credit in rural areas Flashcards
why is credt imp in rural areas
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
what is rural credit
credit given to the farmers in rural areas
classification of rural credit
based on time: 1. short term 2. medium term 3. long term based on purpose: 1. prdtive 2. unprdtive
short term credit needs
. only for a short period of time
. 6 months to 15 months
. for buying fertlzers, tools, manure, etc
medium term credit needs
. for a medium period of time
. 15 months to 5 years
. for buying tools and equipments, digging wells, constructing cattle shed
long term credit needs
. long term
. 5 years to 20 years
. for buying heavy machinery, land, tractors, etc
credit for prdtive purposes
enhances agr prdtity
seeds, tractors, land, etc
credit for unprdtive needs
does not enhance the prdtivity of agr
for meeting social obligations like marriage, paying back old debts, etc
rural credit before and after independence
. 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
sources of rural credit
- institutional sources
2. non institutional sources
institutional sources of credit
. 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
non institutional soures of credit
. traditional sources
. includes money lenders, traders and commission agents, landlords, and relatives
moneylenders as a source of credit
. non inst/tradtional . 94% before independence . large IT . profit, exploitation . manipulate acc . confiscate land and other assets
traders and commission agents as a source of credit
. huge IT
. manipulate acc
. provide advance credit on the mortgage of crops
. fore them to sell crops at cheap prices
landlords as credt source
. manipulate acc
. high IT
relatives as credit source
. no IT
. can be repayed anytime, even after harvest
main inst sources of credit
- cooperative credit society
- land dev banks
- commercial bank credit
- regional rural bank
- self help groups
- kudumbashree
- nabard
- rurban mssion
cooperative credit society
. 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
land dev banks
. 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
commercial bank credit
objectives:
- directly help them by expanding their branches n rural areas
- indirectly help them thru agents
- create awareness about existence of credit facilities provided by them thru newspapers, tvs, radio, etc
regional rural bank (RRB)
. 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
shg
. 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
kudumbashree
. 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
NABARD
. 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
rurban mission
. 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
critical appraisal of rural credit
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
