divyeshpatel
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Hi Friends,
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I am Divyesh from Mumbai
doing BMS from Chinai College.
Whts up
I am Divyesh from Mumbai
doing BMS from Chinai College.
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divyeshpatel
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MEDIA
INTRODUCTION TO MEDIA
Media: Messages that are distributed through the technologies, principally text in books, study guides and computer networks; sound in audio-tapes and broadcast: pictures in video-tapes and broadcast; text, sound and/or pictures in a teleconference. Mass media is a term used to denote, as a class, that section of the media specifically conceived and designed to reach a very large audience (typically at least as large as the whole population of a nation state). It was coined in the 1920s with the advent of nationwide radio networks and of mass-circulation newspapers and magazines. The mass-media audience has been viewed by some commentators as forming a mass society with special characteristics, notably atomization or lack of social connections, which render it especially susceptible to the influence of modern mass-media techniques such as advertising and propaganda. It is also gaining popularity in the blogosphere when referring to the mainstream media. Media (the plural of medium) is a truncation of the term media of communication, referring to those organized means of dissemination of fact, opinion, entertainment, and other information, such as newspapers, magazines, cinema films, radio, television, the World Wide Web, billboards, books, Compact discs, DVDs, videocassettes, computer games and other forms of publishing. Although writers currently change in their preference for using media in the singular ("the media is...") or the plural ("the media are..."), the former will still incur criticism in some situations. (Please see data for a similar example.) Academic programs for the study of mass media are usually referred to as mass communication programs. During the 20th century, the advent of mass media was driven by technology that allowed the massive duplication of material at a low price. Physical duplication technologies such as printing, record pressing and film duplication allowed the duplication of books, newspapers and movies at low prices to huge audiences. Television and radio allowed the electronic duplication of content for the first time.
Mass media had the economics of linear replication: a single work could make money proportional to the number of copies sold, and as volumes went up, units costs went down, increasing profit margins further. Vast fortunes were to be made in mass media.
TYPES OF MEDIA
In Section 4 an object was defined as basic element of a MUSLI language. It contains its descriptions in various media types. Let us have a closer look at what media types an object can contain. Media types can be divided into simple and multimedia types.
Simple Types
Text: the text describes the object in natural language. This may be by using a single word or phrase to a more complete description with examples. The advantage of this media type is that it can easily be indexed and searched. The drawback is of course that text is written in a language and thus not multi-lingual. An object may store the description in different languages though.
Symbol: a symbol is a visual entity. Symbols are a central part of the language. The symbol itself does not hold any information about the object and thus has to be memorized. This task becomes easier if the symbol is an icon or symbols are designed according to basic underlying rules and concepts. Shows one concept, which was introduced by Maurer and Lennon. Symbols are the visual counterpart to words in written natural languages.
Graphic: the graphic is closely related to the symbol. However, there is a significant difference. The symbol represents the abstract idea, whereas a graphic shows one concrete entity. It is like the difference between the word ``chair'' and a photo of a particular chair. Whereas the word includes everything from a comfortable chair to a wooden stool, the photo depicts only one example of a chair. If the photo is chosen carefully, the user should be able to grasp the abstract idea of the entity depicted. There might be several graphics stored in an object, which makes it easier to grasp the meaning of the object by finding the common features of the graphics
.
Video and animation: Just as an object might be described by a whole story (in text or in MUSLI), it may be realized as animation or video too. Again, a video shows only one concrete example whereas a MUSLI movie can be very abstract.
Speech: speech is spoken language and the aural equivalent to text. Speech is not multi-lingual but can be stored in several languages in the object. Speech has the advantage that one does not need to be able to read or write. Furthermore, the intonation and emotions of the speaker provide additional information and generate a more vivid experience than text. Speech is one of the most natural forms to exchange information. Its disadvantage is that it cannot be as easily indexed and searched for - maybe this will change in the future.
Sound icons and symbols: icons and symbols may be in aural form too. Culture independent sound icons are rare because to associate a sound with an object or action we have to have experienced that sound before. Sound symbols have to be memorized but are easily recalled in a given context. For example, the Star Trek sound of sliding doors could be used for the action to open something. Once the meaning is associated with the sound symbol, information can be passed on very efficiently. Other examples would be the ticking of a clock or the wind blowing.
Music: music is a powerful media type to describe emotions and feelings. However, its intended meaning might not be obvious. Thus, music should be considered a supplement and not the primary description of an object. Furthermore, music might provoke different feelings in different contexts.
Meta information: Meta information is usually given in text form and can be provided about any of the above media types. Meta information might be implemented as simple keywords or can be used to provide a visual and aural search utility to find relationships and similarities. Meta information might be accessible by the user or can be hidden and automatically generated and updated. Furthermore, Meta information might hold unrelated data about the object such as author, date of creation, copyright information and so on.
Electronic media and print media include:
Broadcasting, in the narrow sense, for radio and television.
Various types of discs or tape. In the 20th century, these were mainly used for music. Video and computer uses followed.
Film, most often used for entertainment, but also for documentaries.
Internet, which has many uses and presents both opportunities and challenges. Blogs are unique to the Internet.
Publishing, in the narrow sense, meaning on paper, mainly via books, magazines, and newspapers. Press release, house journals, notice boards, posters, hoardings, corporate or institutional advertisement.
Personal- press conference, media interview, meeting, exhibition.
Sponsorships- sports, cultural programs, educational programs, community service
IMPORTANCE OF MEDIA
In today’s image related world corporate-media have turned pro-active and can no longer afford to remain reactive. One cannot think of issuing denials and seeking distances from the media, print or electronics. Fortunately for all corporate there is a growing perception that if they were not transparent and straight forward the gap would be filled by inaccurate reporting and misinformation. There is one old saying ( CAN RUN BUT CAN,T HIDE)
These days company are managing the flow of information and at time even influence the media corporate had come to realize that if the channel of information is not open, many new stories would break, rumors go around and investigate journalism would uncover the information that is normally not accessible.
The stock scam and the Enron case are the classic example here the media played the important role .media constitute one of the most important publics for the corporate communicators. As far as corporate communicators are concerned historically, however the print media is main media in India. The pres continues to be the most prevalent media to communicate the policies of the corporate, function and achievement and build the image of organization .
The non pres media like T.V, radio, cinema etc has gained the momentum and reached the corporate considerably. Obliviously the emphasis will e use to judicious mix of the press and non press media so that the communication process become more effective.
Whatever media the corporate use, the center focus of them to communicate wit the media person and through them with the public, infact they are the people towards whom the most effective media relation programmes are to be directed
INTRODUCTION TO MEDIA
Media: Messages that are distributed through the technologies, principally text in books, study guides and computer networks; sound in audio-tapes and broadcast: pictures in video-tapes and broadcast; text, sound and/or pictures in a teleconference. Mass media is a term used to denote, as a class, that section of the media specifically conceived and designed to reach a very large audience (typically at least as large as the whole population of a nation state). It was coined in the 1920s with the advent of nationwide radio networks and of mass-circulation newspapers and magazines. The mass-media audience has been viewed by some commentators as forming a mass society with special characteristics, notably atomization or lack of social connections, which render it especially susceptible to the influence of modern mass-media techniques such as advertising and propaganda. It is also gaining popularity in the blogosphere when referring to the mainstream media. Media (the plural of medium) is a truncation of the term media of communication, referring to those organized means of dissemination of fact, opinion, entertainment, and other information, such as newspapers, magazines, cinema films, radio, television, the World Wide Web, billboards, books, Compact discs, DVDs, videocassettes, computer games and other forms of publishing. Although writers currently change in their preference for using media in the singular ("the media is...") or the plural ("the media are..."), the former will still incur criticism in some situations. (Please see data for a similar example.) Academic programs for the study of mass media are usually referred to as mass communication programs. During the 20th century, the advent of mass media was driven by technology that allowed the massive duplication of material at a low price. Physical duplication technologies such as printing, record pressing and film duplication allowed the duplication of books, newspapers and movies at low prices to huge audiences. Television and radio allowed the electronic duplication of content for the first time.
