A

PROJECT ON

AGRICULTURAL FINANCE IN INDIA

SUBMITTED TO

THE UNIVERSITY OF MUMBAI

IN PARTIAL FULFILLMENT FOR THE AWARD OF

THE DEGREE OF BACHELOR OF COMMERCE

(BANKING AND INSURANCE)

SEMESTER V

(ROLL NO. 13)

BY

CHHAYA DUBEY

THE K.M.AGARRWAL COLLEGE OF HIGHER EDUCATION

ACADEMIC YEAR 2016-2017

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 K.M AGRAWAL COLLEGE OF ART COMMERCE & SCIENCE

Conducted By;
(HINDI BHASHIK JANKALYAN SHIKSHAN SANTHA, KALYAN)
(Affiliated by university of Mumbai)

(B.COM)BACHLOR IN BANKING AND INSURANCE

CERTIFICATE
THIS IS TO CERTIFY THAT THE REPORT ON
AGRICULTURAL FINANCE IN INDIA
HAS BEEN SUBMITTED BY MS. CHHAYA SHASHIKANT DUBEY
Has been satisfactory completed & submitted under subject finance project
during the academic year 2016-2017 by the student of T.Y.B.COM
(BANKING AND INSURANCE)

EXTERNAL EXAMINER PRINCIPAL

(DR. MRS ANITA MANNA)

GUIDE COURSE CO-ORDINATOR

(MR.MAHENDRA PANDEY) (PROF.SUJEET SINGH)

2
 DECLARATION BY THE STUDENT

I, CHHHAYA SHASHIKANT DUBEY the student of K. M. AGRAWAL

COLLEGE, Kalyan studying in THIRD YEAR BACHELOR OF
COMMERCE (BANKING AND INSURANCE) Semester V (2016-2017)
hereby declare that I have completed the project work on AGRICULTURAL
FINANCE IN INDIA successfully in the academic year.(2016-2017)
The information submitted or presented in this project work is true and original to
the best of my knowledge.

Place:

Date:

STUDENT SIGNATURE
(CHHAYA DUBEY)

3
 ACKNOWLEDGEMENT

First, I would like to thank the K.M. AGRAWAL COLLEGE, KALYAN for
giving me the opportunity to make the project on subject AGRICULTURAL FINANCE
IN INDIA and explore my knowledge.

I would like to thank my college K.M. AGRAWAL for giving a great opportunity to do
work on this project.

I would like to thank MR. MAHENDRA PRATAP PANDEY SIR. For his valuable
advice and support in spite of his busy schedule, he was always there to give feedback and
guidelines whenever needed. Who have sincerely supported me with the valuable insights into
the completion of this project and without his active support and encouragement this project
would not have been possible
Thank you, Madam for mentoring and kind support for the accomplishment of the
project.

Hereby, I want to take the opportunity to thank all sources, people, guides who helped me
to get the required data.

I also express my gratitude to all those who have not been mentioned in this report work
but helped me in completing this report.

I am highly indebted to who provided me with the necessary information and also for the
support extended out to me in the completion of this project work and his valuable suggestion
and comments on bringing out this project report in the best way possible.

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 EXECUTIVE SUMMARY
Agriculture is the backbone of Indian economy and agricultural development is
Central to all strategies for planned development. The agricultural growth has
Powerful average effects on the rest of the economy and all the three basic
Objectives of economic development of the country, viz. output growth, price stability
And poverty alleviation are best served by the growth of the agricultural sector.

Define agricultural finance as the study of the financing and liquidity services credit
provides to farm borrowers. Others may define agricultural finance as the study of those
financial intermediaries who provide loan funds to agriculture, and the financial markets in
which these intermediaries obtain their funds. In fact, several agricultural economist identified a
number of studies focusing on such additional topics as rural banking, insurance, income
distribution, farm financial management, and taxation. Finally, the study of agriculture finance
can be broaden even further to account for all economics and financial interfaces between
agricultural and the rest of the macroeconomics, including the effects that changes in national
economic policies have upon the economic performance of agriculture and financial position of
farm operator families.

Agricultural extension services have, of late, gained more importance in the

developmental agenda of the nation in the face of new challenges with which the agriculture
sector is currently confronted.

The major aim of Agro Money portal, is provide information regarding Agricultural
Credit, Policies & Schemes, Credit Agencies, Financial Inclusion, Microfinance, NREGA,
Market Information, Agricultural Best Practices, on & off Farm Enterprises and various Products
& Services.
Bank had recruited expert staff from various technical disciplines and created a separate
cadre of officers. These officers were involved in formulating, appraising, monitoring and
evaluating different agricultural projects implemented by different credit agencies. These
officers, irrespective of their academic background, were imparted similar type of training as all
other officers. Their placements and the regular job rotations helped in grooming them to take up
assorted assignments, get involved in a variety of roles and functions including credit,
developmental, promotional, supervisory and necessary support and information for decision
making. The Bank also had access to their specialized skills which were utilized whenever
needed.

5
 INDEX
SR. PARTICULARS PAGE
NO. NAO.

1] AGRICULTURAL FINANCE IN INDIA :-

1. Introduction 7
2. 3 Rs of Credit 12
3. Agriculture growth in India
4. Types of credit
5. Agricultural loans
6. Schemes for Agricultural finance
7. Indian Agricultural finance budget
8. Sources of Agricultural finance in India
9. Indias agriculture development problem
2] NABARD :-
1. The function of NABARD
2. Mission
3. Organization structure
4. Nabard budget for Agricultural finance in India
5. Nabard performance
6. Nabard role
3] WEB-BLIOGRAPHY
4] CONCLUSION

6
 1. INTRODUCTION
Finance in agriculture is as important as development of technologies. Technical inputs
can be p u r c h a s e d a n d u s e d b y f a r m e r o n l y i f h e h a s m o n e y ( f u n d s ) . B u t h i s
o w n m o n e y i s a l w a y s inadequate and he needs outside finance or credit .Professional
money lenders were the only source of credit to agriculture till 1935. They use to charge unduly
high rates of interest and follow serious practices while giving loans and recovering them. As a
result, farmers were heavily burdened with debts and many of them perpetuated debts. There
were widespread discontents among farmers against these practices and there were instances of
riots also. With the passing of Reserve Bank of India Act 1934, District Central Co-op. Banks
Act and Land Development Banks Act, agricultural credit received simpletons and there were
improvements in agricultural credit.

A powerful alternative agency came into being. Large-scale credit became available with
reasonable rates of interest at easy terms, both in terms of granting loans and recovery of them.
Although the co-operative banks started fanancing agriculture with their establishments in
1930s real imp tons was received only after Independence when suitable legislation were passed
and policies were formulated. Thereafter, bank credit to agriculture made phenomenal progress
by opening branches in rural areas and attracting deposits. Till 14 major commercial banks were
nationalized in 1969, co-operative banks were the main institutional agencies providing finance
to agriculture. After nationalization, it was made mandatory for these banks to provide finance to
agriculture as a priority sector.

These banks undertook special programs of branch expansion and created a network of banking
services throughout the country and started financing agriculture on large scale. Thus agriculture
credit acquired multi-agency dimension. Development and adoption of new technologies and
availability of finance go hand in hand. In bringing "Green Revolution", "White Revolution" and

7
now "Yellow Revolution" finance has played a crucial role. Now the agriculture credit, through
multi agency approach has come to stay. The procedures and amount of loans for
Various purposes have been standardized. Among the various purposes "Crop loans"
(Short-term loan) has the major share.

In addition, farmers get loans for purchase of electric motor with pump, tractor and other
machinery, digging wells or boring wells, installation of pipe lines, drip irrigation, planting fruit
orchards, purchase of dairy animals and feeds/fodder for them, poultry, sheep/goat keeping and
for many other allied enterprises.

Finance in agriculture is as important as development of technologies. Technical inputs

can be purchased and used by farmer only if he has money (funds). But his own money is always
inadequate and he needs outside finance or credit.

Professional money lenders were the only source of credit to agriculture till 1935. They
use to charge unduly high rates of interest and follow serious practices while giving loans and
recovering them. As a result, farmers were heavily burdened with debts and many of them
perpetuated debts. There were widespread discontents among farmers against these practices and
there were instances of riots also.

With the passing of Reserve Bank of India Act 1934, District Central Co-op. Banks Act
and Land Development Banks Act, agricultural credit received imp tons and there were
improvements in agricultural credit. A powerful alternative agency came into being. Large-scale
credit became available with reasonable rates of interest at easy terms, both in terms of granting
loans and recovery of them. Both the co-operative banks advance credit mostly to agriculture.
First bank advances short-term and medium term loans while the second bank advances long-
term loans. The Reserve Bank of India as the Central bank of the country took lead in making
credit available to agriculture through these banks by laying down suitable policies.

Although the co-operative banks started financing agriculture with their establishments in
1930s real imp tons was received only after Independence when suitable legislation were passed
and policies were formulated. Thereafter, bank credit to agriculture made phenomenal progress
by opening branches in rural areas and attracting deposits.

Till 14 major commercial banks were nationalized in 1969, co-operative banks were the
main institutional agencies providing finance to agriculture. After nationalization, it was made
mandatory for these banks to provide finance to agriculture as a priority sector. These banks
undertook special programs of branch expansion and created a network of banking services
throughout the country and started financing agriculture on large scale. Thus agriculture credit
acquired multi-agency dimension. Development and adoption of new technologies and
availability of finance go hand in hand. In bringing "Green Revolution", "White Revolution" and
now "Yellow Revolution" finance has played a crucial role. Now the agriculture credit, through

multi agency approach has come to stay.

The procedures and amount of loans for various purposes have been standardized.

8
Among the various purposes "Crop loans" (Short-term loan) has the major share. In addition,
farmers get loans for purchase of electric motor with pump, tractor and other machinery, digging
wells or boring wells, installation of pipe lines, drip irrigation, planting fruit orchards, purchase
of dairy animals and feeds/fodder for them, poultry, sheep/goat keeping and for many other
allied enterprises.

Why Agriculture Finance ?

India is mainly an agricultural country. Agriculture accounts for approximately 33

percent of India's GDP and employs nearly 62 percent of the population. It accounts for 8.56 %
of India's exports. About 43 % of India's geographical area is used for agricultural activity.
Agricultural production in this country depends upon millions of small farmers. It is intensity of
their effort and the efficiency of their technique that will help in raising yields per acre. Finance
in agriculture is as important as development of technologies. Technical inputs can be purchased
and used by farmer only if he has money (funds). But his own money is always inadequate and
he needs outside finance or credit. Because of inadequate financial resources and absence of
timely credit facilities at reasonable rates, many of the farmers, even though otherwise willing,
are unable to go in for improved seeds and manures or to introduce better methods or techniques.
The farming community must be kept informed about the various sources of agriculture finance.
Agricultural finance possesses its usefulness to the farmers, lenders and extension workers. The
knowledge of lending institutions, their legal and regulatory environment helps in selecting the
appropriate lender who can adequately provide the credit with terms and related services needed
to finance the farm business.

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 Agro Money aims to disseminate useful information about Agriculture Finance to the
farming community and service providers in the rural areas. Agro Money will create a platform
for different levels in the rural agricultural landscape - farmers, cooperatives and professional
bodies, farm machinery vendors, fertilizer and chemical companies, insurance regulators and
agronomists, consultants, and farm advisors.

The major aim of Agro Money portal, is provide information regarding Agricultural Credit,
Policies & Schemes, Credit Agencies, Financial Inclusion, Microfinance, NREGA, Market
Information, Agricultural Best Practices, On & Off Farm Enterprises and various Products &
Services.
This site will be useful for Agriculture graduates appearing for Bank's Agriculture Officer Exam,
Officers already working in field of Agriculture Credit, Rural Development and related fields.

We foresee a 'knowledge society' in agriculture, by

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 Providing timely and reliable information through our site

Providing information about policies of Government and RBI regarding flow of credit to
agriculture.
Providing information about schemes available for agriculture finance.

The quantum of agricultural credit can be judged from the figures of credit disbursed by all the
banks at all Indian level.

Year Rs. in crores

1987-88 9255

1988-89 9785

1989-90 10186

1990-91 8983

1991-92 11303

1992-93 13000

1993-94 15100

1994-95 16700

1999-2000 43000

2000-01 51500

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 2. THREE RS OF CREDIT
There are three basic considerations, which must be taken into account before a lending agency
decides to advance a loan and the borrower decides to borrow:

Returns from the Proposed Investment,

Repaying capacity.
The risk bearing ability of the borrower.

