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INTRODUCTION
In the last few year, the Indian economy has emerged as one of the
fastest growing economics in the world . however, the vulnerability of the
Indian economy with respect to the performance of the agriculture sector
despite other microeconomic indicators and sectors gaining in strength is
well known. For example, the Indian economy grew at an estimated 3.7 per
cent in 2002-03 against 5.6 per cent during 2001-02. this was largely
because of the negative growth of 4.4 per cent in the agriculture sector .
Many economists and policy- makers increasingly believe that the future
growth of the domestics economy , to large extent , will depend on the
robust performance of the agriculture and rural sector . The manufacturing

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and service sectors cannot sustain the economy, for growth if the rural sector
underperformance.
The contribution of the banking and financial sector to the current
economics growth of the Indian economy is very significant. This is
reflected in the growth in aggregated deposits and advances for scheduled
commercial banks , which stood at 15.4 per cent and 27.9 per cent during
2004-2005. however the access of banking service to the rural, agriculture
and the common man in general is not as promising.
As Mr. V. Leeladhar(deputy governor, RBI, on the occasion of the
commemorative lecture at the fed bank hormis memorial foundation,
ernakulam) said “despite making significant improvement in all the areas
relating to financial viability, profitability and competitiveness, there are
concerns that banks have not been able to included vast segment of the
population, especially the underprivileged sections of the society, into the
fold of basis banking services.”
The focus of Indian banks on financial inclusion i.e. delivery of
banking services at an affordable cost of the low-in-come groups has been
dismal. In India, the focus of the financial inclusion at present is more or less
confined to ensuring agriculture bare minimum access to agriculture saving
bank account without frill to all. Having agriculture current account/ saving
account on its own, cannot be regarded as an accurate indicators of financial
inclusion.

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NEED FOR BANKING IN RURAL AND AGRICULTURE
AREAS
The rural population in India suffer from agriculture great deal of
indebtedness and is subject to exploitation in the credit market due to high
interest rates and the lack of convenient access to credit. Rural household
need credit for investing in agriculture and smoothening out seasonal
fluctuations in earning. Since cash flows and saving in rural areas for the
majority of households are small, rural households typically tend to rely on
credit for other consumption needs like education, food, housing , household
function, etc. rural household need access to financial institutions that can
provide them with credit at lower rates and at reasonable terms than the
traditional money-lender and thereby help them avoid debt-traps that are
common in rural India.

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Table
Change in farmers reliance on the banking system
Source: statistical tables relating to bank in India
(RBI)
Year Farmer
Deposits
(Rs Crore)
Farmer
Borrowing
(Rs Crore)
Total
(Rs Crore)
1992 26211 17835 273
1993 29825 19493 257
1994 36583 19669 251
1995 43341 21334 198
1996 47433 23813 194
1997 53611 27448 188
1998 57442 29442 173
1999 78881 33094 169
2000 91009 36466 162
2001 99812 43420 195
2002 108233 47430 197
Post reform, the banking system has mobilized more deposits from farmers
and extended less credit to a decline number of farmers, These are
reflected in the figure for farmer borrowing and deposits in the last
decade as in Table
CHALLENGES FOR RURAL AND AGRICULTURE
CREDIT

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Agriculture is agriculture matter of livelihood and food security, with
nearly 60 per cent of the population depending on it. At the same time, to
withstand the global competition, enhanced productivity and sustainability
of the agriculture sector has become imperative. In addition, the majority of
the country’s for population, more so marginal and disadvantaged sections
of society, stay in villages. Hence, the role of banks in the enhancement of
agriculture productivity, expansion of rural credit and poverty eradication
assumes high priority.
Despite decades of efforts and experimentation in banking, the
organized financial sector is still not able to meet the credit gap in the rural
sector. The lower levels of per capita income, lack of infrastructure in the
rural areas, focus in the urban sector and lack of proper connectivity were
the main hindrances for banks to venture into rural areas. Directed lending,
cumbersome procedure, delay in sanctioning loans and lack of statutory
backing for recoveries were other major impediments to the growth of
banking in the rural sectors.
The focus in the past has always been to make available cheaper
credit. When bank are forced to lend cheap, there has been agriculture
tendency for a scramble for credit by the non-target group of beneficiaries.
While interest rates of scheduled banks for advances over Rs.2 lakh is
completely deregulated, loans up to Rs.2 lakh are subject to maximum of
prime lending rate (PLR). In the process of recovering the opportunity lost
on income, the banks used to charge a high rate of interest for loans above 2
lakhs. This led to willful defaulting. This has really damaged the credit
culture and structure ion the rural sector resulting in shutting down of non-
viable outlets of rural branches of commercial banks, co-operative banks and
RRBs in last few years.

