

loan under the scheme at their own choice/ options/discretion.

No margin is required.

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Granting of loan under the

scheme is simple and hassle free.

50% of the loan amount may

be utilized for personal/domestic purposes including repayment of debt to money lenders.

Facility of restoration of Term

Loan limit is available on advance repayment of loans.

Kisan ATM
As technology is spreading its wings across the length and breadth of the country, Agriculture need was felt by bank to provide its customer in rural areas with an ATM Which is easy to operate, does not warrant high level of literacy, remembering PINS and can read out instructions on screen to get cash or services. As agriculture solutions to this bank plans to deploy kisan ATM in rural arrears to serve the customers remote rural branches. The first such

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ATM is installed at sivagangai branch Tamilnadu and inaugurated by the Honble finance Shri P. chidambaram.

Kisan ATM are users friendly cash dispensing machine, which are voice enabled and work on bio-metric authentcations like finger print verifications. Kisan ATM can communicate with the users in local language . To make the operations easier kisan ATMs are provided with touch screen monitor. The screen options glow as the instructions are read out to the customer and the customer needs only to touch the options desired by him. The ATM also have dip-type card reader and hence ensure that the machine never capture the card inserted by the customer. All the above features make these ATMs so easy and convenient that people with practically no exposure to technology can use it comfortably. Kisan ATM cards Banks has issued agriculture new series of cards for the kisan ATMs. The cards have an attractive design.

ATM function The ATM will support the following functions: Cash withdrawal Balance enquiry

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ATM operation Kisan ATM are meant to bring in 24*7 banking facilities with the state of art technology, which was so far available only to metro and urban population now within the reach of rural masses and thus providing an much needed fillip for financial inclusion.

FREQUENTLY ASKED QUESTION/ AGRICULTURE ADVANCES

1. What is Kisan Credit Card Scheme? Scheme is in the nature of revolving cash credit. 2. What are the extra benefit/facilities extended through KCC as compared to usuaql crop loan? The credit needs of the farmer for entire year with his consumption needs are taken into accounts at his option and as per his needs within the limit. 3. Is it working satisfactory? The scheme is working satisfactory, we have issued 3,23.000 Kisan Credit Card so far.

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4. What are the benefit under PAIS and amount of premium to be borne by a farmer? The risk covered under PAIS are as under: Death due to accident-claim at Rs 50,000 Permanent total disability Rs50,000 Loss of two limbs or two eyes or One limbs and one eye Rs50,000 Loss of one limbs or one eyes Rs25,000 The farmer has to pay Rs5/-per annum whereas the bank bears Rs10/-p. 5. PAIS is covering KCC holders. Is there any other scheme to cover all other farmers ? SBI life scheme cover other farmer, where yearly premium is Rs480/and amount of claim of Rs2.00lacs for death due to accident are covered, for Rs50,000claim amount a premium of Rs 6. Is there any other scheme like KCC to take care of farmers investment credit requirements? Kisan Star Card scheme where farmer can be sanctioned a maximum loan upto Rs3.00lacs within. 7. What is the Kisan star Card Scheme and facilities offered to farmers? Kisan star card scheme which is a hassle free scheme were farmers can purchase agri Implements including his consumption requirement. Maximum number of accounts permitted are 50.

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8. What are the post harvest scheme available to avoid distress sale? Produce market loan for constructing rural godowns, cold storage, smaller size farm receipts are also given. 9. How rural godowns scheme beneficial to farmers? rural godowns scheme. The NABARD is giving subsidy upto25%. The farmer can substitute to farmer can keep his own produce in the godowns and avail produce market loan. 10.What are the margin for agriculture loan? No margin upto Rs 10,000 For crop loans if scle of finance are determined taking into account margin. Then no margin. For term loans above Rs 10,000/-15%to25% depending upon the quantum of loans 11.Whether bank is giving collateral free loan to farmer, if so to what extent? Upto Rs25,000/-No collateral security is asked, above Rs 25,000equitable mortgage of farm land not possible. For sugarcane growers with tie up arrangements with sugar factories upto Rs 1.00lacs no collateral 12.Whether bank are giving relief to drought-affected people, if so what are they?

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The existing short term loans are converted into term loan with suitable instalments Fresh crop loan are giving to rejuvenate existing crops or take fresh crops. Term loan instalments are postponed. Loan are given for purchase of droght animals, milch animals. Loan are given for repairs of farm machinery, seeds, wells etc. 13.What type of transportation loan are available from the bank to the farmers? Loan are given for purchase of tractors, power tiller, trailer, harvesters, two wheelers ,,bullock. 14.What type of minor irrigation loan are available to farmers? 1. What are the interest rate to agriculture loans under low interest rate regime? 2. Bank is giving loans to farmers upto Rs25,000below PLR and uptoRs2.00lacs at PLR rates that no farmers. Will have to pay more than 2%above PLR for any type of loans. 15.Are banks giving produce marketing loans? Yes, the produce marketing loans are given to avoid distress sale of farm produce 16.What are the benefit to the farmers?