Mass media had the economics of linear replication: a single work could make money proportional to the number of copies sold, and as volumes went up, units costs went down, increasing profit margins further. Vast fortunes were to be made in mass media.
TYPES OF MEDIA
In Section 4 an object was defined as basic element of a MUSLI language. It contains its descriptions in various media types. Let us have a closer look at what media types an object can contain. Media types can be divided into simple and multimedia types.
Simple Types
Text: the text describes the object in natural language. This may be by using a single word or phrase to a more complete description with examples. The advantage of this media type is that it can easily be indexed and searched. The drawback is of course that text is written in a language and thus not multi-lingual. An object may store the description in different languages though.
Symbol: a symbol is a visual entity. Symbols are a central part of the language. The symbol itself does not hold any information about the object and thus has to be memorized. This task becomes easier if the symbol is an icon or symbols are designed according to basic underlying rules and concepts. Shows one concept, which was introduced by Maurer and Lennon. Symbols are the visual counterpart to words in written natural languages.
Graphic: the graphic is closely related to the symbol. However, there is a significant difference. The symbol represents the abstract idea, whereas a graphic shows one concrete entity. It is like the difference between the word ``chair'' and a photo of a particular chair. Whereas the word includes everything from a comfortable chair to a wooden stool, the photo depicts only one example of a chair. If the photo is chosen carefully, the user should be able to grasp the abstract idea of the entity depicted. There might be several graphics stored in an object, which makes it easier to grasp the meaning of the object by finding the common features of the graphics
.
Video and animation: Just as an object might be described by a whole story (in text or in MUSLI), it may be realized as animation or video too. Again, a video shows only one concrete example whereas a MUSLI movie can be very abstract.
Speech: speech is spoken language and the aural equivalent to text. Speech is not multi-lingual but can be stored in several languages in the object. Speech has the advantage that one does not need to be able to read or write. Furthermore, the intonation and emotions of the speaker provide additional information and generate a more vivid experience than text. Speech is one of the most natural forms to exchange information. Its disadvantage is that it cannot be as easily indexed and searched for - maybe this will change in the future.
Sound icons and symbols: icons and symbols may be in aural form too. Culture independent sound icons are rare because to associate a sound with an object or action we have to have experienced that sound before. Sound symbols have to be memorized but are easily recalled in a given context. For example, the Star Trek sound of sliding doors could be used for the action to open something. Once the meaning is associated with the sound symbol, information can be passed on very efficiently. Other examples would be the ticking of a clock or the wind blowing.
Music: music is a powerful media type to describe emotions and feelings. However, its intended meaning might not be obvious. Thus, music should be considered a supplement and not the primary description of an object. Furthermore, music might provoke different feelings in different contexts.
Meta information: Meta information is usually given in text form and can be provided about any of the above media types. Meta information might be implemented as simple keywords or can be used to provide a visual and aural search utility to find relationships and similarities. Meta information might be accessible by the user or can be hidden and automatically generated and updated. Furthermore, Meta information might hold unrelated data about the object such as author, date of creation, copyright information and so on.
Electronic media and print media include:
Broadcasting, in the narrow sense, for radio and television.
Various types of discs or tape. In the 20th century, these were mainly used for music. Video and computer uses followed.
Film, most often used for entertainment, but also for documentaries.
Internet, which has many uses and presents both opportunities and challenges. Blogs are unique to the Internet.
Publishing, in the narrow sense, meaning on paper, mainly via books, magazines, and newspapers. Press release, house journals, notice boards, posters, hoardings, corporate or institutional advertisement.
Personal- press conference, media interview, meeting, exhibition.
Sponsorships- sports, cultural programs, educational programs, community service
IMPORTANCE OF MEDIA
In today’s image related world corporate-media have turned pro-active and can no longer afford to remain reactive. One cannot think of issuing denials and seeking distances from the media, print or electronics. Fortunately for all corporate there is a growing perception that if they were not transparent and straight forward the gap would be filled by inaccurate reporting and misinformation. There is one old saying ( CAN RUN BUT CAN,T HIDE)
These days company are managing the flow of information and at time even influence the media corporate had come to realize that if the channel of information is not open, many new stories would break, rumors go around and investigate journalism would uncover the information that is normally not accessible.
The stock scam and the Enron case are the classic example here the media played the important role .media constitute one of the most important publics for the corporate communicators. As far as corporate communicators are concerned historically, however the print media is main media in India. The pres continues to be the most prevalent media to communicate the policies of the corporate, function and achievement and build the image of organization .
The non pres media like T.V, radio, cinema etc has gained the momentum and reached the corporate considerably. Obliviously the emphasis will e use to judicious mix of the press and non press media so that the communication process become more effective.
Whatever media the corporate use, the center focus of them to communicate wit the media person and through them with the public, infact they are the people towards whom the most effective media relation programmes are to be directed
divyeshpatel
New member
Project on Agriculture Finance in India
CONTENTS
Introduction.
Types of Credit
Long term credit
Crop loan
Kisan gold card scheme
Kisan credit card scheme
Agriculture gold loan
Sources of Agriculture credit
Private Agencies Sources
Institutional Sources of Credit
INTRODUCTION
A vast majority of people in India still live in rural and hilly areas, whose main occupation and means of livelihood is agriculture and forest produce. The soil and climatic conditions are favorable for cultivation of variety of field crops and horticultural crops. Rich natural resources including rare species of flora and fauna, numerous seasonal vegetables, tropical and subtropical fruits and flowers are available in abundance in the region, which generate vast export potential for valuable foreign exchange and the source of capital formation.
Commercial Banks, Regional Rural Banks and Cooperative Banks are the three prominent institutional agencies providing financial assistance for agriculture and rural development in India. Over the years, although there is massive expansion of financial infrastructure including agricultural financing in the country, the pace of development in the India is however, not up to the mark. Although a few studies on macro aspects of agricultural credit have been undertaken, yet the specific studies to highlight the status of agricultural finance in th India are lacking.
Since independence, India has made substantial progress in respect of agriculture finance. Reports of all India rural credit survey committee and all India rural credit review that farmers were fully dependent on various sources of credit, Agricultural credit in early years was characterized by the growth of co-operative credit and there was decline in the share of money lenders. Money lenders were the main sources of credit during 1951-52. However occasional money lenders like landlords and traders have come up as a important suppliers of rural credit.
Money lender was the most convenient and easiest source of credit. Money lender did not make difference between production and consumption credit. His credit was available at the time needed by the farmer. His administration was simple and quite flexible he could assess creditworthiness of not only borrower but his entire family. The most important advantage to money lender was the absence of any worthwhile formal source of credit and illiteracy and ignorance of rural community as a whole. The social tinkers in India were confined to freedom movement and other religious evils and had little time for assessing the damage done by money lenders who were essentially Indians during two centuries preceding independence.
