RURAL BANKS

MEANING

•Banks entrenched to ensure sufficient

institutional credit for agriculture and
other rural sectors.
•mobilize financial resources from rural
/ semi-urban areas ,grant loans small
farmers
 Cooperative movement (Focus on
7th Plan Strategy)
• Cooperative moment currently the largest in the
world with a total of 316 thousand cooperatives
in its kitty along with a working capital of
Rs38000 crores
• Aim to help the weaker sections: in the initial
years loan advanced increased to
709crores(22% inc), while there was a 75%
increase in the sections.
• Distribution Of fertilizers
• Distribution of Cooperative Goods
Structure Of Movement

State Level Apex Banks

DCCB’s

PACS

DCCB’s: District Cooperative Central Banks

PACS: Primary Agricultural Credit Societies
STRUCTURAL AND FUNCTIONAL
DEFICIENCIES IN THE
MOVEMENT
• Lop sided Cooperative Development
• One Sided Intervention
• Credit (Rationing)
• Neglecting Small Farmers
• Difficulty In getting Long Term Loans
• Poor Loan Discipline
 RRB INDIA(1969 to Present)
The 1st Phase 1969

• 1969: nationalization of India’s 14 major commercial banks

green revolution’ in rural India
Objective: social and development banking
• To provide banking services in previously Unbanked rural
areas
• To provide substantial credit to specific activities, including
agriculture and cottage industries;
• To provide credit to certain disadvantaged groups
 The 2nd Phase 1975
 Entrenchment of Regional Rural Banks (RRBs)
promoted by the
Government of India,
State governments and
Commercial banks
 Integrated Rural Development Programme:to create
long-term income-bearing assets in the hands of asset-
poor rural households.

 Consolidation of the institutional infrastructure of rural

banking
 The 3rd Phase 1991 to Current

 Liberalization
 Intensive credit to priority sectors
 The period after nationalization was
characterized by an expansion of bank
credit to rural areas
 RRB:HOW far HAVE THEY BEEN
HELPFUL.
THE METHODOLOGY
Study between two villages: Zullakallu and
Savalyapuram
Beneficiaries or non-beneficiaries are stated as :
1)Small farmers 2)Marginal farmers
3)Agricultural labourers 4)Artisans 5) Others
 Out of a sample of 50(25 from each village) that
intended to obtain loans, following were the
beneficiaries
S.No Particulars No of beneficiaries
1 Seasonal Agricultural Operations 14
2 Sinking of new wells 2
3 Small Business 5
4 Cobblers 4
5 Pottery Making 5
Beneficiaries 20
Non-Beneficiaries 30
Total 50
 ANALYSIS
• Demand for Credit: Agricultural workers mainly
determined by the land held
It was Observed that the major portion
of land was occupied by small farmers(39%)

• Operational Costs are higher in Zullakallu as compared

to Savalyapuram
• While analysing the capital expenditure it was observed
that a paltry amount was spent on land development,
while a major investment was on tractors etc.
AVAILABILITY OF FINANCE
 RESULTS
• While both the villages obtained loans from both institutional and
non institutional sources, the share in institutional credit is
relatively higher.
• Among the institutional agencies, RRBs financed a lions share,
while cooperatives came second. Government finance is negligible
• Among non- institutional agencies, money lenders are a major
source, because these loans are unsecured.
• The share of money lenders in Savalyapuram is less than
Zullakallu because of better role played by RRBs in the former.
• Demand for farm expenses is higher than the supply thus creating
CREDIT GAP of Rs.0.78lacs filled by owned funds.
 Perspectives and Challenges
Initially though the functions of RRB’s were
limited to only Collection of deposits and
providing farm land things have changed
lately.
With the introduction of IRDP, RRB started
extending loans to artisans, traders, weaker
sections liberally.
The two banks in the villages have not been able
to satisfy the credit needs of villagers
completely.
 NABARD

•Apex Development Bank with a mandate for facilitating credit flow

for promotion and development of agriculture, small-scale industries,

•Also has the mandate to support all other allied economic activities
in rural areas, promote integrated and sustainable rural development
and secure prosperity of rural areas
 FUNCTIONS OF NABARD (basic)
 
• Framing policy and guidelines for rural financial
institutions.
• Providing credit facilities to issuing organizations.
• Preparation of potential-linked credit plans annually for
all districts for identification of credit potential.
• Monitoring the flow of ground level rural credit.
• Providing refinance to lending institutions in rural areas  
• Bringing about or promoting institutional development
and   
• Evaluating, monitoring and inspecting the client banks