A

DISSERTATION
ON
“A STUDY OF AGRICULTURAL FINANCE
IN INDIA”

SUBMITTED TO

JAGRAN LAKECITY UNIVERSITY,BHOPAL

IN THE PARTIAL FULFILLMENT OF SEMESTER-VI FOR THE
REQUIRMENTS

OF

MASTER OF BUISNESS ADMINISTRATION (M.B.A)

UNDER THE GUIDANCE OF

(DR.PRIYANKA RAWAL)

SUBMITTED BY

(MOHIT SHAH)

SUBMITTED TO

JAGRAN LAKECITY BUSINESS SCHOOL

2018-2020
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 DECLARATION

I hereby declared that , the dissertation “ A STUDY OF AGRCULTURE FINANCE IN

INDIA “ is executed as per the course requirement of two year full time MBA program of
“ JAGRAN LAKECITY UNIVERSITY “

Place - BHOPAL SIGN

Mohit shah

MBA (2018-2020)

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 TABLE OF CONTENT

Sr. No. Particular Page no.

1.
RESEARCH PROPOSAL
1-10
2.
INTRODUCTION
11-14
3. NEED OF THE STUDY
15-27

4. OBJECTIVES
28-29

30- 33
5. RESEARCH
METHODOLOGY

6. SCOPE OF THE STUDY

34-36

7. LIMITATION
37-38
8. DATA ANALYSIS AND
INTERPRETATION 39-48

9. FINDINGS
49-50

10. CONCLUSION
51-52
11. BIBLOGRAPHY
53-54

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 RESEARCH
PROPOSAL

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INTRODUCTION :-
Finance in agriculture is an important as other inputs being used in agriculture production.
Technical inputs are often purchased and employed by farmers as long as he has money. But
his own money is usually inadequate and he needs outside finance or credit. Professional
money lenders were the sole source of credit to agriculture till 1935. They used to charge an
unduly high rate of interest and follow serious practices while giving loan and recovering
them . As a result, farmers were heavily burdened with debts and lots of them perpetuated
debts. With the passing of Federal Reserve Bank of India Act 1934, District Central Co-op.
Banks Act and exploitation Banks Act, agricultural credit received impetus and there have
been 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 most
institutional agencies providing finance to agriculture. After nationalization, it had been made
mandatory for these banks to supply finance to agriculture as a priority sector. These banks
under took special programs of branch expansion and created a network of banking services
throughout the country and began financing agriculture on large scale. Thus agriculture credit
acquired multi-agency dimension. Development and adoption of latest technologies and
availability of finance go hand in hand. In bringing "Green Revolution", "White Revolution"
and "Yellow Revolution" finance has played an important role. Now the agriculture credit,
through multi agency approach has come to remain .

The procedures and amount of loans for various purposes are standardized. Among the varied
purposes "Crop loans" (Short-term loan) has the main share. In addition, farmers get loans for
purchase of electrical motor with pump, tractor and other machinery, digging wells or boring
wells, installation of pipe lines, drip irrigation, planting fruit orchards, purchase of dairy
animals and feeds/fodder for them, poultry, sheep/goat keeping and for several other allied
enterprises.

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NEED OF STUDY

Initiatives taken by the government for increasing flow of credit:

a) Farm credit package

b) Interest subvention to farmers

c) Extension of interest subvention scheme to post harvest loans

d) Collateral free loans

e) Guidelines for providing relief in event of occurence of natural calamities

f) Interest subvention for loan restructured in the drought affected states in 2012

g) Kisan credit card scheme

h) Agriculture debt waivers and debt relief scheme 2008

i) Bringing green revolution in eastern india

j) Revival package or short term cooperative credit

OBJECTIVES :-

a) To study the agricultural finance

b) To study productive needs of agricultural finance

c) To study the source of agricultural finance

d) To examin the role of nabard in agricultural development

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RESEARCH METHODOLOGY:-

DEFINATION:-

D.SLAZENGER AND M.STEPHENSON,

“Research as the manipulation of things, concepts or symbols for the purpose of generalizing
to extend, correct or verify knowledge, whether that knowledge aids in construction of theory
or in the practice of art.”

METHODOLOGY:-

Methodology is the process of collecting the information which help to find out the solution
to the topic selected by the researcher. Whereas research helps to study and find out the
techniques with proper process. It is a systematic way of presenting information. In order to
collect the required information for the project the following methods were adopted.

SECONDARY DATA:-

These are generally published sources, which are collected originally for a few other purpose.
Source are internal company records, government publication, reports & publication, reports
& journals, trade, professional and business associations publications & reports. The
secondary data is collected and possibly processed by people in question. Common sources of
secondary data include census, large survey and organization records. Secondary data
information relates to past periods. Through old could also be only possible source of desired
data on the topic which cannot use following source of secondary data.

1. Newspaper
2. Magazines
3. Internet
4. Research proposal

SCOPE OF STUDY

India may be a land of villages and agriculture still continues to be the important industry
providing employment and livelihood to about 70 percent of its population. After India’s
independence, the successive five year plans have given great accent to agriculture and

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agricultural development. India is a crucial country in Asia where there's continuous
population explosion creating greater demand for food crops. Besides, the planned industrial
expansion also warrants the assembly and provide of huge quantities of raw materials from
agricultural sector. With these objectives, measures are taken at the governmental level for
increasing agricultural production through the utilization of farm yard manures, pesticides,
chemical fertilizers and high yielding sort of seeds. Intensive cultivation is undertaken and
along side this, rotation of crops and mechanization of farm operations to a limited extent are
undertaken

Agricultural growth is crucial for alleviating rural poverty. Access to institutional credit to
more farmers and appropriate quantity and quality of agricultural credit are crucial for
realizing the complete potential of agriculture as a profitable activity.

The co-operatives and therefore the commercial banks put together aren't ready to eliminate
moneylenders and indigenous bankers who are financing at usurious rates. But the
commercial banks’ lending to agriculture has helped the agriculturists to scale back their
borrowing from non- institutional agencies.