These are known as the Three Rs of credit.

1. Returns: The First Test

Emphasis here should be on additional returns and additional costs involved in utilizing the
borrowed funds. It involves working out the optimum combination of farm enterprises and the
returns thereof, resulting from the additional availability of resources made possible through
borrowed funds. The following points

Estimates of returns should be made on the basis of resources including borrowed funds.
Estimates of returns and costs should be made at the margin, not on an average.
Not only the MR=MC principles be kept in view while deciding the amount of credit but the law
of equi-marginal returns must be fully exploited.
The level of other resources should be considered before deciding upon the amount of working
capital to be used. The possibilities of enhancing the level of other most limiting resources to
farm production should also be examined.
Due care should be taken that more than the required amount of money is not advanced or
obtained. At the same time, an inadequate amount of funds would not serve the purpose. Funds
should, therefore, be advanced neither inadequately or excessively, but just the amount that can
be profitably used.
Money needed for consumption purposes should also be considered for their marginal value to
the farm-family satisfaction against the marginal productivity of the production loans.

2. Repaying Capacity-The Second Test

Although necessary, it is not sufficient to only analyses the productivity or the additional
returns that will accrue due to the borrowed funds. A loan may be productive but still it may not
generate sufficient income to leave funds sufficient enough to repay the loan. Repaying capacity
is the portion of the amount that a farm family will earn from a years operation, which shall be
available for the repayment of the loan. It should be based on an estimate of anticipated income
from all sources of the borrower during the year. Repaying capacity, is therefore, worked out as a
residual after meeting the requirements of the family consumption and payment of other dues,
debts and repayments.

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There can be two types of loans

Self-liquidating,

Non-liquidating or partially self-liquidating loans.

The repaying capacity should be determined separately for self-liquidating and non-liquidating
loans.

In case of the self-liquidating loans the amount gets absorbed in the production process in
one year or production period and the formula here is:

Repaying capacity = Gross Income- [Living expenses Working expenses (not including loan) +
taxes + other loans and payments].

In case of non-liquidating or partially liquidating loans, the resource acquired with the
funds are not directly consumer or are consumed over a number of years. They do not become
completely a part of the first years costs and the returns from the investment are spread over a
period of several years. For non-liquidating or partially liquidating loans, the repaying capacity is
worked out as

Repaying capacity = gross cash income- (all working expenses+ other loans taxes and payments
due).

3. Risk Bearing Ability-The Third Test

It is necessary but again not sufficient that the credit should be productive and generate
sufficient repaying capacity. It is also essential that the borrower should be able to withstand the
shocks of probable financial losses. This is known as the risk-bearing ability of the borrower.
Assessment of risk-bearing ability is necessary because the returns and repaying capacity
analysis are made on the basis of averages. i.e., estimated production, prices and costs etc. but
these averages seldom hold true. Agricultural business is subject to the vagaries of nature ad is
exposed to many other hazards such as pest attacks, diseases and price fluctuations. Variations in
income occur as a rule rather than an exception. The variability in income has, therefore, to be
counted for in order to arrive at a fairly stable and reliable estimate of the repaying capacity.

The overall variability in returns has been estimated to be 21% in Ludhiana district. Such
variability coefficients are needed especially by the financial organizations in all parts of the
country where they wish to operate. The gross income should be deflated by this coefficient and
the analysis should the follow the same pattern as for repaying capacity.

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A. REGIONAL RURAL BANKS

In the multiagency approach to provide credit to agriculture, Regional Rural Banks (RRBs) have
special place. They are state sponsored, regionally based and rural oriented commercial banks.
The Govt. of India, in July 1975, appointed a Working Group to study in depth the problem of
devising alternative agencies to provide institutional credit to the rural people in the context of
steps then initiated under the 20 Point Economic Programs. The Working Group identified
various weaknesses of the co-operative credit agencies and the commercial banks and felt that
these institutions would not be able to fill the regional and functional gaps in the rural credit
system within a reasonable period of time. The Group therefore recommended a new type of
institution which combines

Local feel and familiarity with rural possess problems which co-operative banks.
Degree of business organization ability to mobilize deposit, access to money market and
modernized outlook which commercial banks have.

Thus, it was envisaged to combine desirable qualities of co-operative banks and commercial
banks in RRBs at the same time, it was emphasized that the role of RRBs would be to
supplement and not supplant the other institutional agencies already existing in the field.

a) Formation and Objective:3

The Government of India promulgated the Regional Rural Banks Ordinance on 26th
September 1975, which was later replaced by the Regional Rural Bank Act 1976. The preamble
to the Act states the objective to develop rural economy by providing credit and facilities for the
development of agriculture, trade, commerce, industry and other productive activities in the rural
areas, particularly to small and marginal farmers, agricultural labourers, artisans and small
entrepreneurs.
b) Capital Structure:
The RRB Act empowers the Central Govt. to open the banks from time to time at places
where it may consider it necessary. A Regional Rural Bank is jointly owned by the Govt. of
India, the Government of concerned state and public sector bank, which sponsored it. The
authorised capital of each bank is Rs. 1 crore and the issued capital is Rs. 25 lakhs; which is held
by them in the proportion of 50, 15 and 35 per cent respectively. Each bank carries the banking
business within the local limits specified by the Govt. notification.
c) Organizational structure:
The management of a RRB is vested in a nine-member Board of Directors headed by
Chairman who is an officer deputed by a sponsor bank but appointed by the Govt. of India.
Three directors to be nominated the Central Govt.
Two directors to be nominated by the concerned State Govt.
iv. Three directors to be nominated by the sponsor bank.
The sponsor bank, besides subscribing to the capital and deputing one of its official as chairman,
provides assistance to RRB in several ways such as financial accommodation, deputing
managerial and other staff and arranging the recruitment of staff and their training

14
 d) Functions:
Every RRB may undertake the following types of functions:

The granting of loans and advances particularly to small and marginal farmers and
agricultural laboursers individually or to a group, co-operative societies, agricultural processing
societies, co-operative farming societies, etc.

The Granting of loans and advances to artisans, small entrepreneurs and small traders,
businessmen, etc.

The Reserve Bank of India has brought RRBs under the ambit of priority sector lending on
par with the commercial banks. They have to ensure that forty percent of their advances are
accounted for the priority sector. Within the 40% priority target, 25% should go to weaker
section or 10% of their total advances to go to weaker section.

B. COMMERCIAL BANKS

The commercial banks form the core of the organized banking system and constitute
quantitatively the most important group of financial intermediaries in the country, compresing
both scheduled and non-scheduled banks. Deposits paid up capital and borrowings from the
Reserve Bank of India form the resources of the commercial banks. Commercial banks are the
most important intermediaries for promoting and mobilizing the savings and for allocating
investment among the different productive sectors. The short term and medium term credit needs
of both industry and agriculture are met by the commercial banks and they also help finance
developmental plans by investing funds in the government securities. Initially, the commercial
banks were concentrating only on the financing of the trade and industry.

However, with the nationalization of the banks, they are now actively involved in the
disbursement of agricultural credit. On account of the branch licensing policy adopted by the
RBI, the rural branches of the commercial banks account for a large percentage of the total
network and the Agricultural Development Branches, Gram Vikas Kendras and Rural Service
Centers were set up to cater exclusively to the needs of agriculture and the allied activities.
Under the Lead Bank Scheme all districts were allotted to commercial banks that were
entrusted with the responsibility of preparing credit plans for their lead districts. The Village
Adoption Scheme was formulated by commercial banks to carry out leading operations in
contributing significantly to the development of agriculture.

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 3. AGRICULTURE GROWTH RATE IN INDIA

Agriculture Growth Rate in India GDP had been growing earlier but in the last few years
it is constantly declining. Still, the Growth Rate of Agriculture in India GDP in the share of the
countrys GDP remains the biggest economic sector in the country. India GDP means the total
value of all the services and goods that are produced within the territory of the nation within the
specified time period. The country has the GDP of around US$ 1.09 trillion in 2007 and this
makes the Indian economy the twelfth biggest in the whole world. The growth rate of India GDP
is 9.4% in 2006- 2007. The agricultural sector has always been an important contributor to the
India GDP. This is due to the fact that the country is mainly based on the agriculture sector and
employs around 60% of the total workforce in India. The agricultural sector contributed around
18.6% to India GDP in 2005.Agriculture Growth Rate in India GDP in spite of its decline in the
share of the country's GDP plays a very important role in the all round economic and social
development of the country.
The Growth Rate of the Agriculture Sector in India GDP grew after independence for the
government of India placed special emphasis on the sector in its five-year plans. Further the
Green revolution took place in India and this gave a major boost to the agricultural sector
for irrigation facilities, provision of agriculture subsidies and credits, and improved technology.
This in turn helped to increase the Agriculture Growth Rate in India GDP. The agricultural yield
increased in India after independence but in the last few years it has decreased. This in its turn
has declined the Growth Rate of the Agricultural Sector in India GDP. The total production of
food grain was 212 million tons in 2001- 2002 and the next year it declined to 174.2 million
tones. Agriculture Growth Rate in India GDP declined by 5.2%in 2002- 2003. The Growth Rate
of the Agriculture Sector in India GDP grew at the rate of 1.7%each year between 2001- 2002
and 2003- 2004.
This shows that Agriculture Growth Rate in India GDP has grown very slowly in the last
few years. Agriculture Growth Rate in India GDP has slowed down for the production in this
sector has reduced over the years. The agricultural sector has had low production due to a
number of factors such as illiteracy, insufficient finance, and inadequate marketing of
agricultural products. Further the reasons for the decline in Agriculture Growth Rate in India

16
GDP are that in the sector the average size of the farms is very small which in turn has resulted
in low productivity. Also the Growth Rate of the Agricultural Sector in India GDP has declined
due to the fact that the sector has not adopted modern technology and agricultural practices.
Agriculture Growth Rate in India GDP has also decreased due to the fact that the sector has
insufficient irrigation facilities. As a result of this the farmers are dependent on rainfall, which is
however very unpredictable.

Agriculture Growth Rate in India GDP has declined over the years. The Indian
government must take steps to boost the agricultural sector for this in its turn will lead to the
growth of Agriculture Growth Rate in India GDP.

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3. TYPES OF CREDITS
The Credit requirements of agriculture are of three types viz.
1. Short Term
2. Medium Term
3. Long- Term (LT)
1. Long Term Credit :
The period of long-term credit is generally 5 to 20 years or even more in some special
cases. Inany 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, landlevelling, 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, sputa (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 incase 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 grain.
Land Development Banks:
The special banks providing LT Loans are called Land Development Banks (LDA). The
history of LDBs is quite old. The first LDB was started at Hang in Punjab in 1920. But the real
impetus to these banks was received after passing the Land Mortgage Banks Act in 1930s
(LDBs were originally called Land Mortgage Banks). After passing this Act LDBs 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 talk 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:

18
The main function of raising funds is carried out by the Central or State Land Development Bank
which can really deal with the money market of the country effectively and advance loans to
primary LDBs. The sources of funds of State LDBs are:-

1. Share capital.
2. Issue of debentures
3. Loans from NABARD
4. Reimbursements of subsidies from the Govt.
5. Other funds.

Issue of debentures is the main source of funds for the LDBs. Debentures are a `Bond
conveying and acknowledging the debt and also containing the provision of promise for payment
of interest at stipulated rate and return of the principal amount. The period of debentures varies
from 7 to15 years. As LDBs require funds of longer duration to advance LT loans to borrowers,
the debenture is a convenient instrument of raising funds. Because it guarantees that funds will
remain with the Banks for a specified period.
There are three types of debentures:-

1. Regular debentures
2. Rural debentures
3. Special development debentures.

These debentures are mostly purchased by financial institutions like LIC, Commercial
Banks, Co-op. Banks, NABARD, and State Goats. As there is limited response from the public.
The State Govt. give incentive subsidies for many development activities by individual
farmer including purchase of tractor. The amounts of subsidies are reimbursed to the LDBs.
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 scrutinizes 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. 'MEDIUM TERM'
Medium term is an asset holding period or investment horizon that is intermediate in nature.
The exact period of time that is considered medium term depends on the investor's
personal preferences, as well as on the asset class under consideration. In the fixed-income
market, bonds that have a maturity period of five to 10 years are considered to be medium-
term bonds

19
 4. AGRICULTURAL LOANS

Agricultural loans are available for a multitude of farming purposes. Farmers may apply
for loans to buy inputs for the cultivation of food grain crops as well as for horticulture,
aquaculture, animal husbandry, floriculture and sericulture businesses. There are also special
loans to finance the purchase of agricultural machinery such as tractors, harvesters and trucks.
Construction of biogas plants and irrigation systems as well as the purchase of agricultural land
may also be financed through special types of agricultural finance.

