<–2/”>a >68.84% of the Population in India is rural based and majority of them depends on agriculture for a living. Enhanced and stable Growth of the agriculture sector is important as it plays a vital role not only in generating purchasing power among the rural population by creating on-farm and off-farm EMPLOYMENT opportunities but also through its contribution to price stability and Food Security.The share of agriculture and allied sectors in Gross Bank Credit was about 13 per cent despite rise in credit flow to agriculture in absolute terms. The heavy dependency of farmers on moneylender is partly on account of denial or limited access to Bank Services.
The Rural Finance Market comprises of:
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(i) Organized or formal system;
(ii) Unorganized or informal segment.
The Organized or formal segment consists of the Reserve Bank of India (RBI), National Bank for Agriculture and Rural Development (NABARD), Public and Private Sector Commercial Banks, Regional Rural Banks (RRB), Land Development Banks (LDB), State Cooperative banks (SCB), Central Cooperative Banks (CCB), Primary Agricultural Cooperative Banks (PACB), Central and States Governments, Life Insurance Corporations (LIC), Post Office Saving Banks, etc
Main sources of Unorganized or informal segment are as follows:-
Money Lenders: There are two Types of money lenders in rural areas. a) agricultural money lenders and b) professional money lender. Agricultural money lender’s main occupation is farming and money lending is secondary one. Professional money lender’s main profession is money lending. Although the reliance on money lender by rural poor declined over the years, the credit disbursed by money lenders still forms a major portion of the total credit obtained by the farmers.
Land Lords:Small farmers and tenants rely on land lords for finance to meet out their productive and unproductive expenses. This SOURCE OF FINANCE has all the defects associated with money lenders. Interest rates are exorbitant. Often small farmers are forced to sell out their lands to these land lords and they become land less labourers.
The enactment of the Cooperative Credit Societies Act 1904 was the first effort made by the Government in the country to institutionalize Agricultural credit by promoting the cooperatives in a corporate form.After India attained Independence in August, 1947, cooperatives assumed a great significance in POVERTY removal and faster socio-economic growth. With the advent of the planning process, cooperatives became an integral part of the Five Year Plans. As a result, they emerged as a distinct segment in our national economy.In the First Five Year Plan, it was specifically stated that the success of the Plan would be judged, among other things, by the extent it was implemented through cooperative organisations.
State Cooperative Bank at the apex level in each State, the Central Cooperative Bank at the District level and Primary Agricultural Credit Societies / Primary Agricultural Cooperative Banks / Large Sized Agricultural Multi-Purpose Societies / Farmers Service Societies at the base level serves the structural development of Cooperative Societies in India.
The cooperatives have been operating in various areas of the economy such as credit, production, processing, ,Marketing, input distribution, housing, dairying and textiles. In some of the areas of their activities like dairying, urban banking and housing, sugar and handlooms, the cooperatives have achieved success to an extent but there are larger areas where they have not been so successful.
The failure of cooperatives in the country is mainly attributable to: dormant membership and lack of active participation of members in the management of cooperatives. Mounting overdues in cooperative credit institution, lack of mobilisation of internal Resources and over-dependence on Government assistance, lack of professional management. bureaucratic control and interference in the management, political interference and over-politisation have proved harmful to their growth. Predominance of vested interests resulting in non-percolation of benefits to a common member, particularly to the class of persons for whom such cooperatives were basically formed, has also retarded the development of cooperatives. These are the areas which need to be attended to by evolving suitable legislative and policy support.
National Bank for Agriculture and Rural Development (NABARD) was established through an Act of Parliament in 1982. NABARD was set up as an apex Development Bank with a mandate for facilitating credit flow for agriculture, rural industries and all other allied economic activities.
