UNIT 5

AGRICULTURAL FINANCES AND RETAIL LENDING

By
Dr Virupaksha Goud

Syllabus:- Agricultural finances and Retail lending- Crop loans- Crop insurance schemes- Dairy-
Sericulture- Poultry- Animal husbandry – Horticulture – Gobar gas – Kissan credit cards – NABARD
initiatives – Lead bank schemes – Retail banking advances – Concept – Retail banking products –
Consumer credit financing

AGRICULTURAL FINANCE

Meaning:

Agricultural finance generally means studying, examining and analyzing the financial aspects
pertaining to farm business, which is the core sector of Pakistan. The financial aspects include
money matters relating to production of agricultural products and their disposal.

Definition of Agricultural finance:

Murray (1953) defined agricultural. Finance as “an economic study of borrowing funds by
farmers, the organization and operation of farm lending agencies and of society’s interest in
credit for agriculture.”

Tandon and Dhondyal (1962) defined agricultural. Finance “as a branch of agricultural
economics, which deals with and financial resources related to individual farm units.”

CROP LOANS

Crop Loans are also called short term loans for “Seasonal Agricultural Operations.” The
Seasonal Agricultural Operations are undertaken in the process of raising various crops and are
seasonally recurring in nature. The activities include, among others, ploughing and preparing
land for sowing, weeding, and transplantation where necessary, acquiring and applying inputs
such as seeds, fertilizers, insecticides etc. and labour for all operations in the field for raising &
harvesting the crops. Thus, the credit required to meet the current expenditure for raising the
crops on land till the crops are harvested is construed as production or short term credit for
seasonal agricultural operations.

Term loans for investments towards land development, minor irrigation, purchase of farm
equipment’s and allied agricultural activities. The banks may fix the quantum of credit for term
and working capital limit for agricultural and allied activities, etc., based on the unit cost of the
asset/s proposed to be acquired by the farmer, the allied activities already being undertaken on
the farm, the bank’s judgment on repayment capacity vis-a-vis total loan burden devolving on

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the farmer, including existing loan obligations. The long term loan limit is based on the proposed
investments during the five year period and the bank’s perception on the repaying capacity of the
farmer.

Crop Loan Objective:-

The scheme aims at providing adequate and timely cred it for the comprehensive credit
requirements of farmers under single window for their cultivation and other needs as indicated
below:
 To meet the short term credit requirements for cultivation of crops
 Post-harvest expenses
 Produce Marketing loan
 Consumption requirements of farmer household
 Working capital for maintenance of farm assets, activities allied to agriculture, like dairy
animals, inland fishery and also working capital required for floriculture, horticulture etc.
 Investment credit requirement for agriculture and allied activities like pump sets,
sprayers, dairy animals, floriculture, horticulture etc

Crop Loan Eligibility

 All farmers-individuals/Joint borrowers who are owner cultivators.
 Tenant farmers, Oral lessees and Share Croppers etc.
 SHGs or Joint Liability Groups of farmers including tenant farmers, share croppers etc.

Security for Crop Loan

Security will be applicable as per RBI guidelines prescribed from time to time. Security
requirement may be as under:
 Hypothecation of crops or as per the extant RBI guidelines.
 Collateral security may be obtained at the discretion of Bank for loan limits above
Rs.1.00 lakh in case of non tie-up and above Rs.3.00 lakh in case of tie-up advances.
 In States where banks have the facility of on -line creation of charge on the land records,
the same shall be ensured.

CROP INSURANCE

Agriculture in India is highly susceptible to risks like droughts and floods. It is necessary to
protect the farmers from natural calamities and ensure their credit eligibility for the next season.
For this purpose, the Government of India introduced many agricultural schemes throughout the
country.

