ACKNOWLEDGEMENT

I would take this opportunity to acknowledge all the

people who have aided me in the completion of this
project report. Firstly I would like to thank my
supervisor for his support pin pointing the errors and
suggesting necessary measures to debug them. I would
also use this platform to express my deep regards for
my family who have provided me with all the necessary
tools& resources for the completion of this report.
Further I would also express my love to my friends for
their kind support and suggestions which also proved to
be valuable. Lastly I am also thankful to those seen and
unseen hands & heads which have been of direct or
indirect help in the completion of the project report.

Introduction

Rural

financial

services

were

defined

in

comprehensive terms and should include provision of

Credit, saving mobilization, and a payments system for
transfer of funds to and away from the rural sector. In
view of low incomes and high risks in rural areas,
effective provision of these services serves important
goals of accelerated growth, poverty alleviation and
reduced exposure to vulnerability. The diversity within
the rural sectors requires a variety of diversified formal
and informal institutions for the provision of each
component of rural financial services to its clients.

The major finding of the project is that rural sector

has suffered from policy neglect, poor design and weak
implementation
provided

have

of

delivery

been

system.

inadequate

The
as

services
well

as

inconvenient, inappropriate, unsafe, unaffordable and

causing a great deal of inconvenience. In relative
terms, most attention has been paid to provision of
agricultural credit to and mobilization of deposits from
the wealthy people in rural areas. Provisions of
insurance, credit for non-farm purposes and for the
landless and small farmers and the mobilization of

savings of the poor and poorest in rural areas have not

received much attention from the policy makers.

The fact that there is no permanent institutional

mechanism, which can analyze the situation in the area
of rural finance and come out with policy proposals to
rectify the policy mistakes, though many financial
institutions are trying to enter in rural banking.

Last but not the least, there is a need to create

synergies and linkages between different organizations
involved

in

providing

rural

financial

services

i.e.

savings, credit, insurance and transfer of funds. The

innovative financial products, based on best practices
in national and for international experience and suited
to different kind of clients are helpful in improved
delivery of services.

Background
A good no. of Indian farmers, especially the small
and marginal farmers are subject to indebtedness. As a
result the production and productivity of their land gets
affected as they continue to repay debts, and are not in
position to undertake farm development activity.

The small farmers continue to obtain loans from

moneylenders at high interest rates due to the
difficulties in obtaining loans or credit from organized
sector like banks. Some of the farmers are also
ignorant about bank facilities. It is said that Indian
farmers born in debt lives in debt and dies in debt.

WHAT IS THE ROLE OF AGRICULTURE IN INDIAN

ECONOMY ?
The role of agriculture in Indian economy can be
classified as under :

1. EMPLOYMENT
Agriculture is the major source of employment to the
people in rural areas. In 1951, 72% of Indias work force
was engaged in agriculture. In 1999-00about 57% of
the work force is engaged in agriculture. Besides
providing direct employment in agriculture, it also
affects employment indirectly in other sectors.
2.

CONTRIBUTION IN THE NATIONAL INCOME

Agriculture contributes to the national income of the

India to good extent in 1951 the share of agriculture in
national income was over 56%. In 2002-2003 it was
about 20%.
3.

CAPITAL FORMATION

Capital

formation

depends

upon

savings

and

investment. People in rural areas tend to save money,

however, small amount it may be. The savings of rural
people who largely depend upon agriculture facilitates
investment and hence generates capital formation in
the country.
4.

FOREIGN EXCHANGE

Agriculture product like tea, tobacco, spices, etc.

contribute a good share in Indias exports in 1960-1961
the share of agriculture and allied product in the total

exports of India was about 44%. In 2002-2003 export

earnings was about 13%.
5.

GOVERNMENT REVENUE

Direct revenue by way of land revenue to the state

governments. Indirect revenue by way of taxes and
duties on consumer goods, and also on agricultural
inputs used by farmers.
What are the problems faced by the people living
in rural areas for credit requirements?
The farmers depend upon the unorganized sector the
money lenders for their credit requirements. They
borrow funds at high interest, ranging from 15% to 50%
per annum and even more. Again the moneylenders
manipulate the loan records and cheat the illiterate
farmers
Indian farmers find it difficult to obtain intuitional
finance due to various formalities in obtaining finance
and also due to inadequacy of bank branches in rural
areas. Some of small farmers are not even aware of
intuitional finance facilities.

However it is to be noted that over the years the

share of intuitional finance in agriculture credit has
increased.