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NEW AREAS OF CONTRACT FARMING
1. Jatrophe:

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SBI has tied up with growell agro forest Trees Corporation, which
agrees to buy Jatrophe from farmers. The bank will finance 1300 farmers
from 46 villages covering 5,200acres.
2. Seed plantation:
Corporate want one set of farmers to grow hi-grade set of seeds, which are
subsequently purchased and sold to another set of farmers for the cultivation
of high-grade crops. This trend is catching as in oil seeds, groundnuts,
cotton, pulses and vegetables.
3. Farm forest:
The paper industry is banking on this largely due to the restriction on
cutting down of trees. SBI has tied up with ballarapur paper industries
according to which the farmers grow bamboos and eucalyptus trees for the
company. The agreement covers 2000 farmers who are growing the trees in
over 5000 acres.
4. White card scheme:
The RBI has introduced such a scheme in which fund are provided to
the farmer to buy cows or reconstruct a cowshed, provided the farmer ties up
with the milk-collecting agency. The bank has disbursed up to Rs 35 crore
under the white card scheme and covers 10,000 farmers.
The current contract farming corporates include Himalaya Health
Care, Mysore SNC oil company, Sami Labs Pvt. Ltd., Ion Exchange UB,
Satram Overseas (Basmati Rice) Amira Foods, Appachi Cotton
Company/for Mandm, Cadbury, Godrej, ACE Agrotech, Larsen and Toubro,
BECCO, Reliance Group, JK paper, Shakti Sugar, etc.

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FARM CREDIT TO FARMERS
NABARD has launched agriculture pilot project in Tamilnadu to
disburse fund through self help groups using the existing post office

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network. The bank hopes to initiate the scheme in three districts of the state.
Post office will be used to offer credit to farmers and customer in rural areas.
For post office facing agriculture dwinding shares of activity in recent years,
this offers agriculture chance to re-invest themselves through productive use
of agriculture one lakh plus countrywide network. The NABARD had to
face agriculture services of hiccup in launching the scheme. The stumbling
block appeared in the postal act itself. Since the act does not allowe post
office to take credit risk while post office would act as agents on the fee
basis. This is one way of increasing the banking sectors outreach currently
restricted to only 43.4 million of the 148 million rural households
PROBLEM FACE BY FARMER

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1. Moneylenders generally lends on the basis of personal security and is
prepared to adjust his term to the borrower’s needs provided that a
sufficient high rate of interest is paid for the loan
2. The rates of interest are high by standard and accounts are
manipulated frequently without the knowledge of the borrower’s.
3. Loans are available, particularly on the mortgage of crop from traders
and their agents.
4. The traders not only charge a high rate of interest, but also pay an
unusually low price for the crop.
5. Co-operative societies and commercial banks generally have been
relevant to lend for consumptions needs.
6. In short, in spite of the fact that the non-institutions sources of credit
indulge in malpractice and are responsible for quite a few serious
maladies prevailing in agrarian economy.
SOURCES OF AGRICULTURE CREDIT

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The various sources from which the peasantry procures loans can be into
two groups.
1. Non-institutional agencies
2. Institutional agencies
Non-institutional agencies
a) Local village moneylenders and their agents
b) Landlords
Institutional agencies
a. Co-operative societies
b. Commercials bank
c. Regional rural bank
d. Land development banks
e. Farmers services societies
f. NABARB, etc.
Sources of agriculture finance
There are two ways of agriculture finance
• Direct finance
• Indirect finance

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I. Direct finance to farmers for agriculture purpose
Short- term loans for raising crops, i.e., crops loans.
Institutional additions, advances up to Rs1 lakh to farmers against pledge of
agriculture produce for agriculture period not exceeding 6 months, where the
farmers were given crops loans for raising for produce provided borrowers
draw credit from one bank.
Medium and long-term loans
A. Purchase of agriculture implements and machinery
B. Development of irrigations potential
C. Reclamation and land development scheme
D. Construction of farm building and structures, etc.
E. Construction and running of storage facilities
F. Productions and processing hybrid seeds of crops
G. Payments of irrigation charges, etc.
H. Others types of direct finance to farmers
• Short-term loans

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• Medium-term
• Long-term loans
II. Indirect agriculture finance
Indirect agriculture finance include that finance which is not given directly
to the beneficiaries for any agriculture activity but indirectly helps such
beneficiaries, either by getting finance indirectly through agencies like
primary agriculture credit societies (PACS) ,farmers service societies (FSS),
large area multipurpose societies(LAMPS) , etc.
1. Activities cover under indirect agriculture finance:
(a) Credit for financing distributions of fertilizers, pesticides, seeds, etc.
(b) Credit limit up to Rs. 15 lakhs granted for financing distributions of
inputs for allied activities, such as cattle feed, poultry feed, etc.
2. Loans to electricity boards for reimbursing the expenditure already
incurred by them for providing low tension connections from step-
down point to individual farmers for energizing their wells.
3. Loans to farmers through PACS, FSS and LAMPS.
4. Deposits held by the bank institutional rural infrastrutural
development fund (RIDF) maintained with NABARB

