TABLE OF CONTENTS

1.0 Introduction to the Topic...07

2.0 Introduction to the Organization/Industry 11
3.0 Objectives of the Study. 25
4.0 Scope of the Study 27
5.0 Research Methodology 29
5.1 Universe of the study.
5.2 Sample Size............
5.3 Sampling Method...
5.4 Tools for ata !ollection...
6.0 ata "nalysis # Interpretation. 31
7.0 $indings.. 77
8.0 Recommendations # Suggestions. 79
09.0 !onclusion... 82
9.1 %imitations of the Study.. 84
Bibliography...... 86
1
INTRODUCTIO
N
OF THE TOPIC
1.0 Def!!" R#$%& I!'%(
2
It is ironic that the census of India defines &rural &in the conte't of all that is not
urban considering that there (ere villages before the development of cities
and to(ns ))I* facts +a major part of the countryside still remains steeped in a
lifestyle that is rural +largely depend on agriculture and allied activities (ith
almost three,fourth of the country living in -... villages) It is ironic indeed
that despite having most of the natural resources of the country as (ell as a
superiority in number+ rural has been deprived of the benefits of progress and
the product that go to ma/ing everyday life easier and more comfortable)

In 0120+the urban population comprised 03)45 of the Indian population
)Today +half a century later the number stands at 43)65+the result of +creeping
urbanization &at play)
)e%!!" *f %! U!'e$'e+e&*,e' E-*!*./(
There is a big difference bet(een underdeveloped and developed countries)
The United *ations group of e'perts states+ 78e have had some difficulty in
interpreting the term &underdeveloped countries9) 8e fran/ly consider that+
per capita real income is lo( (hen compared (ith the per capita real incomes
of the United States of "merica+ !anada+ "ustralia # 8estern :urope) ;riefly
a poor country)
The term &underdeveloped countries9 is relative) In practical+ those countries
(hich have real per capita incomes less than a <uarter of the per capita
income of the United States+ are underdeveloped countries) ;ut recently U*
publication prefer to describe them as &eveloping economies9) The term
&developing economies9 signifies that though still underdeveloped+ the process
of development has been initiated in these countries)
Thus+ (e have t(o economies &developing economies9 # &developed
economies9) The 8orld ;an/ issued in its 8orld evelopment Report =4..0>
classified the various countries on the basis of ?ross *ational @roduct =?*@>
per capita) eveloping countries are divided intoA =a> %o( income countries
3
(ith ?*@ per capita of B26. and belo( in 0111C and Middle income countries
(ith ?*@ per capita ranging bet(een B 26. and B -+...) "s against them+
the Digh,income !ountries (hich are mostly members of the Organisation for
:conomic !o,operation and development =O:!> and some others have
?*@ per capita of more than B -+...)
The above data given in the table noted that in 0111 lo( income
countries comprise nearly 23 percent of the (orld population =4+1E6 million>+
but account for only 2 percent of total (orld ?*@) The middle income
countries+ (hich are less developed than the highly developed than the lo(
income countries comprise about 40 percent of (orld population but account
for 00 percent of (orld ?*@) Ta/ing these t(o groups (hich are popularly
described as developing economies or &underdeveloped economies9+ it may
be stated that they comprise over three,fourths of the (orld population but
account for about one,si'th of the (orld ?*@) Most countries of "sia+ "frica+
%atin "merica and some countries of :urope are included in them
D01$2#1*! *f 3*$&' P*,#&%1*! 4 3*$&' 5NP %.*!" +%$*#0 "$*#,0 *f
C*#!1$e0 ! 2011
GNP
(Billion
US $)
Total
Population
(million)
GNP Per
Capita
(US $)
1. Low Income conomie! "#1 ($.%) 2&"$#
('(.()
33)
2. *i++le Income
conomie!
2&2'3
(1).")
1&1)'
(21.2)
2&)$)
3. ,i-. Income conomie! 1'&23)
(%3&$)
#31 (1(.)) 1#&33)
$. /t.er conomie! ___ 323 ((.2) ___
0orl+ 2)&%3(
(1)).))
'&2)(
(1)))
3&"#)
In+ia 2#3 (1.$) #32 (1'.") 3$)
$
India (ith its population of 6F4 million in 4.00 and (ith its per capita income
of BFE. is among poorest of the economies of the (orld) It had a share of
02)1 per cent in (orld population+ but a little more than 0 percent of (orld
?*@)
Three observation made here regarding the U)*) classification of
developed and developing countries on the basis of per capita income) $irst+
there is gross ine<uality of incomes bet(een the rich and the poor countries)
Second+ the gap in per capita income =and naturally in the level of living>
bet(een the rich and poor countries is even (idening over the yearsGthe
annual rate of gro(th of per capita income of the rich countries (as higher
during 016-,4.0. as compared (ith the poor countries) More recently+ the
gro(th rate among lo(,income countries has also sho(n an increase and if
this is sustained+ the gap may sho( a decline over a period) Third+ all the high
income countries are not necessarily developed countries) $or instance+ the
high income oil,e'porting countries have high per capita income but this is
mainly due to their e'ports of oilC really spea/ing+ they are not developed
economies) Recently+ (ith a decline in (orld oil prices+ the ?*@ per capita
has started sho(ing a decline in this group)
'
INTRODUCTION
OF INDUSTR6
(
H01*$/ *f T7e R#$%& E-*!*.- S1$#-1#$e Of I!'%(
1.1 I!'%! E-*!*./ ! 17e P$e8B$107 ,e$*'(8
The Indian economy in the pre,;ritish period consisted of isolated and self,
sustaining villages on the one hand+ and to(ns+ (hich (ere the seats of
administration+ pilgrimage+ commerce and handicrafts+ on the other) Means
transport # communication (ere highly underdeveloped and so the size of the
mar/et (as very small).
a. The structure and organization of villages: The village community (as
based on a simple division of labour) The farmers cultivated the soil
and tended cattle) Similarly+ there e'isted classes people called
(eavers+ goldsmiths+ carpenters+ potters+ oil pressers+ (asher men+
cobblers+ barber,surgeons+ etc) "ll these occupations (ere hereditary
and passed by tradition from father to son) Most of the food produced
in the village (as consumed by the village population itself) The ra(
materials produced from primary industries (ere the feed for the
handicrafts) Thus interdependence of agriculture and hand industry
provided the basis of the small village republics to function
independently) The villages of India (ere isolated and self,sufficient
units (hich formed an enduring organization) ;ut this should not lead
us to the conclusion that they (ere unaffected by (ars or political
decisions) They did suffer the aggressors and (ere forced to submit to
e'actions+ plunder and e'tortion+ but the absence of the means of
transport and communications and a centralized government helped
their survival)
%
b. Classes of Village India: There (ere three distinct classes in village
IndiaA =i> the agriculturists+ =ii> the village artisans and menials+ and =iii>
the village officials) The agriculturists could be further divided into the
land,o(ning and the tenants) %abour and capital needed (as either
supplied by the producers themselves out of their supplied by the
producers themselves out of their savings or by the village
moneylender) These credit agencies supplied finance at e'orbitant
rates of interest but since the moneylender and the landlord (ere the
only sources of credit+ the peasants and even the artisans (ere forced
to depend on them) The village artisans and menials (ere the servants
of the village) Most of the villages had their panchayats or bodies of
village elders to settle local disputes) The panchayats (ere the court
of justice)
3.2 I!'#01$e0 4 7%!'-$%f10 ! P$e8B$107 I!'%(
The popular belief that India had never been an industrial country+ is
incorrect) It (as true that agriculture (as the dominant occupation of its
people but the products of Indian industries enjoyed a (orld(ide reputation)
The muslim of acca+ the calicos of ;engal+ the sarees of ;anaras and other
cotton fabrics (ere /no(n to the foreigners) The chief industry spread over
the (hole country (as te'tile handicrafts) The te'tile handicrafts includes
chintzes of %uc/no(+ dhotis and dopattas of "hmedabad+ sil/+ bordered cloth
of *agpur and Murshidabad) In addition to cotton fabrics+ the sha(ls of
Hashmir+ "mritsar and %udhiana (ere very famous) India (as also <uite (ell,
/no(n for her artistic industries li/e marble,(or/+ stone,carving+ je(ellery+
brass+ copper and bell,metal (ares+ (ood,carving+ etc) The cast,iron pillar
near elhi is a testament to the high level of metallurgy that e'isted in India)
In this (ay Indian industries+ 7*ot only supplied all local (ants but also
enabled India to e'port its finished products to foreign countriesI)
De-&!e Of I!'%! H%!'-$%f10 A!' P$*"$e00+e R#$%&0%1*! Of T7e
I!'%! E-*!*./(
;efore the beginning of Industrial Revolution in :ngland+ the :ast India
!ompany concentrated on the e'port of Indian manufactured goods+ te'tiles+
#
spices+ etc)+ to :urope (here these articles (ere in great demand) ;ut the
Industrial Revolution reversed the face of Indian9s foreign trade) Tremendous
e'pansion of productive capacity of manufactures resulted in increased
demand of ra( materials for ;ritish industry and the need to capture foreign
mar/ets) $ollo(ing principal causes that led to the decay of handicrafts (ere
as follo(sA,
a. Disappearance of Princely courts: The gro(th of industries is only
possible due to patronage of na(abs+ princes+ rajas # emperors (ho
ruled in India) The ;ritish rule meant the disappearance of this
patronage enjoyed by the handicrafts) !otton and sil/ manufactures
suffered especially)
b. Competition of machine-.%'e "**'0( The large,scale production
that gre( as a result of Industrial Revolution meant a heavy reduction
in costs) It also created a gigantic industrial organization and+
conse<uently+ the machine,made goods began to compete (ith the
products of Indian industries nad handicrafts) This led to the decline of
te'tile handicrafts) 8hereas the ;ritish emphasized the free import of
machine,made manufactured goods they did not allo( the import of
machinery as such) The decline of Indian handicrafts created a
vaccum (hich could be filled by the import of ;ritish manufactures
only)
c. The development of new forms and patterns of demand as a
result of foreign influence: 8ith the spread of education+ a ne(
classs gre( in India (hich (as /een to imitate (estern dress+
manners+ fashions and customs so as to identify itself (ith the ;ritish
officials) This led to a change in the pattern of demand) Indigenous
goods (ent out of fashion and the demand for :uropean commodities
got a fillip) ;esides+ there (as a loss of demand resulting from the
disappearance of princely courts and nobility) Thus+ the ;ritish rule+
silently but surely+ alienated the Indians not only from Indian culture but
also sdiverted in its favour their form and pattern of demand for goods
"
3.3 I!'%! P*,#&%1*! %! O+e$+e9(8
India is one of the most populated countries in the (orld+ ne't only to
!hina) "lthough India occupies only 4)E5 of the total area of the (orld it
supports over 025 of the (orld population+ as revealed by statistics) India is
land of diversity+ spread across its cultures+ landscape+ languages and
religion) India has been invaded from the Iranian plateau+ !entral "sia+
"rabia+ "fghanistan+ and the 8est) The Indian people have absorbed these
influences producing a remar/able racial and cultural synthesis) Religion+
caste+ and language are major determinants of social and political
organization in India today) The government has recognized 0- languages as
officialC Dindi is the most (idely spo/en)
"lthough Dinduism is the popular religion+ comprising 6F5 of the
population+ India is also home to one of the largest population of Muslims in
the (orld,,, more than 04. million) The population also includes !hristians+
Si/hs+ Jains+ ;uddhists+ and @arsis) The caste system reflects Indian
historical occupation and religiously defined hierarchies) Traditionally+ there
are four castes identified+ plus a category of outcastes+ earlier called
KuntouchablesK but no( commonly referred to as Kdalits+K the oppressed) In
reality+ ho(ever+ there are thousands of sub,castes and it is (ith these sub,
castes that the majority of Dindus identify) espite economic modernization
and la(s countering discrimination against the lo(er end of the class
structure+ the caste system remains an important factor in Indian society)
@overty is one of the major problems facing India) "n estimated F.,E. percent
of the population lives in poverty) $our out of five of IndiaLs poor live in rural
areas) "bout 3.5 of the people live in more than - -..+... villages+ and the
remainder in more than 4.. to(ns and cities)
S1%101-0( P*,#&%1*! ! I!'%
1)
Mear Rural
population
in million
Urban
population
in urban
Total
population
In million
Rural
population
5
Urban
population
5
0120
01-0
0130
0160
0110
4..0
4.00
412
F-.
EF1
2.6
-40
3E4
633
-4
31
0.1
0-.
402
462
F26
F23
EF1
2E6
--6
6F-
0.43
04F.
64)-
64)..
6.)0.
3-)..
3E)F.
34)4.
3.)6.
03)E.
06)..
01)1.
4E)..
42)3.
43)6.
F.)E.
