A Dissertation report

on
“A study of Agricultural finance in India ”

Submitted in the fulfillment of the degree of Master of Business Administration under BPUT
University

Submitted By-

Esani behera

Regd. No. 1806151019

Under the guidance of Dr. C.Vijaya

In the Year-2019-20

Through

Madhusudan Institute of Co-operative Management

Bhubaneswar
 DECLARATION

I hereby declare that the project titled – “A STUDY OF AGRICULTURAL FINANCE” It is an original piece of
research work carried out by me. The information has been collected from genuine & authentic sources. The work has been
submitted in fulfillment of the requirement of MBA in Marketing.

Place: Bhubaneswar

Date:

SIGNATURE OF THE STUDENT

 INDEX

Serial no. Particulars Page no.

1 Research Proposal 1-6

2 Introduction 7-10

3 Need of study 11-22

4 Objective 23-24

5 Research methodology 25-28

6 Scope of study 29-31

7 Limitation of study 32-33

8 Data analysis & Interpretation 34-43

9 Finding 44-45

10 Learning’s from dissertation 46-48

11 Conclusion 49-50

12 Bibliography 51-52

13 Questionnaire 53-54
RESEARCH PROPOSAL
 Introduction

Finance in agriculture is as important as other inputs being used in agricultural production .technical inputs can be
purchased and used by farmer only if he has money(funds).But his own money is always inadequate and he needs outside
finance or credit. professional money lenders were the only source of credit to agriculture till 1935.They used to charge
unduly high rated of interest and follow serious practices while giving loans and recovering them. As a results ,farmers were
heavily burdened with debts and many of them perpetuated debts .with the passing of Reserve Bank Of India act
1934,district central co-op Banks act and land development banks act, agricultural credit received inputs and there were
improvements in agricultural credit. A powerful alternative agency came into being large scale credit became available with
reasonable rates of interests at easy terms, both in terms of granting loans and recovery of them. Although the cooperative
banks started financing agriculture with their establishments in 1930’s real inputs was received only after independence
when suitable legislation were passed and policies were formulated .Thereafter, bank credit to agriculture made
phenomenal progress by opening branches in rural areas and attracting deposits.

Till 14 major commercial banks were rationalized in1969,co-operative banks were the main
institutional agencies providing finance to agriculture. After nationalization, it was made mandatory for these banks to
provide finance to agriculture as a priority sector. these banks undertook special programs of branch expansion and created
a network of banking services. throughout the country and started financing agriculture on large scale. Thus agriculture
credit acquired multi-agency dimension. Development and Adoption of new technologies and availability of finance go
hand in hand .In bringing “Green revolution” , “White revolution” and “yellow revolution” finance has played a crucial role.
Now the agriculture credit, through multi agency approach has come to say.

The procedures and amount of loans for various purposes have been standardized. among the
various purposes “Crop loans” (short –term loan) has the major share. In addition, farmers get

Need of the study

Initiatives taken by the government for increasing flow of credit

i. Farm credit package

ii. Interest subvention to farmers
iii. Extension of interest subvention scheme to post harvest loans
iv. Collateral free loans
v. Guidelines for providing relief in event of occurrence of natural calamities
vi. Interest subvention for loan restructured in the drought affected states in 2012
vii. Kissan credit card scheme
viii. Agriculture debt Wavier and Debt Relief Scheme,(ADWARDS) 2008
ix. Bringing Green revolution in Eastern India (BGREI)
x. Revival package for Short Term Co-operative Credit Structure

Objectives
i. To study the agriculture finance
ii. To study the productive needs of agricultural finance
iii. To study the sources of Agricultural finance
iv. To examine the role of NABARD in agricultural development.
Research Methodology
Definitions of research:

METHODOLOGY

Methodology is the process of collecting the information which help to find out the solution to the topic selected by the
researcher. Whereas research helps to study and find out the techniques with proper process. It is s systematic way of
presenting information.

In order to collect the required information for the project the following methods were adopted.

Secondary data

These are generally published sources, which have been collected originally for some other purpose. Source are
internal company records, government publication, reports & publication , reports & journals, trade ,professional and
business associations publications & reports. The secondary data is collected and possibly processed by people in question.

Sources of secondary data include census, large survey and organization records. Secondary data information relates to
past periods. Through may be only possible source of secondary data.

1) Newspaper
2) Magazines
3) Internet
4) Research proposal

India is a land of villages and agriculture still continues to be the important industry providing employment and
Livelihood to about 70percent of its population. After india’s independence, the successive five year plans have
given great accent to agriculture and agricultural development.India is an important country in Asia where there is
continuous population explosion creating greater demand for food crops. Besides ,the planned industrial expansion
also warrants the production and supply of large quantities of raw materials from agricultural sector. With these
objectives, measures have been taken at the governmental level for increasing agricultural production through use of
farm yard manures, pesticides, chemical fertilizers.

The cooperatives and the commercial banks put together are not able to eliminate moneylenders and
indefenous bankers who are financing at usurious rates. But the commercial banks lending to agriculture has helped
the agriculturists to reduce their borrowing from non-institutional agencies.

Limitations

1) Study covers only a study of 3 years which is insufficient to get the precise result.
2) Study is limited only to a agricultural finance in india.
3) The time available for the purpose of study is very less i.e two months only. Mostly secondary data is referred
than the primary data for the study is limited.
INTRODUCTION
 Agriculture is adominant sector of our economy and credit plays an important role in increasing agriculture production.

