<–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:
(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 is the provision of financial services to people living in rural areas. It is important for the development of rural areas, as it can help farmers to increase their productivity, improve their livelihoods, and access essential goods and services.
There are a number of different institutions that provide rural credit, including banks, non-banking financial institutions (NBFIs), self-help groups (SHGs), and microfinance institutions (MFIs). Each of these institutions has its own strengths and weaknesses, and the best type of institution to provide rural credit will vary depending on the specific needs of the community.
Banks are the largest providers of rural credit in most countries. They have a long history of providing credit to farmers and other rural businesses, and they have a well-developed Network of branches in rural areas. However, banks can be reluctant to lend to small farmers and businesses, as they may perceive them as being too risky.
NBFIs are a newer type of institution that has emerged to provide rural credit. They are often more willing to lend to small farmers and businesses than banks, as they have a different risk appetite. However, NBFIs may not have the same level of experience or expertise as banks in providing rural credit.
SHGs are groups of poor people who come together to save money and borrow money from each other. They are often seen as a more effective way to provide rural credit than banks or NBFIs, as they are able to provide loans to people who would not otherwise be able to access credit. However, SHGs can be difficult to manage, and they may not be able to provide large loans.
MFIs are for-profit institutions that provide small loans to poor people. They have become increasingly popular in recent years, as they have been able to reach people who would not otherwise have access to credit. However, MFIs have been criticized for charging high interest rates and for using coercive lending practices.
The government also plays a role in providing rural credit. It does this through a number of different programs, such as the Kisan Credit Card Scheme in India. These programs provide loans to farmers at subsidized rates, and they can be a valuable source of credit for farmers who would not otherwise be able to access it.
Rural credit is essential for the development of rural areas. It can help farmers to increase their productivity, improve their livelihoods, and access essential goods and services. There are a number of different institutions that provide rural credit, each with its own strengths and weaknesses. The best type of institution to provide rural credit will vary depending on the specific needs of the community. The government also plays a role in providing rural credit, and its programs can be a valuable source of credit for farmers who would not otherwise be able to access it.
The future of rural credit is uncertain. The global financial crisis has had a negative impact on the availability of credit, and this has been felt particularly acutely in rural areas. In addition, the rise of new technologies, such as mobile banking, is changing the way that credit is provided. It is likely that the future of rural credit will be characterized by greater competition between different types of institutions, and by the use of new technologies to deliver credit to rural areas.
1. What is rural credit?
Rural credit is a type of financial assistance that is provided to farmers and other rural residents. It can be used for a variety of purposes, such as purchasing agricultural inputs, investing in Livestock, or building or repairing homes.
2. What are the different types of rural credit?
There are two main types of rural credit: formal and informal. Formal credit is provided by banks and other financial institutions, while informal credit is provided by individuals or groups, such as moneylenders or rotating Savings and credit associations (ROSCAs).
3. What are the advantages and disadvantages of formal and informal rural credit?
Formal rural credit is typically more expensive than informal credit, but it is also more reliable and secure. Informal rural credit is often cheaper, but it can be risky, as there is no guarantee that the lender will be repaid.
4. What are the challenges of providing rural credit?
One of the biggest challenges of providing rural credit is the lack of collateral. Many rural residents do not own property or other assets that can be used as collateral, which makes it difficult for them to obtain loans from banks or other financial institutions.
Another challenge is the lack of financial Literacy. Many rural residents do not understand the terms and conditions of loans, which can lead to them taking on more debt than they can afford to repay.
5. What are the government’s initiatives to promote rural credit?
The government has a number of initiatives in place to promote rural credit. These include the Kisan Credit Card Scheme, which provides loans to farmers at subsidized rates, and the Pradhan Mantri Jan Dhan Yojana, which aims to provide financial services to all Indians, including rural residents.
6. What are the benefits of rural credit?
Rural credit can help to improve the lives of rural residents in a number of ways. It can help them to purchase agricultural inputs, invest in livestock, or build or repair homes. It can also help them to start or expand businesses.
7. What are the risks of rural credit?
One of the biggest risks of rural credit is the risk of default. If a borrower is unable to repay a loan, the lender may have to take legal action to recover the debt. This can be costly and time-consuming.
Another risk is the risk of fraud. There have been cases of unscrupulous lenders taking advantage of rural residents by offering them loans that they cannot afford to repay.
8. How can rural credit be made more accessible?
There are a number of ways to make rural credit more accessible. One way is to reduce the amount of collateral that is required. Another way is to provide financial Education to rural residents so that they understand the terms and conditions of loans.
The government can also play a role in making rural credit more accessible by providing subsidies to lenders or by offering guarantees on loans.
9. What is the future of rural credit?
The future of rural credit is likely to be shaped by a number of factors, including the growth of the rural economy, the increasing use of technology, and the changing needs of rural residents.
As the rural economy grows, there is likely to be an increasing demand for rural credit. This demand is likely to be met by a combination of formal and informal lenders.
Technology is also likely to play a role in the future of rural credit. Mobile banking and other digital technologies can make it easier for rural residents to access credit.
The changing needs of rural residents are also likely to shape the future of rural credit. As rural residents become more educated and more aware of their financial Options, they are likely to demand more flexible and affordable loans.
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Which of the following is not a source of rural credit?
(A) Commercial banks
(B) Regional rural banks
(C) Cooperative banks
(D) Moneylenders -
The main objective of rural credit is to:
(A) Provide financial assistance to farmers
(B) Promote agricultural development
(C) Increase agricultural production
(D) All of the above -
The main types of rural credit are:
(A) Short-term credit
(B) Medium-term credit
(C) Long-term credit
(D) All of the above -
Short-term credit is used for:
(A) Meeting seasonal expenses
(B) Purchasing inputs
(C) Marketing produce
(D) All of the above -
Medium-term credit is used for:
(A) Purchase of land and equipment
(B) Construction of wells and other Irrigation facilities
(C) Development of orchards and vineyards
(D) All of the above -
Long-term credit is used for:
(A) Purchase of land and equipment
(B) Construction of wells and other irrigation facilities
(C) Development of orchards and vineyards
(D) All of the above -
The main problems faced by rural credit are:
(A) High interest rates
(B) Lack of collateral
(C) Inadequate documentation
(D) All of the above -
The government has taken a number of measures to promote rural credit, including:
(A) Setting up of rural banks
(B) Providing subsidies on interest rates
(C) Guaranteeing loans
(D) All of the above -
The impact of rural credit has been positive, as it has led to:
(A) Increased agricultural production
(B) Improved rural incomes
(C) Reduced rural poverty
(D) All of the above -
The future of rural credit is bright, as the government is committed to promoting it.