Q1.

Explain the reasons for creation of a cooperative

movement& discuss the problems that cause hindrance
of smooth functioning of cooperation.
A1. REASONS FOR CREATION OF CO-OPERATIVE
MOVEMENT (MAGIC-BR)
The British regime was firm after the freedom meeting in 1857. During
this period there was Industrial Revolution in England. It spread in India too
& affected the position of In dustries. In other countries of the world there
was social & financial exploitation, decline of cottage industries &
exploitation of farmers. There was a similar position in India too. This was
the right atmosphere of developing Co-operative Movement in India. The
co-operative movement thus started during the British period.
The reasons were as under:
(1) C-British policy of colonialism : Britishers got a new market in India.
Goods produced in England were sold in Indian markets which had badly
affected the industries. Indian cottage & village industries deteriorated.
This necessitated institutes to provide finance at a reasonably lower
interest.
(2) I-Indebtness of farmers: Indian agriculture was not beneficial to
farmers as there were droughts & floods all over the country, hence the
farmers did not get sufficient produce from their farms. Thus the farmers
had to borrow money from the moneylenders at exorbitant rate of
interest. The land was mortgaged with the moneylenders. Since the
farmers could not repay the loans, moneylenders would take away their
lands. It became necessary to find out some solution for this. It was
therefore important to establish such organisations which would
provide .short term, medium term & long term finance at low rates of
interest.
(3) B-Backward methods of farming: The pre-independence period of
Indian agriculture was acute. Indian farming totally depended on nature.
The old systems & old appliances further added to the deterioration of
farming in India. Indian agricultural field was in the need of loans for
various purposes. However there was no provision for that the farmers
had to fully depend upon moneylenders who gave them loans at an
exorbitant rate of interest. Hence it was necessary to make provision of
sufficient finance to agriculturists.
(4) M-Increased impact of moneylenders : The impact of moneylenders
was on an increasing scale in rural areas. Along with giving loans at an
exorbitant rate of interest these people used to cheat the rural
uneducated people. It was therefore necessary to have Institutes as an
alternative to moneylenders for giving finance for short term & long
term basis. The co-operative societies were the only remedy to
overcome the problems of farmers who could satisfy their needs of
farming & other essentialities.
(5) R- Increase in market rates & scarcity : The agricultural income
reduced due to drought & there was scarcity of food grains . People had
to face increased rates & scarcity. It became necessary to have an
institute which would provide the essentialities regularly & at reasonable
 rates. This was possible through co-operative societies & there the co-
operative movement started during British regime in India.
(6) G-Efforts made by the government : Britishers tried their best to
minimise the importance of moneylenders & to give some relief to Indian
farmers by providing finance in agricultural field. For that they passed
Deccan agricultural relief act in 1883 & agricultural loan act in 1884. But
the agricultural activities found these acts insufficient. For this the co-
operative movement started & under the leadership of Sir Edward Law
its foundation stone was laid in India.
(7) A-Government's financial administrative & judiciary assistance :
The co-operative movement started in 1940 by passing the co operative
societies act. The government adopted the policy of rendering financial
assistance for the development of co-operative movement. The
responsibility of registration & auditing of accounts of the societies was
with the government. The procedure of registration was simplified by
making amendments from time to time restrictions were imposed on
utilisation of profits.
The co-operative societies were exempted from income tax, stamp duty,
registration fees, etc. changes were made in the combination of societies by
appointing expert committees. Amalgamation of Tiny Societies in larger
ones was permitted. Reconstruction of societies, dead or non-functioning
societies were to be wound up for making them self reliable . The Co-
operative Credit & Marketing were linked up during this period.

MAIN PROBLEMS INVOL VED IN EFFECTIVELY MANAGING CO-

OPERATIVES IN INDIA – (BPL-GLOW):
There are some major problems that cause hindrance in the smooth
functioning of the co-operatives. They are as follows:
(1) P-Poor Performance & loss of financial viability : By & large the
performance of co-operatives in India is not satisfactory. In spite of huge
government grants & equity participation, most of the co operatives in
India are not financially viable. A large number of SCBs, DC CBs,
SCARDBs & PCARBs are not performing well financially. If the
government stops its grants & withdraws its equity contribution, many of
the co-operatives would lose their financial viability, unless they are able
to raise their resources from private sources or the capital market.
(2) L-Lack of Professionalism in Management : So far the co-
operatives have been thriving on the government conferred privileges
including huge grants, subsidies & protectionist policy. Today
competition poses a major threat to the co-operatives. They are going to
face growing competition form the domestic & foreign companies. As on
date the co-operatives in India follow the traditional Management
techniques. For a country like India, which has the largest network of co-
operatives in the world, it is a matter of pity that its co-operatives are so
grossly underestimated, mismanaged or not managed at all. One of the
main reasons for the failure of co-operatives is to attract & retain
professional managers.
 Most of the co-operatives at the village level are small in terms of size,
business turnover & profits, & hence they cannot afford to hire
professional managers. Besides this the government officers deputed to
head the co-operatives are not accountable to members of the co-
operative & also do to have any stake in the co operatives. They are
more accountable to political or bureaucratic persons & hence
professional management is a question far off for co-operatives.
(3) G-Excessive Government control & political interference : Various
co-operatives in India were created through the enactment of laws by
the government as an instrument of purveying production inputs
including credit marketing of agricultural produce & delivering other
benefits. The politicians saw the co-operatives as vehicles for political
mobilization & key to vote banks & they were dragged into the realm of
party politics.
In states like Maharashtra, Tamil Nadu & Andhra Pradesh the
government started with the tampering with the management of
cooperative societies mainly for political support. Hence even today we
find excessive government control & political interference in the
management of co-operatives.
(4) L-Lack of Good Leadership : Every co-operative needs an honest,
dedicated, skilled & intelligent leader. Although India is a big country
with a population of 1 billion people, good leaders are short in supply &
those who are good are reluctant to take up the position as leadership
position in co-operatives are mostly honorary.
(5) B- Poor Board-Management Relations : As the co-operatives grow it
needs professional managers. One of the important reasons for the poor
performance of agri-business co-operatives is the poor Board
management relation. In a members controlled co-operative, it is the
members who elect the Board of Directors & they have the power to
appoint or dismiss their managers. As there' is lot of politics involved in
the management process, often the relations are strained.
6) W- Poor work Environment : The co-operative managers get their
salaries, annual increment & promotion regularly irrespective of their
performance. There are neither incentives for good performance nor
punishment for poor performance. Hence the work environment is very
poor.
7) L-Limited & Unlimited Liability : In a corporate enterprise if the losses
do occur , it has to be borne by the Board of Directors or the Financial
Institutions, whereas in co-operatives the entire loss is shared equally
among the members. Unlimited liability comes only as a last resort. It
can be enforced only at the time of closure or Liquidation of the society.
8) L-Loss of Focus on the Prime Objective : The prime objective of a
coopera tive is to provide maximum possible benefits to its members.
One of the potential threats for the survival & growth of a co operative
arises when it looses or dilutes its focus on the prime objective. There is
growing evidence that a sizeable proportion of members feel betrayed by
their co-operatives. They feel that the principle of co-operation is not
followed by the management.
Q2. What are the functions & powers of the Registrar?

