2. Contents
1. Priority sector advances
2. Agricultural credit
( NABARD, Grameen Bank, co operative
system, Government sponsored schemes,
Agricultural schemes, Micro credit &
Hi tech agriculture)
2. Retail banking
(Housing Loans , Educational Loans, Auto
loans, consumer loans & Credit Card loans)
3. Agricultural credit- The four stages
Agricultural sector has always been a priority
Sector and Government has been proactive in
Framing policies , regulatory establishments
etc
1. 1904-69- co-operative societies
2. 1969-75- Banks nationalization & setting
RRB’s
3. 1975-90- Setting up of NABARD
4. 91 onwards- Financial sector reforms
4. Agricultural credit- The beneficiaries
Individual farmers
Farming co-operatives
Companies engaged in farming (tea plantations etc)
Producer companies ; (owned by farmers)
Companies engaged in post harvest activities
High tech agriculture(green house/ poly house/ seed
production and marketing etc)
proprietary./ partnership firms engaged in agriculture
N G O’s
5. Agricultural – Bank credit
1. Priority sector advance
2. Agricultural credit- 18 % of NBC
3. Includes both direct & indirect credit
4. Indirect credit- not to exceed 25% of total
agricultural credit ( 4.55 of N B C)
6. Agricultural credit - types
Direct credit
Indirect credit
Short term- 6 to 18 months
Medium term- 3 to 5 yrs
Long term- Over 5 yrs
7. Direct finance
Short term loans Medium /Long term
Crop loans
Pre/ Post harvesting loans
Plantation/ horticulture
Piggery/ fishery/poultry/
beekeeping etc
Purchase Agricultural
Implements / Machines etc
Development of irrigation
potential
Reclamation & land development
Development of allied activities
8. Indirect finance
Financing for distribution of fertilizers/ pesticides/
seeds/ cattle feed/ poultry feed etc
Subscription to bonds for rural electrification
Corporation/ NABARD bonds/ Adivasi multipurpose
Co operative societies etc
Finance to hire purchase of agricultural implements
Loans for construction of storage godowns / warehouse
Market yards/ cold storages etc
Loans to institutions involved in spraying operations
Loans to co-operative societies for purchase of farm
produces etc
9. Developments
Kisan credit card scheme
This can be issued to all the farmers who are owners/
cultivators engaged in cultivation & other allied
activities
It is a revolving credit . No need for fresh sanctioned
KCC limit can be enhanced
ATM access to K C C is available
Credit limit is based on cropping pattern / scale of
farming activities etc.
K C C has helped in increasing agricultural production.
10. Technology in Agriculture
Rural ATM’s to focus farmers requirement
Use of point of terminal devise for facilitating credit
Delivery at merchant establishment.
Use of smart card to facilitate transaction/
Disbursement
Core banking solutions in RRB/ Co operative
banks under process.
11. NABARD-objectives
Apex development bank in the area of Agriculture
Facilitates credit flow for agriculture/ cottage
Industries/ Handicrafts/ rural crafts/ village
industries etc
To support all kinds of economic activities in rural
areas
Promote/ integrated sustainable rural development
Secure prosperity of rural areas.
12. Main functions
Providing refinance to lending institution in rural
areas(SIDBI,NABARD)
Bring about / promote institutional development
Evaluate / monitor and inspecting the clients banks
13. Other functions
Acts as coordinator in operations of rural credit institutions
Extends assistance to government/ RBI & others in matters
relating to rural development
Offers training / research facilities for banks/
cooperatives/organizations working in rural development.