COOPERATIVE AGRICULTURAL BANK

1.National Bank for Agriculture and Rural Development or NABARD

-It is responsible for refinance disbursement to commercial banks, State cooperative

banks, State cooperatives, rural development banks, Regional Rural Banks (RRBs) and
other eligible financial institutions. It also sanctions money through its Rural Infrastructure
Development Fund for projects covering irrigation, rural roads and bridges, health and education,
soil conservation and drinking water schemes. NABARD also offers a Kisan Credit Card
Scheme and crop loans under the Rashtriya Krishi Bima Yojana.

Banks and RRB's introduced the Kisan Credit Card Scheme of NABARD in their areas
of operation. In this scheme eligible farmers are provided with a Kisan Credit Card and a
passbook or card-cum-pass book. The revolving cash credit facility allows any number
of withdrawals and repayments within the limit. This limit is fixed on the basis of operational
land holding, cropping pattern and the scale of finance. Sub-limits may be fixed at the discretion
of banks. This Kisan Credit Card is valid for 3 years subject to annual review. As incentive for
good performance, credit limits may be enhanced to take care of increase in costs, change in
cropping pattern, etc. Each drawl should be repaid within a maximum period of 12months.
Conversion or rescheduling of loans is allowed in case of damage to crops due to natural
calamities. Security, margin, rate of interest and other details are fixed according to RBI norms.

20
2.Bihar State Co-operative Bank Limited (BSCB)
- Offers a range of loans and financial schemes to agriculturalists.

3.Haryana State Co-operative Apex Bank Limited (HARCOBANK)

- The bank offers crop loans, Kisan Credit Cards, cash credit against hypothecation of
stocks and interim finance by way of cash credit.

4.National Federation of State Co-operative Banks Limited (NAFSCOB)

- This federation offers a range of agricultural loans through member State Cooperative
Banks, District Central Cooperative Banks and Primary Agricultural Cooperative Societies.

5.Orissa State Co-operative Bank Limited (OSCB)

- The bank has introduced Kisan Credit Cards in the S.T. Cooperative Credit Sector. It
also organizes seminars on agri finance. OSCB has 17 Central Cooperative Banks and around
810 minibanks in different districts of Orissa.

6.Repatriates Co-operative Finance and Development Bank Limited

-This bank does not have any specific agricultural loan, but offers a range of financial
products that can be accessed by people who wish to develop agriculture and relatedactivities.

7.Punjab State Cooperative Agriculture Development Bank Ltd

- Initially, the bank only gave farmers loans to pay off old debts and purchase land. Today,
the bank provides loans for various purposes like improvement of alkaline and saline lands,
purchase of tractors, installing tube wells and other modern agricultural equipment. It also offers
financial schemes for poultry development, dairy development, horticulture, floriculture, sheep
rearing and inland fisheries.

8.Andhra Pradesh State Cooperative Bank Limited (APCOB)

- has a loan portfolio that covers crop loans, medium term loans and long term loans for
agricultural purposes. It also supports government sponsored District Rural Development
Agency projects through IRDP loans and cooperative sugar factories, spinning mills, weavers
societies, employees' cooperative credit societies and other organizations. APCOB has also
extended finance to apex cooperative institutions in the State such as APCO,MARKFED
and GCC.

21
 5. SCHEMES FOR AGRICULTURE FINANCE

1. SBT KISAN GOLD CARD SCHEME (General purpose Agriculture TermLoan)

a. 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 deposits with the Bank.
e. Good borrowers of other banks provided they liquidate their dues with other banks.
f. Good farmers who have not availed loans from any bank.

b. PURPOSE

The borrower is at liberty to utilize 50% of the amount for any purpose, including
consumption purpose and purchase of land.

c. AMOUNT OF LOAN

The amount of loan is limited to 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 less, subject to a maximum of Rs.10 lakh.

d. RATE OF INTEREST

Interest rate ranges from 1% below PLR.

e. SECURITY

Hypothecation of crops and assets, if any, created out of bank finance and existing
movable assets such as milch animals, pump sets etc. The loan will be secured by
equitable mortgage of properties worth double the loan amount, or term deposit
receipts, LIC policies of adequate surrender value, NSCs completed lock in period or
more etc.

f. DISBURSEMENT

Cash disbursals are allowed to the full extent of the credit limit.

g. REPAYMENT
The repayment period shall be 10 years. The due date of the installment shall be fixed in such a
way to coincide with the date of generation of income.

22
2. KISAN CREDIT CARD SCHEME

a. ELIGIBILITY

All agriculturists who are in need of short term production requirements. ATM
facility and Personal Accident Insurance Scheme for life up to Rs.50000/- and
permanent disability cover up to Rs.25000/- is available on request.

b. PURPOSE

To provide hassle free short-term credit to farmers on the basis of their land
holdings for purchase of inputs and draw cash to meet their production needs. i.e.
Cultivation expenses including allied activities with a consumption component.

c. AMOUNT OF LOAN

To be fixed on the basis of operational holdings and scale of finance with

consumption component 15% (maximum Ra.10000/-) of production credit. The scale
of finance to farmers who own cultivated land below one acre will be at the rate of
Rs.40000/- (on pro rata basis) and farmers who own more than one acre with
intensive farming of land be given at the rate of Rs.37500/- per acre and part thereof.

d. RATE OF INTEREST

Interest rate ranges from 2.50% below to 1.50% above BPLR for various limits.

e. REPAYMENT

Running Cash Credit account for 36 months subject to annual review

and total annual credit should exceed annual debit.

3. HOMESTEAD FARMING

a. PURPOSE

A scheme for financing farmers practicing mixed cropping / inter cropping along
with allied activities to enable them to undertake cultivation of various crops in a
more integrated way. The scheme provides the farmers with sufficient working
capital required for their homestead farming(Mixed cropping along with allied
activities) by fixing scale of finance based on land holding to meet the cost of entire
farming activities.

b. AMOUNT OF LOAN

23
 The farmers who own cultivated land below one acre be given the scale of finance
on pro rata basis at the rate of Rs.40000/- and farmers who own more than one acre of
land be given at the rate of Rs.37500/- per acre and part thereof.

c. RATE OF INTEREST

Interest rate ranges from 2.50% below to 1.50% above BPLR for various limits.

d. REPAYMENT

The facility will be sanctioned as an Agriculture Cash Credit limit (In case of
Kisan Credit Card running cash credit).

4. LOAN FOR ESTATE PURCHASE

a. ELIGIBILITY

The estate should be either in yielding stage with the crops in its prime yield age
or capable of being developed in to a viable unit. The yield / net income of the estate
should be sufficient to liquid date the proposed loan and interest accrued with in a
period of 7 to 10 years. The proposed estate should be free from encumbrance and
entire property should be offered as security to the loan.

b. PURPOSE

To encourage those who prefer to settle down in agriculture and are in the look
out of good /viable estates for purchase and also to improve production in agriculture.

c. AMOUNT OF LOAN

The quantum of loan that will be considered for sanction will be 75% of the
registered value or 50% of the market value whichever is low. In exceptional cases
80% of the registered value or 50% of the market share whichever is low is also
considered. The loan for the development of the estate like land development
including working capital can also be sanctioned.

d. RATE OF INTEREST Interest rate same as BPLR

e. REPAYMENT

Repayment of loan will be in quarterly/half yearly / yearly installments depending

on the harvest of the crops and the loan shall be repaid within a maximum period of 7 to
10 years.

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5. S CH E M E FO R F I N A N CI N G F AR M E R S F O R PU R C H A S E
O F L A ND FOR AGRICULTURAL PURPOSES

a. ELIGIBILITY

Small and Marginal farmers - land maximum up to 5 acres of non-irrigated land

or 2.5 acres of irrigated land including the land purchased under the scheme. Tenant,
sharecropper and landless agricultural laborers with a good record of prompt
repayment of our loans for the last2 years are also eligible.

b. PURPOSE

To finance small and marginal farmers, share croppers, tenant cultivators

For purchasing land to expand activities and to make existing small and marginal units
economically viable
to bring fallow lands and waste lands under cultivation to step up agricultural
production as well as productivity also to finance share croppers / tenant farmers
to enable them to diversify farming activities to allied areas to increase their
income.

c. AMOUNT OF LOAN

Maximum loan under the scheme towards land cost shall not exceed Rs 5 lack.
Cost of development/economic activity shall be financed under the banks other
financing schemes.

d. RATE OF INTEREST

Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits.

e. REPAYMENT

Repayment of the loan will be 7 to 12 years in half yearly / yearly installments with
maximum of 24 months moratorium period. Gestation period / repayment due dates
etc. will be fixed according to income generation from the activity.

25
6. SCHEME FOR CULTIVATION OF MEDICINAL PLANTS

a. ELIGIBILITY All agriculturists are eligible.

b. PURPOSE

Scheme for financing cultivation of 22 medicinal plants cultivated extensively and

also in great demand in the local as well as foreign market. AMOUNT OF LOAN
Depending on the area of cultivation / project cost.

c. RATE OF INTEREST

Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits.

d. REPAYMENT

Repayment should coincide with harvesting and marketing or at the time

generation of income from the scheme.

7. SCHEME FOR CULTIVATION OF VANILLA

a. ELIGIBILITY

All agriculturists are eligible. PURPOSE Scheme for financing cultivation of

Vanilla, a cash crop, gaining ground in the State of Kerala.

b. AMOUNT OF LOAN

Amount of finance will be Rs.250000/- per hectare for pure crops and
Rs.210000/- per hectare for intercrop.

c. RATE OF INTEREST

Normal rate of interest as applicable to ATL

d. REPAYMENT

The loan shall be repaid within a period of 7 years, in yearly installments. Farmers
eligible for two years gestation period and interest is repayable on the 3rd and 4th year
and the principal from the 5th to 7th year.

26
8. SBT RAIN WATER HARVESTING SCHEME

a. ELIGIBILITY

Farmers having land holding of 0.50 acre or more are eligible to be considered for
finance under this scheme.

b. PURPOSE
Scheme envisages construction of low cost tanks for collecting and storing
rainwater and using it for irrigation, by siphon arrangement, utilizing gravitation flow
or by installing motor pump.

c. AMOUNT OF LOAN

Maximum amount of finance will be Rs.88000/- per acre. Scheme can be adopted
in smaller areas also by reducing the cost proportionately.

d. RATE OF INTEREST

Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits.

e. REPAYMENT

Repayment based on the income generated from the crops raised and cropping
pattern. The maximum period eligible for repayment is 8 years in annual installments.

27
9. PRODUCE MARKETING LOAN (Advance against Warehouse Receipt)
a. ELIGIBILITY

a. Farmers / traders depositing farm produce in the warehouses of the central /

state warehousing corporations.
b. Scheme will be operative in Karnataka, Andhra Pradesh, Tamilnadu & Kerala.

b. PURPOSE

a. To protect the farmers from the compulsion to sell their produce immediately
after harvest of produce despite an adverse market.
b. To finance farmers and traders against warehouse receipt.

c. AMOUNT OF LOAN

70% of the value of the warehouse receipt, valued at the market value or 70% of
the market price advised by Agri. Dept., HO whichever is less.

d. RATE OF INTEREST

Farmers Up to Rs.3 lakh - 3.50% below PLR 9.50%Above Rs.3 lakh - 2.50%
below PLR 10.50%Traders2.50% below PLR 10.50% (Irrespective of the limit)

e. REPAYMENT

On demand / 6 months which can be extended up to 12 months subject to

satisfactory shelf life /market condition.

