Sunday, September 22, 2019

RURAL CREDIT AND SOURCES OF RURAL CREDIT


    INDIAN ECONOMIC DEVELOPMENT
    RURAL CREDIT : RURAL DEVELOPMENT PART 2
(HINDI MEDIUM)
    MEANING OF RURAL CREDIT
    MOST OF THE POPULATION OF THE RURAL AREA IS POOR AND NEEDS FINANCIAL ASSISTANCE IN THE FORM OF CREDIT. MONEY IS BORROWED TO BUY FERTILIZERS,SEEDS AND OTHER IMPLEMENTS AND ALSO MEETING FAMILY EXPENSES
    RURAL CREDIT IS NEEDED FOR THE FOLLOWING REASONS :
I.            LONG GESTATION PERIOD: BETWEEN THE SOWING OF CROPS AND HARVESTING OF THE CROPS.
II.            FARMERS NEED MONEY TO BUY SEES,FERTILIZERS AND TOOLS ETC
III.            PERSONAL EXPENSES:- LIKE MARRIAGE,DEATH,RELIGIOUS CEREMONIES AND TO REPAY OLD DEBT
    TYPES OF RURAL CREDIT
I.            SHORT TERM: FOR THE PURCHASE OF INPUTS LIKE SEEDS, PESTICIDES AND INSECTICIDES AND PAYMENT OF ELECTRICITY BILLS. FOR A PERIOD OF 6 MONTHS TO 12 MONTHS
II.            MEDIUM TERM LOANS IS REQUIRED FOR THE PURCHASE OF MACHINERY,CONSTRUCTION OF FENCES AND DIGGING OF THE WELLS AND  REQUIRED FOR A PERIOD OF 12 MONTHS TO 5 YEARS
III.            LONG TERM CREDIT: - FOR THE PURCHASE OF ADDITIONAL LAND, FOR CARRYING OUT PERMANENT IMPROVEMENT ON THE EXISTING LAND. RANGE IS 5 TO 20 YEARS

    SOURCES OF RURAL CREDIT
    AT THE TIME OF INDEPENDENCE INSTITUTION CREDIT SHOWED ONLY NOTIONAL EXISTENCE
    NON INSTITUTIONAL CREDIT RULED THE ROOST AND IT WAS DOMINATED BY THE MONEY LENDERS, TRADERS AND COMMISSION AGENTS. THEY CHARGED A VERY HIGHER INTEREST RATES AND MANIPULATED THE ACCOUNTS TO EXPLOIT THE FARMERS
    NON INSTITUTIONAL CREDIT LEADS TO DEBT TRAP FOR THE FARMERS
    A SIGNIFICANT CHANGE OCCURRED IN 1969 WITH NATIONALIZATION OF COMMERCIAL BANKS
    THE CONCEPT OF SOCIAL BANKING WAS PUT INTO PRACTICE AND CREDIT NEEDS OF THE FARMERS WAS ADDRESSED AS A PRIORITY ISSUE IN THE CONTEXT OF RURAL DEVELOPMENT
    SOURCES OF RURAL CREDIT
I.            INSTITUTIONAL
II.            NON INSTITUTIONAL
    NON INSTITUTIONAL SOURCES ARE THE CONVENTIONAL/TRADITIONAL SOURCES :
I.            LAND LORDS
II.            VILLAGE TRADERS
III.            MONEY LENDERS
IV.            MOST CREDIT NEEDS ARE MET THROUGH THESE SOURCES
                95% OF THE BORROWING OF THE FARMERS IN THE BEGINNING OF THE FIRST FIVE YEARS PLAN
BUT BY THE 1981.THE INSTITUTIONAL SOURCES EMERGED AS THE PRINCIPAL CHANNEL OF THE RURAL CREDIT
    INSTITUTIONAL SOURCES:
I.            GOVERNMENT
II.            COOPERATIVES
III.            COMMERCIAL BANKS
IV.            REGIONAL RURAL BANKS
TOGETHER THEY ACCOUNTED FOR ONLY SEVEN PERCENT OF THE CREDIT NEEDS OF THE FARMERS IN THE BEGINNING OF THE FIRST FIVE YEAR PLANS, BUT PRESENTLY THEIR SHARE HAS INCREASED TO 66% PERCENT
    INSTITUTIONAL SOURCES:

