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RECENT RELATIONSHIP BETWEEN BANKING AND AGRICULTURE IN INDIA

A final draft submitted in fulfilment of the course of Economics- 2 for attaining the degree of
B.A. LL.B.

Final submission made by -

Diksha Singh

B.A. LL.B.

Roll No. 1724

Final submission made to -

Dr. Shivani Mohan

Faculty, Economics- 2

March, 2019

Chanakya National Law University,

Nyaya Nagar, Patna – 800001

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DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.A., LL.B (Hons.) Project Report entitled
“Recent Relationship Between Banking and Agriculture in India” submitted at Chanakya
National Law University is an authentic record of my work carried out under the supervision
of Dr. Shivani Mohan. I have not submitted this work elsewhere for any other degree or
diploma. I am fully responsible for the contents of my Project Report.

SIGNATURE OF CANDIDATE

NAME OF CANDIDATE: DIKSHA SINGH

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA.

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ACKNOWLEDGEMENT

I would like to thank my faculty Dr. Shivani Mohan whose guidance helped me a lot with
structuring my project.

I owe the present accomplishment of my project to my friends, who helped me immensely with
materials throughout the project and without whom I couldn’t have completed it in the present
way.

I would also like to extend my gratitude to my parents and all those unseen hands that helped
me out at every stage of my project.

THANK YOU,

NAME: Diksha Singh

COURSE: B.A., LL.B. (Hons.)

ROLL NO: 1724

SEMESTER – Fourth

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CONTENT

1. Introduction ........................................................................................................................ 6
2. History of Banking and Agriculture in India ...................................................................... 8
A. History of Banking in India ............................................................................................ 8
B. History of Agriculture in India ..................................................................................... 10
3. Agriculture Credit and Commercial Banks ...................................................................... 10
TYPES OF CREDITS .......................................................................................................... 10
A. Long Term Credit ......................................................................................................... 11
Land Development Banks : .............................................................................................. 11
Structure : ......................................................................................................................... 11
Raising Funds : ................................................................................................................. 12
CROP LOAN ....................................................................................................................... 13
4. Agricultural loans ............................................................................................................. 14
5. COOPERATIVE AGRICULTURAL BANK .................................................................. 14
A. National Bank for Agriculture and Rural Development or NABARD ......................... 14
B. Bihar State Co-operative Bank Limited (BSCB) .......................................................... 15
C. Haryana State Co-operative Apex Bank Limited (HARCOBANK) ............................ 15
D. National Federation of State Co-operative Banks Limited (NAFSCOB) ..................... 15
E. Orissa State Co-operative Bank Limited (OSCB) ........................................................ 15
F. Repatriates Co-operative Finance and Development Bank Limited............................. 15
G. Punjab State Cooperative Agriculture Development Bank Ltd .................................... 15
H. Andhra Pradesh State Cooperative Bank Limited (APCOB) ....................................... 15
6. Nationalised Banks ........................................................................................................... 16
A. Allahabad Bank ............................................................................................................. 16
B. Andhra Bank ................................................................................................................. 16
C. Bank of Baroda ............................................................................................................. 16
D. Bank of India................................................................................................................. 16
E. Bank of Maharashtra ..................................................................................................... 16
F. Canara Bank .................................................................................................................. 16
G. Central Bank of India .................................................................................................... 16
H. Corporation ................................................................................................................... 17
I. Dena .............................................................................................................................. 17
J. Indian ............................................................................................................................ 17

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K. Indian ............................................................................................................................ 17
L. Oriental ......................................................................................................................... 17
M. Punjab ........................................................................................................................ 17
N. Punjab ........................................................................................................................... 17
O. Syndicate ....................................................................................................................... 17
P. UCO .............................................................................................................................. 18
Q. Union............................................................................................................................. 18
R. United............................................................................................................................ 18
S. Vijaya ............................................................................................................................ 18
7. SCHEMES FOR AGRICULTURE FINANCE ............................................................... 18
A. SBT KISAN GOLD CARD SCHEME (General Agriculture Term Loan) ................ 18
B. KISAN CREDIT CARD SCHEME ............................................................................. 19
C. HOMESTEAD FARMING .......................................................................................... 19
D. LOAN FOR ESTATE PURCHASE ............................................................................. 20
E. SCHEME FOR FINANCING FARMERS FOR PURCHASE OF LAND FOR
AGRICULTURALS............................................................................................................. 20
F. SCHEME FOR CULTIVATION OF MEDICINAL PLANTS .................................... 20
G. SBT RAIN WATER HARVESTING SCHEME ......................................................... 21
H. PRODUCE MARKETING LOAN (Advance against Warehouse Receipt) ................ 21
I. MINOR IRRIGATION ................................................................................................. 21
J. AGRICULTURE GOLD LOAN .................................................................................. 21
K. SCHEME FOR DEVELOPMENT / STRENGTHENING OF AGRI. MARKETING
INFRASTRUCTURE, GRADING AND STANDARDIZATION ..................................... 22
L. CONSTRUCTION / RENOVATION / EXPANSION OF RURAL GODOWN ......... 22
8. Conclusion and Suggestion .............................................................................................. 23

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1. INTRODUCTION

Finance in agriculture is as important as development of technologies. Technical inputs can be


purchased and used by farmer only if he has money (funds). But his own money is always
inadequate and he needs outside finance or credit.

