The credit hierarchy
KV
Raghavulu gives an insight to the agriculture credit network in India
and expounds the role that every single bank has to play in strengthening
the system
The
co-operative credit system in India is structured into separate arms
for short-term credit (production credit structure) and long-term
credit (investment credit structure). The short-term co-operative
credit structure has at its base the Primary Agricultural Credit Societies
(PACS) dealing mainly in credit and are affiliated to District Central
Co-operative Banks at the district level, which in turn are affiliated
to the State Co-operative Banks (SCBs) at the state level.
The smaller states and the union territories have a two-tier structure,
under which the credit requirements of the PACS are directly met by
SCBs. Under the long-term co-operative structure, Land Development
Banks cater to the investment credit requirements in the rural areas.
Incidentally, the organisational structure for credit disbursement
is not of a uniform pattern across the country. A majority of states
have a federal setup with the State Land Development Bank (SLDB) at
the state level and affiliated Primary Land Development Banks at the
district or taluka levels, while in other states, the structure is
a of unitary type, where the operational units below the SLDB are
its branches.
The Government of India inducted the commercial banks in the country
into the realm of rural financing with the nationalisation of 14 major
banks in 1969. The number of branches of commercial banks, which was
5,175 in 1969, increased manifold to 65,408 by December 2001.
In order to provide access to low-cost banking facilities to the weaker
sections of the rural population, Regional Rural Banks (RRBs) were
established in 1975. These banks were established at the district
level and the scope of each bank covers 2-3 districts.
Agricultural credit is estimated to have increased by 15 per cent,
from Rs 69,560 crore in 2002-03, to Rs 80,000 crore in 2003-04. In
the budget for 2004-05, the Government of India has fixed a target
of doubling the flow of agricultural credit within the next three
years. During 2004-05, agricultural credit will be enhanced to Rs
1,05,000 crore, representing a 30 per cent increase over the flow
of credit during the previous year. The share of commercial banks,
co-operatives and RRBs in agriculture credit has been fixed at Rs
58,000 crore, Rs 39,000 crore and Rs 8,500 crore respectively.
(For more details see pgs 53-54) Nabard, as a premier institute for
agriculture and rural development, apart from providing refinance
to banks, also plays an important role in institutional development,
particularly in respect of co-operative banks. It also participates
in promotional activities while providing grants for various activities
being taken up for agricultural development across the country. Since
its inception, the organisation has taken various developmental initiatives
to facilitate enhancing the credit flow for agriculture and rural
development in the country. Some of the recent initiatives in this
regard include developing nonfarm sector activities, the outreach
of the rural credit delivery system, women’s empowerment, supporting
research and development activities in the areas of agriculture and
rural development, focusing on watershed development, the integrated
development of backward areas, and setting up agri-clinics and agri-business
centres.
Nabard, in its efforts to attain the goal of doubling agricultural
credit in three years and to provide support to the credit structure,
has issued guidelines to bankers to increase the coverage of small
farmers and marginal farmers by institutional credit, to review and
refix the scales of finance in consultation with the District Level
Technical Committee. Standing guidelines for providing relief to farmers
have also been issued to SCBs and RRBs. They include allowing the
conversion/rescheduling of loans in the case of crop failure due to
natural calamities, and for farmers who are unable to meet their repayment
commitments due to illness, failure of assets, and so on. Nabard has
also issued guidelines to banks to provide relief by way of restructuring
their loan schemes and stipulating repayment in instalments.
Guidelines have also been set forth to issue loans to farmers to repay
loans issued by money-lenders’, as also to provide fresh loans
to carry out agricultural operations for the current season. State
governments have also been requested to provide the required extension
services, which include infrastructure, to augment credit absorption
in rural areas.
Nabard, along with the Indian Banks Association(see story on pgs 20-22),
has devised...
contd...
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