rural-banking-150906131006-lva1-app6892 (1).pptx

introduction to rural banking

1. INDIAN INSTITUTE OF TECHNOLOGY ROORKEE Rural Banking (In India)

2. I n t r oduction Rural banking in India started since the establishment of banking sector in India. As the name suggests, includes banking organizations operating in rural or sub-urban background. 2

3. I n t r oduction 3 The area of operation is limited to few districts or a region of a state. Started with the main focus on Agricultural sector. Gradually raise its participation in trade, commerce, industry and other productive activities in the rural areas.

4. Current Status 4 Rural population of about 780 million with limited access to financial services. A high proportion of rural lending is from informal sources. About 500-600 million people in India still do not have bank accounts. Rural economy(Agriculture + on-agriculture) constitute about 50% of GDP. Current demand for credit in Rural India is around Rs.1,33,000 Crs. Commercial bank branches cover only 7% of rural sector and large market is still untapped.

5. A Peek Over Past 5 Informal lending : large set of lenders ranging from moneylenders, financiers, landlords, traders and shopkeepers, friends and relatives. High interest rates. Interest overpass the principal amount. Debt passes from one generation to another. Wrong calculation of interest amount. Exploitation of village poor by these above given means is excellently described in the famous novel “ Godaan ” by Munshi Premchand .

6. In 1975 GOI setup Narasimham Committee To learn various cultural issues which are hindering commercial banks to lend to farmers. On the basis of this committee’s recommendations, a Regional Rural Banks Ordinance was passed in September 1975, which was replaced by the Regional Rural Banks Act 1976. Regional n R d ural banks came into existence in 1975 on Gandhi Jayanti (2 Oct) with the formation of “Prathama Gramin Bank”. 6

7. Rural Banki n g Regional Rural Banks Cooperative Banks National Bank For Agricultural and Rural Development(NABARD) 7

8. Regional Rural Banks(RRB s ) 8 Established under the provisions of an Ordinance passed on 26 September 1975 and the RRB Act. 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors. These were set up on the recommendations of The Narasimham Working Group during the tenure of Indira Gandhi's government with a view to include rural areas into economic mainstream. These are the Banks which mainly operate over a small region sometimes limited to rural regions of few districts.

9. RRBs are mainly owned by central government, state governments and sponsor Banks. Share of Various Organizations Central Govenmetn State Government Sponser Banks 9

10. Initially the upper ceiling over interest rate charged but from august 1996 RRBs were given full freedom to their own rates of interest. The interest rates mainly revolves around 14-18% for advances. Due to their low their low capital to risk weighted Assets Ratio(CRAR) They subsequently gets helps from Governments and their sponsor banks to maintain a CRAR ratio of 7-9%. 10

11. Credit Flow Of RRBs al 11 ed Agricu Cr d Agricultural Credit Total Credit 2008-2009 43367.13 26439.17 61 13.77 12.4 2009-2010 56079.24 34639.94 62 31.02 29.31 2010-2011 71724.19 43965.45 61 26.92 27.90 2011-2012 82538.39 53058.14 64 20.68 15.08 2012-2013 102161.70 64902.91 57 22.32 23.77

12. 58286 64195 81620 94412 112828 2 05 2 06 2 09 Trends of Deposits of RRBS During 2005 to 2009 2 05 2 06 2007 2 07 2 08 2 08 2009 12

13. Organizational Structure Board of Directors Chairman & Managing Director General Manager Chief Manager/Regional Managers Senior Manager Manager Officer / Assistant Manager Office Assistant (Multipurpose) 13

14. Current Scenario Mostly running into losses. Currently, RRB's are going through a process of amalgamation and consolidation to prevent losses. At Present there are 56 RRBs in India. Some of the Most famous RRBs are:- Allahabad UP Gramin Bank Punjab Gramin Bank Dena Gujarat Gramin Bank Uttarakhand Gramin Bank Prathama Bank Etc. 14

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16. Cooperative Banks 16 Cooperative banking is retail and commercial banking organized on a cooperative basis. Co-operative Banks in India are registered under the Co- operative Societies Act. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. In urban areas, they mainly serve small industry and self- employed workers. “Anyonya sahkari mandali” established in 1889 in the province of Baroda, is the earliest known cooperative credit union in India.