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The crop loan borrower are given loans t\at the same interest rate at which he was given crop loan

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (NABARD)

In the light of recommendations of the Committee to Review Arrangement for institutional Credit for Agriculture and Rural Development the Government of India set-up the National Bank of Agriculture and Rural Development (NABAD) on July 10,1982, to act as agency for promoting integrated rural development and to provide all sorts of production and investment credit for agriculture and rural development. Functions of the NABARD

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The NABARD id essentially a development bank for promoting agricultural and rural development. Its main function is provide refinance credit to the state co-operative Banks. The Regional Rural Banks and other financial institutions as may be approved by reserve Bank. The NABARD provides refinance assistance to these institutions for grinding loans for the following purpose: 1. For agricultural operations: 2. For marketing of agricultural produce. 3. For marketing and distribution of agricultural inputs, such as improved seeds, fertilizers, pesticides etc: 4. For allied activities important for agricultural and rural

development: For production and marketing activities for rural artisans, small scale industries in the tiny and decentralized sector, village and cottage industries, handicrafts and other rural craft. The NABARD may grant refinance credit to the SCBs, RRBs etc, against the security of stock and securities other than immovable property and Promissory Notes supported by title to the goods. In short, the main function of the NABARD is to provide by way of refinance, credit to the rural sector for the promotion of agriculture, small scale industrial units, cottage and village industries, and handicraft other rural crafts and allied productive in the rural Ares.

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This is essential for the promotion of integrated rural development and attainment of rural prosperity. The NABARD is empowered to give short-term as well long-term loans in a composite form. It can also make loans make loans and advances to state Governments for maximum period of 20 years in order to enable them to subscribe directly or indirectly to the share capital of Co-operative credit societies.

The NABARD can also provide medium-term loans (for a period between 1 years and 7 years) to the SCBs and RRBs for agricultural and rural development. Other miscellaneous functions of the NABARD include: (1) Inspections of the RRBs and the co operative societies (other than primary cooperatives societies0, without any prejudice to the authority of the reserve Bank in this regard. (2) The application for opening a branch by RRB or cooperative society (other than a primary Co-operative

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society) to be forwarded to the Reserve Bank through the NABARD. (3) When the returns are submitted by the RRBs and cooperatives societies (other than primary Co-operative societies) to the Reserve Bank, Copies of such returns should also be furnished to the NABARD. (4) The NABARD is empowered to obtain any information or statement form the RRBs and the co-operative societies (other than primary Co-operatives societies) (5) The NABARD has to undertake research and training programmers The R & D Department of the NABARD

should promote research in allied aspects and problems of agricultural and rural development of the country. The NABARD is authorized to maintain a R & D Fund for this purpose out of profits earned by it every year. The NABARD has to provide comprehensive training

programmers to its own staff as well as to the staff of SCBs, RRBs, etc the training is to be meant for upgrading the technical skills and competence of the staff. (6) The NABARD has to take over from the reserve Bank, the responsibility of co-ordinating with the Government of India, the planning Commission, state Government and

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other agencies concerned with the development of rural industrialization, and effectuating various policies and programmer meant for providing finance to the rural industries. Organization and structure of NABARD The NABARD is managed by b Board of Directors, consisting of Chairman managing Director, 2 directors from amongst experts in rural economics, rural development, etc, 3 directors with experience in the working of co-operative banks, 3 directors from out of the directors of the RBI, 3

directors from amongst the official of government of India and 2 directors from among the officials of Government of India and 2 directors from among the officials of state Government. Government. Working of NABARD During 1984-85,NABARD mobilized net resources amounting During 1984-85, NABARD sanctioned Rs. 1,233 crores to SCBs for financing seasonal agricultural operations (i.e., short-term credit). It also provided medium-term and long-term credit facilities for the They are appointed by the central

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benefit of the agricultural sector. During 1984-85, its total outstanding amounted to Rs.1,018 crores and limits sanctioned amounted to Rs. 1,688 crores. The NABARD also sought to help the development and promotion of agricultural investments in the less developed and/or underbanked states: In these areas, it distributed Rs. 455 crores, amounting to nearly 42 per cent of its total disbursements in 1984-85. During 1986-87 (July-June), the NABARD mobilized Rs. 887 crores as its aggregate net resources for providing rural credit. The NABARD also successfully negotiated with the World Bank regarding the NABARD Credit Project-I (NCP-I) and obtained a loan assistance of US $ 375 million from the World Bank for the project

for a period of 3 years from July 1, 1986. In fact, the NABARD has been associated with the implementation of 42 projects with external aid from the World Bank Group and other International Aid Agencies, including bilateral assistance. On June 1987, US $ 2,622.1 million of total credit for these projects have been routed through the NABARD. During 1989-90, the NABARD sanctioned short-term credit limits aggregating to Rs. 2,807 crores for financing seasonal agricultural operations. Its medium-term credit outstanding amounts to Rs. 19 crores at end- December 1989.