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5. 50 per cent of the amount of refinance granted by the sponsor banks to
RRBs.
6. Subscriptions to bonds issued by rural electrification corporation
(REC) exclusively for financing pump set energination programme
institutional rural and semi- urban areas.
7. Subscriptions to bonds issued by NABARB with the objective of
financing exclusively agriculture activities.
8. Others types of indirect finance
AGRICULTURE ADVANCES: SHORT TERM CROP LOANS:

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Till recently, the following schemes were in vogue in the bank to meet short-
term loan requirements of the farmers: -
Agriculture
a) Crop finance: demand loans / annual cash credit
b) India green card scheme to meet requirements of working funds for
crop inputs , inputs for allied agriculture activities and / or other non-
farm activities.
Agriculture advances –interest rate
Size of credit Short term
Upto Rs.25,000 8.75% P.A
Over Rs. 25,000 to Rs. 50,000 8.75% P.A
Over Rs. 50,000 to 2.00 lac 10.00% P.A
Over Rs. 2.00lac to 25.00lac 11.25%P.A
Over Rs. 25.00lac Based on credit
Size of credit Term loans
Upto Rs.25, 000 9.25% P.A
Upto Rs. 2.00lac 10.25% P.A
Over Rs. 2.00lac to 25.00lac 10.50% P.A
Over Rs. 25.00lac Based on credit
Loans to self help groups
Direct loans Upto Rs. 2.00lac to 8.00% P.A

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SHGs
Direct loans above Rs. 2.00lac to
SHGs
9.75% P.A
ROLE OF CREDIT
Credit is the financial stimulant for augmenting production and productivity
in agriculture operation and in the process causes rural development in all
spheres. Efficient credit delivery system must exit. It was realized around the
60’s(when the concept of priority sectors was born) that provision of rural
finance in the right dose, in right time and the right segment could accelerate
the growth of agriculture and rural development. Hence it was considered

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that institutions credit should be increasingly used as an important vehicles
to achieve.
Expansion of institutional structure (by creating new institutions such as
regional rural banks , etc. ) because co-operative credit system was
inadequate.
Directed lending
Cheaper rate of interest (concessional/subsidiary)
Provision of low cost credit in rural areas of their operation compared to
commercial bank
Credit to weaker sections under special programme.
DIFFERENCE BETWEEN INDUSTRIAL BANK AND
AGRICULTURE BANK
 Industrial bank provide long-term finance to trade and industry. While
the agriculture bank provide long-term finance to farmers and
agriculture.

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 The main aim of industrial bank is to help in the development of trade
and industry. The aim of agriculture bank is to help in the
development of land and agriculture.
 Industrial bank accepts fixed assets as security. Agriculture bank
accepts land as security.
 Industrial bank is given for the promotion of an industrial unit or for
expansion, amalgamation, etc. agriculture banks are given for
purchase of machinery, constructions of wells, irrigation, etc.
 It operates in the urban areas. it operate in the rural areas.
 Agriculture bank charge low interest rate on agriculture advances as
compared to industrial bank .
KISAN CREDIT CARD
This scheme was introduced
by NABARB institutional

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1988-99 to help farmers to get credit from banks. Important feature of Kisan
Credit Card are given as follows.
Farmers eligible for productions credit of Rs. 5000 or more are eligible for
issue of Kisan Credit Card
Eligible farmers are to be provided with agriculture Kisan Credit Card and
pass book or card-cum pass- book.
Provision of revolving cash credit facility involving any number of
withdrawal and repayments within the limit.
Entire productions credit needs for full year plus ancillary activities releted
to crops productions considered while fixing limit. Institutional due course,
all activities and non- farm credit needs will also be covereds.
Limit to be fixing on the basis of operational land holding cropping pattern
and scale of finance
Card valid for 3 years subject to annual review.
Each withdrawal to be repaid within 12 months.
As incentive for good performance, credit limit could be enhanced to take
care of increase institutional cost, change institutional cropping pattern etc.
Security, margin, rate of interest as per RBI norms

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KISAN CREDIT CARD
A unique scheme for farmers under which they can draw
loan amount in cash for crop production as well as domestic
needs from the card issuing branch within the sanctioned
limit. The details are as under:
1. Eligibility : Farmers having agricultural land &
Pattaholders (i.e. land allotees). Card is also issued in
joint names where land is owned jointly.
2. Loan Limit : Limit is fixed to meet the cost of
cultivation of crops based on land holding and also for
domestic needs. There is no minimum or maximum
loan limit.
3. Card : A common card named “Kisan Credit-cum-Kisan
Shakti Card” is issued to the farmers on fixation of
loan limit.

