Agricultural finance & credit institutions
Agricultural Finance
- Definition:
Agricultural finance deals with the provision, management, and use of capital in farming and allied activities.
→ It involves raising, using, and repaying funds in agriculture.
Types of Agricultural Credit
|
Type |
Duration |
Purpose |
Example |
|
Short-term Credit |
Up to 15 months |
Purchase of seeds, fertilizers, wages, etc. |
Crop loans |
|
Medium-term Credit |
15 months – 5 years |
Purchase of livestock, irrigation equipment, minor repairs |
Tractor parts, dairy animals |
|
Long-term Credit |
Above 5 years |
Land improvement, well construction, tractor purchase |
Farm machinery loan, land purchase |
Sources of Agricultural Credit
Institutional Sources
- Co-operative Credit Societies
- Commercial Banks
- Regional Rural Banks (RRBs)
- NABARD
- Government Schemes
Non-Institutional Sources
- Moneylenders
- Traders and Commission Agents
- Relatives and Friends
- Landlords
💡 Earlier, non-institutional sources dominated; now, institutional sources play a major role.
Classification of credit
|
Type |
Example |
|
Productive Credit |
For agricultural operations that generate income. |
|
Consumption Credit |
For domestic and family needs. |
|
Investment Credit |
For long-term assets (e.g., tractor, well, irrigation). |
|
Marketing Credit |
For storing produce until good prices are available. |
Co-operative credit system in india
Structure of Cooperative Credit
- Short-term Credit Structure:
- State Cooperative Bank (SCB) – Apex body at State level.
- District Central Cooperative Bank (DCCB) – Middle level.
- Primary Agricultural Credit Societies (PACS) – Village level (base unit).
- Long-term Credit Structure:
- State Cooperative Agriculture and Rural Development Bank (SCARDB) – State level.
- Primary Cooperative Agriculture and Rural Development Bank (PCARDB) – District/Taluk level.
Commercial banks
- Nationalized in 1969 (first 14 banks) and 1980 (6 more banks).
- Play a vital role in providing short-term and medium-term agricultural loans.
- Operate under the Priority Sector Lending (PSL) system.
- 18% of Net Bank Credit is to be given to Agriculture & Allied sectors (as per RBI norms).
Regional rural banks (rrbs)
- Established: 2 October 1975 (on recommendations of the Narasimham Committee).
- Objective: To provide credit to small and marginal farmers, artisans, and rural entrepreneurs.
- Shareholding pattern:
- Central Government – 50%
- State Government – 15%
- Sponsor Bank – 35%
NABARD – National Bank for Agriculture and Rural Development
- Established: 12 July 1982
- Headquarters: Mumbai
- Origin: On recommendation of Shivaraman Committee (1979).
- Merged Institutions:
- Agricultural Refinance and Development Corporation (ARDC)
- Agricultural Credit Department (ACD) of RBI
🔹 Functions of NABARD
- Refinance Function: Provides funds to banks and cooperatives for agricultural lending.
- Development Function: Promotes research, training, and rural infrastructure.
- Supervisory Function: Monitors and guides cooperative and rural banks.
- Promotional Role: Implements schemes like watershed development and rural innovation.