Objectives of Crop Insurance:

1. To provide insurance coverage and financial support to the farmers in the event of failure
of any of the notified crop as a result of natural calamities, pests & diseases.
2. To stabilise the income of farmers to ensure their continuance in farming.
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 3. To encourage farmers to adopt innovative and modern agricultural practices.
4. To ensure flow of credit to the agriculture sector

Crop insurance is purchased by agricultural producers, including farmers, ranchers, and others to
protect themselves against either the loss of their crops due to natural disasters, such as hail,
drought, and floods, or the loss of revenue due to declines in the prices of agricultural
commodities.

Insurance Products from Agriculture Insurance Company of India Limited (AIC)

Agriculture Insurance Company of India Limited (AIC) has been formed at the behest of
Government of India, consequent to the announcement by the then Hon'ble Union Finance
Minister in his General Budget Speech FY 2002-03 that, "to sub serve the needs of farmers better
and to move towards a sustainable actuarial regime, it was proposed to set up a new Corporation
for Agriculture Insurance".

AIC has taken over the implementation of National Agricultural Insurance Scheme (NAIS)
which, until FY 2002-03 was implemented by General Insurance Corporation of India. In
addition, AIC also transacts other insurance businesses directly or indirectly concerning
agriculture and its allied activities.

Presently the following insurance products are offered by AIC.

 Pradhan Mantri Fasal Bima Yojana
 National Agricultural Insurance Scheme
 Bio - Fuel Tree / Plant Insurance
 Cardamom Plant & Yield Insurance
 Coconut Palm Insurance Scheme (CPIS)
 Potato Crop Insurance
 Pulp Wood Tree Insurance Policy
 Rainfall Insurance Scheme For Coffee (RISC) - 2011
 Rubber Plantation Insurance
 Varsha Bima / RainFall Insurance
 Weather Insurance (RABI)

Pradhan Mantri Fasal Bima Yojana

The Pradhan Mantri Fasal Bima Yojana (Prime Minister's Crop Insurance Scheme) was
launched by Prime Minister of India Narendra Modi on 18 February 2016. It envisages a uniform
premium of only 2 per cent to be paid by farmers for Kharif crops, and 1.5 per cent for Rabi
crops. The premium for annual commercial and horticultural crops will be 5 per cent. The
premium rates to be paid by farmers are very low and balance premium will be paid by the

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Government to provide full insured amount to the farmers against crop loss on account of natural
calamities. Other highlights of the scheme are
 There is no upper limit on Government subsidy. Even if balance premium is 90%, it will
be borne by the Government.
 Earlier, there was a provision of capping the premium rate which resulted in low claims
being paid to farmers. This capping was done to limit Government outgo on the premium
subsidy. This capping has now been removed and farmers will get claim against full sum
insured without any reduction.
 The use of technology will be encouraged to a great extent. Smart phones will be used to
capture and upload data of crop cutting to reduce the delays in claim payment to farmers.
Remote sensing will be used to reduce the number of crop cutting experiments.

DAIRY

A Dairy Credit is aimed for Individuals and group of farmers for Purchase of high yielding milch
animals (Cattle: Indigenous breed like Gir, Tharparker, etc. and exotic breeds like Jersey,
Holstein fresian, etc. and in case of Buffalos: Mehsana, Jafarbadi, etc.), Construction of cattle
shed, Purchase of dairy equipment’s, chaff cutters, etc and expenditure incurred for
transportation of animals where the animals are not purchased locally. A dairy is typically
located on a dedicated dairy farm or in a section of a multi-purpose farm (mixed farm) that is
concerned with the harvesting of milk.