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4. Rate of interest :
i) Upto Rs.50,000/- 8.50% (fixed)
ii) Above Rs.50,000/- & upto
Rs.2.00 lacs
2% below PLR (i.e
11.25% p.a)
iii) Above Rs.2.00 lacs & upto
Rs.5.00 lacs
0.50% below PLR (i.e
12.75% p.a)
iv) Above Rs.5.00 lacs 0.50% above PLR (i.e
13.75% p.a )
5. Security :
a. For loans upto Rs.50,000/- : Hypothecation
of crops & movable assets.
b. For loans above Rs.50,000/-:
i. Hypothecation of crops & movable
assets.
ii. Mortgage of land or charge on land
as per Agricultural Credit Operation
Act of the states concerned.
or
Charge/ lien over liquid securities in the
form of Fixed Deposit/ NSC/ Kisan

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Vikash Patra etc. providing full cover to
the limit granted.
6. Repayment :
i. The aggregate credit into the KCC account
during the 12 months period should at least
be equal to the maximum outstanding in the
account
And
ii. No drawal in the account shall remain
outstanding for more than 12 months
1. Validity : Card is valid for 3 years subject to annual
review.
2. Features :
• No admission/membership fee is levied by the Bank.
• A pass book is issued along with card to record
transactions.
• Cardholders are covered under Personal Accident
Insurance Scheme with sum assured for Rs.50,000/-
against death/permanent total disability/loss of two
limbs/eyes or one limb & one eye and Rs.25,000/- for

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loss of one limb/eye on payment of premium of Rs.5/-
p.a. by the cardholder.
• Specified crops in notified areas grown under Kisan
Credit Card is covered under Rashtriya Krishi Bima
Yojna subject to notification issued by the State
Government concerned. 1
Kisan Shakti Yojana
A new scheme designed & launched by the Bank on
24.04.2004 (Bank’s 140th Establishment Day), envisages to
provide farm investment credits as well as
personal/domestic loans including repayment of debt to
money lenders. The details are as under:
1. Eligibility : All existing Kisan Credit Card holders and
all other farmers who are eligible for Kisan Credit
Cards.
2. Loan Limit : The permissible loan limit will be 50% of
the value of land OR 5 times of net Farm Income
whichever is lower, LESS outstanding amount, if
1

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any, in Agril. Term Loan account(s) subject to
maximum Rs.5.00 lacs.Maximum 50% of the loan
limit may be utilised for personal/domestic
purposes.
3. Issuance of Card : After fixation of the loan limit, a
“Kisan Credit – cum – Kisan Shakti Card” along
with a loan pass book is issued to the borrowers.
4. Margin : No margin is required.
5. Rate of interest :
i) Upto Rs.50,000/- 8.50% (fixed)
ii) Above Rs.50,000/- & upto
Rs.2.00 lacs
1% below PLR (i.e
10.00% p.a)
iii) Above Rs.2.00lacs & upto
Rs.5.00lacs
0.25% below PLR (i.e
10.75% p.a)
6. Security :
a. For aggregate limit under Kisan Credit Card, Kisan
Shakti Yojana & existing Agril. Term Loan upto
Rs.50,000/-:
Hypothecation of farm as well as household
assets to be purchased out of the loan
amount.

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b. For aggregate limit under Kisan Credit Card, Kisan
Shakti Yojana & existing Agril. Term Loan above
Rs.50,000/-:
i. Hypothecation of farm as well as
household assets to be purchased
out of the loan amount.
ii. Creation of charge/Mortgage of
lands.
7. Repayment Period : 7 years.
8. Mode of Disbursement : Loan amount is credited to
Savings Bank account of the borrower maintained with
the financing branch. A maximum period of one year will be
allowed to the borrowers to avail the sanctioned loan under the
scheme.
9. Restoration of Term Loan limit : The borrowers under the
scheme are allowed to deposit surplus fund in the loan
accounts and to draw funds within the sanctioned limit
to meet their urgent requirements after adjustment of
loan instalment(s) & interest due, if any, upto the date
of drawing.
10. Special features of the scheme :
• Farmers are free to utilize the loan
under the scheme at their own
choice/ options/discretion.

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• No margin is required.
• Granting of loan under the scheme
is simple and hassle free.
• 50% of the loan amount may be
utilized for personal/domestic
purposes including repayment of
debt to money lenders.
• Facility of restoration of Term Loan
limit is available on advance
repayment of loans.
Kisan ATM
As technology is spreading its wings across the length and breadth of the
country,
Agriculture need was felt by bank to provide its customer in rural areas with
an ATM
Which is easy to operate, does not warrant high level of literacy,
remembering PINS and can read out instructions on screen to get cash or

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services. As agriculture solutions to this bank plans to deploy kisan ATM in
rural arrears to serve the customers remote rural branches. The first such
ATM is installed at sivagangai branch Tamilnadu and inaugurated by
the Hon’ble finance Shri P. chidambaram.
Kisan ATM are users friendly cash dispensing machine, which are voice
enabled and work on bio-metric authentcations like finger print verifications.
Kisan ATM can communicate with the users in local language . To make the
operations easier kisan ATMs are provided with touch screen monitor. The
screen options glow as the instructions are read out to the customer and the
customer needs only to touch the options desired by him. The ATM also
have dip-type card reader and hence ensure that the machine never capture
the card inserted by the customer. All the above features make these
ATMs so easy and convenient that people with practically no exposure to
technology can use it comfortably.
Kisan ATM cards
Banks has issued agriculture new series of cards for the kisan ATMs. The
cards have an attractive design.
ATM function
The ATM will support the following functions:

