Rural Banking

By

Ms. E. Jeevitha
Faculty Department of Management Studies and Research Tamilnadu College of Engineering Coimbatore

ABSTRACT Rural banking in India started since the establishment of banking sector in India. Rural Banks in those days mainly focused upon the agro sector. Today, commercial banks and Regional Rural Banks in India are penetrating every corner of the country are extending a helping hand in the growth process of the rural sector in the country. This paper entitled 'RURAL BANKING' throws light on the following aspects: * * * * * * * * Rural Banking ± an introduction Banks: functioning for development of rural areas Co-operative banks and rural credit Commercial banks and rural credit Regional rural banks and rural credit Role of RBI in rural credit Marketing of mutual fund units-RRBs Conclusion

RURAL BANKING INTRODUCTION Rural banking in India started since the establishment of banking sector in India. Rural Banks in those days mainly focused upon the agro sector. Today, commercial banks and Regional rural banks in India are penetrating every corner of the country are extending a helping hand in the growth process of the rural sector in the country. BANKS: FUNCTIONING FOR THE DEVELOPMENT OF RURAL AREAS The area of operation of a majority of the RRBs is limited to a notified area comprising a few districts in a State.SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI are spread in 13 states extending from Kashmir to Karnataka and Himachal Pradesh to North East. Apart from SBI, there are other few banks which functions for the development of the rural areas in India. Few of them are as follows. y y Haryana State Cooperative Apex Bank Limited NABARD

the expectations they are supposed to fulfill. and the number of offices they operate.y y y y Sindhanur Urban Souharda Co-operative Bank United Bank of India Syndicate Bank Co-operative bank CO-OPERATIVE BANKS AND RURAL CREDIT The Co-operative bank has a history of almost 100 years. Co-operative banks in India finance rural areas under: y y y y y Farming Cattle Milk Hatchery Personal finance Institutional Arrangements for Rural Credit (Co-operatives) y y Short Term Co-operatives Long Term Co-operatives Short Term Co-operatives | District Central Co-operative Banks | State Co-operative Banks | Primary Agriculture Credit Co-operative Societies | Branches Long Term Cooperatives | State Agriculture & Rural Development Banks | Primary Agriculture & Rural Development Banks | Branches . The Co-operative banks are an important constituent of the Indian Financial System. their number. The RBI also regulates the cooperative bank. Co-operative Banks in India are registered under the Co-operative Societies Act. judging by the role assigned to them. and their business in the urban areas also has increased phenomenally in recent years mainly due to the sharp increase in the number of primary co-operative banks. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act. 1965. Their role in rural financing continues to be important even today.

for construction of wells and tube well. that is each member is fully responsible for the entire loss of the society. animals.Primary Agricultural Credit Societies (PACSs) An agricultural credit society can be started with 10 or more persons normally belonging to a village or a group of villages. loans and advances from the Reserve Bank and they are own share capital and reserves. for carrying on agricultural operation. There are now 367 central co-operative banks. piggery. etc. poultry. It should give loans and advances to needy members mainly out of these deposits. State Co-operative Banks (SCBs) The state Co-operative Banks. for leveling and development of land. they finance. fisheries and others. Central Co-operative Banks (CCBs) The central co-operative banks are located at the district headquarters or some prominent town of the district. tractors and other agricultural machinery. commercial banks also extend loans for allied activities viz. bee keeping. such as attracting deposits from the general public and lending to the needy against proper securities. The members have unlimited liability. normally for the harvest season.000 primary agricultural credit societies in the country with a membership of over 100 million. for development of fruit and garden crops. for dairying. central coopertive banks have been undertaking normal commercial banking business also. The value of each share is generally nominal so as to enable even the poorest farmer to become a member. The primary agricultural credit society was expected to attract deposits from among the well ±to-do members and non-members of the village and thus promote thrift and self-help.. y y y Their own share capital and reserves Deposits from the public and Loans from the state co-operative banks Their main function is to lend to primary credit society apart from that. Term loans for varying periods are given for purchasing pump sets. now 29 in number. Loans are given for short periods. There are now over 92. The central co-operative banks have three sources of funds. These banks have a few private individuals also who provide both finance and management. and the rate of interest is fixed. They obtain their funds mainly from the general public by way of deposits. in the event of failure. Commercial Banks and Small Farmers . COMMERCIAL BANKS AND RURAL CREDIT The commercial banks at present provide short term crop loans account for nearly 45 to 47% of the total loans given and disbursed by the commercial banks. for purchase of ploughs. These loans come to 15 to 16%. co-ordinate and control the working of the central Co-operative Banks in each state. They serve as the link between the Reserve bank and the general money market on the one side and the central co-operative and primary societies on the other.