Professional money lenders were the only source of credit to agriculture till 1935. They use to
charge unduly high rates of interest and follow serious practices while giving loans and
recovering them. As a result, farmers were heavily burdened with debts and many of them
perpetuated debts. There were widespread discontents among farmers against these practices
and there were instances of riots also.

With the passing of Reserve Bank of India Act 1934, District Central Co-op. Banks Act and
Land Development Banks Act, agricultural credit received impetus and there were
improvements in agricultural credit. A powerful alternative agency came into being. Large-
scale credit became available with reasonable rates of interest at easy terms, both in terms of
granting loans and recovery of them. Although the co-operative banks started financing
agriculture with their establishments in 1930’s real impetus was received only after
Independence when suitable legislation were passed and policies were formulated. Thereafter,
bank credit to agriculture made phenomenal progress by opening branches in rural areas and
attracting deposits.

Till 14 major commercial banks were nationalized in 1969, co-operative banks were the main
institutional agencies providing finance to agriculture. After nationalization, it was made
mandatory for these banks to provide finance to agriculture as a priority sector. These banks
undertook special programs of branch expansion and created a network of banking services
throughout the country and started financing agriculture on large scale. Thus agriculture credit
acquired multi-agency dimension. Development and adoption of new technologies and
availability of finance go hand in hand. In bringing “Green Revolution”, “White Revolution”
and now “Yellow Revolution” finance has played a crucial role. Now the agriculture credit,
through multi agency approach has come to stay.

The procedures and s for various s have been standardized. Among the various s “Crop loans”
(Short-term loan) has the major share. In addition, farmers get loans for purchase of electric
motor with pump, tractor and other machinery, digging wells or boring wells, installation of

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pipe lines, drip irrigation, planting fruit orchards, purchase of dairy animals and feeds/fodder
for them, poultry, sheep/goat keeping and for many other allied enterprises.

A bank is a financial institution that accepts deposits and channels those deposits into lending
activities. Banks primarily provide financial services to customers while enriching investors.
Government restrictions on financial activities by banks vary over time and location. Banks are
important players in financial markets and offer services such as investment funds and loans.
In some countries such as Germany, banks have historically owned major stakes in
industrial corporations while in other countries such as the United States banks are prohibited
from owning non-financial companies. In Japan, banks are usually the nexus of a cross-
shareholding entity known as the keiretsu. In France, bank assurance is prevalent, as most
banks offer insurance services (and now real estate services) to their clients. Bank a
corporation empowered to deal with cash, domestic and foreign, and to receive the deposits of
money and to loan those monies to third-parties.

Bank has been defined by various authors, experts and judges. The definitions are given below:

(a) Bank is defined as a noun, “An establishment for receiving, keeping, lending, or,
sometimes, issuing money, and making easier the exchange of funds by checks,
notes, etc. the office or building of such an establishment , the fund put up by the
dealer in baccarat, out of which losses are paid, the entire monetary pool of a gambling
establishment, a common fund of chips, pieces, etc. used in playing a game, as poker
or dominoes, a reserve of things for later distribution or use, or a place for this; a store
of blood for transfusions, body organs for transplantation, etc., a store or a device for
keeping retrievable data a memory bank”

(b) Business Definition, ‘Bank is a commercial institution that keeps money in accounts
for individuals or organizations, makes loans, exchanges currencies, provides credit
to businesses, and offers other financial services’.

An Organization Usually a corporation, chartered by a state or federal government, which does


most or all of the following: receives demand deposits and time deposits, honors instruments
drawn on them, and pays interest on them; discounts notes, makes loans, and invests in
securities; collects checks, drafts, and notes; certifies depositor's checks; and issues drafts and
cashier's checks

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Bank is a Financial Institution That is licensed to deal with money and its substitutes by
accepting time and demand deposits, making loans, and investing in securities. The bank
generates profits from the difference in the interest rates charged and paid.

Bank is an Establishment, Authorized by a government to accept deposits, pay interest,


clear checks, make loans, act as an intermediary in financial transactions, and provide other
financial services to its customers.

HYPOTHESIS

The researcher presumes that loan waiving has a negative impact on the agricultural credit
system and the economy.

RESEARCH METHODOLOGY

The researcher proposes to take a doctrinal research.

REVIEW OF LITERATURE

The researcher has examined the primary and secondary sources of data in the project. The
primary sources are official data websites. The secondary sources are books, journals,
magazines, newspaper etc.

LIMITATIONS FOR RESEARCH

• Because of posterity of time, money and resources.

SCOPE OF STUDY

• It will be useful for the society and government.