28
10. AGRI. LOAN TO NON-RESIDENT INDIANS

a. ELIGIBILITY

Agricultural advances are available to the resident family members (means

spouse, father, mother, brother, sister etc.) of Non-Resident Indians for land-based
activities in respect of the land held by them in India subject to a. the loan should be
need based and the total land holding of the Non-Resident Indian, in individual name
or jointly with others, should not exceed 5 hab. The loan amount shall not be used for
acquiring any additional land.

b. PURPOSE

To finance farmers only for land-based activities and to carryon agricultural

activities on the existing land.

c. AMOUNT OF LOAN

The maximum amount of the loan will be need based.

d. RATE OF INTEREST

Interest rate ranges from 2.50% below to 1.50% above BPLR for various short-
term limits and from 1.75% below to 2.00% above BPLR for various long-term
limits.

e. REPAYMENT

The loan can be repaid out of the income generated from the agricultural activities
or remittances from abroad or by debit to their NRE/NRO/FCNR accounts.

29
 5. INDIAN AGRICULTURAL FINANCE BUDGET
Finance Minister Pranab Mukherjee today announced a Rs1,00,000 crore increase in the
agriculture credit target to Rs5,75,000 for the next fiscal and raised the outlay for farm
sector by about Rs3,000 crore.
"Agriculture continues to be a priority to the government. The total plan outlay for
agriculture and cooperation has been increased by 18% from Rs17, 123 crore in 2011-12
to Rs20, 208 crore in 2012-13," Mukherjee said in his Budget speech.
The allocation for scheme "Bringing Green Revolution in Eastern India" was also
increased by Rs600 crore to Rs1,000 crore in next fiscal considering the success of the
program me that led to an additional paddy production of 7 million tons in the Kharif
season of 2011-12 crop year.
The allocation for Rashtriya Krishi Vikas Yojna (RKVY) was also increased by 17% to
Rs 9,217 crore.
"Farmers need timely access to affordable credit. I propose to raise the target for
agricultural credit in 2012-13 to Rs5, 75,000 crore. This represent an increase of Rs1 lakh
crore," he said.
The credit target for this fiscal has been set at Rs4, 75,000 crore. During April-November
period, credit worth Rs2, 94,023 were disbursed by banks to farmers, according to data
provided by Economic Survey.
"The outlay for Rashtriya Krishi Vikas Yojna is being increased from Rs7,860 crore in
2011-12 to Rs9217 crore in 2012-13,"

A fresh approach to measuring the chronic problems does come out of this budget the
thought and intent needs to be commended. The salient points of the new agricultural investment
policy are

A government funding system has been established with the intent of pumping private
funding in the agricultural sector. Some of the major areas of private funding in the
agricultural sector are..

1. Irrigation (dams, canals and embankments)

2. Terminal markets (Mandis)
3. Soil testing labs
4. common infrastructures in agriculture and fertilizer segment
5. Investment in cold chain facilities & warehouses

The basic customs duty on a slew of agricultural, horticulture and agro-processing items
has been waived to a great extent
The budgetary support for the agriculture ministry was raised by 18% to Rs. 20,208
crores
The flagship program of the Indian agriculture, Rshtriya krishi Vikas yojana got a
budgetary boost of Rs. 1,357 crores.

30
 States in eastern India have reported additional paddy production of seven million tonnes in
Kharif 2011. I propose to increase the allocation for this scheme from Rs 400 crore in 2011-12 to
Rs 1000 crore in 2012-13.

This year, under RKVY, I also propose to allocate Rs 300 crore to Vidarbha Intensified
Irrigation Development Programme. This Scheme seeks to bring in more farming areas under
protective irrigation.

The Government intends to merge the remaining activities into a set of missions to address
the needs of agricultural development in the Twelfth Five Year Plan. These missions are:

1. National Food Security Mission which aims to bridge the yield gap in respect of paddy,
wheat, pulses, millet and fodder. The ongoing Integrated Development of Pulses
Villages, Promotion of Nutri-cereals and Accelerated Fodder Development Programme
would now become a part of this Mission;
2. National Mission on Sustainable Agriculture including Micro Irrigation is being taken up
as a part of the National Action Plan on Climate Change. The Rain fed Area
Development Programme will be merged with this;
3. National Mission on Oilseeds and Oil Palm aims to increase production and productivity
of oil seeds and oil palm;
4. National Mission on Agricultural Extension and Technology focuses on adoption of
appropriate technologies by farmers for improving productivity and efficiency in farm
operations; and
5. National Horticulture Mission aims at horticulture diversification. This will also include
the initiative on saffron.

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 5. SOURCES OF AGRICULTURAL FINANCE IN INDIA

Farmers in India financing operating needs, short- and long-term goals, working capital
constraints and expansion objectives by raising funds on securities exchanges and from private
investors. They also use government subsidies, grants and tax incentives to fund operations by
applying for such subsidies, meeting designated investment criteria and hiring local workers.

The sources of agricultural finance are broadly classified into two categories:
(A) Non institutional Credit Agencies or informal sources, and
(B) Institutional Credit Agencies or Formal Sources.

A. Non-institutional Credit Agencies

i) Traders and Commission Agents:

Traders and commission agents advance loans to agriculturists for productive
purposes against their crop without completing legal formalities. It often becomes
obligatory for farmers to buy inputs and sell output through them. They charge a very
heavy rate of interest on the loan and a commission on all the sales and purchases,
making it exploitative in nature.

ii) Landlords:
Mostly small farmers and tenants depend on landlords for meeting their
production and day to day financial requirements.

iii) Money lenders:

Despite rapid development in rural branches of different institutional credit
agencies, village money lenders still dominate the scene. Money lenders are of two
types- agriculturist money lenders who combine their money lending job with
farming and professional money lenders whose sole job is money lending. A number
of reasons have been attributed for the popularity of moneylenders such as:
(a) They meet demand for productive as well as unproductive requirement;
(b) They are easily approachable at odd hours; and
(c) They require very low paper work and advances are given against promissory notes or land.
Money lenders charge a very high rate of interest as they take advantage of the urgency
of the situation. Over the years a need for regulation of money lending has been felt. But lack of
institutional credit access to certain sections and areas had facilitated unhindered operation of
money lending.

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B. Institutional Credit Agencies
The evolution of institutional credit to agriculture could be broadly classified into four
distinct phases - 1904-1969 (predominance of co-operatives and setting up of RBI), 1969-1975
[nationalization of commercial banks and setting up of Regional Rural Banks (RRBs)], 1975-
1990 (setting up of NABARD) and from 1991 onwards (financial sector reforms). Institutional
funding of the farm sector is mainly by commercial banks, regional rural banks and co-operative
banks. Share of commercial banks in total institutional credit to agriculture is almost 48 percent
followed by cooperative banks with a share of 46 per cent. Regional Rural Banks account for just
about 6 per cent of total credit disbursement.

i) Government:
These are both short term as well as long-term loans. These loans are popularly
known as "Taccavi loans" which are generally advanced in times of natural
calamities. The rate of interest is low. But it is not a major source of agricultural
finance.

ii) Cooperative Credit Societies:

The history of cooperative movement in India dates back to 1904 when first
Cooperative Credit Societies Act was passed by the Government. The scope of the
Act was restricted to establishment of primary credit societies and non-credit societies
were left out of its purview. The shortcomings of the Act were rectified through
passing another Act called Cooperative Societies Act 1912. The Act gave provision
for registration of all types of Cooperative Societies. This made the emergence of
rural cooperatives both in the credit and noncredit areas, though with uneven spatial
growth. In subsequent years a number of Committees were appointed and
recommendations implemented to improve the functioning of the cooperatives.

Soon after the independence, the Government of India following the recommendations of All
India Rural Credit Survey Committee (1951) felt that cooperatives were the only alternative to
promote agricultural credit and development of rural areas. Accordingly, cooperatives received
substantial help in the provision of credit from Reserve Bank of India as a part of loan policy and
large scale assistance from Central and State Governments for their development and
strengthening. Many schemes involving subsidies and concessions for the weaker sections were
routed through cooperatives. As a result cooperative institutions registered a remarkable growth
in the post-independence India.

33
iii) Commercial Banks:
Previously commercial banks (CBs) were confined only to urban areas serving
mainly to trade, commerce and industry. Their role in rural credit was meagre i.e., 0.9
per cent in 1951- 52 and 0.7 per cent in 1961-61. The insignificant participation of
CBs in rural lending was explained by the risky nature of agriculture due to its heavy
dependence on monsoon, unorganized nature and subsistence approach. A major
change took place in the form of nationalization of CBs in 1969 and CBs were made
to play an active role in agricultural credit. At present, they are the largest source of
institutional credit to agriculture.

iv) Regional Rural Banks (RRBs):

RRBs were set up in those regions where availability of institutional credit was
found to be inadequate but potential for agricultural development was very high.
However, the main thrust of the RRBs is to provide loans to small and marginal
farmers, landless laborers and village artisans. These loans are advanced for
productive purposes. At present 196 RRBs are functioning in the country lending
around Rs 9,000 crore to rural people, particularly to weaker sections.

v) Micro financing:
Micro financing through Self Help Groups (SHG) has assumed prominence in
recent years. SHG is group of rural poor who volunteer to organise themselves into a
group for eradication of poverty of the members. They agree to save regularly and
convert their savings into a common fund known as the Group corpus. The members
of the group agree to use this common fund and such other funds that they may
receive as a group through a common management. Generally, a self-help group
consists of 10 to 20 persons. However, in difficult areas like deserts, hills and areas
with scattered and sparse population and in case of minor irrigation and disabled
persons, this number may range from 5-20. As soon as the SHG is formed and a
couple of group meetings are held, an SHG can open a Savings Bank account with the
nearest Commercial or Regional Rural Bank or a Cooperative Bank. This is essential
to keep the thrift and other earnings of the SHG safely and also to improve the
transparency levels of SHG's transactions. Opening of SB account, in fact, is the
beginning of a relationship between the bank and the SHG. The Reserve Bank of
India has issued instructions to all banks permitting them to open SB accounts in the
name of registered or unregistered SHGs.

34
 DIAGRAM

Non-institutional Institutional
Credit Agencies Credit Agencies

SOURCES

Other sources

C. Other sources
I. GOVERNMENT SUBSIDIES

Public authorities in India provide grants, subsidies and tax incentives to organizations or
individuals abiding by governmental guidelines and willing to invest in designated fields
or sectors. Such guidelines could mandate building and maintaining agricultural
infrastructure for periods of time, hiring local farming specialists and investing in
economically disadvantaged areas in the country. Officials could also provide financial
assistance---through export finance programs---to exporters who invest in designated
crop categories.

II. FOREIGN DIRECT INVESTMENTS

Foreign organizations willing to establish local businesses in the country engage in joint-
venture agreements with Indian partners, invest in farming companies operating in zones
with profit potential, acquire local operators or build new subsidiaries. Multinational
organizations engaged in development aid, such as the International Monetary Fund or
the World Bank, also may provide financing to farmers. Such institutions could provide
low-interest loans, grants or subsidies to entities with funding needs.

35
III. BOND ISSUANCE

Farming companies may raise funds to finance expansion projects, meet operating needs
and maintain adequate working capital ratios by issuing debt products on India's
securities exchanges such as the Bombay Stock Exchange and the Delhi Stock Exchange.
Entities receive proceeds from bond investors---or bondholders---and pay interest
periodically. They reimburse initial amounts loaned at maturity. Organizations not listed
on securities exchanges may raise cash by selling debt products to investors privately.
Investment bankers help arrange such private transactions.

IV. EQUITY ISSUANCE

Organizations may raise cash by selling shares of equity to investors on securities

exchanges. Entities not listed on exchanges may, under the guidance of investment
bankers, sell shares privately to investors. Equity buyers---also called equity holders,
shareholders or stockholders---hold voting rights and are invited to annual shareholders
meetings. They also receive periodic dividends and make profits when share values
increase. For example, a New Delhi-based farmer seeking to finance large fertilizer
purchases could issue shares on securities markets and use proceeds to undertake such
purchases and issue dividends when crops are sold.

V. FARM LOANS

Farmers may apply for private loans, also called farm loans, with financial institutions
such as banks, insurance companies and mutual funds, if they are not listed on securities
exchanges or funding costs on such exchanges are high. They receive funds from lenders
and agree to pay fixed amounts periodically, usually monthly or quarterly. Lenders verify
farmers' financial information, business-performance indicators, operating metrics and
working capital constraints to grant loans.