4.0N%1#$%& Re0*#$-e0 I! P$*-e00 Of E-*!*.- De+e&*,.e!1
I! R#$%& I!'%(
To achieve the development in national output+ it is essential to
combine natural resources+ human resources # capital) The e'istence or the
absence of favourable natural resources can facilitate or retard the process of
economic development) *atural resources include land+ (ater resources+
fisheries+ mineral resources+ forests+ marine resources+ climate+ rainfall and
topography)
1. Land Resources: The total geographical area of India is about F41
million hectares+ but statistical information regarding land classification
is available for only about F.2 million hectaresC this information is
based partly on village papers and partly on estimates) 8e can e'plain
land utilization pattern from the follo(ing tableA,
L%!' #1&:%1*! ,%11e$! ;.&&*! 7e-1%$e0<
11
P%$1-#&%$0 Area Percent
0) Total geographical area 32" 11
4) Total reporting area 3)' 1))
F) ;arren land not available for cultivation $1 13
E) "rea under forests (% 22
2) @ermanent pastures and grazing land 12 $
-) !ulturable (aste lands+ etc) 1" (
3) $allo( lands 2( "
6) *et area so(n 1$) $(
1) "rea so(n more than once 3% 12
0.) Total cropped area =6N1> 1%% '#
2. orest Resources: $orest are an important natural resource of India)
They have a moderating influence against floods and thus they protect
the soil against erosion) They provide ra( materials to a number of
important industries+ namely+ furniture+ matches+ paper+ rayon+
construction+ tanning+ etc) The total area under forests (as -3 million
hectares in 016-,63 (hich (as about 44 percent of the total
geographical area+ a recent estimate has put it at 32 million hectares or
4F percent of the total geographical area) $orests in India are mostly
o(ned by states =125>C a small portion is under the o(nership of
corporate bodies and private individuals)
3. !ater Resources: India is one of the (ettest countries in the (orld+
(ith average annual rainfall of 00.. m)m) India9s (ater policy+ since
Independence+ has mainly concentrated on highly visible large dams+
12
reservoirs and canal systems+ but has ignored minor (ater (or/s such
as tan/s+ dug(ells and tube(ells)
4. isheries: ;roadly spea/ing+ fishery resources of India are either inland
or marine) The principal rivers and their tributaries+ canals+ ponds+
la/es+ reservoirs comprise the inland fisheries) The rivers e'tend over
about 03+... miles+ and other subsidiary (ater channels comprise
3.+... miles) The marine resources comprise the t(o (ide arms of
the Indian Ocean and a large number of gulf and bays along the coast)
"bout 0)6 million fishermen dra( their livelihood from fisheries+ though
they generally live on the verge of e'treme poverty) Out of a total
catch of F million tones of fish in 0166,61+ over 0 million tones came
from inland fisheries and nearly 4 million tones from marine sources)
India is the seventh largest producer of fish in the (orld and is second
in inland fish production+ (hich contributes E2 per cent of total
production in the country) $ish production reached the level of 2)E
million tonnes in 4...,.0+ comprising F). million tonnes of marine
fishery and 4)E million tonnes of inland fishery and is e'pected to reach
2)- million tonnes in 4.00,04 (ith F). million tonnes of marine fishery
and 4)- million tonnes of inland fishery+ respectively) uring 4..1,
4.00+ the e'port of marine products came do(n to USB 0+.F6 million
from USB 0+4.6 million during 4..1,4.00
4.1 I!f$%01$#-1#$e I! P$*-e00 Of E-*!*.- De+e&*,.e!1 I! R#$%& I!'%(
The prosperity of a Rural India depends directly upon the development
of agriculture and industry) "gricultural production+ ho(ever+ re<uires po(er+
13
credit+ transport facilities+ etc) Industrial production re<uires not only
machinery # e<uipment but also s/illed man,po(er+ management+ energy+
ban/ing facilities+ mar/eting facilities+ transport services (hich include
rail(ays+ roads+ shipping+ communication facilities+ etc) "ll these facilities and
services constitute collectively the infrastructure of an economy and the
development and e'pansion of these facilities are an essential pre,condition
for increasing agricultural # industrial production in a rural area)
T/,e0 *f I!f$%01$#-1#$%& f%-&1e0=*f1e! $efe$$e' 1*9%$'0
e-*!*.- %!' 0*-%& 'e+e&*,.e!1 *f $#$%& I!'%(
". #nergy: The most important single factor (hich can act constraint on
economic gro(th of a country is the availability of energy) There is a
direct correlation bet(een the degree of economic gro(th+ the size of
per capita income and per capita consumption of energy) Since energy
is an essential input of all productive economic activity+ the process of
economic development inevitably demands increasing higher levels of
energy consumption) There are broadly t(o sources of energy
commercial energy # non,commercial energy) $ollo(ing are the
various commercial energyA, coal # lignite+ Oil # gas+ Dydro,electric
resource+ Uranium) # non,commercial energy are $uel(ood+
"gricultural (astes+ "nimal dung)
$. Power: :lectric po(er+ (hich is one form of energy+ is an essential
ingredient of economic development and+ it is re<uired for commercial
and non,commercial uses) !ommercial uses of po(er refer to the use
of electric po(er in industries+ agriculture and transport) *on,
commercial uses include electric po(er re<uired for domestic lighting+
coo/ing+ use of mechanical gadgets li/e the refrigerators+ air
conditioners+ etc) 8ith the gro(th of population and (ith the increase
in the use of modern gadgets in daily life+ it is <uite natural that the
demand for electricity for domestic use should gro( at a fast rate)
1$
%. Transport: If agriculture and industry are regarded as the body and the
bones of the economy+ (hich help the circulation of men and materials)
The transport system helps to broaden the mar/et for goods and by
doing so+ it ma/es possible large,scale production through division of
labour) It is also essential for the movement of ra( materials+ fuel+
machinery etc)+ to the places of production) The more e'tensive and
continuous the production in any branch of activity the greater (ill be
the need for transport facilities) Transport development helps to open
up remote regions and resources for production) Regions may have
abundant agricultural+ forest and mineral resources but they cannot be
developed if they continue to be remote and inaccessible)
)*'e0 *f 1$%!0,*$1 4 -*..#!-%1*! f%-&1e0(
0) &ndian Railways: The most important form of transport system in
India is the Indian rail(ays+ (hich is also the country9s largest single
underta/ing (ith a capital investment of around Rs) 02+... crores) In
012.,20+ rail(ay route length (as 2F+-.. /ms but by 011.,10 it had
increased to nearly -4+E.. /ms,an increase at the rate of .)E percent
per annum)
$. Roads ' Road Transport: Road transport plays an important role in
rural economy of country+ since it is most suitable for short distances) It
has also the advantage of door,to,door service+ fle'ibility+ speed and
reliability) The utility of other modes of transport such as rail(ays+
internal (ater(ays+ ports+ etc) increase (hen lin/ed to the road
transport system) Road construction and maintenance generate
sizeable employment opportunitiesGfactor of great importance in the
conte't of gro(ing population and gro(ing unemployment in the
country) The rural road net(or/ no( connects about 3. percent of our
villages)
3. &nland water transport: Inland (ater transport is the cheapest
mode of transport+ for both long and short distances+ so far as the
1'
points of origin and destination of traffic are concerned) It is cheap as
energy consumption is lo() India has over 0E+2.. /ms) Of navigable
inland (ater(ays comprising a variety of river systems+ canals+
bac/(aters+ cree/s+ etc)
0) Communications: The communication system comprises posts and
telegraphs+ telecommunication system+ broad casting+ television and
information services) ;y providing necessary information about the
mar/ets and also supplying necessary motivation+ the communication
system helps to bring buyers and sellers together effectively and helps
to accelerate the gro(th of the economy)
Def!1*!(
7" country (hich has good potential prospects for using more capital or
more labour or more available natural resources+ or all of these+ to support its
present population on a higher level of living or if its per capita income level is
already fairly high+ to support a large population on a not lo(er level of living)I
"s per this definitions the problem of development is mainly the problem of
development is mainly the problem of poverty and prosperity) The basic
criterion then becomes (hether the country has good potential prospects of
raising per capita income+ or of maintaining an e'isting high level of per capita
income for an increased population)I
2.1 B%0- C7%$%-1e$01-0 Of T7e I!'%! E-*!*./ A0 A!
U!'e$'e+e&*,e' E-*!*./(
India is an underdeveloped economy) Its is a vast country having an
area of F)F million s<) /m) It has almost -+E.+... villages) The population of
India is (idely scattered over villages and to(ns) *early 34)45 of the
population lives in rural # 43)65 of the population lives in semi urban areas+
(hile the rest lives in to(ns) There is doubt that the bul/ of its population
lives in conditions of misery) @overty is not only acute but is also a chronic
malady in India) "t the same time+ there e'ist unutilized natural resources) It
is+ therefore+ <uite important to understand the basic characteristics of the
1(
Indian economy+ treating it as one of the underdeveloped but developing
economies of the (orld)
0) Low per capita income:- Underdeveloped economies are mar/ed by
the e'istence of lo( per capita income) The per capita income of an
India is lo(est in the (orld) The per capita income in S(itzerland in
0161 (as about 66 times+ in 8est ?ermany about -. times+ in U)S)")
-0 times and in Japan 3. times of the per capita income in India) It is
also important that developed economies are gro(ing at a faster rate
than the Indian economy and as a conse<uence+ the disparity in the
levels of income has become (ider during period 01-.,61)
4) (ccupational pattern:- @rimary producing) One of the basic
characteristics of an underdeveloped economy is that it is primary
producing) " very high proportion of (or/ing population is engaged in
agriculture+ (hich contributes a very large share in the national income)
In India+ in 0160+ about 30 per cent of the (or/ing population (as
engaged in agriculture and its contribution to national income (as F-
per cent) In "sia+ "frica and Middle :ast countries countries from t(o,
thirds to more than four,fifths of the population earn their livelihood
from agriculture+ and in most %atin "merican countries from t(o,thirds
to three,fourths of population engaged in agriculture in developed
countries is much less than the proportion of population engaged in
agriculture in underdeveloped countries)
F) )eavy Population pressure:8 The main problem in India is the high
level of birth rates coupled (ith a falling level of death rates) The rate of
gro(th of population (hich (as about 0)F0 per cent per annum during
0120,-. has risen to 4)00 per cent during 4..0,00) The chief cause of
this rapid spurt to population gro(th is the steep fall in death rate from
E1 per thousand during 01-0,3. to 1)- per thousand in 4.0.C as
compared to this+ the birth rate has declined from about E1 per
thousand during 01-0,3. to 41)1 per thousand in 4.0.) The fast rate
of gro(th of population necessitates a higher rate of economic gro(th
in order to maintain the same standard of living of the population) To
1%
maintain a rapidly gro(ing population+ the re<uirements of food+
clothing+ shelter+ medicine+ schooling+ etc) all rise) Thus+ a rising
population imposes greater economic burdens and+ conse<uently+
society has to ma/e a much greater effort to initiate the process of
gro(th)
E) Prevalence of chronic unemployment and underemployment: In
India labour is an abundant factor and+ conse<uently+ it is very difficult
to provide gainful employment to the entire (or/ing population) In
developed countries+ unemployment is of a cyclical nature and occurs
due to lac/ of effective demand) In India unemployment is structural
and is the result of a deficiency of capital) The Indian economy does
not find sufficient capital to e'pand its industries to such an capacity
that the entire labour force is absorbed)
2) Low rate of capital formation: "nother basic characteristic of the
Indian economy is the e'istence of capital deficiency (hich is reflected
in t(o (aysG first+ the amount of capital per head available is lo(C and
secondly+ the current rate of capital formation is also lo() $ollo(ing
table reveals that gross capital formation in India is less than that of
developed countries)
1#
5$*00 D*.e01- I!+e01.e!1 %!' S%+!" ;A0 ,e$ -e!1 *f 5$*00
D*.e01- P$*'#-1<
"s per !olin !lar/ to maintain the same level of living a country re<uires an
additional investment of E percent per annum if its population increases at the
rate of 0 percent per annum) In a country li/e India (here the rate of
population gro(th is 4)00 percent =during 4..0,00>+ about 6 percent
investment is needed to offset the additional burdens imposed by a rising
population) Thus+ India re<uired as high as 0E percent level of gross capital
formation in order that it may cover depreciation and maintain same level of
living) " still higher rate of gross capital formation alone can give a (ay for
economic gro(th to improve living standard of the population)
Gross Domestic Gross Domestic
Investment Saving
1"#( 2)1) 1"#( 2)1)
2apan 2# 33 3) 3$
3u!tralia 2( 2( 23 23
German4 23 22 23 2%
U.S.3. 12 1' 12 13
U.5. 13 21 12 1#
In+ia 1% 2$ 1' 21
1"
OB>ECTI?E OF
STUD6
2)
O2@e-1+e(
o To revise the financial capability of the lending agencies in rural areas
to analysis the dra(bac/s # advantage of flo( of credit in rural areas)
o The rural credit system should be strengthen
o To study the role of rural finance in Indian :conomy)
o To understand the environment of the rural area
o To /no( sources of finance
o To /no( the need of finance


21
SC/P /6 STU78
22
S-*,e *f 17e 01#'/(
The Rural finance has immense potential to be revie(ed for the betterment of
rural area in the competitive (orld) The issue of rural finance administration
also have major contribution to the upcoming researcher and scholars in this
field) The Rural population can use it as a tool bo' and guideline to chal/ out
the future strategies regarding optimum utilization of scare resources)
The purpose and objective of the study is to analyze need of finance to rural
area) Scope of the study means the area of the study to (hich this project is
limited) In other (ords+ Scope means the length and breadth of the study.