Avalaibility and access to adequate , timely and low cost credit from institutional sources is of great importance especially

to small and marginal farmers. along with other inputs, credit is essential for establishing sustainable and profitable farming

systems. Most of the farmers are small producers engaged in agricultural activities in areas of widely varying potential.

experience has shown that easy access to financial services at affordable cost positively affects the productivity, asset

formation, and income and food security of the rural poor. The major concern of the government is therefore, to bring all the

farmer households within the banking fold and promote complete financial inclusion.

Rural indebtness is an age-old problem in India. In the nineteeth century, commercial banking was non-

existent in rural areas , and farmers were completely in the hands of unsurious money lenders. Starting from the days

of British rule, the central government has been striving to expand institutional lending to the rural agricultural sector.

In recent decades ,efforts in this direction have intensified and today, there is a vast network of institutions providing

credit for agriculture.

One of the first step taken by the government of India towards addressing the problem was the

establishment of co-operative credit societies. The co-operative credit societies act (1904) was passed to provide

cheap and costs effective financial services to farmers and attempts were made thereafter to widen the co-operative

movement. The Maclagan committee (1915) and the Royal Commission of Agriculture in India (1928)focused on the

expansion of co-operatives in the country. The RBI Act,1934, made provisions to establish an agriculture credit

department in the bank ad extend refinancing facilities to the co-operative credit system.

However, there was a slowdown in the co-operative movement in subsequent years,as a large number of

co-operative institutions were found to be saddled with the problem of frozen assets, because of heavy overdue in

repayment. The RBI commissioned the All India Rural Credit Survey in 1951 to understand the situation at the

grassroots level and address concerns regarding the financing of the rural sector. The committee recommended th

creation of an efficient system of agricultural fiancé and the development of a sound co-operative credit

structure.They suggested increasing the share of co-operatives and advised that at least one number of each household

should be a member of a co-operative institution.

 When the state bank of India was created in july1955,extending banking services to rural and semi-urban

areas was made one of its objectives .until 1966,co-opeatives were viewed as the main instrument for extending

agricultural credit. The All-India Rural Credit Review Committee (1969) recommended the adoption of a multi-

agency approach” towards agriculture and rural credit and commercial banks were expected to complement the

efforts of co-operatives to enhance the quantum of credit in the rural economy. The nationalization of commercial

banks in 1969 made it possible for government to become more proactive on expanding credit to agriculture. In the

same year ,the concept of Lead bank’ was introduced by the Reserve bank of India ;ach bank is expected to

concentrate on a specific geographical area to increase the flow of credit to agriculture and to promote overall

development in rural areas within its area of operation.

The Narasimham committee on rural credit (1975) recommended the establishment of regional Rural

banks, as it was of the view that neither commercial banks nor co-operative institutions were able to meet agricultural credit

needs. another major step taken towards the development of rural credit was the establishment of NABARD in 1982by a

special act of parliament on the recommendation of the committee to review Arrangement for Institutional Credit for

Agriculture and Rural development. Its mission is to promote sustainable and equitable agriculture and rural prosperity

through effective credit support, related services, institution development and other innovative initiatives (NABARD)

Three other initiatives viz, the Kisan Credit Scheme ,Self help group –bank Linkage programmer and

special agricultural credit plans were put in a place in the 1990s to increase the flow of credit to the agricultural

sector. The increased lending to agriculture accelerated, particularly after the government adopted doubling of

agricultural credit policy(DCAP) over a3 year period beginning in 2003-04.

 Despite the successive efforts taken by the government, the latest All India Debt and investment survey(AIDIS) by

the NSSO shows that non-institutional agencies still accounted for as much as44 percent of outstanding dues in 2012-

13,an increase from the 36 percent level in 1990-91.the ground level institutional credit flow to agriculture has shown

a significant increase of more than ten times from Rs 0.53lakh crore in 2001-02 to rs.6.07 lakh crore in 2012-

13.(annual report NABARD,2013-14),And yet, only about half of 14 crore farm households were covered by formal

institutions while the remaining were dependent of informal sources such as moneylenders who charge exorbitantly

high rates of interest (Annual Report NABARD,2012-13)

In 2006-07,the Central government introduced an interest subvention of two per cent for short-term credit up to

Rs.3 lakh. The sub vention was enhanced subsequently and by 2013-14 ,an additional subvention of five percent and

reducing the effective rate of interest for short term credit to four percent.

In addition to the interest subvention schemes there has been an intensification of debt waiver

scheme the first such waiver was announced in 1990.Another scheme to addresss the issue of indebtness of farmers

was the Farmer’s debt Waiver scheme, announced by the government of india in2008,covering 3.69crore small and

marginal farmers and 0.6 crore other farmers. The cost of this scheme was estimated initially at approximately

Rs.70,000 crore.
NEED OF THE STUDY
Initiatives taken by the government for increasing flow of credit

Firm credit package:

Government of india in its firm credit package announced in june 2004,advised banks to double credit to
agriculture sector in three years,i.e,, by 2006-07. In the subsequent annual budgets, government of india announced
targets for credit to agriculture to ensure adequate credit flow to the sector. Agricultural credit flow has increased
from Rs.86981 crore in 2003-04 to Rs.468291 crore in 2010-11.