WHAT IS THE GOVERNMENTS RESPONSE TO THE

RURAL CREDIT SCENARIO?
In

the

early

1970s

the

Central

Government

observed that despite a wide banking network and

development initiatives in the first 25 years since
Independence, a critical gap still existed in meeting the
credit needs of the rural poor. To find a solution, the
Government appointed a working group on rural credit,
the

Narasimhan

committee

Committee,

observed

that

in

the

July
cost

1975.
structure

The
of

commercial banks, the attitude of bank employees and

the lack of a professional approach in the co-operative
credit system were the main stumbling blocks to rural
credit. The committee also observed that the deposits
collected by banks from rural areas were not totally
deployed there. The panel, therefore, recommended
the creation of a new set of regionally-oriented rural
banks which would combine a co-operatives local feel
and a commercial banks business acumen.

WHY IS THERE A NEED FOR REGIONAL RURAL

BANKS?
The Government accepted the recommendations
of

Narasimhan

Committee

and,

accordingly,

the

ordinance

of

promulgated

Regional
on

Rural

September

Banks,

26,

1975.

1975

was

This

was

replaced by the Regional Rural Banks Act, 1976 on

February 9, 1976. The mandates of these rural financial
institutions were to:

Take banking to the doorsteps of the rural masses,

particularly in areas without banking facilities.

Make available cheaper institutional credit to the

weaker sections of society,

who were to be the

only clients of these banks.

Mobilize rural savings and canalize them for

supporting productive activities in rural areas.

Generate employment opportunities in the rural

areas.

Bring down the cost of providing credit in rural

areas

REGIONAL RURAL BANKS

INTRODUCTION

Regional Rural Banks were established under the

provisions of an ordinance promulgated on 26th
September 1975 and the RRB Act, 1976 with an
objective to ensure sufficient institution credit for
agriculture and other rural sectors. The RRBs mobilize

financial resources from rural / semi-urban areas and

grant loans and advances mostly to small and marginal
farmers, agricultural labourers and rural artisans. The
area of operation of

RRBs is limited to the area as

notified by Government of India covering one or more

districts in the state.
As stated earlier RRBs are jointly owned by
Government of India, the concerned State Government
and sponsor Banks (27 scheduled commercial banks
and one State cooperative Bank); the issued capital of
a RRB is shared by the owners in the proportion of 50
%, 15% and 35% respectively.
The institution of Regional Rural Banks (RRBs) was
created to meet the excess demand for institutional
credit in the rural areas, particularly among the
economically

and

socially

marginalized

sections.

Although the cooperative banks and the commercial

banks had reasonable records in terms of geographical
coverage and disbursement of credit, in terms of
population

groups

the

cooperative

banks

were

dominated by the rural rich, while the commercial

banks had a clear urban bias. In order to provide
access to low-cost banking facilities to the poor, the
Narasimham

Working

Group

(1975) proposed

the

establishment of a new set of banks, as institutions

which combine the local feel and the familiarity with
rural problems which the cooperative possess and the
degree of business organization, ability to mobilize
deposits,

access

modernized

to

outlook

central
which

money
the

markets

commercial

and

banks

have. The multi-agency approach to rural credit was

also to sub serve the needs of the input-intensive
agriculture strategy (Green Revolution) which had
initially focused on betting on the strong but by the
mid-seventies

was

ready

to

spread

more

widely

through the Indian countryside.

In

addition

the

potential

and

the

need

for

diversification of economic activities in the rural areas

had begun to be recognized, and this was sector where
the RRBs could play meaningful role. The RRBs Act,
1976 succinctly sums up this overall vision to
sub-serve

both

the

developmental

and

the

redistributive objectives:The RRBs were established with a view to

developing the rural economy by providing, for the
purpose

of

development

of

agriculture,

trade,

commerce, industry and other productive activities in

the rural areas, credit and other facilities, particularly

to small and marginal farmers, agricultural laborers,

artisans and small entrepreneurs, and for matters
connected therewith and incidental thereto
ROLES & LIMITATIONS OF
REGIONAL RURAL BANKS
PROVISION OF CREDIT
The main function of RRBs is to provide short term and
long-term finance to farmers. The finance is provided
for the following purposes:

Short term finance to meet working capital needs

such as payment of wages, purchase of seeds and
fertilizers, transportation expenses, etc.

Medium term finance to meet medium term needs

such as purchase of cattle, digging of wells etc.

Long term finance to meet fixed capital needs such

as purchase of land, purchase of tractors, etc.
They provide finance at low interest rates. This has
resulted in less dependence on money lenders in
respect of agricultural credit.

RESEARCH AND DEVELOPMENTS

The RRBs finances research and development in
the field of agriculture. Such R & D activities help to
develop

new

and

better

inputs,

techniques

and

technology, as a result, better quality of seeds,

fertilizers and farm equipment is developed. This
helped to improve the production and productivity of
agricultural crops.
COMMUNITY DEVELOPMENTS
RRBs have helped in improving the life in rural
areas. They provide social education to farmers and
others in villages so that they give up their bad habits
like gambling, drinking liquor etc.
Through workshops and documentaries the RRBs
have made attempts to make rural masses about social
evils like child marriages, reckless spending during
festivals, marriages etc.
MARKETING SERVICES
The RRBs assists the farmers in their
marketing

activities.