Charging exorbitant interest rates, cheating the illiterate borrowers by inserting larger amounts than borrowed, non issue of receipts for repayments were the main reasons of malpractice for money lenders decline. All these activities aimed at grabbing the farmers land, the only productive asset of that poor man. This development of agricultural sector called forth medium and long term credit on a large scale. This need was associated with green revolution. The money lenders depending upon their own fund could not entertain term lending.
The factors accounting for decline of money lenders apart from malpractice could be their inability to provide term loans. There are certain important positive factors for this. Most important positive factor on the part of authorities was the realization of needs for institutional credit in agriculture. This led to official patronage for co-operative credit societies by way of extending and liberalizing refinance facilities. Further the short lived social control of commercial banks and their subsequent nationalization, the establishment of low cost regional rural banks and restructing of apex, have helped in a major way to institutional agricultural credit.
Growth of literacy, education and communication network have also helped to reduce the importance of indigenous money lenders in a big way. It should be kept in mind that the informal sources haven’t totally disappeared but have only declined in relative terms.
TYPES OF CREDITS
1) Long Term Credit :
The period of long-term credit is generally 5 to 20 years or even more in some special cases. In any industry, long-term investment is necessary, to create permanent assets which give returns over a period of time. The permanent investment is not only necessary for a particular industry but even for the country. Because for continuity of production and progress of the country. This applies to agriculture also. In Agriculture, long-term investment comprises of sinking well, land leveling, fencing and permanent improvements on land purchase of big machinery like tractor with its attachments including trolleys, establishment of fruit orchard of mango, cashew, coconut, sapota (chiku), orange, pomegranate, fig, guava, etc. There are many other items of long-term capital investment. Investment once made in the beginning continuous to give returns over a long period. Fruit orchards particularly do not give any income in the first 4 - 5 years as in case of other seasonal crops. So the expenditure incurred in the first 4-5 years becomes a capital cost.
All the long-term investments mentioned above require large amounts of funds. Although they have good potential to give returns in future, individual farmers have no financial capacity to make such costly investments from their own funds because they have no savings or very little savings. Therefore, they have to resort to bank borrowing to meet their needs. The financial criteria terms and conditions procedures of granting L.T.loans are altogether different from short-term loans: Even the bank or agency providing LT loans is separate due to its particular mode or system of raising capital and graign.
Land Development Banks :
The special banks providing LT Loans are called Land Development Banks (LDA). The history of LDB’s is quite old. The first LDB was started at Jhang in Punjab in 1920. But the real impetus to these banks was received after passing the Land Mortgage Banks Act in 1930’s (LDB’s were originally called Land Mortgage Banks). After passing this Act LDB’s were started in different states of India.
Structure :
These Banks have two-tier structure
1. Primary Land Development Bank at district level with branches at taluka level.
2. Control or State Land Development Bank. All primary Land Development Banks are federated into Central Land Development Bank at the State Level. In some States, there is “ Unitary structure” wherein, there is only one State Land Development Bank at the state level operating through its branches and sub-branches at district and below levels.
Raising Funds :
The main function of raising funds is carried out be the Central or State Land Development Bank which can really deal with the money market of the country effectively and advance loans to primary LDB’s.
The sources of funds of State LDB’s are:-
1. Share capital.
2. Issue of debentures
3. Loans from NABARD
4. Reimbursements of subsidies from the Govt.
5. Other funds.
Interest rate :
The rates of interest for LT Loans are generally low and within the paying capacity of farmers. They are around 11 to 12%.
Loan Procedure:
The Branch offices receive applications from the prospective borrower. Then Agricultural Finance Officer or Inspector scrutinises these applications, they visit places of the application and ascertain the purpose of borrowing, verify the genuineness of the proposal and it economic viability, repaying ability of the farmers, adequacy of security,etc. After completing those formalities, the loan is granted by the appropriate authority at appropriate level depending upon the delegation of powers by the Banks.
2) CROP LOAN:
Crop loan is a short term credit and is generally obtained from primary credit co-op. Society of a village or also from commercial bank. The period of loan is about one year except for sugarcane for which the period is 18 months. There are two criteria for granting crop loan.
1. One third of gross value
2. Cost of cultivation.
1. One third of gross value approach takes into account the yield and price of the crop, its cost of cultivation and family expenditure. If the gross value is more, more amount of loan becomes available. For e.g. Rice.
I II
Yield (Q.) 20 25
Price (Rs/Q) 400 400
Gross value (Rs.) 8000 10,000
One third (Rs.) 2700 3330
2. Thus in second situation farmer is entitled for Rs.3330 per hectare which is higher than in the first situation. Thus this method takes into account the productive aspect of a crop.
3. In cost of cultivation, direct paid-out costs are only considered. They include items, like seeds, manures, fertilizers, pesticides, diesel/electricity, hired labour etc. In this approach, it is expected that all direct costs to be incurred by the farmer should be covered and accordingly he should get adequate credit. If the cost of all these items of input is Rs.3500/-. If the loan is granted according to first approach, then the amount which is short, is spent by the farmer from his own funds. Since crop loan is for one season, its recovery is made in one installment after the harvest of the crop. Crop loan is an annual requirement and farmer has to borrow fresh loan for new crop season every time. Therefore, he has to repay the earlier loan with interest within stipulated time. Since this loan is required every season/every year, the procedure of getting this loan is simple and convenient and it is made available by the District Central Co-op.Banks through the village Co-op. Credit Society. So the farmer gets his loan in the village itself. If the loan is to be taken from commercial bank, it is available from the nearby branch of the commercial bank. As for security, the farmer has to offer his land as a security. There is a three tier structure providing crop-loans through co-operative institutions.
1) Appex Bank- State Co-op. Bank.
2) District Central co-op. Bank
3) Village co-op. Credit Society.
Crop-loan is the most important need of the farmer to increase and maintain his productive ability. With the help of this loan amount, he can purchase modern costly inputs and adopt new technologies on his farms. So through these loans co-operative banks play important role in the development and prosperity of agriculture. Among the various types of bank loans to agriculture, the share of crop loan is the highest.
3) KISAN GOLD CARD SCHEME
ELIGIBILITY
a. Farmers having good track record of repayment for the last two years.
b. Farmers who have closed their loan account without default and not our current borrowers.
c. Farmers who have defaulted in repayment but closed the Loan within the stipulated repayment period.
d. Farmers who are maintaining sizeable deposits with the Bank.
e. Good borrowers of other banks provided they liquidate their dues with other banks.
Amount of Loan :
Five times the annual farm income including income from allied activities or 50% of the value of the land offered as collateral security whichever is lower subject to a maximum of Rupees 10 lacs.
Purpose:
The borrower is at liberty to use upto 50% of the loan for any purpose including consumption needs.
Repayment :
Within a period of 10 years.
Interest rate:
upto Rs.25,000/- - 10.50% above Rs.25,000/- - 11.00%
4) KISAN CREDIT CARD SCHEME:
Running cash credit account sanctioned to agriculturists for production activity for a period of three years. In addition to production credit, 15% of the production credit subject to a maximum of Rs.10,000/- is also sanctioned for consumption purposes. Insurance protection available. ATM card for all KCC holders.
5) Agri.Gold Loan:
Farmer who needs credit for farming including allied activities
repairing equipments, consumption etc., can avail loans by
pledging gold ornaments as security for the loan. The interest
applicable will be same as that applicable for short term
Agricultural loans.
