Marketing

2. The requisites of a good credit
system are as follows
 All the credit needs (short, medium and long term as well
as kind and cash) of the farmers should be met
 Credit should be made available at right place and right
time as far as possible.
 It should generate savings and accelerate economic growth
at socially desired rate
 The credit policy should reflect a compromise between the
diverse plan objectives and differing group interests i.e. the
farmers, the credit institution and the govt.
 The borrower should be encouraged to adopt new
technologies without which sufficient capital cannot be
generated to repay loans.

3.  Supply and other services too should be made
available
 The lending agency had to ensure that lending
machinery is matched by a recovery
 An efficient finance system would not confine its area
of operation to a particular crop. The lending agency
should be geared to finance the entire farming system,
which may include crop loans.
 The credit agency should be in a position to interlink
with marketing agencies to ensure full recovery of
loans.
 It is necessary that the rate of interest charged from
the farmers should be relatively low.

4.  Credit means extending of funds by the lender to the
borrower on the belief that the borrower will repay the
loan at a specific date or at a specified period with an
additional sum i.e. cost of credit or rate of interest

5. Classification or types of credit
 Agricultural credit can be classified in different ways
like purpose, period, security etc.
Purpose wise
Agricultural
Credit
Non-farm
Business
Family
expediture

6. Agricultural
credit
Developmental
Credit
Production
credit
Marketing
credit
Consumption
credit

7.  Developmental Credit (Investment Credit):
Credit is given to make investment in farms eg.
Purchase of land, implements, farm machinery,
irrigation (for digging channels, installation of pumps,
land reclamation works, construction of farm structure
(go down, fencing etc) development of plantation
crops garden, development of poultry, piggery etc.

8. Production credit
 Required by the farmers for crop production i.e. to
purchase inputs like seed, fertilizers, pesticides,
payment of wages and some other important variable
inputs
 Helps the farmers for modernising his farm business
Marketing credit
 Meant for helping the farmers to overcome distress
sale and market the produce in a better way
 Regulated markets and commercial banks extend
loans upto 75 per cent value of the produce against
warehouse receipt

9. Consumption loan
 Loans advanced other than production, mostly
unproductive
 Loans are given for purpose like medical, religious
ceremony, education, general consumption etc.

10. Period wise classification
Period wise
Short term Medium term Long term

11. Short term
 Repayment period ranges from 6-15 months or a crop
season
 Loan is given to purchase basic variable inputs like
fertilizers, seed, plant protection chemicals, payment
of wages etc.
 Supposed to repay the loan out of sale proceeds of the
crop raised.
Medium term
 Repayment period ranges from 15 months to 5 years
 Loans are given for purchasing implements, milch cattle,
creation of minor irrigation facility, land development
activities etc
 Repayment period is relatively longer due to partial
liquidating nature of the loan.

12. Long term
 Repayment period ranges from 5 to 20 years
 Meant for bringing about permanent improvement on
the land like land leveling, construction of farm
buildings, purchase of tractors, raising orchards etc.
 Activities require large capital hence longer repayment
period is allowed.

13. Security
wise
Secured
Personal
Security
Collateral
Security
Chattel
Security
Hypothecation
Key loan
Open loan
Mortgage
Simple
Equitable
Unsecured

14. Personal Security
 Borrower himself stand as a guarantor. Third party
guarantee may or may not be necessary.
Collateral Security
 The movable properties are offered as security to
obtain a loan
 Example of collateral securities are LIC or fixed deposit
certificates, warehouses receipt, jewellery, livestock
etc.
Chattel loan
 Specific types of loans with particular category of
lenders.
 Loans obtained by pledging movable properties.

15. Hypothecation
 Happens in case of tractor or machinery loans
 Borrower can not sell the equipment until the loan is
cleared off.
a) Key loan
 The agricultural produce is kept under control of the
lender and the loan is advanced to the farmer
 As soon as the loan is repaid , the produce is
returned to the farmer.
b) Open loan
 In this case physical possession of the purchase
machinery rests in the hands of the borrower.
 The legal ownership rights remain with the lending
institution till the loan is repaid.

16. Mortgage
 As against collateral security, immovable properties are
presented for security purpose like land, farm building etc.
a)Simple mortgage
 Borrowers inherited property is mortgaged here for loan
 The property is registered in the name of the banking
institution as security.
 Registration charges are borne by the borrower.
b) Equitable mortgage
 This mortgage is applied to self acquired property.
 No registration is required as borrowers ownership rights
are clearly specified in the title deeds.
 Financial institutions retains the borrowers documents as
security.

17. Unsecured loans
 Based on confidence between the borrower and the
lender the loan transaction may take place. No secured
is involved here.
Based on liquidity
a) Self-liquidating loan
 The income generated through these loans helps the
farmer to repay the entire loan amount in the same
season or year of obtaining loans. The productivity
increase of the loan is direct. Eg crop loan
 Partially liquidating loan the income generated
through these loans will help to pay part of the loan
component only. These loans requires relatively long
time to for realization of benefits e.g. Term loans

18.  Based on activity
 Based on approach
1. Individual approach: loan is advanced to any
potential borrower for the purpose he needs e.g. crop
loan, dairy loan
2. Area approach : here loans are advanced by selecting
the contiguous are by a bank branch “ service area
approach” followed by the banks is an opt example.

19. THANKS