Project on Agriculture Finance BACHELOR OF COMMERCE BANKING & INSURANCE SEMISTER V 2011-2012 PROJECT GUIDE Prof. Mrs.

Jayshree Sen Prof. Mr. Mahesh Patil Prof. Mr. Sanjiv Prsad SUBMITTED BY Akshata Sakharam Dalvi Roll No.09 Manisha Education Trusts

SMT.JANAKIBAI RAMA SALVI

DEGREE COLLEGE OF ARTS, COMMERCE & SCIENCE MANISHA NAGAR, KALWA(W), THANE

DECLARATION I am miss. Akshata Sakharam Dalvi of S.J.R.S Degree College of Arts, Commerce & Science of T.Y.B & I (Sem V) have completed the project on Agriculture Finance for the year 2011-2012 . The information submitted is true and original to the best of my knowledge.

Date : Place:Kalwa

Signature of Student

ACKNOWLEDGEMENT
Success always strikes the door of the people who work hard with dedication plus the blessing of the elders and gentle part of the friends and colleagues. The success not due to any single person, but due to the combined efforts of a group of dedicated and aspirant individuals. Several special people have contributed significantly in the course. I wish to publicity recognize and thank them. Before I get presentation of this dissertation entitled Agriculture Finance. I find it as my obligation to express my sincere gratitude to many a specialist in this field without whose assistance and guide, I would ever have succeeded in making this venture e reality. First of all I thank god almighty, for this kind blessing for the successful completion of this project work. I express my since thanks to the facilities, Prof. Mrs. Jayshree Sen, Prof.Mr.Mahesh Patil,Prof.Mr.Sanjiv Prasad for encouragement and help given during this project work. Yours sincerely, Akshata Sakharam Dalvi

INDEX

Sr.No.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Topic Name
Introduction History Objective Banks provide loan for Kisan Schemes for Farmers Popular Loan Type for Farmer Role of Commercial Bank Role of Regional Rural Bank Agriculture Credit Agriculture Growth Rate in India Role of NABARD Role of Central Bank Case Study on Farmer Suicide Conclusion Bibliography & Webilography

Agriculture Finance
A typical financial sleight-of-hand resorted to by Graeme is to reschedule short-term loans that are unpaid after as long as two years; thus, instead of writing them off, it lets borrowers accumulate interest through new loans simply to keep alive the fiction of repayments on the old loans. Not even extreme pressure techniques such as removing tin roofs from delinquent womens houses, according to the Journal report improved repayment rates in the most crucial areas, where Grameen had earlier won its global reputation among neoliberals who consider credit and entrepreneurship as central prerequisites for develop. Finance in agriculture is as important as development of technologies. Technical inputs can be purchased and used by farmer only if he has money (funds). But his own money is always inadequate and he needs outside finance or credit. Professional money lenders were the only source of credit to agriculture till 1935. They use to charge unduly high rates of interest and follow serious practices while giving loans and recovering them. As a result, farmers were heavily burdened with debts and many of them perpetuated debts. There were widespread discontents among farmers against these practices and there were instances of riots also. With the passing of Reserve Bank of India Act 1934, District Central Co-op. Banks Act and Land Development Banks Act, agricultural credit received 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 1930s real impetons was received only after Independence when suitable legislation were passed and policies were formulated. Thereafter, bank credit to agriculture made phenomenal progress by opening branches in rural areas and attracting deposits.

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

History of Agriculture Finance in India Indian Agriculture began by 9000 BCE as a result of early cultivation of plants, and domestication of crops and animals. Settled life soon followed with implements and techniques being developed for agriculture. Double monsoons led to two harvests being reaped in one year. Indian products soon reached the world via existing trading networks and foreign crops were introduced to India. Plants and animalsconsidered essential to their survival by the Indianscame to be worshiped and venerated. The middle ages saw irrigation channels reach a new level of sophistication in India and Indian crops affecting the economies of other regions of the world under Islamic patronage Land and water management systems were developed with an aim of providing uniform growth. Despite some stagnation during the later modern era the independent Republic of India was able to develop a comprehensive agricultural program.

I.