Source of Agriculture Credit
There are mainly two sources available to the farmers private agencies & institutional. Private agencies means relatives, landlords, agricultural moneylenders, professional private moneylenders, traders & commission agents, others. Where institutional agencies are a. commercial banks, b. the state bank, c. co-operative societies & land mortgage banks d. agricultural finance Corporation.
Private agencies giving 93% of the total credit requirements in 1951-52 and institutional sources including government giving for only 7% of the total credit needs. But in 1960-61, the share of private agencies came down to 81.3 which was as follows:- Relatives 8.8%, Landlords 0.6%, Agricultural moneylenders 36.0, Professional private moneylenders 13.2%, traders & commission agents 8.8%, other sources 13.9. that time institutional 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.
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.
- Traders & commission agents:
Traders & commsiion agents supply funds to farmers for productive purposes much before the crops mature. They force the farmers to sell their produce at low prices and they charge a heavy commission for themselves.
- Landlords & others:
Farmers, predominantly small farmers & tenants, depend upon landlords and others to meet their financial requirements. This source of finance has all the defects associated with moneylenders, traders and commission agents. Interests rates are exorbitant. Often the small farmers are cheated and their lands are appropriated. What is worse, this source of finance is becoming more important—from 3.3 percent in 1951-52 to 14.5 percent in 1961-62 but declined to 8.8 percent in 1981.
Institutional sources of credit:
These are the funds made available by co-operative societies, commercial banks, & regional rural banks & state governments also. The need for institutional credit arises because of the weakness or inadequacy of private agencies to supply credit to farmers. Private credit is defective because:-
I. It is based on profit motive &, therefore, it is always exploitative.
II. It is very expensive and is not related to the productivity of land.
III. It does not flow into most desirable channels and to most needy persons.
IV. It is not available for making agricultural improvements—and much of the necessary improvements are not undertaken as funds are not available for long periods at low rates of interest
V. It is not properly integrated with the agriculturists other needs.
Problems in Institutional sources:
The government was of the view that multi-agency approach to rural credit was the real solution to the emancipation of small farmers from the clutches of the money-lenders. But within a short period, number of problems have surfaced such as:
a) There was no coordination between different agencies operating in the same area and, as a result, there was multiple financing, over-financing in some areas and under-financing in others.
b) Despite the adoption of lead bank scheme and district credit plans, the different agencies often failed to formulate and develop meaningful agricultural credit programmes in given blocks and districts.
c) Despite guidelines issued by RBI, different agencies adopted different procedures and policies in the matter of providing loans and their recover. The result was unnecessary competition among the different agencies.
d) There were practical problems in the recovery of loans when different agencies had lent to the same person against the same securities. Ultimately, there were heavy over dues.
The major problem faced by lending institutions, particularly co-operatives, is the most unsatisfactory level of over dues. The ration of over dues to that of demand is around 40 to 42 percent in the case of co-operatives and 47 percent in the case of Regional rural banks.
Accordingly, health of rural credit institutions, both co-operative and commercial banks, is in a very sad state in several parts of the country.
- Co-operative credit societies
It is the cheapest and the best source of rural credit. The rate of interest is low. Since 1951, the co-operative credit movement has started helping the farmers in a big manner. During 1989-90 there were about 88,000 primary agricultural credit societies. The stranglehold of the moneylenders on the peasants is not met by the co-operatives. Besides, the small farmers find it difficult to meet all their credit requirements from the co-operatives.
Co-operative Central Banks:
These are federations of primary credit societies in specified areas normally extending to the whole district meance they are sometimes called as district co-operative banks. These banks have a few private individuals as shareholders who provide both finance of management. Their main task is to lend to village primary societies, but they were expected to attract deposits from the general public. But the expectation has not been fulfilled and many of the co-operative central banks act as intermediaries between the State Co-operative Bank on the one hand and the village primary credit societies on the other.
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 NABARD has formulated a scheme for the rehabilitation of weak central co-operative 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.
Problem of over dues to Co-operative credit
A highly distressing fact of co-operative credit is the heavy over dues of co-operative credit institutions, now estimated between Rs.9,000 crores to Rs.10,000 crores. According to the RBI study team on over dues “lack of will and discipline among cultivators to repay loans was the principal factor responsible for the prevalence of over dues of co-operatives. Defective lending policy pursued by co-operatives, the apathy of management in taking quick action against recalcitrant members and absence of favourable climate were other contributing factors.”
Apart from these commonly factors normally responsible for a high level of over dues, 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 over dues 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.
- Land development banks :
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 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.
Problems of LDBs:-
Land development banking is yet to take strong roots in India barring few States. However, LDBs have contributed in large measure to agricultural development by lending specially for minor irrigation. All their loans are for productive purposes benefiting mostly the small farm holders. Though land development banking has made considerable progress in recent years, it has not really contributed much to the improvement of the financial position of the farmers. A large number of factors are responsible for the relative ineffectiveness of LDBs.
Overdues Problems:-
Mounting overdues in most of the LDBs have crippled the structure badly, in recent years. Overdues at the level of primary land development banks have been put between 42 to 44 percent. Overdues have caused innumerable financial problems besides limiting the capacity of LDBs to lend and operate as viable units. The financial discipline imposed on the banks in the matter of eligibility to undertake fresh lending based on recovery performance has been the main limiting factor quantitative growth of credit operations. To some extent, the banks themselves are to be blamed for this predicament due to faulty loaning policies, inadequate supervision, over-utilisation of loans, ineffective measures for recovery etc. Which have contributed to the deterioration in recovering the loans.
- Commercial Banks:
The commercial banks in India have long confined their operations to urban areas, receiving deposits from the urban public and financing trade and industry in urban public and financing trade and industry in urban areas. Commercial banks are extending financial support to agriculture both directly and indirectly Direct finance is extended for agricultural operations for short and medium period. Indirect finance to farmers is made through providing advances for the distribution of fertilizers, other inputs, etc, and also through financing primary agricultural credit societies. Financing of investment in agriculture is a major aspect of the farm credit activities of banks Credit needs of service units providing services for warehousing, processing, marketing, transporting, and repairing of tractors etc.
Direct Finance by Commercial Banks:-
At the time of bank nationalization, it was clearly conceded that the commercial banks did not have the necessary experience or the personnel to deal with the farmers directly. While the co-operative had been specializing in rural credit since the beginning of the century. Even then the nationalized banks were expected to go vigorously in the support of the farmers in general and the small cultivators in particular. In the initial stages, for obvious reasons the nationalized banks concentrated their attention on large cultivators and other special category farmers such as those engaged in raising high-yielding varieties of food-grains. At present short term crop loans accounted for nearly 40 to 45% of the total loans disbursed by the commercial banks to the farmers.
Term loans for varying periods for purchasing pump-sets, tractors and other agricultural machinery, for construction of wells and tube-wells, for the development of fruit and garden crops, or leveling and development of land, etc. are provided. These term loans accounted for about 35 to 37% of the total loans disbursed by commercial banks. Finally, commercial banks extend loans for such activities such as dairying, poultry farming, piggery, bee keeping, fisheries and others— these loans account for 15 to16%. Region wise, southern region accounts for the bulk of credit disbursed by commercial banks viz. 52% of the total credit extended.
Indirect Finance by Commercial Banks:
Even though the scope for direct financing by commercial banks would be limited for some years to come, there is a considerable scope for indirect financing by commercial banks. For instance, commercial banks are financing co-operative societies to enable them to expand their production credit to the farmers. More especially they increasingly finance co-operatives engaged in marketing and processing of agricultural produce or in the activities ancillary to agriculture such as dairy farming, poultry farming, etc. In this connection, the Stated Bank of India and its subsidiaries are already playing an active role in financing co-operative marketing and processing. Commercial banks are providing indirect finance for the distribution of fertilizers and other inputs.
