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AGRICULTURE FINANCE

Agricultural production in this country depends upon millions of small farmers. It is intensity of their effort and the efficiency of their technique that will help in raising yields per acre. Because of

inadequate financial resources and absence of timely credit facilities at reasonable rates, many of the farmers, even though otherwise willing, are unable to go in for improved seeds and manures or

to introduce better methods or techniques. Works of minor irrigation like wells owned by thecultivators either get into disuse or are not fully utilised for want of capital. The major object of the

agricultural programme discussed earlier is to develop local resources of seeds, manures andirrigation and to provide other accessories of production. To utilise man-power and cattle resources

more fully than is done at present, these aids to better and more intensive farming are essential. Itis, therefore, of the utmost importance that the financial requirements of the producers for these

purposes should be adequately met. The achievement of targets in the agricultural sector whichcovers production of food and essential raw material like cotton, Jute and oilseeds, ought not to be

allowed to suffer for want of adequate credit has, however, to be related to specific items of productive work rates of interest has, therefore, to be considered as an integral part of the Plan.

Assistance rendered by way of credit has, however, to be related to specific items of productive

work or of essential costs of cultivation. For providing these facilities all the existing agencies e.g.money lenders, commercial banks, cooperatives and the State have to be integrated and harnessedto a common purpose. Such a comprehensive approach is essential for ensuring the best use of all

the available resources of the nation.

NATURE OF REQUIREMENTS AND AGENCIES OF AGRICULTURAL CREDIT

2. Finance required for production can be divided broadly into : (a) short-term (for periods up to 15months); (b) medium-term (from 15 months up to 5 years) and (c) long-term (above 5 Years).

Short-term loans are required for purchasing seeds, manures and fertilizers or for meeting labour charges, etc. These are expected to be repaid after the harvest. Medium-term loans are granted for

purposes such as sinking of wells, purchase of bullocks, pumping plants and other improvedimplements, etc. Loans repayable over a longer period (i.e. above 5 years) are classified as long-

term loans. These are utilised for payment of old debts, purchase of the heavier machines, making permanent improvements and increasing the size of the holding. A quantitative assessment of the

finance required under these three categories is extremely difficult as adequate data for the purposeare not available. It is hoped that the rural credit survey undertaken by the Reserve Bank will

provide more reliable estimates on the basis of which policy can be formulated. It is, however,clear that there is a wide gap between funds at present available on reasonable terms and the

requirements of the cultivators.

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FINANCE FOR AGRICULTURE 235

3. The following agencies provide finance to the cultivators :-

(1) Private agencies : (a) money lenders and landlords; (b) commercial banks.

(2) Public or semi-public agencies : (a) the State; (b) co-operative societies.

Until recently, at any rate, the money lenders and the landlords were the principal sources of ruralcredit. It is generally believed that the recent debt relief legislation, the system of licensing money

lenders and restrictions on the use and transfer of land as security have led to a considerable

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decline in their operations. The abolition of all privileged tenures and the impending reforms bothin zamindari and ryotwari areas have discouraged investment by the landlords and larger

cultivators. No estimates are available regarding the extent to which the money lenders andlandlords have been affected by these considerations or of the extent of the role that they now play

as providers of credit. The findings of the rural credit survey may throw more light on thisimportant aspect of the matter and provide the basis for further thought and action. In the

meantime, however, it is necessary to build up and expand the system of Government or co-operative credit so that the implementation of the Plan may proceed according to schedule.

STATE LOANS

4. As the finance provided from private sources was not adequate, the assistance rendered by the

State in the form of taccavi loans had to be increased considerably during the last few years. Theamount of taccavi loans sanctioned in 1949-50 was about Rs. 15 crores as against Rs. 1 crore in

1938-39. The State which formerly gave loans mostly for relieving distress or meeting the needs of a few indigent cultivators has now assumed increased responsibility for development finance

especially as a result of the Grow More Food campaign. It is a matter of common complaint thatthe actual disbursement of these loans involves considerable delay and that the procedure

connected with it causes considerable inconvenience to the cultivators. Our proposals regardingappropriate use of taccavi loans are discussed at a later stage in this chapter.

LOANS BY CO-OPERATIVE SOCIETIES

5. Besides State loans, a significant share of the finance for agriculture is provided by co-operative

societies. There were 1,42,394 agricultural societies which advanced Rs. 28.53 crores in 1949-50

as against Rs. 6.75 crores advanced by 1,05,301 agricultural societies in the year 1938-39. Nearlytwo thirds of the total loans made by agricultural credit societies were granted in the two States of

Bombay and Madras while 22 per cent of the funds were utilised by the societies in U. P., MadhyaPradesh and the Punjab. The credit movement in other areas has yet to be developed. Long-term

loans extending upto a period of 20 years are provided by the 283 Land Mortgage Banks whichadvanced a sum of Rs 1 crore during the year 1949-50. A major part of the long term loans was

taken up again by Madras and Bombay where the movement has progressed fairly well. Punjaband West Bengal have not yet recovered from the unsettling effects of partition. In many of the

Part `C' and the newly integrated Part `B' States, co-operative structure at the Apex and districtlevels has yet to be

236 THE FIRST FIVE YEAR PLAN

created. Reorganisation and adjustment are also necessary in other areas. The progress andachievements of the movement in Bombay, Madras and the other co-operatively advanced States

prove that cooperatives are the most effective agency for providing finance for agricultural purposes. A co-operative society organised by the people for their economic and social welfare

places proper emphasis on the character of a member without losing sight of his material security.Compared to State agency a co-operative can exercise better supervision and it can ensure

utilisation of loans for productive purposes more effectively. Recovery of loans is also facilitatedas, besides coercive action, public opinion is also brought to bear against wilful defaulters. Co-

operatives are also in a better position to mobilise local savings. It would, therefore, beadvantageous to distribute even the State loans for development purposes through the co-operative

societies. We recommend this policy.

6. As the major portion of the funds that they advance are derived by way of shares, deposits or

loans, co-operative societies like other credit agencies have to operate on recognised banking principles. To avoid a serious risk of losses they have to deal generally with creditworthy farmers.