    OUT OF TOTAL INSTITUTIONAL CREIDTS COOPERATIVES CREIDT CONTRIBUTES NEARLY 15% AND COMMERCIAL BANKS ABOUT 75%
    APART FROM THE SUBSTANTIAL EXPANSION IN THE FLOW OF CREDIT BY COMMERCIAL BANKS AND REGIONAL RURAL BANKS ARE THE COOPERATVES CREDIT INSTITUTION HAVE EMERGED AS IMPORTANT INSIUTIONAL AGENCIES OFFERING CREIDT SUPPORT AND RELATED SERVICES

    MULTI AGENCY SYSTEM
    INSTITUTIONAL STRUCTURE  RURAL BANKING CONSISTS OF RURAL BANKING CONSISTS OF :
I.            COMMERCIAL BANKS
II.            COOPERATIVE CREDIT SOCIEITES
III.            LAND DEVELOPMENT BANK
THE INSTITUTIONAL STRUCTURE OF RURAL BANKING IS CALLED MULTI AGENCY SYSTEM
    IMPORTANT INSTITUTIONAL AGENCIES
    CO-OPERATIVE CREDIT SOCIETIES :
    THE COOPERATIVE CREDIT INSTITUTION IN INDIA CAN BE CLASSIFIED AS UNDER A THREE TIER STRUCTURE:
I.            PRIMARY CREDIT SOCIETIES AT THE BOTTOM ARE FUNCTIONING IN THE VARIOUS TOWNS AND VILLAGES
II.            CENTRAL COOPERATIVE AT THE BANK: AT THE DISTRICT HEAD QUARTER
III.            STATE COOPERATIVE BANK AT THE TOP:-STATE COOPERATIVES BANKS AT THE STATE CAPITALS FORMING THE APEX OF THE SYSTEM
THE RESERVE BANK OF INDIA ASS ITS THE COOPERATIVE STRUCTURE BY PROVIDING CONCESSIONAL FINANCE THROUGH NABARD. THE WHOLE SYSTEM IS INTEGRATED WITH BANKING STRUCTURE OF THE COUNTRY.
    A CREDIT UNION IS MEMBER OWNED FINANCIAL COOPERATIVES DEMOCRATICALLY CONTROLLED BY ITS MEMBERS AND OPERATED FOR THE PURPOSE OF PROMOTING THRIFT,ARRANGING CREDIT AT THE COMPETITIVE RATES AND PROVIDING SO MANY OTHER FINANCIAL SERVICES TO ITS MEMBERS.
    THE COOPERATIVES CREDIT SOCIETIES PROVIDE ADEQUATE CREDIT TO FARMERS AT REASONABLE RATE OF INTEREST
    ALSO PROVIDE GUIDANCE TO DIVERSE AGRICULTURAL OPERATIONS WITH A VIEW TO RAISING THE CROP PRODUCTIVITY
    CURRENTLY COOPERATIVES ACCOUNT FOR 16 TO 17 PERCENT OF RURAL CREDIT FLOWS