Commercial banks extend credit to manufacturing or distribution firms and agencies and co-operatives engaged in the supply of pump-sets and other agricultural machinery on the hire-purchase basis. They finance the operations of the Food Corporation of India, the state governments and others in the procurement, storage and distribution of food grains.
Finally, commercial banks increasingly subscribe to the debentures of the central land development banks and also extend advances to the latter. This enables land development banks to expand their medium and long-term advances to farmers for the purpose of land improvement and land development.
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 into various categories for credit support so as to enable them to become viable cultivators. For instance, in areas where the subsoil water table is high, the small cultivator has to be helped by banks to convert his dry holding into wet holding. With pump set loan, the cultivator can change the cropping pattern into double or even multiple cropping activity. As regards small cultivators near urban areas and with irrigation facilities, commercial banks can help them to go in for poultry farming and maintaining one or two vegetable cultivation or combine it with small milch cattle.
Problems of Commercial Banks in Agricultural Credit:-
The credit needs of the agricultural sector in the next few years are estimated to rise to Rs.50,000 to Rs.60,000 crores. To meet the needs is an enormous task, and responsibility will have to be borne by co-operatives and commercial banks. As resources available to commercial banks in the agricultural sector will naturally be limited, it is important that every commercial bank attempts to make optimum use of its limited resources in this sector. In the field of financing of agriculture, the problem is not merely quantitative but also of coverage vis-à-vis the organization and the personnel available to the nationalized banks. The majority of the rural population consists of small farmers. Further, there are 5,50,000 villages spread throughout the country. To reach all of them with only about 47,000 banking offices is, no doubt, a stupendous task. Even with the completion of branch extension programmes of the commercial banks now in hand or those which may be undertaken during the next 5 to 10 years, commercial bank may not be in a position to cover many of the villages. Moreover in recent years, the rural branches of commercial banks in general and branches of RRB in particular, have been under severe financial strain on account of higher transaction cost involved in handling of large number of small size loan accounts and somewhat lower interest income as a result of concessional rate of interest on small size loans.
The lower proportion of current deposits in total deposits of rural branches has also placed them at a disadvantage with regards to cost of resources. Finally, the presence of overdues, particularly after the implementation of Agricultural and Rural Credit Debt Relief Schemes, 1990 has further adversely affected the viability of rural branches of commercial banks.
Under these conditions, if the development of agriculture is not to suffer for want of credit and if there has to be some improvement in the lot of innumerable small farmers, new dimensions will have to be given to schemes of financing agriculture.
Regional Rural Banks:
These banks were first set up in 1975 specifically to give direct loans and advances to small and marginal farmers, agricultural labourers, rural artisans and other of small means. The loans are given for productive purposes. There were 196 RRBs which have been lending around Rs. 3600 crores annually by way of loans to rural people. Over 90 percent of the loans of RPBs are given to the weaker sections in rural areas. The regional banks, though basically scheduled commercial banks, differ from the latter in certain respects:
The area of regional rural banks is limited to a specified region comprising one or more districts of a State.
The regional rural banks grant direct loans and advances only to small and marginal farmers, rural artisans and agricultural labourers and other of small means for productive purposes.
The lending rates of the regional rural banks should not be higer than the prevailing lending rates of co-operatives societies in any particular State. The sponsoring banks and the Reserve Bank of India provide many subsidies and concessions to RRBs to enable the latter to function effectively
Concessions to RRBs:
From the beginning, the sponsor banks have continued to provide managerial and financial assistance to RRBs and also other concessions such as lower rate of interest on the latter’s borrowing from sponsor banks. Further, the cost of staff deputed to RRBs and training expenses of RRB staff are borne by the sponsor banks. The Reserve Bank of India has been granting many concessions to RRBs.
Progress of RRBs:
There are now 196 regional rural banks in 23 States with 14,500 branches. As at the end of September 1990 the regional rural banks had advanced Rs.3,560 crores by way of short-term crop loans, term loans for agricultural activities, for rural artisans, village and cottage industries, retail trade and self employed, consumption loans etc. Nearly 90 percent of the loans of RRBs, were provided to the weaker sections. State wise Uttar Pradesh found large number of offices.
Objectives of RRBs:
RRBs had followed instructions given by RBI and Government of India regarding loan policies, procedures, etc.
The basic aim of setting up RRBs viz, developing the rural economy by providing credit for the development of agriculture, trade, commerce industry and other productive activities in rural areas, was being fulfilled and
RRBs had successfully maintained their image as a small man’s bank by confining their credit facilities to the target groups viz, small marginal farmers, agricultural labourers, artisans and small enterprises for productive activities.
The recovery position on the whole was not satisfactory.
Problems in functioning of RRBs:
a. On account of the many restrictions place on the business they can undertake, RRBs have lowearning capacity.
b. The wage and salary scales of RRBs have been rising and, in fact, with the recent award of a tribunal, their scales would approximate those of commercial banks; with the increase in salary scales, an important rationale for the setting up of RRBs has ceased to exist.
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.
Reserve Bank of India:
RBI had shown keen interest in agricultural credit and maintained a separate department for this purpose. RBI extended short-term seasonal credit as well as medium-term and long-term credit to agriculture through State level co-operative banks and land developments banks. RBI had also set up the Agricultural Refinance Development Corporation (ARDC) to provide refinance support to the banks to promote programmes of agricultural development, particularly those requiring term credit. With the widening of the role of bank credit from “agricultural development” to “rural development” the Government propo9sed to have a more broad-based organization at the apex level to extend support and give guidance to credit institutions in matter relating to the formulation and implementation of rural development programmes. A National Bank for Agriculture and Rural Development (NABARD) or National Bank was, therefore, set up to take over the agricultural credit functions of RBI on the on hand and the refinance functions of ARDC on the other.
National Bank for Agricultural and Rural Development
NABARD is an apex institution accredited with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas.
NABARD operates throughout the country through its Head Office at Mumbai, 25 Regional Offices and on Sub-Office, located in the capitals of all the states/union territories. It also has 4 training establishments.
It is an apex refinancing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas.
It takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institution, training of personnel, etc.
It co-ordinates the rural financing activities of all the institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India and other national level institutions concerned with policy formulation.
It 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
CONTENTS
Introduction.
Types of Credit
Long term credit
Crop loan
Kisan gold card scheme
Kisan credit card scheme
Agriculture gold loan
Sources of Agriculture credit
Private Agencies Sources
Institutional Sources of Credit
INTRODUCTION
A vast majority of people in India still live in rural and hilly areas, whose main occupation and means of livelihood is agriculture and forest produce. The soil and climatic conditions are favorable for cultivation of variety of field crops and horticultural crops. Rich natural resources including rare species of flora and fauna, numerous seasonal vegetables, tropical and subtropical fruits and flowers are available in abundance in the region, which generate vast export potential for valuable foreign exchange and the source of capital formation.
Commercial Banks, Regional Rural Banks and Cooperative Banks are the three prominent institutional agencies providing financial assistance for agriculture and rural development in India. Over the years, although there is massive expansion of financial infrastructure including agricultural financing in the country, the pace of development in the India is however, not up to the mark. Although a few studies on macro aspects of agricultural credit have been undertaken, yet the specific studies to highlight the status of agricultural finance in th India are lacking.
