Credit and Marketing in Rural Areas

What is Gestation Period?

It is time between

Date of Sowing

and

Date of Realization of Income

In easy language,

If a farmer grows crop today, it will take time to grow up and only when they are cut, they can be sold in market after some months

This Period is called Gestation Period

Why do farmers need Credit?

or

Why do Farmers borrow money?

Farmers need funds during gestation Period

If a farmer grows crop today, it will take time to grow up and only when they are cut, they can be sold in market after some months

Farmers will realise income

During this Period farmers have to inccur lot of expenses

like

Expenses on growing Crops (Seeds, fertilizers, labour, Pesticides)

Personal Expenses (Family Wedding, Day to Day expenses)

To meet these expenses, Farmers borrow funds

What was Condition of Agriculture Credit at the time of Independence?

At time of Independence

Farmers used to borrow funds from Moneylenders and Traders

These People charged high interest rates and manipulated the accounts

This kept people in debt trap

What Measures were taken by Govt to meet needs of Rural Credit?

1. Social banking

India adopted Social Banking in 1969

Banking system in which banks subsidize the provision of banking services to poor and the focus is towards serving the masses is known as social banking.

India established different type of institutions like Commercial banks, Regional Rural banks, Cooperative banks etc whose objective was to give loan at less rate of interest to farmers.

2. NABARD

National Bank for Agriculture and Rural Development was set up in July, 1982

The main funtion was to coordinate the activities of all institutions involved in rural financing system

3. Production Oriented Lending

Green Revolution bought many changes in Credit System

Production Oriented Lending was launched by institutions which gave credit during gestation period of crop

Different Institutions Involved in Lending

Multi Agency Institutions are involved in Rural Lending like:

1. Commercial Banks
2. Regional Rural Banks
3. Cooperatives
4. Land Development Banks
5. Self Help Groups (SHG)

What is Contribution of Self Help Group to Rural Lending?

In Self Help Groups

All farmers contribute a small amount

They pool the total

Credit is given to needy members at very less rate of interest

Since amount involved is very small, it is called micro credit programs

SHG is more popular among men or women?

SHG is particularly popular among women

Around 54 lakhs women are member of SHG

Most of these borrowings are for consumption purposes like spending for wedding etc and not for production process

This is because nornally male members of family take decision regarding production (not female)

What measures have been taken by Govt to Promote SHG?

Government also contributes amount to SHG along with the members

10,000 - 15,000 Per SHG

+

2.5 Lakhs per SHG (as Community Investment Support Fund)

What are Criticisms (or Drawbacks) of Rural Banking Systems in India

1. High Agriculture Default Rates

Many Farmers fail to pay back loans.

Some of this is due to crop failure.

Some farmers also do not repay loans deliberately as political parties promise waiving of their loans

2. No Deposit MOBILISATION

Banks have not encouraged the habit of thrift or savings in farmer

Hence, farmers do not save money and keep it in banks

If they kept this money in banks, deposits of banks will increase and they could give more loans

3. Lack of Expansion and Promotion of Rural Bankings

Reforms made in 1991 did not focus on expansion of rural bankings

Hence, there are lack of banks and credit facilities in remote areas

Why are many farmers committing suicides?

They commit suicide because of :

1. Loss due to Crop Failure
2. Pressure of Money lenders due to Failure to Pay Loans and Interest
3. Lack of alternative employment opportunities

Regional Rural Banks came into existence on Gandhi Jayanti in 1975

NCERT Question

Question 2

Discuss the importance of credit in rural development.

Question 3

Explain the role of micro-credit in meeting credit requirements of the poor.

Question 6

Critically evaluate the role of the rural banking system in the process of rural development in India.

MCQ Other Books

Question 1

In the following questions, select the correct answers:

____ is the apex body which coordinates the functioning of different financial institutions working for expansion of rural credit.

1. NABARD
2. Self-Help Groups
3. Regional Rural Banks
4. Commercial Banks

Question 2

The problems faced in Rural Banking are:

1. High Agriculture Default Rates
2. No Deposit MOBILISATION
3. Lack of Expansion and Promotion of Rural Bankings
4. All of these

Question 3

Government established the institutional sources of finance:

1. To provide adequate credit to farmers at a cheaper interest rate
2. To assist small farmers in raising the agricultural productivity and maximising their income
3. To earn profits
4. All of these

Question 4

The scheme of "Micro Finance" is extended through:

1. Self-Help Groups
2. Land Development Banks
3. NABARD
4. Regional Rural Banks

Question 5

Which one of the following is not a non-institutional source of credit?

1. Money Lenders
2. Co-operative Credit
3. Traders and commission agents
4. Land development bank

Question 1

Identify the correctly matched item from Column A to that of Column B:

1. 1 – (a)
2. 2 – (b)
3. 3 – (c)
4. 4 – (d)

Question 2

When was NABARD constituted?

1. July, 1982
2. June, 1982
3. July, 1980
4. July, 1984

Question 3

Which institute do not provide direct loan to farmers?

1. NABARD
2. Commercial Bank
3. Regional Rural Bank
4. Primary Agriculture Credit Society

Question 4

Identify the correctly matched pair in Column A and Column B from the following:

1. 1 – (a) Loan taken from:
2. 2 – (b) Commerical Banks
3. 3 – (c) Regional Rural Banks
4. 4 – (d) Cooperatives

Question 5

Which of the following is not an institutional credit agency?

1. Co-operative Societies
2. Commercial and Regional Rural Banks
3. NABARD
4. Desi Banker