A2. IMPORTANT PROVISIONS & POWERS OF THE REGISTRAR – (DG-

SAMBAR-FALDA) :
1. D-Deciding policies : The policies regarding the development of
cooperative societies are to be decided as per the financial policies
decided by the state & central government .
2. G-Guidance : The information & guidance is to be given to the workers &
also the procedure for registration, legal provision, etc. is to be given for
establishing co-operative societies .
3. R-Registration of co-operative societies : The application received for
registration is to be scrutinized & other register the society or reject the
proposal .
4. C-To handle the' complaints regarding membership : Complaint
regarding memberships either not getting it or cancellation are to be
attende d.
5. B-Consent for amendment of Bye-Laws : Consent should be given to
the bye-laws submitted by the co-operative societies at the time of
registration. If there are any changes they are to be considered &
approved .
6. F-Investment of society's funds & advances : Some portion of the
profit of society is transferred to Reserve Fund. Reserve Fund is to be
invested elsewhere. The registrar can permit the society to utilize the
excess of Reserve Fund for the business likewise he can allow one society
to give loans to other .
7. A-Audit & inspection of the society : With the help of the employees
the auditor has to audit the accounts of the society & carry out the
inspection.
8. M-Duties regarding meetings : If the meetings are not held by the
society from time to time, the society is to be instructed to call the same.
If necessary the registrar can call a special general meeting & extend
the p eriod.
9. A-Amalgamation & reconstruction of the society : If co-operative
societies are not capable they can be amalgamated or reconstructed so
as to make the base of co-operative segment stronger .
10. G-Guidance for duties : Guidance for duties is given for the smooth
working of the society for writing books of accounts, etc .
11. A-Adjournment of executive committee : If the executive committee
of a society is not functioning properly, there is a breach of provisions in
the bye-laws for safeguarding the interest of th e society , the registrar
can adjourn the executive committee of the society.
12. P-Penalty : The registrar can impose penalty if there is default by the
members of executive committee or the promotes of the society.
13. D-Decisions for disputes : Registrar has to give decisions for the
disputes arising out of election & other mat ters.
14. S-Stoppage of business of society : After conducting the enquiry if a
registrar finds that the work of the society is not satisfactory & against
the welfare of the members then he has powers to stop the business of
the society .
15. A-Assisting in recovery of loans provided by the Land
Development Bank: Registrar can assist land development bank in
recovery of loans by granting certificat es.
16. A-To give class of audit : The registrar has to give audit class to the
society after the inspection & audit of the society in respect of its
financial status, business, loans, assets & liabilities .

Q3. What are the powers & duties of the managing

committee?
4
A3. Powers of Managing Committ ee – (BADSHAHS-C ST)
1. B-The Management of the business of the society shall be vested in the
committee .
2. S-Scrutinize & place before the General Body all the applications for
membershi p.
3. C-Check the account of the Secretary or treasurer & to examine the
registers & books of accounts & to take steps for the recovery of sums
due to the society.
4. H-Hear & deal with complaints.
5. S-See that the cash book is written up promptly & signed daily by one
of the members of the committee authorised in this behalf.
6. S-Sanction working expenses, count the cash balance & deal with the
other miscellaneous business.
7. A-Appoint, suspend, remove or discharge all officers (except the
auditors), solicitors, managers, architects surveyors, accountants,
agents, servants & employee & fix their duties & remunerations.
8. D-Deposit the funds of the society in any bank or banks approved by
the registrar.
9. C-Enter into all contracts for the society & settle the terms thereof .
 10. C-Compromise & settle or contest either in a court of law or by
arbitration any suit, debt, liability or claim by or against the societ y.
11. C-Convene all the meetings of the society according to the bye-laws
thereof.
12. B-Borrow, raise or secure the payment of money in such manner as the
committee may think fit & to redeem or payoff any such securities.
13. S-Suspend any officer, recommend his dismissal to the general
meeting & appoint a substitute pending the final decision.
14. T-Refuse transfer of shares in the event the transferee is not found to
be a fit person to be a member of the society or is disqualified .
15. S-Sanction emergency expenditure.
Du ties of the Managing Committee – (BAAAPU -BD ):
1. B-To observe the provisions of the act, rules & bye-laws.
2. A-To maintain detailed particulars of assets & liabilities of the society.
3. A-To maintain true & accurate accounts & record as particulars of
receipts & expenses.
4. A-To maintain prescribed books of accounts.
5. P-To get the accounts of the society audited & place them b efore the
General Body Meeting.
6. U-To hold elections of committee before the expiry of its term.
7. B-To convene General Body Meeting & Special General Meeting in
accordance with the act, rules & bye-laws.
8. D-To comply with the directions of the registrar in accordance with the
inspection report of the registrar & auditors.

Q4. What are the function of agriculture credit society &

discuss the chart of cooperatives credit structure in India?
A4. IMPORT ANT FUNCTIONS OF AGRICULTURAL CREDIT SOCIETIES –
(PASS-AL-FB)
1. A-To distribute different agricultural inputs such as seeds, fertilizers,
pesticides etc. to the member farmers to enable them to carryon
agricultural operations effectively.
2. F-To provide sufficient or enough finance to their members & thereby
try to reduce their dependence on the money lenders who exploit
them.
3. L-To supervise the use of loans & to recover the loans disbursed.
4. S-To provide storing facilities to the farmers for agricultural produce.
5. A-To collect or purchase agricultural produce from the farmer &
supply the same to consumer Co-operative societies & Marketing
societies including the Government for the purpose.
6. S-To encourage their member to promote the habit of thrifts & saving
among them.
7. P-To associate themselves with the programme of production
activities.
8. B-To borrow from central (apex) agencies
Q5. Discuss LDCB, UCB & their objectives.
A.5 LAND DEVELOPMENT COOP. BANK (LDCB)
The primary co-op credit societies & other co-op. institution who provide
finance for agricultural development could not provide long term finance
for agricultural development. There was a need for long term finance for
agricultural development & it is with this purpose that Land Dev elopment
Co-op. Bank, which was formerly known as land Mortgage Co-op. came to
be established. These Co-op. banks are suppose to provide credit at low
rate of interest & also without delay so as to enable them to bring about
agricultural development rapidly & help the process of investment in
India.
The first Land Development Bank in India was set up in 1929, at
Madras. After independence the development of planned agriculture was
given priority. Hence the government financially assisted the banks by
providing agricultural credit.
The following circumstances led to rise of Land Development Banks in
India:
(1) S- Most of the financial institutions used to provide only short-ter m credit
to agriculture. T here was a need of long term credit supply to agricultur e.
In order to cater to this need Land Developme nt Banks were set-up.
(2) L-Money lenders, financial institutions in the unorganized sector used to
provide long term credit t o cultivators for repaying their old loans. There
was no financial institute ready to provide such credits. So the Land
Development Banks were set-up to make cultivators free from the
clutches of money lenders.
(3) C-Various committees appointed by the government recommended
different measures for supplying long term credit to cultivators. Hence
the government decided to set up Land Development Banks.

FUNCTIONS OF LDCB – (SALAD-COS):

1. C-To encourage thrift & co-operation among members.
2. S-To supervise & inspect the working of primary Land Development Co-
op. Bank & to verify the utilization of both.
3. O-To open branches or organize new primary land deve lopment banks.
4. L-To grant loans to primary land development co-op. banks or to
indi viduals through their branches.
5. D-To issue debentures on the security of the mortgage bonds transferred
by the primary land development co-op. banks to it on such terms &
conditions as pre scribed under the relevant act.
6. S-To promote the habi t of savings among the members.
7. A-To provide valuable advice to cultivators in connection with their land.

Q.6 Explain HUDCO, RRBs.

A6. HOUSING & URBAN DEVELOPMENT CORPORATION (HUDCO):
HUDCO - Housing & Urban Development Corporation Ltd was
incorporated on 25th April 1970: HUDCO India was formed to assist various
agencies & authorities in upgrading the housing conditions in the country.
Special emphasis was laid on the development of housing facilities or
HUDCO Niwas Yojana for the lower income group (LIG) & the economically
weaker sections (EWS) of the society.
Starting with an initial equity base of Rs. 2 crores, HUDCO India has a
net worth of Rs. 3977 crores today. HUDCO Inc primarily aims to provide
financing for housing developments. HUDCO Financial Services are the
task of HUDCO Bank that has mobilized finances from:
ο F-Financing institutions like LIC, GIC & other banking institutions
ο I-International assistance from KfW, JBIC, ADB, USAID etc.
ο B-Market borrowings through debentures, taxable & tax-free bonds
ο P-Public deposits HUDCO has been associated with not just housing
development but the overall infrast ructure development assistance.

