“RURAL BANKING IN INDIA”

SUBMITTED BY

SANJAY SAMPAT AHIRE

REGD.NO.1308003386

In partial fulfillment of the requirement

For the award of the degree

Of MBA in Finance

SANJAY SAMPAT AHIRE

Regd.no : 1308003386

Study center: Ghatkopar

Center code: 03480

Place : Ulhasnagar

Date : 08.03.2015

STUDENT DECLARATION

It is hereby declare that the project report entitled “Rural

Banking in India” Submitted in partial fulfillment of the

requirement for the degree of master of business administration

to Sikkim Manipal University, is my original work and not

submitted for the award of any other degree, diploma,

fellowship or any other similar title or prizes.

(SANJAY SAMPAT AHIRE)DATE-08/03/2015REGD.NO -1308003386PLACE: - Ulhasnagar

BONAFIDE CERTIFICATE

Certified that this project report titled “Rural Banking in India,

Ulhasnagar is the bonafide work of “Sanjay Sampat Ahire” Reg. No

1308003386 who carried out the project work under my supervision.

SIGNATURE SIGNATURE(Faculty) (Incharge)

Certified that this project report titled “RURAL BANKING IN INDIA”

Submitted in partial fulfilment of the requirement for the

Degree of bachlore of science in information technology of

Sikkim manipal university of health , medical and Tecnological

science. Students name SANJAY SAMPAT AHIRE Has worked

under my supervision and guidance and thatNo part of this

report has been submitted for thhe award of any other degree,

diploma, felloship or other similar Titles or prizes and that work

has not been published in any journal or magazine.

REGD.NO 1308003386Students name Sanjay Sampat Ahire

Certified by : Mr. Sagar Asrani

PROJECT REPORT ON

“RURAL BANKING IN INDIA”

ACKNOWLEDGEMENT

It gives me immense pleasure to express my deep sense of gratitude and

sincere thanks to my guide. “Gratitude is one of the expressions difficult to express in

words”. Amongst the wide panorama of people who provided me inspiring, guidance

and encouragement, I wish to take this opportunity to express my heartfelt thanks to

all those people who gave me indebted assistance and constant encouragement to

complete my project.

I would like to thanks Prof. Anil Bhatia, who was a great guiding force during

the course of the entire project and gave me such needed inspiration and motivation

and provided me with required information and help to complete this project.

I would like to thanks Porf. Nitin Shejwal for giving her valuable time and

knowledge which is a value addition to our project.

I would also like to extend my thanks my friends in helping me collect

information, continuous support and encouragement. I am truly indebted to them and

thank them from the bottom of my heart.

DECLARATION

I Sanjay Sampat Ahire, Student of Sikkim Manipal University, studying in

M.B.A. Finance (Semester III) here by declare that I have completed this project

report on “RURAL BANKING IN INDIA” and has not been submitted to any other

University of Institute for the award of any degree, diploma etc. The information is

submitted to me is true and original to the best of my knowledge.

Date: (Name & Sign. of Student)

Place: Ulhasnagar

______________________

Sanjay Sampat Ahire

EXECUTIVE SUMMARY

Rural financial services were defined in comprehensive terms and should

include provision of Credit, saving mobilization, and a payments system for transfer

of funds to and away from the rural sector. In view of low incomes and high risks in

rural areas, effective provision of these services serves important goals of accelerated

growth, poverty alleviation and reduced exposure to vulnerability. The diversity

within the rural sectors requires a variety of diversified formal and informal

institutions for the provision of each component of rural financial services to its

clients.

The major finding of the project is that rural sector has suffered from policy

neglect, poor design and weak implementation of delivery system. The services

provided have been inadequate as well as inconvenient, inappropriate, unsafe,

unaffordable and causing a great deal of inconvenience. In relative terms, most

attention has been paid to provision of agricultural credit to and mobilization of

deposits from the wealthy people in rural areas. Provisions of insurance, credit for

non-farm purposes and for the landless and small farmers and the mobilization of

savings of the poor and poorest in rural areas have not received much attention from

the policy makers.

The fact that there is no permanent institutional mechanism, which can

analyze the situation in the area of rural finance and come out with policy proposals

to rectify the policy mistakes, though many financial institutions are trying to enter in

rural banking.

Last but not the least, there is a need to create synergies and linkages between

different organizations involved in providing rural financial services i.e. savings,

credit, insurance and transfer of funds. The innovative financial products, based on

best practices in national and for international experience and suited to different kind

of clients are helpful in improved delivery of services.

Table of contents

Sr.No. Name of the topic Page

Nos.

1 Rural & Agriculture Credit. 1

2 Role of Agriculture in Indian Economy.

3 Challenges for Rural & Agriculture Credit in Past Reforms Era.

4 Government Response to Rural Credit Scenario

5 Need For Regional Rural Banks

6 Introduction-Regional Rural Banks.

7 Roles & Limitations of Regional Rural Banks.

8 Regional Rural Banks & Economic Reforms.

9 Rural Banking Faces Twin Challenges.

10 More Recent Measures

11 Comparison of RRBs with State Cooperative Banks.

12 The Question of Ownership.

13 Regional Rural Banks Today.

14 NABARD.

15 Commercial Banks Contribution.

16 Key Performance Indicators- Regional Rural Banks.

17 Important Trends.

18 Muhammad Yunus & Grameen Bank.

19 Bibliography.

.