Structure of regional rural bank The establishment of the Regional Rural Banks (RRBs) was initiated in 1975 under the provisions of the ordinance promulgated on 26. RBI has been taking keen interest in expanding credit to the rural sector. 1976. commercial banks can help them to go in for vegetable cultivation or combine it with small poultry farming and maintaing of one or two milch cattle. The main objective of RRBs is to provide credit and other facilities particularly to the small and marginal farmers. The lead banks have to prepare banking plans and allocate the responsibility of financing the identified beneficiaries among the participating banks. agricultural laborers.200 branches. There are now 196 RRBs in 23 states of the country with 14. IRDP and commercial banks Since October 1980. For instance.9. industry and other productive activities in the rural areas. the Sixth Five-year plan(1980-85) had envisaged the setting up of 170 RRBs covering 270 districts by the end of march 1985. 1976. commerce. After NABARD was set up as the apex bank for agriculture and rural . Accepting the recommendations of the Narasimham committee. The progress of RRBs in the initial stage was quite rapid. As regard small cultivators near urban areas and irrigation facilities.1975 and thereafter Section 3(1) of the RRB Act. artisians and small entrepreneurs and develop agriculture.The target was exceeded. REGIONAL RURAL BANKS AND RURAL CREDIT The Narasimham committee on rural credit recommended the establishment of Regional Rural Banks (RRBs) on the ground that they would be much better suited than the commercial banks or co-operative banks in meeting the needs of rural areas. RRBs established with the explicit objective of: * Bridging the credit gap in rural areas * Check the outflow of rural deposits to urban areas * Reduce regional imbalances and increase rural employment generation ROLE OF RBI IN RURAL CREDIT Since it was set up in 1934. Commercial banks have been asked to finance all economically backward people identified by government agencies.The commercial banks identifying the small farmers through Small Farmers Development Agencies (SFDA) set up in various districts and group them into various categories for credit support so as to enable them to become bible cultivators. the Integrated Rural Development Programme (IRDP) has been extended to all the blocks in the country and the commercial banks have been asked by the government of India to finance IRDP. the government passed the Regional Rural Banks Act. sponsor bank and the State Government in the proportion of 50%. The issued capital of RRBs is shared by Central Government. 35% and 15% respectively. trade.

RRBs may. out of which at least 18 percent of net bank credit should flow to agriculture. it is mandatory that any shortfall in fulfilling the 40 percent target or the 18 percent sub-target would have to go to the corpus Rural Infrastructure Development Fund(RIDF).It is necessary to protect the farmers from natural calamities and ensure their credit eligibility from the next season.The major thrust of these micro-finance initiatives is through the setting up of Self Help Groups (SHGs). with approval of their Board of Directors. forwarding applications of the investors for purchase / sale of MF units to the Mutual Fund / Registrar Transfer Agents. RBI has been taking a series of steps for providing timely and adequate credit through NABARD. ginger. Besides. flood.development. . Scheduled commercial banks excluding foreign banks have been forced to supplement NABARDs efforts-through the stipulation that 40percent of net bank credit should go to the priority sector. onion. 187 RRBs and 334 Central cooperative banks. sugarcane potato. cotton.. seven crops viz.The scheme has gained popularity and its implementation has been taken up by 27 commercial banks.The purpose of the Kisan Credit Cards(KCC) scheme is to facilities short term credit to farmers. turmeric and chillies are presently covered. Among commercial crops. pests etc. oilseeds and pulses.RRBS With a view to expanding the scope of business of RRBs and considering that marketing of Mutual Fund (MF) units provides a profitable avenue for banks.Credit Unions etc. enter into agreements with Mutual Funds for marketing their units subject to the following terms and conditions: * The bank should only act as an agent of the customers. Kisan(Farmers') Credit Card Another notable development in recent years is the introduction of Kisan Credit Cards(KCC) in 1998-99. as agents.Non-Governmental organizations(NGOs). it has been decided by RBI on 17th May 2006 to allow Regional Rural Banks (RRBs) to undertake marketing of units of Mutual Funds. MARKETING OF MUTUAL FUND UNITS . the Government of India introduced a comprehensive crop insurance scheme throught the country in 1985 covering major cereal crops. Towards this purpose. Micro-Finance Micro-finance is a novel approach to "banking with poor"as they attempt to combine lower transaction costs and high degree of repayments. * The purchase of MF units should be at the risk of customers and without the bank guaranteeing any assured return. Accordingly. Agricultural Insurance As Agricultural is highly susceptible to risks such as drought.RBI has also taken steps in recent years to strengthen institutional mechanisms such as recapitalisation of Regional Rural Banks (RRBs) and setting up of local area banks(LABs).