2. HISTORY OF BANKING AND AGRICULTURE IN INDIA

A. HISTORY OF BANKING IN INDIA

The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases:

• Early phase of Indian banks, from 1786 to 1969

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• Nationalization of banks and the banking sector reforms, from 1969 to 1991

• New phase of Indian banking system, with the reforms after 1991

The first bank in India, the General Bank of India, was set up in 1786. Bank of Hindustan and
Bengal Bank followed. The East India Company established Bank of Bengal (1809), Bank of
Bombay (1840), and Bank of Madras (1843) as independent units and called them Presidency
banks. These three banks were amalgamated in 1920 and the Imperial Bank of India, a bank of
private shareholders, mostly Europeans, was established. Allahabad Bank was established,
exclusively by Indians, in 1865. Punjab National Bank was set up in 1894 with headquarters in
Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara
Bank, Indian Bank, and Bank of Mysore were set up. The Reserve Bank of India came in 1935.

During the first phase, the growth was very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1,100 banks, mostly small. To streamline
the functioning and activities of commercial banks, the Government of India came up with the
Banking Companies Act, 1949, which was later changed to the Banking Regulation Act, 1949
as per amending Act of 1965 (Act No. 23 of 1965). The Reserve Bank of India (RBI) was
vested with extensive powers for the supervision of banking in India as the Central banking
authority. During those days, the general public had lesser confidence in banks. As an
aftermath, deposit mobilization was slow. Moreover, the savings bank facility provided by the
Postal department was comparatively safer, and funds were largely given to traders.

The government took major initiatives in banking sector reforms after Independence. In 1955,
it nationalized the Imperial Bank of India and started offering extensive banking facilities,
especially in rural and semi-urban areas. The government constituted the State Bank of India
to act as the principal agent of the RBI and to handle banking transactions of the Union
government and state governments all over the country. Seven banks owned by the Princely
states were nationalized in 1959 and they became subsidiaries of the State Bank of India. In
1969, 14 commercial banks in the country were nationalized. In the second phase of banking
sector reforms, seven more banks were nationalized in 1980. With this, 80 percent of the
banking sector in India came under the government ownership.

This phase has introduced many more products and facilities in the banking sector as part of
the reforms process. In 1991, under the chairmanship of M. Narasimham, a committee was set
up, which worked for the liberalization of banking practices. Now, the country is flooded with
foreign banks Role of Banking in Indian Economy.

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B. HISTORY OF AGRICULTURE IN INDIA

A large proportion of the population in India is rural based and depends on agriculture for a
living. Enhanced and stable growth of the agriculture sector is important as it plays a vital role
not only in generating purchasing power among the rural population by creating on-farm and
off-farm employment opportunities but also through its contribution to price stability. In India,
although the share of agriculture in real GDP has declined below one-fifth, it continues to be
an important sector as it employs 52 per cent of the workforce. The growing adult population
in India demand large and incessant rise in agricultural production. But per capita availability
of food, particularly cereals and pulses, in recent years has fallen significantly. As a result,
slackening growth of agriculture during last decade has been a major policy concern.

Three main factors that contribute to agricultural growth are increased use of agricultural
inputs, technological change and technical efficiency. With savings being negligible among the
small farmers, agricultural credit appears to be an essential input along with modern technology
for higher productivity. An important aspect that has emerged in last three decades is that the
credit is not only obtained by the small and marginal farmers for survival but also by the large
farmers for enhancing their income. Hence, since independence, credit has been occupying an
important place in the strategy for development of agriculture. The agricultural credit system
of India consists of informal and formal sources of credit supply. The informal sources include
friends, relatives, commission agents, traders, private moneylenders, etc. Three major channels
for disbursement of formal credit include commercial banks, cooperatives and micro-finance
institutions (MFI) covering the whole length and breadth of the country. The overall thrust of
the current policy regime assumes that credit is a critical input that affects agricultural/ rural
productivity and is important enough to establish causality with productivity. Therefore,
impulses in the agricultural operations are sought through intervention in credit.

3. AGRICULTURE CREDIT AND COMMERCIAL BANKS

TYPES OF CREDITS

The Credit requirements of agriculture are of three types :


A. Short-Term

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B. Medium - Term
C. Long- Term (LT)

A. LONG TERM CREDIT :

The period of long-term credit is generally 5 to 20 years or even more in some special cases.
In any industry, long-term investment is necessary, to create permanent assets which give
returns over a period of time. The permanent investment is not only necessary for a particular
industry but even for the country. Because for continuity of production and progress of the
country. This applies to agriculture also. In Agriculture, long-term investment comprises of
sinking well, land levelling, fencing and permanent improvements on land purchase of big
machinery like tractor with its attachments including trolleys, establishment of fruit orchard
of mango, cashew, coconut, sapota (chiku), orange, pomogranate, fig, guava, etc. There are
many other items of long-term capital investment. Investment once made in the beginning
continuous to give returns over a long period. Fruit orchards particularly do not give any
income in the first 4 - 5 years as in case of other seasonal crops. So the expenditure incurred
in the first 4-5 years becomes a capital cost.
All the long-term investments mentioned above require large amounts of funds. Although
they have good potential to give returns in future, individual farmers have no financial
capacity to make such costly investments from their own funds because they have no savings
or very little savings. Therefore, they have to resort to bank borrowing to meet their such
needs. The financial criteria terms and conditions procedures of granting long term loans are
altogether different from short-term loans : Even the bank or agency providing LT loans is
separate due to its particular mode or system of raising capital and gain.