RURAL AND AGRICULTURE CREDIT

Credit is a key factor in agriculture development. Agriculture credit is

required for purchase of land, fertilizer, cattle’s new equipment etc. About 75% of the

Indian population lives in rural areas and about 80% of this population is dependent

on agriculture for its livelihoods. Agriculture accounts for about 37% of the national

income. The development of the rural areas and of agriculture and its allied activities

thus becomes vital for the rapid development of economy as a whole.

An equally important concern that needs attention is the flow of institutional

credit to agriculture. The growth of commercial banks’ lending to agriculture and

allied activities witnessed a substantial decline in the 1990s as compared with the

1980s.

ROLE OF AGRICULTURE IN INDIAN ECONOMY

1. EMPLOYMENT

Agriculture is the major source of employment to the people in rural areas. In

1951, 72% of India’s work force was engaged in agriculture. In 1999-00about

57% of the work force is engaged in agriculture. Besides providing direct

employment in agriculture, it also affects employment indirectly in other

sectors.

2. CONTRIBUTION IN THE NATIONAL INCOME

Agriculture contributes to the national income of the India to good extent in

1951 the share of agriculture in national income was over 56%. In 2002-2003

it was about 20%.

3. CAPITAL FORMATION

Capital formation depends upon savings and investment. People in rural areas

tend to save money, however, small amount it may be. The savings of rural

people who largely depend upon agriculture facilitates investment and hence

generates capital formation in the country.

4. FOREIGN EXCHANGE

Agriculture product like tea, tobacco, spices, etc. contribute a good share in

India’s exports in 1960-1961 the share of agriculture and allied product in the

total exports of India was about 44%. In 2002-2003 export earnings was about

13%.

5. GOVERNMENT REVENUE

Direct revenue by way of land revenue to the state governments. Indirect

revenue by way of taxes and duties on consumer goods, and also on

agricultural inputs used by farmers.

CHALLENGES FOR RURAL & AGRICULTURE

CREDIT IN THE PAST REFORMS ERA

TECHNICAL RELATED PROBLEM

PROBLEM OF TECHNOLOGY

Indian farmers especially the small and marginal farmers use outdated

technology. They do not use latest technology such as tractors, land tillers. This is

mainly due to problem of finance. Only the large farmers do get loans to purchase

tractors, land tillers, etc. as a result of this, the agriculture productivity of small

farmers does get affected.

POOR QUALITY OF SEEDS

Indian farmers especially the small and marginal farmers use poor quality of

seeds. They use farm seeds rather than laboratory developed seeds. The use of HYV

seeds is limited in India. As a result of this the agriculture productivity is low in

India.

PROBLEM OF FERTILIZERS

Indian agriculture is affected by the problem of fertilizers. There is inadequate

use of fertilizers and also poor quality of fertilizers. Even today some of the small and

marginal farmers use only natural fertilizers such as cow dung, and leaves as manure

or fertilizers they do not use good quality chemical fertilizers and in proper quantity,

which in turn affects agricultural production.

FINANCE RELATED PROBLEMS

AGRICULTURE INDEBTEDNESS

A good no. of Indian farmers, especially the small and marginal farmers are

subject to indebtedness. As a result the production and productivity of their land gets

affected as they continue to repay debts, and are not in position to undertake farm

development activity.

The small farmers continue to obtain loans from moneylenders at high interest

rates due to the difficulties in obtaining loans or credit from organized sector like

banks. Some of the farmers are also ignorant about bank facilities. It is said that

Indian farmers born in debt lives in debt and dies in debt.

PROBLEM OF MONEYLENDERS

The farmers depend upon the unorganized sector the money lenders for their

credit requirements. They borrow funds at high interest, ranging from 15% to 50%

per annum and even more. Again the moneylenders manipulate the loan records and

cheat the illiterate farmers.

PROBLEM OF INSTITUTIONAL CREDIT

Indian farmers find it difficult to obtain intuitional finance due to various

formalities in obtaining finance and also due to inadequacy of bank branches in rural

areas. Some of small farmers are not even aware of intuitional finance facilities.

However it is to be noted that over the years the share of intuitional finance in

agriculture credit has increased.

GOVERNMENT’S RESPONSE TO

THE RURAL CREDIT SCENARIO

In the early 1970s the Central Government observed that despite a wide

banking network and development initiatives in the first 25 years since Independence,

a critical gap still existed in meeting the credit needs of the rural poor. To find a

solution, the Government appointed a working group on rural credit, the Narasimhan

Committee, in July 1975. The committee observed that the cost structure of

commercial banks, the attitude of bank employees and the lack of a professional

approach in the co-operative credit system were the main stumbling blocks to rural

credit. The committee also observed that the deposits collected by banks from rural

areas were not totally deployed there. The panel, therefore, recommended the creation

of a new set of regionally-oriented rural banks which would combine a co-operative’s

local feel and a commercial bank’s business acumen.