LIMITATIONS:-

1. Study covers only a study of 3 years which is sufficient to get the precise result
2. Study is limited only to agriculture finance in india
3. The time available for the purpose of study is very less ie , two months only. Mostly
secondary data is referred than the primary data for that study

CHAPTERS TO BE INCLUDED :-

There are some chapters to be included in study such as :-

 Introduction
 Need of the study
 Objectives
 Research methodology
 Scope of the study
 Limitation
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  Data analysis and interpretation
 Findings
 Conclusions

CONCLUSION :-

The Agricultural sector is one of the major contributors to the economy and provides growth
impulses to the broader economic development of the country. The role of the financing
institutions viz. Banks and Agricultural Finance Companies has grown significantly over the
years in the Agricultural sector. While appraising an Agricultural loan, lenders look for
personal details such as a good credit history, annual and monthly income, In Indian
Agriculture, even small and marginal farmers and Dalit and tribal farmers whether owning
land or not, are risk taking entrepreneurs contributing to economic growth. Farmer is an
important player in the financial, labor, inputs and commodity markets, who because of the
size of transactions in the market place does get marginalized. Livelihood diversification can
help in greater credit absorption at lower end of farming community. Besides, increased
public investment in agricultural infrastructure, research and extension services is required.

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 CHAPTER NO. 1
INTRODUCTION

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Agriculture may be a dominant sector of our economy and credit plays a crucial role in
increasing agriculture production. Availability and access to adequate, timely and low-cost
credit from institutional sources is of great importance, especially to small and marginal
farmers. Along side other inputs, credit is important for establishing sustainable and
profitable farming systems. Most of the farmers are small producers engaged in agricultural
activities in areas of widely varying potential. Experience has shown that quick access to
financial services at affordable cost positively affects the productivity, asset formation, and
income and food security of the agricultural poor. The main concern of the govt is, therefore,
to bring all the farmer households within the banking fold and promote complete financial
inclusion.

Rural indebtedness is an age-old problem in India. In the nineteenth century, commercial

banking was non-existent in rural areas, and farmers were completely within the hands of
usurious moneylenders. Starting from the times of British rule, the central government has
been striving to expand institutional lending to the agricultural agricultural sector. In recent
decades, efforts during this direction have intensified and today, there's a huge network of
institutions providing credit for agriculture

One of the primary steps taken by the govt of India towards addressing the matter was the
establishment of co-operative credit societies. The Co-operative Credit Societies Act (1904)
was passed to supply cheap and cost-effective financial services to farmers and attempts were
made thereafter to widen the co-operative movement. The Maclagan Committee (1915) and
therefore the Royal Commission of Agriculture in India (1928) focused on the expansion of
co-operatives within the country. The RBI Act, 1934, made provisions to determine an
Agriculture Credit Department within the bank and extend refinancing facilities to the co-
operative system .

However, there was a slowdown in the co-operative movement in subsequent years, as a large
number of co-operative institutions were found to be saddled with the problem of frozen
assets, because of heavy overdue in repayment. The RBI commissioned the All India Rural
Credit Survey in 1951 to understand the situation at the grassroots level and address concerns
regarding the financing of the rural sector. The committee recommended the creation of an

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efficient system of agricultural finance and the development of a sound co-operative credit
structure. They suggested increasing the share of co-operatives and advised that at least one
member of each household should be a member of a co-operative institution.

When the State Bank of India was created in July 1955, extending banking services to rural
and semi-urban areas was made one of its objectives. Until 1966, co-operatives were viewed
as the main instrument for extending agricultural credit. The All-India Rural Credit Review
Committee (1969) recommended the adoption of a "multi-agency approach" towards
agriculture and rural credit and commercial banks were expected to complement the efforts of
co-operatives to enhance the quantum of credit in the rural economy. The nationalization of
commercial banks in 1969 made it possible for government to become more proactive on
expanding credit to agriculture. In the same year, the concept of a ‘lead bank’ was introduced
by the Reserve Bank of India; each bank was expected to concentrate on a specific
geographical area to increase the flow of credit to agriculture and to promote overall
development in rural areas within its area of operation.

A directed credit programmer towards certain priority sectors was a serious development
policy in both developed and developing countries within the 1960s. The shortfall in
agricultural output in India in 1966 and 1967 helped focus attention on the necessity for
commercial banks to extend their involvement in financing agricultural activities. Under the
concept of priority sector lending introduced in 1972, commercial banks were mandated to
advance a particular proportion of their funds to those priority sectors, including agriculture
and small-scale industries.

The Narasimham Committee on rural credit (1975) recommended the establishment of

Regional Rural Banks, because it was of the view that neither commercial banks nor co-
operative institutions were ready to meet agricultural credit needs. Another major step taken
towards the event of rural credit was the establishment of NABARD in 1982 by a legislative
act of Parliament on the advice of the Committee to Review Arrangement for Institutional
Credit for Agriculture and Rural Development. Its mission is to “promote sustainable and
equitable agriculture and rural prosperity through effective credit support, related services,
institution development and other innovative initiatives” (NABARD).

Three other initiatives, viz., the Kisan Credit Card Scheme, Self Help Group-Bank Linkage
Programmer and Special Agricultural Credit Plans were put in place in the 1990s to increase
the flow of credit to the agricultural sector. The increased lending to agriculture accelerated,

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particularly after the government adopted doubling of agricultural credit policy (DCAP) over
a three-year period beginning in 2003-04.

Despite the successive efforts taken by the government, the latest All India Debt and
Investment Survey (AIDIS) by the NSSO shows that non-institutional agencies still
accounted for as much as 44 per cent of outstanding dues in 2012-13, an increase from the 36
per cent level in 1990-91. The ground level institutional credit flow to agriculture has shown
a significant increase of more than ten times from Rs.0.53 lakh crore in 2001-02 to Rs.6.07
lakh crore in 2012-13 (Annual Report NABARD, 2013-14). And yet, only about half of 14
crore farm households were covered by formal institutions while the remaining were
dependent on informal sources such as moneylenders who charge exorbitantly high rates of
interest (Annual Report NABARD, 201213).