CONCLUSION RRBs' performance in respect of some important indicators was certainly better than that of commercial banks or even cooperatives. Since the very beginning. * Retailing of units of Mutual Funds may be confined to some select branches of the bank to ensure better control. RRBs have also performed better in terms of providing loans to small and retail traders and petty non-farm rural activities. something like a National Rural Bank of India (NRBI). This. * The RRBs should put in place adequate and effective control mechanisms in consultation with their sponsor banks. The number of rural branches should be increased rather than reduced. In recent years. in turn. Only then will the RRBs fulfill the promise that is so essential for rural development. there should be greater coordination between district planning authorities. * The bank holding custody of MF units on behalf of their customers should ensure that its own investment and investments belonging to their customers are kept distinct from each other. * The bank should comply with the extant KYC/ AML guidelines in respect of the applicants. And most certainly they should be kept apart from a profit-oriented corporate motivation that would reduce their capacity to provide much needed financial services to the rural areas. really requires an apex body that would cover and oversee all the RRBs. Ideally. RRBs should really be strengthened and provided with more resources with which they can undertake more of these important activities.* The bank should not acquire such units of Mutual Fund from the secondary market. * The bank should not buy back units of Mutual Funds from their customers. when the Regional Rural Banks in India (RRBs) were established in October 2. they have taken a leading role in financing Self-Help Groups (SHGs) and other microcredit institutions and linking such groups with the formal credit sector. and most of all. 1975. these banks played a pivotal role in the economic development of the rural . Regional Rural Banks in India Regional Rural Banks in India are an integral part of the rural credit structure of the country. they should be encouraged to develop more sophisticated methods of credit delivery to meet the changing needs of farming. the best use of the resources raised by RRBs through deposits would be through extensive crosssubsidisation. including to agriculture. panchayati raj institutions and the banks operating in rural areas.

viz.India. The equities of rural banks were divided in a proportion of 50:35:15 among the Central Government. especially the small and marginal farmers. The main goal of establishing regional rural banks in India was to provide credit to the rural people who are not economically strong enough. agricultural labours. State Bank of India. United Bank of India and United Commercial Bank. 1 crore. Following are the state-wise list of Indian regional rural banks. the Sponsor bank and the concerned State Government. as there were major concern of financial viability. The Conception and the Brief history The history of regional rural banks in India dates back to the year 1975. Five regional rural banks were set up on October 2 with a total authorized capital of Rs. Andhra Pradesh y y y y y Andhra Pradesh Grameena Vikas Bank Andhra Pragathi Grameena Bank Deccan Grameena Bank Chaitanya Godavari Grameena Bank Saptagiri Grameena Bank Arunachal Pradesh y Arunachal Pradesh Rural Bank Assam y y Assam Gramin Vikash Bank Langpi Dehangi Rural Bank Bihar . 5 crore. Syndicate Bank. The following years have not been so easy for the regional rural banks in India. There were five commercial banks. The roles played by the sponsor banks were also analyzed. which later augmented to Rs. List of Regional Rural Banks in India There are a number of regional rural banks in India. The committee felt the need of 'regionally oriented rural banks' that would address the problems and requirements of the rural people with local feel. Studies were conducted to find out the factors that influence RRBs performance. and even small entrepreneurs. A number of committees were formed to find out solution. It's the Narsimham committee that conceptualized the foundation of regional rural banks in India. which sponsored the regional rural banks. artisans. yet with the same level of professionalism of commercial banks. Punjab National Bank.

