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RURAL CREDIT

1. TYPES OF AGGRICULTURE CREDIT


i) Productive and unproductive credit
ii) Short term , medium term , long term credit
2. Non institutional sources of credit
i) Moneylenders
ii) Land lords and others
iii) Importance –
a. Loan for every purpose whether productive or not
b. Easily accessible
c. No procedural formalities
d. Do not insist on particular type of security
iv) Disadvantages-
a. High rate of interest
b. Indulge in malpractices
c. Force borrowers to sell products at lower rate
d. Other such activities

3. Institutional source of rural credit-

i) advantages-

a. not exploitive in nature

b. Rate of interest is low

c. clear distinction between short term credit and medium term credit

d. Integrated with other agricultural improvement.

Sources of institutional credit


1. Cooperative credit societies
i. Cooperative banks – to provide short term and
medium term loans
ii. Land development bank – long term credit to
agriculture
a. Three tier structure-
Sate cooperative banks , district cooperative banks ,
primary agricultural credit societies
b. Get funds from NABARD and public deposits
c. Advantages of cooperative credit societies-
 Low rate of interest
 Assist the weaker section
d. Short comings of cooperative societies-
 Inadequate coverage
 Regional imbalance
 Inadequate resources
 Inadequate credit
 Cornering by large farmers
 Lack of timely credit
2. Commercial bank
a. Entered rural credit field only after nationalization of banks in 1969
b. Commercial bank restricted to urban areas before because of following
shortfalls in agriculture credit-
 Uncertain character of agriculture
 Lack of proper accounting
 Small amount of loans
 Inadequate security
 High default rate
c. After nationalization effects-
 Rapid expansion of branches in rural areas
 Lead bank scheme -1969
 Setting up of regional rural bank in 1975
 Importance source of credit at present
d. Helped in both ways that is directly and indirectly
e. Difficulties faced by commercial bank
 High cost of operation
 Large number of overdoes
 Staff reluctant to work in rural areas
 Overcautious approach etc.
3. Regional rural bank
a. Established by government of India on 2 october 1975
b. Objectives
 Provide credit to weaker section like small
agricultural albour , rural entrepreneurs , artisians
etc
 Known as small man’s bank
 Provide credit al lowest rate compaired with other
agencies
 Controled by NABARD
c. Achievements
 Increases the agricultural allied sector by 198
times
 Commendeble job in helping weaker section
 Loans at low arte or even without security at
times
d. Limitations
 Low earning capacity
 Recovery possition not satisfactory
 High cost of operation
 Procedural delays
4. Self help groups (SHG)
a. A self-help group (SHG) financial intermediary committee
usually composed of 10–20 local women or men. Most self-help
groups are located in India, though SHGs can be found in other
countries, especially in South Asia and Southeast Asia.SHG is
nothing but a group of people who are on daily wages, they form a
group and from that group one person collects the money and
gives the money to the person who is in need
Also Raed defination from book
b. Lies between formal and informal sector of credit
c. Novel way for poor who can not reach bank for credit
d. Modest interest
e. Pooled funds
f. No collateral for members

NOTE ABOUT NABARD

National Bank for


Agriculture and Rural Development

NABARD logo

Predecessor Agricultural Refinance


and Development
Corporation

Formation July 12, 1982; 36 years


ago[1]
National Bank for Agriculture
and Rural Type Development finance
institution
Development (NABARD) is an
apex development financial
Legal status State-owned
institution in India,
enterprise, Government
headquartered
of India
at Mumbai with regional
offices all over India.The
Purpose Development
Bank has been entrusted
assistance, poverty
with "matters concerning
reduction
policy, planning and
operations in the field of
Headquarters Mumbai, Maharashtra,
credit for agriculture and India[2]
other economic activities in
rural areas in India". Chairman Dr. Harsh Kumar
NABARD is active in Bhanwala[3]
developing financial
inclusion policy and is a Website www.nabard.org
member of the Alliance for
Financial Inclusion.The only DIF(Developmental Financial Institution)
status institution in India.

 It is an apex intitution for rural credit.

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