Provides assistance to eligible institutions in rural
development
Acts as regulator for cooperative banks & RRB’s
14. Refinancing STL/ MTL/LTL
Consolidated limit to SCB’s on behalf of DCCB’s / RRB’s for
financing agricultural activities including marketing activities
State cooperative banks for financing procurement / marketing
of cloth/ yarn/ regional weavers cooperative societies
Consolidated limit to SCB’s on behalf of DCCB’s / RRB’s for
financing village/cottage industries etc
Consolidated limit to SCB’s on behalf of DCCB’s / RRB’s for
financing collection & marketing of forest produces by
Adivasis/ SC/ST
15. Government sponsored schemes
The major government sponsored schemes in force
are
1. Swarnajayanti gram swarozgar Yojana ( S G S Y )
2. Swarnajayanti Sahari rozgar Yojana ( S J S R Y )
3. Prime minister Rozgar yojana ( P M R Y )
16. S G S Y
Launched in 1999 by restructuring some of the schemes such
as IRDP, DWCRA, MWS etc
Scheme funded by center and state in ratio of 75: 25
Focus on rural poor & 50% for SC/ST
Supports in formation of S H G /nurture them
Multiple doses of credit over a period of time to help them
cross BPL
Subsidy at 30% / project ( 50% in case of SC/ST/ group ) up to
maximum of Rs 7500 ( 10,000 for SC/ST)
Refinance by NABARD
17. S J S R Y
Operative from December 1997
Merger of three existing schemes NRY, UBSP, PMIUPEP
Consists of two schemes Urban self employment program
(USEP) & Urban wage employment program (UWEP)
All unemployed youth of BPL are eligible under this scheme
Subsidy is back ended and used too clear the loan. The subsidy
is kept with bank & it appropriates the amount to loan account
Subsidy is 15% of project cost / Rs 7,500 per beneficiary.
18. P M R Y
To provide employment to educated un employed youth to set
up micro enterprises all over the country
Min educational qualification- VIII standard
Reservations ( 22.5 % for SC/St & 27% for OBC)
Upper age limit- 4o yrs (45 in case of SC/ST)
Subsidy / beneficiary – 15% of project cost (max- Rs 12,500)
Subsidy disbursed to banks in advance / kept under FD
without interest / adjusted back end in loan
20. Micro finance
Micro credit is small amount lent to a person for running a
small business.
Micro finance is a provision of thrift , credit , financial services
and products to poor.
Dr Md Yunus , noble prize winner has defined micro finance
as availability of loans to rural people without obtaining
collateral for income generating purpose in order to reduce the
poverty levels.
Micro credit is also termed as collateral free loans for people
living below poverty line.
M F has been responsible for decline in poverty rate
21. Intermediaries
Play critical role in rural areas.
They create awareness in the borrowers about savings
& credit
They are the link between the lenders and borrowers.
They also train , educate the rural poor.
The intermediaries include NGOs, individuals,
government agencies, international donors etc
NGO’s play a much larger role .
22. Role of N GO’s
Provide effective intermediation in micro finance
They identify right kind of borrowers
They ensure success of the project through development
Of skills , communication, participation of the people
They are in regular touch with borrowers & ensure that
the loan payments are made in time.
Their involvement adds cost to financing.
Low cost lending methods were developed.
S H G model has been devised and is a success story
23. S H G
A voluntary association of poor formed with common goal
Of social & economic development
They mobilize resources of individual members for collective
Economic development & to uplift the living conditions.
Assist the members in times of need
To cultivate the savings habit amongst the members
Utilise local resources , skill development of members.
Identify the problems and find solutions
Develop linkages with NGO, MFI, banks for finance etc.
26. M F
Community
organizing
By creating
homogeneous
groups
The Impacts
Large outreach
22 million
clients with loan
portfolio of Rs
1150 crs
Encourage
savings &
insurance
coverage
Multiple
delivery models
MFI’s, banks,
NGO’s
Enterprise
support design
In Finance
Marketing
Technology etc
Community
development
By uplifting
poor & make
them self reliant
29. Retail banking
Business of commercial banks with individual customers
Fast growing portfolio in banks and most profitable
Target group- salaried class, business professionals / traders
Characteristics
Multiple products Multiple distribution
channels
Multiple customers
Deposits
Credit cards
Insurance
Investments
Out sourcing
Call centers
Branch
Internet
Kiosks
Individual consumer
Small business
corporate
30. Consumer credit
1. Growth of consumerism due to better standards
of living
2. A medium term asset for the Banks ( 1 to 4 yrs)
3. Repayment assured (Salary linked)
4. Retail lending and hence low risk/ high return
5. Payable in emi in convenient mode (ECS option)
6. Easy to process and standardized in many banks
7. Highly profitable .
8. Standardized documentation
9. Sanctioned mainly to employees/professionals
10.Has full security coverage .