They

provide

advice

to

the

farmers in respect of proce, packing, transportation;

etc. the marketing advice helps the farmers to take

proper marketing decisions. This in turn helps the

farmers to get better prices for their products.
SUPPLY OF FUNDS
The RRBs not only provide funds, but they
also make efforts to supply good quality inputs like
seeds ,fertilizers, pesticides, etc. this helps to improve
the productivity of land. The inputs are provided at
good rates as part of the discount on bulk purchases is
passed on to the farmers.

LIMITATIONS OF REGIONAL RURAL BANKS

The institutional agriculture credit in India is
faced with many problems. The Indian continues to
depend

on

the

money

lenders

for

his

financial

requirements in spite of the institutional framework.

The various problems are:
INADEQUATE FINANCE
A basic feature of the credit problem is its
overall inadequacy; particularly of the institutional
credit. The credit provided by the cooperative banks
and commercial banks is not sufficient to meet the
requirements of the farmers. The banks mostly provide
short term credit and not the long term credit. There is

need

of

more

long

term

finance

from

land

development banks.
Not only the right quantity of long term
institutional finance is available, but also it is not
available at the right time. Hence the farmers depend
upon moneylenders for their requirements.
PROBLEM OF SECURITY
Normally the banks insist on security to
sanction loans to the farmers. The security may be in
form of land or other assets. The small and marginal
farmers find it difficult to obtain funds as they have
limited amount of land to offer as security.
PROBLEM OF MAINTAINING BRANCHES
The commercial banks as well as the
cooperative banks find it difficult to maintain branches
in rural areas. This is due to low banking business and
high overheads in form of staff salaries, offices rent,
and other overheads. Hence the banks do not give
much importance to set up branches in certain rural
areas. The commercial banks also have face problems
in sanctioning and monitoring of a large no. of small
advances in their rural branches, as it
consuming and unprofitable.

is time

LACK OF TRAINED MANPOWER

The banks often face problem of untrained
manpower in rural areas. The staff and the officers
often lack knowledge of the financial requirements of
the farmers and again they may have a negative
attitude towards the farmers. In order to achieve about
the financial requirements of the farmers.
PROBLEM OF RECOVERY
There is the problem of recovery of credit
provided to the farmers both the rich farmers as well as
the poor ones. The large and rich farmers deliberately
avoid repaying loans and the small farmers find it
difficult to repay their loans. Also quite often, there is
political pressure on the banks to write off the loans.
This result in demotivation to the banks to provide
credit in rural areas.
CORRUPT OFFICIALS
The officials of banks adopt corrupt
practices. They often provide finance to their friends
and relatives. Small and marginal farmers face great
difficulty in obtaining finance. Hence they have to
depend upon the money lenders for their financial
requirements. Not only the officials favour their friends

and relatives to obtain loans. But they are also corrupt

in sanctioning loans. They do ask for the bribes and
adopt

other

corrupt

practices

at

the

time

of

sanctioning, and disbursement of loans.

BACKGROUND

NABARD was established on 12th July 1982 to

implement the National Bank for Agriculture and Rural
Development Act 1981. It replaced the Agricultural

Credit Department (ACD) and Rural Planning and Credit

Cell (RPCC) of Reserve Bank of India, and Agricultural
Refinance and Development Corporation (ARDC).

MISSION

NABARD

being

an

Apex

Development

Bank

promotes agriculture and rural development through

refinance support to all banks for investment credit and
to co-operatives and RRBs for production credit. The
objective of providing refinance to eligible institutions is
to supplement their resources for delivering credit for
agriculture, cottage & village industries, SSIs, rural
artisans, etc. thus influencing the quantum of lending
in consonance with the policy of Govt. of India. It
directs the policy, planning and operational aspects in
the field of credit for agriculture and integrated rural
development.

STRUCTURE

NABARD operates throughout the country through

its 28 Regional Offices and one Sub-office, located in

the capitals of all the states/union territories. It has 336

District Offices across the country, one Sub-office at
Port Blair and one special Cell at Srinagar. It also has 6
training establishments.

NABARD ROLE AND FUNCTIONS

OVERVIEW

NABARD is set up by the Government of India as a

development bank with the mandate of facilitating
credit

flow

for

promotion

and

development

of

agriculture and integrated rural development. The

mandate

also

economic
sustainable

covers

activities
rural

supporting
in

rural

development

all
areas,
and

other

allied

promoting
ushering

in

prosperity in the rural areas. With a capital base of

2,000 crore provided by the Government of India and
Reserve Bank of India.