The activity areas of HUDCO include:

Housing – (VJ-RUSSIA) :
• U-Urban housing
• R-Rural housing
• S-Staff rental housing
• R-Repairs & renewal
• S-Shelter & sanitation facilities for footpath dwellers
• W-Workingwomen ownership condominium housing
• P-Housing through private builders/ joint sector
• I-Individual HUDCO housing loans & HUDCO home loan for construction
& renovation through 'HUDCO Niwas '
• A-Land acquisition
• V-Valmiki Ambedkar Awas Yojana (VAMBAY)
• J-Jawahar Lal Nehru National Urban Renewal Mission (JLNNURM)
 Infrastructure:
• A-Integrated land acquisition & development.
• S-Environmental improvement of slums
• U-Utility infrastructure
• S-Social infrastructure
• E-Economic & commercial infrastructure

Financial Services:
• H-HUDCO Niwas - HUDCO home loans by HUDCO Bank
• F-Financing of Urban Development Projects & Industrial Products
Projects by HUDCO Bank. .

Building Technology:
• T-Building centres for technology transfer at grass-roots
• M-Building materials industries
• A-Building & technical assistance to all borrowing agencies, research
training & networking in human settlement planning & management.

Research & Training Capacity:

Along with the above services by HUDCO Inc, HUDCO also serves India as
HUDCO Electric Supply Limited. HUDCO Electric is a wholesale distributor of
electrical products to industrial, commercial & residential markets covering
motor control, distribution products, wire & cable, lighting fixtures, conduit,
boxes & fittings, electric heating, wiring devices & many other products.
Other critical HUDCO services includes real estate development projects by
HUDCO Delhi on behalf of the ministry of urban development on land
allotted at Andrews Ganj (HUDCO place) & Bhikaji Cama Place (HUDCO
Vishala , HUDCO Trikoot & August Kranti Bhavan ). These activities cover the
states of Jammu & Kashmir, Punjab, Himachal Pradesh, Haryana, Rajasthan,
Uttar Pradesh, Bihar, Tripura, West Bengal, Orissa, Andhra Pradesh, Tamil
Nadu, Kerala, Karnataka, Maharashtra, Madhya Pradesh & Gujarat

REGIONAL RURAL BANKS (RRBS):

One of the important points of the 20-point economic programme of late
Mrs. Indira Gandhi at the time of emergency was the liquidation of rural
indebtedness by stages & provision of institutional credit to the farmers &
artisans in rural areas.
It was in this regard that the Regional Rural Banks were formed. The
main objective of the Regional Rural Banks is to provide credit & other
facilities particularly to the small & marginal farmers, agricultural
labourers , artisans & small entrepreneurs so as to develop.
Initially five regional rural banks were set up in October 2, 1975 at
Jaipur , in Rajasthan, Moradabad & Gorakhpur in Uttar Pradesh, Bhiwani in
Haryana & Malda in West Bengal.
These banks were sponsored by the Syndicate Bank, State Bank of India,
the Punjab National Bank, United Commercial Bank & United Bank of India
respectively. The share capital of the regional rural bank is subscribed by
 the Central Government (50%) the concerned State Government (15%) &
the Sponsoring Commercial Bank (35%).

OBJECTIVES OF REGIONAL RURAL BANKS – (CS-F-PAL):

(1) C-To provide credit at the rate of interest at which co-operative credit
societies provide.
(2) S-To provide credit to small & marginal farmers, agricultural labourers &
rural artisans.
(3) F-To limit the area of functioning to two districts in the State.
(4) P-To remove paucity of finance in the rural sector.
The regional banks differ from the commercial banks in the following ways:
(i) A- The area of operation of RRBs is limited to a specified region
comprising one or more districts of a State.
(ii) L-RRBs grant direct loans & advances only to small & marginal farmers,
rural artisans & agricultural labourers & others of small means for
productive purposes.

Q7. Discuss the functions of RBI, SBI banks

A7. IMPORTANT FUNCTIONS OF RBI - (SWIM- FLRS ):
(1) F-Financing functions : Reserve Bank of India provides three types of
finance (i) Short Term Finance, (ii) Medium Term Finance & (iii) Long Term
Finance.
i. S-Short-term finance : Short-term loans are the type of seasonal loans
provided for agricultural & marketing operations. These loans are given to
the farmers at a concessional rate of 2% below bank rate.
Short-term loans are provided with following two objectives:
(a) To build up strong rural credit structure.
(b) To fulfill agricultural credit requirements as adequately as possible.
RBI has also put two special conditions in sanctioning these concessional
facilities (i) Non overdue cover. (ii) Minimum involvement. The two
conditions ensure co operative banks to employ larger finance to
agricultural loans. There has been a substantial expansion in the financial
assistance of short term credit of the RBI. The RBI has sanctioned
agricultural loans at concessional rates of interest. After the establishment
of NABARD instead of RBI, the new body i.e. NABARD is taking care of the
entire financial assistance of rural sector.
ii.W- Short term finance to weaker sections : The RBI has continued its
efforts to finance the small farmers, commercial banks were asked to
finance minimum of 20% of their short term loans to small & economical
weak farmers.
iii.M-Short term credit for marketing : In 1977 RBI made ceilings on the
advances for commodities like food grains, oilseeds, etc. For this purpose
the RBI brought down the minimum margin limit from 60% to 35% of the
value of stocks. Similar facilities were extended for distribution of
fertilizers & limits on marketing of crops.
iv.M-Medium term loans : They range from a period of 15 months to 5
years. RBI finances loans for reclamation of land, building & other land
improvement, development & maintenance of irrigation sources,
implements, agricultural machinery, etc. conductive to agricultural
 development. The rate of interest on medium term loans is now 3.5%
below bank rate. The bank is also approving such loan for gobar gas
plants in rural areas too. TIle bank has advised district central
cooperative banks to extend medium term loans to purchase bullock
carts, gas, plants, etc.
v.L-Long term finance: The bank extended long term advances in the
initial period. Since 1949 RBI began to buy debentures of the land
development banks. Now RBI contributes 20% in the debenture issues.
vi.S-Finance for small scale & cottage industries : Reserve Bank has
agreed to finance the handloom industry working in co operative sector.
Under the said scheme RBI advances funds first to state co-operative
banks, charging 50% lesser interest rate below bank rate 22 board
groups are made & RBI finances these group for their production &
marketing activities.
vii.R-Floatation of rural debentures : As per the decisions taken by
agricultural credit board, the scheme of rural adventures was introduced
by RBI for long term finance. These debentures of 15 years period carry
5% interest. All this money helps the banks to extend larger loaning
activities in the long term finance.