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In addition to these, there are a large number of potentially credit-worthy cultivators in the ruralareas who are just on the margin. Facilities granted to them either in regard to the terms of

repayment or the rates of interest would go a long way to improve their productive capacity. It isconsidered desirable that the co-operatives should handle the credit business of this class also, as a

separate agency for them would not only be expensive but would also lead to an undesirableduplication because in practice, it is difficult to distinguish between the credit-worthy and

potentially credit-worthy people. Dealing with the latter class, however, involves more risk thanthat normally covered by the societies. To the extent that the co-operatives incur losses on account

of the additional risk they may have to be compensated. The same procedure can be adopted for

providing finance in less developed areas. The uneconomic cultivators should not be denied the benefits of the movement. In fact, it is difficult to maintain a distinction between economic anduneconomic cultivators as in the strict economic sense, most of the Indian farmers would be

classified only as potentially credit-worthy or uneconomic cultivators. Many of them receive andrepay loans from the societies, and will have to continue to do so. In their case character will be a

very important factor in determining their eligibility for loans and the State will have to share amajor part of the risk involved in this work.

7. To take up the functions visualised above the co-operative credit structure has to be

strengthened at various levels in each State. The manner in which this can be brought aboutdepends upon the conditions prevalent as well as the needs of the State. The Co- operative

Planning Committee (1946) recommended that 50 per cent of the villages and 30 per cent of therural population should be brought in the ambit of primary societies within ten years. The programme for a national extension service discussed earlier also contemplates organisation of

multi-purpose societies in every village or a group thereof and efforts should be made to reach by1955-56 the target set by the Cooperative Planning Committee. However, a slower rat of progress

would be preferable to hasty expansion.


8. The success of the programme outlined above as well as the management of the cooperativeslargly depend upon personnel. The absence of adequate trained staff is at present a serious limiting

factor in the growth of the movement. The necessity of proper training for all grades of administrative, managerial and field staff in the Co-operative Department and cooperative

institutions is being increasingly realised. The Reserve Bank has recently organised a specialcourse of training for higher and intermediate personnel at the Cooperative College at Poona,

which is conducted by the Bombay Provincial Co-operative Institute. A single institution,however, will not meet the needs of the country and similar facilities should be provided in other

areas. We consider that there is scope for starting at least three more regional colleges almostimmediately. Training for the subordinate personnel has also to be arranged simultaneously. We

accord a high priority to the training programme and we have provided a sum of Rs. 10 lakhs inthe Plan to subsidise a part of the expenditure. If the expenditure is to be put to good use, co-

operative departments and institutions must increasingly appreciate the importance of employing

trained staff and of deputing their employees for training .

9. Reorganisation and expansion of the movement in this manner for effectively carrying out the production programme will call for large scale investment. The co-operatives will have to initiate a

drive for tapping local resources and for inculcating the habit of thrift in the local people. As theresponse to the savings campaign is, however, likely to be slow, finding adequate finance for the

legitimate needs of their members may well prove to be beyond the resources of the co-operatives.Though ultimately the societies will have to build up adequate funds of their own, in the first

instance they will need considerable financial and technical assistance from the Reserve Bank. TheBank has already taken a long step in this direction. Under the scheme of concessional finance it

provides accommodation to the State Co-operative Banks for seasonal agricultural operations and

marketing of crops at 11/2 per cent (i.e. 2 per cent below the current Bank rate). The period of re-

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payment has been extended by an amendment of the Reserve Bank of India Act from nine monthsto a maximum of 15 months. Several other facilities are also now offered by the Reserve Bank by

liberalisation of the procedure for grant of advances.

10. As a result of this liberal attitude of the Reserve Bank its advances to the Apex CooperativeBanks have increased from Rs. 1.5 lakhs in 1946-47 to Rs. 12.51 crores in 1951-52. At present

these facilities have been availed of mostly by the developed Apex banks of two States, viz.,Madras and Bombay. The Reserve Bank is taking an active interest in reorganising the co-

operative movement in all States, especially the undeveloped States, on a sound footing. It has

completed a study of the movement in practically all the States. In the light of these studies theReserve Bank should be in a position to suggest measures of improvement for adoption by theStates concerned.

11. The Bank provides short term accommodation to the cooperative societies through the StateApex institutions which, in turn, make it available to the District Banks. The Apex Banks exist in

the Part `A' and a few important Part `B' States, but some of them are not yet fully equipped to takeup the increased responsibilities involved in borrowing from the Reserve


Bank, In many of the Part `B' and `C' States the Apex agencies have still to be created. TheReserve Bank has devoted attention to this task as well. The problems involved in expanding themovement are : (a) Securing trained personnel, and (b) finding adequate capital. As regards thecapital it is likely that the funds necessary for organising or strengthening the Apex Banks may not

be forthcoming in adequate measure from the local people or co-operative societies. StateGovernments which have an interest in creating these institutions and fostering their growth should

subscribe a part of their capital and should be represented on their boards of management. TheApex agencies established in this manner would have greater stability and would give better

results, even though such participation by the State would be a departure from the pattern hithertofavoured by most co-operators. While this effort to overcome the shortage of finance is underway,

the State Governments may, if necessary, guarantee re-payment of the amount advanced by the

Reserve Bank to the Apex Bank. This practice has already been adopted in a few cases. This must,however, be a temporary expedient and the movement should be able in the near future to secureits requirements on the basis of its own resources and the credit-worthiness of its constituents.

12. The essential characteristics of short term finance should be cheapness, elasticity and

promptness. The concessional rate at which the Reserve Bank grants loans helps to reduce theinterest rates charged to members. The characteristics of promptness and elasticity have remained

comparatively neglected as the time lag and the rigidity of procedure associated with the wholemechanism of co-operative credit detract from the usefulness. of the loans.

13. As the measures indicated above succeed in placing the credit structure in the States on a sound

footing, the Reserve Bank and the Government should be able to provide even larger assistance.We are in agreement with the Grow More Food Enquiry Committee that in the next four years the

advances to the cultivators through the institutional agencies should be steadily increased so as toreach the limit of at least Rs. 100 crores per annum by the fourth year. For achieving this and the

other targets outlined later, it is necessary that a detailed plan of agricultural finance and co-operative development should be worked out by every State in consultation with the leaders of the

movement, the Reserve Bank and the Central Government. The State plan will have to be brokendown by districts keeping in view the main objective of the Plan in regard to its production targets

and the relative priorities of its several parts.