In 2006-07, the central government introduced an interest subvention of two per cent for
short-term credit up to Rs.3 lakh. The subvention was enhanced subsequently and by 2013-
14, an additional subvention of three per cent was available for prompt payment, making a
total subvention of five per cent and reducing the effective rate of interest for short-term
credit to four per cent.

The first such waiver was announced in 1990. Another scheme to address the issue of
indebtedness of farmers was the Farmer’s Debt Waiver Scheme, announced by the
Government of India in 2008, covering 3.69 crore small and marginal farmers and 0.6 crore
other farmers. The cost of this scheme was estimated initially at approximately Rs.70, 000
crore.

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 CHAPTER 2

NEED OF THE STUDY

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INITIATIVES TAKEN BY THE GOVERNMENT FOR INCREASING FLOW OF
CREDIT:-

I. FARM CREDIT PACKAGE :-

Government of India in its Farm Credit Package announced in June 2004, advised
banks to double credit to agriculture sector in three years, i.e., by 2006-07. In the
subsequent annual budgets, Government of India announced targets for credit to
agriculture to make sure adequate credit flow to the world . The flow of agriculture
credit since 2003-04 has consistently exceeded the target. Agriculture credit flow has
increased from Rs.86981 crore in 2003-04 to Rs. 468291 crore in 2010-11. The target
for the 2011-12 was fixed at Rs.475000 crore and achievement as on 31.03.2012 is
Rs. 511029 crore ( as per provisional figures given by NABARD) forming quite
107% of the target. The target of credit flow for the year 2012-13has been fixed at Rs.
575000 crore and achievement as on October, 2012 is Rs. 308025 crore

II. INTEREST SUBVENTION TO FARMERS:-

Government of India announced an interest subvention scheme in 2006-07 to enable
banks to supply short term credit to agriculture (crop loan) up to Rs.3 lakh at 7%
interest to farmers. Further, to incentivize prompt repayment, within the Union allow
2009-10, Government of India announced a further interest subvention of 1% to those
farmers who repay their short term crop loans promptly and on or before maturity .
This was subsequently raised to twenty in 201011 and three in 2011-12 and 2012-13
also. Thus, farmers, who promptly repay their crop loans, are now extended loans at
an efficient rate of interest of 4% p.a. As proposed within the Union Budget 2013-14,
Interest subvention scheme for short-term crop loans to be continued scheme
extended for crop loans borrowed from private sector scheduled commercial banks

III. EXTENSION OF INTEREST SUBVENTION SCHEME TO POST HARVEST

LOANS:
In order to discourage distress sale by farmers and to encourage them to store their
produce in warehousing against warehouse receipts, the advantage of interest
subvention scheme has been extended to small and marginal farmers having Kisan
master card for an extra period of up to six-month post-harvest on an equivalent rate

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 as available to crop loan against negotiable warehouse receipt for keeping their
produce in warehouses.

IV. COLLATERAL FREE LOANS:

The limit of collateral free farm loan has been increased from Rs.50, 000 to Rs.1,
00,000.

V. GUIDELINES FOR PROVIDING RELIEF IN EVENT OF OCCURENCE OF

NATURAL CALAMITIES:
Reserve Bank has put in place a mechanism to address situations arising out of natural
calamities. The banks have been issued necessary guidelines for undertaking
necessary credit relief measures in event of occurrence of natural calamities. The
guidelines, inter alia, contain directions to banks to ensure that the meetings of
District Consultative Committees or State Level Bankers’
Committees are convened at the earliest to evolve a coordinated action plan for
implementation of the relief programmer together with the State/ district authorities.
Banks are advised to supply conversion/ rescheduling of loans and consider
moratorium period of a minimum of one year altogether cases of restructuring. To
enhance awareness, the banks also are required to offer adequate publicity to their
disaster management arrangements, including the helpline numbers. Further, the
banks are advised to not insist for extra collateral security for such restructured loans.
Asset classification for restructured loans will remain an equivalent as prevalent at the
time of restructuring for a period of 1 year as per extant guidelines. The relief
measures initiated and undertaken are required to be reviewed periodically within the
weekly/fortnightly meetings of specially constituted Task Forces or sub Committees
of the SLBC till such time as conditions are normalized.

VI. INTEREST SUBVENTION FOR LOAN RESTRUCTURED IN THE

DROUGHT AFFECTED STATES IN 2012:
The standing guidelines of Federal Reserve Bank of India (RBI) provide for
rescheduling of short term crop loans upon declaration of natural calamity including
drought. Such rescheduling of crop loans converts them into term loans that normal
rate of interest are applicable. Due to deficient rainfall in 2012 in some parts of the
country, the matter of providing relief to the farmers of the drought affected areas has

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 been under the consideration of the Government. In order to supply relief to drought
affected farmers, it's been decided that in cases where such loan are restructured
thanks to drought, the interest subvention of twenty-two which is already available for
brief term crop loans to Public Sector Banks, Cooperative Banks and Regional Rural
Banks will still be available for the present fiscal year on the full restructured amount.

VII. KISSAN CREDIT CARD SCHEME:

In order to make sure that each one eligible farmers are given hassle free and timely
credit for his or her agricultural operation, Kissan card Scheme for farmers was
introduced in 1998-99 to enable the farmers to get agricultural inputs like seeds,
fertilizers, pesticides, etc. The Kisan master card Scheme is operational throughout
the country and is implemented by Commercial Banks, Coop. Banks and regional
rural banks. The scheme has facilitated in augmenting credit flow for agricultural
activities. The scope of the KCC has been broad-based to incorporate term credit and
consumption needs. All farmers including Small farmers, Marginal farmers, Share
croppers, oral lessee and tenant farmers are eligible to be covered under the Scheme.
The card holders are covered under Personal Accident Insurance Scheme (PAIS)
against accidental death/permanent disability.
Further, Go I has recently accepted suggestions made by a Working Group (Bhasin
Working Group) on Kisan Credit Card Scheme to convert it into a Smart Card cum
Debit Card and revised guidelines have been issued by NABARD.
Some of the major features are as under:
 . Assessment of crop loan component supported the size of finance for the
crop plus premium x Extent of area cultivated + 10% of the limit towards
postharvest / 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.

