Covers Major aspects of Rural Banking a Management Student must know

1. RURAL BANKING IN INDIA
Sanjiv Kumar Mahajan
Career Points University
Kota

2. Preview
 Products of Rural Financing
 Sources of Rural Finance
 NABARD
 Introduction
 Organisation
 Functions/Roles
 Challenges in Rural Banking

3. Products

4.  Various Services offered by the banks to its customers
ie Loans, Deposit accounts, insurance etc
 The products offered by Rural Banking include:-
 Agriculture Credits
 Financial Inclusion
 MSMEs
 Deposits
Products of Rural Banking

5.  Banks have introduced a range of products at attractive
rates of interests.
 Tractor/ Tiller Loan
 Transformation of Traditional subsistence
agriculture into commercial position
Assist farmers, shift from traditional farming to
mechanized farming for reducing the time and cost
of tillage and improve the quality of tillage so as to
increase their crop productions through multiple
cropping and profitability.
Maximum repayment period 7 to 9 years
Products : Agriculture Credits

6.  Short Term Loan for Cold Storage/Scientific Godowns
• Setting up of Cold storage units, warehouses and godowns etc.
• Cash Credit limit of working capital to cold storage units for direct
expenses like wages, salaries, electricity charges, fuel and
maintenance expenses with a view to promote storing capacity of
Agricultural produce and better price realization by the farmers.
 Kisan Credit card
• To meet the short term credit requirements for cultivation of
crops & Post Harvest Expenses
• Consumption requirement of farmer household
• Working capital for maintenance of farm assets and activities
allied to agriculture, like dairy animals, inland fishery etc.
Products : Agriculture Credits

7.  Kissan Bhoomi Vridhi
 Term Loan for 7-10 Years
 Objective
• To finance the farmers to purchase, develop and cultivate
agricultural as well as fallow and waste lands.
 Maximum financing amount - Rs. 10.00 lacs for purchase of land.
 Single Transaction Term Loan An instant credit for farming
community to meet the emergency requirements for Agriculture and
Domestic purposes for tiding over temporary financial difficulties.
Products : Agriculture Credits

8.  All Purpose Term Loans
 To farmers for requirements like Farm Mechanization, Land
Development, Minor Irrigation, Water Conservation, Horticulture,
Allied Activities and Other Agriculture related activities etc.
 Loans for Women
 To encourage and empower women beneficiary by offering hassle
free financial assistance at liberal and concessional terms.
 Both for Farm and Non-Farm activities.
Products : Agriculture Credits

9.  Solar Irrigation Projects
 It is cost-prohibitive for the Government to extend grid power to
remote areas especially to meet agriculture loads.
 The demand for electric energy is far outstripping supply,
especially in the agriculture sector
 To help farmers to extend grid power to remote areas especially
to meet agriculture loads.
.
Products : Agriculture Credits

10.  Financial inclusion is the delivery of financial services at affordable costs to
vast sections of disadvantaged and low income groups ie "no frill accounts".
 It helps Create a platform to inculcate saving habit, Providing formal credit
avenues, Plug gaps and leaks in public subsidies and welfare programmes.
 Various Schemes under financial inclusion are:-
 No-frills account ,Jan Dhan Yojna
 EBT – Electronic Benefits Transfer
 KCC – Kisan Credit Card
 MUDRA Bank Micro Units Development and Refinance
Agency Bank is a public sector financial institution that provides loans at
low rates to micro finance institutions and non-banking financial
institutions which then provide credit to MSME's. It was launched by
Prime Minister Narendra Modi on 8 April 2015.
Products : Financial Inclusion

11.  MSE-Manufacturing
 Loans given to enterprises engaged in the manufacture or
production, processing or preservation of goods in general
including the following :-
• Printing
• Printing and publishing as integrated unit.
• Medical Equipment and Ayurvedic Product
• Composite unit of Bacon Processing and Piggy Farm
• Beedi/Cigarette Manufacturing and other tobacco products.
• Manufacture of Bio Fertilizer
• Tobacco Processing.
Products : Financing MSMEs