Objective of the Dairy scheme:-

 To promote setting up of modern dairy farms for production of clean milk
 To encourage heifer calf rearing, thereby conserving good breeding stock
 To bring structural changes in the unorganized sector so that initial processing of milk
can be taken up at the village level itself
 To upgrade the quality and traditional technology to handle milk on a commercial scale
 To generate self-employment and provide infrastructure mainly for unorganized sector

The loan is provided to dairy societies for modernization and creating infrastructures like
 Construction of "milk house or society office"
 Purchase of "Automatic milk collection system"
 Purchase of transport vehicles.
 Purchase of Bulk chilling unit

Extent of Dairy Credit Exposure

 Bullet Min. Rs. 20,000
 Bullet Max. Rs. 10 lakh

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Expected Margin
 For loans upto Rs.1.00 lakh : Nil
 For loans above Rs.1 lakh and upto Rs.5 lakh : 10%
 For loans above Rs.5 lakh and upto Rs.10 lakh : 15%
 For loans above Rs.10 lakh : 20%

Security
For Loans up to Rs. 1 Lac:
 Primary : Hypothecation of Livestock and other assets Created out of Bank finance.
 Collateral : Nil
For Loans above Rs. 1 Lac:
 Primary : Hypothecation of assets Created out of Bank Finance.
 Collateral : Creation of Mortgage/Charge on land having Market value at least to the
extent of 100% of loan amount.

LOAN FOR SERICULTURE

Sericulture is an agro-based, labour intensive, export oriented commercial activity. It is an
important cottage industry in Karnataka. Sericulture which was considered as a subsidiary
occupation in the past is being considered as major activity. Loan for Sericulture helps provide
hassle-free and adequate credit for Mulberry cultivation, purchase of equipment, construction of
rearing house, establishment of reeling unit, purchase of eggs, etc.

Eligibility:-
Farmers cultivating own land/registered leased land with irrigation facilities for cultivation of
mulberry.

Margin:-
 Up to Rs. 1,00,000/- - Nil.
 Above Rs.1,00,000/- - 10% to 15%.

Repayment Period:-
 Plantation -- 4 years
 Equipment -- 3 years
 Rearing House -- 5 years
 Reeling unit -- 7 years

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Security:-
Up to Rs. 1,00,000/- DPN, Hypothecation of assets created and crops.
 Over Rs. 1,00,000/- DPN, Hypothecation of assets created and crops, mortgage of land
&/or third party guarantee.

POULTRY INSURANCE AND POULTRY LOAN

Poultry are domesticated birds kept by humans for the eggs they produce, their meat, their
feathers, or sometimes as pets. There are many risks in the poultry business. Extreme weather is
just one condition that could lead to significant poultry losses. So it is important to protect the
investment you’ve made in your poultry operation with the right insurance solutions. The
Hartford’s Poultry Insurance Program can help – with flexible coverage that can be tailored to
the risks that could threaten the future of your business.

Poultry Insurance Program

Our poultry insurance program provides broad perils coverage for direct physical damage to
covered poultry resulting in death. It also includes coverage for:
 Debris removal
 Covered poultry in the custody of a common or contract carrier

Covered poultry on your vehicles

 Fire department service charges
 Newly acquired locations

FEATURES – POULTRY LOAN

Features and benefits  Loan for existing and new farmers for constructing
poultry shed, feed room and other equipment’s.
Eligibility :  Person having adequate experience or training in poultry
farming and land for constructing poultry sheds.
Collateral Security :  Mortgage of land on which the poultry shed and other
infrastructure are available or proposed to be constructed
covering at least 50% of advance
Margin :  25%
Repayment Period : 5 years including 6 month of grace period in bi monthly instalments.
Documents required  Duly filled in application form
 Identity proof- Voter ID card/PAN card/Passport/ Aadhaar
card,/Driving Licenseetc.
 Address proof: Voter ID card/Passport/Aadhaar
card/Driving license etc.

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 ANIMAL HUSBANDRY (LIVESTOCK)
Animal husbandry is the management and care of farm animals by humans for profit, in which
genetic qualities and behavior, considered to be advantageous to humans, are further developed.
The term can refer to the practice of selectively breeding and raising livestock to promote
desirable traits in animals for utility, sport, pleasure, or research.