%< P$*'#-1+e loans are re<uired for purpose of seeds +fertilizers+
pesticides+ payment of (ages +digging of (ells +ma/ing permanent
improvement on land etc)
2< C*!0#.,1*! (The farmers re<uire money for running the family
+bet(een mar/eting of agriculture produce and harvesting of ne't
crop)In case of floods /drought situation +the crop is damaged and
farmer are forced to avail loan facilities from village money lenders)
-< U!,$*'#-1+e ,$*'#-1 include money re<uired for litigation
+performance of marriage + birth/death of family member and festivals)


23
RESEARCH
)ETHODOLO56
2$
Re0e%$-7 )e17*'*&*"/(
Se-*!'%$/ D%1%( "ssigned project tas/ is completed by going through
various boo/s+ committee reports regarding Indian agriculture # non,farming
sector+ also role of various financial institutions in this grassland)
The project report entitled here is purely study project and does not include
any predictions or forecast regarding the future trends in the rural sector) The
project is based on various references ta/en from boo/ # reports mentioned
in the bibliography at the end of the assign project)

2'
DATA ANAL6SIS
AND
INTERPRETATION
5.0 )-$*f!%!-e I! A! I!'%! C*!1eA1(8
To overcome the constraints and the high cost of reaching the rural
poor through ban/ing sevices +*";"R has pioneered the concept of thrift
and saving groups +commonly /no(n as SD?s );oth government and non
government agencies promote the formation of SD?s. Microfinance
institutions =M$Is>+ specialised financial institutions that serve the poor+ derive
from the success of some micro enterprise credit programmes performed
2(
mainly by practitioners in developing countries) micro$inance =M$> is being
practiced as a tool to attac/ poverty the (orld over) uring the last t(o
decades+ substantial (or/ has been done in developing and e'perimenting
(ith different concepts and approaches to reach financial services to the poor+
than/s mainly to the initiatives of the *on,?overnmental Organisations
=*?Os> and ban/s in various parts of the country)
espite having a (ide net(or/ of rural ban/ branches in the country
and implementation of many credit lin/ed poverty alleviation programmes+ a
large number of the very poor continue to remain outside the fold of the formal
ban/ing system) Oarious studies suggested that the e'isting policies+ systems
and procedures and the savings and loan products often did not meet the
needs of the hardcore and asset less poor) :'periences of many anti,poverty
and other (elfare programmes of the state as (ell as of international
organisations have also sho(n that the /ey to success lies in the evolution
and participation of community based organizations at the grassroots level)
Sorces :NABARD Report,2009-2010
3-enc4 9wi!e +i!tri:ution o; S,G! ;inance+ up to 31
!t
marc. 2)1)
S,G! Ban< loan
3-enc4 Num:er percenta-e
3mount
=!.in million
percenta-e
Commercial 3&(1&)(1 ') 1&1') '(
2%
Ban<
==B! 2%%&3$) 3" %2% 3(
Cooperati>e! %#"'" 11 1%2 #
5.1 )-$*8f!%!-e %!' P*+e$1/ A&&e+%1*!(
Most poor people manage to mobilize resources to develop their
enterprises and their d(ellings slo(ly over time) $inancial services could
enable the poor to leverage their initiative+ accelerating the process of building
incomes+ assets and economic security) Do(ever+ conventional finance
institutions seldom lend do(n,mar/et to serve the needs of lo(,income
families and (omen,headed households) They are very often denied access
to credit for any purpose+ ma/ing the discussion of the level of interest rate
and other terms of finance irrelevant) Therefore the fundamental problem is
not so much of unaffordable terms of loan as the lac/ of access to credit itself)
The lac/ of access to credit for the poor is attributable to practical
difficulties arising from the discrepancy bet(een the mode of operation
follo(ed by financial institutions and the economic characteristics and
financing needs of lo(,income households) $or e'ample+ commercial lending
institutions re<uire that borro(ers have a stable source of income out of (hich
principal and interest can be paid bac/ according to the agreed terms)
Do(ever+ the income of many self employed households is not stable+
regardless of its size) " large number of small loans are needed to serve the
poor+ but lenders prefer dealing (ith large loans in small numbers to minimize
administration costs) They also loo/ for collateral (ith a clear title , (hich
many lo(,income households do not have) In addition ban/ers tend to
consider lo( income households a bad ris/ imposing e'ceedingly high
information monitoring costs on operation)
In other (ords+ although microfinance offers a promising institutional
structure to provide access to credit to the poor+ the scale problem needs to
2#
be resolved so that it can reach the vast majority of potential customers (ho
demand access to credit at mar/et rates) To be successful+ financial
intermediaries that provide services and generate domestic resources must
have the capacity to meet high performance standards) They must achieve
e'cellent repayments and provide access to clients) "nd they must build
to(ard operating and financial self,sufficiency and e'panding client reach) In
order to do so+ microfinance institutions need to find (ays to cut do(n on their
administrative costs and also to broaden their resource base) !ost reductions
can be achieved through simplified and decentralized loan application+
approval and collection processes+ for instance+ through group loans (hich
give borro(ers responsibilities for much of the loan application process+ allo(
the loan officers to handle many more clients and hence reduce costs)
Savings facilities ma/e large scale lending operations possible) On the
other hand+ studies also sho( that the poor operating in the informal sector do
save+ although not in financial assets+ and hence value access to client,
friendly savings service at least as much access to credit) Savings
mobilization also ma/es financial instituttions accontable to local
shareholders) Therefore+ ade<uate savings facilities both serve the demand
for financial services by the customers and fulfill an important re<uirement of
financial sustainability to the lenders) Microfinance institutions can either
provide savings services directly through deposit ta/ing or ma/e
arrangements (ith other financial institutions to provide savings facilities to
tap small savings in a fle'ible manner)
!onvenience of location+ positive real rate of return+ li<uidity+ and
security of savings are essential ingredients of successful savings
mobilization) Once microfinance institutions are engaged in deposit ta/ing in
order to mobilize household savings+ they become financial intermediaries)
!onse<uently+ prudential financial regulations become necessary to ensure
the solvency and financial soundness of the institution and to protect the
depositors)
?overnments should provide an enabling legal and regulatory
frame(or/ (hich encourages the development of a range of institutions and
2"
allo(s them to operate as recognized financial intermediaries subject to
simple supervisory and reporting re<uirements)
One (ay of e'panding the successful operation of microfinance
institutions in the informal sector is through strengthened lin/ages (ith their
formal sector counterparts) " mutually beneficial partnership should be based
on comparative strengths of each sectors) Informal sector microfinance
institutions have comparative advantage in terms of small transaction costs
achieved through adaptability and fle'ibility of operations) They are better
e<uipped to deal (ith credit assessment of the urban poor and hence to
absorb the transaction costs associated (ith loan processing) On the other
hand+ formal sector institutions have access to broader resource,base and
high leverage through deposit mobilization)
Therefore+ formal sector finance institutions could form a joint venture
(ith informal sector institutions in (hich the former provide funds in the form
of e<uity and the later e'tends savings and loan facilities to the urban poor)
"nother form of partnership can involve the formal sector institutions
refinancing loans made by the informal sector lenders) Under these settings+
the informal sector institutions are able to tap additional resources as (ell as
having an incentive to e'ercise greater financial discipline in their
management) Microfinance institutions could also serve as intermediaries
bet(een borro(ers and the formal financial sector and on,lend funds bac/ed
by a public sector guarantee)
3e%B!e00e0 *f EA01!" )-$*f!%!-e )*'e&0
One of the most successful models discussed around the (orld is the
?rameen type) The ban/ has successfully served the rural poor in
;angladesh (ith no physical collateral relying on group responsibility to
replace the collateral re<uirements) The brief idea about ?rameen is given in
3)
the ne't part of this report) This model+ ho(ever+ has some (ea/nesses) It
involves too much of e'ternal subsidy (hich is not replicable ?rameen ban/
has not oriented itself to(ards mobilizing peoplesL resources) The repayment
system of 2. (ee/ly e<ual installments is not practical because poor do not
have a stable job and have to migrate to other places for jobs) If the
communities are agrarian during lean seasons it becomes impossible for them
to repay the loan) @ressure for high repayment drives members to money
lenders) !redit alone cannot alleviate poverty and the ?rameen model is
based only on credit) Micro,finance is time ta/ing process) Daste can lead to
(rong selection of activities and beneficiaries)
"nother model is Herala model =Shreyas>) The rules ma/e it difficult to
give ade<uate credit Ponly E.,2. percent of amount available for lending>) In
*ari *idhi/@radan system perhaps not reaching the very poor) Most of the
e'isting microfinance institutions are facing problems regarding s/illed labour
(hich is not available for local level accounting) rop out of trained staff is
very high) One alternative is automation (hich is not loo/ed at as yet) Most of
the models do not lend for agriculture) "griculture lending has not been
e'perimented)
Ris/ Management A yield ris/ and price ris/
Insurance # !ommodity $uture :'change could be e'plored
"ll the models lac/ in appropriate legal and financial structure) There is
a need to have a sub,group to brainstorm on statutory structure/ o(nership
control/ management/ ta'ation aspects/ financial sector prudential norms) "
forum/ net(or/ of micro,financier =self regulating organization> is desired)
6.0 R#$%& )%$Be1 C*!1$2#1*! I! T*1%& I!'%! E-*!*./(
8hen you consider a rural mar/et then the measure part of the rural buiness
directly or indirectly connected (ith agriculture) In this condition+(henever you
31
study about rural mar/et you have to consider the impact of agriculture
to(ards Indian :conomy)
6.1 P$*f&e *f R#$%& ,e*,&e(8If (e classify the rural people by their
occupation+ (e find cultivators as the predominant occupation group (ho
account 345 of rural households)
D01$2#1*! *f $#$%& 7*#0e7*&'0 2/ 17e$ ,$*fe00*! *$ 2#0!e00 %-1+1/
cc!pation Percentage o" #o!se$o%&s
Culti>ator! %2
3-ricultural la:ourer! 1'
/t.er non1culti>ator! 11
3rti!an! 2
3ll .ou!e .ol+! 1))
Do(ever this group of cultivators contain both prosperous and (ell as
marginal cultivators (ithin itself) This is rural India9s picture (here 4.5 of
rural households =mostly cultivators> control about --5 of assets in rural
India) In this (ay rural population broadly divided into - categoriesA
0) @roprietors of land includes feudal tribute gatherers li/e zamindars+
rich moneylenders and traders (ho ac<uire large tracts of land and
companies or persons (ho o(n large populations)
4) Rich farmers (ho belong to dominant caste of the area)
F) Small peasants or marginal farmers o(ning uneconomic land holdings)
E) Tenant farmers operating on rented lands belonging to large land
holders and (or/ing on small uneconomic land holdings)
2) "gricultural labourers (ho (or/ on lands of landlords and rich farmers)
-) "rtisans and others+ (hich include the unemployed also)
32
6.2 S1%101-%& P$*f&e *f T7e R#$%& B#0!e00 ! I!'%
TABLE( ?ILLA5E 4 S)ALL INDUSTRIES ;P$*'#-1*!<
Industry Unit Q ?11111111111111111111 Pro+uction 111111111111111@
1"#11#( 1"#(1"1 1""11"( 1""(1)1 2))11)( 2))(111
Traditional
IndustriesA
Hhadi M)S<)Mtres '(.)) #2.)) 1)3."# 1)#.'# 1)##.# 1)'2.(3
Oalue
=Rs) crores>
33.)) "2.)) 1'%.(2 1#(.3) 2#'."' 3'3.$"
Oillage Oalue 122.)) 3$#.)) #)%.)( ")).3# 1""$.)( 3'(21(
Industries =Rs) crores>
Dandlooms Mill Meters 21)).)) 2")).)) 3()).)) 3("2.)) $### %)2)
Oalue
=Rs) crores>
#$).)) 1%$).)) 2##).)) 2"'3.() 3(33
Sericulture
%a/h Hgs)
of ra(
2".)) $#.)) %(.%) %#."% 12#3( 13")"
Sil/
=value
Rs)crores>
(3.)) 131.)) 3$'.(" 31).1$ #(#
Dandicrafts Oalue 1)('.)) 2)').)) 3')).)) 3#)).)) 1132' 2'2))
=Rs) crores>
!oir
%a/h
tonnes of
1.') 1.#' 1.$" 1.#3 2.11 2.(3
$ibre
Oalue
=Rs) crores>
().)) #(.)) 1)).') 13".'1 1(1.))
Sub,total =">
Oalue
=Rs) crores>
21.#3 $$$%.)) %%").#% #2#"."3 1(2%2."' 2'''3.$#"
Modern
IndustriesA
33
Small Scale
Industries
Oalue
=Rs) crores>
%2)).)) 21(3'.)) ')'2).)) (122#.)) 1''3$) 21""(#
@o(erlooms Mill Meters 2$)).)) 3$').)) $"3).)) '##(AA 1)"## 1%2)1
Oalue
=Rs) crores>
1"#).)) 32').)) ($23.)) %((#.'1 1233%
Sub,total =;>
Oalue
=Rs) crores>
"1#).)) 2$##'.)) '("$3.)) ($%(#.'1 1(%(%% 21""(#
Total =OSI>
=Rs)
crores>
00F2F).. 41FF4).. -E3FF)63 3F.26)EE 06F1E1)12 4E2240)E6
'AB(): *I((AG) + S,A(( IND-S'RI)S .)mp%o/ment0
In+u!tr4 Unit B ?11111111111111 mplo4ment (La<. per!on!) 11111111@
1"#11#( 1"#(1"1 1""11"( 1""(1)1 2))11)( 2))(111
Tra+itional
In+u!trie!C
5.a+i *.SD.*tre! #.#$ 11.2) 13.)' 1'.)) 1$.1'
Ealue
(=!. crore!)