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  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 ailment and thereafter simple
declaration (about crops raised/ proposed) by farmer.
 One time documentation at the time of first ailment and thereafter simple
declaration (about crops raised/ proposed) by farmer.
 Disbursement through various delivery channels, including ICT driven
channels like ATM/ Mobile handsets.

The State Governments have been advised to launch an intensive branch/village level
campaign to provide Kissan Credit Card to all the eligible and willing farmers in a time
bound manner. Up to June, 2012, 11.39 crore KCC have been issued.

VIII. AGRICULTURE DEBT WAIVER AND DEBT RELIEF SCHEME, (ADWDRS)

2008:
To mitigate the distress of farming community in general and small and marginal
farmers in particular and to reclog the institutional credit channels and make farmers
eligible for fresh credit, the Debt Waiver and Debt Relief Scheme, 2008 was
announced in the Union Budget for 2008-09.
The scheme covered direct agricultural loans disbursed;-
1. between 31 March 1997 and 31 March 2007
2. overdue as on 31 December 2007
3. Remaining unpaid until 29 February 2008. In the case of small and marginal
farmers, short term production loans (subject to a ceiling in respect of
plantation and horticulture) and installments of investment loans overdue were
covered, while within the case of the opposite farmers, just one occasion
settlement was extended under which a rebate of 25% of the eligible amount
was given on the condition that the farmer repays the balance 75% in three
installments.

IX. BRINGING GREEN REVOLUTION IN EASTERN INDIA (BGREI):-

Financing Agricultural Investments within the Eastern Region – Concessional
Refinance Support: so as to support the banking industry finance such key

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 investments, NABARAD has introduced a concessional refinance scheme within the
year 2011-12, with an objective to accelerate investments in agriculture to reinforce
production and productivity of crops within the Eastern region (Assam, Bihar,
Jharkhand, Chhattisgarh, Odisha, West Bengal and Eastern Uttar Pradesh) by
incentivizing the banks. Under the scheme, NABARD provides 100% refinance to
banks at a concessional rate of seven .5% p.a. provided certain minimum targets are
achieved by the bank in financing these key investments. The operative period of
scheme is for financial years, 2011-12 and 2012-13. Four activities viz, Water
Resources development, exploitation , Farm Equipment’s
A. Forming and linking of Joint Liability Groups (JLGs)
B. Awareness programmers for promoting the scheme
C. Organizing sensitization meets for the branch officials of implementing banks
D. Training and capacity building of identified entrepreneurs is also offered
under the scheme

In partial modification of the Scheme, Tractor Financing under group mode to

Self Help Groups (SHGs) / Joint Liability Groups (JLGs) were also considered for
concessional refinance by the banks, provided tractors are financed to;

a) An existing Self Help Group (SHG) which is at least two years old
b) A new Joint Liability Group (JLG), provided the number of land owning
farmers in the group is not less than five and every member is a Small
Farmer (SF) or a Marginal Farmer (MF)

X. REVIVAL PACKAGE FOR SHORT TERM COOPERATIVE CREDIT

STRUCTURE:
The Government is implementing a package for revival of Short-term Rural
Cooperative Credit Structure in the country. The Revival Package is aimed at
reviving/strengthening the Short-term Rural Cooperative Credit Structure (CCS) and
make it a well-managed and vibrant medium to serve the credit needs of rural India,
especially the small and marginal farmers. It seeks to:-
a) Provide financial assistance to bring the system to an acceptable level of
health;
b) Introduce legal and institutional reforms necessary for their democratic, self-
reliant and efficient functioning; and

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 c) Take measures to improve the quality of management.

Those states choosing to participate in the Revival Package will be entitled for
financial assistance under the package through the mechanism of a formal MOU
or Exchange of Letters with the Central Government and NABARD to implement
(in a phased manner & within a period of 3 Years), the legal and institutional
reforms envisaged. Financial assistance for STCCS under the package which has
been estimated at Rs 13596 crore will be available for cleansing of Balance Sheet
and increasing the capital to a specified minimum level. In order to ensure that the
CCS continues on sound financial, managerial and governance norms, technical
assistance will also be provided to upgrade institutional and human resources of
the CCS, computerization and building up proper internal control and accounting
system. The Package seeks to bring down the interference of the State Govts in
the credit cooperatives and suitable amendments to the State Cooperative
Societies Act and Banking Regulation Act have been proposed in the package.
These form part of the important conditionality’s to be complied with under the
Package.

NEED OF AGRICULTURAL FINANCE

AGRICULTURAL
FINANCE

PRODUCTIVE UNPRODUCTIV
NEEDS E NEEDS

PURCHASE
FERTILIZERS DEVELOPMENT CEEBRATION
AND OF NEEDS OF BIRTH
IMPLEMENT

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 1. PRODUCTIVE NEEDS:-
Predictive needs refers to finance for purchase of needs fertilizers and implements and
also digging and Deeping of wells.

2. UNPRODUCTIVE NEEDS:-
The productive purpose that the farmer also get loan are celebration of marriages,
birth and death. There is another classification of monetary requirement of the farmer
and that they all fall within the productive category
 Short-Term Loan:-
Short-term loans needed for cultivation or for marketing domestic expenses
 Medium Term Loan
Medium term loans which range from 15 months to 5 years for making
improvement of land, buying cattle agricultural implements etc.
 Long Term Loan
Long term loan period more than 5 year required for purchase of additional
land, make permanent improvements on land, and pay off old debts and to
purchase costly agricultural machinery Need for Agricultural Finance
Productive Need Purchase Fertilizers and Implement Development of Land
Unproductive Need Celebration of Birth Celebration of Marriages

SOURCE OF AGRICULTURAL FINANCE:-

CENTRAL
COOPERATIVE
BANK
INSTITUTIONAL
SOURCES
STATE CO-
AGRICUTURAL OPERATIVE BANK
FINANCE

NON-
INSTITUTIONAL MONEY LENDERS
SOURCES

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INSTITUTIONAL SOURCE:-

Institutional sources consist of the government and co-operative societies, commercial bank
including the Regional bank, Lead bank.