y y y y y Madhya Bihar Gramin Bank Bihar Kshetriya Gramin Bank Uttar Bihar Kshetriya Gramin Bank Kosi Kshetriya Gramin Bank Samastipur Kshetriya Gramin Bank Chhattisgarh y y y Chhattisgarh Gramin Bank Surguja Kshetriya Gramin Bank Durg-Rajnandgaon Gramin Bank Gujarat y y y Dena Gujarat Gramin Bank Baroda Gujarat Gramin Bank Saurashtra Gramin Bank Haryana y y Harayana Gramin Bank Gurgaon Gramin Bank Himachal Pradesh y y Himachal Gramin Bank Parvatiya Gramin Bank Jammu & Kashmir y y y Jammu Rural Bank Ellaquai Dehati Bank Kamraz Rural Bank Jharkhand y y Jharkhand Gramin Bank Vananchal Gramin Bank Karnataka y y y y y Karnataka Vikas Grameena Bank Pragathi Gramin Bank Cauvery Kalpatharu Grameena Bank Krishna Grameena Bank Chimagalur-Kodagu Grameena Bank .

y Visveshvaraya Gramin Bank Kerala y y Narmada Malwa Gramin Bank North Malabar Gramin Bank Madhya Pradesh y y y y y y y y y y Narmada Malwa Gramin Bank Satpura Kshetriya Gramin Bank Madhya Bharath Gramin Bank Chambal-Gwalior Kshetriya Gramin Bank Rewa-Sidhi Gramin Bank Sharda Gramin Bank Ratlam-Mandsaur Kshetriya Gramin Bank Vidisha Bhopal Kshetriya Gramin Bank Mahakaushal Kshetriya Gramin Bank Jhabua Dhar Kshetriya Gramin Bank Maharashtra y y y y y y y Marathwada Gramin Bank Aurangabad-Jalna Gramin Bank Wainganga Kshetriya Gramin Bank Vidharbha Kshetriya Gramin Bank Solapur Gramin Bank Thane Gramin Bank Ratnagiri-Sindhudurg Gramin Bank Manipur y Manipur Rural Bank Meghalaya y Ka Bank Nogkyndong Ri Khasi-Jaintia Mizoram y Mizoram Rural Bank Nagaland y Nagaland Rural Bank .

Orissa y y y y y Kalinga Gramya Bank Utkal Gramya Bank Baitarani Gramya Bank Neelachal Gramya Bank Rushikulya Gramya Bank Punjab y y y Punjab Gramin Bank Faridkot-Bhatinda Kshetriya Gramin Bank Malwa Gramin Bank Rajasthan y y y y y y Baroda Rajasthan Gramin Bank Marwar Ganganagar Bikaner Gramin Bank Rajasthan Gramin Bank Jaipur Thar Gramin Bank Hodoti Kshetriya Gramin Bank Mewar Anchalik Gramin Bank Tamil Nadu y y Pandyan Grama Bank Pallavan Grama Bank Tripura y Tripura Gramin Bank Uttar Pradesh y y y y y y y y y y y y Purvanchal Gramin Bank Kashi Gomti Samyut Gramin Bank Uttar Pradesh Gramin Bank Shreyas Gramin Bank Lucknow Kshetriya Gramin Bank Ballia Kshetriya Gramin Bank Triveni Kshetriya Gramin Bank Aryavart Gramin Bank Kisan Gramin Bank Kshetriya Kisan Gramin Bank Etawah Kshetriya Gramin Bank Rani Laxmi Bai Kshetriya Gramin Bank .

to oversee their operations.y y y y Baroda Western Uttar Pradesh Gramin Bank Devipatan Kshetriya Gramin Bank Prathama Bank Baroda Eastern Uttar Pradesh Gramin Bank Uttaranchal y y Uttaranchal Gramin Bank Nainital Almora Kshetriya Gramin Bank West Bengal y y y Bangiya Gramin Vikash Bank Paschim Banga Gramin Bank Uttar Banga Kshetriya Gramin Bank Regional Rural Bank The government of India set up Regional Rural Banks (RRBs) on October 2. 1975 which were sponsored by Syndicate Bank. State Bank of India. 1975. five RRBs were set up on October 2. There are several concessions enjoyed by the RRBs by Reserve Bank of India such as lower interest rates and refinancing facilities from NABARD like lower cash ratio. particularly the small and marginal farmers. . managerial and staff assistance from the sponsoring bank and reimbursement of the expenses on staff training. The RRBs are under the control of NABARD. agricultural labourers. lower rate of interest on loans taken from sponsoring banks. 5 Crore. Initially. The total authorised capital was fixed at Rs. United Commercial Bank and United Bank of India. artisans and small entrepreneurs. NABARD has the responsibility of laying down the policies for the RRBs. provide refinance facilities.lower statutory liquidity ratio. The banks provide credit to the weaker sections of the rural areas. Punjab National Bank. to monitor their performance and to attend their problems. 1 crore which has since been raised to Rs.