12.  MSE-Services
 Loans given to enterprises engaged in providing or rendering of
services in general including the following :-
• Small Road and Water Transport Operators.
• Small Business
• Service enterprises engaged in activities, viz,
- Consultancy Services including management services
- Seed grading services
- Training-cum-Incubator centre
- Educational Institutions
- Training Institutes
- Hospitals
Products : Financing MSMEs

13. • Besides the facilities of opening Current Deposit/Savings Bank
Deposit/regular Recurring Deposit and Fixed Deposit accounts,
Banks provide a number of well thought out deposit schemes,
tailor made to suit different needs of different people - each in its
own way maximizing the benefits for the depositor
Products : DEPOSITS

14. Sources : Rural Finance

15. • Rural finance is a line of credit specifically intended for the
requirements of the agricultural industry. Range from land
development to farming equipment. These credit plans are a
significant aspect of rural and semi-urban support.
• A number of banks and finance companies have begun to
specialize in offering credit to farmers.
• As banks and financial services continue to extend their services
into rural India they are generating employment in the vicinity.
Rural Finance

16.  Various Sources of rural finance are:-
 Nationalised Banks - Regional Rural Banks
 Private Banks
 Co-Operative Banks
Informal loans (Money Lenders)
Sources of Rural Finance

17. Nationalized Banks – Regional Rural Banks (RRB/ Gramin)
 The Government of India, the concerned State Government and
the sponsoring bank, contribute to the share capital of RRBs in
the proportion of 50%, 15% and 35%, respectively.
 The area of operation of the RRBs is limited to notified few
districts in a State
 As on date, there are 14,475 rural banks in the country of which
2126 (91%) are located in remote rural areas.
Sources: Rural Finance

18. Cooperative Banks Credit Cooperatives
 The Co-operative Credit Structure (CCS) set up to serve the
needs of both short term and long term rural credit in India.
Short term credit is provided by three institutions –
 State Cooperative Banks (SCB)
 District Central Cooperative Banks (DCCB)
 Primary Agricultural Credit Societies (PACS)
 Long term credit :-
Primary Cooperative Agriculture and Rural Development
Banks (PCARDB).ie Land Devp Banks
Sources : Rural Finance

19. NABARD

20.  RBI resp for all banking and Credit for agriculture and rural
development after independence.
 More than 70% population was in rural India with agriculture
being backbone of economy
 RBI was finding it difficult to focus on Credits for Rural as well as
Urban develpoment
 A committee was constituted to review the arrangements for
institutional credit for agriculture and rural development.
 On 28 November 1979, the Committee recommended the
formation of NABARD to focus on the credit problems of
integrated rural development.
 The bank came into existence on 12 July 1982
Genesis

21.  NABARD took over:-
 Agricultural credit functions of RBI
 Refinance functions of the then Agricultural Refinance and
Development Corporation (ARDC).
 NABARD was set up with an initial capital of 100 crore.
 Consequently GOI and RBI, the paid up capital as on 31 March
2015, stood at 5000 crore with Government of India
holding 4,980 crore (99.60%) and Reserve Bank of India 20.00
crore (0.40%).
Genesis

22. Mission
 To Promote sustainable and equitable agriculture and rural
prosperity through effective credit support, related services,
institution development and other innovative initiatives
Objectives
 Facilitate credit flow for agriculture , rural infrastructure
and development
 Promote policies and practices conducive for rural development
 Institutional development for rural credit system
 Supervise Rural Financial Institutions E.g. ( Co-operative banks and
Regional Rural Banks)
 Consultancy Services.
Mission & Objectives

23. Dr. Harsh Kumar
Bhanwala
Chairman
NABARD head quarters is located at Mumbai
431
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Organisation

24. Functions of NABARD

25. Functions
Financial
Refinance
Direct Finance
Developmental
Supervisory
Functions : NABARD

26. Short Term Refinance:
 Refinance for production purposes at concessional rate of interest
to State Cooperative Banks (SCBs), Regional Rural Banks (RRBs) and
PSBs(public sector banks) for financing PACS (py agri cr society) for
Seasonal Agricultural Operations
 Seasonal Agriculture Operations include various types of
production, marketing and procurement activities, being provided
to client institutions.
 Each withdrawal against the sanctioned credit limit is repayable
within 12 months.
- REFINANCE
Refinance Function