NABARDS

ROLES

SUMMARIZED BELOW

AND

FUNCTIONS

ARE

DEVELOPMENT AND PROMOTIONAL FUNCTIONS

Credit is a critical factor in development of

agriculture and rural sector as it enables investment in
capital formation and technological up gradation.
Hence, strengthening of rural financial institutions,
which deliver credit to the sector, has been identified
by NABARD as a thrust area. Various initiatives have
been taken to strengthen the cooperative credit
structure and regional rural banks, so that adequate
and timely credit is made available to the needy.

In order to reinforce the credit function and to

make credit more productive, NABARD has been
undertaking

number

of

developmental

and

promotional activities such as:-

Help cooperative banks and Regional Rural Banks

to

prepare

development

actions

plans

for

themselves.
Enter into MoU with state governments and
cooperative

banks

specifying

their

respective

obligations to improve the affairs of the banks in a

stipulated timeframe.
Help Regional Rural Banks and the sponsor banks
to enter into MoUs specifying their respective
obligations to improve the affairs of the Regional
Rural Banks in a stipulated timeframe.
Monitor implementation of development action
plans of banks and fulfillment of obligations under
MoUs.
Provide financial assistance to cooperatives and
Regional

Rural

Banks

for

establishment

of

technical, monitoring and evaluations cells.

Provide

Organization

development

(ODI) through reputed

intervention

training institutes like

Bankers Institute of Rural Development (BIRD),

Lucknow

www.birdindia.com, National Bank Staff

College, Lucknow www.nbsc.in and College of

Agriculture Banking, Pune, etc.
Provide financial support for the training institutes
of cooperative banks.
Provide

training

for

senior

and

middle

level

executives of commercial banks, Regional Rural

Banks and cooperative banks.

 Create awareness among the borrowers on ethics

of repayment through Vikas Volunteer Vahini and
Farmers clubs.
Provide financial assistance to cooperative banks
for building improved management information
system,

computerization

of

operations

and

development of human resources.

CREDIT FUNCTIONS

REFINANCE AGAINST INVESTMENT CREDIT

This is a long-term refinance facility. It is intended

to create income generating assets in the following

Investment in agriculture and allied activities such

as minor irrigation projects, farm mechanization,
land development, soil conservation, dairy, sheep
rearing, poultry , piggery, plantation/horticulture,
forestry, fishery, storage and market yards, biogas
and

other

alternative

sources

of

energy,

sericulture, apiculture, animals and animal driven

carts, agro-processing, agro-service centers, etc.

 Investment for artisans, small scale industries, tiny

sector, village and cottage industries, handicrafts,
handlooms, power looms, etc.

Activities of voluntary agencies and self help

groups working among the rural poor.

Investment
institutions

in

share

involved

in

capital/securities
agriculture

and

of
rural

development

ELIGIBLE INSTITUTIONS

NABARD provides refinance support to SCARDBs,

SCBs, RRBs, CBs, scheduled primary urban cooperative
banks, North East Development Finance Corporation
Ltd. (NEDFI) etc. against their investment credit in the
rural sector

PURPOSES

Some of
investment

the

major

credit

are

purposes

farm

covered

under

mechanization,

minor

irrigation, plantation / horticulture, animal husbandry,

storage

market

yards,

fisheries,

post

harvest

management, food / agro processing, non-farm sector

including rural industries, microfinance, purchase of
land ( for small/marginal farmers, share croppers etc.),
rural

housing

and

disbursements

under

poverty

alleviation programmes like SGSY and SC/ST Action

plan etc. Hi-tech projects and agri export zones are
identified as thrust areas and NABARD helps in technofinancial appraisal of such projects besides providing
refinance.
In recent years, refinance support has been
extended to new activities like financing of diesel
generator sets in Madhya Pradesh and LPG kits to rural
households all over the country.
CRITERIA
The technical feasibility of the project, financial
viability and generation of incremental income to
ultimate borrowers thereby, enabling them to have a
reasonable
installments

surplus
are

after

the

repayment

necessary

of

the

conditions

to

lone
be

satisfied for sanctioning investment credit. The period

of loan ranges between 3 and 15 years depending on
the purpose for which it is provided.
The refinance is provided to SCARDBs, SCBs, CBs
and

RRBs.

programme

However,
are

the

partnership

beneficiaries
concerns,

of

the

companies,

state-owned corporations or cooperative societies. But,

finally the assistance reaches the individuals, who are
members of the primary credit institutions.
The refinance is usually 50% to 95% of the project
cost. The balance will be met by the banks or the
concerned state governments or the Government of
India in the case of SCARDBs.With a view to ensure
credit flow to certain thrust areas, the quantum of
refinance is enhanced to 100% as in the case of special
category beneficiaries like SC/ST members and self
help groups
SUPERVISORY FUNCTIONS

OVERVIEW

As an apex bank involved in refinancing credit

needs of major financial institutions in the country

engaged in offering financial assistance to agriculture

and rural development operations and programmes,
NABARD has been sharing with the Reserve Bank of
India

certain

supervisory

functions

in

respect

of

cooperative banks and Regional Rural Banks (RRBs)

As part of these functions, it:

Undertake inspection of Regional Rural Banks

(RRBs)

and

cooperative

urban/primary

bank

cooperative

banks)

(other

than

under

the

provisions of Banking Regulation Act, 1949.

