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NEED /TYPES

ON basis of TIME Short term (< 15 months) Medium term (15 months to 5 years) Long term (> 5 years)

NEED /TYPES
ON basis of PURPOSE

Productive. Consumption needs. Unproductive.

Constraints To Financial Services


Cheap , Adequate and Timely supply. Small Farmers and Landless Labourers. Uncertainty shrouding credit requirements. Seasonality of many agricultural activities High information and transaction costs Weak institutional capacity of ruralfinance providers

SOURCES OF AGRI-FINANCE
1. NON-INSITUTIONAL SOURCES.
Money Lenders. Traders. Commission agents. Landlords.

2. INSITUTIONAL SOURCES.

INSITUTIONAL SOURCES
CO-OPERATIVE CREDIT SOCIETIES. COMMERCIAL BANKS. REGIONAL RURAL BANKS. NATIONAL BANK FOR AGRICULTURE & RURAL DEVELOPMENT. (NABARD)

SHARE OF SOURCES

Total Credit to Agriculture


In Crore

05-06

06-07

CO-OPERATIVE CREDIT SOCIETY


CO-OPERATIVE CREDIT SOCIETY

Urban Co-operative Banks (1,813)

Rural Co-operative Credit Institutions (1,07,497)

Long-Term

(716)
State Co-operative bank (31) Primary Agricultural Credit Societies (1,06,384)

Short-Term (1,06,781)
District Central Co-operative bank (369)

SCARDBs (696)

PCARDBs (20)

SCARDBs: State Co-operative Agriculture and Rural Development Banks. PCARDBs: Primary Co-operative Agriculture and Rural Development Banks. Source: Report on trend and Progress of banking in India. RBI

Evaluation of co-operatives
Heavy dependence on outside funds Problem of high level of Overdues High level of NPAs Substantial losses PACS are too small in size to economical & viable. Greater benefits to Larger landowner Regional disparities in distribution of credit Domination of government.

Co-operation has failed but Co-operation must succeed


In 2005-06 Co-operatives provided Rs. 39,404 crore of rural credit 21.8 % of total 1,80,486 crore institutional credit to agriculture provided that year.

REFORMS
Revival and restructure of CCS. Financial restructuring & assistance. To make co-operatives truly democratic & member driven. Regulatory control of the RBI NABARD-as implementing & Pass through agency.

COMMERCIAL BANKS
Less Concentration on Primary Sector. Nationalization of banks.

During 2005-06 Commercial banks provided rural credit of Rs. 1,25,859 crore. 69.7 % of total 1,80,486 crore institutional credit.

REVIEW
Rapid Expansion and Diversification. Large no. of small advances. Reduction of margin available. Bad recovery position. Multi-alternative credit system. Decline in credit deposit ratio. Reduction of loan to small farmers.

REGIONAL RURAL BANKS


Local feel + Business organization. Low cost low profile credit institution. Staff from the neighboring area. 2006-07, RRBs provided 27,964 crore as credit to Agriculture sector. 8.5% of total institutional credit to agriculture.

PROBLEMS OF RRBs
Organizational Problem. Problems of recovery

Mounting losses leading to NonViability. Management Problems.

REFORMS
Restructure the operations of RRBs

Infuse fresh capital.


Greater flexibility in their operations.

Allowance to target only 40% to advances to priority sector.


RRBs ARE NOT JUST RURAL CREDIT AGENCIES. THEY ARE MORE THAN THAT : THEY ARE A FRUITFUL EXERCISE IN BANK LED RURAL GROWH

Relative Share
Per cent

2004-05 2005-06

Apex bank for rural credit.


Provides credit to SCBs & RRBs.

Assistance to state government.


Inspecting Co-operatives, RRBs. Maintains a R&D funds.

Rural Infrastructure Development Fund


(RIDF)

Microfinance Innovation.
Kisan Credit card scheme.

Credit monitoring arrangement.


Refinance under SGSY. Co-operative development fund (CDF)

Supervision

Take up one idea. Make that one idea your life - think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea, and just leave every other idea alone. This is the way to success, that is the way great spiritual giants are produced. - Swami Vivekananda