LAND DEVELOPMENT BANKS :


The special banks providing LT Loans are called Land Development Banks (LDA). The
history of LDB’s is quite old. The first LDB was started at Jhang in Punjab in 1920. But the
real impetus to these banks was received after passing the Land Mortgage Banks Act in
1930’s (LDB’s were originally called Land Mortgage Banks). After passing this Act LDB’s
were started in different states of India.

STRUCTURE :
These Banks have two-tier structure
1. Primary Land Development Bank at district level with branches at taluka level.
2. Control or State Land Development Bank. All primary Land Development Banks are

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federated into Central Land Development Bank at the State Level. In some States, there is “
Unitary structure” wherein, there is only one State Land Development Bank at the state level
operating through its branches and sub-branches at district and below levels.

RAISING FUNDS :
The main function of raising funds is carried out be the Central or State Land Development
Bank which can really deal with the money market of the country effectively and advance
loans to primary LDB’s. The sources of funds of State LDB’s are:-
1. Share capital.
2. Issue of debentures
3. Loans from NABARD
4. Reimbursements of subsidies from the Govt.
5. Other funds.

Issue of debentures is the main source of funds for the LDB’s. Debentures is a `Bond’
conveying and acknowledging the debt and also containing the provision of promise for
payment of interest at stipulated rate and return of the principal amount. The period of
debentures varies from 7 to 15 years. As LDB’s require funds of longer duration to advance
long term loans to borrowers, the debenture is a convenient instrument of raising funds.
Because it guarantees that funds will remain with the Banks for a specified period.

There are three types of debentures:-


1. Regular debentures
2. Rural debentures
3. Special development debentures.

These debentures are mostly purchased by financial institutions like LIC, Commercial Banks,
Co-op. Banks, NABARD, and State Govts. As there is limited response from the public. The
State Govt. give incentive subsidies for many development activities by individual farmer
including purchase of tractor. The amounts of subsidies are reimbursed to the LDB’s.
The rates of interest for LT Loans are generally low and within the paying capacity of farmers.
They are around 11 to 12%. The Branch offices receive applications from the prospective
borrower. Then Agricultural Finance Officer or Inspector scrutinizes these applications, they
visit places of the application and ascertain the of borrowing, verify the genuineness of the
proposal and it economic viability, repaying ability of the farmers, adequacy of security, etc.

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After completing those formalities, the loan is granted by the appropriate authority at
appropriate level depending upon the delegation of powers by the Banks.

CROP LOAN

Crop loan is a short term credit and is generally obtained from primary credit co-op. Society of
a village or also from commercial bank. The period of loan is about one year except for
sugarcane for which the period is 18 months. There are two criteria for granting crop loan.

1. One third of gross value

2. Cost of cultivation.

1. One third of gross value approach takes into account the yield and price of the crop, its
cost of cultivation and family expenditure. If the gross value is more, more becomes
available.

2. Thus in second situation farmer is entitled for Rs.3330 per hectare which is higher than
in the first situation. Thus this method takes into account the productive aspect of a
crop.

3. In cost of cultivation, direct paid-out costs are only considered. They include items, like
seeds, manures, fertilizers, pesticides, diesel/electricity, hired labour etc. In this
approach, it is expected that all direct costs to be incurred by the farmer should be
covered and accordingly he should get adequate credit. If the cost of all these items of
input is Rs.3500/-. If the loan is granted according to first approach, then the amount
which is short, is spent by the farmer from his own funds. Since crop loan is for one
season, its recovery is made in one installment after the harvest of the crop. Crop loan
is an annual requirement and farmer has to borrow fresh loan for new crop season every
time. Therefore, he has to repay the earlier loan with interest within stipulated time.
Since this loan is required every season/every year, the procedure of getting this loan is
simple and convenient and it is made available by the District Central Co-op.Banks
through the village Co-op. Credit Society. So the farmer gets his loan in the village
itself. If the loan is to be taken from commercial bank, it is available from the nearby
branch of the commercial bank. As for security, the farmer has to offer his land as a
security. There is a three tier structure providing crop-loans through co-operative
institutions.

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• Apex Bank- State Co-op. Bank.
• District Central co-op. Bank
• Village co-op. Credit Society.

Crop-loan is the most important need of the farmer to increase and maintain his productive
ability. With the help of this loan amount, he can purchase modern costly inputs and adopt new
technologies on his farms. So through these loans co-operative banks play important role in the
development and prosperity of agriculture. Among the various types of bank loans to
agriculture, the share of crop loan is the highest.

4. AGRICULTURAL LOANS

Agricultural loans are available for a multitude of farming s. Farmers may apply for loans to
buy inputs for the cultivation of food grain crops as well as for horticulture, aquaculture, animal
husbandry, floriculture and sericulture businesses. There are also special loans to finance the
purchase of agricultural machinery such as tractors, harvesters and trucks. Construction of
biogas plants and irrigation systems as well as the purchase of agricultural land may also be
financed through special types of agricultural finance.