CORPORATIVE SOCIETIES:-

Indian planners consider co-operation as an instrument for economic development of the

deprived farmers, particularly within the rural areas. They see during a village panchayat, a
village co- operatives and village school, because the trinity of institution on which a self-
reliant and just economic and social order is to be built. The co-operative movement was
started in India largely with a view to providing agriculturists funds for agricultural
operations at low rates of interest and projects them from the clutches of money lenders

a) primary agricultural credit society:-

Primary agricultural credit societies are grass root level arms of the short term co-
operative credit structure. PACs deal directly with farmer borrowers, grant short term
and medium term loans and also undertake distribution and making functions. The
usefulness of PACs has been rising steadily. In 1950-51, it advanced loan worth Rs.
23 crores and Rs. 34,520 crore in 2000-01. The PACs have stepped up their advances
to the weaker sections particularly the small and marginal farmers. The progress has
been quite spectacular but not sufficient considering the demand of finance by
farmers.
b) central cooperative bank:-
There are now 369 (2001-2002) District Central Co-operative Banks. The loan
amount of 56,650 crore is distributed to the farmers so far. Their main task is to lead
Primary Agricultural Credit Societies in village. Central Co-operative Banks functions
as intermediaries between the State Co- operative Bank and Primary Agricultural
credit society.
c) state co-operative bank:-
There are now 30 State Co-operative banks in the country. These Banks are the apex
banks of the Co-operative credit structure. It serves as a link between NABARD from
which it borrows and lends to the co-operative central bank and primary societies
village.

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OBJECTIVES OF STATE CO-OPERATIVES BANK:-

1) To work as an apex bank at state level

2) To guide and supervise the functioning of district central co-operative bank and
primary co-operative agricultural socities and to develop the mutual relationship
among them
3) To communicate between other cooperative societies and the district co-operatives
central bank
4) To carry the whole responsibility of banking business in cooperative sector
5) To make maximum extensive of credit to the rural section . in 1991-92 Rs 5800
were provided as loan for agricultural . it increase Rs 28.947 crore in 2005-06 .
therefore , at present co-operatives bank distribute in 22% in total distributed
agriculture loans

THE COMMERICIAL BANK:-

The commercial banks were not much bothered about agricultural finance. They were
confined to the urban areas receiving deposits from the urban public and financing trade and
industry. All this changed after the nationalization of banks in 1969. Now the commercial
banks are providing finance both directly and indirectly. Direct finance is for agricultural
operation for short and medium periods. Indirect finance refers to advance for distribution of
fertilization and other inputs. The commercial banks have implemented “Village Adoption
Scheme” by 1987-88 the commercial banks had given Rs. 3930 crore in advances.
Commercial bank lent 4,806 crore to agricultural finance in 1991-92 and in Rs, 68,557 crore
in 2005-06.

LAND DEVELOPMENT;-

Land Development Banks were found out so as provide for future finance. Previously they
were called Land Mortgage Banks; the target of the bank is to supply future credit to
cultivators against the mortgage of their lands. In additional to the present the bank does the
subsequent functions.

1) To open branches of the bank to different places.

2) To see whether there is proper disposal of the debt given.
3) To issued debentures from time to time.
4) To create feeling of co-operation among the members and to promote it.

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 5) To create feeling of co-operation among the members and to promote it.
6) To promote habit of savings among the members.
7) To provide valuable advice to cultivators in cultivators.

These banks provide loans for:-

1) These banks provide loans for

2) Purchasing new land.
3) Digging and construction of the well.
4) Repairing the well

The co-operative has the direct encouragement from the government and support of the
NABARD as it had made spectacular progress. By 1981 the co-operatives were financing
nearly 30 percent of the advantages of this.

REGIONAL RURAL BANK;-

The Regional Rural Banks were set up in 1975. The main objective of the RRBS is to provide
credit and other facilities particularly to the small and marginal farmers, agricultural laborers,
artisans and small entrepreneurs so as to develop agriculture, trade commerce, industry and
other productive activities in the rural areas.

THE GOVERNMENT:-

These are both short term as well as long-term loans. These loans are popularly known as
“Taccavi loans” which are generally advanced in times of natural calamities. The rate of
interest is low. But it is not a major source of agricultural finance. The government provides
finance indirectly as well as indirect.

1) INDIRECT FINANCE:-
Indirect credit is provided through the co-operative societies

2) DIRECT FINANCING:-
The govt. Has been financing farmers directly. Agricultural credit from the govt. Is
calls “taccavi' and has a long history in India, it is provided under Land
Improvement Loan Act of 1883 and the agricultural Loans Act of 1884. The
government gives “taccavi loans” to the farmers which are disbursed at the time of

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 distress famines, flood etc. At a low interest rate of 6 percent and the repayment
schedule is very convenient

NABARD:-

The Federal Reserve Bank of India since its formation had wanted to appoint a separate
department for handling agricultural credit. The RBI had found out ARDC (Agricultural
Refinance Development Corporation) for providing refinance support to the banks to market
programmers of agricultural development particularly those requiring term credit. The
government needed an Apex institution to increase support and to offer guidance to credit
institutions in matters concerning the formulation and implementation of rural development
programmers. Therefore NABARD was set up. It was set up in July 1982 and it took over the
functions to the ARDC and also it took over the functions of the RBI in relation to co-
operative banks and RRBs

The main objective of the NABARD is to look after agricultural credit, it also has to provide
refinance facilities to all banks and financial institution landing to agricultural and rural
development

NON-INSITUTIONAL SOURCE:-

 MONEY LENDER:-
There are two types of money lenders in rural areas. There are rich farmer or
landlords who combine farming with money-lending. There is lasso professional
money lender whose only occupation or profession is to lend money. The cultivators
depend upon the money-lenders for their requirements of cash. However, there are
many reasons for the preponderance of the village money-lenders in rural area even
now.
i. The money lender freely suppliers credit for productive and non-productive
propose, and also for short-term and long-term requirements the farmers
ii. He is easily accessible and maintains a close and personal contact with the
borrowers often having relations with family extending over generations
iii. These methods of business are simple and elastic.