N.3.
Eilla-e Ealue ".2% 1(.13 2$.#$ 2'.') 3$.$2
In+u!trie! (=!. crore!)
,an+loom! *ill *eter! '2.$) (1.') %(.#) %3.%) "(.#% 12#.))
Ealue
(=!. crore!)
Sericulture
La<. 5-!. o;
raw
12.)) 1(.)) 2).$3 '3.() '2.)) '".')
!il<
(>alue
=!.crore!)
3$
,an+icra;t! Ealue 1'.)) 2).3) 2%.$) 2#.)) $3.#$ ('.')
(=!. crore!)
Coir La<. tonne! o; '.)) '.'" '.#" #.)) '.$(
;i:re N.3.
Ealue
(=!. crore!)
Su:1total (3)
Ealue
(=!. crore!)
1)2.21 13).%2 1(#.$1 2)3.#) 2$(.%$ 2'3.))
*o+ern In+u!trie!C 3".(' (%.)) ").)) "(.)) 12$.3 1'2.(1
Small Scale
In+u!trie!
Ealue
(=!. crore!)
Powerloom! *ill *eter! 1).)) 11.)) 32.1" 3'.32 ''.)) N.3.
Ealue
(=!. crore!)
6.3 A"$-#&1#$%& I.,%-1 *! N%1*!%& E-*!*./(
"griculture is a bac/bone of the Indian :conomy) It is important to note that
importance is given to industrialization in last four decades+ agriculture is
largest industry in the country)
3'
6.4 A"$-#&1#$%& P$*'#-1*! A
The agricultural sector as a (hole is estimated to
record a real gro(th rate of -)- per cent during 4..3,
.6) The overall gro(th in agricultural production
during 4..6,.1 has been provisionally estimated at
-)6 per cent+ as against a negative gro(th rate of =,>
2)E per cent during 4..1,0.) In spite of the damage caused to the cotton crop
in @unjab by e'cessive rains and une'pected cyclonic storms in "ndhra
@radesh in October 4.0.+ cotton production (as estimated to be higher at
0F)F million bales in 4.0.,00+ as against 00)0 million bales produced in 4..6,
.1) Similarly+ the sugarcane output is e'pected to touch 464)3 million tonnes
during 4.0.,00+ compared to 43-)F million tonnes during 4..3,.6) The
production of oilseeds is also li/ely to be higher at 42)F million tonnes during
4.0.,00+ as against 44). million tonnes during 4..1,0.)
F**'"$%!0 P$*'#-1*!
The production of /harif foodgrains estimated at
0.4)2 million tonnes during 4..1 sho(ed a marginal
gro(th of 0)E per cent over the production achieved
=0.0)0 million tonnes> in 4..1) The rabi foodgrains
production for 4.0.,00 is e'pected to go up to 16)E
million tonnes compared to 10)F million tonnes in 4..1,0.) The foodgrains
production is estimated to be 4..)1 million tonnes in 4.0.,00 compared to
014)E million tonnes during 4..1,0.+ recording an impressive increase by E)E
per cent ="dvance :stimates>) uring 4.0.,00+ efforts have also been
initiated by various government agencies to double the food production in the
ne't decade)
uring 4.0.,00 rice production is estimated to increase to 6E)2 million tonnes
from 64)F million tonnes produced in 4..1,0.+ (hile the (heat production
during 4.0.,00 is estimated at 3.)- million tonnes+ compared to the previous
yearLs level of -2)1 million tonnes+ an increase by 3)0 per cent) @roduction of
3(
pulses in 4..1,0. is e'pected to be around 02)4 million tonnes+ as against
0F)0 million tonnes during 4.0.,00)
A"$-#&1#$%& P$*'#-1*!8)%@*$ -$*,0 *in million tonnes+
1ear 2002-03 2003-04 2004-09 2009-11
5rops Ac$iev-
ement
'arget Ac$iev
ement
6
c$ange
over
1997-
92
'arget Ac$iev
-ement
6
c$ange
over
1992-
93
'arget
Pro&!-
ction
.A&v8
)st80
F
c.an-e
o>er
1""%1"#
Rice
3380 4180 4183 281 4980 4289 083 4:82 4:87 2.%
;$eat
2281 2780 298: 1184 2487 2789 .-0 780 3080 3082 %.1
5oarse
5erea%s
2980 2980
9287
9:81 1382 9987 9181 .-0 484 9:89 3).(
P!%ses
1289 1780 1:82 178: 1780 1981 .-0 383 1787 1782 1(.)
'ota%
<oo&gr-
ains
1408: 19987 1998: 1087 20080 1928: .- 987 20:80 20089 $.$
i%see&s
2281 2980 2:8: 108: 2787 2280 .-0 984 2380 2789 1'.)
S!garca
-ne
24181 23080 23382 .-0 182 24080 23289 .-0 1087 90080 24283 2.3
5otton= 12." 13.) 1$.2 1).) 1$.# 11.1 (1) 21.# 1$.# 13.3 1".#
* Million bales of 170 kg. each.
A"$-#&1#$%& EA,*$10 %!' I.,*$10(

The share of e'ports of agriculture and allied products in the total
e'ports had declined marginally+ from 06)1 per cent during 4..1,0. to 03)6
3%
per cent during 4.0.,00) uring the same period+ the value of e'ports of
agriculture and allied products amounted to USB 2+11E million+ sho(ing a
decline of 1)- per cent from a level of USB -+-FE million in 0113,16) Major
items of agricultural e'ports (ere basmati and non,basmati rice+ ra( cotton+
meat+ oilmeals+ tea+ coffee+ unmanufactured tobacco+ cashe(+ spices+ fresh
and processed fruits and juices+ vegetables and marine products+ etc)
"gricultural imports related to food and other items constituted 2)6 per
cent of the total imports during 4.0.,00+ as against E). per cent during
corresponding period of the previous year) Important agricultural items
imported during the year (ere vegetable oils =edible>+ sugar+ (heat and fruits
# nuts) uring 4.0.,00+ the volume of agricultural imports aggregated USB
4+E.1 million+ as against USB 0+-36 million during the corresponding period of
the previous year+ recording a gro(th of EF)- per cent)
A"$-#&1#$%& .%$Be10(
There (ere 3+.-4 agricultural regulated mar/ets operating in India+ 0-4
agricultural commodities considered for grading standards and F+42F cold
storage (ith capacity of 6)3F million tonnes as on end March 4.0.) 8ith the
introduction of economic reforms+ futures trading (as permitted in coffee+
cotton+ castor oil and jute goods during 4.0.,00) :arlier futures trading (ere
permitted in gur+ potato+ castor seed+ pepper+ turmeric+ etc) $urther+ during
4.0.,00+ futures trading (as introduced in oilseeds+ oil ca/es and edible oils)
" net(or/ of co,operatives at the national+ state and primary level operates to
help farm producers (ith access and further reach for sale of produce) "s per
the "nnual Report =4.0.,00> of Ministry of "griculture+ ?overnment of India+
the value of agricultural produce mar/eted through co,operatives has
registered a remar/able gro(th of 40)- per cent+ from Rs)1+2.. crore in 4..2,
0. to about Rs)00+220 crore in 4.0.,00)
6.5 A"$-#&1#$e $*&e ! I!'%! E-*!*./(
3#
A"$-#&1#$e f*$ I!'#01$%& De+e&*,.e!1(
Indian agriculture has been the source of supply of ra( materials to our
leading industries) !otton and jute+ te'tiles+ sugar+ plantationsG all these
directly depend on agricultural output) There are many industries+ (hich
depend on agriculture indirectly) Many of our small scale and cottage
industries li/e handlooms+ oil crushing+ etc depend on agriculture for their ra(
materials)
;ut then+ in recent years+ agriculture is losing its significance to
industries such as iron and steel+ engineering+ chemicals+ etc) Do(ever in
recent years+ the importance of food processing industries is being increasing
recognized both for generation of income and generation of employment)
A"$-#&1#$e ! e-*!*.- ,&%!!!"(
Importance of agriculture in the national economy is indicated by many
facts) $or e'ample+ agriculture is main support for transport sector as
rail(ays and road(ays secure bul/ of their business from the movement of
agricultural goods) $urther it is seen that good crops implying large
purchasing po(er (ith the farmers lead to greater demand for manufactures
and therefore better prices) In other (ords prosperity of farmers is also the
prosperity of the industries and vice,versa) "griculture is bac/bone of the
Indian economy and the prosperity of agriculture can also stand for the
prosperity of the economy) "t the same time it is true that per capita
productivity in agriculture is less than in the industry) Many scholars thin/ that
so long as the Indian :conomy is dominated by agricultural activity+ per
capita income (ill not rise to an e'tent+ (hich is necessary and desirable)
6.6 C%,1%& F*$.%1*! ! A"$-#&1#$e(
The ?ross !apital $ormation in agriculture+ at 011F,1E prices+ increased from
Rs)06+40E crore in 011E,12 to Rs)4.+112 crore in 0113,16. The share of
private sector investment in agriculture has been registering an increasing
trend over the last four years) It increased from Rs)0F+4EE crore in 011E,12 to
3"
Rs)02+222 crore in 011-,13 and further to Rs)0-+231 crore in 0113,16. The
rising trend in the private investment in agriculture is attributable mainly to
accelerated flo( of institutional credit) It is e'plain graphically as follo(sA

The public sector capital investment in agriculture (hich has been declining
from Rs) E+13. crore in 011E,12 to Rs)E+33- crore in 0112,1- and further to
Rs)E+FE3 crore in 011-,13 sho(ed an increase from Rs)E+FE3 crore in 011-,
13 to Rs)E+E0- crore =at 011F,1E prices> in 0113,16)
7.0 C7%!"!" S-e!%$* Of R#$%& C$e'1(
Indian rural credit structure is regarded all over the (orld as <uite uni<ue and
innovative) It re<uired a careful feasibility study to understand rural structure)
:volved over a period of last eight decades+ it can perhaps claim the honour
of being a very important constituent of the most comple' rural economy in
$)
the third (orld countries) In India there is different caste+ religion of people
living together+ the language of every state+ caste is different than each other)
The land+ (eather+ (ater availability is different in different area+ (hich give
lots of problem in applying various policies) One of the distinguishing features
has been its ability to adapt itself+ (ithout much turmoil and stress+ to the
socio,economic dynamics of the rural scenario) Over the years it has
developed into a multi faceted structure to service almost the entire cross,
section of rural population spread thoughtout the length and breadth of our
country)
In rural areas the indigenous moneylenders continued to be the ban/er
in need) Since these money,lenders had virtual monopoly in supplying credit
in rural areas+ the poor (ere often subjected to e'ploitation) 8ith the
overriding monopoly the money,lenders often resorted to usurious practices,,,
levying the e'obirant rate of interest+ demanding gift/contribution to the temple
funds out of the amount of credit+ demanding advance interest+ etc) ;esides+
often the money,lenders resorted to unethical practices li/e ta/ing thumb
impression on a blan/ paper for inserting some arbitrary amount+ manipulation
of account to inflate the balance due) The poor villager could not escape the
clutches of these indigenous ban/ers as they had to /eep on borro(ing from
them under distress since they (ere the only source of credit for all type of
re<uirements,,, production and consumption) The conditions of the poor
peasantry (ere perpetually so pathetic that an adageG7they are born in debt+
they live in debt # die in debtI (as the usual description of their plight)
To mitigate the sufferings of the poor farmers the infrastructure of co,
operative credit (as brought into being in the matter of agricultural finance)
The !o,operatives Societies "ct of 01.E provided the formation of primary
agricultural co,operatives credit societies) %ater in 0104+ the co,operative
movement (as e'tended to formation of non,agricultural co,operative credit
societies also)
The commercial ban/s on the other hand (ere participating in rural
ban/ing only as an alien since they (ere programmed for meeting the
financial re<uirements of trade and commerce) In a vie( of the huge gap in
$1
rural credit from institutional sources and in a bid to meet the gro(ing needs
of financial assistance to modernizing farming+ the government adopted the
multi,agency approach) This (as intended to increase the farm productivity
and thus raise the living standards of the poor farmers) The formation of
State ;an/ Of India (hich (as formed my ta/ing over the Imperial ;an/ of
India by the ?overnment (as (ith a objective of 7e'tension of ban/ing
facilities on a large scale more particularly in the rural and semi,urban areas
and for other diverse purposes)I This (as an important milestone in the
ban/ing of rural India) Momentum (as gained more prominently after the
concept of 7Social controlI over commercial ban/s (as propagated in 01-3)
8ith the setting up of *ational !redit !ouncil in 01-6 to asses the demand for
ban/ credit for various sectors of economy and to determine priorities for the
grant of loans+ etc) it came to be felt increasingly that ban/s should become
instruments of economic and social development)
To this effect nationalization of 0E major Indian commercial ban/s in
July 01-1 can be described as a major landmar/ in the history of Indian
financial system and a big leap to(ards rural ban/ing) 8ith emphasis on
lending to priority sectorGagriculture+ rural artisans and handicrafts+ small
scale industries+ small business and retail trade and other (ea/er sections of
the societyG rural ban/ing came to the fore) The step (as initiated to utilize
effectively the professional s/ills and acumen developed by the ban/ing
system for achieving the basic objective of balanced socio,economic
development)
;oth the !o,operative and !ommercial ban/s made substantial
development in providing credit to agricultural and rural economy) The total
share of co,operatives in total borro(ing of the rural household gre( from
2+4.E in july 4..0 to 04+.-2 in ec 4.00) ;ut still it (as noticed that t(o,
thirds of the total credit (as ta/en from non,institutional sources) The
demand for rural credit (as on the increase o(ing to adoption of modern
agriculture+ (hich increasingly re<uired larger amounts of capital both short
term # long term)
$2
7.1 S1$#-1#$e *f R#$%& C$e'1 I! I!'%
In the village itself no for of credit organization !ill be suitable e"cept the
Co#operative $ociety%Co#operation has failed& but co#operation ust
succeed.'
