Presentation to bank staff on features of rural economy, rural financing, Kisan Credit Card, National Rural Livelihood Mission (NRLM), Self Help Groups (SHG), Joint Liability Group (JLG), term loans for agriculture, dairy etc., in Indian context

1. Rural financing
Dr D V Deshpande
Ex-Director BIRD/CGM NABARD
Professor at VAMNICOM, Pune
dvdesh@gmail.com
(M) +91 9919225539

2. Rural and agriculture economy- key
features
 India lives in villages
 2011 census- 69% population still lives in villages (down from 72% in 2001)
 Rural and agricultural economy is overlapping- Farm & non-farm
 Key characters-
 Incomes are less and poverty is more in rural areas (25.7% in 2012) against 13.7 %
in urban & 21.9% overall
 Dependent on agriculture- almost 60%
 Infrastructure is less developed
 But growth is more in rural areas- business potential for banks is higher!

3. Kisan Credit Card (KCC)
 Introduced in 1998 to provide a flexible, hassle free, quick and timely access to
affordable credit.
• cumulative 6.92 crore issued up to 2018 out of about 12 crore farmers
• Rupay Kisan Card
 Purpose- Cultivation & other short term needs of agriculture including Term
Loan requirement.& consumption
 Basis of loan _ “scale of Finance” & cultivated land
 Eligibility-
 i. Farmers - individual/joint borrowers who are owner cultivators
 ii. Tenant farmers, oral lessees & share croppers;
 iii. SHGs, JLGs of farmers including tenant farmers, share croppers etc.

4. Limit
a) Short term credit requirements for cultivation of crops;
b) Post-harvest expenses ;
c) Consumption requirements of farmer household;
d) Working capital for maintenance of farm assets and activities allied to
agriculture;
e) Investment credit requirement for agriculture and allied activities.
 Components ‘a’ to ‘e’= KCC Limit
 Increased 10% every year sanctioned for 5 years in one go
 Is it followed in your bank?

5. Deendayal Antyodaya Yojana – National
Livelihoods Mission (DAY-NRLM)
 GOI launched NRLM by restructuring and replacing the Swarnjayanti Gram
Swarozgar Yojana (SGSY) scheme from 2013
 Flagship program for promoting poverty reduction by:
 Building effective community owned institutions (of women)-
 Women’s Self-Help Group (SHG) of 10-20 women is the primary building block
 Federations at Village level (Village Organisation), Block, District & State
 promoting financial inclusion and
 Livelihood promotion
 Hand-holding support to the institutions of poor is for a period of 5 – 7 years
 Interest rate 7% (difference between bank’s interest & 7% is subvention from GoI)
 No collateral & no margin upto Rs 10 lakh limit to the SHGs.

6. Role of banks in DAY NRLM
 Opening of Savings account of SHGs
 KYC verification of only the office bearers shall suffice for opening SB a/c
 Should not insist on PAN.
 Opening of Savings account of Federation of SHGs
 Provide loans to SHGs: Qualifications:
 SHG should be in active existence at least last 6 months as per the books of SHGs (not
from date of opening of SB a/c)
 SHG should be qualified as per grading norms fixed by NABARD.
 SHG should practice Panchasutra principles: Regular meetings, Regular Savings, regular
inter-loaning ,timely repayment and Up- to date Books of Accounts
 SHGs can avail either Term Loan or a Cash Credit Limit (CCL) loan or both based
on the need. In case of need, additional loan can be sanctioned.
 Cash Credit Limit (CCL): Sanction minimum loan of Rs 5 lakhs to SHG for 5 years with
a yearly drawing power (DP)

7. Loan to NRLM SHG contd..
 No capital subsidy is provided . Corpus is received by SHGs of NRLM as
Revolving fund- Rs 10000-15000 per SHG (One time) for 3-6 month
 DP for First Year: 6 times of the corpus or minimum of Rs 1 lakh whichever is
higher.
 DP for Second Year: 8 times of the corpus or minimum of Rs 2 lakh, whichever
is higher
 DP for Third Year: Min. Rs 3 lakhs based on “Micro credit plan” of SHG and
appraised by the Federations /Support agency & credit History.
 DP for Fourth Year onwards: Minimum of Rs 5 lakhs based on “Micro credit
plan” of SHG and appraised by the Federations /Support agency & credit
History.
 Similar norms are there for Term loan also

8. Repayment schedule NRLM SHG
 willful defaulters should not be financed under DAY-NRLM
 First year/ first dose of loan: 6-12 months in monthly/ quarterly instalments
 Second year/ Second dose of loan: 12-24 months in monthly/quarterly
instalments.
 Third year/ Third dose: will be repaid in 24-36 months in monthly/ quarterly
instalments.
 Loan from Fourth year/ Fourth dose onwards: 3-6 years based on the cash
flow