Lecture 6 - Rural Credit & Agricultural Marketing | Indian Economy - In Depth Analysis - Economics PDF Download

 Page 1


Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
 
 
 
Lesson: Rural Credit & Agricultural Marketing 
Lesson Developer: Taruna Rajora 
College/Department: Research Scholar,CCS 
University 
Page 2


Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
 
 
 
Lesson: Rural Credit & Agricultural Marketing 
Lesson Developer: Taruna Rajora 
College/Department: Research Scholar,CCS 
University 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Table of contents 
1. Learning outcomes. 
2. Introduction. 
3. Types of loans. 
4. Non institutional finances. 
? Money lenders. 
? Friends and relatives. 
? Traders. 
5. Institutional finances 
? Cooperative society. 
? Cooperative banks. 
? Commercial banks. 
? Regional rural banks. 
? NABARD. 
? Micro finance. 
? Kisan credit cards. 
6. Major problems in rural credit. 
7. Improvements in rural credit. 
? Common service centers. 
? Role of technology and micro finance. 
? Financial inclusion. 
8. Steps taken by RBI to strengthen the banking infrastructure. 
9. Agricultural marketing. 
10. Defects and government initiatives to improve them. 
11. Cooperative marketing and its advantages. 
12. Types of cooperative marketing. 
13. National agricultural cooperative marketing federation of India ltd. 
14. Current position of NAFED in various fields (2012-2013). 
15. Flaws in agricultural marketing. 
16. References. 
 
 
 
Page 3


Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
 
 
 
Lesson: Rural Credit & Agricultural Marketing 
Lesson Developer: Taruna Rajora 
College/Department: Research Scholar,CCS 
University 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Table of contents 
1. Learning outcomes. 
2. Introduction. 
3. Types of loans. 
4. Non institutional finances. 
? Money lenders. 
? Friends and relatives. 
? Traders. 
5. Institutional finances 
? Cooperative society. 
? Cooperative banks. 
? Commercial banks. 
? Regional rural banks. 
? NABARD. 
? Micro finance. 
? Kisan credit cards. 
6. Major problems in rural credit. 
7. Improvements in rural credit. 
? Common service centers. 
? Role of technology and micro finance. 
? Financial inclusion. 
8. Steps taken by RBI to strengthen the banking infrastructure. 
9. Agricultural marketing. 
10. Defects and government initiatives to improve them. 
11. Cooperative marketing and its advantages. 
12. Types of cooperative marketing. 
13. National agricultural cooperative marketing federation of India ltd. 
14. Current position of NAFED in various fields (2012-2013). 
15. Flaws in agricultural marketing. 
16. References. 
 
 
 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Learning outcomes 
After reading this chapter you will be able to know about-: 
I. The types of loan. 
II. Different types of rural credit providers. 
III. Concept of micro finance. 
IV. Major problems in rural credit and various improvements in it. 
V. Financial inclusion and its role in improving rural credit in a country. 
VI.  Various steps taken by RBI to strength the banking infrastructure. 
VII. Agricultural marketing, its defects and governments role in improving these defects. 
VIII. Cooperative marketing. 
IX. National agricultural cooperative marketing federation of India ltd. 
 
Page 4


Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
 
 
 
Lesson: Rural Credit & Agricultural Marketing 
Lesson Developer: Taruna Rajora 
College/Department: Research Scholar,CCS 
University 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Table of contents 
1. Learning outcomes. 
2. Introduction. 
3. Types of loans. 
4. Non institutional finances. 
? Money lenders. 
? Friends and relatives. 
? Traders. 
5. Institutional finances 
? Cooperative society. 
? Cooperative banks. 
? Commercial banks. 
? Regional rural banks. 
? NABARD. 
? Micro finance. 
? Kisan credit cards. 
6. Major problems in rural credit. 
7. Improvements in rural credit. 
? Common service centers. 
? Role of technology and micro finance. 
? Financial inclusion. 
8. Steps taken by RBI to strengthen the banking infrastructure. 
9. Agricultural marketing. 
10. Defects and government initiatives to improve them. 
11. Cooperative marketing and its advantages. 
12. Types of cooperative marketing. 
13. National agricultural cooperative marketing federation of India ltd. 
14. Current position of NAFED in various fields (2012-2013). 
15. Flaws in agricultural marketing. 
16. References. 
 