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Recently, the NABARD has launched a 15-Point Programme for the development of 30 Primary Agricultural Societies (PACs) and all Large-size Adivasi Multi-Purpose Societies (LAMPS) in 15 selected pilot project districts. In 1987, the NABARD has also commenced a 10-point Action Programme for rehabilitation of weak primary land development banks and branches of state land development banks. The Action Programme is concerned with: (1) investigation of overdues; (ii) strengthening of organisation and management; (iii) review of loan policies and procedures; and (iv) strengthening of the resources of the LDBs. During 1986-87 (July-June), the NABARD provided refinance credit under the IRDP amounting to Rs. 379 crores.

Besides providing credit for agricultural and allied activities, the NABARD also renders financial help to the non-agricultural sector with the aim of promoting integrated rural development. It provides financial assistance to small scale industries, cottage and village industries, industrial co-operative societies etc., for meeting their working capital and block capital requirements. It also provides medium-term finance for meeting their investment capital needs. The NABARD has adopted liberal policies in this regard. During 1986-87, the NABARD had inspected 178 CCBs, 86 RRBs, 7 SLDBs and 30 other institutions.

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During 1986-87, the NABARD approved and assisted 5 research proposals and 17 seminars and several conferences/symposia from its R & D Fund, and spent Rs. 33.41 lakhs for these purposes. Recently in 1988 onwards, the NABARD introduced certain policy changes and schemes regarding farm short-term credit: (i) Financing of seasonal agricultural operations; (ii) the scheme of fresh finance; (iii) National Oilseeds Development Programme (NODP); and (iv) Product Marketing Loan Scheme. Today, thus, the NABARD has become a kingpin of rural development. During 1989-90, the NABARDs refinance assistance was of the order of Rs. 549 crores. The NABARD has been giving uniform scales for all States/Union Territories for financing working capital and under the refinance scheme for handlooms and powerlooms in the co-operative sector. The responsibility of administering the Credit Authorisation Scheme for co-operative banks rests with the NABARD.

During 1995-96, the total amount of refinance disbursements by NABARD increased by less than 2 per cent to Rs. 3,064 crore from that of the previous year. During 1995-96 a Rural Infrastructural Development Fund (RIDF) with an initial corpus of Rs. 2,000 crore was created within NABARD for facilitating rural infrastructure projects.

ROLE OF BANK IN AGRICULTURE -40 -

During 1996-97, there was a turn around in the resource position of the ABARD. It increased to Rs. 2,963 in 1996-97 as against Rs. 1,617 crore in the previous year. The NABARDs and state governments amounted to Rs. 3,881.15 in Policy Initiatives by NABARD Major thrust of NABARD during the year was on strengthening the rural credit delivery system to support the growing credit needs of the agricultural and rural sectors. Some of the important policy initiatives taken by NABARD during the 1998-99 inc1ude (i) Introduction of Kisan Credit Cards, (ii) augmenting flow of credit in1l areas served by weaker cooperative banks, (iii) accelerating flow of credit to the handloom weavers through financing State Handloom Development Corporations, (iv) stimulating investment in minor irrigation and wasteland development, lowering of interest rates on refinance, and (vi) giving special thrust on micro credit development. NABARD also liberalized the terms and conditions for providing long term loans to State Governments for 1996-97.

contributing the share capital of co-operative credit institutions. The policy initiatives relating to the non-farm sector during the year included (i) enhancing the ceiling under automatic refinance facility (ARF) and integrated loan scheme(ILS), (ii) liberalized the small road transport operators (SORT) scheme and (iii) enlarging the scope of soft loan assistance for margin money scheme.

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(a) Kisan Credit Card Scheme

Pursuant to the announcement made in the Union Budget for 199899. NABARD formulated a model Kisan Credit Card scheme in consultation with the Reserve Bank and major banks. The scheme aimed at providing ready credit facilities to the farmers covering their entire production credit needs for the full year plus an amount for ancillary activities related to crop production. The model scheme was circulated by the Reserve Bank to commercial banks and by NABARD to co-operative banks and RRBs in August 1998. RRBs and co-operative banks together issued 1.61 lakh cards covering credit facility of Rs.836.8 crore during the year 1998-99. In addition. NABARD introduced a system of Flexi credit on a pilot basis in three districts of Kerala to take care of the unique needs of the farmers in the State who raise a wide mix of crops in small holdings around the)T homes together with rearing of livestock. (b) Increase in Quantity of P-finance