NEED FOR REGIONAL RURAL BANKS

REGIONAL RURAL BANKS EMERGE

The Government accepted the recommendations of Narasimhan Committee

and, accordingly, the ordinance of Regional Rural Banks, 1975 was promulgated on

September 26, 1975. This was replaced by the Regional Rural Banks Act, 1976 on

February 9, 1976. The mandates of these rural financial institutions were to:

Take banking to the doorsteps of the rural masses, particularly in areas

without banking facilities.

Make available cheaper institutional credit to the weaker sections of society,

who were to be the only clients of these banks.

Mobilize rural savings and canalize them for supporting productive activities

in rural areas.

Generate employment opportunities in the rural areas.

Bring down the cost of providing credit in rural areas

The regional rural banks were to form with: Central Government (50 per

cent), State governments (15 per cent) and commercial banks (35 per cent) (as

per the recommendations of Narshiham committee). The number of RRBs rose from

just six in 1975 to 196 by 1987, covering 476 districts. They financed only the weaker

sections of the rural community – small and marginal farmers, agricultural labourers,

small traders, and so on. Along with commercial banks, RRBs participated

enthusiastically in poverty alleviation schemes (IRDP, for example) and

disadvantaged area (drought-prone regions and deserts) development programmes.

They quickly became an important and integral part of the rural credit system.

However, their financial viability was initially overstretched by policy rigidities

coupled with a low capital base in an environment of inadequate infrastructure and

deeper social and economic disparities.

After the financial sector reforms, several measures to improve the viability of

RRBs were initiated. More importantly, re-capitalization to cleanse their balance

sheets was taken up in 1993-94. Other important reforms are as follows:

Measures included deregulation of interest rates on advances as well as

deposits.

Permission to lend to others outside target groups.

Provision for rationalization of branch network- relocation and merger of loss-

making branches.

Introduction of prudential norms on income-recognition.

Asset classification and provisioning.

Preparation of development action plans and signing of memorandum of

understanding with sponsor bank for sustained viability in a planned manner.

Provision of greater role space and larger operational responsibilities to

sponsor banks in the management of RRBs

Encouragement to function as self-help promoting institutions and financing

of self-help groups and introduction of Kisan Credit Cards to simplify

provision of production credit to their clients.

REGIONAL RURAL BANKS

INTRODUCTION

Regional Rural Banks were established under the provisions of an ordinance

promulgated on 26th September 1975 and the RRB Act, 1976 with an objective to

ensure sufficient institution credit for agriculture and other rural sectors. The RRBs

mobilize financial resources from rural / semi-urban areas and grant loans and

advances mostly to small and marginal farmers, agricultural labourers and rural

artisans. The area of operation of RRBs is limited to the area as notified by

Government of India covering one or more districts in the state.

As stated earlier RRBs are jointly owned by Government of India, the

concerned State Government and sponsor Banks (27 scheduled commercial banks and

one State cooperative Bank); the issued capital of a RRB is shared by the owners in

the proportion of 50 %, 15% and 35% respectively.

The institution of Regional Rural Banks (RRBs) was created to meet the

excess demand for institutional credit in the rural areas, particularly among the

economically and socially marginalized sections. Although the cooperative banks and

the commercial banks had reasonable records in terms of geographical coverage and

disbursement of credit, in terms of population groups the cooperative banks were

dominated by the rural rich, while the commercial banks had a clear urban bias. In

order to provide access to low-cost banking facilities to the poor, the Narasimham

Working Group (1975) proposed the establishment of a new set of banks, as

institutions which “combine the local feel and the familiarity with rural problems

which the cooperative possess and the degree of business organization, ability to

mobilize deposits, access to central money markets and modernized outlook which

the commercial banks have”. The multi-agency approach to rural credit was also to

sub serve the needs of the input-intensive agriculture strategy (Green Revolution)

which had initially focused on ‘betting on the strong’ but by the mid-seventies was

ready to spread more widely through the Indian countryside.

In addition the potential and the need for diversification of economic activities

in the rural areas had begun to be recognized, and this was sector where the RRBs

could play meaningful role. The RRBs Act, 1976 succinctly sums up this overall

vision to sub-serve both the developmental and the redistributive objectives:-

The RRBs were established” with a view to developing the rural economy by

providing, for the purpose of development of agriculture, trade, commerce, industry

and other productive activities in the rural areas, credit and other facilities,

particularly to small and marginal farmers, agricultural laborers, artisans and small

entrepreneurs, and for matters connected therewith and incidental thereto”

Table-1 Expansion of Regional Banking:-1975-1990

Dec.1975 Dec.1980 Dec.1985 Mar.1990

Banks 6 85 188 196

Branches 17 3279 12606 14443

The following one-and-a-half decades saw large-scale efforts to increase the

number of banks, bank branches, and disbursements nationwide. By 1991, there were

196 RRBs with over 14,000 predominantly rural branches in 476 districts with an

average coverage of three villages per branch. These banks had disbursed over Rs.3,

500 crore in credit and mobilized over Rs.4, 100 crore in deposits. Perhaps the most

significant achievement of the RRBs during this period was in enabling the weaker

sections of the rural community access to institutional credit. The bulk of the

loans from RRBs were to the priority sectors, which accounted for over 70 per cent of

the total. Agriculture and allied activities took up more than 50 percent of the total

advances.