Livestock (Animal husbandry) plays an important role in Indian economy. About 20.5 million
people depend upon livestock for their livelihood. Livestock contributed 16% to the income of
small farm households as against an average of 14% for all rural households. Livestock provides
livelihood to two-third of rural community. It also provides employment to about 8.8 % of the
population in India. India has vast livestock resources. Livestock sector contributes 4.11% GDP
and 25.6% of total Agriculture GDP.

Livestock Loan
1 Salient features
2 Eligibility for the Scheme 
3 Quautum of Finance
4 Margin
5 Security Norms
6 Repayment
 To meet capital expenditure and working capital requirement of Dairy,
Piggery, poultry, Goat/sheep rearing, fisheries and sericulture.
Individual farmers/Companies/Cooperatives of
farmers/Partnership/Proprietorship firms/ SHG/JLG of farmers.
 75-85% of the project cost
 For loans upto Rs. 1.00 lakh : Nil
 Above Rs. 1.00 lakh :15-25 %.
 For limits upto Rs. 1.00 lakh - Hypothecation of assets purchased out of bank
loan.
 Above Rs. 1.00 lakhs - Hypothecation of assets purchased out of bank loan
and Mortgage of land and building.
 Dairy : 4-5 years
 Poultry/Goat/Sheep/Fishery/Piggery/Sericulture : 3-7 years

HORTICULTURE
Horticulture is the branch of agriculture that deals with the art, science, technology, and business
of plant cultivation. It includes the cultivation of medicinal plant, fruits, vegetables, nuts, seeds,
herbs, sprouts, mushrooms, algae, flowers, seaweeds and non-food crops such as grass and
ornamental trees and plants. It also includes plant conservation, landscape restoration, landscape
and garden design, construction, and maintenance, and arboriculture.

1 Salient features
2 Eligibility for the Scheme 
3 Quautum of Finance
4 Margin
5 Security Norms
6 Repayment
 Financing farmers to establish new orchards, gardens and nurseries and
maintenance of the existing gardens.
 Loans granted for establishment of various tropical fruit, sub-tropical and
temperate fruit crops, vegetables and flowers.
Individual farmers/Corporate companies/Partnership/Proprietorship firms/
Co-operatives, Federation of Co-operatives of farmers/ SHG/JLG of farmers.
 75-85% of the project cost
 15-25 %.
 Hypothecation of assets purchased out of bank loan and/or Mortgage of
property.
 Repayment period varies from crop to crop and is as per the
NABARD guidelines.

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BIOGAS
Biogas typically refers to a mixture of different gases produced by the breakdown of organic
matter in the absence of oxygen. Biogas can be produced from raw materials such as agricultural
waste, manure, municipal waste, plant material, sewage, green waste or food waste. It is a
renewable energy source and in many cases exerts a very small carbon footprint. Biogas can be
produced by anaerobic digestion with anaerobic bacteria, which digest material inside a closed
system, or fermentation of biodegradable materials.

Biogas Loan
Expenses on construction of biogas chambers of steel gasholder and even construction of latrine,
if attached are recommended for financing. Many agencies, such as Z.P. / State Govt./ Central
Govt. are providing subsidy, which is treated as margin for the loan.

Purpose of Bio Gas Loan:-

To provide hassle-free and adequate credit, i.e, working capital and term loan for the
construction of bio-gas plant and to acquire accessories like stove, lamp, etc.

Eligibility of Biogas Loan:-

To avail the loan, the beneficiary farmers should have minimum number of cattle herds in
relation to the size of the plant and should have proper site for erection of the Plant.

Biogas Loan amount:-

The loan amount will depend upon the size of the plant. Subsidy is fixed by the Government of
India in relation to geographical areas, states, and notified hill areas/desert district. Subsidy is
given to all farmers irrespective of their Category, which will be treated as part of margin.

Margin amount required to obtain Biogas Loan:-

Up to Rs. 1,00,000/- - Nil.
Above Rs.1,00,000/- - 10% to 15%.

