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.