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Commercial Banks (CBs) and Regional Rural Bank (RRB)

Commercial Banks (CBs) and Regional Rural Bank (RRB)

  • Till 1961, the commercial banks provided less than 1% of total agricultural credit. However, after nationalization of banks in 1969, the total number of branches in rural areas and the credit disbursed by them increased consistently.
  • The CBs finance rural credit directly through poverty alleviation programmes like IRDP and through RRBs.
  • In 1975, five RRBs were set up to provide direct loans to small and marginal farmers, rural artisans and agricultural labourers.
  • The RRBs were co-sponsored by Central government (50%), state government (15%) and the sponsoring bank (35%).
  • The RRBs can fix rate of interest between 14% and 18% on advances. There are about 200 RRBs covering more than 400 districts.
  • In 2006-07, RRBs disbursed total credit of Rs. 20,435 which was 10% of the total agricultural credit.
  • Despite 69% contribution of Commercial Banks towards total rural credit, the rural credit accounts for only 15% of total bank credit. This fact is confirmed by an NSSO study, which shows that only 27% of cultivator households have any access to any institutional credit.
  • Only five states viz. Andhra Pradesh, Karnataka, Uttar Pradesh, Maharashtra and Tamil Nadu together account for 50% of outstanding rural credit as on 31st March, 2005.
  • The North-Eastern states accounted for only 3% of outstanding loans.   Commercial Banks (CBs) and Regional Rural Bank (RRB)

Recent developments on Agricultural Credit

    • Kisan Credit Card (KCC) scheme
    • KCC scheme was introduced in August 1998 to provide short and medium term loans to the farmers for their cultivation needs, including the purchase of all inputs.
    • The scheme includes reasonable component of consumption credit and investment credit within the overall credit limit sanctioned to the borrowers. The scheme has also been extended to the borrowers of the long-term cooperative credit structure to address all the loan requirements of the borrowers of State Cooperative Agriculture Rural Development Bank (SCARBDs) under KCC scheme.
    • The KCC scheme is being implemented by the commercial banks, RRBs and Co-operative banks, with their proportional contribution being about 39%, 13% and 48% respectively.
    • Holders of the KCC are also automatically covered under accident insurance cover against death or disability.
    • A revised KCC scheme was introduced in March 2012 in which the KCC passbook has been replaced by an ATM-cum-debit card to all eligible and willing farmers in a time-bound manner.

Agriculture Debt Waiver and Debt Relief Scheme 2008 –

    • In the Union Budget 2008-09, the Government announced a scheme of agricultural debit waiver and debt relief for farmers with the total value of overdue loans being waived estimated at Rs. 50,000 crore and one-time settlement (OTS) relief on the overdue loans at Rs. 10,000 crore for implementation by all Scheduled Commercial Banks (SCBs), RRBs and cooperatives.

ALSO READ : https://www.brainyias.com/banking-sector-reforms/

Indian Economy

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