KISAN CREDIT CARD SCHEME

Crop loans are generally disbursed by the banks through the mode of Kisan Credit Card (KCC).
The Kisan Credit Card Scheme is in operation throughout the country and is implemented by
Commercial Banks, Cooperative Banks and RRBs. All farmers including small farmers,
marginal farmers, share croppers, oral lessees and tenant farmers are eligible for issuance of
KCC. KCC holders are also covered under Personal Accident Insurance Scheme (PAIS) against
accidental death/permanent disability. Bank assesses farmer’s eligibility on the basis of land
available for cultivation and the scale of finance fixed by the District Level Technical Committee
in that district and the credit history of the farmer. The scope of the KCC has recently been
broad-based to include term credit and consumption needs. Government has advised the banks to
convert Kisan Credit Card into a Smart Card cum Debit Card.

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Some of the main features of KCC scheme are:
 Assessment of crop loan component based on the scale of finance for the crop plus
insurance premium x Extent of area cultivated + 10% of the limit towards post-harvest /
household/consumption requirements + 20% of limit towards maintenance expenses of
farm assets.
 Flexi KCC with simple assessment prescribed for marginal farmers.
 Validity of KCC for 5 years.
 For crop loans, no separate margin need to be insisted as the margin is in-built in scale of
finance.
 No withdrawal in the account to remain outstanding for more than 12 months; no need to
bring the debit balance in the account to zero at any point of time.
 Interest subvention /incentive for prompt repayment to be available as per the
Government of India and / or State Government norms.
 No processing fee up to a limit of Rs. 3.00 lakh.
 One time documentation at the time of first availment and thereafter simple declaration
(about crops raised/ proposed) by farmer.
 KCC cum SB account instead of farmers having two separate accounts. The credit
balance in KCC cum SB account to be allowed to fetch interest at saving bank rate.
 Disbursement through various delivery channels, including ICT driven channels like
ATM/ PoS/ Mobile handsets.
FEATURES – KISAN CREDIT CARD
Features and benefits  Get interest at saving bank rate on credit balance in KCC
account
 Free ATM cum debit card (State Bank Kisan Card) for all KCC
borrowers
 Interest subvention @2%p.a.is available for loan amount
uptoRs. 3 Lacs
 Additional interest subvention @3% p.a.for prompt repayments
 notified crops / notified areas are covered under crop insurance
for all KCC loans
Eligibility :  All farmers – individuals/Joint cultivator owners
 Tenant farmers, oral lessees and share croppers etc.
 SHGs or Joint liability groups including tenant farmers.
Quantum of loan:  Quantum of loan for 1st year will be assessed on the basis of
Cost of cultivation, post-harvest expenses and farm
maintenance cost
 For subsequent 5 year loan will be sanction on the basis of
increase in scale of finance
Collateral Security :  Collateral security is waived for KCC limit up to Rs. 1 lac.
 Sanctioned KCC limit will be considered for the purpose of
fixing collateral security requirement

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 Rate of Interest :  Simple interest @7% p.a will be charged for one year or up to
the repayment due date, whichever is earlier.
 In case of non-repayment within the due dates interest is
applied at card rate
 Beyond due date interest will be compounded half yearly
Repayment : The repayment period may be fixed as per the anticipated
harvesting and marketing period for the crops for which a loan
has been granted.
Documents required  Duly filled in application form
 Identity proof- Voter ID card/PAN card/Passport/ Aadhaar
card,/Driving License etc
 Address proof: Voter ID card/Passport/Aadhaar card/Driving
license etc

NABARD
National Bank for Agriculture and Rural Development (NABARD) is an apex development
financial institution in India, headquartered at Mumbai with branches all over India. The Bank
has been entrusted with "matters concerning policy, planning and operations in the field of credit
for agriculture and other economic activities in rural areas in India". NABARD is active in
developing financial inclusion policy and is a member of the Alliance for Financial Inclusion.
NABARD has been working as Friend, Philosopher & Guide for Cooperatives and has taken
many initiatives since inception to make Cooperatives strong and vibrant institutions.