##(ll#India )ural Credit $urvey
N%1*!%& P*&-/ 4 I10C0 A.(
"gricultural credit is one of the most crucial inputs in all agricultural
development programmes) $rom olden days private money,lenders are main
sources of credit to(ards agricultural or rural products) "fter independence
multi,agency approach consisting of co,operatives+ commercial ban/s and
regional rural ban/s are adopted due to its cheaper and ade<uate credit to
farmers) The major policy in the sphere of agricultural credit has been its
progressive institutionalization for supplying agriculture and rural development
programmes (ith ade<uate and timely flo( of credit to assist (ea/er sections
and less developed regions)
The basic aim of this @olicy are as follo(sA,
a) To ensure timely # sufficient flo( of credit to the farming sectorC
b) To avoid money,lender chain from rural scene)
c) To reduce regional imbalance through their credit facilities)
d) To provide larger credit support to areas covered by special programmes)
e)g)
*ational Oilseeds evelopment @roject)
$3
7.2 Nee' *f C$e'1 f*$ F%$.e$0(8
$armers need finance mainly for the follo(ing thingsGto pay current
e'penses of cultivation such as the purchase of seed+ manures+ etc)C the
purchase of cattle+ implements and ra( materialsC ac<uire ne( landC or
improve land by irrigation+ drainage+ (edding and plantingC pay up old debts
to build and repair houses+ to purchase food stuffs and other personal
necessariesC pay land revenue to the ?overnmentC meet e'penses connected
(ith marriage and other social events in the family+ but je(ellery and conduct
la( suits) The credit need of agriculturists can+ therefore+ be broadly divided
into directly productive # indirectly unproductive e'penses) Unfortunately fact
is that underdeveloped and old countries are in need of both the types of
credit
8.0 S*#$-e0 Of R#$%& C$e'1
There are mainly t(o sources available to the farmers private agencies
# institutional) @rivate agencies means relatives+ landlords+ agricultural
moneylenders+ professional private moneylenders+ traders # commission
agents+ others) 8here institutional agencies are a) commercial ban/s+ b) the
state ban/+ c) co,operative societies # land mortgage ban/s d) agricultural
finance !orporation)
@rivate agencies giving 1F5 of the total credit re<uirements in 0120,24
and institutional sources including government giving for only 35 of the total
credit needs) ;ut in 01-.,-0+ the share of private agencies came do(n to
60)F (hich (as as follo(sA, Relatives 6)65+ %andlords .)-5+ "gricultural
moneylenders F-).+ @rofessional private moneylenders 0F)45+ traders #
commission agents 6)65+ other sources 0F)1) that time institutionals sources
(ere 06)3 and the brea/ up (as government 4)-5+ !o,operative 02)25+
!ommercial ban/s .)-5) "s per the "ll India ebt and Investment Survey
=4.00>+ estimated that the share of private agencies had further slumped to
about F15 # share of institutional credit jumped to -F5 brea/ up (as F.5 of
$$
co,operative # F05 of commercial ban/s) ?overnment # Reserve ;an/ of
India is supporting commercial ban/ # co,operatives to meet the gro(ing
demand for agricultural credit)
9.0 P$+%1e A"e!-e0 S*#$-e0(
)*!e/ &e!'e$0( Though there are dra(bac/s+ moneylenders are by far
the most important source of agricultural credit in India) That (e have
already seen before+ It is therefore+ clear that the basic problem of the
agricultural economy of India is the huge indebtedness of farmers and
their e'ploitation by private moneylenders) $or that government of India
ma/e provisions in act as follo(s a) maintenance of accounts in prescribed
forms+ b) furnishing of the receipts and periodical statements+ c) fi'ing of
ma'imum rates of interest+ d) @rotection of the debtors from molestations
and intimidations+ e) licensing of moneylenders+ and f) penalties for
infringement of the provisions) The basic objectives of such legislative
enactments can be stated asA I) To bring about an improvement in the
terms on (hich private credit (as available to agriculturists and to place
legal restrictions on the unreasonable e'actions of moneylenders+ II) To
enable civil courts to do greater justice as bet(een lenders and borro(ers
than (as possible in the prevailing circumstances under the ordinary !ode
of !ivil @rocedure)
T$%'e$0 4 -*..00*! %"e!10( Traders # commsiion agents supply
funds to farmers for productive purposes much before the crops mature)
They force the farmers to sell their produce at lo( prices and they charge
a heavy commission for themselves)
L%!'&*$'0 4 *17e$0( $armers+ predominantly small farmers # tenants+
depend upon landlords and others to meet their financial re<uirements)
This source of finance has all the defects associated (ith moneylenders+
traders and commission agents) Interests rates are e'orbitant) Often the
small farmers are cheated and their lands are appropriated) 8hat is
(orse+ this source of finance is becoming more importantGfrom F)F
$'
percent in 0120,24 to 0E)2 percent in 0116,11 but declined to 0.)4 percent
in 4.00)
10.0 I!011#1*!%& 0*#$-e0 *f -$e'1(
These are the funds made available by co,operative societies+
commercial ban/s+ # regional rural ban/s # state governments also) The
need for institutional credit arises because of the (ea/ness or inade<uacy of
private agencies to supply credit to farmers) @rivate credit is defective
becauseA,
I) It is based on profit motive #+ therefore+ it is al(ays e'ploitative)
II) It is very e'pensive and is not related to the productivity of land)
III) It does not flo( into most desirable channels and to most needy
persons)
IO) It is not available for ma/ing agricultural improvementsGand much of
the necessary improvements are not underta/en as funds are not
available for long periods at lo( rates of interest
O) It is not properly integrated (ith the agriculturists other needs)
P$*2&e.0 ! I!011#1*!%& 0*#$-e0(
The government (as of the vie( that multi,agency approach to rural credit
(as the real solution to the emancipation of small farmers from the clutches of
the money,lenders) ;ut (ithing a short period+ number of problems have
surfaced such asA
a) There (as no coordination bet(een different agencies operating in
the same area and+ as a result+ there (as multiple financing+ over,
financing in some areas and under,financing in others)
$(
:) espite the adoption of lead ban/ scheme and district credit plans+
the different agencies often failed to formulate and develop
meaningful agricultural credit programmes in given bloc/s and
districts)
c) espite guidelines issued by R;I+ different agencies adopted different
procedures and policies in the matter of providing loans and their
recover) The result (as unnecessary competition among the different
agencies)
+) There (ere practical problems in the recovery of loans (hen different
agencies had lent to the same person against the same securities)
Ultimatlely+ there (ere heavy overdues)
The major problem faced by lending institutions+ particularly co,
operatives+ is the most unsatisfactory level of overdues) The ration of
overdues to that of demand is around E. to E4 percent in the case of co,
operatives and E3 percent in the case of Regional rural ban/s) "ccordingly+
health of rural credit institutions+ both co,operative and commercial ban/s+ is
in a very sad state in several parts of the country)
1.C*8*,e$%1+e -$e'1 0*-e1e0 A0.)0
It is the cheapest and the best source of rural credit) The rate of interest is
lo() Since 0120+ the co,operative credit movement has started helping the
farmers in a big manner) uring 0161,1. there (ere about 66+... primary
agricultural credit societies) The stranglehold of the moneylenders on
the peasants is not met by the co,operatives) ;esides+ the small farmers find
it difficult to meet all their credit re<uirements from the co,operatives)
P$.%$/ A"$-#&1#$%& C$e'1 S*-e1/(
$%
The co,operative movement (as started in India largely (ith a vie( to
providing agriculturists funds for agricultural operations at lo( rates of interest
and protect them from the clutches of moneylenders) The organization of the
co,operative credit for short period may be briefly outlined as follo(sA
" co,operative credit society+ commonly /no(n as the primary
agricultural credit society =@"!S> may be started (ith ten or more persons+
normaly belonging to a village) The value of each share is generally nominal
so as to enable even the poorest farmer to become a member) The members
have unlimited liability+ that is each member is fully responsible for the entire
loss of the society in the event of failure) This (ill mean that all the members
should /no( each other intimately) The management of the society is under
an elected body consisting of @resident+ Secretary # Treasurer) The
management is honorary+ the only paid member being normally) %oans are
given for short periods+ normally for one year+ for carrying out agricultural
operations+ and the rate of interest is lo() @rofits are not distributed as
dividend to shareholders but are used for the (elfare of the village) In the
construction of a (ell+ or maintenance of a school+ and so on) The usefulness
of the primary credit societies has been rising steadily) In 012.,20+ it
advanced loans (orth Rs)4F croresC this rose to Rs) 432 crores in 016.,60+
and to Rs) -2.. crores in 4.0.,4.00)
F!%!-%& S1$e!"17 *f PACC0.( To ma/e all primary agricultural societies
viable and ensure ade<uate and timely flo( of co,operative credit to the rural
areas the Reverse ;an/ of India+ in collaboration (ith State governments+ had
been ta/ing a series of steps to strengthen (ea/ co,operative ban/s and to
correct regional imbalances in co,operatives development) Steps (ere ta/en
to reorganize viable @"!s and for amalgamation of non,viable societies (ith
farmer9s service societies or large sized multipurpose societies) These efforts
are being intensified by providing larger funds to (ea/ societies to (rite off
their losses+ bad debts and overdues)
PACC0 %!' 3e%Be$ Se-1*!0( The major objective of the co,operative
development programmes is to ensure that the benefits of co,operative
activities flo( increasingly to (ea/er sections including scheduled castes and
$#
scheduled tribes) The government see/s to achieve this through e'panding
the membership of the (ea/er sections in the e'isting @"!s and ensuring
larger flo( of funds and services to them) In the tribal areas+ large sized
multipurpose societies are being organized mainly for the benefit of the tribals)
Co-operative Central ,an-s: These are federations of primary credit
societies in specified areas normally e'tending to the (hole district meance
they are sometimes called as district co,operative ban/s) These ban/s have
a fe( private individuals as shareholders (ho provide both finance of
management) Their main tas/ is to lend to village primary societies+ but they
(ere e'pected to attract deposits from the general public) ;ut the e'pectation
has not been fulfilled and many of the co,operative central ban/s act as
intermediaries bet(een the State !o,operative ;an/ on the one hand and the
village primary credit societies on the other)
.tate Co-operative ,an-: This ban/ forms the ape' of the co,operative
credit structure in each state) It finances and controls the (or/ing of the
central co,operative ban/s in the State) It serves as a lin/ bet(een the
Reserve ;an/ of India from (hich it borro(s and the co,operative central
ban/s and village primary societies) The State !o,operative ;an/ obtain its
(or/ing funds from its o(n share capital and reserves+ deposits from the
general public and loans and advances from the Reserve ;an/ no( *";"R
has formulated a scheme for the rehabilitation of (ea/ central co,operative
ban/s) *";"R is providing liberal assistance to the State ?overnments for
contributing to the share capital of the (ea/ central co,operative ban/s
selected for the purpose) The State !o,operative ban/ is not only interested
in helping the co,operative credit movement but also in promoting other co,
operative ventures and in e'tending the principles of co,operation)
P$*2&e. *f *+e$'#e0 1* C*8*,e$%1+e -$e'1
$"
" highly distressing fact of co,operative credit is the heavy overdues of
co,operative credit institutions+ no( estimated bet(een Rs)1+... crores to
Rs)0.+... crores) "ccording to the R;I study team on overdues 7lac/ of (ill
and discipline among cultivators to repay loans (as the principal factor
responsible for the prevalence of overdues of co,operatives) efective
lending policy pursued by co,operatives+ the apathy of management in ta/ing
<uic/ action against recalcitrant members and absence of favourable climate
(ere other contributing factors)I
"part from these commonly factors normally responsible for a high level
of overdues+ intervention of e'ternal forces such as loan (aivers+ concession
in various forms to(ards repayment of principal and interest has also affected