Objectives of Agriculture Finance in India

To help increase agriculture production; To help fill the existing credit gap in the field of agriculture; To provide adequate and timely credit for viable agricultural schemes; To help achieve the National plan objectives , with special emphasis on the weaker section; To help in including banking and saving habits among the rural people; and To assist cultivators in adopting improved methods of agriculture. II. Some other development which have led to a more active involvement of the banks in the field of agriculture finance are : The establishment of the Refinance Corporation for Agriculture to provide refinancing facilities to co-operative, commercial, and development banks for their agriculture advances; The policy of the social control of the banks impaired a new sense of direction to commercial banks which began to provide finance for agricultural purpose something which they had not done before; The Agriculture Finance Corporation was setup in 1968 to increase the commercial bank participation in agricultural financing; Fourteen major banks were nationalized in 1969 (six more nationalized in 1980), which has led to a greater involvement of commercial banks in the financing of agriculture under the direction of the Reserve Bank and the Central Government.

Banks provide loan for Kisan:Nationalize Bank 1.Allahabad Bank - offers the Kinas Credit Card and Kinas Shakti Yojana Scheme. The Kinas 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 Kinas 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 Kinas Vikas Card, AB Pattabhi Agricard, AB Kinas Chakra, rural godowns, agri clinics, agri service centres, self helpgroups and solar cookers. They also provide other schemes such as Kinas Sampathi,tractor financing, Kinas Green Card, Surya Sakhti and loans to dairy agents. 3.Bank of Baroda- offers farmers the Baroda Kinas Credit Card. It also has schemesfor the purchase of agricultural implements, heavy agricultural machinery like tractors,irrigationandotherinfrastructure. Bank of Baroda also finances the development of agri industries like horticulture, sericulture, fisheries, dairy and poultry. 4.Bank of India- has a Kinas 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 purpose

5. Bank of Maharashtra- offers agriculturists a Mahabank Kinas Credit Card and financial schemes for digging new wells, purchasing harvesters, livestock,vehicleand land. Repayment terms for different agricultural loans range from three to fifteen years. 6. Canara Bank- provides Kinas 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 Kinas 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 Kinas Tie-Up Loan Scheme, Corp Kinas Farm Mechanisation Scheme and Corp Kinas 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 trainingunemployed youth in rural areas. Other financial schemes of the bank are the DenaSwacch Gram

Yojana, Dena Kinas Gold Credit Card Scheme and the Dena Bhumiheen Kinas Credit Card Scheme. 10. Indian Bank- has a wide range of schemes for agriculturalists such as Swarojgar Credit Card, Gramin Mahila Sowbhagya Scheme, Kinas Bike Loan Scheme, Yuma Kinas Vidya Nidhi Yojana and Indian Bank Kinas 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.

12. Oriental Bank of Commerce- It has two agricultural projects the Grameen Project and the Comprehensive Village Development Programme. The Grameen Projectinvolves disbursing small loans ranging from Rs. 75 onwards to mostly women. Trainingis also provided in villages in using locally available raw material to produce pickles andjams.TheComprehensiveVillageDevelopment Programme focuses on providing anintegrated 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 UdyogKhazana Yojana, vermi composting scheme, horticulture clinic and private veterinaryclinic with dairy unit scheme. 14. Punjab National Bank - This bank has a special website called PNB Krishifor 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 offinancial schemes offered

by Punjab National Bank on production credit, investmentcredit, composite loans, animal husbandry and farm mechanization. 15. Syndicate Bank- offers a wide range of agricultural loan products such as the Synd Jai Kinas Loan Scheme, Jewel Loan Scheme for Agriculture, Syndicate FarmHouse Scheme, Finance for Hi-tech Agriculture, Development of Irrigation Infrastructurescheme, Syndicate 2/3/4 Wheelers Scheme and the Syndicate Kinas 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, alliedactivities as well as for personal purposes. Only farmers below 60 years are eligible toapply. 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 Kinas ATM Cards and special Kinas ATM Machines. These ATM's are easy to operate and do not requirefarmers 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- The range of financial schemes offered to agriculturalists include the United Krishi Laghu Paribahan Yojana, United Krishi Sahayak Yojana, UnitedGramyashree Yojana, Gramin Bhandaran Yojana and the United Bhumiheen KisanCredit 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 farmersto meet entire agricultural credit requirements such as crop production, investment creditand consumption credit cultivators sharecroppers are eligible.