5. COOPERATIVE AGRICULTURAL BANK

A. NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OR NABARD –

is responsible for refinance disbursement to commercial banks, State cooperative banks, State
cooperatives, rural development banks, Regional Rural Banks (RRBs) and other eligible
financial institutions. It also sanctions money through its Rural Infrastructure Development
Fund for projects covering irrigation, rural roads and bridges, health and education, soil
conservation and drinking water schemes. NABARD also offers a Kisan Credit Card Scheme
and crop loans under the Rashtriya Krishi Bima Yojana.

Banks and RRB's introduced the Kisan Credit Card Scheme of NABARD in their areas of
operation. In this scheme eligible farmers are provided with a Kisan Credit Card and a passbook
or card-cum-pass book. The revolving cash credit facility allows any number of withdrawals
and s within the limit. This limit is fixed on the basis of operational land holding, cropping
pattern and the scale of finance. Sub-limits may be fixed at the discretion of banks.

This Kisan Credit Card is valid for 3 years subject to annual review. As incentive for good
performance, credit limits may be enhanced to take care of increase in costs, change in cropping

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pattern, etc. Each drawl should be repaid within a maximum period of 12 months. Conversion
or rescheduling of loans is allowed in case of damage to crops due to natural calamities.
Security, margin, and other details are fixed according to RBI norms.

B. BIHAR STATE CO-OPERATIVE BANK LIMITED (BSCB) - Offers a range of loans and
financial schemes to agriculturalists.

C. HARYANA STATE CO-OPERATIVE APEX BANK LIMITED (HARCOBANK) - The bank


offers crop loans, Kisan Credit Cards, cash credit against hypothecation of stocks and
interim finance by way of cash credit.
D. NATIONAL FEDERATION OF STATE CO-OPERATIVE BANKS LIMITED (NAFSCOB) -
This federation offers a range of agricultural loans through member State Cooperative
Banks, District Central Cooperative Banks and Primary Agricultural Cooperative
Societies.
E. ORISSA STATE CO-OPERATIVE BANK LIMITED (OSCB) - The bank has introduced
Kisan Credit Cards in the S.T. Cooperative Credit Sector. It also organizes seminars on
agri finance. OSCB has 17 Central Cooperative Banks and around 810 mini banks in
different districts of Orissa.
F. REPATRIATES CO-OPERATIVE FINANCE AND DEVELOPMENT BANK LIMITED- This
bank does not have any specific agricultural loan, but offers a range of financial
products that can be accessed by people who wish to develop agriculture and related
activities.
G. PUNJAB STATE COOPERATIVE AGRICULTURE DEVELOPMENT BANK LTD - Initially,
the bank only gave farmers loans to pay off old debts and purchase land. Today, the
bank provides loans for various s like improvement of alkaline and saline lands,
purchase of tractors, installing tube wells and other modern agricultural equipment. It
also offers financial schemes for poultry development, dairy development, horticulture,
floriculture, sheep rearing and inland fisheries.
H. ANDHRA PRADESH STATE COOPERATIVE BANK LIMITED (APCOB) - has a loan
portfolio that covers crop loans, medium term loans and long term loans for agricultural
s. It also supports government sponsored District Rural Development Agency projects
through IRDP loans and cooperative sugar factories, spinning mills, weaver's societies,

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employees' cooperative credit societies and other organizations. APCOB has also
extended finance to apex cooperative institutions in the State such as APCO,
MARKFED and GCC.

6. NATIONALISED BANKS

A. ALLAHABAD BANK – offers the Kisan Credit Card and Kisan Shakti Yojana Scheme.
The Kisan Credit Card is a unique scheme for farmers through which they can draw a
cash loan for crop production as well as domestic needs from the card-issuing branch
within the sanctioned limit. The Kisan Shakti Yojana provides farm investment credit,
as well as personal/domestic loans including of debt to moneylenders. The permissible
loan limit will be 50 per cent of the value of land or 5 times the net farm income,
whichever is lower, less the outstanding amount, if any, in April.
B. ANDHRA BANK - provides facilities to farmers like AB Kisan Vikas Card, AB Pattabhi
Agri-card, AB Kisan Chakra, rural godowns, agri-clinics, agri-service centres, self-help
groups and solar cookers. They also provide other schemes such as Kisan Sampathi,
tractor financing, Kisan Green Card, Surya Sakhti and loans to dairy agents.
C. BANK OF BARODA - offers farmers the Baroda Kisan Credit Card. It also has schemes
for the purchase of agricultural implements, heavy agricultural machinery like tractors,
irrigation and other infrastructure. Bank of Baroda also finances the development of agri
industries like horticulture, sericulture, fisheries, dairy and poultry.
D. BANK OF INDIA - has a Kisan Credit Card Scheme that helps farmers raise short-term
funds for agriculture and other farm-based activities, on an on-going basis, with very
flexible and friendly terms. It also offers an agricultural loan for development of
agriculture related industries, purchase of machinery and other agricultural s.
E. BANK OF MAHARASHTRA - offers agriculturists a Mahabank Kisan Credit Card and
financial schemes for digging new wells, purchasing harvesters, livestock, vehicles and
land. terms for different agricultural loans range from three to fifteen years.
F. CANARA BANK - provides Kisan Credit Cards. Limits up to 50,000 have no margin
while those above 50,000 have a margin of 15 to 20 percent. Other than this, Canara
Bank provides a wide array of financial schemes for different agricultural s.
G. CENTRAL BANK OF INDIA - The Central Kisan Credit Card is a credit service provided
to farmers on the basis of their holdings for purchasing agricultural inputs. Only those
farmers having a good track record for the past 2 years with the bank as a borrower or