the recovery performance of credit institutions to a significant e'tent) The
problem is further aggravated on the account of the state governments in
ability to meet the financial commitments to co,operative ban/s)
In recent years+ the farmers are getting organized and one of their chief
demands of the farmer union is to cancel their debts to the co,operative
societies and ban/s) States have mee/ly surrender to such demands to (rite
off the debts in a matter of e'treme concern+ as it hampers the recovery of
dues from the farmers) The problem of loan overdues is a matter of serious
concern+ as it affects the recycling of funds and credit e'pansion on one hand
and economic viability of the lending institutions+ specially the co,operatives
and RR;s+ on the other)
2. L%!' 'e+e&*,.e!1 2%!B0 R0.)4SA The need for long,term loan is being
satisfied by land development ban/s =formerly the (ere called land
mortgage ban/s>) The objective of such ban/s is to provide long,term
credit to the cultivators against the mortgage of their lands) The loans
from the land development ban/s are <uite cheap and are spread over a
long period of 02 to 4. years) It is+ therefore+ convenient ot borro( from
these ban/s if previous debts have to be cancelled or if additional land is
to be purchased or if improvements have to be made) Though land
development ban/s have been ma/ing considerable progress in recent
years in this country+ they have not really contributed much to the
')
financial need of the farmers) Most farmer are not even a(are about this
ban/ # 3.5 of the land development ban/s are located in the three
South Indian States of Tamil *adu+ "ndhra @radesh # Harnata/a) The
loan sanction by this ban/ has been increase annually from Rs) F crores
to Rs) 03F. crores bet(een 013.,30 and 4..1,0.) major dra(bac/ of
this ban/ is they lend against the security of land+ and big landlords have
ta/en advantage of them and+ by and large+ small peasants have not
benefited from them)
The .tructure of LD,s(8 The long term credit structure consists of the
central land development ban/s =generally one for each State> and
primary land development ban/s) In some States+ there are no primary
land developments ban/s but in their place+ there are branches of central
land development ban/s)
Problems of LD,s(8 %and development ban/ing is yet to ta/e strong
roots in India barring fe( States) Do(ever+ %;s have contributed in
large measure to agricultural development by lending specially for minor
irrigation) "ll their loans are for productive purposes benefiting mostly
the small farm holders) Though land development ban/ing has made
considerable progress in recent years+ it has not really contributed much
to the improvement of the financial position of the farmers) " large
number of factors are responsible for the relative ineffectiveness of
%;s)
(verdues Problems(8 mounting overdues in most of the %;s have
crippled the structure badly+ in recent years) Overdues at the level of
primary land development ban/s have been put bet(een E4 to EE
percent) Overdues have caused innumerable financial problems besides
limiting the capacity of %;s to lend and operate as viable units) The
financial discipline imposed on the ban/s in the matter of eligibility to
underta/e fresh lending based on recovery performance has been the
main limiting factor <uantitative gro(th of credit operations) To some
'1
e'tent+ the ban/s themselves are to be blamed for this predicament due
to faulty loaning policies+ inade<uate supervision+ over,utilisation of
loans+ ineffective measures for recovery etc) 8hich have contributed to
the deterioration in recovering the loans)
3. C*..e$-%& B%!B0 R0.)FS( The commercial ban/s in India have long
confined their operations to urban areas+ receiving deposits from the
urban public and financing trade and industry in urban public and
financing trade and industry in urban areas) !ommercial ban/s are
e'tending financial support to agriculture both directly and indirectly
irect finance is e'tended for agricultural operations for short and
medium period) Indirect finance to farmers is made through providing
advances for the distribution of fertilizers+ other inputs+ etc+ and also
through financing primary agricultural credit societies) $inancing of
investment in agriculture is a major aspect of the farm credit activities of
ban/s !redit needs of service units providing services for (arehousing+
processing+ mar/eting+ transporting+ and repairing of tractors etc)
D$e-1 F!%!-e 2/ C*..e$-%& B%!B0A, "t the time of ban/
nationalization+ it (as clearly conceded that the commercial ban/s did
not have the necessary e'perience or the personnel to deal (ith the
farmers directly) 8hile the co,operative had been specializing in rural
credit since the beginning of the century) :ven then the nationalized
ban/s (ere e'pected to go vigorously in the support of the farmers in
general and the small cultivators in particular) In the initial stages+ for
obvious reasons the nationalized ban/s concentrated their attention on
large cultivators and other special category farmers such as those
engaged in raising high,yielding varieties of food,grains) "t present short
term crop loans accounted for nearly E. to E25 of the total loans
disbursed by the commercial ban/s to the farmers)
Term loans for varying periods for purchasing pump,sets+
tractors and other agricultural machinery+ for construction of (ells and
tube,(ells+ for the development of fruit and garden crops+ or leveling and
'2
development of land+ etc) are provided) These term loans accounted for
about F2 to F35 of the total loans disbursed by commercial ban/s)
$inally+ commercial ban/s e'tend loans for such activities such as
dairying+ poultry farming+ piggery+ bee /eeping+ fisheries and othersG
these loansaccount for 02 to0-5) Region (ise+ southern region
accounts for the bul/ of credit disbursed by commercial ban/s viz) 245
of the total credit e'tended)
&ndirect inance by Copmmercial ,an-s: :ven though the scope
for direct financing by commercial ban/s (ould be limited for some years
to come+ there is a considerable scope for indirect financing by
commercial ban/s) $or instance+ commercial ban/s are financing co,
operative societies to enable them to e'pand their production credit to
the farmers) More especially they increasingly finance co,operatives
engaged in mar/eting and processing of agricultural produce or in the
activities ancillary to agriculture such as dairy farming+ poultry farming+
etc) In this connection+ the Stated ;an/ of India and its subsidiaries are
already playing an active role in financing co,operative mar/eting and
processing) !ommercial ban/s are providing indirect finance for the
distribution of fertilizers and other inputs)
!ommercial ban/s e'tend credit to manufacturing or distribution
firms and agencies and co,operatives engaged in the supply of pump,
sets and other agricultural machinery on the hire,purchase basis) They
finance the operations of the $ood !orporation of India+ the state
governments and others in the procurement+ storage and distribution of
food grains)
$inally+ commercial ban/s increasingly subscribe to the
debentures of the central land development ban/s and also e'tend
advances to the latter) This enables land development ban/s to e'pand
their medium and long,term advances to farmers for the purpose of land
improvement and land development)
'3
Commercial ,an-s ' .mall armers: It has been estimated that
nearly 3. percent of farmers o(ning less than 4 hectares of land are not
getting ban/ creditC only large lando(ners have been found credit(orthy
and suitable for ban/s advances) ;ut such a situation cannot continue
for long) Under the direction of the @lanning !ommission+ Small farmers
evelopment "gencies have been set up to identify small farmers and
(or/ out economically viable schemes of agricultural development)
!ommercial ban/s have to group them into various categories for credit
support so as to enable them to become viable cultivators) $or instance+
in areas (here the subsoil (ater table is high+ the small cultivator has to
be helped by ban/s to convert his dry holding into (et holding) 8ith
pump set loan+ the cultivator can change the cropping pattern into double
or even multiple cropping activity) "s regards small cultivators near
urban areas and (ith irrigation facilities+ commercial ban/s can help
them to go in for poultry farming and maintaining one or t(o vegetable
cultivation or combine it (ith small milch cattle)
Problems of Commercial ,an-s in /gricultural CreditA, The credit
needs of the agricultural sector in the ne't fe( years are estimated to
rise to Rs)2.+... to Rs)-.+... crores) To meet the needs is an
enormous tas/+ and responsibility (ill have to be borne by co,operatives
and commercial ban/s) "s resources available to commercial ban/s in
the agricultural sector (ill naturally be limited+ it is important that every
commercial ban/ attempts to ma/e optimum use of its limited resources
in this sector) In the field of financing of agriculture+ the problem is not
merely <uantitative but also of coverage vis,T,vis the organization and
the personnel available to the nationalized ban/s) The majority of the
rural population consists of small farmers) $urther+ there are 2+2.+...
villages spread throughout the country) To reach all of them (ith only
about E3+... ban/ing offices is+ no doubt+ a stupendous tas/) :ven (ith
the completion of branch e'tension programmes of the commercial
ban/s no( in hand or those (hich may be underta/en during the ne't 2
to 0. years+ commercial ban/ may not be in a position to cover many of
the villages) Moreover in recent years+ the rural branches of commercial
'$
ban/s in general and branches of RR; in particular+ have been under
severe financial strain on account of higher transaction cost involved in
handling of large number of small size loan accounts and some(hat
lo(er interest income as a result of concessional rate of interest on small
size loans)
The lo(er proportion of current deposits in total deposits of rural
branches has also placed them at a disadvantage (ith regards to cost of
resources) $inally+ the presence of overdues+ particularly after the
implementation of "gricultural and Rural !redit ebt Relief Schemes+
011. has further adversely affected the viability of rural branches of
commercial ban/s)
Under these conditions+ if the development of agriculture is not
to suffer for (ant of credit and if there has to be some improvement in
the lot of innumerable small farmers+ ne( dimensions (ill have to be
given to schemes of financing agriculture)
4. Re"*!%& R#$%& B%!B0 R0.)ES( These ban/s (ere first set up in 0132
specifically to give direct loans and advances to small and marginal
farmers+ agricultural labourers+ rural artisans and other of small means)
The loans are given for productive purposes) There (ere 01- RR;s
(hich have been lending around Rs) F-.. crores annually by (ay of
loans to rural people) Over 1. percent of the loans of R@;s are given to
the (ea/er sections in rural areas) The regional ban/s+ though basically
scheduled commercial ban/s+ differ from the latter in certain respectsA
The area of regional rural ban/s is limited to a specified region
comprising one or more districts of a State)
The regional rural ban/s grant direct loans and advances only to small
and marginal farmers+ rural artisans and agricultural labourers and other
of small means for productive purposes)
''
The lending rates of the regional rural ban/s should not be higer than
the prevailing lending rates of co,operatives societies in any particular
State) The sponsoring ban/s and the Reserve ;an/ of India provide
many subsidies and concessions to RR;s to enable the latter to function
effectively
Concessions to RR,s( $rom the beginning+ the sponsor ban/s have
continued to provide managerial and financial assistance to RR;s and
also other concessions such as lo(er rate of interest on the latter9s
borro(ing from sponsor ban/s) $urther+ the cost of staff deputed to
RR;s and training e'penses of RR; staff are borne by the sponsor
ban/s) The Reserve ;an/ of India has been granting many concessions
to RR;s)
Progress of RR,s( There are no( 01- regional rural ban/s in 4F
States (ith 0E+2.. branches) "s at the end of September 4.0. the
regional rural ban/s had advanced Rs)F+2-. crores by (ay of short,term
crop loans+ term loans for agricultural activities+ for rural artisans+ village
and cottage industries+ retail trade and self employed+ consumption
loans etc) *early 1. percent of the loans of RR;s+ (ere provided to the
(ea/er sections) State (ise Uttar @radesh found large number of
offices)
(b0ectives of RR,s(
RR;s had follo(ed instructions given by R;I and ?overnment of
India regarding loan policies+ procedures+ etc)
The basic aim of setting up RR;s viz+ developing the rural economy