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• Cash withdrawal
• Balance enquiry
ATM operation
Kisan ATM are meant to bring in 24*7 banking facilities with the state of art
technology, which was so far available only to metro and urban population
now within the reach of rural masses and thus providing an much needed
fillip for financial inclusion.
FREQUENTLY ASKED QUESTION/ AGRICULTURE
ADVANCES
1. What is Kisan Credit Card Scheme?
Scheme is in the nature of revolving cash credit.
2. What are the extra benefit/facilities extended through KCC
as compared to usuaql crop loan?
The credit needs of the farmer for entire year with his consumption
needs are taken into accounts at his option and as per his needs within
the limit.
3. Is it working satisfactory?

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The scheme is working satisfactory, we have issued 3,23.000 Kisan
Credit Card so far.
4. What are the benefit under PAIS and amount of premium
to be borne by a farmer?
• The risk covered under PAIS are as under:
• Death due to accident-claim at Rs 50,000
• Permanent total disability Rs50,000
• Loss of two limbs or two eyes or
• One limbs and one eye Rs50,000
• Loss of one limbs or one eyes Rs25,000
• The farmer has to pay Rs5/-per annum whereas the bank
bears Rs10/-p.
5. PAIS is covering KCC holders. Is there any other scheme to
cover all other farmers ?
SBI life scheme cover other farmer, where yearly premium is Rs480/-
and amount of claim of Rs2.00lacs for death due to accident are
covered, for Rs50,000claim amount a premium of Rs
6. Is there any other scheme like KCC to take care of farmers
investment credit requirements?
Kisan Star Card scheme where farmer can be sanctioned a maximum
loan upto Rs3.00lacs within.
7. What is the Kisan star Card Scheme and facilities offered to
farmers?

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Kisan star card scheme which is a hassle free scheme were farmers
can purchase agri Implements including his consumption requirement.
Maximum number of accounts permitted are 50.
8. What are the post harvest scheme available to avoid distress
sale?
Produce market loan for constructing rural godowns, cold storage,
smaller size farm receipts are also given.
9. How rural godowns scheme beneficial to farmers?
rural godowns scheme. The NABARD is giving subsidy upto25%.
The farmer can substitute to farmer can keep his own produce in the
godowns and avail produce market loan.
10.What are the margin for agriculture loan?
• No margin upto Rs 10,000
• For crop loans if scle of finance are determined taking into
account margin. Then no margin.
• For term loans above Rs 10,000/-15%to25% depending upon
the quantum of loans
11.Whether bank is giving collateral free loan to farmer, if so
to what extent?
• Upto Rs25,000/-No collateral security is asked, above Rs
25,000equitable mortgage of farm land not possible.
• For sugarcane growers with tie up arrangements with sugar factories
upto Rs 1.00lacs no collateral

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12.Whether bank are giving relief to drought-affected people,
if so what are they?
The existing short term loans are converted into term loan with
suitable instalments
Fresh crop loan are giving to rejuvenate existing crops or take
fresh crops.
Term loan instalments are postponed.
Loan are given for purchase of droght animals, milch animals.
Loan are given for repairs of farm machinery, seeds, wells etc.
13.What type of transportation loan are available from the
bank to the farmers?
Loan are given for purchase of tractors, power tiller, trailer,
harvesters, two wheelers ,,bullock.
14.What type of minor irrigation loan are available to
farmers?
1. What are the interest rate to agriculture loans under low interest rate
regime?
2. Bank is giving loans to farmers upto Rs25,000below PLR and
uptoRs2.00lacs at PLR rates that no farmers. Will have to pay more
than 2%above PLR for any type of loans.
15.Are banks giving produce marketing loans?

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Yes, the produce marketing loans are given to avoid distress sale of farm
produce
16.What are the benefit to the farmers?
The crop loan borrower are given loans tat the same interest rate at which
he was given crop loan
NATIONAL BANK FOR AGRICULTURE AND RURAL
DEVELOPMENT (NABARD)
In the light of recommendations of the Committee to Review
Arrangement for institutional Credit for Agriculture and Rural Development
the Government of India set-up the National Bank of Agriculture and Rural
Development (NABAD) on July 10,1982, to act as agency for promoting
integrated rural development and to provide all sorts of production and
investment credit for agriculture and rural development.

