This document discusses the need for and sources of credit in Indian agriculture. It notes that agricultural credit is a crucial input, and that the major historical source was private moneylenders who charged high interest rates. To address this, a multi-agency approach using cooperatives, commercial banks, and regional rural banks now provides cheaper and more adequate credit to farmers. It then outlines the various financial needs of Indian farmers and the roles of credit. Finally, it details the major institutional sources of agricultural credit in India, including cooperatives, commercial banks, land development banks, regional rural banks, government loan schemes, and NABARD.

1. NEED & source OF CREDIT IN INDIAN
AGRICULTURE

2. CREDIT NEEDS IN AGRICULTURE
Agricultural credit is one of the most crucial inputs in all
agricultural development programmes.
For a long time, the major source of agricultural credit was
private moneylenders. But this source of credit was
inadequate, highly expensive and exploitative.
 To curtail this, a multi-agency approach consisting of
cooperatives, commercial banks ands regional rural banks
credit has been adopted to provide cheaper, timely and
adequate credit to farmers.

3. The financial requirements of the Indian farmers are for,
1. Buying agricultural inputs like seeds, fertilizers, plant
protection chemicals, feed and fodder for cattle etc.
2. Supporting their families in those years when the crops have
not been good.
3. Buying additional land, to make improvements on the
existing land, to clear old debt and purchase costly
agricultural machinery.
4. Increasing the farm efficiency as against limiting resources i.e.
hiring of irrigation water lifting devices, labor and machinery.

4. Role of credit in Agriculture
• 1. The basic role of credit in Agriculture is to provide
capital to acquire any kind of productive assets, land
and/or machinery.
• 2. Credit provides the means for many farmers to
adjust their operations to keep up with the constant
changes and, by doing so, to improve their
operations.
• 3. This credit is borrowed either from Landlords or
from small rural banks or from cooperatives.

5. • The important factor of production, credit
must play a pivotal role in agriculture by
fostering an equitable distribution of the
increasing agricultural income.
• It must be used to create productive
employment for absorbing the growing
numbers of underemployed in the agricultural
sectors.

6. SOURCES OF CREDIT

7. Agricultural
Finance
Institutional
Source
Non –
Institutional
Source
Co-operative
Societies
Commercial
Banks
Land Development
Banks
RRB s
Government
NABARD
Money
Lenders
Land lords and
others
PACS
State Co-
operative Banks
Central Co-
operative
Banks

8. INSTITUTIONAL CREDIT AGENCIES
Cooperative Credit Societies:-
Primary Agricultural Credit Societies (PACs) :
 These are Organized at the Village Level.
 These Societies generally advance loans only for Productive
Purposes
 The Main Objective of a PACS is to raise capital for the purpose of
a giving loans.
 And the supporting the essential activities such as supply of
agricultural inputs at cheap price, improving on land owned by
members , encourage various income - augmenting such as
horticulture, animal husbandry, poultry etc..

9. Central Co-operative Bank :
 These Cooperative are organized at the district level.
 The PACS are affiliated to the District Central Co- operative
Banks (DCCBs).
 DCCBs coordinate the activities of district central Financing
agencies , organize credit for PACs and carry out banking
business.
State Co-operative Banks :
 The DCCBs are affiliated to state Co-operative Banks (SCBs),
Which Coordinate the activities of DCCBs.
 It organize provision of finance for credit worthy farmers, carry
out banking business and act as leader of the co-operatives in
the states.

10. Commercial Banks
 Commercial banks are providing both directly and indirectly.
 Direct finance is for agricultural operation for short and medium periods.
 Indirect finance refers to advance for distribution of fertilization and other
inputs.
Land Development Banks
 Land Development Banks were set up in order provide for long term finance.
 Previously they were called Land Mortgage Bank ; The objective of the bank
is to provide long term credit to cultivators against the mortgage of their
lands.
 These banks provide loans for :-
i ) Repayment of old loans to cultivators
ii) Purchase new land
iii) Digging, Constructions and repairing of the well

11. Regional Rural Banks
 The Regional Rural Banks were set up in 1975.
 The main objective of the RRBs is to provide credit and other
facilities particularly to the small and marginal farmers,
agricultural laborers, artisans and small entrepreneurs so as to
develop agriculture, trade commerce, industry and other
productive activities in the rural areas.
The Government Loan Schemes
 These are both short term as well as long term loan schemes.
 The loans are popularly known as “ Taccavi Loans” which are
generally advanced in times of natural Calamities.
 The rate of interest is low. But it is not major source of
agriculture finance.

12. NABARD-National Bank for Agricultural and Rural Development
 NABARD was set up as the government needed an apex
institution to extend support and give guidance to credit
institutions.
 NABARD was set up in July 1982 and it took over the functions
of ARDC and also the functions of the RBI in relations to co-
operative banks and RRBs.
 The Main objective of the NABARD is to look after agriculture
credit.
 It is also has to provide refinance facilities to all banks and
financial institutions landing to agricultural and rural
development.

13. Functions & operations:
It extends refinance to commercial banks for term
loans in relation to agriculture and rural development.
It offers advice and guidance to State Governments,
Cooperative federations and National Cooperative
Development Corporation (NCDC) and functions in
close contact with Central Government in matters
related to agriculture and rural development.
It provides finance for production and marketing
activities of rural artisans, cottage industries, small-
scale industries, handicrafts etc. in the rural areas.

14.  It helps in planning and operational matters related to credit for
agriculture and allied activities, rural artisans, village industries
and other rural development activities.
 It contributes to share capital and securities of eligible
institutions and State Governments concerned with agriculture
and rural development.
 It facilitates all eligible financial institutions for conversion of
production loans into term loans in the times of natural
calamities.
 It coordinates and monitors all agricultural and rural lending
activities with a view to tying-up with extension and planned
development activities in rural areas.
 It conducts training, consultancy and research relating to
agricultural finance and agricultural and rural development.

15. THANKS FOR VIEWING
Brought to you by:
KARTHIK CHITTIBOMMA
B.Sc(Ag) scholar
Central Agricultural University