NABARD HISTORY
NABARD was established on the recommendations of B.Sivaraman Committee, (by Act 61,
1981 of Parliament) on 12 July 1982 to implement the National Bank for Agriculture and Rural
Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural
Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and
Development Corporation (ARDC). It is one of the premier agencies providing developmental
credit in rural areas. NABARD is India's specialised bank for Agriculture and Rural
Development in India.

The initial corpus of NABARD was Rs.100 crores. Consequent to the revision in the
composition of share capital between Government of India and RBI, the paid up capital as on 31
May 2017, stood at Rs.6,700 crore with Government of India holding Rs.6,700 crore (100%
share). The authorized share capital is Rs.30.000 crore.

International associates of NABARD include World Bank-affiliated organizations and global

developmental agencies working in the field of agriculture and rural development. These
organizations help NABARD by advising and giving monetary aid for the upliftment of the
people in the rural areas and optimizing the agricultural process.

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NABARD ROLE
NABARD has been instrumental in grounding rural, social innovations and social enterprises in
the rural hinterlands. It has in the process partnered with about 4000 partner organizations in
grounding many of the interventions be it, SHG-Bank Linkage programme, tree-based tribal
communities’ livelihoods initiative, watershed approach in soil and water conservation,
increasing crop productivity initiatives through lead crop initiative or dissemination of
information flow to agrarian communities through Farmer clubs. Despite all this, it pays huge
taxes too, to the exchequer – figuring in the top 50 tax payers consistently. NABARD virtually
ploughs back all the profits for development spending, in their unending search for solutions and
answers. Thus the organization had developed a huge amount of trust capital in its 3 decades of
work with rural communities.

A summary of such initiatives is indicated below.

 Assistance in Implementation of Revival Package for improving the health of Short Term
Rural Cooperative Credit system (STCCS).
 Sanction of credit limits under Short Term Seasonal Agricultural and other Operations to
State Cooperative Banks
 Direct refinance assistance to CCBs for short term multipurpose credit.
 Support for Seasonal Agricultural Operations to Commercial Banks
 Refinance for lending to farmers against Negotiable Warehouse Receipts.
 Support from PODF to develop PACS as Multi Service Centers.
 Refinance and Credit Facility to Marketing Federations
 Special Package with concessional rate of interest for North Eastern and other regions.
 Interest subvention for short term crop loans on the own funds involved by Cooperative
Banks.
 Creations of Cooperative Development Fund (CDF), primarily for Capacity Building &
Infrastructure Development of PACS.
 Setting up of STCRC to augment NABARD resources for Short Term Credit facilities to
Cooperatives.
 Providing level playing field to Co-operatives through Core Banking Solution (CBS).
 Assistance for Setting up of PACS Development Cell (PDC) in Cooperative Banks.
 Establishment of Centre for Professional Excellence in Co-operatives (C-PEC) by
NABARD in collaboration with GIZ for supporting the Co-operative Training Institutes
(CTIs) in STCCS to impart quality training.

Lead Bank Scheme

The origin of the LBS in India can be traced to the late 60’s. LBS was introduced in 1969, based
on the recommendations of the Gadgil Study Group. The Gadgil group has recommended “Area
Approach” for the development of financial structure through intensive efforts. To transform the

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Gadgil’s groups recommendation into reality, RBI set up a committee under F.S.Nariman, to fine
tune the details. This banker’s committee, headed by F. S. Nariman, concluded that districts
would be the units for area approach and each district could be allotted to a particular bank
which will perform the role of a Lead Bank.

Objectives of Lead Bank Scheme:

1. Eradication of unemployment and under employment
2. Appreciable rise in the standard of living for the poorest of the poor
3. Provision of some of the basic needs of the people who belong to poor sections of the
society

As a consortium leader, the Lead Bank would

1. Co-ordinate with government office’s, banks and other stakeholders,
2. Undertake planning and formulation of Annual District Credit Plans through Block and
District Consultative Committees and
3. Help in synergizing all efforts to fulfill Plan priorities and district-specific
requirements.