36
 Policies

A. Priority Sector Lending

As per the existing regulatory framework, banks have priority sector lending (PSL) targets
(the Reserve Bank of India mandates that banks must lend a certain percentage of funds to
certain sectors: 40% of ANBC (Adjusted Net Bank Credit) for domestic banks and 32% of
ANBC for foreign scheduled commercial banks). Within the overall figure, sub-targets are set
for banks: for domestic banks, 18% agricultural loans (of which 13.5% is direct-agri) plus 10%
lending to weaker sections, for domestic banks; for foreign banks, the requirement of specific
relevance to this context is the 10% sub-target for micro, small and medium enterprises. Any
shortfall in achieving these targets needs to be compensated by placing funds with NABARD
under RIDF scheme at very nominal rate of interest.

Priority Sector includes those sectors that impact large sections of the population, the weaker
sections and the sectors which are employment-intensive such as agriculture, and tiny and small
enterprises.
Presently, the broad categories of priority sector for all scheduled commercial banks are as
under:

37
CATEGORIES OF PRIORITY SECTOR

(i) Agriculture (Direct and Indirect finance):

Direct finance to agriculture includes short, medium and long term loans given for
agriculture and allied activities (dairy, fishery, piggery, poultry, bee-keeping, etc.) directly to
individual farmers, Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) of individual
farmers without limit and to others (such as corporate, partnership firms and institutions) for
taking up agriculture/allied activities.

(ii) Small Enterprises (Direct and Indirect Finance):

Direct finance to small enterprises includes all loans given to micro and small
(manufacturing) enterprises engaged in manufacture/ production, processing or preservation of
goods, and micro and small (service) enterprises engaged in providing or rendering of services,
and whose investment in plant and machinery and equipment (original cost excluding land and
building and such items as mentioned therein). The micro and small (service) enterprises
includes small road & water transport operators, small business, professional & self-employed
persons, and all other service enterprises.

Indirect finance to small enterprises includes finance to any person providing inputs to or
marketing the output of artisans, village and cottage industries, handlooms and to cooperatives of
producers in this sector.

(iii) Retail Trade:

Includes retail traders/private retail traders dealing in essential commodities (fair price
shops), and consumer co-operative stores.

(iv) Micro Credit:

Provision of credit and other financial services and products of very small amounts not
exceeding Rs. 50,000 per borrower, either directly or indirectly through a SHG/JLG mechanism
or to NBFC/MFI for on-lending up to Rs. 50,000 per borrower, will constitute micro credit.

(v) Education loans:

Education loans include loans and advances granted to only individuals for educational
purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad, and do not
include those granted to institutions;

(vi) Housing loans:

Loans up to Rs. 20 lakh to individuals for purchase/construction of dwelling unit per family,
(excluding loans granted by banks to their own employees) and loans given for repairs to the
damaged dwelling units of families up to Rs. 1 lakh in rural and semi-urban areas and up to Rs. 2
lakh in urban and metropolitan areas.

38
 B. Kisan Credit Card Scheme

In spite of various measures to rejuvenate farm credit, the flow of credit remained
quantitatively and qualitatively poor. The institutional sources of credit meet only 51 per cent of
the credit requirements of farm sector. The non-institutional sources were mainly reached by
farmers due to lack of collaterals, frequent needs, undue delays, complicated procedures and
malpractices adopted by institutional lending agencies. With a view to inquire into the reasons
for the problems of the farm credit and suggest measure for improving the delivering system,
RBI set up a one man Committee of Shri R. V. Gupta to in December 1997. The Committee
submitted its report in April 1998. It was against this background that RBI directed all Public
Sector Banks (PSBs), RRBs and cooperative banks to introduce "Kisan Credit Card Scheme
(KCCS)" on the lines of the model scheme formulated by NABARD and in due course of time
the KCCS was adopted by all the directed agencies.

1. Objective

The KCCS aims at adequate and timely support from banking system to the farmer for
crop production and ancillary activities. The credit limit (loan) is sanctioned in proportion
to the size of the owned land but some flexibility is provided for leased-in land in
addition to owned land. The borrowing limit is fixed on the basis of proposed cropping
pattern. Most of the banks are adhering to Scales of Finance (SOF) decided by the State
Level Bankers Committee (SLBC) but some banks have fixed their own SOF. The nature
of credit extended under KCCS is revolving cash credit i.e., it provides for any number of
withdrawals and repayments within the limit. This feature would provide flexibility and
reduce the interest burden upon KCCS beneficiary. Security and margin norms would be
in conformity with the guidelines issued by RBI and NABARD from time to time. With
effect from 2001-2002, it was made obligatory for the implementing agencies to operate
the KCCS with an in-built component of life-insurance for KCCS beneficiary. The KCCS
as envisaged has substituted all other existing institutional modes of short term credit
delivery.

39
2. The features of the scheme at a glance are:

Type of revolving cash credit facility with unlimited withdrawals and repayments.
Meet the production credit need, cultivation expenses, and contingency expenses of the
farmers.
Limits based on the basis of operational land holding, cropping pattern and scale of
finance. This limit is inclusive of 20% of production credit.
Each withdrawal to be paid within 12 months.
Card valid for 3 years subject to annual renewals.
Credit limits can be enhanced depending on performance and needs.
Rescheduling is also possible depending upon the situation. If for example the crops fail
due to a natural calamity and the farmer is not able to repay his loan, then he could get an
extension of up to four years.
Cash withdrawals through slips accompanied by card and passbook.
A credit cum passbook would be issued.
All branches engaged in agricultural lending could issue Kisan Credit Cards.

3. Benefit of KCC Scheme

Simplifies disbursement procedures

Removes rigidity regarding cash and kind
No need to apply for a loan for every crop
Assured availability of credit at any time enabling reduced interest burden for the farmer.
Helps buy seeds, fertilizers at farmer's convenience and choice
Helps buy on cash-avail discount from dealers
Credit facility for 3 years - no need for seasonal appraisal
Maximum credit limit based on agriculture income
Any number of withdrawals subject to credit limit
Repayment only after harvest
Rate of interest as applicable to agriculture advance
Security, margin and documentation norms as applicable to agricultural advance

40
 C. FINANCIAL INCLUSION-REACHING THE UNREACHED

Indian economy in general and banking services in particular have made rapid strides in
the recent past. However, a sizeable section of the population, particularly the vulnerable
groups, such as weaker sections and low income groups, continue to remain excluded from
even the most basic opportunities and services provided by the financial sector. Financial
inclusion is aimed at providing banking / financial services to all people in a fair, transparent
and equitable manner at affordable cost. Households with low income often lack access to
bank account and have to spend time and money for multiple visits to avail the banking

services, be it opening a savings bank account or availing a loan. These families find it more
difficult to save and to plan fi

nancially for the future. Thus, the unbanked public is largely cut off from the Banking
products/services. It is the endeavor of the Bank to provide the basic banking facility of SB
a/cs to all the unbanked.

Financial Inclusion Package: To start with, the Bank provided 'No frills' SB accounts. As a
next step, small overdraft facilities were allowed in the SB accounts in order to cater to the
account holder's general purpose or consumption needs, which eventually would provide
credit history for the future. Those who are engaged in income generation activities were
provided with General Credit Card facility (GCC) with a flexibility of rollover facility.

Business Facilitators / Business Correspondents (BF/BC)

With the objective of ensuring greater financial inclusion and increasing the outreach of the
banking sector, the RBI has permitted banks to use the services of NGOs / SHGs, MFIs and
other civil society organizations as intermediaries in providing financial and banking
services through the use of BF and BC Models.

Business Facilitator Model

Under the BF Model, banks may use intermediaries such as NGOs, farmers' clubs,
cooperatives, community based organizations, IT-enabled rural outlets of corporate entities,
post offices, insurance agents, well-functioning Panchayats, village knowledge centers, agri-
clinics / agri-business Centres, Krishi Vigyan Kendras and KVIC / KVIB units for providing
facilitation services. It has been clarified that such services may include:

Identification of borrowers and fitment of activities,

Collection and preliminary processing of loan applications,
Creation of awareness about savings and other products, education and advise on
managing money and debt counseling,
Processing and submission of application to banks,
Promotion and nurturing of SHGs / JLGs,
Post sanction monitoring,
Monitoring and hand holding of SHGs / JLGs / credit groups / others, and
Follow-up for recovery

41
Business Correspondent Model

Under the BC Model, NGOs / MFIs set up under the Societies / Trust Act,
Societies registered under Mutually Aided Cooperative Societies Acts or the
Cooperative Societies Acts of States, Section 25 Companies, Registered NBFCs not accepting
public deposits and post offices may act as BCs. Banks have been advised to conduct due
diligence on such entities and ensure that they are well established, enjoy good reputation and
have the confidence of local people.

In addition to the activities listed under the BF Model, the scope and activities to be undertaken
by BCs will include

Disbursal of small value credit,

Recovery of principal / collection of interest,
Collection of small value deposits,
Sale of micro-insurance / mutual fund products / pension products / other third party
products, and
Receipt and delivery of small value remittances / other payment instruments.

42
RURAL INFRASTRUCTURE DEVELOPMENT
FUND (RIDF)
The RIDF was set up by the Government in 1995-96 for financing ongoing rural Infrastructure
projects. The Fund is maintained by the National Bank for Agriculture and Rural Development
(NABARD). Domestic commercial banks contribute to the Fund to the extent of their shortfall in
stipulated priority sector lending to agriculture. The main objective of the Fund is to provide
loans to State Governments and State-owned corporations to enable them to complete ongoing
rural infrastructure projects. The shortfall in disbursements of RIDF funds as compared to
sanctions continues to remain a matter of concern in the implementation of RIDF. The
Government has taken a number of steps to address this problem. The scope of RIDF has been
widened to include activities such as rural drinking water schemes, soil conservation, rural
market yards, rural health centers and primary schools, mini hydel plants, shishu shiksha
kendras, anganwadis, and system improvement in the power sector. From RIDF V onwards, the
ambit was extended to projects undertaken by Panchayat Raj institutions and projects in the
social sector covering primary education, health and drinking water.

The activities to be financed under RIDF X include minor irrigation projects/micro irrigation,
flood protection, watershed development/reclamation of waterlogged areas, drainage, forest
development, market yard / go down, apna mandi, rural haats and other marketing infrastructure,
cold storage, seed / agriculture/ horticulture farms, plantation and horticulture, grading and
certifying mechanisms such as testing and certifying laboratories, etc., community irrigation
wells for irrigation purposes for the village as a whole, fishing harbour/jetties, riverine fisheries,
animal husbandry and modern abattoir.

43
6. INDIAS AGRICULTURE DEVELOPMENT PROBLEM

Lack of Access to Credit is one of the most pressing issues that hinder Indias rural
population from progress is the lack of access to credit. Farmers suicide within the agricultural
sector does not occur as a shocking matter as these poor citizens are deprived of monetary
assistance when they are most in need.[1]

The farmers cries for help have been ignored as the damaging effects from the absence
of credit loans tickles down the population. Apart from the healthcare of a farmer, the lack of
access to credit also highly important as almost 80% the farmers own less than a hectare of land.
The availability of credit allows farmers to be protected from the inflated costs faced in
agriculture and also, improve the quality of fertilizers and hence the output. Should the
distribution of credit loans improve, the Indian government would also find it easy to meet
production targets and have a better control over prices of grains. Due to the critical shortage of
agricultural output, India has to resort to banning grain exports and instead, drive up its import
bills from wheat coming into the country. There has been so much attention focused on the
industrial and services sector that the agricultural side has been largely neglected.[2] The lack of
credit loans coupled with improper government intervention had resulted in the livelihood of the
farmers to go downhill.

As commercial banks are not present in remote locations of India, where agriculture is
supposed to thrive, it becomes an important limitation as the rural population has a strong

44
dependence on it.[3] Co-operative banks which have been set up previously were also doomed to
fail as a result of bad loans and a lack of funds. These commercial banks have their own set of
worries, as defaults and crop failures are common in the sector. As such, they prefer lending out
to areas where each farmer owns a much larger proportion of land and also, have better irrigation
systems.[4]

However, that does not solve the problem as the smaller farmers (which forms a
majority) issues remains unaddressed. There should be better banking systems established that is
accessible and affordable to every person. It is obvious that the benefits of economic growth
have not been equally shared among all as the access to credit is not granted to all. Economic
opportunities ought to be created for the marginalized groups to help in poverty reduction and
inequality problems. Further attempts made by the government to expand credit loans have
ironically resulted in more cases of poverty than ever.[5] The lack of access to formal credit thus
places many constraints on agricultural output and also, the standards of living for the rural
population thereby hindering their path to further economic and social development.