 LANDLORD AND OTHER:-

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 Traders and commission agent supply funds to farmers for productive purpose much
before the crops mature. They force the framers to sell their produce at low price and
that they charge an important commission for themselves. Thus source of finance is
especially important within the case of money crop like cotton, groundnut, tobacco,
and within the case of fruit of chard like mangoes. Traders and commission agent
could also be bracketed with money lenders, as their lending to farmers is additionally
at exorbitant rates and has other undesirable effects too.

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 CHAPTER NO. 3

OBJECTIVES

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OBJECTIVES OF THE STUDY:-

i. To study the agriculture finance

ii. To study the productive needs of agricultural finance

iii. To study the source of agricultural finance

iv. To examine the role of NABARD in agricultural development

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 CHAPTER NO.4

RESEARCH
METHODOLOGY

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RESEARCH METHODOLOGY :-

MEANING OF RESEARCH:-

Research in common parlance refers to an enquiry for knowledge. Once also can define
research as a scientific and systematic look for pertinent information on a selected topic. In
fact, research is an art of scientific investigation. Some people consider research as a
movement, a movement from the known to the unknown. It's actually a voyage of discovery.
We all possess the vital instinct of inquisitiveness for, when the unknown confronts us, we
wonder and our inquisitiveness makes us probe and attain full and fuller understanding of the
unknown. This inquisitiveness is that the mother of all knowledge and therefore the method,
which man employs for obtaining the knowledge of regardless of the unknown, are often
termed as research.

Research is a tutorial activity and intrinsically the term should be utilized in a technical sense.
According to Clifford Woody research comprises defining and redefining problems,
formulating hypothesis or suggested solutions; collecting, organizing and evaluating data;
making deductions and reaching conclusions; and eventually carefully testing the conclusions
to work out whether or not they fit the formulating hypothesis. Research is, thus, an ingenious
contribution to the prevailing stock of data making for its advancement. It is the pursuit of
truth with the assistance of study, observation, comparison and experiment. In short, the look
for knowledge through objective and systematic method of finding solution to a drag is
research. The systematic approach concerning generalization and therefore the formulation of
a theory is additionally research. As such the term ‘research’ refers to the systematic method
consisting of enunciating the matter , formulating a hypothesis collecting the facts of
knowledge , analyzing the very fact of reaching certain conclusions either within the sort of
solutions towards the concerned problem or in certain generalization for a few theoretical
formulation.

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RESEARCH DESIGN:-

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METHODOLOGY:-

Methodology is the process of collecting the information which help to find out the solution
to the topic selected by the researcher. Whereas research helps to study and find out the
techniques with proper process. It is a systematic way of presenting information. In order to
collect the required information for the project the following methods were adopted.

SECONDARY DATA;-

These are generally published sources, which are collected originally for a few other purpose.
Source are internal company records, government publication, reports & publication, reports
& journals, trade, professional and business associations publications & reports. The
secondary data is collected and possibly processed by people in question. Common sources of
secondary data include census, large survey and organization records. Secondary data
information relates to past periods. Through old could also be only possible source of desired
data on the topic which cannot use following source of secondary data.

1. Newspaper

2. Magazines

3. Internet

4. Research proposal

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 CHAPTER NO. 5

SCOPE OF THE STUDY

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SCOPE OF PRESENT STUDY:-

India may be a land of villages and agriculture still continues to be the important industry
providing employment and livelihood to about 70 percent of its population. After India’s
independence, the successive five year plans have given great accent to agriculture and
agricultural development. India is a crucial country in Asia where there's continuous
population explosion creating greater demand for food crops. Besides, the planned industrial
expansion also warrants the assembly and provide of huge quantities of raw materials from
agricultural sector. With these objectives, measures are taken at the governmental level for
increasing agricultural production through the utilization of farm yard manures, pesticides,
chemical fertilizers and high yielding sort of seeds. Intensive cultivation is undertaken and
along side this, rotation of crops and mechanization of farm operations to a limited extent are
undertaken

Agricultural growth is crucial for alleviating rural poverty. Access to institutional credit to
more farmers and appropriate quantity and quality of agricultural credit are crucial for
realizing the complete potential of agriculture as a profitable activity.

Credit is the sine qua non for agricultural operations and both for short term and long term,
credit is needed by agriculturists. Short term credit is of repetitive nature and is needed for
every agricultural operation. As the size of the holdings is small the retained earnings of the
farmers are practically nil. Traditionally, Indian farmers have been borrowing for many
centuries, and even now from moneylenders, indigenous bankers, friends, and relatives.
There was no institution for agricultural lending until the co-operatives were established in
1904. But even then the impact of the co-operatives was practically nil till 1954.
Subsequently, measures were taken to strengthen the co-operatives. The commercial banks
were for a long time of the view that agricultural credit was not in their purview. It was only
in the year 1955 when the State Bank of India was established as a state-owned commercial
bank by nationalizing the Imperial Bank of India, some efforts were taken to lend money for
agricultural operations.

The co-operatives and therefore the commercial banks put together aren't ready to eliminate
moneylenders and indigenous bankers who are financing at usurious rates. But the
commercial banks’ lending to agriculture has helped the agriculturists to scale back their
borrowing from non- institutional agencies.