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MEDIUM AND LONG TERM LOANS

14. While short term loans meet the immediate and pressing needs of cultivation, medium term

loans enable the fanner to raise the standard of his tillage and to bring about an improvement inyields. Much greater emphasis, has, therefore, to be placed on medium term loans than has been

done hitherto and adequate accommodation should be provided for them. Precise estimates of theamount of such loans advanced by co-operative societies are not available. It is, however, known

that the bulk of their advances are repayable soon after the harvest. This pre-occupation of thesocieties with short term loans is due firstly to their greater urgency and secondly to the very

limited availability of funds (by way of long term deposits, etc.)


which they can safely invest for a medium term, say upto five years. The comparative inability of

the co-operatives to meet this demand of the cultivator deters many a credit-worthy person fromseeking even short term loans as in this process he gets indebted to more than one creditor. The co-

operatives will not, therefore, be really effective agencies for credit unless they are in a position togrant these so called medium term loans which are essential to large production. Medium term

loans of the societies do not qualify at present for assistance from the Reserve Bank. Many leadingco-operators feel that the Bank ought to be empowered to make medium term advance as well. We

understand that the proposal has been accepted by the Reserve Bank, which has agreed to makesuch advances upto a limit of Rs. 5 crores. To enable the Bank to take up this work, amendment of

the Reserve Bank Act is necessary. A Bill incorporating these and other changes has been placed before Parliament.

15. Medium term finance upto Rs. 5 crores provided by the Reserve Bank under the proposed

arrangement will help the cooperatives in building up their business on a sounder and a more productive footing. Larger assistance from the Reserve Bank for short term loans will also releasesome of the medium term funds of the movement where they are at present utilised for crop loans.

To the extent that this occurs, the amount available for agricultural improvement will increase.However, in view of the fact that there is great demand as well as scope for productive investment

in this sphere and also in view of the fact that the co-operative structure is being created andextended in areas in which cooperation has so far been less developed, it is to be expected that the

sum of Rs. 5 crores to which the Reserve Bank has limited medium term finance will prove-inadequate. It is essential that this limit should not be allowed to hamper the normal pace of

production. We, therefore, recommend that a provision of Rs. 5 crores spread over the next threeyears should be made in the Plan to supplement the resources of cooperative banks or other credit

agencies created as an interim arrangement. These resources will, of course, include theintermediate finance which the Reserve Bank will be able to supply after its statute has been

amended. Taking into account this additional provision, the accommodation likely to be availablefrom the Reserve Bank and the funds that may be found within the movement, we consider that the

target for medium term finance, Government and co-operative, at the end of the present Plan might

be placed at Rs. 25 crores per annum.

AGRICULTURAL MARKETING

1. The problems of agricultural finance discussed in the previous chapter relate to the preharvest

requirements of the cultivators. The disposal of the produce after the harvest and the returnobtained, therefore, also have a significant effect on production and on the welfare of the

cultivator. Production in agriculture being seasonal, the crop is harvested during a short period and

consumed gradually. While commodities like cotton and groundnut require large storage space

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which the average cultivator lacks, fruits, vegetables and sugarcane are of a perishable nature. Thefarmer has, therefore, to dispose of his surplus immediately either at the village or at the mandi. In

the absence of staying power the large number of small farmers compete with each other and themarkets witness conditions of occasional glut and scarcity. A major part of the commercial crops

like cotton, jute, sugar-cane and oilseeds has to be marketed immediately as the farmers are inneed of cash for meeting their dues and other expenses. As regards foodgrains the marketable

surplus varies by crops and regions but may be placed at about 20 to 30 per cent under normalconditions. The total quantity and value of the marketed produce, even in a predominantly

subsistence economy as in India is considerable.

2. Sale of agricultural produce involves a number of functions such as assembling, storing,grading, standardising, transporting and financing the produce and negotiating sale. Some of these

operations may be performed by the farmer, but storage and sale of a commodity and findingfinance for purchase, call for specialised knowledge and adequate resources which the individual

cultivator does not possess. Those who render these services, therefore, perform a useful functionfor which a reasonable return is due.

3. The village money lender or the mandi arhativa advances loans to farmers for securing production requirements like seeds, and manures and for meeting other needs. These debts some

times carry an understanding or and obligation to sell the produce to or through the lender or his

nominee. At the time of sale the position of advantage occupied by the village banker acts reflectedeither in a lower price or unfair weights or delayed settlement. If the sale takes place in the mandior the market through the brokers or arhatiyas the farmer pays not only for the services rendered by

the middlemen but is also subjected to other unwarranted deductions.

4. To remove the disabilities of the farmers in the mandi, regulated markets have been establishedin the States of Bombay, Madras, Punjab, Hyderabad, Mysore, Pepsu and Madhya Pradesh.

Unauthorised deductions are prohibited and the charges of brokers and weighmen regulated. Insome of these places the system of open auction or sales has been introduced. These improvements

have benefited the cultivator to a certain extent. Regulated markets, however, do not exist in theStates of Uttar Pradesh, West Bengal, Bihar, Orissa, etc. Some

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AGRICULTURAL MARKETING 243

of the States which have adopted the Agricultural Produce Markets Acts have a large number of markets which still continue to be unregulated. It is necessary to extend the operation of the Act so

as to cover all the important markets in each State by 1955-56, as this is the first step in improvingmarketing facilities.

5. The management of regulated markets vests in committees on which growers are also

represented. Their voice is, however, seldom effective. Many of the marketing committees are notyet fully conscious of their responsibility of utilising their funds for developing marketingfacilities. The Madhya Pradesh Government have, therefore amended the Cotton and Agricultural

Produce Markets Act with a view to entrusting the management of regulated markets to theCooperative Societies and the Cotton Market at Amravati has been handed over to the local

marketing co-operative.

PROGRESS OF CO-OPERATIVE MARKETING

6. The benefits of a regulated market which attempt only to improve the existing practices are

limited; without changing the marketing structure the number of middlemen and costs cannot be

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reduced. Efforts in this direction have been made in some States by organising cooperativemarketing. For example, 1,600 cane cooperative unions and other primary societies have been

organised in Uttar Pradesh in the last 10 years. They handle 85 to 90 per cent of the total canesupplied to sugar factories. The average value (3 years ending 1951-52) of about 50 lakhs tons of

cane annually sold by the societies amounted to more than Rs. 25 crores. This has been achievedunder the Sugar Factories Control Act which requires every member of the society in the zone to

deliver a specified quantity of cane through the cooperative society for which minimum prices are paid by the factory. The cooperatives are paid a commission of about Rs. 1/4/- per ton for their

services by the sugar factories. This is taken into account while calculating the sale price of sugar.

Besides arranging the sale, these cooperatives are making an attempt to link up credit withmarketing. They supply seeds, manures, fertilizers and other requirements. The unions also carryon rural welfare activities.