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depositor and who are not defaulters to any credit institution would be considered for
loans.
H. CORPORATION BANK - offers a range of loan schemes to farmers. They are the Corp
Gram Mitra Yojana, Corp Arthias Loan Yojana, Corp Kisan Tie-Up Loan Scheme, Corp
Kisan Farm Mechanisation Scheme and Corp Kisan Vehicle Loan Yojna.
I. DENA BANK - Dena Bank has sponsored 2 Regional Rural Banks namely Dena Gujarat
Gramin Bank in Gujarat and Durg Rajnandgaon Gramin Bank (DRGB) in Chhattisgarh.
The bank has set up a Rural Development Foundation for training unemployed youth in
rural areas. Other financial schemes of the bank are the Dena Swacch Gram Yojana,
Dena Kisan Gold Credit Card Scheme and the Dena Bhumiheen Kisan Credit Card
Scheme.
J. INDIAN BANK - has a wide range of schemes for agriculturalists such as Swarojgar
Credit Card, Gramin Mahila Sowbhagya Scheme, Kisan Bike Loan Scheme, Yuva Kisan
Vidya Nidhi Yojana and Indian Bank Kisan Card Scheme.
K. INDIAN OVERSEAS BANK - offers agri business consultancy services that include
conducting feasibility and market studies, preparation of detailed project reports and
formulation of rehabilitation packages for sick agro units.
L. ORIENTAL BANK OF COMMERCE - It has two agricultural projects - the Grameen
Project and the Comprehensive Village Development Programme. The Grameen Project
involves disbursing small loans ranging from Rs. 75 onwards to mostly women. Training
is also provided in villages in using locally available raw material to produce pickles
and jams. The Comprehensive Village Development Programme focuses on providing
an integrated package of rural finance to villagers to build up their village.
M. PUNJAB AND SIND BANK - offers a range of financial schemes for farmers like the
Zimidara Credit Card, tractor finance scheme, drip irrigation scheme, Kheti Udyog
Khazana Yojana, composting scheme, horticulture clinic and private veterinary clinic
with dairy unit scheme.
N. PUNJAB NATIONAL BANK - This bank has a special website called PNB Krishi for
agriculturalists. It gives details on crop practices, plant protection, farm machinery,
market prices and other farming news and activities. The website also provides a list of
financial schemes offered by Punjab National Bank on production credit, investment
credit, composite loans, animal husbandry and farm mechanization.
O. SYNDICATE BANK - offers a wide range of agricultural loan products such as the Synd
Jai Kisan Loan Scheme, Jewel Loan Scheme for Agriculture, Syndicate Farm House

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Scheme, Finance for Hi-tech Agriculture, Development of Irrigation Infrastructure
scheme, Syndicate 2/3/4 Wheelers Scheme and the Syndicate Kisan Credit Card
(S.K.C.C).
P. UCO BANK - This Bank provides the UCO Hirak Jayanti Krishi Yojana to meet the
long-term credit needs of the farming community in rural areas for agriculture, allied
activities as well as for personal s. Only farmers below 60 years are eligible to apply.
Minimum quantum of the loan is Rs. 25,000/- and the maximum is Rs. 5 lakhs.
Q. UNION BANK OF INDIA - Facilities provided to farmers include Kisan ATM Cards and
special Kisan ATM Machines. These ATM's are easy to operate and do not require
farmers to have a high level of literacy. They are voice enabled in the local language,
have a touch screen monitor and work on a bio-metric authentication system like finger
print verification.
R. UNITED BANK OF INDIA - The range of financial schemes offered to agriculturalists
include the United Krishi Laghu Paribahan Yojana, United Krishi Sahayak Yojana,
United Gramyashree Yojana, Gramin Bhandaran Yojana and the United Bhumiheen
Kisan Credit Card.
S. VIJAYA BANK - This bank offers one comprehensive financial scheme known as the
Vijaya Krishi Vikas (VKV) Scheme. This scheme provides a simple package to farmers
to meet entire agricultural credit requirements such as crop production, investment credit
and consumption credit. All farmers including owners, tenant cultivators, leased land
farmers and sharecroppers are eligible for this scheme

7. SCHEMES FOR AGRICULTURE FINANCE

A. SBT KISAN GOLD CARD SCHEME (GENERAL AGRICULTURE TERM LOAN)


Farmers having good track record of for the last two years. Farmers who have closed their
loan account without default and not our current borrowers. Farmers who have defaulted in
but closed the Loan within the stipulated period. Farmers who are maintaining deposits with
the Bank. Good borrowers of other banks provided they liquidate their dues with other banks.
Good farmers who have not availed loans from any bank. The borrower is at liberty to utilize
50% of the amount for any , including consumption and purchase of land. The is limited to
five times the annual farm income including income from allied activities or 50% of the value

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of the land offered as collateral security, whichever is less, subject to a maximum of Rs.10
lakh. Interest rate ranges from 1% below PLR. Hypothecation of crops and assets, if any,
created out of bank finance and existing movable assets such as milk animals, pump sets etc.
The loan will be secured by equitable mortgage of properties worth double the loan amount, or
term deposit receipts, LIC policies of adequate surrender value, NSCs completed lock in period
or more etc. Cash disbursals are allowed to the full extent of the credit limit. The period shall
be 10 years. The due date of the instalment shall be fixed in such a way to coincide with the
date of generation of income.