Undertakes

inspection

Agriculture

and

(SCARDBs)

and

Rural
apex

of

state

Cooperative

Development
non-credit

Banks

cooperative

societies on a voluntary basis.

Undertakes portfolio inspections, system study,

besides off-site.

 Surveillance of cooperative banks and Regional

Rural Banks (RRBs).

Provides recommendations to Reserve Bank of

India on opening of new branches by State
Cooperative Banks and Regional Rural Banks
(RRBs).
Administering the Credit Monitoring Arrangements
in SCBs and CCBs

CORE FUNCTION
NABARD has been entrusted with the statutory
responsibility

of

conducting

inspections

of

State

Cooperative Banks (SCBs), District Central Cooperative

Banks (DCCBs) and Regional Rural Banks (RRBs) under
the provision of the Banking Regulation Act, 1949. In
addition, NABARD has also been conducting periodic
inspections of state level cooperative institutions such
as

State

Development

Cooperative
Banks

Agriculture

(SCARDBs),

and

Apex

Rural

Weavers

Societies, Marketing Federations, etc.on a voluntary

basis.

OBJECTIVES OF INSPECTION

To protect the interest of the present and future

depositors.
To ensure that the business conducted by this
banks is in conformity with the provisions of the
relevant acts, rules, regulations bye-laws etc.

To ensure observance of rules guidelines etc.

formulated

and

issued

by

NABARD/RBI/Government.

To examine the financial soundness of the banks.

To suggest ways and means of strengthening the
institutions so as to enable them to play more
efficient role in rural credit.

IMPORTANT SCHEMES OF NABARD

RURAL INFRASTRUCTURE DEVELOPMENT FUND

(RIDF)

In 1995-96 RIDF-I set up with a corpus fund of Rs.

2000

crore

for

the

infrastructure projects

purpose
such

of

financing

rural

as irrigation projects,

construction of rural roads and bridges, etc. The RIDF

fund has been continued in subsequent years. The RIDF
IX (last in the Series) was introduced in 2003-04.
The RIDF came to an end with the commencement
of the Lok Nayak Jai Prakash Narayan fund in February
2004.

LOK

NAYAK

JAI

(AGRICULTURE

PRAKASH

NARAYAN

INFRASTRUCTURE

AND

FUND
CREDIT

FUND)

The fund came into existence in Feb-2004.It

replaced the RIDF.NABARD has prepared this scheme
with the following three components:

Finance

for

infrastructure

through

Governments (Rs. 30000 crore).

State

Activities

includes

minor

irrigation,

rain

fed

agriculture, and flood control, public sector cold

storage facilities, etc. Eligible clients are state
Governments,

state

undertakings,

and

local

bodies.

Finance for investments in agriculture and

commercial infrastructure through banking
system (Rs.18000 crore).

Activities

includes

priority

areas

like

micro

irrigation, rain fed agriculture, post-harvest related

support, agriculture marketing, investment credit,
etc. Eligible clients are corporate, NGOs, and
individual, etc.

Development

measures

and

Risk

Management Mechanism (Rs. 2000 crore).

REHABILITATION
SCHEME

OF

COOPERATIVE

BANKS

NABARD undertakes a rehabilitation programme

for weak CCBs and SCBs. Under this programme, it
assists CCB and SCBs, which are financially and
administratively

weak

due to

large overdue and

untrained staff.

KISAN CREDIT CARD (KCC) SCHEME

This scheme was introduced in 1998-99 with a

view to facilitate the flow of timely and adequate shortterm credit to the farmers. This scheme is operated
through cooperative banks, RRBs and commercial
banks. The cooperative banks, RRBs and commercial
banks together issued about 414 lakh KCCs involving
credit of about Rs.97, 710 crore up to March 2004.

The KCC scheme is an ongoing scheme, which is

envisaged to gradually replace the traditional system
and procedures in the issue of shot-term crop loan.

REFINANCE UNDER SGSY

NABARD has issued operational instructions to

cooperative

banks

and

RRBs

with

regard

to

implementation of self employment projects under

SGSY on similar lines as was issued by RBI to
commercial banks.

SELF-HELP GROUPS SCHEME

NABARD has been active in promoting and linking

more and more self-help groups (SHGs) to the banking
system. The banks provide finance to SHGs. NABARD
provides 100% refinance assistance to banks at an
interest rate of 6.5% p.a. for financing SHGs.

