Agricultural Credit
- July 5, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Agricultural Credit
Subject: Economy
Section: Agriculture
Context:
Mandated to provide and regulate credit for agriculture, NABARD has deviated from its objectives by investing in private corporations. Therefore, it’s time to consider a separate ‘Rashtriya Kisan Bank’ that is completely dedicated to agriculture and rural development.
Issue?
- In the last 10 years, agriculture credit has increased by more than 350 per cent. However, the agriculture sector’s performance has not been commensurate with the subsidised credit that it has received.
- Misuse of agricultural credit-The subsidised credit has not reached even 20 percent of the 12.56 crore small and marginal farmers in the country.
- In some States, credit disbursal to the farm sector was higher than their agriculture gross domestic product (GDP), and the ratio of crop loans disbursed to input requirement was highly uneven.
- Diversion of credit for non-agriculture purposes.
Sources Agricultural Credit:
Sources of agricultural credit can be broadly classified into institutional and non-institutional sources.
- Non-Institutional sources include moneylenders, traders and commission agents, relatives and landlords, but
- Institutional sources include co-operatives, commercial banks including the SBI Group, RBI and NABARD.
- The major institutional credit agencies in India are Commercial Banks (CBs), Regional Rural Banks (RRBs) which are mainly sponsored by the Scheduled Commercial Banks and state governments. There are also the Cooperative Banks which are further divided into rural cooperatives and urban cooperatives.
- Scheduled Commercial Banks are the largest credit providers followed by Cooperatives and Regional Rural Banks. It is observed that after the nationalization of commercial banks of India in 1969, the commercial banks as a whole have consistently increased their share in institutional credit to the agriculture sector.
National Bank for Agriculture and Rural Development (NABARD)
- NABARD is a development bank focussing primarily on the rural sector of the country.
- It is the apex banking institution to provide finance for Agriculture and rural development. Its headquarter is located in Mumbai, the country’s financial capital.
- It is responsible for the development of the small industries, cottage industries, and any other such village or rural projects.
- It is a statutory body established in 1982 under the Parliamentary act-National Bank for Agriculture and Rural Development Act, 1981.
- Functions:
- NABARD’s initiatives are aimed at building an empowered and financially inclusive rural India through specific goal oriented departments which can be categorized broadly into three heads: Financial, Developmental and Supervision.
- It provides refinance support for building rural infrastructure.
- It prepares district level credit plans to guide and motivate the banking industry in achieving these targets.
- It supervises Cooperative Banks and Regional Rural Banks (RRBs) and helps them develop sound banking practices and integrate them to the CBS (Core Banking Solution) platform.
- It is involved in designing the Union government’s development schemes and their implementation.
- It provides training to handicraft artisans and helps them in developing a marketing platform for selling these articles.
- NABARD has various international partnerships including leading global organizations and World Bank-affiliated institutions that are breaking new ground in the fields of rural development as well as agriculture.
- Rural Infrastructure Development Fund (RIDF) is administered by NABARD.
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