B. KISAN CREDIT CARD SCHEME

All agriculturists who are in need of short term production requirements. ATM facility and
Personal Accident Insurance Scheme for life up to Rs.50000/- and permanent disability cover
up to Rs.25000/- is available on request. To provide hassle free short-term credit to farmers
on the basis of their land holdings for purchase of inputs and draw cash to meet their production
needs. i.e. Cultivation expenses including allied activities with a consumption component. To
be fixed on the basis of operational holdings and scale of finance with consumption component
15% (maximum Ra.10000/-) of production credit. The scale of finance to farmers who own
cultivated land below one acre will be at the rate of Rs.40000/- (on pro rata basis) and farmers
who own more than one acre with intensive farming of land be given at the rate of Rs.37500/-
per acre and part thereof. Interest rate ranges from 2.50% below to 1.50% above BPLR for
various limits. Running Cash Credit account for 36 months subject to annual review and total
annual credit should exceed annual debit.

C. HOMESTEAD FARMING
A scheme for financing farmers practicing mixed cropping / inter cropping along with allied
activities to enable them to undertake cultivation of various crops in a more integrated way.
The scheme provides the farmers with sufficient working capital required for their homestead
farming (Mixed cropping along with allied activities) by fixing scale of finance based on land
holding to meet the cost of entire farming activities. The farmers who own cultivated land
below one acre be given the scale of finance on pro rata basis at the rate of Rs.40000/- and
farmers who own more than one acre of land be given at the rate of Rs.37500/- per acre and
part thereof. Interest rate ranges from 2.50% below to 1.50% above BPLR for various limits.
The facility will be sanctioned as an Agriculture Cash Credit limit (In case of Kisan Credit
Card running cash credit).

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D. LOAN FOR ESTATE PURCHASE
The estate should be either in yielding stage with the crops in its prime yield age or capable of
being developed in to a viable unit. The yield / net income of the estate should be sufficient to
liquidate the proposed loan and interest accrued with in a period of 7 to 10 years. The proposed
estate should be free from encumbrance and entire property should be offered as security to the
loan. To encourage those who prefer to settle down in agriculture and are in the look out of
good / viable estates for purchase and also to improve production in agriculture. The quantum
of loan that will be considered for sanction will be 75% of the registered value or 50% of the
market value whichever is low. In exceptional cases 80% of the registered value or 50% of the
market share whichever is low is also considered. The loan for the development of the estate
like land development including working capital can also be sanctioned. Interest rate same as
BPLR. Repayment of loan will be in quarterly/half yearly / yearly instalments depending on
the harvest of the crops and the loan shall be repaid within a maximum period of 7 to 10 years.

E. SCHEME FOR FINANCING FARMERS FOR PURCHASE OF LAND FOR


AGRICULTURALS
Small and Marginal farmers - land maximum upto 5 acres of non-irrigated land or 2.5 acres of
irrigated land including the land purchased under the scheme. Tenant, sharecropper and
landless agricultural labourers with a good record of prompt of our loans for the last 2 years
are also eligible. To finance small and marginal farmers, share croppers, tenant cultivators for
purchasing land to expand activities and to make existing small and marginal units
economically viable to bring fallow lands and waste lands under cultivation to step up
agricultural production as well as productivity also to finance share croppers / tenant farmers
to enable them to diversify farming activities to allied areas to increase their income. Maximum
loan under the scheme towards land cost shall not exceed Rs 5 lakh. Cost of
development/economic activity shall be financed under the bank’s other financing schemes.
Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits. Repayment of
the loan will be 7 to 12 years in half yearly / yearly instalments with maximum of 24 months
moratorium period. Gestation period / due dates etc will be fixed according to income
generation from the activity.

F. SCHEME FOR CULTIVATION OF MEDICINAL PLANTS


All agriculturists are eligible. Scheme for financing cultivation of 22 medicinal plants
cultivated extensively and also in great demand in the local as well as foreign market.
Depending on the area of cultivation / project cost. Interest rate ranges from 1.75% below to

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2.00% above BPLR for various limits. Repayment should coincide with harvesting and
marketing or at the time generation of income from the scheme.

G. SBT RAIN WATER HARVESTING SCHEME


Farmers having land holding of 0.50 acre or more are eligible to be considered for finance
under this scheme. Scheme envisages construction of low cost tanks for collecting and storing
rainwater and using it for irrigation, by siphon arrangement, utilizing gravitation flow or by
installing motor pump. Maximum amount of finance will be Rs.88000/- per acre. Scheme can
be adopted in smaller areas also by reducing the cost proportionately. Interest rate ranges from
1.75% below to 2.00% above BPLR for various limits. Repayment based on the income
generated from the crops raised and cropping pattern. The maximum period eligible for
repayment is 8 years in annual instalments.