36 | P a g e
The present study of the demand for and supply of credit will help the bank to allocate more
funds for major purposes for which they require funds and also provide adequate amount of
funds at the right time. Study of the causes of default will provide lessons to the farmers on
how to use credit in a better way for productive purposes so that they can repay the loan
within the specified period. Examining the performance of the banks will help in identifying
the difficulties involved in advancing and recovery of loans. This will enable the banks to
alter their lending procedures and the repayment schedule. The study will help the policy
makers to reformulate the policies so as to improve the performance of the banks.

37 | P a g e
 CHAPTER NO.6

LIMITATION

38 | P a g e
LIMITATION:-

i. Study covers only a study of 3 years which is insufficient to get precise result

ii. Study is limited only to an agricultural finance in india

iii. The time available for the purpose of study is very less ie two month only .mostly
secondary data is referred than the primary data for the study is limited

39 | P a g e
 CHAPTERS NO. 7

DATA ANALYSIS AND

INTERPRETATION

i. AGRICULTURAL CREDIT POLICY :-

40 | P a g e
 The Government of India has initiated several policy measures to enhance the
accessibility of farmers to the institutional sources of credit. The emphasis of those
policies has been on progressive institutionalization for providing timely and adequate
credit support to all or any farmers with particular specialise in small and marginal
farmers and weaker sections of society to enable them to adopt modern technology
and improved agricultural practices for increasing agricultural production and
productivity. The Policy lays emphasis on augmenting credit flow at the bottom level
through credit planning, adoption of region-specific strategies and rationalization of
lending Policies and Procedures. These policy measures have resulted within the
increase within the share of institutional credit of the agricultural households.
Progress in reference to flow of agricultural credit is given below:

( Rs in crore)

YEAR TARGET ACHIEVEMENT

2007-2008 105000 125309
2008-2009 141000 180486
2009-2010 175000 229400
2010-2011 225000 254658
2011-2012 280000 287149
2012-2013 325000 384514
2013-2014 375000 468291
2014-2015 475000 511029
2015-2016 575000 308025
2016-2017 650000 580250
2017-2018 700000 610424

TABLE-2 BREAK-UP OF INSTITUTION AND NON-INSTITUTON RURAL

CREDIT

41 | P a g e
 Source of credit 1951 1961 1971 1981 1991 2002 2016

Instution 7.2 14.8 29.2 61.2 64 57.1 56

goverment 3.3 5.3 6.7 4 5.7 2.3 1.3

Co-operative
societies 3.1 9.1 20.1 28.6 8.6 27.3 24.8
Commercial banks 0.8 0.4 2.2 28 29 24.5 25.1

insuarance - - 0.2 0.6 1.4 0.6 0.3

Other agencies - - - - 9.3 2.4 4.6

Non-institutionals 92.8 85.2 70.8 38.8 26 42.9 44

Money
lenders 69.7 60.8 36.9 16.9 15.7 29.6 33.2
relatives 14.2 6.9 13.8 9 6.7 7.1 8.5

Traders,commission
agent 1.5 0.9 8.6 4 4 1 0.7
Landlords 1.5 0.9 8.6 4 4 1 0.7

others 1.9 8.9 2.8 4.9 2.5 2.6 1.4

total 100 100 100 100 100 100 100

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 100

90

80

70

60

50 institution
non-institution
40

30

20

10

0
1951 1961 1971 1981 1991 2002 2016

Note:- break-up of the shares of each source is taken from RBI working paper
series .persistence of informal credit in rural india .evidence from “ all india debt and
investment survey and beyond “ includes financial corporation /institution , financial
companies

TABLE -3 BREAK-UP OF INSTITUTION AND NON-INSTITUTIONS:-

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 Source of credit 1951 1961 1971 1981 1991 2002 2016

Instution 10.2 20.9 32 56.2 66.3 61.1 64

goverment - 6.2 - 4 5.7 1.7 1.3

Co-operative
societies 6.2 12.5 - 27.6 23.6 30.2 28.9

Commercial banks 4 2.2 - 23.8 35.2 26.2 30.7

insuarance - - - 0.8 0.7 0.5 0.1

Other agencies - - - - 1.1 2.4 3

Non-institutionals 89.9 79.1 68 43.8 33.7 38.9 36

Money
lenders 39.8 25.3 - 17.2 17.5 26.8 29.6
relatives - - - 11.5 4.6 6.2 4.3

Traders,commission - - - 5.8 2.2 2.6 -

agent
Landlords 21.4 15 - 3.6 3.7 0.9 6.4

others 28.6 38.8 - 5.7 5.7 2.4 1.7

total 100 100 100 100 100 100 100

44 | P a g e
 100

90

80

70

60

50 institutional
non-institutional
40

30

20

10

0
1951 1961 1971 1981 1991 2002 2016

EXPLAINATION:-

Non-institutional sources were dominant in 1951, accounting for 90 per cent of the
outstanding debt of cultivator households, but their share declined rapidly to 79 per cent in
1961 and further to 68 per cent in 1971 and 43.8 per cent in 1981. After 1981, the rate of
decline slowed down and the share of non-institutional sources was 33.7 per cent in 1991.
There was, however, a reversal of this pattern thereafter and the share of non-institutional
debt actually climbed up to 39 per cent in 2002 and dropped to 36 per cent in 2013. During
this period, the share of moneylenders in providing credit rose from 17.5 per cent in 1991, to
26.8 per cent in 2002 and 29.6 per cent in 2016

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4) FLOW OF AGRICULTURAL CREDIT:-

( Rs in crore)

YEAR TARGET ACHEIVMENTS

2009-2010 175000 229400
2010-2011 225000 254658
2011-2012 280000 301908
2012-2013 325000 384514
2013-2014 375000 446779
2014-2015 475000 476550
2015-2016 575000 607375
2016-2017 700000 723225
2017-2018 725000 750000
2018-2019 746000 783590