Schemes for Agricultural Finance

1.SBT KISAN GOLD CARD SCHEME (General purpose Agriculture Term Loan) ELIGIBILITY Farmers having good track record of repayment for the last two years. Farmers who have closed their loan account without default and not our current borrowers. Farmers who have defaulted in repayment but closed the Loan within the stipulatedrepayment period. Farmers who are maintaining deposits with the Bank. Good borrowers of other banks provided they liquidate their dues with other banks. Good farmers who have not availed loans from any bank. 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 existing movable assets such as milch animals, pump sets etc. The loan will be secured by equitable mortgage of properties worth double the loanamount, or term deposit receipts, LIC policies of adequate surrender value, NSCscompleted 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 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. 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 Interest rate ranges from 2.50% below to 1.50% above BPLR for various limits. REPAYMENT The facility will be sanctioned as an Agriculture Cash Credit limit (In case of Kinas 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 the loan. 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 is 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 PURPOSES

ELIGIBILITY 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 productivityalsoto 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 banks other financing schemes. RATE OF INTEREST Interest 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: Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits. 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 Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits. 9. PRODUCE MARKETING LOAN (Advance against Warehouse Receipt)

ELIGIBILITY Farmers / traders depositing farm produce in the warehouses of the central / state warehousing corporations. Scheme will be operative in Karnataka, Andhra Pradesh, Tamilnadu & Kerala. PURPOSE To protect the farmers from the compulsion to sell their produce immediately after harvest of produce despite an adverse market. To finance farmers and traders against warehouse receipt. 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 less is. 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) 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: 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 Drip Irrigation 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 Tractors with engine capacity up to 35 HP The applicant should own / cultivate six acres of perennially irrigated land. Tractors with engine capacity above 35 HP The applicant should own / cultivate eight acres of perennially irrigated land. 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 Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits. 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. Popular Loans relating to Agriculture Finance CROP LOAN Crop loan is a short term credit and is generally obtained from primary credit co-op. Society of a village or also from commercial bank. The period of loan is about one year except for sugarcane for which the period is 18 months. There are two criteria for granting crop loan. 1.One third of gross value 2.Cost of cultivation. 1.One third of gross value approach takes into account the yield and price of the crop, its cost of cultivation and family expenditure. If the gross value is more, more amount of loan becomes available. For e.g. Rice. Thus in second situation farmer is entitled for Rs.3330 per hectare which is higher than in the first situation. Thus this method takes into account the productive aspect of a crop. 3.In cost of cultivation, direct paid-out costs are only considered. They include items, like seeds, manures, fertilizers, pesticides, diesel/electricity, hired labour etc. In this approach, it is expected that all direct costs to be incurred by the farmer should be covered and accordingly he should get adequate credit. If the cost of all these items of input is Rs.3500/-. If the loan is

granted according to first approach, then the amount which is short, is spent by the farmer from his own funds.Since crop loan is for one season, its recovery is made in one installment after the harvest of the crop. Crop loan is an annual requirement and farmer has to borrow fresh loan for new crop season every time. Therefore, he has to repay the earlier loan with interest within stipulated time. Since this loan is required every season/every year, the procedure of getting this loan is simple and convenient and it is made available by the District Central Co-op.Banks through the village Co-op. Credit Society. So the farmer gets his loan in the village itself. If the loan is to be taken from commercial bank, it is available from the nearby branch of the commercial bank. As for security, the farmer has to offer his land as a security. There is a three tier structure providing crop-loans through co-operative institutions. Apex Bank- State Co-op. Bank. District Central co-op. Bank Village co-op. Credit Society. Crop-loan is the most important need of the farmer to increase and maintain his productive ability. With the help of this loan amount, he can purchase modern costly inputs and adopt new technologies on his farms. So through these loans co-operative banks play important role in the development and prosperity of agriculture. Among the various types of bank loans to agriculture, the share of crop loan is the highest.

Development Loans
Purpose: i. ii. Minor Irrigation, i.e, sinking of new wells,renovation of old wells, installation of disel/electric pump-sets; Land Improvement i.e land reclamation, soil conservation, land leveling and shaping, laying out of field channels/drainage/ditch; and Diversified puposes, such as : a) Purchase of tractors, threshers, farm machinery, agroservice centres. b) Dairy, popularity, sheep breeding , piggery, fisheries. c) Plantation and horticulture development. d) Consruction of godownes and silos. e) Market yards development. f) Aerial spraying.

iii.