Since independence, India has made substantial progress in respect of agriculture finance. Reports of all India rural credit survey committee and all India rural credit review that farmers were fully dependent on various sources of credit, Agricultural credit in early years was characterized by the growth of co-operative credit and there was decline in the share of money lenders. Money lenders were the main sources of credit during 1951-52. However occasional money lenders like landlords and traders have come up as a important suppliers of rural credit.
Money lender was the most convenient and easiest source of credit. Money lender did not make difference between production and consumption credit. His credit was available at the time needed by the farmer. His administration was simple and quite flexible he could assess creditworthiness of not only borrower but his entire family. The most important advantage to money lender was the absence of any worthwhile formal source of credit and illiteracy and ignorance of rural community as a whole. The social tinkers in India were confined to freedom movement and other religious evils and had little time for assessing the damage done by money lenders who were essentially Indians during two centuries preceding independence.
Charging exorbitant interest rates, cheating the illiterate borrowers by inserting larger amounts than borrowed, non issue of receipts for repayments were the main reasons of malpractice for money lenders decline. All these activities aimed at grabbing the farmers land, the only productive asset of that poor man. This development of agricultural sector called forth medium and long term credit on a large scale. This need was associated with green revolution. The money lenders depending upon their own fund could not entertain term lending.
The factors accounting for decline of money lenders apart from malpractice could be their inability to provide term loans. There are certain important positive factors for this. Most important positive factor on the part of authorities was the realization of needs for institutional credit in agriculture. This led to official patronage for co-operative credit societies by way of extending and liberalizing refinance facilities. Further the short lived social control of commercial banks and their subsequent nationalization, the establishment of low cost regional rural banks and restructing of apex, have helped in a major way to institutional agricultural credit.
Growth of literacy, education and communication network have also helped to reduce the importance of indigenous money lenders in a big way. It should be kept in mind that the informal sources haven’t totally disappeared but have only declined in relative terms.
TYPES OF CREDITS
1) Long Term Credit :
The period of long-term credit is generally 5 to 20 years or even more in some special cases. In any industry, long-term investment is necessary, to create permanent assets which give returns over a period of time. The permanent investment is not only necessary for a particular industry but even for the country. Because for continuity of production and progress of the country. This applies to agriculture also. In Agriculture, long-term investment comprises of sinking well, land leveling, fencing and permanent improvements on land purchase of big machinery like tractor with its attachments including trolleys, establishment of fruit orchard of mango, cashew, coconut, sapota (chiku), orange, pomegranate, fig, guava, etc. There are many other items of long-term capital investment. Investment once made in the beginning continuous to give returns over a long period. Fruit orchards particularly do not give any income in the first 4 - 5 years as in case of other seasonal crops. So the expenditure incurred in the first 4-5 years becomes a capital cost.
All the long-term investments mentioned above require large amounts of funds. Although they have good potential to give returns in future, individual farmers have no financial capacity to make such costly investments from their own funds because they have no savings or very little savings. Therefore, they have to resort to bank borrowing to meet their needs. The financial criteria terms and conditions procedures of granting L.T.loans are altogether different from short-term loans: Even the bank or agency providing LT loans is separate due to its particular mode or system of raising capital and graign.
Land Development Banks :
The special banks providing LT Loans are called Land Development Banks (LDA). The history of LDB’s is quite old. The first LDB was started at Jhang in Punjab in 1920. But the real impetus to these banks was received after passing the Land Mortgage Banks Act in 1930’s (LDB’s were originally called Land Mortgage Banks). After passing this Act LDB’s were started in different states of India.
Structure :
These Banks have two-tier structure
1. Primary Land Development Bank at district level with branches at taluka level.
2. Control or State Land Development Bank. All primary Land Development Banks are federated into Central Land Development Bank at the State Level. In some States, there is “ Unitary structure” wherein, there is only one State Land Development Bank at the state level operating through its branches and sub-branches at district and below levels.
Raising Funds :
The main function of raising funds is carried out be the Central or State Land Development Bank which can really deal with the money market of the country effectively and advance loans to primary LDB’s.
The sources of funds of State LDB’s are:-
1. Share capital.
2. Issue of debentures
3. Loans from NABARD
4. Reimbursements of subsidies from the Govt.
5. Other funds.
Interest rate :
The rates of interest for LT Loans are generally low and within the paying capacity of farmers. They are around 11 to 12%.
Loan Procedure:
The Branch offices receive applications from the prospective borrower. Then Agricultural Finance Officer or Inspector scrutinises these applications, they visit places of the application and ascertain the purpose of borrowing, verify the genuineness of the proposal and it economic viability, repaying ability of the farmers, adequacy of security,etc. After completing those formalities, the loan is granted by the appropriate authority at appropriate level depending upon the delegation of powers by the Banks.
2) CROP LOAN:
Crop loan is a short term credit and is generally obtained from primary credit co-op. Society of a village or also from commercial bank. The period of loan is about one year except for sugarcane for which the period is 18 months. There are two criteria for granting crop loan.
1. One third of gross value
2. Cost of cultivation.
1. One third of gross value approach takes into account the yield and price of the crop, its cost of cultivation and family expenditure. If the gross value is more, more amount of loan becomes available. For e.g. Rice.
I II
Yield (Q.) 20 25
Price (Rs/Q) 400 400
Gross value (Rs.) 8000 10,000
One third (Rs.) 2700 3330
2. Thus in second situation farmer is entitled for Rs.3330 per hectare which is higher than in the first situation. Thus this method takes into account the productive aspect of a crop.
3. In cost of cultivation, direct paid-out costs are only considered. They include items, like seeds, manures, fertilizers, pesticides, diesel/electricity, hired labour etc. In this approach, it is expected that all direct costs to be incurred by the farmer should be covered and accordingly he should get adequate credit. If the cost of all these items of input is Rs.3500/-. If the loan is granted according to first approach, then the amount which is short, is spent by the farmer from his own funds. Since crop loan is for one season, its recovery is made in one installment after the harvest of the crop. Crop loan is an annual requirement and farmer has to borrow fresh loan for new crop season every time. Therefore, he has to repay the earlier loan with interest within stipulated time. Since this loan is required every season/every year, the procedure of getting this loan is simple and convenient and it is made available by the District Central Co-op.Banks through the village Co-op. Credit Society. So the farmer gets his loan in the village itself. If the loan is to be taken from commercial bank, it is available from the nearby branch of the commercial bank. As for security, the farmer has to offer his land as a security. There is a three tier structure providing crop-loans through co-operative institutions.
1) Appex Bank- State Co-op. Bank.
2) District Central co-op. Bank
3) Village co-op. Credit Society.
Crop-loan is the most important need of the farmer to increase and maintain his productive ability. With the help of this loan amount, he can purchase modern costly inputs and adopt new technologies on his farms. So through these loans co-operative banks play important role in the development and prosperity of agriculture. Among the various types of bank loans to agriculture, the share of crop loan is the highest.
3) KISAN GOLD CARD SCHEME
ELIGIBILITY
a. Farmers having good track record of repayment for the last two years.
b. Farmers who have closed their loan account without default and not our current borrowers.
c. Farmers who have defaulted in repayment but closed the Loan within the stipulated repayment period.
d. Farmers who are maintaining sizeable deposits with the Bank.
e. Good borrowers of other banks provided they liquidate their dues with other banks.