7. Cooperative marketing of cotton has been attempted in Bombay where 84 cotton sale societies

functioned in 1948-49. While the societies in Karnatak arrange the sales of the produce of their members in individual lots, the Gujerat cotton growers pool cotton of a similar variety for purposes

of sale. The cooperatives own II ginning and pressing factories in the State. The producer-cum-consumer societies in Madras which have been converted into marketing societies and a few others

in other States are also making efforts in this direction. Some of them have taken up procurementwork for the Government. Provincial marketing societies which have been established in 9 States

to assist the primary units registered only a small volume of business which amounted to Rs. 1.15crores in 1949-50.

8. The progress of marketing societies, in spite of immense scope, has so far been slow. The entryof a co-operative even as an agent is not generally favoured by the trade. For instance, it refused to

by cotton offered by the cotton sale society in Karnatak and boycotted its sales.


The buyers also make payment after a time lag and the cooperatives acting as agents are required

either to raise a larger amount of finance to meet their commitments or to keep the amounts

outstanding. The U. P. sugar factories, for example, were in arrears to the extent of about Rs. 2crores, to the societies by the end of the year 1950. Some of the cooperatives had to engagecontractors for finding finance and making payments. The performance of the contractors was

unsatisfactory and their charges were heavy. To overcome such difficulties the Gujerat CottonSales Society established a ginning factory. This facilitated the sales and the ginning charges were

reduced by 50 per cent. The Society however, did not own the pressing factory and utilized a plant belonging to the traders. After sometime the press owners raised their charges by more than 75%

and declined to undertake the pressing work on behalf of the Society. The society was, therefore,compelled to erect its own press. The cane growers of Ahmednagar District in Bombay State who

had suffered for the last 30 years from violent fluctuations in prices of gur they produced, haverecently set up a Cooperative Sugar Mill which has not only ensured them better prices and timely

payment but has also helped them in improving the efficiency of production through the supply of manures, fertilizers and seeds. The society tries to work with each farmer on his problems and

provides long term credit for development. The loyalty and the support of the members, theenlightened leadership, financial aid in the shape of share capital Rs. 6 lakhs from the Bombay

Government and a loan of Rs. 20 lakhs from the Industrial Finance Corporation are some of theimportant factors which have led to the success of the scheme.

9. It would thus appear that even after the linking of credit with marketing, cooperatives, which act

only as commission agents for sale, (as in Uttar Pradesh) are not effective and that ownership andmanagement of processing facilities on a cooperative basis are essential for protecting the interests

of the growers and strengthening the economy. The benefits of efficiency and economy in the

processing activities are considerable, and if they are transmitted to cultivators, there will be an

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incentive for increasing production. A co-operative which functions in this manner can also assistin crop planning by introducing improved varieties of seeds, by giving the necessary technical

advice to cultivators and by financial help wherever necessary.

10. There are, however, some commodities which are marketed without elaborate processing. Insuch cases the marketing cooperative will have to establish direct dealings with the consumer

cooperatives. In Canada, the Grain Growers' Cooperative Company in Winnipeg having been boycotted by the Canadian traders, had to negotiate sales of wheat with the Scotish Cooperative

Whole-sale. In this country there exists a considerable volume of inter and intra State trade in

wheat, pulses, fruits, vegetables, etc. By contacting its counter-parts in other States the provincialmarketing association should work out an arrangement for imports and exports. Similar arrangements within the State could also be made.

11. Some of the marketing societies appear to have been organised without adequate share capital.The Madras Provincial Marketing Society, for instance, has a share capital of about Rs. 50,000

while Orissa and West Bengal Apex Marketing Societies are functioning with a share


capital of about Rs. 13,000 and Rs. 5,000 respectively. The credit limit assessed by and assistance

available from the State Apex credit agency and the, Reserve Bank for financing marketingoperations depend upon the capital structure an. owned resources of the society and the volume of its business is largely regulated thereby. It is, therefore, necessary that marketing associationsespecially those which are meant to be apex agencies should obtain sufficient capital from their

constituents.

12. Marketing requires technical skill and specialised knowledge. Associations operating in agroup of villages or in a commodity do not have the volume or turnover to warrant employment of

trained or qualified personnel. The area of operation of a marketing society should, therefore, befairly large, say a Tehsil. Further, separate societies for individual commodities should be

restricted only to such staples of trade as have a specialized wholesale market.

STORAGE AND WAREHOUSING

13. Another difficulty that the societies encounter relates to storage facilities. Most of the surplus

produce in an area is assembled and sold at the mandi or market which is generally at the rail or motor head and possesses road transport and banking facilities. On the strength of the goods

pledged the banks finance the marketing operations. Release of goods and their despatch either onconsignment or sale can be arranged more quickly from the godowns at the mandi than from those

located in the rural areas. It would, therefore, be an advantage to develop storage facilities at mandicentres. Some godowns space-temporary, semi-temporary or permanent- are available in every

mandi. This accommodation is often unsatisfactory as it fails to provide adequate protection togoods from damage and deterioration by moisture, rodents, insects, pests, etc. Moreover, even for

getting such space, fairly high rent has to be paid. It would, therefore, be better if the cooperatives plan to have their own storage facilities. Some State Governments, particularly Madras, Bombay,

and Orissa are alive to this problem and are rendering assistance by providing loans and subsidiesfor the construction of godowns. Other States, we suggest, may follow this practice.

14. Several committees and commissions including the Royal Commission on Agriculture, the

Central Banking Enquiry Committee, the Marketing Sub-Committee, the Agricultural FinanceSub-Committee, the Cooperative Planning Committee and the Rural Banking Enquiry Committee

have emphasised the need to promote warehousing in the country and have also made varioussuggestions in this connection. In the absence of warehouse receipts which could serve as

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collateral for the promissory notes of the borrowing banks, it has not been possible for the ReserveBank to extend assistance to the cooperative and scheduled banks under section 17 of the Reserve

Bank Act for financing marketing operations. The Reserve Bank, therefore, suggestedestablishment of Licensed warehouses. The States of Bombay, Madras, Madhya Pradesh, Mysore,

Hyderabad and Travancore-Cochin have already enacted the necessary legislation. We recommendthat similar action should be taken by other State Governments as well. Even though the

Warehousing Act has been passed in some States more than four years ago, licensed warehouseshave not been established so far. This is largely due to the


fact that the law, being an enabling piece of legislation, leaves it to the trade, private investors,limited companies or the cooperatives to set up the warehouses. The investors generally hesitate to

take up a new venture in which they have little experience. Further, the law provides not only for regulation and inspection of the warehouses but also for fixing the charges at a reasonable level.