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Functions of the NABARD
The NABARD id essentially a development bank for promoting
agricultural and rural development. Its main function is provide refinance
credit to the state co-operative Banks. The Regional Rural Banks and other
financial institutions as may be approved by reserve Bank.
The NABARD provides refinance assistance to these institutions for
grinding loans for the following purpose:
1. For agricultural operations:
2. For marketing of agricultural produce.
3. For marketing and distribution of agricultural inputs, such as
improved seeds, fertilizers, pesticides etc:
4. For allied activities important for agricultural and rural
development:
For production and marketing activities for rural artisans, small scale
industries in the tiny and decentralized sector, village and cottage industries,
handicrafts and other rural craft.
The NABARD may grant refinance credit to the SCBs, RRBs etc,
against the security of stock and securities other than immovable
property and Promissory Notes supported by title to the goods.
In short, the main function of the NABARD is to provide by way
of refinance, credit to the rural sector for the promotion of agriculture,

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small scale industrial units, cottage and village industries, and
handicraft other rural crafts and allied productive in the rural Ares.
This is essential for the promotion of integrated rural development and
attainment of rural prosperity.
The NABARD is empowered to give short-term as well long-term
loans in a composite form. It can also make loans make loans and
advances to state Governments for maximum period of 20 years in
order to enable them to subscribe directly or indirectly to the share
capital of Co-operative credit societies.
The NABARD can also provide medium-term loans (for a period between
1 ½ years and 7 years) to the SCBs and RRBs for agricultural and rural
development.
Other miscellaneous functions of the NABARD include:
(1) Inspections of the RRBs and the co –operative societies
(other than primary cooperatives societies0, without any
prejudice to the authority of the reserve Bank in this regard.

35. ROLE OF BANK IN
AGRICULTURE -35 -
(2) The application for opening a branch by RRB or co-
operative society (other than a primary Co-operative
society) to be forwarded to the Reserve Bank through the
NABARD.
(3) When the returns are submitted by the RRBs and co-
operatives societies (other than primary Co-operative
societies) to the Reserve Bank, Copies of such returns
should also be furnished to the NABARD.
(4) The NABARD is empowered to obtain any information or
statement form the RRBs and the co-operative societies
(other than primary Co-operatives societies)
(5) The NABARD has to undertake research and training
programmers The R & D Department of the NABARD
should promote research in allied aspects and problems of
agricultural and rural development of the country. The NABARD
is authorized to maintain a R & D Fund for this purpose out of
profits earned by it every year.
The NABARD has to provide comprehensive training
programmers to its own staff as well as to the staff of SCBs, RRBs,
etc the training is to be meant for upgrading the technical skills and
competence of the staff.

36. ROLE OF BANK IN
AGRICULTURE -36 -
(6) The NABARD has to take over from the reserve Bank, the
responsibility of co-ordinating with the Government of
India, the planning Commission, state Government and
other agencies concerned with the development of rural
industrialization, and effectuating various policies and
programmer meant for providing finance to the rural
industries.
Organization and structure of NABARD
The NABARD is managed by b Board of Directors,
consisting of Chairman managing Director, 2 directors from
amongst experts in rural economics, rural development, etc,
3 directors with experience in the working of co-operative
banks, 3 directors from out of the directors of the RBI, 3
directors from amongst the official of government of India
and 2 directors from among the officials of Government of
India and 2 directors from among the officials of state
Government. They are appointed by the central
Government.
Working of NABARD

37. ROLE OF BANK IN
AGRICULTURE -37 -
During 1984-85,NABARD mobilized net resources amounting During
1984-85, NABARD sanctioned Rs. 1,233 crores to SCBs for
financing seasonal agricultural operations (i.e., short-term credit). It
also provided medium-term and long-term credit facilities for the
benefit of the agricultural sector. During 1984-85, its total outstanding
amounted to Rs.1,018 crores and limits sanctioned amounted to Rs.
1,688 crores.
The NABARD also sought to help the development and promotion of
agricultural investments in the less developed and/or underbanked
states:
In these areas, it distributed Rs. 455 crores, amounting to nearly 42
per cent of its total disbursements in 1984-85.
During 1986-87 (July-June), the NABARD mobilized Rs. 887 crores
as its aggregate net resources for providing rural credit.
The NABARD also successfully negotiated with the World Bank
regarding the NABARD Credit Project-I (NCP-I) and obtained a loan
assistance of US $ 375 million from the World Bank for the project
for a period of 3 years from July 1, 1986.
In fact, the NABARD has been associated with the implementation of
42 projects with external aid from the World Bank Group and other
International Aid Agencies, including bilateral assistance. On June
1987, US $ 2,622.1 million of total credit for these projects have been
routed through the NABARD.