Period: These loans should be repayable in 3 to 10 years, ending the purpose of the loan, the borrowers capacity to repay other relevant factor. Security: Bank may take a security for term loan as follows: a) Where the borrower creates movable assets out of loans: Such assets may be hypothecated with the bank in case the loan amount is up to the cost of economic unit where applicable or Rs.5,000 whichever is lower. In the case of loans exceeding Rs.5,000, bank may also take a third party guarantee or mortgage of the land, at its own discretion. b) Where movable assets are not created out of loans : Bank should take only demand promissory note/loan agreement if the amount of loan is up to Rs.2,000. In other cases mortgage of the land may also be taken at

discretion of bank. Bank may take a simple declaration by the borrower that a charge has been created on the land in favor of the bank. In those States where legislation on the lines suggested by the Talwar Committee has been passed. Margin: Banks are required to maintain margin as follows: a. Loans to cost unit (wherer applicable) or Rs.5,000, whichever is lower and loans up to Rs.5,000 to small marginal farmers and agricultural labourers no margin, if subsidy is available. If sbsidy is not available margin @ 5%. b. For others, margin may vary between 15% to 25% depending on the pupose and the amount of loan. The Reserve Bank has prescribed a minimum economic unit in respect of certain activities.e.g., in case of purchase of milch cattle 2 animals and in case of poultry 90/100 layers. Repayment: If the borrower defaults due to his death, physical incapacity ar natural calamity, etc., the repayment period may be extended and in suitable cases a fresh term loan may also be sanctioned.

Role of Commercial Bank in Agricultural Financing:

The average Indian Farmer is so poor that he is unable to provide any tangible security except land. Considering these impediments in the way of agricultural finance, the Reserve Bank and the Central Government have taken steps to ensure that commercial banks may plays a more important part in agricultural financing . For this purpose, there are:

The Reserve Banks guidelines to commercial banks on agricultural finance; Study Group on State enactments having a bearing on lendings by commercial banks to agriculturists; The Agricultural Refinancing and Development Corporation(A.R.D.C); The Agricultural Finance Corporation(A.F.C); Regional Rural Bank; The Lead Bank Scheme; The Small Farmers Development Agency(S.F.D.A); The Marginal Farmers and Agricultural Labourers Development Agencies(M.F.A.L); and The Farmers Service Societies.

Role of Regional Rural Bank in Agriculture Finance:

In the multiagency approach to provide credit to agriculture, Regional Rural Banks (RRBs) have special place. They are state sponsored, regionally based and rural oriented commercial banks. The Govt. of India, in July 1975, appointed a Working Group to study in depth the problem of devising alternative agencies to provide institutional credit to the rural people in the context of steps then initiated under the 20 Point Economic Programme. The Working Group identified various weaknesses of the co-operative credit agencies and the commercial banks and felt that these institutions would not be able to fill the regional and functional gaps in the rural credit system within a reasonable period of time. The Group therefore recommended a new type of institution which combines a. Local feel and familiarity with rural possess problems which co-operative banks. b. Degree of business organization ability to mobilise deposit, access to money market and modernised outlook which commercial banks have. c. Thus, it was envisaged to combine desirable qualities of cooperative banks and commercial banks in RRBs at the same time, it was emphasised that the role of RRBs would be to supplement and not supplant the other institutional agencies already existing in the field. Formation and Objective: The Government of India promulgated the Regional Rural Banks Ordinance on 26th September 1975, which was later replaced by the Regional Rural Bank Act 1976. The preamble to the Act states the objective to develop rural economy by providing credit and facilities for the development of agriculture, trade, commerce, industry and other productive activities in the rural areas, particularly to small and

marginal farmers, agricultural labourers, artisans and small entrepreneurs.