FUNCTIONS OF SBI IN CO-OPERATIVE SECTOR – (F2OR-WC2):

(1) F-Provide finance to societies : SBI provides finance to marketing &
processing societies. It works as a supplementary financer. State bank
gives clean advances to apex banks & apex marketing societies & charge
7% rate of interest & the margin amount varies in between 25% to 40%.
The bank also provides working capital to marketing societies, through
district central banks.
State bank provides finance to sugar factories also e.g. ( i) Advances
against sugar stock (ii) Clean credit for working capital (iii) Interim
accommodation on guarantee of state government, etc. (iv) It gives
advances to sugar cane growers also.
(2) W-Working Capital to Industrial Co-operative : The state bank grants
advances against raw materials .and finished products. Clean loans are
given on the guarantee from state government or apex bank.
(3) R-Remittance facilities : SBI provides remittance facilities to co operative
institutions within certain limits. Some remittance facilities are provided for
transfer of funds, between central office & branch office of LDB's. -
(4) F-Provides finance for debentures Land Development Banks : SBI
participates in two ways: ( i) Contribution to the debentures (ii) Provides
interim accommodation for floating debentures.
(5) O-Overdraft facilities : The SBI provides overdraft facilities to
district central banks against government securities at the concessional
rate of interest. It provides direct finance to co-operative societie s against
govt. guarantee
(6) C-Comprehensive help to consumer co-operative : In this sector
the SBI provides loans to consumer co-operative for working capital & for
hypothecation purposes. Clean advanced loans are also sanctioned to such
societies against gov t. guarantee.
(7) C-Co-ordination with Co-operative Institution : SBI provides
cheap credit facilities to the co-operatives without disturbing the integrated
rural development programmes . Terms & conditions of advances granted
are liberal & flexible to suit the requirement of different co-operative.
Interest rates vary from 7 to 9%.
Therefore it can be said that SBI has played a useful role in augmenting the
resources of co-operative banks for financing marketing & processing
societies, consumer stores & other co-operatives. The All India rural credit
review committee (1969) has pointed out that over the years SBI has evolved
good operational methods.

Q8. Explain NABARD & various credit schemes provided by

NABARD.
A8. NATIONAL BANK FOR AGRICULTURE & RURAL DEVELOPMENT (NABARD):
NABARD is a specialised financial institution in the field of agriculture &
rural development. It has been designed specifically as an organisational
device for providing undivided attention, forceful direction & pointed focus,
to the credit problems of rural sector. Half of NABARD's capital was
contributed by RBI & other half by the government. It has enough financial
resources to support agricultural & rural development programmes .
Function of NABARD – (ASM-RURAL) :
(a) A-It works as a n apex body which looks after the financial needs of
agriculture & rural development.
(b) S-It provides short term loans ( upto 18 months) to state co-operatives for
seasonal agricultural operations.
(c) M-In provides medium term credit (18 months to 7 years) to state
cooperatives & RRB's for approved agricultural purposes.
(d) R-It maintains research & development fund to be used of promote
research in agriculture & rural development.
(e) A-t has authority to oversee the functioning of co-operative sector through
agricultural credit development.
(f) R- It is entrusted with the responsibility of inspecting central & state co-
operative banks & RRB's.
(g) L-It provides long & medium term credit (not exceeding 25 years) for
investment in agriculture to state co-operative banks, RRB's & commercial
banks.
(h) L-It provides long term assistance in form of loans to state government not
exceeding 20 years for contribution to share capital of co-operative credit
institutions.

NABARD & Rural Credit·

Types of refinance facilities
Agency Credit Facility
• Long-term credit for investment purpose
• Financing working capital requirements of
Commercial Bank Weavers’ Cooperative societies(WCS) &
State Handloom Development
Corporations (SHDC)
Short-term Cooperative • ST (crop & other loans)

Structure(State coop banks,
District Central Coop banks,
PACS)
Long-term Cooperative
Structure (State Coop.
Agriculture & rural Dvlpmt
banks, Primary Coop Agri &
rural Dvlpmt banks)
RRBs
State Governments
NGOs- informal Credit
Delivery System
• MT (conversion) loans
• Term loans for investment Purpose
• Financing WCS for production & marketing
purpose
• Financing SHDC for working capital by
SCBs
• Term loans for investment purpose
• ST (crop & other loans)
• Term Loans for investment purpose
• LT loans for equity participation in coop
• Rural Infrastructure development
Fund(RIDF) loans for infrastructure
purposes
a. Revolving Fund assistance for various
micro-credit delivery innovation &
promotional projects under ‘ credit &
financial services fund’ (CFSF) & ‘Rural
Promotion Corpus Fund’ (RPCF) resply .

Q9. Explain the Consumer Rights of under the CPA & RTI Act
1986.
A9. THE CONSUMER PROTECTION ACT, 1986 - (GRACES):
The Consumer Protection Act, 1986 is one of the most progressive &
comprehensive pieces of legislation. It was enacted for the protection of
consumers after an in-depth study of consumer protection laws in a number
of countries. It was enacted in consultation with representatives of
consumers, trade & industry & after having discussions with the
government. The provisions of the Act came into forc e with effect from July
1987
The Act was amended in 1991 & 1993 to extend its scope & coverage. The
salient features of this Act are as follows:
1. G-It applies to all the goods & services unless specifically exempted by
central government.
2. C-It covers all the sectors whether private, public or co-operative.
3. R-It states the following rights of consumers :
a. H-Right to be protected against marketing of goods & services which
are hazardous to life & property.
b. I-Right to be informed -about the quality, quantity, potency, purity,
standard & price of goods & services so as to protect the consume rs
from unfair trade practices.
c. P-Right to be assured, wherever possible to access to a variety of
goods & services at competitive prices .
d. H-Right to be heard & to be assured that consumer's interest will
receive due consideration .
 e. R-Right to seek redressal against unfair trade practices & exploitation
of consumers.
f. C-Right to consumer education .
4. E-The Act also envisages establishment of consumer protection councils
at central & state levels, whose main objectives are to promote &
protect rights of consumers.
5. S-To provide a simple, speedy & inexpensive remedy of consumer
grievances, this Act envisages three-tier quasi-judicial machinery at
national state & district levels. These are: National Consumer Disputes
Redressal Commission known as National Commission, State Consumer
Disputes Redressal Commission known as State Commissions, & District
Consumer Disputes Redressal Fora known as District Fora .
At present there are 32 state commissions , one in each state & 555
districts besides National Commi ssion. The state government has to set
up the National commission with the awareness created by the
government consumer associations & the media. The inflow of cases are
increasing day by day

Q10. What are the various heads of cooperative

department & administrative working structure at
state level?
A10.
Q12 . Explain basis of rural market segmentation.
A12 .BASIS OF MARKET SEGMENTATION – (GDPB):
Like the urban areas, it is possible to segment the rural markets based on may
variables such as geographic, demographic, psychographic, socio-economic
characteristics, exposure to modernization & so on.

(1) G-Geographical segmentation: Geographic location is the most popular basis

for market segmentation. Distinction between urban & rural market is still of
great importance. Geographic segmentation is made based on the variables like
zones, regions, states, district, towns & villages by sizes, density & climate.
The regional distribution of population is important to market because
sectional differences exist in the demand for many products .These differences
may be due to climate, religions, states, districts, towns & villages by size
density & climate.

(2) D-Demographic segmentation: In demographic segmentation, demographic

variables such as age of the customer group, sex, family size, family life cycle,
income, expenditure pattern, occupation, education, language, religion, race,
nationality & rural urban base are used for segmentation of market. The size of
the various age groups has a substantial effect on market for certain product.
In terms of gender, the male market is different from the female market.
Hence, gender is used for segmenting the market for different products such as
dress, footwear, cosmetics, jewellery & other products. In the rural areas the
 joint family systems still exist. As a family size increases, consumption of
consumable will also increase. In such cases family pack or economy refill packs
works very well.