The concept pf SHGs promoted by NABARD for

financing the poor was introduced in 1991-92 under
this scheme, the SHGs are linked with formal credit
agencies (banks). By March 2004, over 1.7 crore rural
poor families accessed financial services and credit
through 10.79 lakh credit linked SHGs. Around 90% of
these SHGs are exclusive women SHGs. More than

30,000 branches and 500 banks which participate in

the programme have extended loans amounting to
Rs.3,904 crore by March 31,2004 backed by refinance
support of Rs.2,124 crore from NABARD.

NABARD TODAY

Initiates measures towards institution building for

improving

absorptive

capacity

of

the

credit

delivery system including monitoring formulation

of rehabilitation schemes restructuring of credit
institutions, training of personnel etc.

Promotes research in the fields of rural banking,

agriculture and rural development.

Functions as regulatory authority, supervising,

monitoring and guiding cooperative and regional
rural banks.

 Undertakes monitoring and evaluation of projects

refinance by it.

Prepares on annual basis rural credit plans for all

the districts in the country. These plans form the
base for annual credit plans of all rural financial
institutions.

Coordinates the rural financing activities of all the

institutions engaged in developmental work at the
field

level

and

maintain

liaison

with

the

government of India, state governments, Reserve

Bank of India and other national level institutions
concerned with policy formulation.
COMMERCIAL BANKS CONTRIBUTION

STATE BANK OF INDIA

State Bank of India Caters to the needs of

agriculturists

and

landless

agricultural

specialized

branches which have been set up in different parts of

the

country

exclusively

for

the

development

of

agriculture through credit deployment. These branches

include 427 Agricultural Development Branches (ADBs)
and

547

branches

with

Development

Banking

Department (DBDs) which cater to agriculturists and 2

Agricultural

Business

Branches

at

Chennai

and

Hyderabad catering to the needs of hi-tech commercial

agricultural projects.

Their branches have covered a whole gamut of

agricultural activities like crop production, horticulture,
plantation

crops,

farm

mechanization,

land

development and reclamation, digging of wells, tube

wells and irrigation projects, forestry, construction of
cold

storages

and

godowns,

processing

of

agri-

products, finance to agri-input dealers, allied activities

like dairy, fisheries, poultry, sheep-goat, piggery and
rearing of silk worms. The branch also has farmers
meet in villages to explain to farmers about various
schemes offered by the bank.

To give special focus to agriculture lending Bank

has set up agri business unit. Bank has also agri
specialists in various disciplines to handle projects/
guide farmers in their agri ventures. Advances are
given for very small activity covering poorest of the
poor to hi-tech activities involving large fund outlays.
They are the leaders in agri finance in the country with
a portfolio of Rs. 18,000 crores in agri advances to
around 50 lakhs farmers.
State Bank of India has sponsored 30 RRBs, which
operate in 102 districts of 16 States viz. Andhra
Pradesh, Arunachal Pradesh, Assam, Bihar, Chattisgarh,
Himachal
Karnataka,

Pradesh,
Madhya

Jammu

&

Pradesh,

Kashmir,
Meghalaya,

Jharkhand,
Mizoram,

Nagaland, Orrissa, Uttaranchal and Uttar Pradesh, with

a network of 2336 branches.

VARIOUS SCHEMES OFFERED BY STATE BANK OF

INDIA

CROP LOAN (ACC)

PURPOSE

To provide financial assistance to meet cultivation

expenses for various crops.

ELIGIBILITY FOR CROP LOAN

Agriculturists, Tenant farmers and share Croppers who

actually cultivate the lands are eligible for these loans.
All categories of farmers Small/Marginal (SF/MF) and
others are included.

LOAN AMOUNT

Loan amount is worked based on the cost of cultivation

incurred for each crop per acre of crop cultivated and

90% of the cost of cultivation (Scale of Finance) is given

as loan.

KISAN CREDIT CARD SCEME (KCC) :-

PURPOSE

To extend adequate and timely support to farmers for

their short term credit needs.

ELIGIBILITY FOR THE LOAN

Farmers with excellent repayment record for 2 years

and new farmers with sizeable deposits with branches
for 3 to 4 years are eligible. Borrowers with good track

record in other Banks are also eligible. Farmers who

have defaulted in repayment but have liquidated the
outstanding are also eligible.

LOAN AMOUNT

Loan amount is decided based on the cropping pattern,

ancillary and contingency needs of the farmer for the
full year. 90% of the cost of cultivation (Scale of
Finance) is given as loan per acre. 100% of the cost is
available as loan up to Rs. 50,000/- and 85% of the cost
is available as loan above Rs. 1, 00,000/FARM MECHANISATION SCHEMES

PURPOSE

Credit for purchase of farm equipment and machinery

for

agricultural

activities

ranging

operations.
from

The

purchase

scheme
of

covers

tractors

and

accessories, trailers. Power tillers, combine harvesters,

power sprayers, dusters, threshers etc.