Interest subvention o farmers:

Govt. Has announced interest subvention schenme in 2006-07 to enable banks to provide short term
ccredit to agriculture (crop loan) up to Rs 3 lakh at 7% interest to farmers.further to incentivize, prompt repayment ,n
the unin budget for 2009-10,Government of india announced an additional interest subvention of 1% to those
farmers who repay their short term crop loans promptly and on or before due date.

Collateral free loans:

The limit of collateral free farm loan has been increased from Rs.50,000 to Rs.1,00,000.

Guidelines for providing relief in event of occurrence of natural calamities:

Reserve bank has put in place a mechanism to address situations arising out of natural calamities. The banks
have been issued necessary guidelines for undertaking necessary credit relief measures in event of occurrence of
natural calamities .the guidelines ,inter alia contains directions to banks to ensure that the meetings of District
Consultative Committees or State level banks committee are convened at the earliest to evolve a coordinated action
plan for implementation of the relief programmer in collaboration with the state/district authorities.

Interest subvention for loan restructured in the drought affected states in 2012:
The standing guidelines of Reserve Bank of India provide for rescheduling of short term crop loans upon
declaration of natural calamity including drought. such rescheduling of crop loans converts them into term loans for
which normal rate of interest are applicable. Due to deficient rainfall this year in some parts of the country, the matter
of providing relief to the farmers of the drought affected farmers ,it has been that in case where such loan are
restructured due to drought ,the interest subvention of 2% which is already available for short term crop loans to
public sector banks, cooperative banks and regional rural banks will continue to be available for the current financial
year on the full restructured amount.

Kisan credit card scheme

In order to ensure that all eligble farmers are provided with hassle free and timely credit for their
agricultural operation, Kisan credit scheme for farmers was introduced in1998-99 to enable the farmers to purchase
agricultural inputs such as seeds, fertilizers, pesticides, etc. the Kisan credit scheme has facilitated in augmenting
credit flow for agricultural activities. the scope of KCC has been broad based to include term credit and consumption
needs.

CREDIT CARD scheme to convert it into a smart card cum debit card and revised guidelines have been issued by
NABARD ,some of the major features are as under ;

• Flexi KCC with simple assessment prescribed for marginal farmers.

 • Validity of KCC for 5years
• No processing fee up to a limit of Rs.3.00 lakh
• No withdrawl the account to remain outstanding for more than 12 months :no need to bring the debit balance
in the account of zero at any point of time.
• One time documentation at the time of first ailment and thereafter simple declaration (about crops
raised/proposed) by farmer.
• KCC cum SB account instead of farmers having two separate accounts. the credit balance in KCC and SB
account to be allowed to fetch interest at saving bank rate.
• Disbursement through various delivery channels including ICT driven channels like ATM/PoS/Mobile
handsets.
The state governments have been advised to launch an intensive branch/village level campaign to
provide Kisan credit card to all the eligible and willing farmers in a time bound manner. Up to June,2012,
11.39 crore KCC has been issued.

Agriculture debt waiver and debt relief scheme,(ADWDRS)2008

To mitigate the distress of farming community in general and marginal farmers in particular and to reclog
the institutional credit channels and make farmers eligble for fresh credit, the Debt Waiver and Debt Relief
Scheme,2008 was announced in the Union Budget for 2008-09.
The scheme covered direct agricultural loans disbursed
i. Between 31 march 1997 and 31 march 2007
ii. Overdue as on 31 december 2007
iii. Remaining unpaid until 29 february 2008

Bringing green revolution in Eastern India (BGREI)

Financing agricultural investments in the Eastern Region-Concessional Refinance Support:

In order to support the banking system finance such key investments ,NABARD has introduced a concessional
refinance scheme in the year 2011-12 ,with an objective to accelerate investments in agriculture to enhance
production and productivity of crops in the Eastern Uttar Pradesh )by incentivizing the banks.

Revival package for short term cooperative credit credit structure:

The government is implanting a package for revival of short term rural cooperative credit structure in the
country. The revival package is aimed at reviving /strengthening the short term rural cooperative credit structure and
make it a well managed and vibrant medium to serve the credit needs of rural India, especially the small and marginal
farmers. It seeks to:
a) Provide financial assistance to bring the system to an acceptable level of health
b) Introduce legal and institutional reforms necessary for their democratic, self -reliant and efficient functioning;
and
c) Take measures to improve the quality of management.
Needs of Agricultural finance:

Need for
Agricultural
finance

Productive unproductive
need need

purchase
development celebration of celebration of
fertilizer &
of land birth marriages
implement

PRODUCTIVE NEEDS

Productive needs refers to finance for purchase of needs fertilizers and implements and also digging and Deeping of
wells.

UNPRODUCTIVE NEED

The productive purpose for which the farmer also get loan are celebration of marriages, birth and death. There is

another classification of financial requirement of the farmer and they all fall in the productive category.