(3) P-Psychographic segmentation: In psychographic segmentation certain

psychographic variables such as social class, lifestyle & personality
characteristics are used for segmentation.
Lifestyle reflects the overall manner in which persons live & spend time &
money. It is a behavioral concept enabling us to grasp & predict buyer behavior.
Lifestyle as a basis of segmentation is quite reasonable & desirable.
The rural consumers brand choices are not that different from his
counterparts. But while the brand choices tend to coverage packing preference
don’t. By & large, rural preferences is for a smaller packs. Whenever an option
exist incase of durables, premium models are preferred by the rural rich.
(4) B-Behavioral Segmentation: In the behavioral segmentation buyers are
divided into groups on the basis of their knowledge of attitude, the use or the
response to a product. The different behavioral variables are occasions,
benefits, user status, usage rate, loyalty status, buyer readiness stage, &
attitude.
Benefits segmentation emphasize on wants & desires of consumers. Benefits
sought by consumers are the basic reasons for existence of the market
segment. The rural consumers are concerned with the utility of the product than
its appearance & sophistication.
Nowadays most 0f the FMCG goods are segment in sachet packs for a rural
consumers & family packs economy packs for large families. In terms of brand
loyalty the rural consumers take a long time to decide on a particular brand.

Q13 . Distinguish between urban & rural markets &

explain rural consumer rural profile.
A13. PROFILE OF RURAL CONSUMER-(SCROLL -SCHIMBRR):
1. S-Size of the rural consumer : The size of rural consumer group can
be understood from the following details provided in the table:
Table 14.1- Population of India Rural vs. Urban: 1971, 1981, 1991 & 2001
Populatio Populatio Populatio Populatio
%to %to %to %to
n n n n
Total Total total total
1971 1981 1991 2001

Rural 43.90 cr 80 50.20 cr 76.3 64.1 76 74.2 cr 72.25

Urban 10.91 cr 20 15.62 cr 23.7 20.3 24 28.5 cr 27.75

Total 54.81 cr 100 65.82 cr 100 84.4 100 102.7 cr 100

Rural population forms a major portion of the Indian population as

seen in the table. If we consider the state level picture, in several states
like Uttar Pradesh, 'Rajasthan, Madhya Pradesh & Kerala, the rural
population constitutes more than 80% of the total population. In states
like Bihar & Orissa 90% of the population is in rural areas.
2. P-Location pattern of rural consumer : The urban population of
India is concentrated in 3,200 cities & towns & the rural population is
scattered over 6 ,38,365 villages. Statistics shows that out of the
6,38,365 villages only 6,300 villages have a population of more than
5,000 persons each. About 55% of the villages have population in the
range of 500 people or less. The influence is clear; rural demand is
scattered over a large area, unlike the urban demand which is highly
concentrated.
3. L-Low Literacy level : It is estimated that the literacy level in rural
India is 45% as compared to 52% for the entire country. The rural
literacy in the rural area is on an increase. Among the rural
population Kerala tops with 77%. However the literacy rates are much
lower in Bihar & Rajasthan. Due to this the hoardings & print media
canno t make a significant impact. L iteracy rate has its implication in
communication with the rural population. It appears that
communication should not prove a hurdle, provided appropriate
means are chosen.

4. I-Rural income : An analysis of the rural income pattern reveals that

nearly 60% of the rural income is from agriculture. Rural prosperity &
the discretionary income with the rural consumer is directly tied up
with agricultural prosperity. A large part of the income is spent on
meeting the basic necessities of life i.e. food, clothing & shelter
leaving a smaller portion for other consumer goods.

5. S-Rural savings : The rural consumers have been drawn into the
saving habit in a big way. The commercial banks & the co operatives
have been marketing the saving habit in the rural areas for quite
some years. Today nearly 70% of the rural households are saving a
part of their income. The habit is particularly widespread among
salary earners & self-employed non-farmers.

6. R-Reference groups : In rural areas the primary health workers,

doctors, teachers & the Panchayat -Raj members belong to the
reference groups. The ' Baniya ' or Mahajan who is the village trader
may also be an important influence in the decision making process of
the rural consumers. This is due to the credit extended by them to
the farmers.

7. O-Occupation : In rural area the main occupation is farming, trading,

craft & other odd jobs, like plumbing, electrical work, masonary work,
carpentry etc. There are teachers & primary health workers too. The
rural people carry out different types of farming activities like growing
crops, cattle & pouting farming, horticulture, sericulture, floriculture
etc. The consumption pattern differs according to the level of income.

8. M- Media habits : The rural folk are very much fond of music &
folklore. 'TAMASHA' is a popular form of entertainment in
 Maharashtra. Likewise in Uttar Pradesh 'NAUTANKI' entertain the rural
customer & then there are television, radio & videos too.

9. C-Conscious customer : A rural customer though not well educated has

good common sense & he is wise & sharp in many ways. He/she is very
conscious of "Value for money". He/she does no always look for cheap
products but wants good quality.

10. B-Brand loyalist : Rural customers sense a patronizing attitude & even
formidable barriers to protect themselves. It is not easy introduce new
products for them. They are bigger brand loyalist than their urban
counterparts.

11. I-High degree of involvement : There is a high degree of involvement

in the purchase of any product more so of expensive consumer durable.
A typical rural customer checks & re-checks the expensive product
he/she is buying. A rural customer cannot be pushed too far as there is
no urgent requirement for the product.

12. C-Inter-personal communication : Inter-personal communication skill

accounts for 80 percent of the rural communication process in the
villages. This means that word of mouth recommendations by users &
sheer familiarity influences rural folk in their purchase decisions.

13. C-Consultation : Very often, dealers act as consultants & so their

influence carries a lot of weight at the point of purchase. Decisions
regarding the brand of consumer durables are taken by the man in the
household in consultation with others in the community .

14. S-Significant aspects : It can be seen in general sense low purchasing

power, low standard of living, low per capita income, low literacy level &
over all low social & economic positions are the traits of the rural
consumers.
By & large, Indian rural consumers are a tradition bound community,
religion, culture & superstition strongly influence their consumption habits.

Urban Market Rural Market

Environment
a. Large contiguous settlement a. Small contiguous settlement
units of concentrated towns units of dispersed villages
b. High infrastructural level b. Low infrastructural level
c. High population density per c. High population density per
km 2 of space km 2 of space
d. Good physical connectivity & d. Good physical connectivity &
mobility mobility
Employment & incomes
a. Urban occupation & incomes a. Rural people work in a less
are more stable & permanent certain environment.
b. Occupation include b. Agrarian base, mostly small
 employment in government land holdings. Per household
business, industry & service & more than 7 0% people in
organization small agricultural
c. Frequency of income receipts occupations.
predictable & at regular c. Acute seasonality in income
intervals receipts
Social Relations
a. Less number of interpersonal
a. Large number of interactions
interactions & more frequent
with interpersonal persons &
interactions between the
less frequent between same
same persons.
persons.
b. Individuals are better known
b. Individuals are less known &
& identified.
identified between members
c. Social norms influencing
the social & settlement
individuals are more visible.
system.
d. Status is ascribed &
c. Social norms are less visible.
determined by birth in a
d. Status is achieved.
family.
e. Caste influence indirect & of
e. Caste influence direct &
less strength.
strong.
Marketing Stimuli
a. Low product exposure & low
a. High product exposure & high
exposure to branded
exposure to branded
products. Low ad exposure,
products.
low comprehensions of ads,
b. High ad exposure & high
low brand awareness.
brand awareness.
b. Less convenient buying, low
c. More convenient buying, high
rate of retail outlets per 1000
reach, availability of wide
population & low market
range of products & high rate
reach, availability of limited
of retail outlet per 1000
range of branded products
population.
along with imitation products.
d. High exposure to marketing
c. Less exposure to marketing
(d) researchers & multiple
researchers & limited source
source of information.
of information.

Q14. Discuss Rural Marketing.