    THESE SOCIETIES ARE TO ENSURE :
I.            TIMELY AND RAPID FLOW OF CREDIT TO THE FARMERS
II.            ELIMINATION OF THE MONEY LENDERS AS CREDIT AGENCIES
III.            SPREAD CREDIT FACILITIES ACROSS ALL REGIONS OF THE COUNTRY
IV.            PROVISION OF ADEQUATE CREDIT IN AREAS COVERED BY SPECIAL PROGRAMMES DEVELOPMENT
    STATE BANKS AND OTHER COMMERICALS BANKS
I.            THE STATE BANK OF INDIA WAS SET IN 1955 WITH A FOCUS ON RURAL CREDIT
II.            THE GOVT REALIZED THAT RURAL CREDIT NEEDS COULD NOT BE MET BY THE COOPERATIVE CREDIT SOCIETIES ALONE AND THAT COMMERCIAL BANKS SHOULD PLAY AN IMPORTANT ROLE
III.            THE PROMPTED NATIONALIZATION OF CERTAIN BANKS IN 1969
IV.            THROUGH THEIR BRANCH EXPANSION WERE DIRECTED TO OFFER CREDIT DIRECTLY TO THE FARMERS AS WELL AS INDIRECTLY THROUGH COOPERATIVES SOCIETIES
    REGIONAL RURAL BANKS ( RRBS) AND LAND DEVELOPMENT BANKS
I.            REGIONAL RURAL BANKS (RRBS) ARE INDIAN SCHEDULED COMMERCIAL BANKS OPERATING AT REGIONAL LEVEL IN DIFFERENT STATES OF INDIA
II.            THEY HAVE BEEN OPERATING AT THE REGIONAL LEVEL IN DIFFERENT STATES OF INDIA
III.            FOUNDED ON 2ND OCTOBER ,1975 UNDER THE PROVISIONS OF  ORDINANCE PASSED ON 26 TH SEPTEMBER,1975
IV.            HAVE BEEN CREATED WITH A VIEW TO SERVE PRIMARILY TH RURAL AREAS OF INDIA WITH BASIC BANKING AND FINANCIAL SERVICES
V.            MAY HAVE BRANCHES SET UP FOR URBAN OPERATIONS AND THEIR OPERATION MAY INCLUDE URBAN AREAS TOO
VI.            REGIONAL RURAL BANKS ( RRBS) AND LAND DEVELOPMENT BANKS
VII.            AREA ARE NOTIFIED BY THE GOVT OF INDIA
    RRBS PERFORM VARIOUS FUNCTIONS IN FOLLOWING HEADS :
I.            PROVIDING BANKING FACILITIES TO RURAL AND SEMI URBAN AREAS
II.            CARRYING OUT GOVT OPERATIONS LIKE DISBURSEMENT WAGES OF MGNREGA,WORKERS AND DISTRIBUTION OF PENSIONS
III.            PROVIDING PARA BANKING FACILITIES LIKE LOCKER FACILITIES,DEBIT AND CREDIT CARDS ,MOBILE BANKING ,INTERNET BANKING ETC
    REGIONAL RURAL BANKS ( RRBS) AND LAND DEVELOPMENT BANKS
I.            WERE SET UP TO PROMOTE CREDIT SUPPLIES,PARTICULARLY IN THE REMOTE RURAL AREAS AND BACKWARD
II.            OPERATE AT THE DISTRICT LEVEL AND ARE UNDER OBLIGATION TO FOCUS ON CREDIT NEEDS OF THE WEAKER SECTION OF THE RURAL POPULATION
    NATIONAL BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT
I.            NATIONAL BANK FOR AGRICULTURE IS A DEVELOPMENT BANK FOCUSING PRIMARILY ON THE RURAL SECTOR OF THE COUNTRY.
II.            INDIA’S APEX DEVELOPMENT BANK. ONE OF THE IMPORTANT INSTITUTION IN THE COUNTRY
III.            NABARD IS RESPONSIBLE FOR THE DEVELOPMENT OF THE SMALL INDUSTRIES, COTTAGE INDUSTRIES AND ANY OTHER SUCH VILLAGE OR RURAL PROJECTS.
IV.            ESTABLISHED ON 12 TH JULY,1982 AND IT HAD INITIAL CAPITAL OF 100 CRORES
V.            THE BANK IS UNDER THE SUPERVISION OF A BOARD OF DIRECTORS WHICH THE GOVT WILL APPOINT
VI.            HEADQUARTER OF THE NABARD IS IN MUMBAI
