Role of rbi & co operative movement


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RBI & Co-op movement

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  • Role of rbi & co operative movement

    2. 2. PRE-INDEPENDENCE PERIOD Reasons for less contribution by RBI to Co- operative Movement. British rule • certain parts were not accountable to RBI on account of legal existence • difficult for RBI to implement the policies. • credit limits fixed were very low • Because RBI - lender of last resort did not consider it proper to maintain high credit limits. • General policy -was to provide assistance only to enable the co-operative credit institution to overcome tempory shortage of funds.
    3. 3. POST-INDEPENDENCE PERIOD 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 Institutes re-designed its agriculture credit department in order to provide financial assistance to agricultural sector. took various steps to ensure that rural credit is channelized in a proper manner. Contribution by RBI
    4. 4. NATIONAL AGRICULTURAL CREDIT FUND was established. financial and promotional functions in respect of rural credit for development of co-operative movement. 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 Contribution by RBI
    6. 6. FINANCING FUNCTIONS • 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 economical farmers. • Short term credit for marketing - RBI brought down the margin limit to 35% of the value of stocks for commodities like foodgrains,oilseeds,etc
    7. 7. • 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.
    8. 8. 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.
    9. 9. REGULATORY/STATUTORY FUNCTIONS • 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 developement
    10. 10. 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
    11. 11. Financer Of Rural And Co-operative Sector Credit facility to non credit co-operatives Co-operation between credit departments Capital to procure food grains
    12. 12. Finance to societies Capital to Industrial Co- ops Remittance facility Finance LDBsOverdraft facility Help consumer Co-ops Co-ordinate with co-ops Functions of SBI in Co- operative Sector
    13. 13. Definition : 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”
    14. 14. FEATURES OF CO-OPERATIVE 1. Association of Persons 2. Business Enterprise 3. Voluntary Enterprise 4. Democratic Enterprise 5. Body Corporate 6. Spirit of Service
    15. 15. 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. Functions NABARD: 1. It works as an apex body, which looks after the financial needs of agriculture and rural development. 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 operations. 4. Provides log-term loans to state cooperatives, RBBs and commercial banks for investment in agriculture.
    16. 16. PRODUCTION CREDIT Production and marketing activities of village cottage industries, handicrafts, handlooms, powerlooms, artisans, small scale and tiny industries and other rural non- farm enterprises
    17. 17. Eligible institutions • (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- operatives etc. • (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 term)refinance
    18. 18. • (1)Institutions eligible for refinance: • -State co-operative agriculture and rural development banks (SCARDBs) • -Regional rural banks (RRBs) • -State co-operative banks (SCBs) • - State agricultural development finance companies (ADFCs) • (2)Purpose • -Farm sector: Investment in agriculture and allied activities such as minor irrigation, farm mechanization, land development, etc. • -Non farm sector: Investment activities of artisans, small scale industries, tiny sector, village and cottage industries, etc. • (3)Loans period • -Upto a maximum of 15 years Investment credit (medium and long term) refinance
    19. 19. • (6)Ultimate beneficiaries • -Although refinance is provided to SCARDBs/SCBs/CBs/RRBs/ADFCs, the ultimate beneficiaries of investment finance maybe individual • (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
    20. 20. 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.