A14. Definition
MK Malavya , “It consist of 2 words ‘rural’ & ‘marketing’. Rural is
an environment & marketing is a process. Their synthesis is a
meaningful development authority”
National commission on Agriculture, “It is aprocess which starts
with decision to produce saleable form of commodity. It involves all
aspects of marketing structure (financial & institutional) & includes
HAGS-TD (Harvesting, Assembling, Grading, Storing, Transport &
Distribution)”
 Domain of Rural Market
Cell 1: It represents flow of product from rural producers to rural
consumers e .g. bamboo, baskets etc. Occupation involved in rural
marketing is mainly of blacksmith, goldsmith carpenter, cobbler etc.
Cell 2: It represents flow of prod uct from rural producers to urban
consumers e .g. foodgrains , oil seeds sugarcane e tc. & raw material
like tobacco, oilseeds, brassware, wooden goods etc.
Cell 3: It repr esents flow of product from urban producers to rural
consumers e .g. cigars, fertilizers, HY seeds, cosmetics, tractors etc.
Rural marketing requires a different marketing approach
because of variation in consumer behavior & income.
Micro Environment
1. It is a type of channel & media available to reach out rural
market
2. Geographical spreadout market also requires different approach
to this market.
Scope of Rural Market - (UP-MID-CAL):
U- Urbanization
P – Purchasing power increases
M- Media exposure
I- Infrastucture
D- Decision making
C- Changing phase of rural market
A- Alert buyers
L- L eaders

Problems of Rural Marketing – (CWC-UTI-LPPD)

C- Lack of Capital
W- Warehousing problems
C- Communication problems
U- Underdeveloped markets & people
T- Transport problems
I- Improper market organization & staff
L- Many Languages & dialects
P- Product positioning
P- Low PCI
D- No Dealers

Q15. Overview the Indian rural consumer durable

industry.
A15. The Indian consumer durables industry can be broadly classified into
• Brown goods
• White goods
The brown goods segments refers to products such as television, audio
systems, VCRs & VCDs, & those items which are essentially household articles viz.
kitchen machines, electric irons etc.
The white goods segment includes products like air conditioners,
refrigerators, microwave ovens, washing machines vacuum cleaners, etc. In the
initial life cycle of this category, the products introduced were mostly white in
colour. As a result, this category was named "white goods". However, the launch of
various other products in the same colour, the name has been extended across
other categories also.
According to the Webster's Dictionary, the term "White Goods" is generally
referred to those classes of household appliances that are coated with a coat of
white enamel. Nowadays, however white goods with various shades of colour
includes items such as refrigerators, washing/laundering machines, microwave
ovens dishwashers, vacuum cleaners etc

Consumer durables goods in India include the following

• Televisions
• Washing machines
• Refrigerators
• Air conditioners
• Audio Systems
• Microwave ovens
• Dishwashers
• Vacuum Cleaners
• VCD/DVD players

Most of the segments in the Indian consumer durables industry are characterized
by intense competence, seasonal demand, entry of new players/expansion of the
existing players, special offers, discount schemes, exchange schemes etc. Recent
years have seen a shift in the market from the unorganized players to organized
players, primarily due to the intense marketing & technological changes brought in
by the MNCs & other domestic majors in the industry. Considering this, the majors
in the industry have developed entry barriers like brand names, distribution
networks & effective marketing strategies, which makes it difficult for fresh players
to enter the sector. With increasing competition, the bargaining power of the
customers is high due to the availability of many brands.

Consumer durables are no longer considered as luxury items

With increasing competition, price wars, promotional strategies, etc. the concept
has filtered down to the masses & has become a part of household necessities. The
entry of MNCs has fuelled the growth of competition in the Indian consumer
durables industry. Low penetration of consumer durables, liberal policies of the
government etc., have attracted MNCs to foray into this sector. Over the years
MNCs have increased their presence as well as their market shares across various
segments.

In the current scenario, the competition in the industry is determined more by the
marketing & advertising strategies rather than anything else. Creating a brand
image & capturing the mind share of the customers are the talk of the players in
the consumer durables industry. One major phenomenon in the consumer durables
industry is the emergence of the rural market. Now people in the rural areas are
showing an increasing interest towards consumer durables goods. Majors in the
industry are increasingly realising the need to tap the huge rural market. For
instance, LG recently launched "Sampoorna", a colour TV targeting the Indian rural
market. However, rural consumers are highly price sensitive & attach more
importance to the functional aspects of the products rather than the aesthetic
attributes. With the increasing attention of the government's towards development
of rural India, especially rural electrification, the rural demand is likely to increase
further. Any further increase in the spending of the government in the
infrastructure would only facilitate growth in the industry.

Among the various segments of the Indian consumer durables industry, the colour
television segment takes a large share with around 40 percent of the total
industry size, followed by refrigerators, which contribute 25 percent of the
entire industry size. The washing machine & air conditioner segments account
for 10 percent & 7 percent of the total industry size respectively, & the
remaining part is being shared by other segments namely audio systems,
microwave ovens, vacuum cleaners, electronic appliances & water purifiers.

FEATURES OF A CO-OPERATIVE SOCIETY (BUD-CEMS):

1. U-Union of Persons: A Co-operative Society is a union of persons. Here
persons out of their own sweet will come & associate together as individual
members
2. M-Membership: Under See. 6 of the Maharashtra Co-operative Societies Act
1960, minimum 10 persons are required to form a Cooperative Society. Whereas
no upper limit has been fixed for Membership of a Co-operative Society.
However in case of a lift irrigation Co-operative Society, the minimum required
members are fixed at five but it should not exceed more than ten.
3. E-Equality: The Principles of Equality & Co-operation are the basis of the Co-
operative Society. The soul of Co-operative Society lies in the essence of co-
operation of all its members, i.e. in the co-operative spirit, the willingness &
readiness to work for & with others. "Each for all & all for each
4. C-Common Interest : The object of a Co-operative Society is to promote
the common interest & to satisfy the common need of its members.
5. S-Spirit of Service : A Co-operative Society is characterized by the spirit
of service that generates the feeling of loyalty & fellowship & also a
corporate feeling among the members. This concept of spirit of service is
based on the motto: "TO HELP PEOPLE IS TO HELP THEMSELVES."
6. M-Part of Co-operative Movement : A Co-operative Society is not
merely a business run on a Co-operative basis but a healthy combination
of business run on a co-operative basis, with a moral background & high
deals. The Co- operative Movement is characterized by a new spirit which
enables members of the Co-operative Society to follow the Golden Motto
"LIVE & LET OTHERS LIVE IN PEACE."
7. B-Body Corporate : A Co-operative. Society once registered becomes a
body corporate by the name under which it is registered with perpetual
succession & a common real.
8. D-Declare Dividend : A Co-operative Society can declare a dividend out
of the profits made by the~ society, which is paid in proportion to the
shares held by members
URBAN BANKS DEPARTMENT OF RESERVE BANK
OF INDIA:
The Urban Banks Department of the Reserve Bank of India is vested with the
responsibility of regulating & supervising primary (urban) cooperative banks,
which are popularly known as Urban Cooperative Banks (UCBs).
While overseeing the activities of 1926 primary (urban) cooperative banks,
the Urban Banks Department performs three main functions: regulatory,
supervisory & developmental. The Department performs these functions
through its 17 regional offices

(I) Regulatory Functions (BENS)

(i) N-Licensing of New Primary (Urban) Cooperative Banks:
For commencing banking business, a primary (urban) cooperative bank, as in the
case of commercial bank, is required to obtain a licence from the Reserve Bank of
India, under the provisions of Section 22 of the Banking Regulation Act, 1949 (As
Applicable to Cooperative Societies).

(ii) E-Licensing of Existing Primary (Urban) Co-operative Banks:

In terms of sub-section (2) of Section 22 of the Banking Regulation Act, 1949 (As
Applicable to Cooperative Societies), the primary (urban) cooperative banks
existing in the country as on March 1, 1966, (when some banking laws were applied
to VCBs), were required to apply to the Reserve Bank of India.