VII.            MAIN FUNCTIONS OF NATIONAL BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT
VIII.            TO SERVE AS APEX FUNDING AGENCY FOR THE INSTITUTIONS PROVIDING CREDIT IN RURAL AREAS
IX.            TO TAKE APPROPRIATE MEASURES TO IMPROVE THE CREDIT DELIVERY SYSTEM
X.            THE BANK WAS TO FOCUS ON RESTRUCTURING OF CREDIT INSTITUTIONS AND TRAINING PERSONNEL
XI.            TO COORDINATE THE RURAL FINANCING ACTIVITIES OF ALL CREDIT INSTITUTIONS AND MAINTAIN LIA SON WITH GOVERNMENT OF INDIA,STATE GOVERNMENT,RESERVE BANK OF INDIA AND OTHER NATIONAL LEVEL INSTITUTIONS CONCERNED WITH POLICY FORMULATIONS
XII.            TO UNDER TAKE MONITORING AND EVALUATION OF PROJECTS REFINANCED BY IT
    ROLE OF RBI IN RURAL CREDIT
    SINCE 1935,THE RBI HAS BEEN PLAYING AN IMPORTANT ROLE IN PROVIDING CREDIT TO AGRICULTURE AND STRENGTHEN CREDIT INSTITUTION,PRIMARY COOPERATIVES CREDIT SOCIETIES AND DEVELOPMENT BANK IN PARTICULAR
  1. FOCUSES ON : SHORT TERM FINANCE FACILITIES TO AGRICULTURE AND ALLIED ACTIVITIES
  2. DEVELOPMENT OF COOPERATIVE CREDIT INSTITUTIONS
  3. EXPANSION OF SOURCES OF FUNDS  FOR SHORT TERM AND LONG TERM WINGS OF THE COOPERATIVES CREDIT SUSTAINING AND PROFESSIONALISM OF COOPERATIVES
  4. CONDUCTING RURAL CREDIT SURVEYS TO DETERMINE THE COVERAGE OF RURAL HOUSEHOLDS BY CREDIT INSTITUTIONS
  5. HELPING BANK BRANCH EXPANSION PROGRAMME TO PROVIDE CHEAPER REMITTANCE FACILITIES FOR BANKS OPERATING IN RURAL AREAS
  6. GUIDANCE TO ALL CONCERNED ON MATTERS RELATING TO RURAL CREDIT
·         MULTIDIMENSION
    EVALUATION
I.            NATIONALISATION OF COMMERCIAL BANKS MARKED THE BEGINNING OF SOCIAL BANKING IN RURAL SECTOR
II.            ESTABLSIHMENT OF NABARD AS AN APEX BODY COORDINATING ACTIVITIES OF ALL FINANCIAL INSTITUTIONS ENGAGED IN RURAL CREDIT PROGRAMMES HAS MADE A SUBSTANTIAL DIFFERENCE IN THE INSTITUTION OF RURAL CREDIT.
III.            INSTITUTIONAL CREDIT HAS GONE A LONG WAY IN LIBERATING THE FARMERS FROM THE DEBT TRAP OF MAHAJANS AND MONEY LENDERS
IV.            ALSO PROMTED THE COMMERCIALIZATION OF AGRICULTURE
V.            EVALUATION
VI.            SELF HELP GROUPS AND MICRO CREDIT PROGRAMMES ARE AN EMERGING PHENOMENON IN THE CONTEXT OF RURAL CREDIT AND PROMOTE THRIFT AMONG RURAL HOUSEHOLD
VII.            CREDIT IS OFFERED WITHOUT ANY SECURITY AND A MODERATE RATE OF INTEREST.
VIII.            BANKS MAY ISSUE THE KISAN CREDIT CARDS TO THE FARMERS WHICH AIMS AT ADEQUATE AND TIMELY SUPPORT TO THE FARMERS  FOR THEIR SHORT TERMS CREDIT NEEDS

     DEFICIENCIES OF RURAL BANKING SYSTEM
I.            TIED TO COLLATERAL ( SECURITY OR GUARANTEE OF PROPERTY  FOR THE LOANS
II.            LACK OF STRICTNESS IN RECOVERY OF LOANS
III.            FAILED TO DEVELOP A CULTURE OF THRIFT
IV.            SUBDUE AFFAIR OF MOBILIZATION OF DEPOSITS
V.            IMPACT OF DEBT IS HUGE ,SUICIDAL TENDENCIES
VI.            CONSIDER AS SOCIAL BANKING RATHER THAN A ACTIVITY TO ACHIEVE POLITICAL POPULARITY



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