45
 2_)NATIONAL BANK FOR AGRICULTURE AND
RURAL DEVELOPMENT
National Bank for Agriculture and Rural Development (NABARD) is an apex
development bank in India having headquarters based in Mumbai (Maharashtra) and other
branches are all over the country.

The Committee to Review Arrangements for Institutional Credit for Agriculture and
Rural Development (CRAFICARD), set up by the Reserve Bank of India (RBI) under the
Chairmanship of Shri B. Siva Raman, conceived and recommended the establishment of the
National Bank for Agriculture and Rural Development (NABARD). It was established on 12
July 1982 by a special act by the parliament and its main focus was to uplift rural India by
increasing the credit flow for elevation of agriculture & rural non-farm sector and completed its
25 years on 12 July 2007.

It has been accredited with "matters concerning policy, planning and operations in the
field of credit for agriculture and other economic activities in rural areas in India". RBI sold its
stake in NABARD to the Government of India, which now holds 99% stake.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.

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 institutions, 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

46
 It promotes research in the fields of rural banking, agriculture and rural development
It is active in developing financial inclusion policy and is a member of the Alliance for Financial
Inclusion National Bank for Agriculture and Rural Development (NABARD) came into
existence on 12 July 1982. NABARD was established for providing credit for promotion of
agriculture, small-scale industries, cottage and village industries, handicrafts and other allied
economic activities in rural areas with a view to promoting integrated rural development and
securing prosperity of rural areas. NABARD as the apex institutions, is concerned with all policy
planning and operations in the field of credit for agriculture and other economic activities in the
rural areas.
NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for
promotion and development of agriculture, small-scale industries, cottage and village industries,
handicrafts and other rural crafts. It also has the mandate to support all other allied economic
activities in rural areas, promote integrated and sustainable rural development and secure
prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is
entrusted with

1. Providing refinance to lending institutions in rural areas

2. Bringing about or promoting institutional development and

3. Evaluating, monitoring and inspecting the client banks

Besides this pivotal role, NABARD also:

Acts as a coordinator in the operations of rural credit institutions

Extends assistance to the government, the Reserve Bank of India and other organizations in
matters relating to rural development

Offers training and research facilities for banks, cooperatives and organizations working in
the field of rural development

Helps the state governments in reaching their targets of providing assistance to eligible
institutions in agriculture and rural development

Acts as regulator for cooperative banks and RRBs

Some of the milestones in NABARD's activities are:

47
 A. Business Operations:

Production Credit: Production Credit (or Crop Loans) to Cooperative Banks and Regional
Rural Banks (RRBs) stood at 48,981 crore during 2011-12, registering a growth of 45 per
cent over the previous year.

Investment Credit : Investment Credit for capital formation in agriculture & allied sectors,
non-farm sector activities and services sector to commercial banks, RRBs and co-operative
banks reached a level of 15,421 crore as on 31 March 2012 registering an increase of 14 per
cent, over the previous year.

Rural Infrastructure Development Fund (RIDF): Through the Rural Infrastructure

Development Fund (RIDF) 14927 crore was disbursed during 2011-12. A cumulative
amount of 142470.65 crore has been sanctioned for 462229 projects as on 31 March 2012
covering irrigation, rural roads and bridges, health and education, soil conservation, drinking
water schemes, flood protection, forest management etc.

B. New Business Initiatives:

NABARD Infrastructure Development Assistance (NIDA): NABARD has set up NIDA, a

new line of credit support for funding of rural infrastructure projects. The cumulative
sanctions under NIDA during the year 2011-12 was 890.85 crore and disbursement was
422.90 crore.

Direct Lending to CCBs: Under Direct lending to CCBs, 937.74 crore was disbursed during
the year 2011-12.

PACS as Multi Service Centres: A total of 2,335 PACS have been developed as Multi-
service Centres through various interventions from NABARD.

Core Banking Solutions (CBS) : Through Core Banking Solution (CBS), Co-operatives are
being brought to a higher technology platform so as to compete with other banks for business
and growth.

48
 C. Development Initiatives:

Watershed Development Fund (WDF): During 2011-12, NABARD provided assistance of

239.99 crore for watershed development covering an area of 5.29 lakh ha, as against 152
crore during 2010-11. The cumulative support stood at 598 crore in respect of 620 projects
as on 31 March 2012.

Farm Innovation and Promotion Fund (FIPF): During 2011-12, 41 projects were sanctioned
under FIPF in 14 States with financial assistance of 56.53 crore under the Fund. The Fund
also supported the pilot testing of the unique mobile-enabled Kisan Credit Project (m-KCC)
project.

Farmers Technology Transfer Fund (FTTF): During the year 2011-12, 395 proposals were
sanctioned in 29 States with grant assistance of 20.59 crore. The cumulative disbursement
as at the end of March 2012 was 44.59 crore.

Umbrella Programme on Natural Resource Management (UPNRM): UPNRM aims to boost

rural livelihoods by supporting community-managed sustainable natural resource
management projects and supported 104 projects in 16 States with disbursements to the tune
of 131.89 crore.

Tribal Development Fund (TDF): During the year 2011-12, financial assistance of 290.63
crore was sanctioned for 98 projects benefiting 72,419 tribal families in 16 States. The
cumulative sanction as on 31 March 2012 was 1,208.23 crore, covering 3.23 lakh families
in 415 projects across 26 States/UTs.

Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund (FITF) : As on
31 March 2012, the cumulative sanctions under FIF and FITF were 114.62 crore and
343.48 crore, respectively and disbursements were 36.46 crore and 184.16 crore,
respectively.

49
1. THE MAIN FUNCTIONS OF NABARD

1. Integrated Rural Development Programme

IRDP is a scheme devised by Government of India for generating self-employment

opportunities in the rural sector and for the economic development of rural areas. Banks are
advised to extend cheap credit facilities to the people/ group selected under this programme.
NABARD then provides refinance to banks.

NABARD has accorded high priority to projects envisaged under IRDP. The refinance
provided for IRDP accounts for highest share for the support provided for poverty alleviation
programmes. Some specific steps taken to augment the flow of credit under IRDP programme
are given below:

(i) Including the activities under IRDP in the service area plan, backward and forward linkage
and infrastructural support.

(ii) Treating the family as a unit for providing assistance and determining the size and number of
activities in relation to the income gap to be bridged for lifting the family above the poverty line.

(iii) Among alternative activities, promoting the less costly ones for securing optimum utilization
of the available resources.

(iv) Diversifying the IRDP by encouraging secondary and tertiary sectors.

(v) Facilitating provision of infrastructural support including backing support and marketing
linkages and supervision by adopting a cluster approach in the selection of beneficiaries. A total
sum of Rs. 735 crore has been disbursed by banks under the scheme during the year 1998-99.

The RRBs and commercial banks are the major participating banks in the programme. Most of
the funds under the scheme go to states like Uttar Pradesh, Bihar, Assam, Orissa, and Madhya
Pradesh where poverty level is high.

The IRDP and other special schemes are now merged into a single scheme by Government of
India and announced the details of the scheme in August 1999. The new scheme, SGSY is
explained below.

In the past years there were many self-employment schemes were in operation for the upliftment
of rural poor. Effective from April, 1999 Government of India has merged all such Self
Employment Schemes into one and launched the new SGSY scheme.Under this scheme rural
individual poor and group of individuals like the self-help group may obtain credit facilities to
undertake any economic activity which will generate regular income for the borrowers.

The main objective of the scheme is to lift those who are living below poverty line and enable
them to get income of at least Rs. 2,000 per month. Presently, poverty line differs from state to

50
state between Rs. 13,000 and Rs. 19650 per year. The scheme envisages lifting the poor families
above the poverty line within 3 years of assistance.

2. Development of Women and Children in Rural Areas

NABARD prepared guidelines for promoting group activities under the programme and
provided 100% refinance support.

3. Training-cum-production Centre for Women

NABARD provides grant? To voluntary/development agencies for setting up of centers
which aim at providing vocational/entrepreneurship training centers for women exclusively.
Some provide marketing-oriented skill to women for upgrading technical and designing skill.

4. Self-Help Group
NABARD has been making efforts to establish linkages between Self-help Group
organized by some voluntary agencies for poor people in rural areas and official credit agencies.
This would augment the flow of credit for production purposes and reduce their dependence on
informal credit sources.

Provision of credit extended under the SHG scheme during the recent past. Under the
scheme so far 4.6 lacs SHG from more than 78 lacs poor families have been covered upto March
2002.

During the year 2 lacs new SHG have been extended bank loans amounting to Rs. 545
crore as against Rs. 288 crore disbursed during the year 2000-01. The total bank loan provided to
all the 4.6 lacs SHGs till March 2002 aggregated to Rs. 1026 crore.

It should be remembered that NABARD provides refinance at special interest rate of

banks. Andhra Pradesh and Tamil Nadu are the leading states which account for large portion of
new linkages under the scheme. It is noteworthy to mention here that 90% of new SHGs were
formed exclusively by women. NABARD also provides refinance to full extent for project taken
under National Watershed Development Programme and National Mission of Wasteland
Development.

5. Scheme of Monitoring Evaluation and Research Activities

NABARD conducts studies of on-going schemes and completed studies to obtain feed-
back on performance of these projects.

The NABARD has system of District Oriented Monitoring studies in which a cross
section of schemes sanctioned in a district to various banks is studied to ascertain the
performance of the schemes and to identify constraints in implementation and for initiating
appropriate action to remedy them. Annually about 100 such studies are conducted.

51
 NABARD also provides support to research studies by academic and technical institu-
tions on matters having bearing on its developmental role. For this purpose, it has Research and
Development Fund.

7. Vikas Volunteer Vahini Programme

NABARD has been organizing farmers club in association with voluntary agencies in
rural areas particularly in tribal areas, which have proved very helpful for credit institutions in
extending credit to poor farmers. These clubs, besides creating awareness among weaker sections
about the proper utilization of assets and importing modern method of farm technology, are
involved in educating the tribal people.

8. External Aid Project

NABARD has been implementing various foreign aided projects. The projects are as-
sisted by World Bank Group, Organization of Petroleum Exporting Countries Fund for
International Development, etc., NABARD actively participates in formulation and imple-
mentation of such projects. It is also required to monitor the projects and submit final report to
aid agencies.

9. Inspection and Supervision of Co-operative Banks and Regional Rural

Banks
NABARD has been entrusted with the responsibility of supervision of Co-operative and
Regional Rural Banks. For this purpose, it conducts inspections of Co-operative Banks and
Regional Rural Banks. These banks are also to submit periodical information to NABARD for
monitoring purposes.

NABARD gives its recommendations to RBI with the matter relating to licensing of Co-
operative Banks and Regional Rural Banks. The nominees of NABARD on the boards of Co-
operative Banks and Regional Rural Banks monitor the working of banks.

10. Human Resource Development (HRD)

NABARD provides assistance and support for the training of staff of other credit insti-
tutions engaged in credit dispensation for agriculture and rural development. Training facilities
are extended at its two training institutions Bankers Institute for Rural Development (BIRD), and
Regional Training Centers (RTCs).

Some funding of the courses conducted at the College of Agricultural Banking of RBI
and junior Level Training Centres of SLDBs are also provided. Apart from these, NABARD
conducts seminar.

52
 2. MISSION
Promoting sustainable and equitable agriculture and rural development through effective credit
support, related services, institution building and other innovative initiatives.