11. Borrower to provide margin ( 10 to 25%)
31. Various consumer credits
T V
Vehicle
II/ IV wheeler
Fridge
Furniture
Other
electronic
goods
Kitchen
appliances
32. Personal loans
1. Highly competitive.
2. To be extended only to trustworthy / high net
worth applicants
3. Salaried persons are the target constituents
4. Repayment ranges from 12 to 18 months
5. Loan component based on repayment capacity.
6. Standardized format and appraisal methods
7. The fund utilization is flexible.
8. The loans maximum limit is Rs 10 lakhs
33. Personal loans (Cont’d)
1. Some banks decide the loan component based
on gross/ net/ disposable income / income of
spouse
2. The eligibility depends on take home pay of
the applicant
3. Post dated cheques are insisted in some cases.
4. Balance transfer facility is offered by some
banks in the recent past .
34. Housing loans
1. Is a growing portfolio
2. Cost of supervisory activity is low.
3. Low risk of default
4. Fully secured.
5. Popular in metros and is getting extended to
rural areas too
6. Contributes to social stability
7. A backward linkage to various markets (land/
building materials/ labour etc.
8. The market is quite competitive as many lenders
are in the fray.
35. Housing loans (cont’d)
1. The institutional set up is strong in housing
finance
2. HDFC, HUDCO, NHB, Central & State
housing financing societies, LIC Housing
finance , commercial banks, Subsidiaries of
commercial banks , Private housing financing
societies are some of them.
3. Government has from time to time extended
incentives to this sector in the form of IT
deductions.
4. Risk weightage has been reduced for housing
loans offered by institutions.
36. Housing loans ( cont’d)
1. I T exemptions both in case of interest paid &
Installment components are available.
2. Interest to the extent of Rs 1.50 lakhs for self
occupied house is exempted . In case of rented
properties, the total interest paid to institutions
is exempted .
3. In case of principle component , amount to the
extent of Rs 1.50 ( overall) is eligible for
deductions.
4. Repayment ranges from 10 to 20 years.
37. Credit Cards
1. Is one of the delivery channels for Banking
sector and is well spread .
2. Gained popularity due to value added services
apart from credit period
3. Large number of merchants establishment and
easy delivery mechanism
4. Credit period ranges from 15 to 45 days
depending on date of purchase. Delayed
payment attracts interest.
38. Credit Cards
1. Cash drawals are permitted for certain amount
through ATM’s but they carry interest
2. Fair practices code for credit card operations
need to be followed
3. There is a surge in NBFC’s and Banks issuing
C C to customers and many customers maintain
more than one C C .
4. Hence proper assessment of the client to be
done while issuing C C.
5. All the KYC norms to be followed before issuing
C C
39. Credit Cards
Advantages
1. Large number of outlets and choice to choose
the shop
2. Credit without interest from 15- 45 days.
3. Cash drawals from ATM in case of emergency
Disadvantages
1. Over spending
2. Fraud due to loss of cards/ forgery of signatures
etc
40. Retail Loans
Consumer goods Vehicle loans
Purchase of goods
Repayment- 2 to 4 years
Repayment in EMI mode
Interest rate in floating mode
and higher
Hypothecation of assets
purchased
Guarantee normally not needed
To purchase 2-4 wheelers for
own use
Repayable in 3-7 yrs
Repayment through EMI
method
Interest is floating
Assets hypothecated &
charges registered with RTA
Guarantee insisted
41. Retail Loans
Educational loans Personal loans
Clean loan/ no security
Repayment- 2 to 4 years
Repayment in EMI mode
Interest rate in floating mode
and highest
Guarantee insisted in case of
personal loans.