62 billion) (2007) Official Website NABARD is the apex development bank in India National Bank for Agriculture and Rural Development (NABARD) is an apex development bank in India based in Mumbai. planning and operations in the field of credit for agriculture and other economic activities in rural areas in India".National Bank for Agriculture and Rural Development Logo of NABARD Headquarters Established Managing Director Currency Reserves Website Headquarters in Mumbai Mumbai. Maharashtra. India 12 July 1982 [1] Dr K G Karmakar [2] 81.[3] It has been accredited with "matters concerning policy. . Maharashtra.220 crore (US$17.

formulation of rehabilitation schemes. serves as an apex financing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas 2. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India. and the Head office has several Top executives like the Executive Directors[ED]. Commercial Banks (CBs) and other financial institutions approved by RBI.Contents [hide] y y y y y 1 History 2 Role 3 Rural Innovation 4 References 5 External links [edit] History NABARD was established on the recommendations of Shivaraman Committee. restructuring of credit institutions. by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. Stateowned corporations or co-operative societies. companies. training of personnel. State Co-operative Banks (SCBs). and the Chairperson. It is one of the premiere agencies to provide credit in rural areas.Each Regional Office[RO] has a Chief General Manager [CGMs] as its head. etc. undertakes monitoring and evaluation of projects refinanced by it.It has 336 District . Reserve Bank of India (RBI) and other national level institutions concerned with policy formulation 4. and Agricultural Refinance and Development Corporation (ARDC). including monitoring. [edit] Role NABARD: 1. NABARD's refinance is available to State Co-operative Agriculture and Rural Development Banks (SCARDBs). NABARD has its head office at Mumbai. co-ordinates the rural financing activities of all institutions engaged in developmental work at the field level and maintains liaison with Government of India. located in the capitals of all the states/union territories. partnership concerns. While the ultimate beneficiaries of investment credit can be individuals. India NABARD operates throughout the country through its 28 Regional Offices and one Sub-office. production credit is generally given to individuals. Managing Directors[MD]. State Governments. Regional Rural Banks (RRBs). takes measures towards institution building for improving absorptive capacity of the credit delivery system. 3.

risk friendly.[4] NABARD also has a portfolio of Natural Resource Management Programmes involving diverse fields like Watershed Development. Cooperatives. NABARD set up the Rural Infrastructure Development Fund. NABARD is also known for its 'SHG Bank Linkage Programme' which encourages India's banks to lend to self-help groups (SHGs). The credit flow to agriculture activities sanctioned by NABARD reached Rs 1. water schemes etc. [edit] Rural Innovation NABARD's role in rural development in India is phenomenal. executing ideas in optimum commercial way. one Sub-office at Port Blair and one special cell at Srinagar. health and education. The Indian economy as a whole is poised for higher growth in the coming years. 512830 million have been sanctioned for 2. 600000 cooperatives are working in India at grass root level in almost every sector of economy. The overall GDP is estimated to grow at 8.[5] National Bank For Agriculture & Rural Development (NABARD) is set up as an apex Development Bank by the Government of India with a mandate for facilitating credit flow for promotion and development of agriculture. Because SHGs are composed mainly of poor women. Through member base of 250 million. As of March 2006 2. NGOs. rural roads and bridges. Self Help Group.4 per cent.[6] The assistance is extended to Individuals. It also has 6 training establishments. NABARD has started a new direct lending facility under 'Umbrella Programme for Natural Resource Management' (UPNRM). Under this facility financial support . SHG & PRIs. Effectiveness of the program depends upon many factors. The very purpose of RIDF is to promote innovation in rural & agricultural sector through viable means.[7] Recently in 2007-08.Offices across the country. There are linkages between SHG and other type institutes with that of cooperatives.800 million in 2005-2006.2 million SHGs representing 33 million members had to been linked to credit through this programme. while SHG is informal one.651 projects covering irrigation. unconventional experiments in these sectors that would have the potential to promote livelihood opportunities and employment in rural areas. Under the RIDF scheme Rs. Role of NABARD in overall development of India in general and rural & agricultural in specific is highly pivotal. and Panchayati Raj Institutions who have the expertise and willingness to implement innovative ideas for improving the quality of life in rural areas. cottage and village industries. NGO have more of social color while that of PRI is political one. Cooperative is member driven formal organization for socio-economic purpose.44.. Tribal Development and Farm Innovation through dedicated funds set up for the purpose.574. soil conservation. this has evolved into an important Indian tool for microfinance. Rural Innovation Fund is a fund designed to support innovative. Through assistance of Swiss Agency for Development and Cooperation. but the type of organization to which the assistance is extended is crucial one in generating. Does the legal status of an institute influences effectiveness of the program? How & to what an extent? Cooperative type of organization is better (Financial efficiency & effectiveness) in functioning (agriculture & rural sector) compared to NGO.