I. Short-term loan
Short –term loans needed for cultivation or for marketing domestic expenses.

II. Medium term loan

Medium term loans which range from 15 months to 5 years for making improvement of land, buying cattle
agricultural implements etc.
III. Long term loan long term period more than 5 year required for purchase of additional land, make permanent
improvements on land, and pay off old debs and to purchase costly agricultural machinery.
 cooperative
societies

commercial banks

loan
development at
bank
Agricultural finance institutional source

RRB

Money lenders
government
NON-INSTITUTIONAL
SOURCE
NABARD
land lord & others
Institutional source
Institutional sources consist of the government and co-operative societies, commercial bank including the regional
bank, Lead bank

1) Co-operative societies
Indian planners consider co-operation as an instrument for economic development of the deprived farmers,
particularly in the rural areas .they see in a village panchayat, a village co-operations and village co-operatives and
village school, as the trinity of institution on which a self-reliant and just economic and social order is to be built. The
co-operative movement was started in India largely with a view to providing agriculturists funds for agricultural
operations at low rates of interest and projects them from the clutches of money lenders.

A) Primary agricultural credit society

Primary agricultural societies are grass root level arms of the short term co-operative credit
structure. PACs deal directly with farmer borrowers, grant short term and medium term loans
and also undertake distribution and making functions.

B) Central co-operative banks

There are now 369(2001-2002) District Central Co-operative Banks. The loan amount of
56,650 crore is distributed to the farmers so far. Their main task is to lead primary agricultural
credit societies in village. Central co-operative banks functions as intermediaries between the
State co-operative bank and primary agricultural society.

C) State co-operative bank

There are now 30 state co-operative banks in the country. These banks are the apex banks of
the co-operative credit structure. It serves as a link between NABARD from which it borrows
and lends to the co-operative central bank and primary societies village.

OBJECTIVES OF STATE CO-OPERATIVE BANK

1) To work as the apex bank at state level
2) To guide and supervise the functioning of district central co-operative banks,and primary co-operative
agricultural socities and to develop the natural relationship among them.
3) To communicate between other co-operative societies and the district co-operative central banks.
4) To carry the whole responsibility of banking business in co-operative sector.
5) To make maximum extension of credit to the rural section. In 1992-93 Rs.5,800 crore were provided as
loans for agriculture. it increased Rs.28,947 crore in 2005-06.Therefore,at present co-operative banks
contribute in 22% in total distributed agricultural loans.

2) The Commercial Banks

The commercial banks were not much bothered about agricultural finance. They were confined to the urban
areas receiving deposits from the urban public and financing trade and industry .all this changed after the
nationalization of banks in 1969.now the commercial banks are providing finance both directly and indirectly.
The commercial banks have implemented “Village Adoption Scheme” by 1987-88 the commercial banks had
given Rs.3930 crore in advances. Commercial bank lent 4,806 crore to agricultural finance in 1991-92 and in
Rs.68,557 crore in 2005-06.
3) Land Development Banks

Land development banks were set up in order provide for long term finance. Previously they were called
land mortgage banks,the objective of the bank is to provide long term credit to cultivators against the mortgage
of their lands. In additional to this the bank does the following functions

1) To open branches of the bank to different places

2) To see whether there is proper disposal of the debt given
3) To issued debentures from time to time
4) To create feeling of co-operation among the members and to promote it.
5) To guide for different development projects in agriculture
6) To promote habit of savings among the members
7) To provide valuable advice to cultivators in cultivators.
These banks provide loan for
1) Repayment of old loans to cultivators
2) Purchasing new land
3) Digging and construction of the well
4) Repairing the well

The cooperative has the direct encouragement from the government and support of the NABARD
as it had made spectacular progress. By 1981, the co-operatives were functioning nearly 30 percent of
the advantages of this.

4) Regional rural banks

The regional banks was set up in 1975. The main objective of the RRBS is to provide credit and other
facilities particularly to the small and marginal farmers, agricultural laborers, artisans and small entrepreneurs
so as to develop agriculture ,trade commerce ,industry and other productive activities in the rural areas.

5) The Government

These are both short term as well as long term loans .these loans are popularly known as “Taccavi loans” which
are generally advanced in times of natural calamities .The rate of interest is low. But it is not a major source of
agricultural finance. The government provides finance indirectly as well as indirect.

1. Indirect financing

Indirect credit is provided through the co-operative societies.

2. Direct financing

The govt. has been financing farmers directly. Agricultural credit from the govt. is calls “taccavi ’and
has a long history in India, it is provided under Land improvement Loan Act of 1883 and the agricultural
loans Act of 1884.the government gives “Taccavi loans” to the farmers which are disbursed at the time
of distress famines, flood etc.
6) NABARD
The Reserve bank of India since its formation had wanted to appoint a separate department for handling
agricultural credit. The RBI had set up ARDC for defining refinance support to the banks to promote
programmers of agricultural development particularly those requiring term credit .the government needed an
Apex institution to extend support and to give guidance to credit institutions in matters relating to the formation
and implementation of rural development programmers. Therefore, NABARD was set up .It was set up in july
 1982 and it took over the functions to the ARDC and also it took over the functions of the RBI in relation to
co-operative banks and RRBs.
The main objective of the NABARD is to look after agricultural credit, it also has to provide
refinance facilities to all banks and financial institution landing to agricultural and rural development .

Non - Institution Source

1. Money Lenders

There are two types of money lenders in rural areas. There are rich farmers or landlords who combine farming

with money-lending. There is lasso professional money lender whose only occupation or profession is to lend

lend money. The cultivators depend money lenders for their requirements of cash. However, there are many

reasons for the preponderance of the village money-lenders in rural area even now.

i. The money lender freely suppliers credit for productive and non- productive propose, and also for short

term and long term requirements the farmers.

ii. He is easily accessible and maintains a close and personal contact with the borrowers often having

relations with family extending over generations.

iii. These methods of business are simple and elastic.