Under the present conditions when the money market is tight and there are other moreremunerative fields for investment it is doubtful if private capital would be attracted, particularly in

producing areas. Progress will, therefore, depend mostly on the initiative of the cooperatives andtheir ability to secure the required long term capital. We therefore suggest that the State

Governments and the Reserve Bank should assist warehousing development by measures such as

provision of loans, etc. to organisations which are willing to undertake this work.

FUTURE PATTERN OF DEVELOPMENT

15. Cooperatives will be successful to the extent that they render efficient service to the growers atthe minimum cost. This in turn depends upon their ability to undertake processing activities,

command warehousing accommodation, and obtain sufficient financial resources and, above all,honest, capable and efficient management. Though some States have fostered the growth of

marketing societies, a policy for their development has yet to be laid down or followed for thecountry as a whole. Cooperative marketing linked with production, finance and cooperative

ownership of processing industries will be a useful instrument in increasing production, cuttingcosts and introducing a system of crop planning. Favourable conditions for their growth have,

therefore, to be created without loss of time.

16. In this context we suggest that processing plants established hereafter should be owned andmanaged by cooperative societies, and licences and other forms of support given to them by the

States. Where such societies do not exist active and timely steps should be taken to organise and toequip them. As regards cooperative management and ownership of the existing facilities the

progress will depend upon the speed with which the necessary organisation can be created and personnel trained. Where the movement has developed well in other fields such as the States of

Madras and Bombay--marketing societies may develop more rapidly as to them would be availablethe long standing and valuable experience of cooperative workers. Cooperatives in other States

would also benefit thereby as they would be able to build societies after taking into account theresult obtained in these States.

17. The technical, marketing, financial and administrative problems involved in these operationsneed expert study, guidance and supervision particularly in the initial stages. As every State may

not be in a position to provide the experts and in some cases they may not have full-time work, itwould be an advantage to have a standing committee of four experts on processing and marketing

at the Centre. The Committee should assist the State Governments


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and the cooperatives in drawing up detailed schemes after a careful examination. It would be their responsibility to review the progress of work of every unit in the State from time to time and make

a comparative study of the factors which hinder the work. In the past many a marketingcooperative has foundered because the local manager and the Board are not able to foresee or

tackle a problem on their own. While failures in private trade or industry often go unnoticed,mistakes or shortcomings of a cooperative attract a good deal of public attention and criticism

because of their democratic character and economic and social significance. Hence the need for and importance of expert guidance. As regards long term finance required by the societies for

purchasing machinery and other equipment we consider that it should be made available by the

State and Central Industrial Finance Corporations.

18. As the cooperative gain a surer foothold in the commodity markets it should be possible to

bring the management of regulated markets more and more under cooperative direction.Immediately, cooperatives should be given adequate representation on the managing committees

of regulated markets. As the positive services made available to growers by these cooperativelydirected market committees become more evident, the committees may be empowered to make a

small charge on the produce handled by them for a further expansion of these services. In thismanner it would be possible for each market to build up funds of its own. On their strength the

cooperatives could obtain accommodation from the bank for financing their operations.

GRADING

19. The introduction of proper grades and standards is another matter in regard to which the State

can usefully assist. Grading of farmers' produce before sale on the basis of well defined grades in aregulated market will help in the proper valuation of his produce which will enable him to claim a

price commensurate with the quality offered, thus providing an incentive to improve its quality,Grade standards are also necessary as a basis for the issue of negotiable receipts by warehouses

and economical development of public storage facilities. The poor quality of the agricultural produce has been an important handicap in export markets. Shipments of cashew nuts, black

pepper, turmeric, wool, etc., fetch reduced prices and get condemned abroad as they contain

foreign matter and are not of uniform quality. On the other hand, the introduction of grading on the basis of Agmark quality standards has yielded satisfactory results in respect of tobacco and sannhemp. To remove the handicaps experienced by other commodities and promote export trade, it is

proposed to undertake grading of wool, bristles, lac, sheep and goat skins, cashew-nuts, vegetableoil seeds, oils and kopak, the export value of which was of the order of Rs. 110 crores annuallyduring the 3 years immediately after partition. These commodities would be brought under

compulsory grading in successive stages. The total estimated expenditure on the scheme would beRs. 86.47

Schemes of Nationalised Banks

1. Allahabad Bank (External website that opens in a new window) - offers the Kisan Credit Card andKisan Shakti Yojana Scheme. The Kisan Credit Card (External website that opens in a new

window)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 repayment

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 Agril.

2. Andhra Bank (External website that opens in a new window) - provides facilities to farmers like AB

Kisan Vikas Card, AB Pattabhi Agricard, 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.

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3. Bank of Baroda (External website that opens in a new window) - 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.

4. Bank of India (External website that opens in a new window) - 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 repayment terms. It also offers an agricultural loan for

development of agriculture related industries, purchase of machinery and other agricultural

purposes.

5. Bank of Maharashtra (External website that opens in a new window) - offers agriculturists aMahabank Kisan Credit Card and financial schemes for digging new wells, purchasing harvesters,

livestock, vehicles and land. Repayment terms for different agricultural loans range from three to

fifteen years.

6. Canara Bank (External website that opens in a new window) - 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

purposes.

7. Central Bank of India (External website that opens in a new window) - 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 depositor and who are not defaulters to any credit institution would be

considered for loans.

8. Corporation Bank (External website that opens in a new window)- 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.

9. Dena Bank (External website that opens in a new window) - 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.

10. Indian Bank (External website that opens in a new window) - 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. 11. Indian Overseas Bank (External website that opens in a new window) - 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.

12. Oriental Bank of Commerce (External website that opens in a new window) - 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.

13. Punjab and Sind Bank (External website that opens in a new window) - offers a range of financial

schemes for farmers like the Zimidara Credit Card, tractor finance scheme, drip irrigation scheme,Kheti Udyog Khazana Yojana, vermi composting scheme, horticulture clinic and private veterinary

clinic with dairy unit scheme.

14. Punjab National Bank (External website that opens in a new window) - This bank has a special

website called PNB Krishi (External website that opens in a new window) 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.

15. Syndicate Bank (External website that opens in a new window) - offers a wide range of

agricultural loan products such as the Synd Jai Kisan Loan Scheme, Jewel Loan Scheme for

Agriculture, Syndicate Farm House Scheme, Finance for Hi-tech Agriculture, Development of

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Irrigation Infrastructure scheme, Syndicate 2/3/4 Wheelers Scheme and the Syndicate Kisan Credit

Card (S.K.C.C).