hi-tech agriculture with an export orientation has brought about higher productivity in cotton. Do we need to rethink the appropriate institutional structure for rural banking in India? The problems of widespread poverty. The Narasimham Committee observed that the manning of rural branches ³has posed problems for banks owing to the reluctance of urban-oriented staff to work in the rural branches and the lack of motivation to do so. scheme appraisal work in connection with farm and non-farm investments and the production of different crops. [9] Rural Banking in India ECONOMICALLY empowering. access to inexpensive credit and other micro-finance services. Progressive and not-so-small farmers have no difficulty in obtaining credit from the commercial banks. The focus should be on assisting and guiding small farmers. Since the days of the Rural Credit Survey Committee (1954). It is in this context that the role of rural banking institutions has to be reconsidered. eco-tourism in Karnataka[8] etc. dairy farming. etc. Already 35 projects have been sanctioned involving loan amount of about Rs 1000 million. Though there has been some improvement. India has come a long way in its search for an appropriate rural banking set-up. Apart from having a basic knowledge of agriculture and rural development. Stagnation in rural banking is noticed in the north and northeastern regions. More local recruitment and improved working conditions in rural areas should help to meet this problem. Further. . The sanctioned projects include honey collection by tribals in Maharashtra. tussar value chain by a women producer company ('MASUTA'). growing inequality. India¶s rural population will have a significant impact on India¶s economic growth. i.´ Experience of RRBs that have locally-recruited employees. the employees are unhappy in view of the lack of adequate career prospects. Activities allied to agriculture ± livestock breeding.e. including savings and insurance. Economic empowerment is defined here as. The development strategy adopted and the increasing diversification and commercialisation of agriculture underline the need for the rapid development of rural infrastructure and a larger flow of credit. a rural banker is required to handle credit extension work. rapid population growth and rising unemployment all find their origins in the stagnation of economic life in rural areas. The modern banking system has failed to deliver inexpensive credit to India¶s 600. the problem remains.for natural resource management activities can be provided as a loan at reasonable rate of interest. Credit for the poorer households is the real problem. oilseeds. There has been tremendous progress in quantitative terms but quality has suffered. sericulture etc are being taken up on commercial lines.000 villages ± despite several expensive attempts to do so. progress has been slow and halting and significant regional disparities persist.

Another reason for such a state of affairs is that the apex bodies have expanded and prospered at the cost of primary bodies by taking over functions like deposit mobilisation even at the rural level. societies that want to work independently of the federal system should be allowed to exit. A person who says he has been in bank service for more than 25 years writes: ³That rural credit has become unfashionable is evident from the fact that the subject is accorded only residual focus in the various congregations of our bankers. the pest problem and the market and price problem. the agricultural sector is beset with considerable uncertainties ± the weather and rainfall problem. The placement policy in vogue in our banks is such that exposures in rural credit or agro-financing rarely count for promotions. By way of liberalisation of the federal structure¶s working. Unfortunately a uniform standardized approach to lending has led to rigidities as a result of which a farmer-borrower becomes a defaulter for no fault of his. . Government interference that leaves no scope for these apex bodies to show initiative and work out action plans for development on their own is partly responsible for this situation. Also.the monitoring/supervision and recovery of loans spread over villages which are not even connected by all-weather roads and in an environment in which vested interests are quite powerful.

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