by providing credit for the development of agriculture+ trade+ commerce
industry and other productive activities in rural areas+ (as being fulfilled
and
RR;s had successfully maintained their image as a small man9s ban/
by confining their credit facilities to the target groups viz+ small marginal
'(
farmers+ agricultural labourers+ artisans and small enterprises for
productive activities)
The recovery position on the (hole (as not satisfactory)

Problems in functioning of RR,s:
a) On account of the many restrictions place on the business they can
underta/e+ RR;s have lo(earning capacity)
b) The (age and salary scales of RR;s have been rising and+ in fact+
(ith the recent a(ard of a tribunal+ their scales (ould appro'imate
those of commercial ban/sC (ith the increase in salary scales+ an
important rationale for the setting up of RR;s has ceased to e'ist)
c) The sponsoring ban/s are also running their o(n rural branches in
the very area of operations of the RR;sC this has given rise to certain
anamolies and to avoidable e'penditure on controls and
administration)
5. Re0e$+e B%!B *f I!'% R0.)2SA
R;I had sho(n /een interest in agricultural credit and maintained a
separate department for this purpose) R;I e'tended short,term
seasonal credit as (ell as medium,term and long,term credit to
agriculture through State level co,operative ban/s and land
developments ban/s) R;I had also set up the "gricultural Refinance
evelopment !orporation ="R!> to provide refinance support to the
ban/s to promote programmes of agricultural development+ particularly
those re<uiring term credit) 8ith the (idening of the role of ban/ credit
from 7agricultural developmentI to 7rural developmentI the ?overnment
propo1sed to have a more broad,based organization at the ape' level
to e'tend support and give guidance to credit institutions in matter
relating to the formulation and implementation of rural development
programmes) " *ational ;an/ for "griculture and Rural evelopment
'%
=*";"R> or *ational ;an/ (as+ therefore+ set up to ta/e over the
agricultural credit functions of R;I on the on hand and the refinance
functions of "R! on the other)

0.)2)a N A B A R D( %! O+e$+e98
*";"R is an ape' institution accredited (ith all matters
concerning policy+ planning and operations in the field of credit for
agriculture and other economic activities in rural areas)
*";"R operates throughout the country through its Dead Office
at Mumbai+ 42 Regional Offices and on Sub,Office+ located in the
capitals of all the states/union territories) It also has E training
establishments)
It is an ape' refinancing agency for the institutions providing
investment and production credit for promoting the various
developmental activities in rural areas)
It ta/es measures to(ards institution building for improving
absorptive capacity of the credit delivery system+ including
monitoring+ formulation of rehabilitation schemes+ restructuring of
credit institution+ training of personnel+ etc)
It co,ordinates the rural financing activities of all the institutions
engaged in developmental (or/ at the field level and maintains
liaison (ith ?overnment of India+ State ?overnments+ Reserve
;an/ of India and other national level institutions concerned (ith
policy formulation)
It prepares+ on annual basis+ rural credit plans for all districts in the
countryC these plans form the base for annual credit plans of all
rural financial institutions
'#
o It underta/es monitoring and evaluation of projects refinanced
by it)
o It promotes research in the fields of rural ban/ing+ agriculture
and rural development)
11.0 S-7e.e0 4 F%-&1e0 f$*. 17e +%$*#0 2%!B0
11.1 NABARD(8
RURAL NON8FAR) SECTOR FINANCE SCHE)E A
Rural *on $arm Sector =R*$S> holds the /ey to faster
economic development of the country) It has potential
and promise for generating employment and increased
income in the rural areas) Dence+ *";"R has
identified financing+ development and promotion of
R*$S as one of its thrust areas)
S-7e.e0 f$*. NABARD f*$ !*!8f%$.!" 0e-1*$(
1. CO)POSITE LOAN SCHE)E ;CLS< 8 #!'e$ ARF
,orrowersA Rural artisans+ handicraftsmen+ small entrepreneurs+ groups of
individuals+ partnership firms+ co,operative societies+ *?Os+ etc)
Refinance ceiling AMa'imum of Rs) 0. la/h per borro(er)
Repayment period: ,F to 0. years (ith suitable need based moratorium not
e'ceeding 06 months)
'"
#ligible activities A,"ll manufacturing+ processing+ and approved service
activities)
2. INTE5RATED LOAN SCHE)E ;ILS< 8 #!'e$ ARF
B*$$*9e$0( Individuals+ artisans+ groups of individuals+ associations =formal
and informal>+ proprietary/ partnership firms/ co,operative societies+ registered
institutions/ trusts+ voluntary agencies+ private and public limited companies+
etc)
Refinance Repayment period AF to 0. years (ith suitable need based
moratorium not e'ceeding 06 months)
#ligible activities AManufacturing+ processing and approved service activities
in the cottage+ village and tiny industry sector and modernization/ renovation/
e'pansion/ diversification of e'isting units)
3. S.%&& R*%' %!' 9%1e$ T$%!0,*$1 O,e$%1*$0 SCHE)E ;SR3TO< 8 U!'e$
ARF
,orrowers: Individuals+ groups of individuals+ including partnership/
proprietary firms and co,operative enterprises) The borro(ers should be from
the rural areas and should utilise the vehicle mainly for transportation of Rural
$arm and *on,$arm @roducts and inputs and passengers to/ from mar/eting
centres) The borro(er or his employee should possess a valid driving licence
and the vehicle should be duly registered (ith the Regional Transport
"uthority as public transport vehicle)
Refinance ceiling: Ma'imum of Rs)02 la/h per borro(er
Repayment period: 2 years (ith moratorium of - months)
#ligible vehicles: Transport vehicles including %ight Motor vehicles+ Jeeps+
"utoric/sha(s+ 8ater transport units =boats+ launches etc)>
4. S-7e.e0 #!'e$ ,$e 8 0%!-1*! ,$*-e'#$e(
()
;< Te$. L*%! 1* SSI #!10 ;17$*#"7 CB0 4 S-7e'#&e' PCB0+ A
,orrowers A Individuals+ @roprietary / @artnership concerns+ @rivate/ @ublic
%imited !ompanies+ @romotional/ evelopmental Organisations+ State %evel
$ederations/ !orporations+ Joint Sector Underta/ings)
;< Te$. L*%! 1* I!'#01$%& C*8*,e$%1+e0 ;17$*#"7 SCB0<
,orrowers A Industrial !o,operative Societies identified as viable/ potentially
viable by the State ?overnment)
< P$*@e-1 F!%!-e f*$ A"$*8I!'#01$e0 ;17$*#"7 CB0D S-7e'#&e' PCB0
%!' SCB0<
,orrowers A
0) State level corporations such as agro,industries corporations+ forest/
tribal development corporations+ HOI!/ HOI;+ state level cooperative
societies/ federations+ co,operative mar/eting/ processing and industrial
societies+ joint sector underta/ings+ registered societies in HOI!/ HOI;
fold)
4) @ublic/ private limited companies+ partnership firms and proprietary
concerns)
Repayment periodA F to 0. years (ith moratorium of 04 months)
2) S*f1 L*%! A0001%!-e S-7e.e f*$ )%$"! )*!e/(
Be!ef-%$e0 %!' ,#$,*0e( :ntrepreneurs having necessary talent/ s/ills+
but (ho lac/ monetary resources to meet the margin re<uirements stipulated
under the relevant schemes covering both "R$ and prior sanction)
P#$,*0e A To set up ne( units as (ell as for modernisation/ renovation/
e'pansion/ diversification of e'isting units even if the units (ere not initially
refinanced by the ;an/)
(1
E&"2&1/ -$1e$%( Refinance (ill be available on the ban/sL satisfying the
eligibility criteria based on recovery performance/the position of *@"s+ as
prescribed by *";"R from time to time)
FAR) SECTOR FINANCE SCHE)E(
A< Ref!%!-e A0001%!-e f*$ f!%!-!" f%$. .e-7%!:%1*!
< T$%-1*$0(
=a> The <uantum of refinance in respect of financing for ac<uisition of second
tractor has been enhanced from e'isting level of E.5 to 1.5 = 125 in case of
S!"R;s> of the loan amount as in the case of first tractor)
=b> Though the minimum land holding re<uired for financing tractors is 6 acre
perennially irrigated land+ necessary discretion has been given to ban/s to
evolve their o(n area specific norms+ if need be+ and report such norms
evolved by them to the concerned RO of *";"R)
=c> Refinance facility for financing purchase of second hand tractors has been
e'tended to ?ujarat in addition to @unjab+ Daryana and Rajasthan)
< P*9e$ T&&e$0(
=a> Though the minimum land holding re<uired for financing po(er tillers is -
acres of perennially irrigated land+ necessary discretion has been given to
ban/s to evolve their o(n area specific norms+ if need be+ and report such
norms evolved by them to the concerned RO of *";"R)
=b> ;an/s have also been advised to give focused attention on financing
po(er tillers by preparing a three year ban/ing plan for a compact area for the
benefit of the small farmers)
C< S9%$!%@%/%!1 5$%. S9%$*:"%$ 6*@%!% ;S5S6<
S?SM+ formed by restructuring ongoing self employment programmes+ viz)
IR@+ TRMS:M+ 8!R"+ etc)+ is under implementation from .0 "pril 0111)
(2
The programme envisages formation of S?SM ?roups and their lin/age (ith
the ban/s) Individuals as also S?SM group members+ belo( poverty line are
assisted under the programme
D< S-7e.e f*$ 0e11!" #, *f A"$-&!- %!' A"$2#0!e00 -e!1e$0
In pursuance of the announcement made by the Union $inance Minister in the
budget speech for the year 4..0,.4+ *ational ;an/ in consultation (ith the
Ministry of "griculture+ ?OI and select ban/s formulated a scheme for
financing "griculture ?raduates for setting up "griclinics and "gribusiness
!entres The scheme aims at supplementing the e'isting :'tension *et(or/
to accelerate the process of technology transfer to agriculture and supplement
the efforts of State "gencies in providing inputs and other services to the
farmers)
E< S-7e.e f*$ f!%!-!" f%$.e$0 f*$ ,#$-7%0e *f &%!' f*$ A"$-#&1#$%&
,#$,*0e0
In response to the DonLble Union $inance MinisterLs emphasis on the need to
step up priority sector lending and to e'amine financing farmers for purchase
of land for agricultural purposes+ the 8or/ing ?roup constituted by Indian
;an/s "ssociation formulated a above scheme in consultation (ith the
?overnment of India+ R;I and *";"R)
T7e *2@e-1+e *f 17e S-7e.e 0 to finance the farmers to purchase+ develop
and cultivate agricultural as (ell as fallo( and (aste lands as also consider
financing purchase of land for establishing or diversifying into other allied
activities)
E&"2&1/ =i> Small and marginal farmers i)e)) those (ho (ould o(n ma'imum
of 2 acres of non, irrigated land or 4)2 acres of irrigated land including
purchase of land under the scheme and =ii> Share croppers / Tenant farmers
are eligible)
(3
F< Ce!1$%& Se-1*$ C%,1%& S#20'/ 0-7e.e f*$ I!+e01.e!1 P$*.*1*!
;IPS<
" !entral Sector !apital Subsidy scheme =Investment @romotion
Scheme> launched by the ?overnment of India in collaboration (ith *";"R
for development of privately o(ned non,forest (astelands in the country is
under implementation since 0116) Of the E. schemes covering about 02.. ha
sanctioned till date+ the coverage is mostly confined to the States of Tamil
*adu+ "ndhra @radesh and Maharashtra+ (ith Tamil *adu accounting for
more than 4. schemes) The scheme provides for subsidy upto 425 of ban/
loan (ith a ceiling of Rs) 42 la/h for ta/ing up plantation and other on,farm
developments in private (astelands) In vie( of the availability of substantial
area under non,forest (asteland in all States and the need to develop them+ a
nation(ide a(areness and publicity campaign (as launched by the
?overnment of India in association (ith *";"R for popularizing the
Investment @romotion Scheme =I@S>) "s a part of this effort+ (or/shops are
being organized by *";"R in different States/ regions)
5< Ref!%!-e S-7e.e f*$ f!%!-!" F%$.e$0 Se$+-e Ce!1e$ ;FSC<
*";"R has decided to e'tend 0..5 refinance facility to ban/s for financing
$armers Service !entres =$S!> set up in collaboration (ith Mahindra
Shubhlabh Services %td =MSS%> for providing various e'tension services to
farmers including supply of agri,inputs) $S! is intended to benefit farmers by
(ay of higher yields and productivity through private sector participation in
technology transfer and e'tension services)
($
S-7e.e f*$ R#$%& F!%!-e E11.2F(
S;I !aters to the needs of agriculturists and landless agricultural
labourers through a net(or/ of --.. rural and semi,urban branches)There are
134 specialized branches (hich have been set up in different parts of the
country e'clusively for the development of agriculture through credit
deployment)These branches include E43 "gricultural evelopment ;ranches
=";s> and 2E3 branches (ith "gricultural ;an/ing ivisions =";s> and 4
"gricultural ;usiness ;ranches at !hennai and Dyderabad catering to the
needs of hitech commercial agricultural projects)
The ;an/ has achieved tremendous gro(th in agricultural credit)"s on
March 4..1 +it has covered E6 la/h farmers (ith loan outstanding of Rs)
0E1-4 crores + accounting for 465 of total agricultural advances of @ublic
Sector ;an/s =@S;s>
C$*, L*%!