16. UCO Bank (External website that opens in a new window) - 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 purposes. 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.

17. Union Bank of India (External website that opens in a new window) - 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 fingerprint verification.

18. United Bank of India (External website that opens in a new window) - 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.

19. Vijaya Bank (External website that opens in a new window) - 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.

INTRODUCTIONFinance 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 LandDevelopment Banks Act, agricultural credit received impetons 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 impetons was received only after Independence when suitable

legislation were passed and policies were formulated. There after, 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 servicesthroughout 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 amount of loans for various purposes have been standardized. Among the

various purposes "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 pipe lines, drip irrigation, planting fruit orchards, purchase of dairy

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animals and feeds/fodder for them, poultry, sheep/goat keeping and for many other allied

enterprises.

AGRICULTURE GROWTH RATE IN INDIA Agriculture Growth Rate in India GDP had been growing earlier but in the last few years

it is constantly declining. Still, the Growth Rate of Agriculture in India GDP in the share of the

country's GDP remains the biggest economic sector in the country. India GDP means the total

value of all the services and goods that are produced within the territory of the nation within the

specified time period. The country has the GDP of around US$ 1.09 trillion in 2007 and this

makes the Indian economy the twelfth biggest in the whole world.

The growth rate of India GDP is 9.4% in 2006- 2007. The agricultural sector has always

been an important contributor to the India GDP. This is due to the fact that the country is mainly

based on the agriculture sector and employs around 60% of the total workforce in India. The

agricultural sector contributed around 18.6% to India GDP in 2005.

Agriculture Growth Rate in India GDP in spite of its decline in the share of the country's

GDP plays a very important role in the all round economic and social development of the

country. The Growth Rate of the Agriculture Sector in India GDP grew after independence for

the government of India placed special emphasis on the sector in its five-year plans. Further the

Green revolution took place in India and this gave a major boost to the agricultural sector for irrigation facilities, provision of agriculture subsidies and credits, and improved technology. This

in turn helped to increase the Agriculture Growth Rate in India GDP.

The agricultural yield increased in India after independence but in the last few years it has

decreased. This in its turn has declined the Growth Rate of the Agricultural Sector in India

GDP. The total production of food grain was 212 million tonnes in 2001- 2002 and the next

year it declined to 174.2 million tonnes. Agriculture Growth Rate in India GDP declined by 5.2%

in 2002- 2003. The Growth Rate of the Agriculture Sector in India GDP grew at the rate of 1.7%

each year between 2001- 2002 and 2003- 2004. This shows that Agriculture Growth Rate in

India GDP has grown very slowly in the last few years.

Agriculture Growth Rate in India GDP has slowed down for the production in this sector

has reduced over the years. The agricultural sector has had low production due to a number of

factors such as illiteracy, insufficient finance, and inadequate marketing of agricultural products.

Further the reasons for the decline in Agriculture Growth Rate in India GDP are that in the

sector the average size of the farms is very small which in turn has resulted in low productivity.

Also the Growth Rate of the Agricultural Sector in India GDP has declined due to the fact that

the sector has not adopted modern technology and agricultural practices. Agriculture Growth

Rate in India GDP has also decreased due to the fact that the sector has insufficient irrigation

facilities. As a result of this the farmers are dependent on rainfall, which is however very

unpredictable.

TYPES OF CREDITSThe Credit requirements of agriculture are of three types viz.

1. Short -Term

2. Medium - Term

3. Long- Term (LT)

We shall deal with long-term credit in this article.

Long Term Credit :

The period of long-term credit is generally 5 to 20 years or even more in some special cases. In

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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 continious 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 acapital 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 conditons procedures of granting L.T.loans are altogether different

from short-term loans : Even the bank or agency providing LT loans is separatedue to its

particular mode or system of raising capital and graign.

Land Development Banks :

The special banks providing LT Loans are called Land Development Banks (LDA). The historyof 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 federated

into Central Land Development Bank at the State Level. In some States, there is ³ 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 LT 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.

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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.

Interest rate :

The rates of interest for LT Loans are generally low and within the paying capacity of farmers.

They are around 11 to 12%.

Loan Procedure :

The Branch offices receive applications from the prospective borrower. Then Agricultural

Finance Officer or Inspector scrutinises these applications, they visit places of the application

and ascertain the purpose of borrowing, verify the genuineness of the proposal and it economicviability, repaying ability of the farmers, adequacy of security,etc. 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 LOANCrop 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 value2. 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 amount of

loan becomes available. For e.g. Rice.

Yield (Q.)20 25

Price (Rs/Q)

400 400

Gross value (Rs.) 8000 10,000

One third (Rs.) 2700 3330

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 f irst 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.

Appex 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

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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.

AGRICULTURAL LOANS Agricultural loans are available for a multitude of farming purposes. 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.

COOPERATIVE AGRICULTURAL BANK 1. 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 apassbook or card-cum-pass book. The revolving cash credit facility allows any number of

withdrawals and repayments 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 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, rate of interest and other details are fixed

according to RBI norms.

2.Bihar State Co-operative Bank Limited (BSCB)- Offers a range of loans and financial schemes to agriculturalists.

3.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.

4. 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.

5.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 minibanks in different districts of Orissa.

6.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.

7.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 purposes 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.

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8.Andhra Pradesh State Cooperative Bank Limited (APCOB)- has a loan

portfolio that covers crop loans, medium term loans and long term loans for agricultural

purposes. It also supports government sponsored District Rural Development Agency

projects through IRDP loans and cooperative sugar factories, spinning mills, weaver's

societies, 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.

NATIONALISED BANKS1.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 repayment 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 Agril.

2.Andhra Bank - provides facilities to farmers like AB Kisan Vikas Card, AB Pattabhi

Agricard, 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.

3.

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.

4.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 repayment terms. It also offers an agricultural loan for development

of agriculture related industries, purchase of machinery and other agricultural purposes.

5.Bank of Maharashtra- offers agriculturists a Mahabank Kisan Credit Card and

financial schemes for digging new wells, purchasing harvesters, livestock, vehicles andland. Repayment terms for different agricultural loans range from three to fifteen years.

6.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 purposes.

7.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 depositor and who are not defaulters to any credit institution would be considered for

loans.

8.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.

9.Dena Bank - Dena Bank has sponsored 2 Regional Rural Banks namely Dena

Gujarat Gramin Bank in Gujarat and Durg Rajnandgaon Gramin Bank (DRGB) inChhattisgarh. 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.

