A study on the growth of rural and farm credit

in India

Gauri Verma
BBA -VI Sem

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

Farm CreditThe Farm Credit Act of 1971 (Pub.L. 92181, 85 Stat. 583, enacted December 10, 1971)
recodified all previous acts governing the Farm Credit System (FCS), a cooperatively owned
government-sponsored enterprise (GSE) that provides credit primarily to farmers and ranchers.
Background.
The legislation was enacted by the United States government to "further provide for the farmerowned cooperative system of making credit available to farmers and ranchers and their
cooperatives, for rural residences, and to associations and other entities upon which farming
operations are dependent, to provide for an adequate and flexible flow of money into rural areas,
and to modernize and consolidate existing farm credit law to meet current and future rural credit
needs, and for other purposes."

The Farm Credit Act of 1933 (48 Stat. 257) was first passed on June 16, 1933, the last day of
President Franklin D. Roosevelt's "Hundred Days" initiative, an effort by his administration to
quickly put in place measures to fight the Great Depression. The Act eliminated earlier
provisions relating to government capitalization of the System, and expanded the lending
authorities of many System institutions.

Amendments
The Agricultural Credit Act of 1987, a major piece of legislation modifying the 1971 Act,
authorized up to $4 billion in federal financial assistance to FCS institutions to assist in their
recovery from the agricultural credit crisis of the 1980s. The Act created a System entity to issue
up to $4 billion in federally guaranteed bonds, required the U.S. Treasury to pay a portion of the
interest on these bonds, and also required the FCS to ultimately repay the Treasury for this
assistance. The Act also mandated the merger of certain System banks within each farm credit
district and expanded other merger authorities, and gave delinquent FCS borrowers certain
rights.
A separate System institution was established by the Act to insure the timely repayment of
principal and interest on consolidated Systemwide debt issues. Farm Credit Banks and
Associations Safety and Soundness Act of 1992 (Pub.L. 102552, 106 Stat. 4102, enacted
October 28, 1992) was designed to enhance the financial safety and soundness of FCS banks and
associations by establishing new mechanisms to ensure repayment of Farm Credit System debt
resulting from federal financial assistance provided to the System under the 1987 Act. The Farm
Credit System Reform Act of 1996 (Pub.L. 104105, 110 Stat. 162, enacted February 10, 1996)
included numerous provisions to provide regulatory relief for the FCS.

Objective
1. To know about the major eras of agriculture credit (pre reform era, post reform era)
2. To know about the kind of credit (short term credit and long term credit).
3. To know about the direct and indirect credit and the share of agriculture credit in direct
and indirect credit.
4. To know about the role of RRBs in the rural development.

Importance

The study will helps to population of India to understand the role of credit intitution in

the rural devolvement of Uttar Pradesh

The study will helps to the credit institution in implementation of development policy.
The study will help the government of India to developing the strategies adopted by them

to improve the rural areas.

The conclusion of this study helps in the decision making of the government.

Scope of the Study

The scope of this effort will be limited to estimating the impact of formal credit from different
institutions cooperatives, rural and commercial banks on agricultural output. The spillover
effects of formal credit on the rural non-farm sector will not be addressed specifically, an issue

that research suggests might be quite important (Pande and Burgess, 2005). Neither does this
work address the implications of recent interventions in credit policy such as debt waiver; this is
already studied elsewhere (Kanz, 2012; Cole, 2009). Another important area that is beyond the
remit of this study is the fiscal implication of the system of disbursing formal rural credit. One
could argue that to gauge the true impact of credit, one would have to account for the fiscal
burden (or some notion of net benefit cost ratio) (Binswanger and Khandkerm 1992). In this
work, the question of interest is to gauge whether or not direct formal rural credit impacts
agricultural output, the extent to which it does so and the relative importance of the different
pathways through which these effects occur.

RESEARCH METHODOLOGY

Research

A Systematic search for an answer to a question or solution to problem is known as

RESEARCH.
According to KERLINGER defines RESEARCH , A Systematic , Controlled , Empirical
and

Critical Investigation of Hypothetical Preposition about Presumes Relation among

Natural Phenomenon .
The marketing research process that will be adopted in the present study will consist of the
following stages
a. Defining the problem and the research objective:
b. Developing the research plan:
c. Collection and Sources of data:
d. Analyze the collected information
e. Report research findings:
Research design
A research design is defined, as the specification of methods and procedures for acquiring the
Information needed. It is a plant or organizing framework for doing the study and collecting the
data. Designing a research plan requires decisions all the data sources, research approaches,
Research instruments, sampling plan and contact methods.
Research design is mainly of following types: 1

Exploratory research.

Descriptive studies
Exploratory Research
The major purposes of exploratory studies are the identification of problems, the more precise
Formulation of problems and the formulations of new alternative courses of action. The design of
exploratory studies is characterized by a great amount of flexibility and ad-hoc veracity.
Descriptive studies
Descriptive research in contrast to exploratory research is marked by the prior formulation of
specific research Questions. The investigator already knows a substantial amount about the
research problem. Perhaps as a Result of an exploratory study, before the project is initiated.
Descriptive research is also characterized by a Preplanned and structured design.
The research design used in this project is a DESCRIPTIVE DESIGN.
Data collection
Research will be based on two sources:
Primary data Primary data is that kind of data which is collected by the investigator herself for
the purpose of specific study. The data such collected is original in character. The advantage of
third method collection is the authenticity.

Secondary data

When an investigator uses the data that has been collected by others is called secondary data.
The secondary data could be collected from journals, reports and various publications. The
advantages of secondary data can be economical, both in the term of money and time spent.
Sources of Secondary Data
Following are the main sources of secondary data:
1
2
3
4
5

Official Publications.
Publications Relating to Trade:
Journal/ Newspapers etc.:
Data Collected by Industry Associations:
Unpublished Data: Data may be obtained from several companies, organizations,
working in the same areas like magazines.
NOTE In this research report I have used the Secondary data from the different source
of secondary data.

This study is based on the secondary data.

LIMITATIONS
Although lets of care and efforts are made to ensure the fault free study but still there
remains certain limitation which possibly may accrue such as

 Lack of time acted as constraint in study.

The study is based on secondary data any kind of discrepancy in the will cause
same in the study.
Research is only an indicator and cannot solve the problem.