H. PRODUCE MARKETING LOAN (ADVANCE AGAINST WAREHOUSE RECEIPT)


Farmers / traders depositing farm produce in the warehouses of the central / state warehousing
corporations. Scheme will be operative in Karnataka, Andhra Pradesh, Tamilnadu & Kerala.
To protect the farmers from the compulsion to sell their produce immediately after harvest of
produce despite an adverse market. To finance farmers and traders against warehouse receipt.
70% of the value of the warehouse receipt, valued at the market value or 70% of the market
price advised by Agri. Dept, HO whichever is less. On demand / 6 months which can be
extended up to 12 months subject to satisfactory shelf life / market condition.

I. MINOR IRRIGATION
Projects with cumulative command area of less than 2000 ha are called minor irrigation
projects. The beneficiary should have a minimum of 50 cents of land to be brought under
irrigation to ensure viability and of loan. Scheme for developing irrigation potential, Minor
Irrigation, Installation of Pump set Drip Irrigation etc. Interest rate ranges from 1.75% below
to 2.00% above BPLR for various limits. The loan shall be repaid within a period of 9 years,
in yearly instalments.

J. AGRICULTURE GOLD LOAN


All individual farmers undertaking cultivation or other activities including allied activities are
eligible for short-term finance. To meet genuine credit requirements of farming including allied
activities, repairing of equipment’s and consumption needs etc. The eligible loan amount
should be assessed based on the area under cultivation, crops(s) raised, scale of finance and not
in relation to the value of gold offered as security. Interest rate ranges from 2.50% below to

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1.50% above BPLR for various limits. For working capital loans like ACC/KCC/AGL up to
Rs.3 lakh interest at the rate of 7% is extended as per RBI guidelines subject to the periods
stipulated by RBI and beyond that normal rate will apply. As applicable to Agri. Cash Credit
accounts depending on the duration of crops raised and harvesting period and income
generation, subject to a maximum period of 12 months. The account has to be closed at the
end of the period.

K. SCHEME FOR DEVELOPMENT / STRENGTHENING OF AGRI.


MARKETING INFRASTRUCTURE, GRADING AND STANDARDIZATION
Scheme shall be available to individuals, groups of farmers / growers / consumers, partnership
/ partnership firms, NGO’s, SHG, Companies, Corporations, Cooperatives, Co-marketing
Federations, Local Bodies etc. For development of agricultural marketing operations including
strengthening of infrastructure, techniques of preservation, storage etc. BPLR irrespective of
credit size. Adequate long-term period according to the project.

L. CONSTRUCTION / RENOVATION / EXPANSION OF RURAL GODOWN


The project for construction of rural godowns can be taken up by Individuals, Farmers, Group
of farmers/growers, Partnership / Proprietary firms, NGOs, SHGs, Companies, Corporations,
Co-operatives, Federations, Agricultural Produce Marketing Committees, Marketing Boards
and Agro Processing Corporations. To create scientific storage capacity with allied facilities in
rural areas to meet the requirements of farmers for storing farm produce, processed farm
produce and agricultural inputs. As applicable to advances under SIB / C&I segments will be
charged. Adequate long-term period, not less than 5 years including a grace period of one
year.

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8. CONCLUSION AND SUGGESTION

The agriculture sector mostly depends on the credit from banks and due to regular increase in
banking credit the agriculture has been growing regularly, so it is right to say that deployment
of credit has resulted into better development of the agriculture sector.

Both the co-operative banks advance credit mostly to agriculture. First bank advances short-
term and medium term loans while the second bank advances long-term loans. The Reserve
Bank of India as the Central bank of the country took lead in making credit available to
agriculture through these banks by laying down suitable policies. Agriculture credit is an
important prerequisite for agricultural growth. Agricultural policies have been reviewed from
time to time to provide adequate and timely availability of finance to this sector. Rural credit
system assumes importance because for most of the Indian rural families, savings are
inadequate to finance farming and other economic activities. This coupled with the lack of
simultaneity between income realization and expenditure and lumpiness of agricultural capital
investments. The institutional credit system is critical for agricultural development and its role
has further increased in the liberalized economic environment. In India a multi-agency
approach comprising co-operative banks, scheduled commercial banks and regional rural
banks (RRBs) has been followed to allow credit to agricultural sector. The rural credit systems
have under gone several changes during the last decade. There has been an increasing trend
towards institutional rural financing. The financial institutions are under stress, particularly
since the financial sector reforms of 1992-93. The credit policy should continue to emphasize
small borrowers. The commercial banks have started feeling shy of lending to agricultural
sector and rural poor. The provisions of mandatory lending for priority sector and the
agricultural activities should continue. The banks should take the help of NGOs and local
formal institutions in their lending programmes to reduce the transaction costs and improve
recoveries. The financial cum consultancy approach needs to be followed. For meeting the
credit needs of the poor, the programmes like linking of self-help groups (SHGs) with lending
agencies are to be further strengthened.

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