Capital Structure: The RRB Act empowers the Central Govt. to open the banks from time to time at places where it may consider it necessary. A Regional Rural Bank is jointly owned by the Govt. of India, the Government of concerned state and public sector bank, which sponsored it. The authorised capital of each bank is Rs. 1 crore and the issued capital is Rs. 25 lakhs; which is held by them in the proportion of 50, 15 and 35 per cent respectively. Each bank carries the banking business within the local limits specified by the Govt. notification. Organisational structure: The management of a RRB is vested in a nine-member Board of Directors headed by 1. Chairman who is an officer deputed by a sponsor bank but appointed by the Govt. of India. 2. Three directors to be nominated the Central Govt. 3. Two directors to be nominated by the concerned State Govt. 4. Three directors to be nominated by the sponsor bank. The sponsor bank, besides subscribing to the capital and deputing one of its official as chairman, provides assistance to RRB in several ways such as financial accommodation, deputing managerial and other staff and arranging the recruitment of staff and their training. Functions: Every RRB may undertake the following types of functions:

 The granting of loans and advances particularly to small and marginal farmers and agricultural laboursers individually or to a group, co-operative societies, agricultural processing societies, co-operative farming societies, etc. The Granting of loans and advances to artisans, small entrepreneurs and small traders, businessmen, etc. The Reserve Bank of India has brought RRBs under the ambit of priority sector lending on par with the commercial banks. They have to ensure that forty percent of their advances are accounted for the priority sector. Within the 40% priority target, 25% should go to weaker section or 10% of their total advances to go to weaker section.

How rural' is India's agricultural credit?

Recent data on banking has brought out a fourth disturbing feature of the revival in agricultural credit. There has been a sharp growth of agricultural finance that is urban in nature. Between 1995 and 2005, the share of agricultural credit supplied by urban and metropolitan bank branches in India increased from 16.3 per cent to 30.7 per cent ( Table). The share of agricultural credit supplied by metropolitan branches alone increased from 7.3 per cent in 1995 to 19 per cent in 2005. While there was a moderate decrease in these shares between 2006 and 2008, urban and metropolitan branches continued to supply about one-third of the total agricultural credit in 2008. Concurrently, there was a sharp fall in the share of agricultural credit supplied by rural and semi-urban branches from 83.7 per cent in 1995 to 69.3 per cent in 2005. In 2008, the share of rural and semi-urban branches .

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. Agriculture Growth Rate in India GDP has declined over the years. The Indian government must take steps to boost the agricultural sector for this in its turn will lead to the growth of Agriculture Growth Rate in India GDP.

ROLE OF NABARD IN SUPPORTING AGRICULTURE FINANACE:

NABARD the Apex Institution for Agriculture and Rural Development was set up on 12 July 1982. Objective of NABARD: Promoting sustainable and equitable agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives It ensures integrated development of rural areas through single window approach.

Steps to Increase Institutional Finance to Agriculture The evolution of institutional credit to agriculture could be broadly classified into four distinct phases 1904-1969 - Predominance of co-operatives and setting up of RBI 1969-1975 - Nationalization of commercial banks and setting up of Regional Rural Banks (RRBs) 1975-1990- Setting up of NABARD 1991 onwards - Financial sector reforms. 1935 - Reserve Bank of India (RBI) started operations 1949 - RBI Nationalized; Banking Regulation Act enacted 1966 - Cooperative banks come under RBI regulation 1969 - Nationalization of 14 major commercial banks 1974 - Introduction of priority sector lending targets

Role of Central Bank in Regulating Agriculture Finance

Directed credit for lending to priority sector and weaker sections Lead Bank Scheme designated lead bank in each district for ensuring banking development Strengthening and supporting small local banks which includes RRBs and cooperative banks Doubling of Agriculture Credit in three years by provision of short-term credit to farmers at an interest rate of 7 per cent.

Methods and Schemes of Agriculture Finance

1. Crop Loans Crop-production finance Classification of crops Scrutiny of loan application and appraisal Scales of finance Financing under tie-up arrangements Crop insurance and renewal Joint Liability Groups (JLGs) and related aspects

2.Advances against Gold ornaments Process to extend finance from banks to farmers against gold ornaments/gold wares to increase their liquidity Identification of farmers for the purpose of loan by Ascertaining farmers' eligibility and the purpose of the loan availed Credit appraisal through valuation and processing of the gold ornaments Process of extending credit delivery 2. Produce Marketing loans Concept of agricultural marketing Need for a produce marketing loan Objectives and advantages of produce marketing loan Process of extending produce marketing loan 3. Minor Irrigation Schemes Meaning of irrigation Classification of irrigation projects Issue of the environmentalists opposing major irrigation projects Minor irrigation projects and the types of minor irrigation Different kinds of pump sets Drip and sprinkler irrigation systems