ELIGIBILITY FOR TERM LOANS

Farmers owning mare than minimum acreage of

perennially irrigated lands are eligible (for power tillers
2 acres, for tractors 4 acres for > 35 HP and 6 acres for
above 35 HP and for combine 8 acres). Eligibility for
purchase of other farm equipment is decided on the
income generated by the agri activity undertaken by.

LOAN AMOUNT
Up to Rs. 50,000/- 100% of the cost of the asset is
provided as loan. Above Rs. 50,000/- up to 85% of the
cost of the asset provided as loan.
LAND DEVELOPMENT SCHEMES

PURPOSE

To provide credit solution for land development projects

in the form of direct finance to cultivators for better
productivity.

Loans under this head cover various activities like land

clearance ( removal bushes, trees, etc.), land leveling
and shaping, contour/ graded bunding, bench terracing
for hilly areas, contour stone walls, staggered contour
trenches,

disposal

drains,

reclamation

alkaline soils and fencing etc.

ELIGIBILITY FOR TERM LOANS

of

saline/

All farmers owning agricultural land are eligible.

LOAN AMOUNT

Up to Rs. 50,000/- 100% of the cost of the asset /

project cost is provided as loan. Above Rs. 50,000/- up
to 85% of the cost of the asset / project is given as
loan.

LOAN AGAINST WAREHOUSE RECEIPTS / COLD

STORAGE RECEIPTS

PURPOSE

The Bank extends financial assistance to farmers

storing produce in private / government warehouse/
cold storages against pledge of warehouse / cold

storage receipt to prevent distress sale. The maximum

repayment period of the loan is 6 months.

WHO IS ELIGIBLE FOR THE LOAN

All categories of farmers availing crop loan.

LOAN AMOUNT

The lone amount will be 60% of the value (minimum

support price) of the produce stored.
MINOR IRRIGATION SCHEMES

PURPOSE

To provide credit for creating irrigation facilities from

underground / surface water sources. All structures and
equipments connected with it are also financed. Loans
cover various activities like digging of new wells

(open/bore

wells),

deepening

of

existing

wells

(traditional/in well bore), energisation of wells (oil

engine/electrical pump set), laying of pipe lines,
installing drip/ sprinkler irrigation system and lift
irrigation system.

ELIGIBILITY FOR TERM LOANS

All farmers having a known source of water which can

be exploited for irrigation purpose.

LOAN AMOUNT

Up to Rs. 50,000/- 100% of the cost of the asset/

project cost is provided as loan. Above Rs. 50,000/- up
to 85% of the cost of the asset / project is provided as
loan.
OTHER SCHEMES INCLUDES

PRODUCE MARKETING LOAN SCHEME

FINANCE TO HORTICULTURE

 FARM MECHANISATION SCHEMES

AGRICULTURAL TERM LOANS (ATL)
LAND DEVELOPMENT SCHEMES
MINOR IRRIGATION SCHEMES
LEAD BANK SCHEME
FINANCING OF COMBINE HARVESTERS
KISAN GOLD CARD SCHEME
BROILER PLUS SCHEME
KRISHI PLUS SCHEME
ARTHIAS PLUS SCHEME
DAIRY PLUS SCHEME
LAND PURCHASE SCHEME
MUHAMMAD YUNUS & GRAMEEN BANK

NOBEL PEACE PRIZE WINNER MUHAMMAD YUNUS

Muhammad Yunus ideas about lending to the poor

to lift millions out of poverty. Have changed lives in his
native Bangladesh and beyond. Known as the banker
to the poor, Yunus, winner of the 2006 Nobel Peace
Prize, has helped people rise above poverty by giving
them small, usually unsecured loans through his
Grameen Bank.

Through Yunuss efforts and those of the bank he

founded, poor people around the world, especially
women, have been able to buy cows, a few chickens or
the cell phone they desperately needed to get ahead.

Yunus

is

the

first

Nobel

Prize

winner

from

Bangladesh, a poverty-stricken nation of about 141

million people located on the Bay on Bengal.

Yunus

received

Ph.D.

in

economics

from

Vanderbilt University in 1970 and taught at Middle

Tennessee

University

from

1969

to

1972.

After

returning to Bangladesh, he joined the University of

Chittagong as head of the Economics Department. He

also holds honorary doctorate degrees from dozens of

universities around the world.

Yonus has won dozens of international awards,

including the Simon Bolivar Prize, the Indira Gandhi
Peace Prize, the Seoul Peace Prize and the Freedom
Award of the International Rescue Committee.

He has also been appointed as an International

Goodwill Ambassador for UNAIDS by the United Nations
and

inducted

as

member

of

Frances

Legion

dHonneur.

