Reasons for less contribution by RBI to Co-
• certain parts were not
accountable to RBI on
account of legal existence
• difficult for RBI to
implement the policies.
• credit limits fixed were
• Because RBI - lender of last
resort did not consider it
proper to maintain high
• General policy -was to
provide assistance only to
enable the co-operative
credit institution to
shortage of funds.
convened a conference of people connected with
this movement in 1951 which considered problems
related to this movement.
established STANDING ADVISORY COMMITTEE
ON AGRICULTURE CREDIT to bring close co-
ordination between different co-operative
re-designed its agriculture credit department in
order to provide financial assistance to agricultural
took various steps to ensure that rural credit is
channelized in a proper manner.
Contribution by RBI
NATIONAL AGRICULTURAL CREDIT FUND
financial and promotional functions in respect
of rural credit for development of co-operative
AGRICULTURAL CREDIT BOARD -
providing financial assistance for agricultural
and rural development.
All functions performed by RBI was
transferred to NATIONAL AGRICULTURAL
AND RURAL DEVELOPMENT BANK
FUNCTIONS OF RBI
• Short term finance loans
- provided for agricultural and marketing operations.
- given at concessional rate of 2% below bank rate.
- provided to build up strong rural credit structure
• Short term finance to weaker sections
- Commercial Banks to finance min of 20% of their short term loans to small and
• Short term credit for marketing
- RBI brought down the margin limit to 35% of the value of stocks for commodities
• Medium Term Finance
- range from a period of 15 months to 5 years.
- loans for land improvement and maintainence of irrigation sources.
- rate of interest is now 3.5% below bank rate.
• Long term Finance
- extended long term advances.
- RBI began to buy debentures of the land development banks.
- RBI contributes 20% in the debenture issues.
PROMOTIONAL ADVISORY SUPERVISORY FUNCTION
• Performs development and promotional functions in the co-operative sector.
• For long term credit agricultural department gives advice to central land development
banks on maintainence of sinking funds , debenture issues, organization functions, etc.
• In promotional activities RBI has developed the co-operative credit movement.
• The RBI has set up agriculture refinance corporations
• The RBI has kept itself in close touch with the co-operative credit institutions and
institutions like NCDC, NFSC and Land Development Banks, etc.
• RBI undertakes periodical inspection of co-operative banks to
tone up efficiency at all levels
• The RBI has set up a committee known as CRAFICARD
committee to review credit for agricultural and rural
Assessment Of Reserve Bank’s Role In Co-operation
• Improve operational efficiency
• Reorganise primary agricultural credit society
• Build society in qualitative & quantitative terms
• Direct policies & extend credit to farmers
Financer Of Rural And Co-operative Sector
Credit facility to non credit co-operatives
Co-operation between credit departments
Capital to procure food grains
Finance LDBsOverdraft facility
Functions of SBI in Co-
Co-operative society is defined as “a union of persons established according to the principles
of equality, the purpose is to improve the financial position of its members by joint
performance, provided that all profits made, aims to distribute among members and not in
proportionate to investment”
FEATURES OF CO-OPERATIVE
1. Association of Persons
2. Business Enterprise
3. Voluntary Enterprise
4. Democratic Enterprise
5. Body Corporate
6. Spirit of Service
NABARD (Nov. 01, 02, 05, May 04, 05, 08)
NABARD is an apex institution for making policy, planning and operations in the field of
credit for agriculture and other economic activities in rural areas. The bank was setup by the
Indian Parliament in 1982. NABARD has paid up capital of Rs. 2000 crores, which was
contributed by the Government of India and RBI in equal proportion.
1. It works as an apex body, which looks after the financial needs of agriculture and rural
2. Provides short-term loans to state cooperatives for seasonal agricultural operations
3. Provides medium-term loans to state cooperatives and RBBs for approved agricultural
4. Provides log-term loans to state cooperatives, RBBs and commercial banks for investment in
Production and marketing
activities of village cottage
artisans, small scale and tiny
industries and other rural non-
• (a )State co-operative bank (SCBs) (b) regional
rural banks (RRBs)
• Eligible purposes
• (a ) Agricultural production operation and
marketing of crops by farmers, farmers co-
• (b) Marketing and distribution of inputs like
fertilizers, seeds, pesticides etc.
• (c) Production and marketing activities of village
and cottage industries, handicraft, handlooms,
artisans, small-scale and tiny industries and other
rural non-farm enterprises.
Production credit (short
• (1)Institutions eligible for refinance:
• -State co-operative agriculture and rural development
• -Regional rural banks (RRBs)
• -State co-operative banks (SCBs)
• - State agricultural development finance companies
• -Farm sector: Investment in agriculture and allied activities
such as minor irrigation, farm mechanization, land
• -Non farm sector: Investment activities of artisans, small
scale industries, tiny sector, village and cottage industries,
• (3)Loans period
• -Upto a maximum of 15 years
Investment credit (medium and long
• (6)Ultimate beneficiaries
• -Although refinance is provided to
ultimate beneficiaries of investment finance
• (7)Margin money
• NABARD stipulates beneficiary’s contribution
to the project cost in order to ensure his/her
stake in the investment.
• (8)Special focus
• -Removal of regional/sectoral imbalance:
NABARB considers removal of regional and
sectoral imbalance as one of the thrust areas
Regional Rural Banks were established under the provisions of an Ordinance
promulgated on the 26th September 1975 and the RRB Act, 1976 with an objective to
ensure sufficient institutional credit for agriculture and other rural sectors. The RRBs
mobilize financial resources from rural / semi-urban areas and grant loans and
advances mostly to small and marginal farmers, agricultural labourers and rural
artisans. The area of operation of RRBs is limited to the area as notified by GoI
covering one or more districts in the State.