4. Loans Types of land developments General aspects of land development schemes and the details required for study the same Lending procedure for land development 5. Seed Production Genetic aspects of seed production Methods and steps to maintain the genetic purity of seeds Concept of breeder Hybridization of seeds and its production process Process of seed identification, seed processing, and storage etc. Economies of hybrid seed product unit with the help of case stud

Recent Trade In Agriculture Finanace

Agriculture is a major source of livelihood throughout the world, especially for the majority of poor people living in rural areas in developing countries. A key challenge for the majority of these farmers is - access to finance. Lack of access to finance is a key impediment to farmers in improving the efficiency of their productions and adopting better technologies. The objective of IFCs Global Agri-Finance Advisory Program is to foster a measurable increase in the availability of agriculture finance in IFCs client portfolio globally, by promoting appropriate risk mitigation products and building necessary skills. The program crosscuts and integrates across IFCs investment, advisory, and regional units and it works in close collaboration with IFCs existing pipeline of strategic agribusiness initiatives, supporting the global food security effort. The program supports IFC regional facilities and their client financial institutions with agri-finance tools and expertise, focusing on three main work areas: -Building capacity of client financial institutions in agri-finance: conducting diagnostics, improving risk management systems and processes, designing new products; -Linking financial institutions to sustainable supply chains: promoting access to finance for stakeholders along sustainable supply chains; and -Linking insurance to agri-finance: bringing insurance products to address production and revenue risks, working closely with IFCs Global Index Insurance Facility. As agriculture sector contributes about 40% of worldwide

employment and a 100% food production increase will be required in developing countries to feed the 2050 population, investment in agriculture sector is critical for driving global economic growth. The issues of food security, increased poverty in developing nations and overall imbalanced development of agriculture-dependent economies have highlighted the urgent need for development in that sector. IFC has a broad and diverse reach in the agriculture sector and plays a unique role in helping our clients address risks and identify opportunities. Our financing and advisory services support private sector investment that applies creative solutions to complex problems. Through our partner financial intermediaries (FIs), IFC is deeply involved in various parts of the agriculture finance chains by providing customized short and medium-term working capital as well as long-term financing. Our investments include both credit line and risk participation, and in some cases, are complemented by advisory service. Some of our recently established agriculture finance programs include Global Trade Liquidity Program (GTLP) - Food and Agri and Global Warehouse Finance Program (GWFP). IFCs approach is innovative and aims to use banks and larger companies as intermediaries to reach small farmers and SMEs to achieve wider reach and greater development impact. The objective of IFCs Global Agri-Finance Advisory Program is to foster a measurable increase in the availability of agriculture finance in IFCs client portfolio globally, by promoting appropriate risk mitigation products and building necessary skills. The program crosscuts and integrates across IFCs investment, advisory, and regional units and it works in close collaboration with IFCs existing pipeline of strategic agribusiness initiatives, supporting the global food

security effort. The program supports IFC regional facilities and their client financial institutions with agri-finance tools and expertise, focusing on three main work areas: Building capacity of client financial institutions in agri-finance: conducting diagnostics, improving risk management systems and processes, designing new products Linking financial institutions to sustainable supply chains: promoting access to finance for stakeholders along sustainable supply chains; and Linking insurance to agri-finance: bringing insurance products to address production and revenue risks, working closely with IFCs Global Index Insurance Facilit

Case Study Indepth Study of Farmers Suicides, their Causes and Remedies
One of the most disquieting development in the era of the neo-liberal policy in India the private sector in the secondary and tertiary sectors, that is, industrial and ser has been widespread occurrence of farmer sucide in different parts of the country including not only the drought prone areas of Andhra Pradesh, Karnataka and Maharashtra but also a State of heavy rainfall like Kerala, as also a State like Punjab with large areas under irrigation. With the preoccupation of the Government with the rate of economic growth and promotion of One of the most disquieting development in the era of the neo-liberal policy in India the private sector in the secondary and tertiary sectors, that is, industrial and service sectors, the agriculture sector and the sector of rural development were neglected. The government did not wake up for many years to attend to this phenomenon. The Finanace Minister was disturbed by the fall in the stock exchange and elated when the stock exchange rose. The Reserve Bank, forgetting its responsibility for the agricultural and rural sector, started concentrating on what it considered to be its legitimate concern, namely, monetary policy and sound banking, mainly measured in terms of profit and loss. It is estimated that more than one-and-a-half lakh farmers committedsuicide. This is indeed a black mark on the economic performance of the government.