2. Landlord And Others

Traders and commission agent supply funds to farmers for productive purpose much before the crops nature.

They force the farmers to sell their produce at low price and they charge a heavy commission for themselves.

This source of finance is particularly important in the case of cash crop like cotton, groundnut, tobacco, and in

the case of fruit of chard like mangoes. Traders and commission agent may be bracketed with money lenders,

as their lending to farmers is also at exorbitant rates and has other undesirable effects too.
OBJECTIVES
OBJECTIVES OF THE STUDY

1) To study the agricultural finance

2) To study the productive needs of agricultural finance

3) To study the sources of agricultural finance

4) To examine the role of NABARD in agricultural development.

 RESEARCH

METHODOLOGY
Research methodology

Meaning of research

Research in common parlance refers to a search for knowledge. Once can also define research as a scientific

and systematic search for patient information on a specific topic. In fact,research is an art of scientific

investigation, some people consider research as a movement, a movement, from the known to the unknown.

This inquisitiveness is the mother of all knowledge and the method, which man employs for obtaining the

knowledge of whatever the unknown, can be termed as research.

Research is an academic activity and as such the term should be used in a technical sense. According to

Clifford Woody research comprises defining and redefining problems, formulating hypothesis or suggested

solutions; collecting, organizing and evaluating data ; making deductions and reaching conclusions; and at last

carefully testing the conclusions to determine whether they fit the formulating the hypothesis ..research is

thus,an original contribution, to the existing stock of knowledge making for its 22 eneralization. It is the

persuit of truth with the help of study, observation, comparison and experiment. In short the search for

knowledge through objective and systematic method consisting of enunciating the problem, formulating a

hypothesis collecting the facts of data ,analyzing the fact of reaching certain conclusions either in the form of

solutions towards the concerned problem or in certain 22 eneralization for some theoretical formulation.
Research design

define research
problem

review previous
review concepts
research
& theories
findings

review of literature

formulate hypothesis

design research

collect data

analyze data

interpret & report

Definitions of research

1. The advanced dictionary of current English

2. Research as a careful investigation or inquiry especially through search for new facs in any branch of
knowledge.

3. Redman and Mary

“Research as a systemized effort to gain new knowledge.”

4. D.Slazenger and M.Stephenson,

“Research as the manipulation of things, concepts or symbols for the purpose of generalizing to
extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the
practice of art.”

5.2 METHODOLOGY

Methodology is the process of collecting the information which help to find out the solution to the topic

selected by the researcher. Whereas research helps to study and find out the techniques with proper process.

It is a systematic way of presenting information .In order to collect the required information for the project the

following methods were adopted.

5.2.1 Secondary Data:
These are generally published sources, which have been collected originally for some other purpose. Source

are internal company records, government publication, reports & publication, reports & journals, trade,

professional and business associations publications & reports. The secondary data is collected and possibly

processed by people in question. Common sources of secondary data include census, large survey and

organization records. Secondary data information relates to past periods. Through old may be only possible

source of desired data on the subject which cannot use following source of secondary data.

1. Newspaper

2. Magazines

3. Internet

4. Research proposal
SCOPE OF THE STUDY
 Scope of the present study

India is a land of villages and agriculture still continues to be the important industry providing

employment and livelihood to about 70 percent of its population. after India’s independence ,the successive

five year plans have given accent to agriculture & agricultural development. India is an important country in

Asia where there is continuous population explosion creating greater demand for food crops. Besides, the

planned industrial expansion also warrants the production and supply of large quantities of raw materials from

agricultural sector. With these objectives, measures have been taken at the governmental level for increasing

agricultural production through the use of farm yard manners ,pesticides, chemical fertilizers and high yielding

variety of seeds. Intensive cultivation is undertaken and along with this, rotation of crops and mechanization of

farm operations to a limited extent are undertaken.

Agricultural growth is crucial for alleviating rural poverty. Access to institutional credit to ore

farmers and appropriate quantity and quality of agricultural credit are crucial for realizing the full potential of

agriculture as agriculture as a profitable activity.

Credit is the sine qua non for agricultural operations and both for short term and long term , credit is

needed by agriculturists. Short term credit is of repetitive nature and is needed for every agricultural operation.

As the size of the holdings is small the retained earnings of the farmers are practically nil. Traditionally Indian

farmers have been borrowing for many centuries, and even now from moneylenders, Indegenious bankers,

friends and relatives there was no institution for agricultural lending till the co-operatives were established in

1904. But even the n the impact of the co-operatives nil till 1954. Subsequently measures were taken to

strength the co-operatives. The commercial banks were for a long time of the view that agricultural credit was

not in their purview. It was only in the year 1955, when the state bank of india was established as a state

owned commercial bank by nationalizing the imperical bank of India, some efforts were taken to lend money

for agricultural operations.

 The co-operatives and the commercial banks put together are not able to eliminate moneylenders and indegenious

bankers who are financing at usurious rates. But the commercial bank’s lending to agriculture has helped the agriculturists

to reduce their borrowing from non-institutional agencies.