The year 1990 marks the end of the expansion phase of regional banking,

beyond which there has been no growth in the number of Regional Rural Banks

(including branches).

In addition, the RRBs were instrumental in extending credit for poverty

alleviation schemes (e.g. IRDP) and disadvantaged area (drought-prone regions and

deserts) development programmes.

The expansionary phase of the late seventies and the eighties while more

focused on outreach was not devoid of blueprint for viability of the RRBs, unlike

what the mainstream academia and press claim to be the case. It was understood that

the RRBs to survive as credit institutions could not remain unviable for long time,

though the RRBs might not become viable in the initial years. This expectation was,

however, tempered by the prevalent situation on the field and the ultimate objectives

for which these specialized institutions were created. It was realized early that

question of viability of the RRBs could not be the same as other business ventures. A

business unit has all the freedom to take decisions on many matters such as opening

branches, deploying its resources, staff recruitment, its purchases, methods

rendering services etc. But the RRBs could not be flexible in many of their affairs;

even their clientele was specific, scattered, remote and not assisted by anyone.

Keeping in view the objectives, structure and the nature of operations of the RRBs,

these institutions could certainly not be evaluated on the basis of mere financial

viability. There was a general agreement that the viability of the RRBs had to be

assessed in terms of composite criteria including increase in business per branch,

recovery rate, productivity of staff, cost effectiveness of operations, closer

monitoring, socioeconomic upliftment and improvements in the standards of living of

the clientele. Again in respect to the viability question, there was considerable

flexibility accorded to banks on the time dimension. It was estimated that the RRBs

would need about seven years to become viable, though for the RRBs with large

number of infant branches even this period might not be adequate. Between 1980 and

1987, while the number of RRBs increased a little more than two-fold the number of

branches of RRBs increased more than four-fold. It was not totally unexpected

therefore that by the end of the 1980s several of these banks were showing losses on

their books.

Table 2:- Purpose wise Advances of RRBs, Outstanding (end of Sept, 1990)

Rs. Crores

1 Short Term (crop loan) 615

2 Term Loan and Agriculture Activities 669

3 Allied Activities 555

4 Rural Artisans, Village & Cottage Industries 277

5 Retail Trade and Self-employed etc. 1052

6 Consumption Loan 54

7 Other Purpose 290

8 Indirect Advances 43

Total 3555

ROLES & LIMITATIONS OF

REGIONAL RURAL BANKS

ROLES OF REGIONAL RURAL BANKS

PROVISION OF CREDIT

The main function of RRBs is to provide short term and long-term finance to

farmers. The finance is provided for the following purposes:

Short term finance to meet working capital needs such as payment of wages,

purchase of seeds and fertilizers, transportation expenses, etc.

Medium term finance to meet medium term needs such as purchase of cattle,

digging of wells etc.

Long term finance to meet fixed capital needs such as purchase of land,

purchase of tractors, etc.

They provide finance at low interest rates. This has resulted in less

dependence on money lenders in respect of agricultural credit.

RESEARCH AND DEVELOPMENTS

The RRBs finances research and development in the field of agriculture. Such

R & D activities help to develop new and better inputs, techniques and technology, as

a result, better quality of seeds, fertilizers and farm equipment is developed. This

helped to improve the production and productivity of agricultural crops.

COMMUNITY DEVELOPMENTS

RRBs have helped in improving the life in rural areas. They provide social

education to farmers and others in villages so that they give up their bad habits like

gambling, drinking liquor etc.

Through workshops and documentaries the RRBs have made attempts to

make rural masses about social evils like child marriages, reckless spending during

festivals, marriages etc.

MARKETING SERVICES

The RRBs assists the farmers in their marketing activities. They provide

advice to the farmers in respect of proce, packing, transportation; etc. the marketing

advice helps the farmers to take proper marketing decisions. This in turn helps the

farmers to get better prices for their products.

SUPPLY OF FUNDS

The RRBs not only provide funds, but they also make efforts to supply good

quality inputs like seeds ,fertilizers, pesticides, etc. this helps to improve the

productivity of land. The inputs are provided at good rates as part of the discount on

bulk purchases is passed on to the farmers.

LIMITATIONS OF REGIONAL RURAL BANKS

The institutional agriculture credit in India is faced with many problems. The

Indian continues to depend on the money lenders for his financial requirements in

spite of the institutional framework.

The various problems are:

INADEQUATE FINANCE

A basic feature of the credit problem is its overall inadequacy; particularly of

the institutional credit. The credit provided by the cooperative banks and commercial

banks is not sufficient to meet the requirements of the farmers. The banks mostly

provide short term credit and not the long term credit. There is a need of more long

term finance from land development banks.

Not only the right quantity of long term institutional finance is available, but

also it is not available at the right time. Hence the farmers depend upon moneylenders

for their requirements.

PROBLEM OF SECURITY

Normally the banks insist on security to sanction loans to the farmers. The

security may be in form of land or other assets. The small and marginal farmers find

it difficult to obtain funds as they have limited amount of land to offer as security.