In pursuing this mission, NABARD focuses its activities on:

A. Credit functions :-
It involving preparation of potential-linked credit plans annually for all districts of the country
for identification of credit potential, monitoring the flow of ground level rural credit, issuing
policy and operational guidelines to rural financing institutions and providing credit facilities to
eligible institutions under various programmes

Types of Refinance Facilities offered

Agency Credit Facilities

Commercial Banks
Long-term credit for investment
purposes
Financing the working capital
requirements of Weavers' Co-operative
Societies (WCS) & State Handloom
Development Corporations

Short-term Co-operative Structure (State Co-operative

Banks, District Central Co-operative Banks, Primary Short-term (crop and other loans)
Agricultural Credit Societies) Medium-term (conversion) loans
Term loans for investment purposes
Financing WCS for production and
marketing purposes
Financing State Handloom
Development Corporations for working
capital by State Co-operative Banks

Long-term Co-operative Structure (State Co-operative

Agriculture and Rural Development Banks, Primary Term loans for investment purposes
Co-operative Agriculture and Rural Development
Banks)
Regional Rural Banks (RRBs)
Short-term (crop and other loans)
Term loans for investment purposes

53
 State Governments
Long-term loans for equity
participation in co-operatives
Rural Infrastructure Development
Fund (RIDF) loans for infrastructure
projects

Non-Governmental Organizations (NGOs) - Informal

Credit Delivery System Revolving Fund Assistance for
various micro-credit delivery
innovations and promotional projects
under 'Credit and Financial Services
Fund' (CFSF) and 'Rural Promotion
Corpus Fund' (RPCF) respectively

INTEREST RATES:

Margin money:-
The beneficiary's contribution to the project cost is necessary in order to ensure his stake in
the investment. Such margin money varies from 5% to 25% depending on the type of
investments and the category of the beneficiaries. The margin money can be by way of
contribution in cash or own or family labour. Large farmers, firms, corporate borrowers
including state-owned corporations, forest development corporations provide margin money
up to 25% pf the investment cost.

Special focus :-
Removal of regional and sectoral imbalances is one of the thrust areas and hence preference
is given to the needs of the underdeveloped areas. For example, the development of the
north-eastern region has been a key programme and special efforts have been made through
refinance offered on liberal terms and other supportive measures so that the rural credit
delivery system in the region is strengthened.

54
 Monitoring :-
Special attention is paid to monitoring the projects that are offered assistance so that the
targets are met and the implementation is properly done. An evaluation of the project is taken
up and in the light of the findings the quality of the projects and their implementation
methods can be improved. District-oriented monitoring studies are conducted to evaluate the
performance of the ongoing agricultural development schemes sanctioned. Specific sector
studies are also undertaken like floriculture, mushroom, aqua culture, agro-processing, etc. to
get an insight into the problems and prospects of these sectors.

Guidelines are often issued for formulation of high-tech and export-oriented projects in farm
and non-farm sectors. Besides, even consultancy is also offered for projects, including
appraisal of projects even in cases where refinance is not secured from the bank.

DIRECT CREDIT

Supporting Cooperatives
In order to strengthen the owned funds position of cooperative credit institutions and thereby
increasing their capacity to leverage larger resources, NABARD provides loans to State
Governments to contribute to the share capital of these institutions.

Rural Infrastructure Development

With the objective of assisting State Governments in the completion of ongoing rural
infrastructure projects and to take up new infrastructure projects, the Rural Infrastructure
Development Fund (RIDF) was set up with NABARD in 1995-96 with contributions from
Commercial banks by way of deposits. The shortfall in agripriority sector lending was deposited
by the commercial banks with NABARD as part of their contribution to the RIDF. The total
corpus covering RIDF I (1995-96) to X (2004-05) is Rs. 42,000 crore. Sanctions under all
trenches of RIDF as on 31 March 2005 were Rs.42948.51 crore against which the disbursements
were Rs. 25384.02 cr.

Anticipated Benefits
It is anticipated that the projects sanctioned up to 31 March 2005 under RIDF would result in:
Creation of additional irrigation potential in 92.47 lakh ha.
Addition of 178000 km of rural road network & 331000 meter bridge length
Contribution to the GDP to the tune of Rs. 11058 crore
Generation of recurring employment of 48.01 lakh jobs and non-recurring employment of
13681 lakh man days due to increased irrigation
Generation of non-recurring employment expected from non-irrigation projects: 23238 lakh
person days

55
 Co-financing
To ensure substantial credit flow to agriculture and rural sector and to instill confidence in
banks for financing hi-tech/export oriented agriculture projects involving large financial
outlays/sunrise technologies, etc., NABARD has entered into agreements for co-financing with
12 Commercial Banks thereby sharing the credit risks with partner banks.
Under this arrangement, projects have been sanctioned in areas like floriculture, organic
farming, milk processing, ethanol production, infrastructure development and forestry.

Bulk-lending/ Revolving Fund Assistance

NABARD provides bulk-lending facilities to NGOs. As on 31.3.2005, 30 agencies have been

sanctioned assistance of Rs 27.07 crore against which Rs.15.18 crore has been disbursed.

REFINANCE AGAINST INVESTMENT CREDIT

This is a long-term refinance facility. It is intended to create income generating assets in the
following:

Agriculture and allied activities

Artisans, small scale industries, Non-Farm Sector ( Small and Micro Enterprises),
handicrafts, handlooms, power looms, etc.

Activities of voluntary agencies and self-help groups working among the rural poor

The credit is normally provided for a period of 3 to 15 years.

Investment credit leads to capital formation through asset creation. It induces technological up
gradation resulting in increased production, productivity and incremental income to farmers and
entrepreneurs.

Eligible Institutions

State Cooperative Agriculture and Rural Development Banks (SCARDBs), State Cooperative
Banks (SCBs), Regional Rural Banks (RRBs), Scheduled Commercial Banks, Scheduled
Primary Urban Cooperative Banks, North East Development Finance Corporation Ltd. (NEDFI),
ADFCs (ADFT, ABFL & NABFINS) and NBFCs are eligible for refinance from NABARD for
investment credit in the rural sector.

Eligible Purposes

Some of the major purposes covered under Investment credit are Minor Irrigation, farm
mechanization, plantation/ horticulture, animal husbandry, storage/market yards, fisheries, post-
harvest management, food/agro processing, non-farm sector including rural industries,
microfinance, purchase of land (for small/marginal Farmers, share croppers etc.), rural housing

56
and disbursements under poverty alleviation programmes like PMRY, SGSY and SC/ST Action
Plan etc. Hi-tech projects and agri-export zones are identified as thrust areas and NABARD
helps in techno-financial appraisal of such projects besides providing refinance.

Criteria

The technical feasibility of the project, financial viability and generation of incremental income
to ultimate borrowers thereby enabling them to have a reasonable surplus after repayment of the
loan installments are the necessary conditions to be satisfied for sanctioning investment credit.

The beneficiaries of the programme are individuals / group of individuals, SHGs, proprietory /
partnership concerns, companies, state-owned corporations or cooperative societies.

OTHERS
Loans to State Governments for funding equity of Co-operative Credit Institutions

NABARD provides long-term loans to state governments for contribution to the share capital
of co-operative credit institutions subject to certain condition

This is to facilitate strengthening of equity base of these credit institutions and improve their
viability

The maturity period of such loans is 12 years with a moratorium period of initial 2 years and
repayment in 10 annual instalments

SUPERVISORY FUNCTIONS
AS PART OF THESE FUNCTIONS, IT

UNDERTAKES INSPECTION OF REGIONAL RURAL BANKS (RRBS) AND COOPERATIVE

BANKS (OTHER THAN URBAN/PRIMARY COOPERATIVE BANKS) UNDER THE PROVISIONS OF
BANKING REGULATION ACT, 1949.

UNDERTAKES INSPECTION OF STATE COOPERATIVE AGRICULTURE AND RURAL

DEVELOPMENT BANKS (SCARDBS) AND APEX NON-CREDIT COOPERATIVE SOCIETIES ON A
VOLUNTARY BASIS

UNDERTAKES PORTFOLIO INSPECTIONS, SYSTEMS STUDY, BESIDES OFF-SITE

SURVEILLANCE OF COOPERATIVE BANKS AND REGIONAL RURAL BANKS (RRBS)

PROVIDES RECOMMENDATIONS TO RESERVE BANK OF INDIA ON ISSUE OF LICENSES TO

57
COOPERATIVE BANKS, OPENING OF NEW BRANCHES BY STATE COOPERATIVE BANKS AND
REGIONAL RURAL BANKS (RRBS)

ADMINISTERING CREDIT MONITORING ARRANGEMENTS (CMA) IN SCBS AND CCBS.

CORE FUNCTIONS

NABARD HAS BEEN ENTRUSTED WITH THE STATUTORY RESPONSIBILITY OF CONDUCTING

INSPECTIONS OF STATE COOPERATIVE BANKS (SCBS), DISTRICT CENTRAL COOPERATIVE
BANKS (DCCBS) AND REGIONAL RURAL BANKS (RRBS) UNDER THE PROVISIONS OF
SECTION 35(6) OF THE BANKING REGULATION ACT (BR ACT), 1949. IN ADDITION,
NABARD HAS ALSO BEEN CONDUCTING PERIODIC INSPECTIONS OF STATE LEVEL
COOPERATIVE INSTITUTIONS SUCH AS STATE COOPERATIVE AGRICULTURE AND RURAL
DEVELOPMENT BANKS (SCARDBS), APEX WEAVERS SOCIETIES, MARKETING
FEDERATIONS, ETC., ON A VOLUNTARY BASIS.
OBJECTIVES OF INSPECTION

TO PROTECT THE INTEREST OF THE PRESENT AND FUTURE DEPOSITORS

TO ENSURE THAT THE BUSINESS CONDUCTED BY THESE BANKS IS IN CONFORMITY WITH

THE PROVISIONS OF THE RELEVANT ACTS/RULES, REGULATIONS/BYE-LAWS, ETC.

TO ENSURE OBSERVANCE OF RULES, GUIDELINES, ETC., FORMULATED AND ISSUED BY

NABARD/RBI/GOVERNMENT

TO EXAMINE THE FINANCIAL SOUNDNESS OF THE BANKS

TO SUGGEST WAYS AND MEANS FOR STRENGTHENING THE INSTITUTIONS SO AS TO

ENABLE THEM TO PLAY MORE EFFICIENT ROLE IN RURAL CREDIT

INSTRUMENTS OF SUPERVISION

PERIODIC ON-SITE INSPECTION OF SCBS, DCCBS, SCARDBS AND RRBS AND OTHER
APEX LEVEL COOPERATIVE INSTITUTIONS

SUPPLEMENTARY APPRAISAL

OFF-SITE SURVEILLANCE SYSTEM ( OSS )

PORTFOLIO INSPECTION/SYSTEM STUDY MONITORING THROUGH RETURNS INCLUDING

CMA AND FRAUDS

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 ATTENDING TO COMPLAINTS IN RESPECT OF COOPERATIVE BANKS (EXCLUDING URBAN
COOPERATIVE BANKS) AND RRBS
SUPERVISORY STRATEGY

IN THE WAKE OF THE BANKING SECTOR REFORMS, NEW SET OF INTERNATIONAL

NORMS/PRACTICES WERE MADE APPLICABLE TO COMMERCIAL BANKS (CBS) TO MAKE
THEM MORE COMPETITIVE AND SUSTAINABLE IN THE CHANGING SCENARIO. THE CO-
OPERATIVE BANKS AND RRBS WERE ALSO TO FUNCTION IN THE GENERAL BANKING
ENVIRONMENT, EMERGING OUT OF THE FINANCIAL SECTOR REFORMS, INTRODUCED BY THE
GOI/RBI. ACCORDINGLY, THE PRUDENTIAL NORMS WERE EXTENDED TO THEM IN PHASES.
WHILE THE CAPITAL ADEQUACY NORM HAS NOT YET BEEN MADE APPLICABLE TO THESE
BANKS, THE OTHER PRUDENTIAL NORMS VIZ. INCOME RECOGNITION, ASSET CLASSIFICATION
AND PROVISIONING, WHICH WERE MADE APPLICABLE BY RBI TO THE COMMERCIAL
BANKING SECTOR HAD BEEN EXTENDED TO COVER RRBS IN 1995-96, SCBS AND DCCBS
IN 1996-97 AND BY NABARD TO SCARDBS IN 1997-98. NABARD, THROUGH A
CONCRETE AND TIME-BOUND SUPERVISION STRATEGY, FACILITATE THESE BANKS TO
ADJUST TO THE NEW FINANCIAL DISCIPLINE SO AS TO INTERNALIZE PRUDENTIAL NORMS
STIPULATED.

B. DEVELOPMENT AND PROMOTIONAL FUNCTIONS

Credit is a critical factor in development of agriculture and rural sector as it enables investment
in capital formation and technological up gradation. Hence strengthening of rural financial
institutions, which deliver credit to the sector, has been identified by NABARD as a thrust area.
Various initiatives have been taken to strengthen the cooperative credit structure and the regional
rural banks, so that adequate and timely credit is made available to the needy.