The present study of the demand for and supply of credit will help the bank to allocate more funds for major

purposes for which they require funds and also provide adequate amount of funds at the right time. Study of the causes of

default will provide lessons to the farmers on how to use credit in a better way for productive purposes so that they can

repay the loan within the specified period. Examining the performance of the banks will help in identifying the difficulties

involved in advancing and recovery loans. This will help in identifying the difficulties involved in advancing and recovery

of loans. This will enable the banks to alter their lending procedures and the repayment schedule. The study will help the

policy makers to reformulate the policies so as to improve the performance of the banks.
LIMITATIONS
LIMITATIONS

1. Study covers only a study of 3 years which is insufficient to get the precise result.

2. Study is limited only to an Agricultural Finance in India

3. The time available for the purpose of study is very less i.e two months only. Mostly

Secondary data is referred than the primary data for the study is limited.
DATA ANALYSIS
&
INTERPRETATION
AGRICULTURAL CREDIT POLICY

The government of India has initiated several policy measures to improve the accessibility of farmers to the

Institutional sources of credit. The emphasis of these policies has been on progressive institutionalization for

providing timely and adequate credit support to all farmers with particular focus on small and marginal

farmers and weaker sections of society to enable them to adopt modern technology and improved agricultural

practices for increasing agricultural production and productivity.

The policy lays emphasis on augmenting credit flow at the ground level through credit planning , adoption of

region-specific strategies and rationalization of lending policies and procedures. These policy measures have

resulted in the increase in the share of institutional credit off the rural households. Progress in regard to flow of

agricultural credit is given below :

YEAR TARGET ACHIEVEMENT

2007-2008 105000 125309

2008-2009 141000 180486
2009-2010 175000 229400
2010-2011 225000 254658
2011-2012 280000 287149
2012-2013 325000 384514
2013-2014 375000 468291
2014-2015 475000 511029
2015-2016 575000 308025
2016-2017 650000 580250
2017-2018 700000 610424
 Sources Of Credit 1951 1961 1971 1981 1991 2002 2016

Institutional 7.2 14.8 29.2 61.2 64 57.1 56

Government 3.3 5.3 6.7 4 5.7 2.3 1.2

Co-operative societies/ 3.1 9.1 20.1 28.6 8.6 27.3 24.8

Banks etc.
Commercial banks 0.8 0.4 2.2 28 29 24.5 25.1

Insurance, provident - - 0.2 0.6 1.4 0.6 0.3

fund
Other Agencies* - - - - 9.3 2.4 4.6
Non-institutional 92.8 85.2 70.8 38.8 36 42.9 44

Money lenders 69.7 60.8 36.9 16.9 15.7 29.6 33.2

Relatives,friends etc. 14.2 6.9 13.8 9 6.7 7.1 8.5

Traders& commission 1.5 0.9 8.6 4 4 1 0.7

agents
landlords 1.5 0.9 8.6 4 4 1 0.7

Others 1.9 8.9 2.8 2.5 2.5 2.6 1.4

Total 100 100 100 100 100 100 100

 BREAK-UP OF INSTITUTIONAL & NON-INSTITUTIONAL CREDIT

100

90

80

70

60
institutional
50
Nom-
40 indtitutional

30

20

10

0
1951 1961 1971 1981` 1991 2002 2016

Sources : All India Debt & Investment Surveys, Various Issues , NSSO

Note: Breakup of the share of each sources is taken from RBI working Paper Series, Persistence,

of Informal Credit in Rural India : Evidence from “ All India and Investment Survey” and

beyond. Includes financial corporations/institutions, financial companies.

 Table III : Break-up of Institutional & Non-institutional Agricultural Credit

Sources of credit 1951 1961 1971 1981 1991 2002 2016

Institutional 10.2 20.9 32 56.2 66.3 61.1 64

Government - 6.2 - 4 5.7 1.7 1.3

Co-operative 6.2 12.5 - 27.6 23.6 30.2 28.9
societies/Banks etc.
Commercial banks 4 2.2 - 23.8 35.2 26.3 30.7
Insurance, providend fund 0.8 0.7 0.5 0.1
Other agencies* 1.1 2.4 3
Non-institutional 89.8 79.1 68 43.8 33.7 38.9 36
Money lenders 39.8 25.3 17.2 17.5 26.8 29.6
Relatives , friends, etc. - - - 11.5 4.6 6.2 4.3
Traders & Commission - - - 5.8 2.2 2.6 -
agents
Landlords 21.4 15 - 3.6 3.7 0.9 6.4
Others 28.6 38.8 - 5.7 5.7 2.4 1.7
Total 100 100 100 100 100 100 100
BREAK-UP OF INSTITUTIONAL & NON- INSTITUTIONAL CREDIT

120

100

80

Column1
60
non-institutional
institutional
40

20

0
1951 1961 1971 1981 1991 2002 2016

Source: All India Debt& Investment Survey , Various issues, NSSO

EXPLANATION

Non-institutional sources were dominant in 1 951,accounting for 90 per cent of the outstanding

debt of cultivator households ,but their share declined rapidly to 79percent in 1961 and 43.8

percent in 981. After 1981,the rate of decline slow down and the share of non-institutional

sources was 33.7 percent in 1991. There was , however a reversal of this pattern thereafter and

the share of non-institutional debt actually climbed up to 39 percent in 2002 and dropped to 36

percent in 2013. During the period, the share of moneylenders in providing credit rose from 17.5

percent in 1991, to 26.8 percent in 2002 and 29.6 percent in 2016.