PROBLEM OF MAINTAINING BRANCHES

The commercial banks as well as the cooperative banks find it difficult to

maintain branches in rural areas. This is due to low banking business and high

overheads in form of staff salaries, offices rent, and other overheads. Hence the banks

do not give much importance to set up branches in certain rural areas. The

commercial banks also have face problems in sanctioning and monitoring of a large

no. of small advances in their rural branches, as it is time consuming and

unprofitable.

LACK OF TRAINED MANPOWER

The banks often face problem of untrained manpower in rural areas. The staff

and the officers often lack knowledge of the financial requirements of the farmers and

again they may have a negative attitude towards the farmers. In order to achieve

about the financial requirements of the farmers.

PROBLEM OF RECOVERY

There is the problem of recovery of credit provided to the farmers both the

rich farmers as well as the poor ones. The large and rich farmers deliberately avoid

repaying loans and the small farmers find it difficult to repay their loans. Also quite

often, there is political pressure on the banks to write off the loans. This result in

demotivation to the banks to provide credit in rural areas.

CORRUPT OFFICIALS

The officials of banks adopt corrupt practices. They often provide finance to

their friends and relatives. Small and marginal farmers face great difficulty in

obtaining finance. Hence they have to depend upon the money lenders for their

financial requirements. Not only the officials favour their friends and relatives to

obtain loans. But they are also corrupt in sanctioning loans. They do ask for the bribes

and adopt other corrupt practices at the time of sanctioning, and disbursement of

loans.

REGIONAL RURAL BANKS

AND ECONOMIC REFORMS

In the year 1989 for the first time, the conceptualization of the entire structure

of Regional Rural Banks was challenged by the Agricultural Credit Review

Committee (Khusro Committee), which argued that these banks have no justifiable

cause for continuance and recommended their mergers with sponsor banks. At the

time such a policy move was politically unthinkable, so the Reserve Bank and the

Government of India quite prudently pushed the khusro committee report under the

carpet without a public debate. With the onset of the neo-liberal economic reforms

and the liberalization of the financial system, the RRBs came under the scanner ones

again, but this time in a policy regime that was too willing to let the market principles

rule.

The committee on financial Systems, 1991(Narasimham committee) stressed

the poor financial health of the RRBs to the exclusion of every other performance

indicator.172 of the 196 RRBs were recorded unprofitable with an aggregate loan

recovery performance of 40.8 percent. (June 1993) The low equity base of these

banks (paid up capital of Rs.25 lakhs) didn’t cover for the loan losses of most RRBs.

In the case of a few RRBs, there had also been an erosion of public deposits, besides

capital. In order to impart viability to the operations of RRBs, the Narasimham

Committee suggested that the RRBs should be permitted to engage in all types of

banking business and should not be forced to restrict their operations to the target

group’s proposal which was readily accepted.

This recommendation marked a major turning point in the functioning of

RRBs as we shall see below. For the time being though, the suggestion of mergers of

the RRBs with their sponsor bank, which the Committee on Financial Systems had

put forth in a slightly modified form-‘sponsor banks might decide whether to retain

the identities of sponsored RRBs or to merge them with rural subsidiaries of

commercial banks to be set up on the recommendation of the committee’- was put on

hold.

In the ensuing years, reforms of the RRBs largely followed the same format as

that of the commercial banks, irrespective of the fact that their very role in the society

required a special status and a different set of policies. Since the early 1990s, there

was a complete freeze on recruitment of new staff in the RRBs. As a part of

comprehensive restructuring programme, recapitalization of the RRBs was initiated in

the year 1994-45, a process which continued till 1999-2000 and covered 187 RRBs

with aggregate financial support of Rs.2188.44 crore from stakeholders.

Simultaneously, prudential norms on income-recognition, asset classification

and provisioning for loan-losses following customary banking benchmarks were

introduced. From 1996/1997, there has been a tendency to allow greater role and

larger operational responsibilities to sponsor banks in the management of RRBs. The

rest of the section discusses a few of the major policy changes and their observed

outcomes.

PROVISION FOR RATIONALIZATION OF BRANCH NETWORK

INCLUDING RELOCATION AND MERGER OF LOSS-MAKING

BRANCHES

One of the regulations that the RRBs faced was regarding the limited area of

operations and their narrow client base. In 1993, RBI gave permission to

RRBs to relocate branches that were consistently making losses for more than

three years. This policy provided an opportunity to the RRBs shift branch

premises to more commercially promising areas from localities where they

had incurred sustained losses. As Table 3 indicates, between 1996 and 2003,

about 459 offices of RRBs were closed and relocated to semi-urban and urban

centers so that the overall number of branches of RRBs would remain

constant.

In addition, there were relocations within the rural areas from remote

locations to commercial places (not captured by the data). The transfer of

banking business to semi-urban and urban centers was even more drastic with

a 6 percent decline in share of rural areas in credit amount outstanding, over

the seven years, as the banks adjusted their clientele.

Table 3:- Relocation OF RRBs Business from Rural to Semi-Urban & Urban

Areas

Distribution of Credit Outstanding

Number of offices (%)

1996 2003 1996 2003

Rural 12448 11989 77.45 71.51

Semi-Urban 1844 2183 17.72 21.76

Urban 373 477 4.78 6.50

Metropolitan 7 22 0.06 0.24

All-India 14672 14671 100.00 100.00

Sources: RBI, Basic Statistical Returns, March 1996 and March 2003.