S;I offers financial assistance to meet cultivation e'penses for various
crops as short Term %oan) 8ith a repayment period not e'ceeding 06 months+
the !rop %oan is e'tended in the form of direct finance to cultivators)
E&"2&1/,"griculturists+ Tenant farmers and Share !roppers (ho actually
cultivate the lands are eligible for these loans) "ll categories of farmers ,
Small/Marginal =S$/M$> and others are included)
P$*'#-e .%$Be1!" &*%! 0-7e.e
The ;an/ e'tends financial assistance to help farmers store produce on
their o(n to avoid distress sale) The repayment period of the produce
mar/eting loan =@M%> does not e'ceed - months) $urther+ this facilitates
immediate rene(al of crop loans for ne't crop)
('
E&"2&1/8"ll categories of farmers , Small/Marginal =S$/M$> and others , are
eligible)
The ;an/ verifies the follo(ing aspects before granting the loanA
0>Service "rea "pproach)
4> Stoc/s at the borro(ersL residence/godo(n)
F> Stoc/ statement for valuation)
L*%! A.*#!1 Se-#$1/ 1* 2e f#$!07e'
Upto Rs)42+... @*+ @* ta/e delivery letter Dypothecation of
stoc/s)
"bove Rs)42+... Dypothecation of stoc/s)Mortgage of
properties)
G0%! -$e'1 -%$' 0-7e.e
The S;I offers the Hisan !redit !ard for farmers under short,term credit
introduced as per R;I/*";"R guidelines+ providing a running account
facility tofarmers to meet their production credit need and contingency needs)
E&"2&1/,"ll agricultural clients having good trac/ record for the last t(o
years are eligible for the Hisan !redit !ard) Minimum credit limitA Rs)F.../,
*e( borro(ers re<uiring crop loans can also avail this product)
!redit limit is based on operational land holding+ cropping pattern and scale of
finance) 8ithdra(als can be made using easy and convenient (ithdra(al
slips) The Hisan !redit !ard is valid for F years+ subject to annual revie()
A"$-#&1#$e 1e$. &*%!0
S;I gives agricultural term loans in the form of direct finance to cultivators
to create assets facilitating crop production/income generation) Repayments
span not less than F years and not e'ceeding 02 years) "ctivities broadly
covered are land development+ minor irrigation+ farm mechanization+
((
plantation and horticulture+ dairying+ poultry+ sericulture+ dry land+ (aste land
development schemes+ etc)
E&"2&1/,"ll categories of farmers,small/medium,and agricultural labourers
are eligible for agricultural term loans+ provided they have necessary
e'perience in the activity and the re<uired land area)
L%!' De+e&*,.e!1 S-7e.e0
The S;I gives credit solutions for land development programmes in the
form of direct finance to cultivators aimed at better productivity) %oans under
this head cover various activities li/e land clearance =removal bushes+ trees+
etc)>+ land leveling and shaping+ contour/graded bunding+ bench terracing for
hilly areas+ contour stone (alls+ staggered contour trenches+ disposal drains+
reclamation of saline/al/aline soils and fencing)
E&"2&1/(%oans cover various activities li/e digging of ne( (ells =open/bore
(ells>+ deepening of e'isting (ells =traditional/in(ell bore>+ energisation of
(ells =oil engine/electrical pump set>+ laying of pipe lines+ installing
drip/sprin/ler irrigation system and lift irrigation system)
)!*$ I$$"%1*! S-7e.e0
S;I provides credit for creating ne( source of irrigation by e'ploiting
underground (ater+ energyisation of (ells+ conveyance of (ater+ judicious use
of available (ater+ etc)
%oans cover various activities li/e digging of ne( (ells =open/bore (ells>+
deepening of e'isting (ells =traditional/in(ell bore>+ energisation of (ells =oil
engine/electrical pump set>+ laying of pipe lines+ installing drip/sprin/ler
irrigation system and lift irrigation system)

(%
F%$. )e-7%!0%1*! S-7e.e0
S;I provides credit for purchase of farm e<uipment and machinery for
agricultural operations)
This mode of finance covers activities ranging fromA @urchase of tractors+
trailers+ cultivators+ cage (heels+ po(er tillers+ combine harvesters+ po(er
sprayers+ dusters+ etc)
E&"2&1/, is ascertained on the basis of minimum area re<uirementsA
Tractors , 6 acres of irrigated area @o(er tiller , 2 ,- acres !ombine harvester
, 4. acres
F!%!-!" *f C*.2!e H%$+e01e$0:
o " farmer should o(n minimum 6 acres of irrigated land)
o *on,farmer entrepreneurs capable of utilizing combine harvester for
custom hiring (or/ are also eligible)
o !ombine harvester should be utilised for a minimum of 0... hours of
productive (or/ in a year)
o Unit cost (ill include cost of combine harvester and accessories+ if any)
G0%! 5*&' C%$' S-7e.e:
E&"2&1/,$armers (ith e'cellent repayment record for at least past 2
years) *e( farmers are not eligible for the product)

P#$,*0e,Investment credit for (hich term loans are ordinarily sanctioned)
The scheme also includes major family e'penditures li/e marriages and
education of children)
L%!' P#$-7%0e S-7e.e:
E&"2&1/,Small/marginal farmers+ tenants+ share,croppers o(ning less
than 2 acres of unirrigated / 4)2 acres irrigated land in their o(n name and
landless agricultural labourers are eligible to avail loan under the scheme+
provided they are our e'isting borro(ers (ith record of prompt repayment
(#
of loans) O(n land before and after purchase should not e'ceed 2 acres
irrigated / 4)2 acres irrigated)
Se-#$1/,%and to be purchased (ith ;an/ finance (ill be mortgaged as
security) *o other security (ill be insisted upon)
Re,%/.e!1,:ntire loan (ill be repayable in 0. years in half,yearly
instalments) "de<uate gestation period (ill be allo(ed for development
of land for cultivation)
Se&f He&, 5$*#,0 ;SH50<
SD?s are self managed homogeneous groups of economically bac/(ard
people that promote savings among themselves and pool the savings) These
pooled resources are supplemented by e'ternal resources i)e) ban/ credit
(hen these groups gain e'perience) The Self Delp ?roups %in/age
@rogramme of S;I is under implementation since 0114) "t the end of March
4..0+ the ;an/ has financed 42+... self,help groups (ith aggregate credit
limit of Rs E- crore)
00)F ?%$*#0 F!%!-e S-7e.e Offe$e' F$*. 5*+e$!.e!1(
)%7%$%071$% R#$%& C$e'1 P$*@e-1 ;)RCP< 8 I!'% 8 O#1 &!e *f 17e ,$*@e-1
fe%1#$e0 %!' I.,%-1
5e!e$%&A "ccess to credit has long been considered a major poverty
alleviation strategy in India) " variety of credit,lin/ed programmes
supplemented by subsidies have been implemented) The Integrated Rural
evelopment @rogramme =IR@> operating since 0136,31 has been a major
national rural poverty alleviation programme (ith a large credit component)
Under this programme+ nearly 2F million families belo( poverty line (ere
assisted (ith ban/ credit of Rs)F0 billion and subsidy of Rs) 0.)2 billion upto
F0st March 0116+ but its impact had not matched the resources spent) This
(as due to reasons li/e provision of supply rather than demand,led credit+
("
loans not tailored to meet needs of individual enterprises+ lac/ of aftercare
support+ (ea/ lin/ages lac/ of supervision over loan utilisation etc) $urther+
there (as no effective involvement of the people at any stage of
implementation of the programme) "s a result+ the incidence of high overdues
and high transaction cost for the ban/s in financing the rural poor became a
matter of concern for the policy,ma/ers)
)%7%$%071$% R#$%& C$e'1 P$*@e-1 ;)RCP<
"gainst this bac/drop the MR!@ supported by I$" (as evolved as an
innovative approach to poverty reduction (ith people9s participation) The
strategy for implementation of this project has been devised in such a manner
that the rural poor assume centre,stage and their participation ensured at all
stages of the project viz) planning+ implementation and monitoring) The
e'perience gained sho(s that once the people9s participation is invo/ed at the
planning stage itself a strong sense of o(nership of the project develops
among the people (hich stimulates them to actively involve in the subse<uent
phases of the project)
The MR!@ being implemented (ith an outlay of USB E6)F2 million is financed
by an I$" loan of USB 41)4 million supplemented by a contribution of USB
0E)13 million from ?overnment of India/?overnment of Maharashtra and USB
0)-2 million from participating ban/s) The @roject (hich is implemented by a
number of ban/ing institutions+ ?overnment agencies and *on ?overnmental
Organisation =*?Os> since 011E,12 (as designed (ith the principal goal )
%)
C$e'18C#.8S#20'/ S-7e.e f*$ R#$%& H*#0!".
I!1$*'#-1*!A, The !redit,!um,Subsidy Scheme for Rural Dousing has been
conceived for rural households having annual income upto Rs)F4+.../,)
O2@e-1+e, To enable/facilitate construction of houses for all rural households
(ho have some repayment capacity)
T%$"e1 5$*#,, The target group under the scheme (ill be the rural
households having an annual income of Rs) F4.../, only) Do(ever
preference (ill be given to rural households (ho are belo( poverty line)
S%&e!1 Fe%1#$e0(8
Subsidy upto Rs)0.+.../, per eligible household in plain areas and
Rs)00+.../, in hilly/difficult areas)
%oan upto Rs)K4K.+.../, per household)
Sanitary latrine and smo/eless chulha are integral part of the house)
A-7e+e.e!1
The scheme has been launched (ith effect from 0 "pril+ 0111 and is in the
process of implementation)
F#!'!" P%11e$!
$unds are shared by the !entre and State in the ratio of 32A42)
I.,&e.e!1!" A"e!-/
The Implementing "gency for the !redit !um Subsidy Scheme for Rural
Dousing may be the State Dousing ;oard+State Dousing !orporation+
%1
specified Scheduled !ommercial ;an/+ Dousing $inance Institution or the
R"/U@)
C*#!-& f*$ A'+%!-e.e!1 *f Pe*,&eC0 A-1*! 4 R#$%& Te-7!*&*"/
;CAPART<
Recognizing the need for an organisation that (ould coordinate and
catalyze the development (or/ of voluntary agencies in the country+
particularly to ensure smooth flo( of benefits to the underprivileged and socio,
economically (ea/er sections of society+ ?overnment of India+ in September+
016- set up the !ouncil for "dvancement of @eople9s "ction and Rural
Technology =!"@"RT>+ a registered society under the aegis of the
epartment of Rural evelopment+ by merging t(o autonomous bodies+
namely+ @eople9s "ction for evelopment of India =@"I> and !ouncil for
"dvancement of Rural Technology =!"@"RT>)
The main objectives of the !"@"RT are A,
To encourage+ promote and assist voluntary action for the
implementation of projects intending enhancement of rural prosperity)
To Strengthen and promote voluntary efforts in rural development (ith
focus on injecting ne( technological inputsC
To act as a catalyst for the development of technology appropriate for
rural areas)
To promote+ plan+ underta/e+ develop+ maintain and support
projects/schemes aimed at all,round development+ creation of
employment opportunities+ promotion of self,reliance+ generation of
a(areness+ organisation and improvement in the <uality of life of the
people in rural areas through voluntary action)
%2
$I*I*?S
%3
F!'!"0(
0)To remove the rural poverty +The *ationational rural employment ?uarantee
programme is an initiative to provide minimum number of days of (or/ in an
year to unemployed )
4)The rural counterparts have the need of finance for the purpose of purchase
of seeds +fertilizers+ pestisides+ payment of (ages);irth/ death of family )
F)The rural counter parts finance the money from various sources li/e
a> *on institutional sources and institutional sources li/e ;ig
landlords+mobile traders+ credit co,operative+ %and evelopment
;an/+commercial ban/)
E)Rural area still suffer from poor housing and shelter )The government has
ta/en initiatives to construct houses (ith regard to type of houses +E05
of rural population have pucca houses +F-5semi,pucca houses and
4F5Hachcha houses+ against 445pucca +F35semi pucca and
E05/achcha houses in 0160 );ut the problem continues due to
unchec/ed gro(th in population )The sanitation coverage has gone up
to FF5 from 445in 4..0 )The plan is to achieve total sanitation by
4.02+by providing sanitation coverage to each and every household
E) Our postage and telegram department covers small to(ns and villages
through a net(or/ of 0+E.... post offices )The government has ta/en
initiatives in developing communication facilities by e'panding landline
and mobile phone service to rural and semi,urban areas +there are 404
million phone subscribers in the country and the target is to have 42.
million phone by 4..3)
%$
R:!OM"*"TIO*
%'
Re-*..e!'%1*!(
"s per the above evaluation of the major problems and issues relating
to the rural financial system I can submit the follo(ing observations #
recommendationsA
Interest ratesA Interest rates must be different for different categories)
$irst it should be concessional rate e'clusively for small and marginal
farmers at 0)25 to 00)25 # Secondly+ there should be a higher rate of
interest applicable to the rest of the agricultural borro(ers upper limit
for it is02)25
Infrastructure evelopmentA tempo of agricultural lending has been lo(
in the eastern regional states li/e ;ihar+ Orissa and 8est ;engal # in
the *orth :astern States) So "gricultural and Rural Infrastructure
evelopment !orporation should be setup in these area (hich (ill
concentrate on building up necessary bac/(ard and for(ard lin/ages
and supporting services as (ell as formulate location specific schemes
for accelerating the transformation of agriculture and to arrange for
funding of the schemes)
Insurance schee: !rop insurance scheme (hich (as introduced in
India from Hharif 0162 covering major cereal crops+ oilseeds and
pulses) The sum insured (as limited to Rs)0.+... per farmer
irrespective of <uantum of crop loan and the total sum insured (ould
be limited to 0.. percent of the crop loan disbursed) @roper research
should be done by statutory crop insurance corporation)
)ecovery of dues: Recovery is important for survival of the ban/s+ it is
important that a common legal frame(or/ covering cooperatives and
commercial ban/s for recovery of dues for the country as a (hole
should be formulated) # The government should setup State level
tribunals for adjudication)
%(
)ationalisation: In present scenario each village is allotted to a
commercial ban/ branch under the Service "rea approach) "s per the
analysis each bloc/ should be allotted to a ban/ (hich has the largest
presence in the bloc/ through its branches) 8hich (ill reduce the cost
of supervision+ improve <uality of monitoring and be beneficial to the
customers)
%%
CONCLUSION
%#
C*!-&#0*!(
"griculture and its associated activities are found constituting the
economic base and the main source of livelihood and employment for
the people in the state) Do(ever+ unprecedented gro(th of population
on one hand and decreasing rate of available agriculture land along
(ith degradation of supporting natural resources as re<uired for
sustaining crop productivity on the other have been seriously forcing
the problems of sustaining livelihood for farming communities) It is
becoming difficult to do the farming activity (ithout e'ternal or internal
sources) In this conte't the significance of e'tending non,farm sector
becomes only alternative but it also re<uired finance assistance for its
development)
Means a lot of hard (or/ # government a(areness is re<uired to flo(
the finance assistance in Rural :conomy) ;ut various scheme (hich
are provided by the various ban/s # government should be specific in
its eligibility criteria to stop the misuse of these funds by large farmers
and to ensure that the credit reaches the farmers (ho is in need of
finance)
%"
LI)ITATIONS OF
STUD6
#)
L.1%1*! (
0 "s (e /no( that India is underdeveloped country has big population in rual
area about 34)45 and has lo( literacy level due the literacy problem rural
counter parts are not a(are regarding sources of finance)
4)There are lot of social (elfare programmes and scheme for rural area (hich
is introduced by the government is not successful running li/e *R:?" )
F)There are lot of problem facing by the rural counter parts li/e transportation
problem +lo( income level+ lo( standard of living +collective sanction )They
have need of finance for fulfilling these re<uirement
E)The rural counterparts are not a(are (ith technology)
#1
BIBLIOGRAPHY
#2
B2&*"$%,7/(
Sr.No. Name Author
1. In+ian conom4 =u++ar 7att.
5.P.*. Sun+.aram.
2. State Ban< o; In+ia Gournal!
3. 3-ricultural 6inancin- In
In+ia
S.N.G.o!al
$. =ural mar<etin- R) /rishnamoorthy
'. =ural *ar<etin- Romeo S) Mascarenhas
B2&*"$%,7/(
((()nabard)org
((()rbi)gov
((()sbi)co)in
#3
#$