credit in rural areas

Question 1

why is credt imp in rural areas

Answer 1

in india, majority farmers are small and marginal.around 1/3rd of ppl in rural areas are farmers and live in poverty
. moreover there is a gap btwn the sowing and harvesting of crop, where the farmer is unemployed bc he
1. has no other non-farm activities
2. has no awareness abt existing job opp
3. isnt skilled enough to work in majority job opp available in the urban areas
. this means that for a long period of time the farmers are in poverty since they do not earn anything
. hence they req money not just for farming purposes, but also for consumption purposes
. for this they go the moneylenders, since they are the most available source of money for the farmers in the rural areas
. but the moneylenders only care abt profits and hence exploit the farmers
. they collect huge sums as rate of interest and even manupulate their ac to gain more profit
. they also dd for their assets in failure of repayment
. thus credit facilities in the rural areas are imp

Question 2

what is rural credit

Answer 2

credit given to the farmers in rural areas

Question 3

classification of rural credit

Answer 3

based on time:
1. short term 
2. medium term
3. long term
based on purpose:
1. prdtive
2. unprdtive

Question 4

short term credit needs

Answer 4

. only for a short period of time
. 6 months to 15 months
. for buying fertlzers, tools, manure, etc

Question 5

medium term credit needs

Answer 5

. for a medium period of time
. 15 months to 5 years
. for buying tools and equipments, digging wells, constructing cattle shed

Question 6

long term credit needs

Answer 6

. long term
. 5 years to 20 years
. for buying heavy machinery, land, tractors, etc

Question 7

credit for prdtive purposes

Answer 7

enhances agr prdtity

seeds, tractors, land, etc

Question 8

credit for unprdtive needs

Answer 8

does not enhance the prdtivity of agr

for meeting social obligations like marriage, paying back old debts, etc

Question 9

rural credit before and after independence

Answer 9

. before independence, majority farmers borrowed money from moneylenders
. after independence, in 1969, the govt initiated a social banking and multi agency approach for providing adequate credit facilities at reasonable interest rates for the farmers

Question 10

sources of rural credit

Answer 10

1. institutional sources

2. non institutional sources

Question 11

institutional sources of credit

Answer 11

. non traditional sources
. came into existence when the govt intiated a social banking and multi agency approach
. several commercial banks were nationalised and thus shifted focus from informal setor to formal sector
. in 1980, 6 more banks were nationalised and gave more importance to institutional sources

Question 12

non institutional soures of credit

Answer 12

. traditional sources

. includes money lenders, traders and commission agents, landlords, and relatives

Question 13

moneylenders as a source of credit

Answer 13

. non inst/tradtional
. 94% before independence
. large IT
. profit, exploitation
. manipulate acc
. confiscate land and other assets

Question 14

traders and commission agents as a source of credit

Answer 14

. huge IT
. manipulate acc
. provide advance credit on the mortgage of crops
. fore them to sell crops at cheap prices

Question 15

landlords as credt source

Answer 15

. manipulate acc

. high IT

Question 16

relatives as credit source

Answer 16

. no IT

. can be repayed anytime, even after harvest

Question 17

main inst sources of credit

Answer 17

1. cooperative credit society
2. land dev banks
3. commercial bank credit
4. regional rural bank
5. self help groups
6. kudumbashree
7. nabard
8. rurban mssion

Question 18

cooperative credit society

Answer 18

. 1904
. helped shift focus from informal sector to formal sector
. 30% of today’s rural credit
. low IT
. objectives:
1. low IT
2. spread credit in all parts of country
3. free farmers from exploitation of moneylenders
4. ensure timely and continuous flow of credit to farmers

Question 19

land dev banks

Answer 19

. long term credit
. credit is advanced against the mortgage of land
. objectives:
1. long term credit
2. help farmers to purchase seeds, etc and also to construct structures on land
3. provide funds like subsidies to agr

Question 20

commercial bank credit

Answer 20

objectives:

1. directly help them by expanding their branches n rural areas
2. indirectly help them thru agents
3. create awareness about existence of credit facilities provided by them thru newspapers, tvs, radio, etc

Question 21

regional rural bank (RRB)

Answer 21

. set up to cover the gap btwn the credit structures in the rural area
. est as a part of 20 point program intro by PM late smt Indra Gandhi
. 1975- 5 RRBs were est
. eg. South Malabar Grameen Bank and North Malabar Grameen Bank in Kerala
. obj:
1. to open branches in those areas where credit facilities are unavailable
2. to provide credit facilities to small and regional farmers

Question 22

shg

Answer 22

. self help groups
. set up to fill the gap in the formal credit sources bc they have proved to be insufficient and has not been fully integrated
. objectives:
1. promote thrift with minimum contribution from each member
2. money is borrowed from this pooled money and an be repayed with reasonable rates of interest n small installments]
3. manly for consumption purposes
4. women empowerment
5. micro financing inst like ESAF, Ujjiran financial services

Question 23

kudumbashree

Answer 23

. successful women empowerment program
. launched poverty eradication mission in 1998
. inaugurated by A B Vajpay
. Kerala’s Kudumbashree has implemented several projects led by women

Question 24

NABARD

Answer 24

. National Bank for Agriculture and Rural Development
. 1982
. functions:
1. apex body to all financing systems
2. coordinates the activities of other financing systems
3. provide employment opp in non-farm sectors
4. promote strength of credit facilities
5. control and evaluate programs financed by t

Question 25

rurban mission

Answer 25

. feb 21, 2016
. obj:
1. bridge rural-urban divide economically and technologically
2. emphasize on rural dev and poverty eradication
3. spread dev in the area
4. attract investment to rural areas

Question 26

critical appraisal of rural credit

Answer 26

positive:
1. improved output and employment of farm and non-farm sector esp after green rev
2. helped farmers to avail services and credit
3. famines became a thing of the past
4. achieved food security
5. buffer stock dev
negative:
1. small and marginal farmers are yet to receive the benefits
2. they are still at the mercy of cut throat village money lenders
3. farmers ocasoanlly default
4. 50% of defaults are willful defaults
5. to improve this situation, the culture of saving, credit, and prompt repayment has to be dev