PERMISSION TO LEND TO OTHERS OUTSIDE TARGET GROUPS

AND DEREGULATION OF INTEREST RATES

Before the initiation of banking reforms, lending from the RRBs was largely

restricted to the priority sector. From September1992 onwards, the RRBs

were allowed to finance non-target groups to the extent not exceeding 40

percent of their incremental lending. This limit was subsequently enhanced to

60 percent in 1994.As a result; the RRBs diversified into a range of non-

priority sector (NPS) advances, including jewel and deposit-linked loans,

consumer loans and home loans. The RRBs adopted new innovations for

credit delivery with lower risk of default such as self-help Group linked

lending, non priority sector collateralized lending, Kisan Credit Card scheme

for landed agriculturists, etc. As a proportion of total advances, priority sector

lending dipped from around 70 percent in 1990 to 57 percent in 2001.Even

among the categories that were eligible as priority sector, the attempt was to

minimize credit risk and make easy loans. Between 1995 and 2003, while

short term agriculture credit under the priority sector increased at about 29

percent per annum, term loans declined by 2.6 percent a year.

Sinha et al (2003) in a field study of 5 RRBs find that non-priority sector

advances increased sharply in the second-half of the 1990s for all the sample

banks. Of these, 4 banks have a significant 25 percent of their portfolio

invested in non-priority sector loans. The interviewed RRB managers agree

that this was a deliberate strategy to improve viability. Non-priority sector

advances are mostly collateralized and therefore carry low risk; they are

generally market –based and of a higher value extended to higher-income

clients or to low income clients through deposit and jewelry linked loans; and

banks have freedom to charge cost-covering interest rates on non-priority

sector advances. The bank managers candidly accept that the RRBs have been

able to raise their profitability by refusing to serve low-income clients!

RISING INVESTMENTS IN BANKS’ PORTFOLIOS

The RRBs in following the trend set by the commercial banks increased the

share of investment assets in the portfolio. Not only did the share of

investments in government securities increase beyond the SLR norms,

simultaneously there was diversion of an increasing share of the investment

portfolio into other approved securities such as PSU bonds and debentures.

The importance of investments in the portfolio of the RRBs can be gauged

from the fact that the interest on investments was about 52 percent of the total

income in 2003 while interest on advances was 37 percent of the income.

Mujumdar (2001) attacks this reverse flow of funds from the rural to the urban

areas as the most retrogressive policy initiated by the RBI. Priority sectors –

including agriculture, small industry, retail trade, the whole range of non-

farm activities in the rural sector – have no access to the capital market and

hence the emphasis should be to promote flow of resources from the urban to

the rural areas. However, an indulgent RBI has yielded to the biased

perspective that there aren’t enough avenues to invest bank resources in the

rural sector.

RURAL BANKING FACES TWIN CHALLENGES

Banking in rural India is faced with the twin challenges of regulation and

distribution. Regulation with respect to banking has been designed for delivery in

urban India and distribution required more manpower to be deployed in rural areas.

Initiatives like cheque transaction – where the electronic image and not the actual

cheque is sent – have in mind the urban customer, about 500-600 million people in

India still do not have bank accounts. For the rural segment, one needs to design no-

frills products and deliver hard core value. The other handicap was that while Rs 1-

crore business in microfinance required 30 people in terms of manpower, the same

volume of business in other portfolios required only one person. Also, contract

farming and supply chain integration has not gone the way they should have. Power,

telecommunications, banking and transportation had reduced the urban-rural divide.

Besides traditional banking services, people in the rural and semi-urban areas are

expressing interest in liability and investment products. Rural India is fast

transforming a nation of savers into a nation investor.

MORE RECENT MEASURES

It is only in the past few years that the unwanted effects of reform measures

on rural banking have begun to be recognized in certain official quarters. That the

improved performances of the RRBs – 163 out of 196 RRBs were earning profits in

2003-2004 was largely a result of the banks abrogating their credit intermediation

role rather than a sign of their genuine health and vibrancy is pitifully obvious.

Moreover, the agrarian distress and stagnation of the rural economy has become too

stark and imminent and, of course, the political ramifications of the crisis can no

longer be ignored.

Among the various official committees that were set up review the situation

and make policy recommendations on the future course of development of the RRBs,

the Parliamentary Estimates Committee (2002-03) had come up with a number of

useful suggestions to tackle the shrinking credit delivery to the priority sector and the

rural areas:

Among RRBs which are making absolute profit, the credit-deposit ratio

should not be lower than 75% and for those which are making profits but still

have accumulated losses, an increasing trend of the ratio should be ensured

and their investment portfolio should get reduced accordingly.

The priority sector lending by RRBs has been declining and as per latest

figures, priority sector lending to agriculture and other allied activities comes

to about 57 % of the total lending……..There could be no rationale for fixing

the same norms for lending to priority/agricultural sector by the RRBs as in

the case of commercial banks. The RBI should apply proper checks to ensure

that the present level of 57% of lending by the RRBs to the priority sector is

not allowed to decline further. And it should look into the …….desirability of

enhancing the percentage of lending to the priority sector.