Amount of Loan :
Five times the annual farm income including income from allied activities or 50% of the value of the land offered as collateral security whichever is lower subject to a maximum of Rupees 10 lacs.
Purpose:
The borrower is at liberty to use upto 50% of the loan for any purpose including consumption needs.
Repayment :
Within a period of 10 years.
Interest rate:
upto Rs.25,000/- - 10.50% above Rs.25,000/- - 11.00%
4) KISAN CREDIT CARD SCHEME:
Running cash credit account sanctioned to agriculturists for production activity for a period of three years. In addition to production credit, 15% of the production credit subject to a maximum of Rs.10,000/- is also sanctioned for consumption purposes. Insurance protection available. ATM card for all KCC holders.
5) Agri.Gold Loan:
Farmer who needs credit for farming including allied activities
repairing equipments, consumption etc., can avail loans by
pledging gold ornaments as security for the loan. The interest
applicable will be same as that applicable for short term
Agricultural loans.
Source of Agriculture Credit
There are mainly two sources available to the farmers private agencies & institutional. Private agencies means relatives, landlords, agricultural moneylenders, professional private moneylenders, traders & commission agents, others. Where institutional agencies are a. commercial banks, b. the state bank, c. co-operative societies & land mortgage banks d. agricultural finance Corporation.
Private agencies giving 93% of the total credit requirements in 1951-52 and institutional sources including government giving for only 7% of the total credit needs. But in 1960-61, the share of private agencies came down to 81.3 which was as follows:- Relatives 8.8%, Landlords 0.6%, Agricultural moneylenders 36.0, Professional private moneylenders 13.2%, traders & commission agents 8.8%, other sources 13.9. that time institutional 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.
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.
- Traders & commission agents:
Traders & commsiion agents supply funds to farmers for productive purposes much before the crops mature. They force the farmers to sell their produce at low prices and they charge a heavy commission for themselves.
- Landlords & others:
Farmers, predominantly small farmers & tenants, depend upon landlords and others to meet their financial requirements. This source of finance has all the defects associated with moneylenders, traders and commission agents. Interests rates are exorbitant. Often the small farmers are cheated and their lands are appropriated. What is worse, this source of finance is becoming more important—from 3.3 percent in 1951-52 to 14.5 percent in 1961-62 but declined to 8.8 percent in 1981.
Institutional sources of credit:
These are the funds made available by co-operative societies, commercial banks, & regional rural banks & state governments also. The need for institutional credit arises because of the weakness or inadequacy of private agencies to supply credit to farmers. Private credit is defective because:-
I. It is based on profit motive &, therefore, it is always exploitative.
II. It is very expensive and is not related to the productivity of land.
III. It does not flow into most desirable channels and to most needy persons.
IV. It is not available for making agricultural improvements—and much of the necessary improvements are not undertaken as funds are not available for long periods at low rates of interest
V. It is not properly integrated with the agriculturists other needs.
Problems in Institutional sources:
The government was of the view that multi-agency approach to rural credit was the real solution to the emancipation of small farmers from the clutches of the money-lenders. But within a short period, number of problems have surfaced such as:
a) There was no coordination between different agencies operating in the same area and, as a result, there was multiple financing, over-financing in some areas and under-financing in others.
b) Despite the adoption of lead bank scheme and district credit plans, the different agencies often failed to formulate and develop meaningful agricultural credit programmes in given blocks and districts.
c) Despite guidelines issued by RBI, different agencies adopted different procedures and policies in the matter of providing loans and their recover. The result was unnecessary competition among the different agencies.
d) There were practical problems in the recovery of loans when different agencies had lent to the same person against the same securities. Ultimately, there were heavy over dues.
The major problem faced by lending institutions, particularly co-operatives, is the most unsatisfactory level of over dues. The ration of over dues to that of demand is around 40 to 42 percent in the case of co-operatives and 47 percent in the case of Regional rural banks.
Accordingly, health of rural credit institutions, both co-operative and commercial banks, is in a very sad state in several parts of the country.
- Co-operative credit societies
It is the cheapest and the best source of rural credit. The rate of interest is low. Since 1951, the co-operative credit movement has started helping the farmers in a big manner. During 1989-90 there were about 88,000 primary agricultural credit societies. The stranglehold of the moneylenders on the peasants is not met by the co-operatives. Besides, the small farmers find it difficult to meet all their credit requirements from the co-operatives.
Co-operative Central Banks:
These are federations of primary credit societies in specified areas normally extending to the whole district meance they are sometimes called as district co-operative banks. These banks have a few private individuals as shareholders who provide both finance of management. Their main task is to lend to village primary societies, but they were expected to attract deposits from the general public. But the expectation has not been fulfilled and many of the co-operative central banks act as intermediaries between the State Co-operative Bank on the one hand and the village primary credit societies on the other.
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 NABARD has formulated a scheme for the rehabilitation of weak central co-operative 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.
Problem of over dues to Co-operative credit
A highly distressing fact of co-operative credit is the heavy over dues of co-operative credit institutions, now estimated between Rs.9,000 crores to Rs.10,000 crores. According to the RBI study team on over dues “lack of will and discipline among cultivators to repay loans was the principal factor responsible for the prevalence of over dues of co-operatives. Defective lending policy pursued by co-operatives, the apathy of management in taking quick action against recalcitrant members and absence of favourable climate were other contributing factors.”
Apart from these commonly factors normally responsible for a high level of over dues, 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 over dues 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.
- Land development banks :
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 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.
Problems of LDBs:-
Land development banking is yet to take strong roots in India barring few States. However, LDBs have contributed in large measure to agricultural development by lending specially for minor irrigation. All their loans are for productive purposes benefiting mostly the small farm holders. Though land development banking has made considerable progress in recent years, it has not really contributed much to the improvement of the financial position of the farmers. A large number of factors are responsible for the relative ineffectiveness of LDBs.
Overdues Problems:-
Mounting overdues in most of the LDBs have crippled the structure badly, in recent years. Overdues at the level of primary land development banks have been put between 42 to 44 percent. Overdues have caused innumerable financial problems besides limiting the capacity of LDBs to lend and operate as viable units. The financial discipline imposed on the banks in the matter of eligibility to undertake fresh lending based on recovery performance has been the main limiting factor quantitative growth of credit operations. To some extent, the banks themselves are to be blamed for this predicament due to faulty loaning policies, inadequate supervision, over-utilisation of loans, ineffective measures for recovery etc. Which have contributed to the deterioration in recovering the loans.
- Commercial Banks:
The commercial banks in India have long confined their operations to urban areas, receiving deposits from the urban public and financing trade and industry in urban public and financing trade and industry in urban areas. Commercial banks are extending financial support to agriculture both directly and indirectly Direct finance is extended for agricultural operations for short and medium period. Indirect finance to farmers is made through providing advances for the distribution of fertilizers, other inputs, etc, and also through financing primary agricultural credit societies. Financing of investment in agriculture is a major aspect of the farm credit activities of banks Credit needs of service units providing services for warehousing, processing, marketing, transporting, and repairing of tractors etc.
Direct Finance by Commercial Banks:-
At the time of bank nationalization, it was clearly conceded that the commercial banks did not have the necessary experience or the personnel to deal with the farmers directly. While the co-operative had been specializing in rural credit since the beginning of the century. Even then the nationalized banks were expected to go vigorously in the support of the farmers in general and the small cultivators in particular. In the initial stages, for obvious reasons the nationalized banks concentrated their attention on large cultivators and other special category farmers such as those engaged in raising high-yielding varieties of food-grains. At present short term crop loans accounted for nearly 40 to 45% of the total loans disbursed by the commercial banks to the farmers.