From 1993 to 1995, Yunus was a member of the

International Advisory Group for the Fourth World
Conference on Women, a post to which he was
appointed by the U.N. secretary general. He has served
on the Global Commission of Womens Health, the
Advisory

Council

for

Sustainable

Economic

Development and the U.N. Expert Group on Women

and Finance.

In addition to Grameen Bank, Yunus has created

numerous other companies in Bangladesh to address
poverty and development issues. Those companies are
involved in a range of industries, including mobile
telephony, Internet access, capital management and
renewable energy.

Grameen Bank was the first lender to hand out

microcredit,

giving

very

small

loans

to

poor

Bangladeshis who did not quality for loans from

conventional banks. No collateral is needed and
repayment is based on an honor system.

Grameen,
language,

which

says

the

means

rural in

method

the Bengali

encourages

social

responsibility.

A LOOK AT GRAMEEN BANK

WHAT IS IT: The Grameen Bank hands out microcredit,

or very small loans, to the poor peoples of Bangladesh

who, do not qualify for loans from conventional banks.

No collateral is needed and repayment is based on an
honor system.

HOW DID IT START: In 1974, Yunus, then an

economics professor recently returned from the United
States, lend a total of $27 to 42 villages who, made
bamboo furniture. The loans, which were all paid back,
allowed them to cut out the middlemen and purchase
their

own

raw

materials.

Emboldened

by

his

experiment, Yunus won government approval in 1983

to open Grameen, Bengali for rural.

WHO QUALIFIES: Anyone can qualify, but they must

belong to a five-member group. Once the first two
members begin to pay back their loans, the others can
get theirs. While there is no group responsibility for
returning the loans, the bank believes it creates a
sense of social responsibility, ensuring all members pay
back their loans.

DOES IT WORK: Grameen claims a 99 percent

repayment rate. According to a recent Grameen survey,

58 percent of the families of Grameen borrowers have

crossed the poverty line.

WHO

OWNS

THE

BANK:

The

government

of

Bangladesh owns 6 percent of the bank while the

borrowers own the other 94 percent.

WHAT ARE THE NUMBERS: The bank has handed out

$ 5.72 billion since its inception to 6.61 million people
had been repaid $ 5.07 billion. Women account for 97
percent of the loan takers. Grameen Bank has 2,226
branches, works in 71,371 villages and has a total staff
of 18,795.
OTHER INFORMATION

Earns Profit-Ever since Grameen Bank came into

being, it has made profit every year except in 1983,
1991 and 1992. It has published its audited balancesheet every year, audited by two internationally
reputed audit firms of the country.

Revenue and Expenditure: Total revenue generated

by Grameen Bank in 2006 was Tk 9.43 billion (US
$134.90 million). Total expenditure was Tk 8.03 billion
(US $ 114.90 million). Interest payment on deposits of
Tk 3.47 billion (US $ 35.35 million) was the largest
component of expenditure (43 per cent). Expenditure
on salary, allowances, and pension benefits amounted
to Tk 2.03 billion (US $ 28.97 million), which was the
second largest component of the total expenditure (25
per cent). Grameen Bank made a profit of Tk 1398
million (US $ 20.00 million) in 2006. Entire profit is
transferred to a Rehabilitation Fund created to cope
with disaster situations. This is done in fulfillment of a
condition imposed by the government for exempting
Grameen Bank from paying corporate income tax.

Low Interest Rates: Government of Bangladesh has

fixed interest rate for government-run micro credit
programmes at 11 per cent at flat rate. It amounts to
about 22 per cent at declining basis. Grameen Banks
interest rate is lower than government rate.

There are four interest rates for loans from

Grameen Bank : 20% (declining basis) for income

generating loans, 8% for housing loans, 5% for student

loans, and 0% (interest-free) loans for Struggling
Members (beggars). All interests are simple interest,
calculated on declining balance method. This means, if
a borrower takes an income-generating loan of say, Tk
1,000, and pays back the entire amount within a year
in weekly installments, shell pay a total amount of Tk
1,100, i.e. Tk 1,000 as principal, plus Tk 100 as interest
for the year, equivalent to 10% flat rate.

Deposit Rates:

Grameen Bank offers very attractive rates for

deposits. Minimum interest offered is 8.5 per cent.
Maximum rate is 12 per cent.
BEGGARS AS MEMBERS

Begging is the last resort for survival for a poor

person, unless he/she turns into crime or other forms of
illegal activities. Among the beggars there are disabled,
blind, and retarded people, as well as old people with ill
health.

Grameen

Bank

has

taken

up

special

programme, called Struggling Members Programme, to

reach out to the beggars. About 100,505 beggars have

already joined the programme. Total amount disbursed
stands at Tk. 107.16 million. Of that amount of Tk.
74.39 million has already been paid off.