The committee is constrained to note that the percentage of loans to small and

marginal farmers out of total loans disbursed by the RRBs has been declining

steadily. The RRBs do not maintain separate details of number of accounts of

small and marginal farmers. In the absence of such information it is difficult

to understand as to how RRBs ensure credit disbursement to small/marginal

farmers and other weaker sections of society as per the guidelines issued by

the Government/the RBI. The committee recommended that the RRBs should

take steps for compiling and maintaining data regarding credit facility

extended to small and marginal farmers and other weaker sections of the

society to monitor that credit facilities being provided by the RRBs reach the

targeted beneficiaries.

A number of RRBs were charging compound interest on agriculture loans.

Even on the subsidy part, certain RRBs were charging compound interest,

which was in utter violation of the guidelines issued by the RBI. The

committee is of the view that this trespass should be dealt with severely……

More distressing is the fact that even though in the case of a number of banks

this irregularity was pointed out in the Inspection Reports by NABARD,

neither had the RRBs taken any corrective measures in this regard nor was

any serious note of it taken by the sponsor banks……It appears the RBI,

NABARD and the sponsor banks seem content with issuing of circulars and

conducting mandatory inspections without ensuring compliance of the

guidelines issued by them and rectification of irregulations noticed during

inspections.

On the issue of NPAs of the RRBs, the committee expressed its dissatisfaction

at the current levels. While the official statistics highlights the decline in NPAs from

34 percent in March 1996 to 3.99 percent in March 2006.Very few of the above

recommendations were, in fact, accepted by the RBI/Government of India. From the

year 2003-04, the RBI revised upwards the lending target for priority sector to 60

percent of the total advances for the RRBs. Ambitious overall credit targets were laid

down for the RRBs by the Union Government.

The farm credit target for the RRBs at Rs 11,900 crore for the fiscal year

2005-2006 is 40 percent higher than Rs 8,500 crore target set during the fiscal year

2004-2005. But little else happened. In reviewing the action taken by the RBI/GOI on

the proposals of the Estimates Committee (2002-2003), the committee in 2004-2005

finds that ’no specific action has been taken’ on most of the major recommendations.

NO FURTHER MERGER OF RRBS

There is a need for policy refinement regarding further merger of RRBs. The

Vyas Committee had recommended merger of all RRBs in the same State.

Currently, RRBs of the same sponsor bank are merged at State-level. By April

2007, the number of RRBs was reduced to 96. If sponsor banks are to have the

requisite initiative to support their RRBs fully, they would need assurance that

there will be no further mergers. The Committee is of the view that further

merger of all RRBs at State-level is not required. It may also not be desirable

if there has to be a firm reinforcement of the rural orientation of these

institutions with a specific mandate on financial inclusion. The Committee,

therefore, recommends that the process of merger should no proceed beyond

the level of sponsor bank in each State.

RECAPITALIZATION OF RRBS WITH NEGATIVE NET WORTH

Recapitalization of RRBs with negative net worth has to be given a serious

consideration as it would facilitate their growth, provide lenders a level of

comfort and enable their achieving standard capital adequacy ratios. As on

March 2004, 98 RRBs were in need of Rs 3,050 crore for making the net

worth positive. The position, as on 31March 2006, is that 40 RRBs would

require Rs. 1,718 crore.

WIDENING NETWORK AND EXPANDING COVERAGE

As on 01 April 2007, RRBs were covering 535 districts. They may be directed

to cover all unbanked areas in these districts, taking the village as a unit, either

by opening a branch (wherever feasible) or through the BF/BC model in a

time bound manner. As on 01 April 2007, 87 districts in the country were not

covered by RRBs and their area of operation may be extended to cover these

districts.

COMPUTERIZATION

With a view to facilitate the seamless integration of RRBs with the main

payment system, there is a need to provide computerization support to them.

Banks will be eligible for support from the Financial Inclusion Funds on a

matching contribution of 50% in regard to districts other than tribal districts

and 75% in case of branches located in tribal districts under the Tribal Sub

plan.

STRENGTHENING BOARDS OF MANAGEMENT

Further ,now that RRBs are being merged and are becoming large size

entities, it is necessary that their Boards of Management are strengthened and

powers delegated to them on policy and business operations ,viz. introduction

of new liability and credit products, investment decisions, improving market

orientation in raising and deployment of resources, non-fund based business,

career progression, transfer policy etc.

TAX INCENTIVES

From 2006-07, RRBs are liable to pay income tax. To further strengthen the

RRBs, profits transferred to reserves could be exempted from tax till they

achieve standard capital adequacy ratios. Alternatively, RRBs may be allowed

tax concessions to the extent of 40% of their profits, as per provisions under

sec.36 (1) (viii) of the Income Tax Act.

Implementation of RBI initiatives for financial inclusion:-

All recent circulars relating to financial inclusion, viz., no frills accounts,

GCC, One Time Settlement (OTS) for loans up to Rs 25, 000, use of

intermediaries, etc., should be implemented by RRBs.