In order to reinforce the credit functions and to make credit more productive, NABARD has been
undertaking a number of developmental and promotional activities such as:-

Help cooperative banks and Regional Rural Banks to prepare development actions plans for
themselves

Enter into MoU with state governments and cooperative banks specifying their respective
obligations to improve the affairs of the banks in a stipulated timeframe

Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying their
respective obligations to improve the affairs of the Regional Rural Banks in a stipulated
timeframe

Monitor implementation of development action plans of banks and fulfillment of obligations

under MoUs

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 Provide financial assistance to cooperatives and Regional Rural Banks for establishment of
technical, monitoring and evaluations cells

Provide organization development intervention (ODI) through reputed training institutes like
Bankers Institute of Rural Development (BIRD), Luck now www.birdlucknow.in, National
Bank Staff College, Luck now www.nbsc.in and College of Agriculture Banking, Pune, etc.

Provide financial support for the training institutes of cooperative banks

Provide training for senior and middle level executives of commercial banks, Regional Rural
Banks and cooperative banks

Create awareness among the borrowers on ethics of repayment through Vikas Volunteer
Vahini and Farmers clubs

Provide financial assistance to cooperative banks for building improved management

information system, computerization of operations and development of human resources

3.ORGANIZATION STRUCTURE

Board of directors

Chairman

Managing director

Executive directors (1)

Head office departments Regional offices (28) Training establishments (6)

(26)

Sub office special cell (Srinagar) District development offices

(391)

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 4. NABARD BUDGET FOR AGRICULTURAL FINANCE IN INDIA

1) RS 11,000 CR. CLEARED FOR CROP LOAN WAIVER

The government will release Rs 10,901 crore to state-run banks to enable interest subvention
for short-term crop loans up to Rs 3 lakh to farmers for the current financial year. On Thursdays
cabinet meeting, chaired by the Prime Minister, decided this.

Public sector banks (PSBs) provide such a subvention to enable short-term crop loans at seven
per cent interest. Also, a three per cent subvention is given to those who start repaying their loans
within the first year of disbursal.

2) AGRI MINISTRY PUSHES FOR RS 5,000-CR SCHEME FOR POST-HARVEST LOGISTICS

Officials said the aim was to ensure availability of farm produce across the country at
affordable prices

The Union ministry of agriculture has planned to ask for Rs 5,000-crore budget during the 12th
five-year Plan (2012-17) for a scheme to allow private companies to collaborate with farmers to
produce, harvest, process, transport and market various agro products. Officials said the aim was
to ensure availability of farm produce across the country at affordable prices.

3) MAHARASHTRA FARMERS TO HARVEST TECH BENEFITS UNDER NABARD-IMD PROJECT

About 50,000 farmers in 10 districts of Maharashtra are expected to benefit from a pilot
project which will disseminate weather-related inputs using Information and Communication
Technology (ICT) to improve land productivity and boost crop output.

It is being launched jointly by the National Bank for Agricultural and Rural Development
(NABARD) and India Meteorological Department (IMD), and is to be financed under the
Farmers Technology Transfer Fund

4) MAHARASHTRA FARMERS TO BENEFIT FROM NABARD-IMD PROJECT

The project will disseminate weather-related inputs to farmers to improve land productivity
and boost crop output

About 50,000 farmers in ten districts of Maharashtra are expected to benefit from a pilot
project, which will disseminate weather-related inputs using Information and Communication
Technology (ICT) to improve land productivity and boost crop output. It is being launched
jointly by the National Bank for Agricultural and Rural Development (NABARD) and India
Meteorological Department (IMD), and is to be financed under the Farmers' Technology
Transfer Fund (FTTF).

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 5. NABARD'S PERFORMANCE

Past Performance
During 1983-84 NABARD mobilized net resources amounting to Rs. 774 cores, which
however fell to Rs.541 cores during the year 1984-85. During this year NABARD
sanctioned Rs. 1233 cores to SCBs for financial seasonal agricultural operations. It also
provided medium-term and long term credit facilities for the benefit of the agricultural
sector. During 1984-85, its total outstanding amounted to Rs. 1018 cores and limits
sanctioned amounted to Rs.1688 cores.
NABARD also assisted the development and promotion of agricultural investments in the
less developed and/or under banked states. For this purpose during the year 1984-85, it
disbursed Rs.455 cores.
For the year 1986-87 NABARD could mobilize Rs.887 cores towards its aggregate net
resources for providing rural credit.
During 1986-87, NABARD completed the inspection of 178 CCBs, 86 RRBs, 7 SLOBs
and 30 other institutions. It also approved and assisted during the year, 5 research
proposals, 17 seminars and several conferences from its R&D fund, and incurred an
expenditure of Rs.3.41 lakhs on this account.
During the year 1987, NABARD also introduced a 10 point action programme for
rehabilitation of weak primary land development banks and branches of state land
development banks. The action program was with regard to:
(I) investigation of overdue;
(ii) Strengthening of organization and management;
(iii) Review of loan policies and procedures; and
(iv) Strengthening of the resources of the LOBs.
For the year 1989-90, the short term credit limits sanctioned by NABARD for financing
seasonal agricultural operations aggregated to Rs.2807 crores. During this period
NABARD provided refinance assistance to the tune of Rs.549 crores.
During 1995-96, the total amount of refinance disbursements by NABARD increased by
less than 2% to Rs.3064 crore from that of the previous year. During this period a Rural
Infrastructural Development Fund (RIDF) was created within NABARD for facilitating
rural infrastructure projects.
During 1996-97 NABARD's resources increased to Rs.2963 crores against rs.1617 crore
in the previous year.

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Current Performance

NABARD saw its refinance to commercial banks increase by over 50% year on year, for the
fiscal ended March 31, 2006. For 2005-06, the refinance was Rs.4028 crore against Rs.2569
crore in 2004-05. As on February 2006, commercial banks, regional banks and co-operatives
disbursed an aggregate of Rs.1, 46,668 crores by way of farm credit. This is against Rs.1, 25,000
crore in 2004-05.

Purpose wise Disbursements under investment Credit during 2007-08

Sector/Purpose/Activity Amount (Rs. In Lakh) % to Total Disb.
Agriculture
Minor irrigation 40368 4.46%
Land development 46214 5.11%
Farm Mechanization 174765 19.32%
Plantation & Horticulture 34182 3.78%
SGSY Farm Sector 13242 1.46%
SC/ST -AP-Farm Sector 1648 0.18%
Other Agriculture 45717 5.05%
356136 39.37%
Allied to Agriculture
Fisheries 2545 0.28%
Dairy Development 60587 6.70%
Poultry 21629 2.39%
Storage/Market Yard 13628 1.51%
Wasteland Development 639 0.07%
99028 10.95%
NFS
SGSY Non-Farm Sector 12616 1.39%
SC/ST -AP-Non Farm Sector 404 0.04%
Non Farm Sector 274795 30.38%
287815 31.82%
Others
Non-conventional energy 98 0.01%
Self Help Group 161550 17.86%
161648 17.87%
TOTAL DISBURSEMENT 904627 100.00%

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The purpose wise disbursement for the year 2007-08 shows that total of Rs.9,04, 627 was
disbursed for various purposes like agriculture and allied activities, non-farm sector etc. and
maximum 32% is allotted to agriculture sector.

Purpose wise Disbursements under RIDF during 2007-08

Purpose Amount (Rs. In Lakh) % Share
Irrigation 286955 35.71%
Rural Roads 257338 32.03%
Drinking Water Supply 64688 8.05%
Bridges 58159 7.24%
Primary/Secondary School 49227 6.13%
Power Sector 19294 2.40%
Watershed Development 17980 2.24%
Flood Protection 13225 1.65%
Soil Conservation 8827 1.10%
Forest Management 8030 1.00%
Drainage Improvements 5931 0.74%
Storage/Market Yard 3467 0.43%
Others 10371 1.29%
TOTAL DISBURSEMENT 803492 100.00%

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The data shows that under Rural Infrastructural Development Fund (RIDF) maximum
disbursement is provided to irrigation i.e. 35.71% , 32.03 % to rural roads and rest approximate
32% to all the other activities like drinking water, drainage improvements etc.

6. NABARD AND ITS ROLE IN TRAINING

National Bank Staff College, Lucknow

National Bank Training Centre, Lucknow

Zonal Training Centre, Hyderabad

Bankers Institute of Rural Development (BIRD), Mangalore

Bankers Institute of Rural Development (BIRD), Bolpur

Bankers Institute of Rural Development (BIRD), Lucknow

The provisions of the Act as stated below very clearly indicate the nature and scope of the
developmental mandate of the Bank and its role in training and capacity building with the
underlying belief that the process of development cannot be accomplished by credit/refinance
alone.

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Section 38 of the NABARD Act provides that the Bank shall:

Maintain expert staff to study all problems relating to agriculture and rural development and
be available for consultation to the Central Government, the Reserve Bank, the State
Governments and the other institutions engaged in the field of rural development.

Provide facilities for training, for dissemination of information and the promotion of research
including the undertaking of studies, researches, techno-economic and other surveys in the
field of rural banking, agriculture and rural development.

provide technical, legal, financial, marketing and administrative assistance to any person
engaged in agriculture and rural development activities;

may provide consultancy services in the field of agriculture and rural development and other
related matters in or outside India, on such terms and against such remuneration, as may
agree upon;

In this context, the role of training in NABARD and the role played by it for capacity building in
client institutions, partner agencies and other developmental agencies is important.

For maintaining 'Expert Staff', the bank needs to provide continuous exposure to its officers and
staff for up scaling their knowledge and skills in core areas. However, in the initial years the
Bank had recruited expert staff from various technical disciplines and created a separate cadre of
officers. These officers were involved in formulating, appraising, monitoring and evaluating
different agricultural projects implemented by different credit agencies.These officers,
irrespective of their academic background, were imparted similar type of training as all other
officers. Their placements and the regular job rotations helped in grooming them to take up
assorted assignments, get involved in a variety of roles and functions including credit,
developmental, promotional, supervisory and necessary support and information for decision
making. The Bank also had access to their specialized skills which were utilised whenever
needed.

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In pursuance of the Bank's mandate as stated in the Act, the Bank provides training facilities for
the RFIs and agencies involved in rural development through BIRD and the two RTCs. With a
view to broad-based the training and capacity building efforts, the Bank encourages the RFIs to
set up their own training systems and provides these training institutes the necessary support to
conduct meaningful and quality training. Options and avenues for strengthening the training
interventions at the client level are continuously examined so that the human resources in these
institutions are developed to take on the challenges, reckon with the competition, improve
customer service, expand outreach, develop suitable products and thereby contribute to rural
development.
As NABARD primarily functions through other agencies, the needs of the client institutions
largely determine the knowledge and skill requirements of NABARD officers

NABARD endeavors to blend the experiences of client bank training with the training for NABARD
officers so as to make training meaningful and relevant to their roles. Efforts are also made to blend the
study findings with the outcome from training to periodically measure the overall impact of the
investments made in the training efforts.

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 3) WEB-BLIOGRAPHY

www.agriculturalfinanceIndia.com

www.nabard.com

www.afcindia.com

www.birdlucknow.com

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 4) CONCLUSION

Both the co-operative banks advance credit mostly to agriculture. First bank advance short-term
and medium term loans while the second bank advances long-term loans. The Reserve Bank of India as the
Central bank of the country took lead in making credit available to agriculture through these banks
by laying down suitable policies.

NABARD plays very important role in rural & agricultural development through The Committee
to Review Arrangements for Institutional Credit for Agriculture and Rural Development. It has
been accredited with matters concerning policy, planning and operations in the field of credit for
agriculture and other economic activities in rural areas in India. It takes measures towards
institution building for improving absorptive capacity of the credit delivery system, including
monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of
personnel, etc.

As per my opinion India should invest more in agriculture &manufacturing sector rather than to
invest more in service sector. As India is more workforce intensive country & Indias population
is large as compared to other developed countries. If India will invest in agriculture, it will
enhance India to grow. Today India is growing faster as inflation rate is high but there is issue of
unemployment. The investment in agriculture & manufacturing sector help India to increase jobs
which will control unemployment.

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