Term loans for varying periods for purchasing pump-sets, tractors and other agricultural machinery, for construction of wells and tube-wells, for the development of fruit and garden crops, or leveling and development of land, etc. are provided. These term loans accounted for about 35 to 37% of the total loans disbursed by commercial banks. Finally, commercial banks extend loans for such activities such as dairying, poultry farming, piggery, bee keeping, fisheries and others— these loans account for 15 to16%. Region wise, southern region accounts for the bulk of credit disbursed by commercial banks viz. 52% of the total credit extended.
Indirect Finance by Commercial Banks:
Even though the scope for direct financing by commercial banks would be limited for some years to come, there is a considerable scope for indirect financing by commercial banks. For instance, commercial banks are financing co-operative societies to enable them to expand their production credit to the farmers. More especially they increasingly finance co-operatives engaged in marketing and processing of agricultural produce or in the activities ancillary to agriculture such as dairy farming, poultry farming, etc. In this connection, the Stated Bank of India and its subsidiaries are already playing an active role in financing co-operative marketing and processing. Commercial banks are providing indirect finance for the distribution of fertilizers and other inputs.
Commercial banks extend credit to manufacturing or distribution firms and agencies and co-operatives engaged in the supply of pump-sets and other agricultural machinery on the hire-purchase basis. They finance the operations of the Food Corporation of India, the state governments and others in the procurement, storage and distribution of food grains.
Finally, commercial banks increasingly subscribe to the debentures of the central land development banks and also extend advances to the latter. This enables land development banks to expand their medium and long-term advances to farmers for the purpose of land improvement and land development.
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 into various categories for credit support so as to enable them to become viable cultivators. For instance, in areas where the subsoil water table is high, the small cultivator has to be helped by banks to convert his dry holding into wet holding. With pump set loan, the cultivator can change the cropping pattern into double or even multiple cropping activity. As regards small cultivators near urban areas and with irrigation facilities, commercial banks can help them to go in for poultry farming and maintaining one or two vegetable cultivation or combine it with small milch cattle.
Problems of Commercial Banks in Agricultural Credit:-
The credit needs of the agricultural sector in the next few years are estimated to rise to Rs.50,000 to Rs.60,000 crores. To meet the needs is an enormous task, and responsibility will have to be borne by co-operatives and commercial banks. As resources available to commercial banks in the agricultural sector will naturally be limited, it is important that every commercial bank attempts to make optimum use of its limited resources in this sector. In the field of financing of agriculture, the problem is not merely quantitative but also of coverage vis-à-vis the organization and the personnel available to the nationalized banks. The majority of the rural population consists of small farmers. Further, there are 5,50,000 villages spread throughout the country. To reach all of them with only about 47,000 banking offices is, no doubt, a stupendous task. Even with the completion of branch extension programmes of the commercial banks now in hand or those which may be undertaken during the next 5 to 10 years, commercial bank may not be in a position to cover many of the villages. Moreover in recent years, the rural branches of commercial banks in general and branches of RRB in particular, have been under severe financial strain on account of higher transaction cost involved in handling of large number of small size loan accounts and somewhat lower interest income as a result of concessional rate of interest on small size loans.
The lower proportion of current deposits in total deposits of rural branches has also placed them at a disadvantage with regards to cost of resources. Finally, the presence of overdues, particularly after the implementation of Agricultural and Rural Credit Debt Relief Schemes, 1990 has further adversely affected the viability of rural branches of commercial banks.
Under these conditions, if the development of agriculture is not to suffer for want of credit and if there has to be some improvement in the lot of innumerable small farmers, new dimensions will have to be given to schemes of financing agriculture.
Regional Rural Banks:
These banks were first set up in 1975 specifically to give direct loans and advances to small and marginal farmers, agricultural labourers, rural artisans and other of small means. The loans are given for productive purposes. There were 196 RRBs which have been lending around Rs. 3600 crores annually by way of loans to rural people. Over 90 percent of the loans of RPBs are given to the weaker sections in rural areas. The regional banks, though basically scheduled commercial banks, differ from the latter in certain respects:
The area of regional rural banks is limited to a specified region comprising one or more districts of a State.
The regional rural banks grant direct loans and advances only to small and marginal farmers, rural artisans and agricultural labourers and other of small means for productive purposes.
The lending rates of the regional rural banks should not be higer than the prevailing lending rates of co-operatives societies in any particular State. The sponsoring banks and the Reserve Bank of India provide many subsidies and concessions to RRBs to enable the latter to function effectively
Concessions to RRBs:
From the beginning, the sponsor banks have continued to provide managerial and financial assistance to RRBs and also other concessions such as lower rate of interest on the latter’s borrowing from sponsor banks. Further, the cost of staff deputed to RRBs and training expenses of RRB staff are borne by the sponsor banks. The Reserve Bank of India has been granting many concessions to RRBs.
Progress of RRBs:
There are now 196 regional rural banks in 23 States with 14,500 branches. As at the end of September 1990 the regional rural banks had advanced Rs.3,560 crores by way of short-term crop loans, term loans for agricultural activities, for rural artisans, village and cottage industries, retail trade and self employed, consumption loans etc. Nearly 90 percent of the loans of RRBs, were provided to the weaker sections. State wise Uttar Pradesh found large number of offices.
Objectives of RRBs:
RRBs had followed instructions given by RBI and Government of India regarding loan policies, procedures, etc.
The basic aim of setting up RRBs viz, developing the rural economy by providing credit for the development of agriculture, trade, commerce industry and other productive activities in rural areas, was being fulfilled and
RRBs had successfully maintained their image as a small man’s bank by confining their credit facilities to the target groups viz, small marginal farmers, agricultural labourers, artisans and small enterprises for productive activities.
The recovery position on the whole was not satisfactory.
Problems in functioning of RRBs:
a. On account of the many restrictions place on the business they can undertake, RRBs have lowearning capacity.
b. The wage and salary scales of RRBs have been rising and, in fact, with the recent award of a tribunal, their scales would approximate those of commercial banks; with the increase in salary scales, an important rationale for the setting up of RRBs has ceased to exist.
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.
Reserve Bank of India:
RBI had shown keen interest in agricultural credit and maintained a separate department for this purpose. RBI extended short-term seasonal credit as well as medium-term and long-term credit to agriculture through State level co-operative banks and land developments banks. RBI had also set up the Agricultural Refinance Development Corporation (ARDC) to provide refinance support to the banks to promote programmes of agricultural development, particularly those requiring term credit. With the widening of the role of bank credit from “agricultural development” to “rural development” the Government propo9sed to have a more broad-based organization at the apex level to extend support and give guidance to credit institutions in matter relating to the formulation and implementation of rural development programmes. A National Bank for Agriculture and Rural Development (NABARD) or National Bank was, therefore, set up to take over the agricultural credit functions of RBI on the on hand and the refinance functions of ARDC on the other.
National Bank for Agricultural and Rural Development
NABARD is an apex institution accredited with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas.
NABARD operates throughout the country through its Head Office at Mumbai, 25 Regional Offices and on Sub-Office, located in the capitals of all the states/union territories. It also has 4 training establishments.
It is an apex refinancing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas.
It takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institution, training of personnel, etc.
It co-ordinates the rural financing activities of all the institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India and other national level institutions concerned with policy formulation.
It 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