17. These Institutions mainly accepts Deposits and Lend Money to the members only. Follows all Prudential Rules and Regulations. Provides Financial means to the People to prevent them from debt trap of money lenders. 17

18. Two of the major success of cooperatives are:- Gujarat Dairy Cooperatives(Amul). Maharashtra’s sugar co-operative. 18

19. Organizational Structure 19 Urban Cooperative Bank : monitored by RBI Rural Cooperative Bank : Short Term Cooperatives:- State Cooperative Banks District Central Cooperative Banks Primary Agricultural Credit Societies Long Term Cooperatives:- State Cooperative Agriculture and Rural Development Banks (SCARDS). Primary Cooperative Agriculture and Rural Development Banks (PCARDBS).

20. Facilities They Mainly finance rural activities such as:- Farming Cattle Milk Hatchery Personal Loans 20

21. Self Help Groups(SHGs) Local cooperative village groups mainly for woman's intended to provide economic support and to promote savings in rural areas. It can be registered or unregistered. Borrowings are made without without any collateral.

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23. National Bank for Agriculture and Rural 23 Development NABARD is an apex development bank in India. A committee setup by RBI under the chairmanship of Shri B.Sivaraman conceived and recommended the establishment of NABARD. It was established on 12 July 1982 by a special act by the parliament and its main focus was to uplift rural India by increasing the credit flow for elevation of agriculture & rural non farm sector. GOI holds 99% stake in this bank. st Started with capital of 100 crs and on 31 march 2014,it stood upto 4700 crs.

24. R oles Facilitates credit flow for promotion and development of agriculture, cottage and village industries. It regulates the cooperative banks and the RRB’s. NABARD refinances the financial institutions which finances the rural sector. Acts as Fatherly figure for other developmental activities going over in region. SHG Bank Linkage Programme. 24

25. Lending Facilities 25 Short Term Landings :- Refinance at concessional rate of interest to State Cooperative Banks (SCBs) and Regional Rural Banks (RRBs) by way of sanction of credit limits. Each withdrawal against the sanctioned credit limit is repayable within 12 months. Medium Term landings :- It provides medium-term loans to SCBs for periods of 3 to 5 years. Mainly for agricultural purposes. Long Term Agricultural Credits :- Long-term credit for agricul- ture is provided mainly through investment in the debentures of SLDBs.

26. Non-Agricultural Finance The NABARD provides short- term finance for: The production and marketing activities of selected cottage and small- scale industries (mostly handloom weavers’ co-operative societies) The purchase and distribution of fertilizers. 26

27. Kisan credit card A Kisan Credit Card is a credit card facility to provide affordable credit for farmers in India. It was started by the Government of India, Reserve Bank of India (RBI), and National Bank for Agriculture and Rural Development (NABARD) in 1998-99 to help farmers access timely and adequate credit . Various private banks can also offer such cards to farmers. 27

28. Number of KCCs 24.31 27.11 30.24 33.79 28 5 10 15 20 25 30 35 40 4 2 3 8 4 6 3 4 9 6 9 4 1 3 3 4 Series 1

29. Importance of Rural Banking Nearly about 70% Indians resides in Villages. Farmers are often need of banking facilities such as loans, insurances etc., if banking facilities lacks in rural areas farmers will have to suffer which makes economy to suffer. 29

30. To widen the economic base the time has come to deepen its root since no space is left over the surface to expand. In conditions of Droughts or some other calamities such services are life saving. 30

31. In Absence of such services Farming will be worse affected which in turn will be affecting you as the prices of vegetables and other agricultural products will rise. It also saves farmers from the hands of money lenders and zamindars, and prevents them from falling into the cycle of borrowing and repaying. 31

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33. Possible Suggestions Services such as Gold loans should also be introduced. The process of loans should be made simple considering the illiteracy of people of rural background. 33

34. “The importance of the rural banking in the economic development of a country cannot be overlooked. As Gandhiji said “real India lies in villages,” and village economy is the backbone of Indian economy. Without the development of the rural economy, the objectives of economic planning cannot be achieved” 34

35. Thank You