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 900000

800000

700000

600000

500000

400000
target
300000 achievments

200000

100000

0
0 1 2 3 4 5 6 7 8 9
2 01 2 01 2 01 2 01 2 01 2 01 2 01 2 01 2 01 2 01
0 9- 1 0- 1 1- 1 2- 1 3- 1 4- 1 5- 1 6- 1 7- 1 8-
20 20 20 20 20 20 20 20 20 20

EXPLANATION:-

Shows that targeted credit flow to agriculture during the year 2009-2010 is 175,000(in
crores), corresponding achievement is 229,400.The percentage of achievement on targeted is
131%. During the year 2010-2011 agricultural credit flow achieved Rs.254, 658 against the
targeted amount Rs. 225,000. It shows that agricultural credit flow achieved is 113%. As
compared to the year 2007-08 agricultural credit flow is less during the year 2008-09. Five
years after i.e. 2014-15 the target of credit fixed Rs.4, 75,000 crore and the achievement
Rs.476, 550crore, represents 100.32% of the targets. During 2016-17 the targeted credit flow
Rs.7, 00,000 crore and the achievement isRs.7, 23,225 crore, 103 per cent of target. During
2014-15 the targeted credit flow Rs 750000 crore and achievement is Rs 750000 crore we can
understand the percentage of credit flow is showing decreasing trend up to 2014-15 and
slightly improved thereafter.

DIFFERENT PURPOSE OF THE LOAN :-

47 | P a g e
 frequency pecentage
agriculture 32 94.1
Open a shop 82 85.3
poultry 83 82.4
handloom 26 76.5
diary 25 73.5
piggery 24 70.6
fishery 24 70.6
handicraft 20 58.8
Shop renovation 20 58.8
education 18 52.8
health 17 50.0
Petty trading 16 47.1
Transportation services 10 29.4
Nursery plantation 6 17.6
weaving 5 14.5
guttery 4 11.6
artisian 3 8.8
Consumption loan 1 2.9
marriage 1 2.9
Milk vendors 1 2.9
Stationory 1 2.9
Rickckshaw 1 2.9
Tea stall 1 2.9
Freeing from 1 2.9
moneylenders
tailors 1 2.9
Masala preparation 1 2.9
sugarcane 1 2.9
maternity 1 2.9
sericulture 1 2.9
terracotta 1 2.9
duckery 1 2.9
Mastered cultivation 1 2.9
Pottery 1 2.9

48 | P a g e
 agriculture
poultry
dairy
fishery
shop renovation
health
transportation services
weaving
percentage
artisian
marriage
stationary
tea stall
tailors
sugarcane
sericulture
duckery
pottery
0 10 20 30 40 50 60 70 80 90 100

EXPLANATION:- Above graph shows different purpose of loan and the heights .frequency
and percentage in an agriculture is, 32 and 94.1 respectively and the lowest frequency and
percentage in a pottery items is , 1 and 2.9 respectively.

49 | P a g e
 CHAPTER NO. 8

FINDINGS

FINDINGS:-

 This dissertation helped to investigate the relationship between institutional credit to

agriculture .gross domestic product (GDP) Collectively the result suggest that the fear
that credit might be ineffective are perhaps misplaced . There is strong evidence that
credit is indeed playing its part of supporting the purchased inputs and perhaps even
aiding the agriculture sector respond to its contextual constraints
 Credit flow to agriculture sector to increase at the rate 30 per cent per year
 Supply of adequate and timely credit to small farmers
 Little was done for the implementation of crop loan system in most states

50 | P a g e
  Small farmer’s development agency ( SFDA) to route the co-operatives credit to small
farmers and for providing subsidy to them when needed
 Risk taking abilities
a) Interest in agriculture
b) Proper utilisation of the amount
c) Repayment capacity and behaviour
d) Willingness to repay

 Self help group(SHG) - bank linkage programme

 Trend in long –term and short-term credit
 The data on interest subvention provided to NABARD , regional rural bank and PSBs
on short-term credit to farmers is provided in the expenditure budget prepared by the
ministry finance
 Review interest rate subvention on short term credit . in view of the lack identifiable
benefits resulting from interest rate subvention and the emerging evidence that it
could be leading to the diversion of subsidized agricultural credit for non-agriculture
purpose , there is a strong case for a serious review of the policy
 Credit flow to agriculture sector to increase at the rate of 30% per year

51 | P a g e
 CHAPTER NO.9

CONCLUSION

CONCLUSION :-

The Agricultural sector is one of the major contributors to the economy and provides growth
impulses to the broader economic development of the country. The role of the financing
institutions viz. Banks and Agricultural Finance Companies has grown significantly over the
years in the Agricultural sector. While appraising an Agricultural loan, lenders look for
personal details such as a good credit history, annual and monthly income

52 | P a g e
It contributes to the share capital and debentures of co-operatives. Instead of playing direct
role in providing form credit, the government may play a vital role in creating conditions or
infra- structural facilities to the promotion of institutional credit

In Indian Agriculture, even small and marginal farmers and Dalit and tribal farmers whether
owning land or not, are risk taking entrepreneurs contributing to economic growth. Farmer is
an important player in the financial, labour, inputs and commodity markets, because of the
size of transactions in the market place does get marginalized. Livelihood diversification can
help in greater credit absorption at lower end of farming community. Besides, increased
public investment in agricultural infrastructure, research and extension services is required.
Need is also felt for developing post-harvest technologies and marketing facilities that can
reduce frequent risk and losses faced by farmers

53 | P a g e
 CHAPTER N0.10

BIBLOGRAPHY

BOOKS ;-

Indian economy , RUDDAR DUTTA and K.P.M SUNDHARAN

RESEARCH ARTICLE ;-

54 | P a g e
  Agricultural finance :-an overview - PRATAP BAPUSO LAD
 Credit policy for agricultural in india –an evaluation-ANWARUL HODA
 Managment of agricutural credit and the impact of indian banking sector reforms on
agricultural –SEENA PC
 Institutional credit to indian agriculture : default and policy option –ASHOK
GULATI

Websites:-

 WWW.NABARD.COM

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