In order to augment the flow of credit at the ground-level, the ceiling for sanction of short-term credit limits by NABARD was enhanced for different categories (based on audit classification) of CCBs. While the policy of stipulating minimum levels of involvement (ML!) of own resources by StCBs and CCBs in short-term agricultural lending was

ROLE OF BANK IN AGRICULTURE -42 -

continued, certain relaxations in the existing norms were made for those banks which had hardly any eligibility for concessional refinance from NABARD. The stipulation of minimum coverage of small and marginal farmers was modified with a view to increasing credit flow to sir all and marginal farmers. Sir nihalh. higher credit limits were provided to CCBs operating in nihal areas, with due weightage for loans provided for the consumption reeds of tribals. Efforts have also been made to increase the flow of credit to Bihar. Jammu and Kashmir and the North-Eastern Region. Considering the importance attached to the handloom sector, NABARD continue to lay special emphasis on meeting the credit requirements of 94 thrust districts spread over 23 States identified by the Government of India for special development. With a view to supplementing the efforts of Handloom Development Corporations set up by some of the State Governments. NABARD in consultation with the Reserve Bank, has decided to extend refinance support to commercial banks and StCBs in respect of their working capital limits to these Corporations. In order to channelise larger flow of credit to priority sector under

thrust area programmes, an upward revision in the quantum of refinance was made, inter alia, for dry land and wasteland development and minor p4ation schemes: C)Micro-Finance Innovations

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NABARDs efforts towards increasing the access of the rural poorformal banking services through promotion and credit-linking If Help Groups (SHGs) of the rural poor, and other micro-finance initiatives gathered momentum during the last two years. As may as 18,678 additional SHGs were linked to banks as against the target of linking 10,000 SHGs as envisaged in the Union Budget, 1998-99. The amount of bank loati disbursed through SHGs amounted to Rs.33.3 crore. NABARD continued to provide 100 per cent refinance to banks at the rate of interest of .5 per cent per annum. Refinance assistance at Rs.30.7 crore under the program during 1998-99 was much higher than that of Rs. 10.7 crore during 1997-98. During the year, 52 new banks joined the linkage programme. In all, 2021 banks comprising 38 commercial banks, 129 RRBs and 35 co-operative banks) have participated in the programme covering 24 States and Union Territories. As many as 550 non-government organizations (NCOs) are participated in the programme. Bank yet to tap huge unmet credit card demand

geographical distribution

ANNEXURE
Bank yet to Tap huge unmet credit card demand

12%

3% rurul

12% 61% 12%

super metros other urban class 1 town other metro

ROLE OF BANK IN AGRICULTURE -44 income distribution

9% 18% 1% 72%

<Rs1lakh >Rs10 lakh Rs 1lakh-Rs 2.5 lakh Rs2.5 lakh-Rs10 lakhj

call it Indias impending boom. Three time as many people who have credit cards now wants to acquire them over the next 12 month. And people who earn less than 1lakh a year account almost three-quarters of the demand for new cards. According to survey there are 321 million paid workers in India. While 17 million people say they want to get a new credit card in the next year

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RECOMMENDATION 1. Establishment of storage facilities by way of godowns and cold storage can also help the farms in getting better price realizations for agriculture produce. 2. Adoptions of flexible delivery system a) Union governments and central bank authorities are not satisfied with bank effort in lending money to farmers for agriculture developments. Even now the village money lender still thrives because of the flexibility of credit that he offers. He works as the ATM for the villager. b) We needs rural branches, which can offers flexible working hours to suit the requirements of the farmers. 3. Future trading through commodity exchange a) The farmers can protect himself from the price change by contracting to sell the expected produce in the future market at agriculture specified price at the time. The resources are committed for production. b) The farmers may not understand derivatives and concept of margins and mark-to-market would be cumbersome to graps. Here banks, could play agriculture lending role by aggregating the produce for farmers and hedging through their central office

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treasuries. Suitable change in the banking regulations Act are requirements again to enable this scene.

4. Improved competitiveness, high quality and high safety farm. Products and co-operative marketing scheme are essentials so that the small produce will be benefited more credit instalments should not merely focus on primary productions but also on augmentation of the entire value chain such as food processing or value, additions for commercial crops.

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CONCLUSION
Bank must strengthen their credit delivery system for rural India. Fortunately, over the last few years, India has been paying special attention to rural sector to achieve major growth in agriculture and rural sectors the massive target of over three-fold increase in credit flow to agriculture during the tenth plan period speaks volumes of the serious. I also conclude that rapidly falling interest rate have made loans affordable to more people, which means theres still plenty room left for growth.

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BIBLIOGRAPHY
Website
1. www.State Bank of Hyderabad.com 2. www.Union Bank of India.com 3. www.SBI.com

Magazines

Journal of the institute of charted accountant

Newspaper

Mint
Books

The Indian banking system