 
 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Learning outcomes 
After reading this chapter you will be able to know about-: 
I. The types of loan. 
II. Different types of rural credit providers. 
III. Concept of micro finance. 
IV. Major problems in rural credit and various improvements in it. 
V. Financial inclusion and its role in improving rural credit in a country. 
VI.  Various steps taken by RBI to strength the banking infrastructure. 
VII. Agricultural marketing, its defects and governments role in improving these defects. 
VIII. Cooperative marketing. 
IX. National agricultural cooperative marketing federation of India ltd. 
 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Introduction 
India is a country where agriculture is dominated profession. It is an unorganized sector 
where success and failure depends largely on weather condition i.e. Monsoon. A farmer 
needs finance for various activities Professional and Personal for example purchasing seeds, 
fertilizers, digging a tube well and purchase or repair of tractor or marrying his daughter 
and for education of his son. For all these he needs money which if he cannot have from his 
sources he has to take loan. This money which he borrows comes from a system called 
Rural Credit. The money can be borrowed from Private sources such as money lenders, 
friends, relative, etc. These are all private or non-institutional sources of credit. Or, he can 
borrow from banks, cooperative societies or micro finance institutions. These are 
institutional sources. 
Types of Loan  
Loan can be classified into different categories on the basis of time and purpose of loan. 
Classification On the Basis of Time 
Short Term Loans:-In this form of loan time span is quite short generally, less than a year 
and can be repaid within the period of one year. For Example, purchase of seeds, fertilizers, 
payment of wages, fodder of livestock, pesticides etc. These loans are mainly taken from 
Money lenders and co-operative societies. 
Medium Term Loans:-These loans are taken for the duration more than one year but less 
than five years. These loans are generally required purchasing cattle, fencing of field, 
construction of new well. These loans are obtained from money lenders, friends, Banks, and 
cooperative societies. 
Long Term Loans:-These loans are taken for the period more than five years for 
purchasing new land, clearing old debts, buying big machinery such as harvesters. These 
Loans are obtained from rural banks or other commercial banks. 
 
Classification on the basis of purpose 
Productive Loan:-Productive loans are the loans that are needed and used for production 
purpose such as purchase of seeds, fertilizers, buying agriculture machinery. These loans 
used for increasing productivity to increase the output. These loans can be easily paid as 
they increase the income of the borrower. 
Un-Productive Loan:-These loans are taken for discharge of social obligations, religious 
activities and do not help in increase in production capacity or improving income. As they 
are used for consumption some time they are called consumption loans. They also don’t 
create any mean for the repayment. Thus such loans should be discouraged as they 
increase burden on farmer and does not add any value to the production capacity. 
Rural Credit Providers 
Credit in rural India is provided by two types of Sources Private or Non –Institutional 
Sources and Institutional Sources. 
1. Non Institutional Finances- The Non-Institutional Sources Includes following  
Page 5


Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
 
 
 
Lesson: Rural Credit & Agricultural Marketing 
Lesson Developer: Taruna Rajora 
College/Department: Research Scholar,CCS 
University 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Table of contents 
1. Learning outcomes. 
2. Introduction. 
3. Types of loans. 
4. Non institutional finances. 
? Money lenders. 
? Friends and relatives. 
? Traders. 
5. Institutional finances 
? Cooperative society. 
? Cooperative banks. 
? Commercial banks. 
? Regional rural banks. 
? NABARD. 
? Micro finance. 
? Kisan credit cards. 
6. Major problems in rural credit. 
7. Improvements in rural credit. 
? Common service centers. 
? Role of technology and micro finance. 
? Financial inclusion. 
8. Steps taken by RBI to strengthen the banking infrastructure. 
9. Agricultural marketing. 
10. Defects and government initiatives to improve them. 
11. Cooperative marketing and its advantages. 
12. Types of cooperative marketing. 
13. National agricultural cooperative marketing federation of India ltd. 
14. Current position of NAFED in various fields (2012-2013). 
15. Flaws in agricultural marketing. 
16. References. 
 
 
 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Learning outcomes 
After reading this chapter you will be able to know about-: 
I. The types of loan. 
II. Different types of rural credit providers. 
III. Concept of micro finance. 
IV. Major problems in rural credit and various improvements in it. 
V. Financial inclusion and its role in improving rural credit in a country. 
VI.  Various steps taken by RBI to strength the banking infrastructure. 
VII. Agricultural marketing, its defects and governments role in improving these defects. 
VIII. Cooperative marketing. 
IX. National agricultural cooperative marketing federation of India ltd. 
 