They were given three months to obtain a licence to carryon banking business.
Similarly, a primary credit society which becomes a primary (urban) cooperative
bank by virtue of its share capital & reserves reaching Rs. one lakh (Rs.l,OO,OOO) &
above was to apply to the Reserve Bank of India for a licence within three months
from the date on which its share capital & reserves reach Rs. one lakh. The existing
unlicensed primary (urban) cooperative banks can carryon banking business till
they are refused a licence by the Reserve Bank of India.

(iii) B-Branch Licensing:

Under the provisions of Section 23 of the Banking Regulation Act, 1949 (As
Applicable to Cooperative Societies), primary (urban) cooperative banks are
required to obtain permission from the Reserve Bank of India for opening branches.

(iv) S-Statutory Provisions:

The regulatory functions of Urban Banks Department relate to monitoring
compliance with the provisions of the Banking Regulation Act, 1949 (As Applicable
to Cooperative Societies) by urban cooperative banks. These provisions include:
(a) Minimum Share Capital: Under the provisions of Section 11 of the Banking
Regulation Act, 1949 (As Applicable to Cooperative Societies), no primary (urban)
cooperative bank can commence or carryon banking business if the real or
exchangeable value of its paid-up capital & reserves is less than Rs. One lakh.
(b) Maintenance of CRR & SLR: As in the case of commercial banks, primary (urban)
cooperative banks are also required to maintain certain amount of cash reserve &
liquid assets. The scheduled primary (urban) cooperative banks are required to
maintain with the Reserve Bank of India an average daily balance, the amount of
which should not be less than 5 per cent of their net demand & time liabilities in
India in terms of Section 42 of the Reserve Bank of India Act, 1934. Non-scheduled
(urban) cooperative' banks, under the provision of Section 18 of Banking Regulation
Act, 1949 ,(As Applicable to Cooperative Societies) should maintain a sum
equivalent to at least 3 per cent of their total demand & time liabilities in India on
day-to-day basis.

Sr. No
Category of bank
Minimum SLR holding in Government & other approved securities as percentage of
Net Demand & Time Liabilities (NDTL)

(1) Scheduled banks 25%

(2) Non-Scheduled banks
(a) with NDTL of Rs.25 crore & above
(b) with NDTL of less than Rs,25 crore

(II) Supervisory Functions:

To ensure that the UCBs conduct their affairs in the interests of the depositors &
also comply with the regulatory framework prescribed by the Reserve Bank of India,
the department undertakes on site inspection of these banks with frequency
ranging from one to two years depending upon the financial condition / status of
banks. The thrust of supervision is to ensure that banks' affairs are not conducted
in a manner detrimental to the depositors' interest & also to assess the solvency of
the bank vis-a-vis its liabilities, besides examining the banks' compliance with the
existing regulatory framework. The department also undertakes off-site surveillance
of scheduled banks & non-scheduled banks with a deposit base of Rs. 100 crore &
above based on a set of quarterly & annual returns.

(III) Developmental Functions:

With a view to extending institutional credit support to tiny & cottage units, the
Reserve Bank of India grants refinance facilities to urban cooperative banks under
the provisions of Section 17 of the Reserve Bank of India Act, 1934, The refinance is
given at the Bank Rate.

Training is imparted to the middle & top management of urban cooperative banks
through College of Agricultural Banking, Pune.

(IV) Sections / Divisions of Urban Banks Department: (L-BARS)

1. A-Administration: This Section handles staff matters of the department.
2. L-New Bank Licensing & Branch Licensing: This section frames policies for
issue of bank licence/allots centres for opening of branches & authorizes regional
offices to take action accordingly. It also deals with conversion of cooperative
credit societies into urban banks
3. R-Returns : Returns section at each of the regional offices is responsible
for monitoring receipt of various statutory returns under the provisions of
Banking Regulation Act, 1949, (AACS) & Sec 42 of Reserve Bank of India
Act 1934 in case of scheduled UCBs. They also verify compliance with the
provisions of the Acts, ibid, & take suitable action against non-compliant
UCBs.
4. S-Banks Supervision : This division arranges inspection of urban
cooperative banks through regional offices & closely monitors the action
 taken by the UCBs to rectify the irregularities/deficiencies pointed out in
inspection reports. The division also associates itself with the RCS of
respective states in rehabilitation of financially weak UCBs.
5. B-Banking Policy: This section frames policies on prudential norms,
investment policies, monitoring priority sector targets, refinancing, issue
of directives on interest rates, CRR/SLR, etc. Policies relating to para
banking activities such as merchant banking, hire purchase, leasing,
insurance business, etc. are also formulated by this division. Besides, the
section also attends to compliance with the directions of Local Board /
Central Board / BFS, furnishes requisite material for Bank's publications
such as Annual Report, Report on Trend & Progress of Banking in India,
Currency & Finance, etc