NABARD was established with an aim of building an empowered and financially inclusive rural India through specific goal oriented departments which can be categorized broadly into three heads: Financial, Developmental and Supervision. Through these initiatives we touch almost every aspect of rural economy. From providing refinance support to building rural Infrastructure-2/”>INFRASTRUCTURE; from preparing district level credit plans to guiding and motivating the banking Industry in achieving these targets; from supervising Cooperative Banks and Regional Rural Banks (RRBs) to helping them develop Sound banking practices and onboarding them to the CBS platform; from designing new development schemes to the implementation of GoI’s development schemes; from training handicraft artisans to providing them a marketing platform for selling these articles.
The Regional Rural Banks (RRBs) were established in 1975 with the objective to create an alternative channel to ‘cooperative credit structure’ with a view to ensure sufficient institutional credit for rural and agriculture sector. The RRBs are integral segment of the Indian banking system with focus on serving the rural areas. As on date 82 RRBs are functioning in the country.
RRBs are jointly owned by Government of India, the State Government concerned and the Sponsor Banks. The issued capital of RRBs is subscribed by Central Government, State Government and sponsor banks in the proportion of 50%, 15% and 35%, respectively.
The functions of the RRB are as follows:
(1) Granting of loans and advances to small and marginal farmers and agricultural labourers, whether individually or in groups, and to co-operative societies, agricultural processing societies, co-operative farming societies, primarily for agricultural purposes or for agricultural operations and other related purposes;
(2) Granting of loans and advances to artisans, small entrepreneurs and persons of small means engaged in trade, commerce and industry or other productive activities within its area of co-operation; and
(3) Accepting deposits.,
Rural credit and financial institutions are essential for the development of rural areas. They provide loans to farmers and other rural businesses, which helps them to grow and create jobs. Rural credit and financial institutions also provide financial services such as Savings accounts and insurance, which help rural people to manage their finances and protect their assets.
There are a variety of different types of rural credit and financial institutions. Agricultural credit institutions provide loans to farmers and other agricultural businesses. Rural banks provide a range of financial services to rural people, including loans, savings accounts, and insurance. Cooperative banks are owned and operated by their members, and they provide financial services to their members at a lower cost than commercial banks. Microfinance institutions provide small loans to poor people, who often do not have access to credit from other sources. Rural development banks provide loans and other financial assistance to rural businesses and communities. Land development banks provide loans to farmers and other landowners to help them improve their land. State-owned commercial banks are owned by the government, and they provide a range of financial services to both rural and urban people. Regional rural banks are a type of state-owned commercial bank that is specifically designed to serve rural areas. Non-banking financial companies (NBFCs) are financial institutions that are not banks. They provide a range of financial services, including loans, mortgages, and investments.
Rural credit and financial institutions play an important role in the development of rural areas. They provide loans to farmers and other rural businesses, which helps them to grow and create jobs. Rural credit and financial institutions also provide financial services such as savings accounts and insurance, which help rural people to manage their finances and protect their assets.
There are a number of challenges facing rural credit and financial institutions. One challenge is that rural areas are often underserved by financial institutions. This is because rural areas are often remote and have low population densities. As a result, it can be expensive for financial institutions to operate in rural areas.
Another challenge facing rural credit and financial institutions is that rural people often have low incomes. This makes it difficult for them to repay loans. As a result, rural credit and financial institutions often have high rates of loan default.
Despite these challenges, rural credit and financial institutions play an important role in the development of rural areas. They provide loans to farmers and other rural businesses, which helps them to grow and create jobs. Rural credit and financial institutions also provide financial services such as savings accounts and insurance, which help rural people to manage their finances and protect their assets.
The future of rural credit and financial institutions is uncertain. The rise of digital technology is changing the way that financial services are delivered. This could make it easier for financial institutions to operate in rural areas and reach more rural people. However, it is also possible that digital technology could lead to the decline of traditional rural credit and financial institutions.
What is rural credit?
Rural credit is a type of financial service that provides loans to farmers and other rural residents. It can be used to finance agricultural production, purchase equipment, or build homes.
What are the benefits of rural credit?
Rural credit can help farmers and other rural residents to improve their livelihoods. It can also help to stimulate economic growth in rural areas.
What are the challenges of rural credit?