38. ROLE OF BANK IN
AGRICULTURE -38 -
During 1989-90, the NABARD sanctioned short-term credit limits
aggregating to Rs. 2,807 crores for financing seasonal agricultural
operations. Its medium-term credit outstanding amounts to Rs. 19
crores at end- December 1989.
Recently, the NABARD has launched a 15-Point Programme for the
development of 30 Primary Agricultural Societies (PACs) and all
Large-size Adivasi Multi-Purpose Societies (LAMPS) in 15 selected
pilot project districts.
In 1987, the NABARD has also commenced a 10-point Action
Programme for rehabilitation of weak primary land development
banks and branches of state land development banks. The Action
Programme is concerned with: (1) investigation of overdues; (ii)
strengthening of organisation and management; (iii) review of loan
policies and procedures; and (iv) strengthening of the resources of the
LDBs.
During 1986-87 (July-June), the NABARD provided refinance credit
under the IRDP amounting to Rs. 379 crores.
Besides providing credit for agricultural and allied activities, the
NABARD also renders financial help to the non-agricultural sector
with the aim of promoting integrated rural development. It provides
financial assistance to small scale industries, cottage and village
industries, industrial co-operative societies etc., for meeting their
working capital and block capital requirements. It also provides

39. ROLE OF BANK IN
AGRICULTURE -39 -
medium-term finance for meeting their investment capital needs. The
NABARD has adopted liberal policies in this regard.
During 1986-87, the NABARD had inspected 178 CCBs, 86 RRBs, 7
SLDBs and 30 other institutions.
During 1986-87, the NABARD approved and assisted 5 research
proposals and 17 seminars and several conferences/symposia from its
R & D Fund, and spent Rs. 33.41 lakhs for these purposes.
Recently in 1988 onwards, the NABARD introduced certain policy
changes and schemes regarding farm short-term credit: (i) Financing
of seasonal agricultural operations; (ii) the scheme of fresh finance;
(iii) National Oilseeds Development Programme (NODP); and (iv)
Product Marketing Loan Scheme. Today, thus, the NABARD has
become a kingpin of rural development.
During 1989-90, the NABARD’s refinance assistance was of the order
of Rs. 549 crores.
The NABARD has been giving uniform scales for all States/Union
Territories for financing working capital and under the refinance
scheme for handlooms and powerlooms in the co-operative sector.
The responsibility of administering the Credit Authorisation Scheme
for co-operative banks rests with the NABARD.
During 1995-96, the total amount of refinance disbursements by
NABARD increased by less than 2 per cent to Rs. 3,064 crore from
that

40. ROLE OF BANK IN
AGRICULTURE -40 -
of the previous year. During 1995-96 a Rural Infrastructural
Development
Fund (RIDF) with an initial corpus of Rs. 2,000 crore was created
within NABARD for facilitating rural infrastructure projects.
During 1996-97, there was a turn around in the resource position of
the ABARD. It increased to Rs. 2,963 in 1996-97 as against Rs. 1,617
crore in the previous year. The NABARD’s and state governments
amounted to Rs. 3,881.15 in 1996-97.
Policy Initiatives by NABARD
Major thrust of NABARD during the year was on strengthening the rural
credit delivery system to support the growing credit needs of the agricultural
and rural sectors. Some of the important policy initiatives taken by
NABARD during the 1998-99 inc1ude (i) Introduction of Kisan Credit
Cards, (ii) augmenting flow of credit in1l areas served by weaker co-
operative banks, (iii) accelerating flow of credit to the handloom weavers
through financing State Handloom Development Corporations, (iv)
stimulating investment in minor irrigation and wasteland development,
lowering of interest rates on refinance, and (vi) giving special thrust on
micro credit development. NABARD also liberalized the terms and
conditions for providing long term loans to State Governments for
contributing the share capital of co-operative credit institutions.
The policy initiatives relating to the non-farm sector during the
year included (i) enhancing the ceiling under automatic refinance facility

41. ROLE OF BANK IN
AGRICULTURE -41 -
(ARF) and integrated loan scheme(ILS), (ii) liberalized the small road
transport operators’ (SORT) scheme and (iii) enlarging the scope of soft loan
assistance for margin money scheme.
(a) Kisan Credit Card Scheme
Pursuant to the announcement made in the Union Budget for 1998-
99. NABARD formulated a model ‘Kisan Credit Card’ scheme in
consultation with the Reserve Bank and major banks. The scheme aimed at
providing ready credit facilities to the farmers covering their entire
production credit needs for the full year plus an amount for ancillary
activities related to crop production. The model scheme was circulated by
the Reserve Bank to commercial banks and by NABARD to co-operative
banks and RRBs in August 1998. RRBs and co-operative banks together
issued 1.61 lakh cards covering credit facility of Rs.836.8 crore during the
year 1998-99.
In addition. NABARD introduced a system of ‘Flexi credit’ on a
pilot basis in three districts of Kerala to take care of the unique needs of the
farmers in the State who raise a wide mix of crops in small holdings around
the)T homes together with rearing of livestock.
(b) Increase in Quantity of P-finance