STRENGTHENING & DEVELOPING OF AGRICULTURAL

MARKETING:
RECOMMENDATIONS OF EXPERT COMMITTEE:
(ME2DI2CAL2-FE2W-DROPS-GV)
1. M-PROFESSIONAL MANAGEMENT: There is a need to make government
administered marketing organisations administratively viable & managerially
competent in keeping with liberalised trade atmosphere. The marketing
activities are many folded & need liaison & collaboration with related
organisation. Market committees including sub-yards, should be headed by
professionals existing secretaries need to be trained in professional
management of the markets.
2. ECA-ESSENTIAL COMMODITIES ACT: The Essential Commodities act 1955
which has resulted in restrictions on storage & free movements of stocks should
be repealed to make way for play of free market forces in real sense. A task<
force be set up under the ministry of agriculture, department of agriculture &
cooperation to undertake a review of all marketing legislations, policies &
programmes & suggest various reforms.
3. E-ENCOURAGEMENT: Encouragement by way of policy back-up as well as
financial 'support is recommended for special type of markets like floriculture,
cattles etc. For export promotion & inter state marketing setting up of 50 mega
markets in the country with government financial support in private, public,
cooperative or joint venture is suggested. Encouragement may be considered for
promoting marketing of organically grown produce, fruits & vegetables,
medicinal plants
4. D-DIRECT MARKETING: Direct marketing enables farmers to meet the specific
requirements of wholesaler’s preferences & take advantage of favourable prices
& improve their net margin. It encourages farmers to undertake grading of farm
produce at the farm gate. Direct marketing thus enables farmers & buyers to
economise on transportation costs & to improve price realisation
considerably.
5. I-INFORMAL GROUPS : Direct marketing through informal groups, NGOs
cooperatives, farmers associations, companies, joint venture may be
encouraged by the government. These organisation may be encouraged to
 create & manage markets present as well as future. The cooperatives
however will have to be freed from the shackles of politicians & bureaucrats
6. I-INSTITUTIONALIZE COMMODITY EXCHANGE: The spot markets have not
been linked within the forward & future market to receive price signals. The
future trading in agricultural commodities is also regulated by the government.
The linkage between the spot & future markets seems to be poor due to
domination of the speculators. Government has to continue it efforts to
strengthen & institutionalise commodity exchanges to instil confidence &
awareness among the market players
7. A-PRIORITY SECTOR ADVANCE: Loan for a period up to 6 months to farmers
availing crop loan up to Rs one lakh are reckoned as priority sector advance.
Banks are financing artiya's for provision of inputs to farmers. Finance to
wholesaler / trader is not treated as agricultural finance. Loans for construction/
running facilities are already included under priority lending. It is suggested that
the existing limit of the priority sector advance should be revised upward
suitably taking into consideration innovation in agricultural sector in the post
WTO regime. The credit flow to the agricultural marketing is very meagre. The
banking environment & lending policies & programmes for financing is not
found conducive for the increased capital needs of agricultural marketing
Therefore government is requested to design full fledged agricultural marketing
credit policy considering the requirement of increased production, market
innovations, technologies & socio- economic changes with specific reference to
post WTO regime
8. A-AMENDMENTS: In promoting competitive market systems, the. Government
need to examine all existing policies, rules & regulations with a view to remove
all legal provisions inhibiting free marketing system. Today state governments
alone an empowered to initiate the process of setting up of a market for certain
commodities which are regulated. These provisions will have to be replaced
9. L-LIBERALISATION: An efficient agricultural marketing is essential for the
development of agricultural sector. The marketing system contributes greatly to
the commercialisation of subsistence farmers. Governments worldwide have
recognised the importance of liberalising agricultural markets.
10. L-LEGAL REFORMS: The nature of legal frame work within which agricultural
markets operate has a fundallleI1tal effect on the functioning of the agricultural
marketing system. Legal reforms can play an important role in making the
marketing system more effective & efficient by removing unnecessary condition
& by establishing a sound frame work to reduce uncertainty of the market
11. F-PLEDGE FINANCING: Pledge financing enables the usage of inventories of
graded produce as collateral for accessing credit from the organised credit
market. It enables farmers to dynamically take advantage of favourable prices &
improve their net margin it also enables farmers to hold inventory of graded
produce under favourable storage conditions & standardised preservation under
supervisory conditions; promotes rural god owns & warehousing
12. F-FORWARD CONTRACTS : Forward contract may well be regarded as
direct alternative marketing facilitator. With the initiation of liberalisation
process in India, interest in futures markets has been revived. In the
country currently futures contracts are traded in nine commodities in 20
commodity exchanges. It is suggested that more & more commodities be
added to facilitate competitive & free marketing system
13.F-FOOD PROCESSING: Considering the rising demand for value added & processed
products there is a need for enhancing the capacity of agro-processing sector. For
attracting private initiative & investment in food processing the government of India
through department of food processing & national horticulture board have already
formulated several schemes of assistance. There is strong need to popularise their
implementation in different agro-cliamatic zones by creating awareness about these
schemes
14.E- ENCOURAGE EXPORT: With a view to taking advantage of new international trade
environment there is a need to encourage export of high value non-traditional products
grown in various parts of the country. The government of India (ministry of commerce)
has announced a scheme of creating export oriented agri-zone (EOAZ). It should be
promoted by providing institutional & physical infrastructure in each of these as per
needs of the specific commodity in some of the EQAZ's there is also a need to establish
what is called food parks. In these parks some common facilities like electricity &
warehouse should be created with central government assistance which will help in
attracting investment by the private sector & the state government
15. E-EMPLOYMENT : AS another form of direct marketing, the unemployed
youth could be involved in procurement of orders & supply of graded &
packed products to different city dwellers. The youth could be trained in
marketing practices of procuring products & supplying them. The financial
assistance from the public sector to such ventures would generate
entrepreneurship & provide profitable employment to the younger
generation. They could be given assistance in the form of working capital to
start the enterprise along with the necessary agri-business training
16. E-STRENGTHEN EXCHANGE : A recent study conducted by the IIM ,
Ahmedabad has indicated that the performance of the Indian commodity
futures markets is varied across the commodities, the exchanges &
contracts. They are deficient in several aspects such as infrastructure.
Logistic, management, linkages with financial institutions, reliability,
integrity & an efficient information system which do not encourage a large
group of the market players in the commodity sector to trade in this
market. Government has therefore to continue its efforts to strengthen the
exchanges & to instill confidence & awareness among market players
17. W-INSTITUTIONALISATION OF WAREHOUSES : Poor credit flows have
had an adverse effect on the development of agricultural marketing
systems in the country. Certified warehouse & a system of negotiable
warehouse receipts could lead to improved credit delivery, better loan
recovery & convenience in asset management. The existing government
warehousing corporations should play a leading role in the development of
warehousing. However they can only cover part of the field which should be
opened up to private operators, particularly those who provide storage services.
The institutionalisation of the warehouse receipts system through the
commodity exchanges is most likely to yield the best results in the context of
promoting & propagating warehouse receipts
18. I-PRIVATE INVESTMENT IN MARKET INFRASTRUCTURE: Market
Infrastructure is important not only for the performance of various marketing
functions & expansion of the size of the market but also for transfer of
appropriate price signals leading to improved marketing efficiency. High
investments with entrepreneurial skills are required for creation & managing
these infrastructures. Therefore private investment in the market infrastructure
 development may be encouraged by modifying various procedure backed up by
package of incentives.
19. D-DEVELOPMENT OF INFRASTRUCTURE: Projection of production & marketed
surplus of various farm products show that even at the existing marketed
surplus- Output ratios, quantities which the marketing system will be required to
handle in future are quite large. The marketing system backed by strong
adequ71:e infrastructure is the core content of agri-marketing
20. R-REEFER CONTAINERS: The country require containers/ vans for transport of
perishable items for domestic & export marketing. At present their availability in
the country is negligible in comparison to the present production of perishable
commodities. For handling the expected higher production in the next 10 years
at least 3000 reefer containers/ vans with a capacity upto 8 tonnes each would
be required. This would require an investment of Rs 600 crores which shall be
created by private, cooperative & joint sector. There is a need to encourage the
investors in the area by providing suitable incentives.
21. O-PROMOTION OF ORGANISED MARKET: Government is promoting
organised marketing of agricultural commodities in the country through a
network of regulated markets. Most of the state governments & union territories
have enacted legislations to provide for development of agricultural produce
markets. As on 31- 3-2001, 7161 markets have been covered under regulation.
The country also has nearly 27,294 rural periodical markets about 15 % of which
function under the ambit of regulation.
22. P-DEVELOP RURAL PERIODIC MARKET: Rural periodic market is the first
contact point for producer-sellers for encashing his agricultural produce &
buying other goods needed by them. There are in all 27,294 rural periodic
markets including those for livestock in the country. There is an urgent need to
develop these rural periodic markets in a phased manner with necessary
infrastructural amenities to have a strong base level link in the marketing chain.
The investment requirement for developing these primary rural market places is
estimated at Rs 2146 crores
23. S-DEVELOPMENT OF SPECIALISED MARKETS: Apart from general purpose
markets, there is a need for developing specialised markets for fruits &
vegetables. It has been assessed that there are at least 241 such places in the
country where fruit & vegetables markets should be developed. The investment
requirement for fruit & vegetables markets in the country is around Rs 970
crores.
24. S-MORE STORAGE FACILITY: Storage infrastructure is found necessary for
carrying the agricultural produce from production to consuming periods. Country
needs much more storage facility than what is available now. This is specially
more important for hill & remote areas in several states. For an additional 20
million storage capacity the investment required is estimated at Rs 5400 crores.
The private sector needs to be encouraged to enter the storage & warehousing
activity & make investment of this magnitude village panchayats, cooperatives,
SHG's & farmers organisations may be encouraged for undertaking warehousing
25.GP-GRADING & PACKAGING: There is a need to create facilities for cleaning grading
& packaging not only in spot markets but also in villages from where produce is brought
to the market for sale. There is a need to promote proper packaging after grading so
that further chances of adulteration may not be there. Besides this there is a strong
need to educate the farmers for proper packaging & grading before they bring the
 produce to the market. Scientific packaging should be encouraged at the farmer level
through various incentives.
26.V-INCREASE VALUE ADDITION: At present value addition is estimated at only seven
percent & processing only two percent of the total production. Within next ten year,
there is a need to increase value addition to 35 percent & processing at least 10
percent. Quality control & standardisation will be extremely important in this edeavour.
The central government should encourage a network of analysis laboratories in the
country.