Records & Finance:

• Farm record is a systematic record of farm activities, input use, and output.
• Farm inventory is a complete list of assets and liabilities.
• Balance sheet shows the financial position of a farm at a given time.
• Net worth = Total assets − Total liabilities.
• Depreciation is the reduction in the value of a fixed asset over time.
• Farm income = Gross income − Total cost.
• Gross income = Value of main product + Value of by-product.
• Net Farm Income (NFI) = Gross Income – Total Expenses.
• Family labour income = Net income − Hired labour cost.
• Farm business income = Gross income − (Operating cost + Depreciation + Interest on capital).
• Liquidity refers to the ability to convert assets into cash quickly.
• Solvency refers to the ability to meet long-term financial obligations.

Risk & Insurance:

• Risk refers to the variability of outcome that can be measured.
• Uncertainty refers to unpredictable events whose probability cannot be estimated.
• Types of risk include Production risk, Price risk, Financial risk, and Institutional risk.
• Diversification of crops reduces production risk.
• Crop insurance protects farmers against yield or price loss.
• The Crop insurance scheme was first introduced in 1972–73.
• Comprehensive Crop Insurance Scheme (CCIS) was launched in 1985.
• National Agricultural Insurance Scheme (NAIS) started in 1999–2000.
• Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched in 2016 and replaced NAIS.

Other Concepts:

• Enterprise combination means selecting enterprises that provide maximum profit.
• The farm size–productivity relationship in India is inverse, i.e., smaller farms are more productive per hectare.
• Farm mechanization increases productivity and reduces drudgery.
• Farm appraisal is the evaluation of farm performance over time.

Agricultural Finance & Credit

Concepts & Definitions:

• Agricultural finance deals with the procurement and utilization of funds in farming.
• The Father of Agricultural Finance is Tandon (1968).
• Credit means the ability to command capital or goods before actual payment, derived from the Latin word ‘Credo’, meaning ‘I believe’.
• The three R’s of credit are: Return, Repayment, and Risk.
• The five C’s of credit are: Character, Capacity, Capital, Collateral, and Condition.

Types & Sources of Credit:

• Types of credit: Short-term (up to 15 months), Medium-term (15 months to 5 years), Long-term (above 5 years).
• Productive credit is used to generate income, while consumptive credit is for personal needs.
• Sources are Institutional (banks, cooperatives) and Non-institutional (moneylenders, traders).
• Institutional finance share in total rural credit has increased significantly since 1951.

Institutional Framework:

• The first cooperative credit society in India was formed in Anantapur (1904) under the Cooperative Credit Societies Act, 1904.
• RBI (Reserve Bank of India) was established in 1935 and started providing credit to agriculture from 1954.
• State Bank of India (SBI) was established in 1955.
• Agricultural Refinance and Development Corporation (ARDC) was established in 1963 and merged into NABARD in 1982.
• NABARD was established on 12 July 1982 on the recommendations of the Sivaraman Committee (1979). Its headquarters are in Mumbai.
• The Lead Bank Scheme was introduced in 1969 to ensure coordinated credit delivery at the district level.
• Regional Rural Banks (RRBs) were established in 1975 under the RRB Act, 1976. The first RRB was Prathama Bank in Moradabad, U.P.
• Commercial banks were nationalized in 1969 (14 banks) and 1980 (6 more), leading to increased agricultural financing.
• Priority Sector Lending (PSL) mandates that 40% of total advances go to priority sectors, with 18% for agriculture.

Credit Instruments & Schemes:

• Kisan Credit Card (KCC) scheme was launched in 1998-99 on the recommendation of the R.V. Gupta Committee.
• The Self Help Group (SHG) – Bank Linkage Programme was started by NABARD in 1992.
• Microfinance provides small loans to low-income groups without collateral.
• The Interest Subvention Scheme (ISS) provides a 3% interest subvention for timely repayment of crop loans.
• The Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS) was launched in 2008.

Key Terms & Challenges:

• Rural Infrastructure Development Fund (RIDF) was set up in 1995–96 under NABARD.
• Credit–Deposit Ratio (CDR) measures the credit flow in a region.
• Overdues refer to loans not repaid by the due date.
• NPAs (Non-Performing Assets) are loans where repayment is overdue for more than 90 days.
• A Debt trap occurs when farmers borrow repeatedly to repay old loans.
• Financial inclusion ensures access to financial services for all (e.g., PM Jan Dhan Yojana).