Even though the phenomenon of farmers suicides started assuming serious proportions, the then Chief Minister of Karnataka, S.M. Krishna, and the then Chief Minister of Andhra Pradesh, Chandrababu Naidu, looked upon themselves as the CEOs of their States and found a sense of achievement in making Bangalore the Silicon Valley of India and Hyderabad, a cyber city. While they thought that this was the touchstone of their achievement, the rural voters suffering from drought rejected them and both lost power. In Maharashtra, the government neglected the phenomenon which was most striking in the Vidarbha area, until the High Court got seized of it and asked the Tata Institute of Social Sciences to study the subject. The Government of Maharashtra then woke up and asked the Indira Gandhi Institute of Development and Research to make a survey and submit its findings. The Planning Commission also sent a team at the instance of the Prime Minister to study the causes of farmerssuicides and propose suitable measures and programmes. The State Government under pressure made some provisions and after the Prime Ministers visit, the Central Government provided a financial package. Both these failed to stem the tide of farmers suicides, suggesting that the package was not based on a correct understanding of the causes of farmers suicides. As the general elections are drawing near, the Finance Minister, in his Budget speech, made a dramatic announcement of the write-off of loans of small and marginal farmers and made a provision of Rs 60,000 crores, later increased to Rs 71,000 crores, to enable the banks to write off the loans. This still leaves out the farmers debts to the private moneylenders, which are a substantial part of indebtedness. In the era of neo-liberalisation, since 1991, the nationalised banks started reducing their commitment below the prescribed 18 per cent, while the cooperative banks turned sick and failed to provide adequate credit. This forced the farmers to turn from institutional credit to the moneylenders, despite the usurious interest rates charged by them. THE problem cannot be solved unless the causes of farmers suicides are properly pinpointed and comprehensive

policies and programmes are formulated. This is what the book under review endeavours to do. It concentrates its research on the districts in the Vidarbha area, whose epicentre is the Yavatmal district. The study, based on a wealth of statistics and casestudies, shows that farmers commit suicides because they are driven to do so by the desperate conditions in which they find themselves. These farmersbelong to different caste groups and not only small and marginal farmers but even those owning larger holdings, which in the context of dry agriculture are not enough to enable the farmers families to eke out livelihood. The suicide of the breadwinner, whether young or old, leave the families desolate and disrupt the social order. The causes are both economic and social. The economic causes are : (i) growing expenditure, specially on bought inputs (ii) low productivity (iii) inadequate prices of agriculture produce (iv) difficulties in marketing and marketing hazards (v) natural hazards caused by drought (vi) absence of proper crop planning (vii) unsatisfactory agriculture credit (viii) accumulated burden of debt Amongst the social causes are : (i) the drinking habit which atrophies the productivity of the farmer (ii) extravagant expenditure on marriages (iii) bad health and illness and inability to meet the necessary expenditure on medicine and health services The study rightly comes to the conclusion that unless all these causes are simultaneously dealt with the situation cannot improve. It requires large public investment in irrigation and rural infrastructure, rejuvenation of the cooperative credit, marketing and processing system, strengthening of the agriculturalextension services and sympathetic administration working closely with the farming community.

CONCLUSION Both the co-operative banks advance credit mostly to agriculture. First bank advances short-term and medium term loans while the second bank advances long-term loans. The Reserve Bank of India as the Central bank of the country took lead in making credit available to agriculture through these banks by laying down suitable policies. Numerous initiatives in microfinance aimed at helping rural populations, who have heretofore been excluded from access to financial services, have become a source of hope for agricultural financing in developing countries. But the reality remains that significant inequalities in financial service access are still prevalent, not only among different regions(1) but also in agriculture as distinct from other sectors. Establishing financial services in out-of-the-way areas with low population density and which lack basic infrastructure (roads, electricity, health centers, and the like) is truly a challenge. When in addition the target activity is agriculture, the challenges only increase due to the riskiness and low profitability associated with this sector. For these reasons, microfinance has not been able to respond to more than a small fraction of the needs of agriculture in developing countries for financial services.

Biblography
Indian Economy Banking Theory And Practice (Dr.P.K.Shrivastav)

Webilography
http://www.scribd.com http://www.agrifinfacility.org http://www.kesdee.com http://www.indiaagronet.com http://www.fondation-farm.org http://www.agrifinance.org