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Rural Credit- Institutional and Non-institutional sources of rural credit, Indian Economy, Sit On Exam


8 Major sources of the rural credit India


Non-institutional and institutional sources of Agricultural credit in India

Rural Credit in India


Agricultural credit in Indian is being advanced by different sources.  We can broadly classify the agricultural sources as the institutional and non-institutional. Now institutional and non-institutional agricultural sources can be classified as below:

NON-INSTITUTIONAL SOURCES

(a) Money Lenders: From the very beginning, money lenders have been advancing a major share of farm credit. The money lenders were supplying a major portion of the agricultural credit(69.7% in 1951-52) and indulge in mal-practice like manipulation of accounts and charged a huge rate of interest from their loan. Due to all these factors, the share of money lenders in the total farm credit has declined sharply from 69.7% in 1951-52to 7% in 1995-96.



(b) Traders and commission Agents: Traders and Commission Agents are also advancing loan to the Agriculturist for productive purposes before the maturity of crops at very low prices and charge heavy commission.





(c)  Relatives: Cultivators are also normally borrowing fund from their own relatives in times of their crisis both in terms of cash or kind.



(d) Land Lords: In India, small as well as marginal farmers and tenants are also taking the loan from the landlords for meeting their financial requirements. This source has been following all the ill practices followed by money lenders, traders etc. The share of this source to rural credit has increased from 3.3% in 1951-52 to 10% in 1995-96.





INSTITUTIONAL SOURCES



The main motive of Institutional credit is to assist the farmers in raising their agricultural productivity and maximizing their income. Institutional credit is also not exploitative in character. The following are some of the important institutional sources of agricultural credit in India.

(a) Co-operative credit societies: The cheapest and the best sources of rural credit in India is definitely the co-operative finance. In India, the active primary agricultural credit societies(PACS) cover nearly 86% of the Indian villages and account for nearly 36% of the total rural population of the country. The share of co-operatives in the total agricultural credit increased to nearly 40% in 1996 as compared with only 3% in 1951-52.



(b) Land Development Banks: Land Development banks are advancing long-term co-operative credit for 15-20 years to the farmers. Agricultural implements and for repaying whole debts. The no. of state land development banks (SLDB) increased from 5 in 1950-51 to 19 as of June 1986 which again consisted of 2447 primary land development bank (PLDB branches. The amount of loan sanctioned annually by these PLDB branches has increased from Rs. 3 crore in 1950-51 to Rs. 2039 crore in 1993-94.





(c)  Commercial Banks: In the initial period, the commercial banks of our country pledge a marginal role in advancing rural credit. But after the nationalization of commercial bank started to extend financial support with directly and indirectly and also for both short and medium periods. Till 1969 direct advances by the commercial banks were restricted to only Rs. 44 crore but as on March 2000, the amount of loan has increased to Rs. 22,854 crore.



(d) Regional Rural Bank: These were established in 1975 for supplementing the commercial banks and co-operatives in supplying rural credit. Since 1975 these regional rural banks are advancing direct loans to small and marginal farmers, agricultural labourers and rural artisans etc. for productive purposes. Till June 1996, in total 196 RRBs have been lending annually nearly Rs. 1500crore to the rural people and more than 90% of these loans were also advance to the weaker section.

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