IV. Flow of agricultural credit

Year Target Achievement

2007-2008 175000 229400
2008-2009 225000 254658
2009-2010 280000 301908
2010-2011 325000 384514
2011-2012 375000 446779
2012-2013 475000 476550
2013-2014 575000 607375
2014-2015 700000 723225
2015-2016 725000 750000
2016-2017 746000 783590

(Source: Annual Report NABARD Annual Report RBI ,Ministry of Agriculture)

 FLOW OF AGRICULTURAL CREDIT

800000

700000

600000

500000

400000
target
300000
achievement
Column1
200000

100000

0
EXPLANATION

Shows that targeted credit flow to agriculture during the year 2007-2008 is 175,000 (in crores)

corresponding achievement is 229,400. The percentage of achievement on targeted is 131%.

During the year 2008-20098 agricultural credit flow achieved Rs.254, 658 against the targeted

amount Rs. 225,000 . It shows that agricultural credit flow achieved is 113%. As compared to

the year 2007-2008 agricultural credit flow is less during the year 2008-2008-2009 . Five years

after i.e 2012-2013 the target of credit fixed Rs.4,75,000 crore and the achievement Rs476,550

crore , represents 100.32% of the targets. During 2014-2015 the targeted credit flow Rs 7,00,000

crore and the achievement is Rs7,23,225 crore, 103percent of target . During 2014-15 the

targeted credit flow Rs 750000 crore and achievement is Rs 7500000 crore we can understand

the percentage of credit flow is showing decreasing trend up to 2012-13 and slightly improved

thereafter.
4. Different purposes of the Plan
Frequency Percent
Agriculture 32 94.1
Open a shop 82 85.3
Poultry 83 82.4
Handloom 26 76.5
Diary 25 73.5
Piggery 24 70.6
Fishery 24 70.6
Handicraft 20 58.8
Shop renovation 20 58.8
Education 18 52.8
Health 17 50.0
Petty Trading 16 47.1
Transportation Service 10 29.4
Nursey/plantation 6 17.6
Weaving 5 14.5
Guttery 4 11.6
Artisans 3 8.8
Consumption loan 1 2.9
Marriage 1 2.9
Milk vendors 1 2.9
Stationary /Grocery 1 2.9
Rickshaw 1 2.9
Tea stall 1 2.9
Freeing from Moneylenders 1 2.9
Tailors 1 2.9
Masala preparation 1 2.9
Sugarcane 1 2.9
Maternity 1 2.9
Sericulture 1 2.9
Terracotta 1 2.9
Duckery 1 2.9
Mastered cultivation 1 2.9
Pottery items 1 2.9
 agriculture

open a shop

poultry

handloom

diary

fishery

piggery

shop renovation

handicraft

education

health

petty trading

other purposes

transportation service

nursery/plantation

weavers

guttery

artisans

0 10 20 30 40 50 60 70 80 90 100
Source: All India Debt & Investment Survey , Various Issues, NSSO

EXPLANATION
Above graph show the different purpose of the loan & the heights frequency & percentage is an
Agriculture i.e 32 & 94.1 respectively & the lowest frequency & percentage is a pottery item i.e 1
& 2.9 respectively.
FINDINGS
FINDINGS

➢ This dissertation helped to investigate the relationship between institutional credit to agriculture and agricultural

Gross Domestic product (GDP) .collectively, the results suggests that the fears that credit right be ineffective are

perhaps misplaced. There is strong evidence that credit is indeed playing its part of supporting the purchase of inputs

and perhaps even aiding the agricultural sector respond to its contextual constraints

➢ Credit flow to agriculture sector to increase at the rate of 30 percent per year.

➢ Supply of adequate and timely credit to small farmers.

➢ Little was done for the implementation of crop loan system in most states.

➢ Small farmers development agency (SFDA) to route the co-operative credit to small farmers and for

providing subsidy to them when needed.

i. Risk taking abilities

ii. Interest in agriculture

iii. Proper utilization of the amount

iv. Repayment capacity and behaviour

v. Willingness to repay

➢ Self help groups Bank linkage Programmer

➢ Trends in long term and short term credit

➢ The data on interest subvention provided to NABARD , Regional Rural Banks, co-operative banks and

PSBs on short-term credit to farmers is provided in the Expenditure Budget prepared by the Ministry of

Finance.

➢ Review interest rate subvention on short term credit : In view of the lack of identifiable benefits resulting

from interest rate subvention and the emerging evidence that it could be leading to a diversion of

subsidized agricultural credit for non-agricultural purposes, there is a strong case for a serious review of

the policy.

➢ Credit flow to agriculture sector to increase at the rate of 30% per year.
LEARNING’S
FROM
DISSERTATION
LEARNING’S FROM DISSERTATION

This shows the narrow focus of the banks towards short term production loans rather than for term loans. Post reforms, the
banking system has mobilized more deposits from farmers and extended less credit to a declining number of farmers.

We can classify the financial need of the Indian farmer into two categories ;

Productive Need and Unproductive Need

• Source of agricultural finance

A) Institutional source

1) Co-Operative Societies

2) Central Co-Operative Banks

3) State Co-Operative Banks

4) The Commercial Banks

5) Land Development Banks

6) Regional Rural Banks

7) The Government

8) NABARD

B) Non- institution source

1) Money lenders

2) Landlord and others

• Now days many co-operative banks ,commercial banks and RRB provides loans to the farmers in convenient interest

rates and also government of India’s policy is favorable towards agricultural sector RRB’s and NABARD also

working efficiency and effectively towards financial problem.