42. ROLE OF BANK IN
AGRICULTURE -42 -
In order to augment the flow of credit at the ground-level, the
ceiling for sanction of short-term credit limits by NABARD was enhanced
for different categories (based on audit classification) of CCBs. While the
policy of stipulating minimum levels of involvement (ML!) of own
resources by StCBs and CCBs in short-term agricultural lending was
continued, certain relaxations in the existing norms were made for those
banks which had hardly’ any eligibility for concessional refinance from
NABARD.
The stipulation of minimum coverage of small and marginal
farmers was modified with a view to increasing credit flow to sir all and
marginal farmers. Sir nihal’h. higher credit limits were provided to CCBs
operating in nihal areas, with due weightage for loans provided for the
consumption reeds of tribals. Efforts have also been made to increase the
flow of credit to Bihar. Jammu and Kashmir and the North-Eastern Region.
Considering the importance attached to the handloom sector,
NABARD continue to lay special emphasis on meeting the credit
requirements of 94 thrust districts spread over 23 States identified by the
Government of India for special development. With a view to supplementing
the efforts of Handloom Development Corporations set up by some of the
State Governments. NABARD in consultation with the Reserve Bank, has
decided to extend refinance support to commercial banks and StCBs in
respect of their working capital limits to these Corporations.
In order to channelise larger flow of credit to priority sector under
thrust area programmes, an upward revision in the quantum of refinance was

43. ROLE OF BANK IN
AGRICULTURE -43 -
made, inter alia, for dry land and wasteland development and minor p4ation
schemes:
C)Micro-Finance Innovations
NABARD’s efforts towards increasing the access of the rural poorformal
banking services through promotion and credit-linking If Help Groups
(SHGs) of the rural poor, and other micro-finance initiatives gathered
momentum during the last two years. As may as 18,678 additional SHGs
were linked to banks as against the target of linking 10,000 SHGs as
envisaged in the Union Budget, 1998-99. The amount of bank loati
disbursed through SHGs amounted to Rs.33.3 crore. NABARD continued to
provide 100 per cent refinance to banks at the rate of interest of .5 per cent
per annum. Refinance assistance at Rs.30.7 crore under the program during
1998-99 was much higher than that of Rs. 10.7 crore during 1997-98.
During the year, 52 new banks joined the linkage programme. In all, 2021
banks comprising 38 commercial banks, 129 RRBs and 35 co-operative
banks) have participated in the programme covering 24 States and Union
Territories. As many as 550 non-government organizations (NCOs) are
participated in the programme.
Bank yet to tap huge unmet credit card demand

44. ROLE OF BANK IN
AGRICULTURE -44 -
ANNEXURE
Bank yet to Tap huge unmet credit card demand
income distribution
72%
1%
18%
9% <Rs1lakh
>Rs10 lakh
Rs 1lakh-Rs 2.5
lakh
Rs2.5 lakh-Rs10
lakhj
call it India’s impending boom.
Three time as many people who have credit cards now wants to acquire them
over the next 12 month. And people who earn less than 1lakh a year account
almost three-quarters of the demand for new cards. According to survey
there are 321 million paid workers in India. While 17 million people say
they want to get a new credit card in the next year
geographical distribution
61%
12%
12%
12%
3%
rurul
super metros
other urban
class 1 town
other metro

45. ROLE OF BANK IN
AGRICULTURE -45 -
RECOMMENDATION
1. Establishment of storage facilities by way of godowns and cold
storage can also help the farms in getting better price realizations for
agriculture produce.
2. Adoptions of flexible delivery system
a) Union governments and central bank authorities are not
satisfied with bank effort in lending money to farmers for
agriculture developments. Even now the village money lender
still thrives because of the flexibility of credit that he offers. He
works as the ATM for the villager.
b) We needs rural branches, which can offers flexible working
hours to suit the requirements of the farmers.
3. Future trading through commodity exchange
a) The farmers can protect himself from the price change by
contracting to sell the expected produce in the future market at
agriculture specified price at the time. The resources are
committed for production.
b) The farmers may not understand derivatives and concept of
margins and mark-to-market would be cumbersome to graps.
Here banks, could play agriculture lending role by aggregating
the produce for farmers and hedging through their central office

46. ROLE OF BANK IN
AGRICULTURE -46 -
treasuries. Suitable change in the banking regulations Act are
requirements again to enable this scene.
4. Improved competitiveness, high quality and high safety farm.
Products and co-operative marketing scheme are essentials so that the
small produce will be benefited more credit instalments should not
merely focus on primary productions but also on augmentation of the
entire value chain such as food processing or value, additions for
commercial crops.

47. ROLE OF BANK IN
AGRICULTURE -47 -
CONCLUSION
Bank must strengthen their credit delivery system for rural India.
Fortunately, over the last few years, India has been paying special
attention to rural sector to achieve major growth in agriculture and rural
sectors the massive target of over three-fold increase in credit flow to
agriculture during the tenth plan period speaks volumes of the serious. I also
conclude that rapidly falling interest rate have made loans affordable to more
people, which means there’s still plenty room left for growth.

48. ROLE OF BANK IN
AGRICULTURE -48 -
BIBLIOGRAPHY
Website
1. www.State Bank of Hyderabad.com
2. www.Union Bank of India.com
3. www.SBI.com
Magazines
Journal of the institute of charted accountant
Newspaper
Mint
Books
The Indian banking system