27.  The ST Refinance would consist of different purposes
viz
Agriculture and Allied Activities
Marketing of crops
Fisheries Sector
Industrial Cooperative Societies.
Rural artisan.
Purchases, Stocking and Distribution of Chemical
Fertilisers and other Agricultural Inputs.
Refinance Function

28. MT Conversion:
 NABARD provides relief to farmers whose crops are damaged due
to natural calamities by :-
Conversion of current short term loans into medium term loans
Re-phase / reschedule of existing MT (Conversion) loans.
 Consolidated limit sanctioned to RRBs and SCBs in respect of
eligible DCCBs.(Distt Co-op Central Bank)
Refinance Function

29. Long Term Refinance
 Loan Period: Normally 3 to 15 years.
 Agriculture and allied activities
Artisans, small scale industries, Non-Farm Sector (Small and
Micro Enterprises), handicrafts, handlooms, power looms, etc.
Activities of voluntary agencies and self help groups working
among the rural poor
Refinance Function

30. Eligible Institutions
Regional Rural Banks (RRBs)
State Co-operative Banks (SCBs)
Commercial Banks (CBs)
State Agricultural Development Finance Companies (ADFCs)
Scheduled Primary Urban Co-operative Banks (PUCBs)
North East Development Finance Corporation (NEDFC)
Non-Banking Financial Companies (NBFCs)
Refinance Function

31. Short Term Multipurpose Credit Product (STMPCP)
To provide financial assistance to Dist Central Co-operative Banks
(DCCBs) to expand their lendable resources and also enable them
diversify business operations to improve their profitability
Purpose
 Loans for food processing units
 Loans to warehouses, cold storage and cold chain infrastructure
 Credit facility to marketing federation ie societies for marketing
agricultural produce
 Rural infrastructure development fund
Direct Refinance Function

32. DEVELOPMENTAL FUNCTIONS
 Farm sector
 Non farm sector
 Financial inclusion
 Research and development
 Core banking solution to cooperative banks
Development

33. Implementation of various farm sector initiatives aimed at :-
 Conservation and management of natural resources – Water
Harvest, Cooking gas .
 Accelerating ground level credit flow by Rural Financial Institutions.
 Incremental agricultural production and productivity
 Generating rural employment
 Raising the standard of living of rural poor through credit and grant.
Development : Farm Sector

34.  Building an entrepreneurial culture and necessary skills among the
rural youth and women .
 Credit to the unreached small, cottage and village industries,
handloom, handicrafts and other rural crafts and service sector in
the decentralized sector in the rural areas.
Development :Non Farm Sector

35. "The process of ensuring access to financial services and timely and
adequate credit where needed by vulnerable groups such as weaker
sections and low income groups at an affordable cost.”
 Two Funds have been established for enhancing financial inclusion
 Financial Inclusion Fund (FIF)
 Financial Literacy Centres & Programmes.
 Training staff of PACs and RRBs.
 Financial Inclusion Technology Fund (FITF).
 Implementing Core Banking Solution(CBS)-Branch Networking
 Information and Communication Technology (ICT) .
 Kisan Credit Cards (KCC)
Financial Inclusion Department (FID) is the nodal department.
Development : Financial Inclusion

36. R&D Fund
• To get to know the problems of agricultural and rural
development through in-depth studies and applied research.
• Utilised for formulating policies on agricultural operations
and rural development, facilities for training, dissemination
of information and promotion of research by undertaking
surveys in the fields of agriculture, rural banking and rural
development.
Research & Development

37.  NABARD is empowered to conduct inspection of
 State Cooperative Banks (SCBs),
 Central Cooperative Banks (CCBs)
 Regional Rural Banks (RRBs).
 NABARD has been conducting voluntarily periodic
inspections of state level cooperative institutions:-
 State Cooperative Agriculture and Rural Development Banks
(SCARDBs).
 Apex Weavers Societies
 Marketing Federations etc
Supervision

38.  Competition
 Scale of investment
 Customers scattered over wide areas
 Rural infrastructure
 Irregularity in payments
 Operational challenges
 Cultural diversity
 Profitability
Challenges : Rural Banking

39. Conclusion

40. Thank You