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
Introduction 
India is a country where agriculture is dominated profession. It is an unorganized sector 
where success and failure depends largely on weather condition i.e. Monsoon. A farmer 
needs finance for various activities Professional and Personal for example purchasing seeds, 
fertilizers, digging a tube well and purchase or repair of tractor or marrying his daughter 
and for education of his son. For all these he needs money which if he cannot have from his 
sources he has to take loan. This money which he borrows comes from a system called 
Rural Credit. The money can be borrowed from Private sources such as money lenders, 
friends, relative, etc. These are all private or non-institutional sources of credit. Or, he can 
borrow from banks, cooperative societies or micro finance institutions. These are 
institutional sources. 
Types of Loan  
Loan can be classified into different categories on the basis of time and purpose of loan. 
Classification On the Basis of Time 
Short Term Loans:-In this form of loan time span is quite short generally, less than a year 
and can be repaid within the period of one year. For Example, purchase of seeds, fertilizers, 
payment of wages, fodder of livestock, pesticides etc. These loans are mainly taken from 
Money lenders and co-operative societies. 
Medium Term Loans:-These loans are taken for the duration more than one year but less 
than five years. These loans are generally required purchasing cattle, fencing of field, 
construction of new well. These loans are obtained from money lenders, friends, Banks, and 
cooperative societies. 
Long Term Loans:-These loans are taken for the period more than five years for 
purchasing new land, clearing old debts, buying big machinery such as harvesters. These 
Loans are obtained from rural banks or other commercial banks. 
 
Classification on the basis of purpose 
Productive Loan:-Productive loans are the loans that are needed and used for production 
purpose such as purchase of seeds, fertilizers, buying agriculture machinery. These loans 
used for increasing productivity to increase the output. These loans can be easily paid as 
they increase the income of the borrower. 
Un-Productive Loan:-These loans are taken for discharge of social obligations, religious 
activities and do not help in increase in production capacity or improving income. As they 
are used for consumption some time they are called consumption loans. They also don’t 
create any mean for the repayment. Thus such loans should be discouraged as they 
increase burden on farmer and does not add any value to the production capacity. 
Rural Credit Providers 
Credit in rural India is provided by two types of Sources Private or Non –Institutional 
Sources and Institutional Sources. 
1. Non Institutional Finances- The Non-Institutional Sources Includes following  
Rural Credit & Agricultural Marketing 
Institute of Lifelong Learning, University of Delhi 
(i) Money Lenders:-The money lender is the traditional of rural credit, although 
importance of money lender is declined because of growth of institutional sources of finance 
such as bank, MFI, and co-operative societies but still in villages money lenders are main 
source of credit. Money Lenders are known in throughout the country by names such as 
bania, sahukar, mahajan etc. 
Importance of Money lenders 
 Even after growth and visibility of Institutional Finance at Villages still Money Lenders hold 
great Importance at villages and they are respected by Villagers because  
? They are easily accessible and can be approached any time for getting Loan. 
? For getting Loan Villagers don’t have to do lengthy paper work. 
? They provide loan for all purposes.  
Malpractices by Money lenders 
The Money Lenders sometimes do some dishonest and unprincipled activities because of 
which poor, illiterate villagers were driven to continued poverty. They charge very high 
interest rate which is almost impossible to pay. Some time they forged the signature of the 
villager and put loan against their name. 
(ii)Friends and Relatives:-The farmers also take loan from friends and relative for 
personal loan or for discharging the social responsibility. 
(iii)Traders:-Traders gives loan to farmers and they enter in agreement according to which 
farmers have to sale his produce to the traders much before it is ready. But this is having a 
problem of low pricing by traders as farmers are in need of Loans the traders charged low 
rate for the crops of farmers. 
 
2. Institutional Finances 
The institutional sources of agricultural credit in India are as follows -: 
a) Co-operative societies, 
b) Cooperative banks, 
c) Commercial banks, 
d) Regional rural banks (RRBs)  
e)   NABARD and, 
f)  Micro finance 
Cooperative Society:- A Cooperative society provides loan at villages for short and 
medium term .They provide loan at cheap rate and they are very popular among farmers 
and villagers. They play important role in rural credit structure. A cooperative society can 
be formed by group of ten or more members. At Village level Primary agricultural credit 
societies (PACS) works.  
Cooperative Banks:-They play very important role in rural credit structure because they 
are involved in refinancing of co-operative societies and they are also involved in loan to the