The LBS has been able to achieve great success in the rural areas, and also it has aided in
building up a cadre of Bank Officers devoted to Rural Banking. A central component of LBS is
the SLBC’s (State Level Bankers Committee) Meetings. These SLBC Meetings are a great tool
for networking and driving the Annual District Credit Plan.

Why the Lead Bank Scheme became inactive?

 The Lead bank Scheme was not fully able to achieve its targets due to shift in policies,
complexities in operations and issues shifting to the Financial Inclusion.
 Lack of coordination between district planning authorities and banking institutions
operating in a district on one side and between Nabard and the Lead Bank on the other is
the prominent reason which required attention. Duplication of efforts in credit plan
preparation should be avoided by empowering the plan team at the district level
appropriately.
 Over the period the system of lead bank scheme and associated district-level coordination
committees of bankers has apparently become inactive.
 There was a strong need felt to revitalize the scheme with clear guidelines on respecting
the bankers’ commercial judgements even as they fulfil their sectoral targets.
 Various committees like Block Level Bankers Committee, District Coordination
Committee and District Review Committee seldom function with all seriousness.
 LBS Information System does not have any checks and balances and does not agree with
several other returns relating to Priority Sector Credit.

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Retail Banking
Meaning:
Retail banking, also known as consumer banking, is the provision of services by a bank to
individual consumers, rather than to companies, corporations or other banks. Services offered
include savings and transactional accounts, mortgages, personal loans, debit cards, and credit
cards. The term is generally used to distinguish these banking services from investment
banking, commercial banking or wholesale banking. It may also be used to refer to a division or
department of a bank dealing with retail customers.

Retail banking services

The objective of the Retail Bank is to provide its target market customers a full range of financial
products and banking services, giving the customer a one-stop window for all his/her banking
requirements

Accounts & Deposits

ATM Savings Accounts Current Accounts Trading accounts Fixed Deposits
Internet Banking Mobile Banking

Loans
Home Loans Personal Loans Car Loans Commercial Vehicle Loans Loans against
Securities Education loan

The future of retail banking: A global perspective

 Indian retail banking has been showing phenomenal growth
 In 20014-15, 60% of credit growth came from retail
 Over the last 5 years CAGR has been over 35%
 Rural areas offer tremendous potential too which needs to be exploited

Advantages:
 Your money is much more secure than in a box under your bed and you can buy goods,
be paid, and sell things without cash changing hands
 The bank you are familiar with and which knows you can also offer you a wide range of
other services, such as mortgages and insurance.
 Retail banks offer a variety of ways you can access your account and manage your
money
 Retail Banking focuses on individual and small units
 The risk is spread and the recovery is good
 Surplus deployable funds can be put into use by the banks
 Customize and wide ranging products are available

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Disadvantages
Banks are a business, and they need to make money from looking after yours. If the bank decides
to apply charges to your account (within the terms of the account), you may only find out about
it afterwards—for example if you accidentally go overdrawn without permission. If you disagree
with a charge, you will need to contest it to recover the money.

Consumer credit financing

Short- and intermediate-term loans used to finance the purchase of commodities or services for
personal consumption or to refinance debts incurred for such purposes. The loans may be
supplied by lenders in the form of cash loans or by sellers in the form of sales credit.

Consumer credit in industrialized countries has grown rapidly as more and more people earn
regular income in the form of fixed wages and salaries and as mass markets for durable
consumer goods have become established.

Consumer loans fall into two broad categories: installment loans, repaid in two or more
payments; and non-installment loans, repaid in a lump sum. Installment loans include
(1) Automobile loans,
(2) Loans for other consumer goods,
(3) Home repair and modernization loans,
(4) Personal loans, and
(5) Credit card purchases.

The most common non installment loans are single-payment loans by financial institutions,
retail-store charge accounts, and service credit extended by doctors, hospitals, and utility
companies.

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