10. 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.

11. 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.

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12. 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.

13. 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, vermi composting scheme, horticulture clinic and private veterinary

clinic with dairy unit scheme.

14. 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.

15. 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 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).16. 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 purposes. 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.

17. 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.

18. 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.

19. 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.

SCHEMES FOR AGRICULTURE FINANCE1. SBT KISAN GOLD CARD SCHEME (General purpose Agriculture Term

Loan)ELIGIBILITY

a. Farmers having good track record of repayment for the last two years.

b. Farmers who have closed their loan account without default and not our current borrowers.

c. Farmers who have defaulted in repayment but closed the Loan within the stipulated

repayment period.

d. Farmers who are maintaining deposits with the Bank.

e. Good borrowers of other banks provided they liquidate their dues with other banks.

f. Good farmers who have not availed loans from any bank.

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PURPOSE

The borrower is at liberty to utilize 50% of the amount for any purpose, including consumption

purpose and purchase of land.

AMOUNT OF LOAN

The amount of loan is limited to five times the annual farm income including income from allied

activities or 50% of the value of the land offered as collateral security, whichever is less, subject

to a maximum of Rs.10 lakh.RATE OF INTEREST

Interest rate ranges from 1% below PLR.

SECURITY

Hypothecation of crops and assets, if any, created out of bank finance and existingmovable assets such as milch 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.DISBURSEMENT

Cash disbursals are allowed to the full extent of the credit limit.

REPAYMENT

The repayment 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.

2. KISAN CREDIT CARD SCHEME

ELIGIBILITY

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.

PURPOSE

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.

AMOUNT OF LOAN

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.RATE OF INTEREST

Interest rate ranges from 2.50% below to 1.50% above BPLR for various limits.

REPAYMENT

Running Cash Credit account for 36 months subject to annual review and total annual creditshould exceed annual debit.

3. HOMESTEAD FARMING

PURPOSE

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.

AMOUNT OF LOAN

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.RATE OF INTEREST


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REPAYMENT

The facility will be sanctioned as an Agriculture Cash Credit limit (In case of Kisan Credit Card

running cash credit).

4. LOAN FOR ESTATE PURCHASE

ELIGIBILITY

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 theloan.

PURPOSE

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.

AMOUNT OF LOAN

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.RATE OF INTEREST

Interest rate same as BPLR

REPAYMENT

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.

5. SCHEME FOR FINANCING FARMERS FOR PURCHASE OF LAND

FOR AGRICULTURAL PURPOSESELIGIBILITY

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 repayment of our loans for the last

2 years are also eligible.PURPOSE

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.

AMOUNT OF LOAN

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.RATE OF INTERESTInterest rate ranges from 1.75% below to 2.00% above BPLR for various limits.

REPAYMENT

Repayment of the loan will be 7 to 12 years in half yearly / yearly installments with maximum of

24 months moratorium period. Gestation period / repayment due dates etc will be fixed

according to income generation from the activity.

6. SCHEME FOR CULTIVATION OF MEDICINAL PLANTS

ELIGIBILITY

All agriculturists are eligible.

PURPOSE

Scheme for financing cultivation of 22 medicinal plants cultivated extensively and also in great

demand in the local as well as foreign market.AMOUNT OF LOAN

Depending on the area of cultivation / project cost

RATE OF INTEREST

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REPAYMENT

Repayment should coincide with harvesting and marketing or at the time generation of income

from the scheme.

7. SCHEME FOR CULTIVATION OF VANILLA

ELIGIBILITY

All agriculturists are eligible.PURPOSE

Scheme for financing cultivation of Vanilla, a cash crop, gaining ground in the State of Kerala.

AMOUNT OF LOAN Amount of finance will be Rs.250000/- per hectare for pure crops and Rs.210000/- per hectare

for intercrop.RATE OF INTEREST

Normal rate of interest as applicable to ATL

REPAYMENT

The loan shall be repaid within a period of 7 years, in yearly instalments. Farmers eligible for

two years gestation period and interest is repayable on the 3rd and 4th year and the principal

from the 5th to 7the year.

8. SBT RAIN WATER HARVESTING SCHEME

ELIGIBILITY

Farmers having land holding of 0.50 acre or more are eligible to be considered for finance under

this scheme.

PURPOSE

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.

AMOUNT OF LOAN

Maximum amount of finance will be Rs.88000/- per acre. Scheme can be adopted in smaller

areas also by reducing the cost proportionately.RATE OF INTEREST


REPAYMENT

Repayment based on the income generated from the crops raised and and cropping pattern.The maximum period eligible for repayment is 8 years in annual instalments.

9. PRODUCE MARKETING LOAN (Advance against Warehouse Receipt)

ELIGIBILITY

a. Farmers / traders depositing farm produce in the warehouses of the central / state

warehousing corporations.

a. Scheme will be operative in Karnataka, Andhra Pradesh, Tamilnadu & Kerala.

PURPOSE

a. To protect the farmers from the compulsion to sell their produce immediately after harvest of

produce despite an adverse market.

b. To finance farmers and traders against warehouse receipt. AMOUNT OF LOAN

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.

RATE OF INTEREST

Farmers

Up to Rs.3 lakh - 3.50% below PLR 9.50%

Above Rs.3 lakh - 2.50% below PLR 10.50%

Traders

2.50% below PLR 10.50% (Irrespective of the limit)

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REPAYMENT

On demand / 6 months which can be extended up to 12 months subject to satisfactory shelf life /

market condition.

10. AGRI. LOAN TO NON-RESIDENT INDIANS

ELIGIBILITY

Agricultural advances are available to the resident family members (means spouse, father,

mother, brother, sister etc.) of Non-Resident Indians for land-based activities in respect of the

land held by them in India subject to:a.

the loan should be need based and the total land holding of the Non-Resident Indian,in individual name or jointly with others, should not exceed 5 ha.

b.

The loan amount shall not be used for acquiring any additional land.

PURPOSE

To finance farmers only for land-based activities and to carryon agricultural activities on the

existing land.AMOUNT OF LOAN

The maximum amount of the loan will be need based.

RATE OF INTEREST

Interest rate ranges from 2.50% below to 1.50% above BPLR for various short-term limits and

from 1.75% below to 2.00% above BPLR for various long-term limits.REPAYMENT

The loan can be repaid out of the income generated from the agricultural activities or

remittances from abroad or by debit to their NRE/NRO/FCNR accounts.