One challenge of rural credit is that it can be difficult to obtain. This is because rural residents often have lower incomes and less collateral than urban residents. Another challenge is that rural areas may not have a well-developed financial infrastructure, which can make it difficult for banks to operate in these areas.
What are some examples of rural credit institutions?
Some examples of rural credit institutions include agricultural banks, cooperatives, and microfinance institutions.
What are the roles of rural credit institutions?
Rural credit institutions play an important role in providing financial services to rural residents. They can help to improve access to credit, which can help farmers and other rural residents to improve their livelihoods. Rural credit institutions can also help to stimulate economic growth in rural areas.
What are the future trends in rural credit?
The future of rural credit is likely to be shaped by a number of factors, including the growth of the rural population, the development of new technologies, and the changing regulatory Environment. It is likely that there will be an increasing demand for rural credit in the future, as the rural population continues to grow. New technologies, such as mobile banking, could make it easier for rural residents to access credit. The changing regulatory environment could also impact the availability of rural credit.
What are some of the key issues facing rural credit institutions?
Some of the key issues facing rural credit institutions include the following:
- Access to credit: Rural residents often have difficulty accessing credit, due to their lower incomes and lack of collateral.
- Lack of financial infrastructure: Rural areas may not have a well-developed financial infrastructure, which can make it difficult for banks to operate in these areas.
- High interest rates: Rural credit institutions often charge high interest rates, which can make it difficult for borrowers to repay their loans.
- Corruption: Corruption can be a problem in the rural credit sector, which can make it difficult for borrowers to obtain loans and for lenders to recover their loans.
What are some of the solutions to these issues?
Some of the solutions to the issues facing rural credit institutions include the following:
- Government support: Governments can provide support to rural credit institutions, such as by providing subsidies or guarantees.
- Financial Education: Financial education can help rural residents to understand the risks and benefits of credit, and to make informed decisions about borrowing.
- Development of financial infrastructure: The development of financial Infrastructure in Rural Areas can make it easier for banks to operate in these areas.
- Regulation: Regulation can help to reduce corruption in the rural credit sector.
Which of the following is not a type of rural credit?
(A) Institutional credit
(B) Non-institutional credit
(C) Formal credit
(D) Informal creditWhich of the following is not a function of rural financial institutions?
(A) Mobilizing savings
(B) Providing credit
(C) Investing in rural infrastructure
(D) Providing insuranceWhich of the following is not a challenge faced by rural financial institutions?
(A) High transaction costs
(B) Lack of collateral
(C) Absence of credit history
(D) High default ratesWhich of the following is a government program that provides credit to rural farmers?
(A) The Agricultural Credit Bank
(B) The Rural Development Bank
(C) The Small Farmers’ Development Agency
(D) The National Bank for Agriculture and Rural DevelopmentWhich of the following is a non-governmental organization that provides credit to rural Women?
(A) The Self-Employed Women’s Association of India
(B) The Bharatiya Mahila Bank
(C) The National Commission for Women
(D) The National Rural Livelihood MissionWhich of the following is a microfinance institution that provides credit to rural entrepreneurs?
(A) The Grameen Bank
(B) The SKS Microfinance
(C) The Bandhan Bank
(D) The ICICI BankWhich of the following is a type of microcredit that is used to finance small businesses?
(A) WORKING CAPITAL loans
(B) Term loans
(C) Equipment loans
(D) Consumption loansWhich of the following is a type of microcredit that is used to finance education and healthcare?
(A) Education loans
(B) Health loans
(C) Housing loans
(D) Consumption loansWhich of the following is a type of microcredit that is used to finance social events such as weddings and funerals?
(A) Consumption loans
(B) Social loans
(C) Housing loans
(D) Education loansWhich of the following is a challenge faced by microfinance institutions?
(A) High interest rates
(B) High default rates
(C) Lack of government support
(D) Lack of awareness about microfinance
Answers:
1. (C)
2. (C)
3. (D)
4. (D)
5. (A)
6. (A)
7. (A)
8. (B)
9. (A)
10. (B)