• Role of NABARD

➢ Serves as an apex financing agency for the institutions providing investment and production credit for

promoting the various developmental activities in rural areas

➢ NABARD refinances the financial institutions which finance the rural sector

➢ NABARD partakes in development of institutions which finances the rural sector.

➢ NABARD also keeps a check on its client institutes.

➢ Co-ordinates the rural financing activities of all institutions engaged in developmental work at the field level and

maintains liaison with Government of India, state governments , Reserve Bank of India and other national level

institutions concerned with policy formulation.

➢ Takes measures towards institution building for improving absorptive capacity of the credit delivery system,

including monitoring, formulation of rehabilation schemes, restructuring of credit institutions ,training of

personnel etc.

➢ Undertakes monitoring and evaluation of projects refinanced by it.

➢ It regulates the institutions which provide financial help to the rural economy.

➢ It provides training facilities to the institutions working in the field of rural up lift ment.

• To study the management of agricultural credit of india.

• To analyses the measures announced by RBI for increasing they flow of credit to agriculture

• To study the comprehensive credit scheme announce by the Govt. of India for doubling credit flow to

agriculture.

• Credit flow to agriculture sector to increase at the rate of 30 percent per year.

• Debt restructuring in respect of farmers in distress and farmers in arrears providing for rescheduling of

outstanding loans over a period of five years including moratorium of two years, thereby making all

framers eligible for fresh credit.

• Special one time settlement scheme for old and chronic loan accounts of small and marginal farmers

• Banks allowed to extend financial assistance for redeeming the loans taken by farmers from private

moneylenders
• New investments in agriculture and allied activities at the rate of two to three projects per branch

• Refinements in Kissan credit cards (KCCs) and fixation of scale of finance.

• The need for one or more specialized institution called rural bank to fill in the gap left out by commercial

banks and co-operative banks.

• Need for proper co-ordination between co-operative banks and commercial banks expressing great

faith in these two institutions.

• Low interest is charged

• The repayment plan is convenient, i.e, repayment in equal annual installments.

CONCLUSIONS
 Conclusion the agricultural sector is one of the major contributors to the company and provides growth impulses

to the broader economic development of the country. The role of the financing institutions viz. Banks and Agricultural

Finance companies has grown significantly over the years in the agricultural sector. While appraising an agricultural loan,

lenders look for personal details such as a good credit history, annual and monthly income.

It contribute to the share capital and debentures of co-operatives , instead of playing direct role in providing

form credit, the government may play a vital role in creating conditions or infrastructural facilities to the promotion of

institutional credit.

In Indian Agriculture, even small and marginal farmers and Dalit and Tribal farmers whether owing land or

not, are risk taking entrepreneurs contributing to economic growth. Farmer is an important player in the financial ,labor,

inputs and commodity markets, who because of the size of the transactions in the market place does get marginalized.

Livelihood diversification can help in grater credit absorption at lower end of farming community. Besides, increase public

investment in agricultural infrastructure, research and extension services is required. Need is also felt for developing post-

harvest technologies and marketing facilities that can reduce frequent risk and losses faced by farmers.
BIBLIOGRAPHY
BOOKS
Indian economy, Ruddar Datta and K.P.M Sundharan

Economic survey 2005-06

RESEARCH ARTICLE
1) AGRICULTURE FINANCE AN OVERVIEW”-PRATAP BAPUSO LAD

2) Credit policy for agriculture in India- an evaluation –Anwarul Hoda

3) Management of agricultural credit and the impact of Indian banking sector reforms on agriculture – Seena P.C,

4) Institutional credit to Indian agriculture: defaults and policy options- Ashok Gulati

5) Annual report 2014-2015- Ministry of agriculture government of India.

WEBSITES
www.agrimoney.com

www.globalizesearch.org

www.nabard.com
QUESTIONNAIRE
 QUESTIONNARE

NAME:

ADDRESS: EMAIL ADDRESS :

1. Land is of which type ?

a) IRRIGATED
b) Non- irrigated

2. If irrigated what is the source of water ?

a) Well
b) River
c) Canal
d) Tube well

3. What are the crops?

a) Grains
b) Fruits
c) Vegetables
d) Oil seeds
e) Sugarcane
f) Cotton

4. Do you have crop insurance?

a) Yes
b) No

5. What is the nature of the farming ?

a) Individual
b) Contract farming
c) Joint family
d) Corporate farming

6. What is the technique of farming ?

a) Traditional
b) Modern
7. From which branch of central bank you have taken the loan ?

8. Do you have any idea about various schemes of central bank of india?

a) Yes
b) No

9. Under which scheme you have taken loan ?

10. How much loan you have taken ?
11. What is the mode of repayment ?
a. Yearly
b. Half- yearly

12. How is the repayment of loan ?

a) Regular
b) Irregular

13. If bank executives adapt loan recovery process, what will you do ?
a) Assist them
b) Oppose them
c) Don’t know

14. Whether the scheme of Central bank of India , regarding mordern farming is useful ?

15.Do you have any suggestions or recommendation to central bank of india ?