11. MINOR IRRIGATION

Projects with cumulative command area of less than 2000 ha are called minor irrigation projects

ELIGIBILITY

The beneficiary should have a minimum of 50 cents of land to be brought under irrigation to

ensure viability and repayment of loan.

PURPOSE

Scheme for developing irrigation potential, Minor Irrigation, Installation of Pump set DripIrrigation etc.AMOUNT OF LOAN

As per the project submitted.

RATE OF INTEREST

Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits.REPAYMENT

The loan shall be repaid within a period of 9 years, in yearly instalments.

12. FARM MECHANISATION

Loan for Farm Mechanisation, Purchase of tractors, Power Tillers, etc.

ELIGIBILITY

a.

Tractors with engine capacity up to 35 HP ± The applicant should own / cultivate sixacres of perennially irrigated land.

b.

Tractors with engine capacity above 35 HP ± The applicant should own / cultivate eight

acres of perennially irrigated land.

c.Power Tillers ± the applicant should own / cultivate four acres of perennially irrigated

land.

PURPOSE

To purchase tractor / power tillers for agricultural activities.

AMOUNT OF LOAN

Amount of advance will be the investment cost of tractor / power tiller and implements less

margin @15%.

RATE OF INTEREST

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REPAYMENT

The period of repayment shall be 9 years for tractors and 7 years for power tillers.

13. AGRICULTURE GOLD LOAN

ELIGIBILITY

All individual farmers undertaking cultivation or other activities including allied activities are

eligible for short-term finance.

PURPOSE

To meet genuine credit requirements of farming including allied activities, repairing of

equipments and consumption needs etc.

AMOUNT OF LOAN

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.

RATE OF INTEREST

Interest rate ranges from 2.50% below to 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.

REPAYMENT

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 repayment period.

14. SCHEME FOR DEVELOPMENT / STRENGTHENING OF AGRI.

MARKETING INFRASTRUCTURE, GRADING AND STANDARDIZATION

ELIGIBILITY

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.

PURPOSE

For development of agricultural marketing operations including strengthening of infrastructure,

techniques of preservation, storage etc.

AMOUNT OF LOANAs per the project

RATE OF INTEREST

BPLR irrespective of credit size.

REPAYMENTAdequate long-term repayment period according to the project.

15. CONSTRUCTION / RENOVATION / EXPANSION OF RURAL

GODOWNELIGIBILITY

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.

PURPOSE

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.AMOUNT OF LOANAs per the project.

RATE OF INTEREST

As applicable to advances under SIB / C&I segments will be charged.

REPAYMENTAdequate long-term repayment period, not less than 5 years including a grace period of one

year.

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The first agri credit agency : Agricultural Finance Corporation

Micro-credit is now emerging as a tool of social and economic empowerment!

A.K. Garg

Agricultural Finance Corporation Limited (AFCL) was established in 1968 by State Bank of India and the then private sector

commercial banks to facilitate flow of credit for agriculture and rural development both through financial and non-financial services.

³This was the period when Indian Banking system was in a phase of transition with emphasis on social banking. The commercial

banks were nationalized in 1969 and the entire contour of banking industry including the agriculture banking changed tremendously

leaving restricted scope for AFCL to directly provide retail financial services to agriculture sector. The company therefore decided to

strengthen its non financial services especially advisory and consultancy services to entrepreneurs, central and state governments to

facilitate flow of funds to rural sector,´ avers Mr. A.K. Garg, Director.

Presently AFCL has 41 shareholders covering all major public sector commercial banks, NABARD, EXIM Bank, IDBI Bank and a few

private sector banks, foreign banks and co-operative bank. It is headquartered in Mumbai with regional offices at New Delhi, Kolkata,

Bangalore and branch offices at Hyderabad, Guwahati, Bhubaneswar, Dehradun and Lucknow. AFCL has project offices at Bhor in

Pune, Kalahandi and Bargarh in Orissa, Nasik in Maharashtra and Pilibhit in U.P. ³We are undertaking livelihood promotion projects at

these places,´ avers Mr. Garg.

Objectives

The organization is working for rural prosperity through multi-dimensional approach which covers advisory services, training, capacity

building, grass root level implementation of projects specially livelihood promotion projects and distance education. ³We also have

plans to undertake retail microfinance which will be an integral component of our grass root level livelihood promotion projects,´ says

Mr. Garg.

Services

The services offered by AFCL are the following:

1. Consultancy : It provides consultancy covering the entire gamut of agriculture and rural development. The services are tailor-made

to meet the following requirements:

· Identification of potential projects for promoting development in different sub-sectors. · Pre-feasibility studies.

· Formulation of projects for agricultural and rural development. · Appraisal of project reports prepared by other agencies for financial

assistance/implementation.· Regional/Sectoral planning.

· Performance certification, advisory and technical services to implementing agencies. · Monitoring and evaluation of projects under

implementation.

· Benchmark/base line, socio-economic, hydrological, topographic/contour pre-planning and engineering surveys. · Socio-economic,

techno-economic and marketing studies. · Studies on flow of institutional credit.

2. Capacity Building : AFC organizes training programmes, workshops, conference and consultation meets to cater to the capacity

building requirements of various stakeholders in themes relevant to development and reaching the millennium development goals.

These include:

· Institution building · Peoples participation · Organization and management development · Participatory monitoring and evaluation ·

Community forestry management · Participatory irrigation management · Development of MIS for development projects · Experience

sharing · Micro-credit, etc. · The stakeholders include people from Government, parasitical organizations, banks, NGOs, CBOs and

village community.

3. Micro-Finance : Micro-credit is emerging as an important vehicle of social and economic empowerment of resource poor households

in rural and urban areas. Though certain parts of India have made great progress in using micro-credit as a development vehicle, the

regions which constitute the core of the poverty problem are still largely untouched. To cater to the people of these areas, AFC is

designing a package of new micro-finance products and services and models of micro-enterprise development.

Hands-on experience has been obtained by being closely associated with the programmes of Rashtriya Mahila Kosh and SIDBI under

and the cluster-based action-learning program of Ministry of Environment & Forests, Rural Women Development & Empowerment

Project, Tribal Development Programmes in Jharkhand and Chhattisgarh, etc. which have an important element of micro-credit

CONCLUSION

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Both the co-operative banks advance creditmostly to agriculture. First bank advancesshort-term and medium term loans while thesecond bank advances long-term loans. TheReserve Bank of India as the Central bank of

the country took lead in making credit availableto agriculture through these banks by layingdown suitable policies.

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