NRFIP FOR RRBS

The strategy recommended earlier for NRFIP for commercial banks would be

equally applicable for RRBs. The process of undertaking a survey,

identification of excluded households, dissemination of the information,

settings of bank-wise/ branch-wise targets etc., could be followed. RRBs will

have certain handicaps in executing the plan. They would require

promotional, funding and technology support in different areas as outlined

below. RRBs may Endeavour to cover to a large part of their incremental

lending thru’ the group mode (SHGs/JLGs) as it will enhance their outreach to

the financially excluded. Lending thru’ group mode would also keep NPAs at

low level.

STRATEGIC MICROFINANCE PLAN WITH NABARD SUPPORT

RRBs have potential and capability to emerge as niche operators in

microfinance. They are playing major role in SHG-Bank Linkage

Programmed especially also as SHPIs. It is significant that as an institution

they have the expertise and potential to fulfill both the requirements of SHGs

– formation plus nurturing and financial service provisions (credit plus).Their

dual role has special meaning in areas which face severe financial exclusion

and which do not have a sufficient presence of well performing NGOs.

However, to upscale the programmed to a level where it can really make a

visible impact, RRBs need handholding particularly in the areas of training,

promotion and development, NABARD may provide required assistance.

NABARD should prepare a strategic action plan RRB-wise, for promotion

and credit linkage of SGHs. RRBs may be asked to form, nurture and credit

link at least 3,000 SHGs in all districts covered by them in North-Eastern,

Eastern and central Regions. A Memorandum of Understanding (MoU) may

be signed by RRBs with NABARD for a period of 5 years – with NABARD

providing the promotional and development assistance out of the “Financial

Inclusion Promotion and Development Fund” and RRBs forming, nurturing

and providing financial services to SHGs. RRBs may accomplish the task

with the support of individual rural volunteers, BFs, their staff members, etc.

NABARD may closely monitor the programme-with focus on qualitative

aspects.

SEPARATE CREDIT PLAN FOR EXCLUDED REGIONS

The Committee recommends that RRBs operating in predominantly tribal

areas and having high levels of exclusion may prepare annual credit plans

having a separate component for excluded groups, which would integrate

credit provision with promotional assistance such as agriculture services and

BDSs for the farm and nonfarm sectors respectively including

entrepreneurship development and formation and strengthening of producer’s

organizations like dairy cooperatives. Refinance and promotional support may

be provided by NABARD to RRBs on a large scale for implementation of

these credit plans.

NABARD TO SUPPORT HR DEVELOPMENT IN RRBS:-

RRBs should serve, with the support of NABARD, GoI, RBI and the sponsor

banks, as active financial inclusion players especially in areas with high levels

of financial exclusion. In order to build up the skills and expertise of the

personnel of RRBs, NABARD has played a crucial role since the inception of

RRBs. But for the efforts of NABARD and initiative of sponsor banks besides

RRB managements themselves in HR development and in implementation of

the reform package, the changes in business performance of RRBs would not

have been possible. The work could be accomplished by NABARD working

in close tandem with GoI and RBI besides the sponsor banks. NABARD

would continue to give special priority to RRBs to train their staff through the

training institutions like the bankers Institute of Rural Development (BIRD) at

Lucknow and the Regional Training Colleges at Mangalore and Bolpur,

specially set for meeting the training requirement of RRBs. NABARD my

design suitable training programmes to enable RRBs to meet the challenges in

post merger environment. This training may also cover members of the Board

of RRBs. This support should be provided by NABARD working in close

tandem with GOL, RBI and the sponsor banks.

PILOT TESTING OF BF/BC MODEL BY RRBS:-

RRBs should adopt the BF and BC models as a major strategy of financial

inclusion. NABARD should extend the required support including running

pilots in selected banks. The proposal for a technology based intervention

under the BF/BC model would be equally relevant for RRBs. However, RRBs

would require some handholding in implementing the proposal. NABARD

may identify 10 RRBs across the country giving greater weightage to regions

manifesting higher levels of financial exclusion and work in strategic alliance

with these RRBs and their sponsor banks in implementing the proposal. The

RRBs identified by NABARD for the project will require, developing a core

banking software for proper integration of the technology model proposed.

NABARD should enter into a MoU with identified sponsor banks and RRBs

and provide initial funding and technology support.

COMPARISON OF RRBS WITH

STATE COOPERATIVE BANKS

A note is about state government-run cooperative banks on how they compare

with RRBs. Both rural financial institutions are in same rural credit market but with

different ownership and management patterns. India’s cooperative banks were

instituted in the fifties, also to meet the rural credit requirements each district of the

country.

They are managed by the respective state governments under cooperative Act.

There are basically three-tier cooperative structures in most of the states. Primary

Agricultural Cooperatives at grass-root level, District cooperative Bank at District

level and State Cooperative Banks at State level with each supporting the lower one.

The co-operative credit system has come under increasing pressure from the

emerging competitive scenario of low interest rate regime. Cooperative Banks have

also continued to suffer from several weaknesses that do not augur well for building-

up their ability to compete with banking structure in the emerging liberalized

environment.

In part they have not been successful due to excessive political interference in

their management. It may be noted that the elected boards of 478 cooperative banks

out of 1186 were superseded for a variety of reasons including political interference.

RRBs on the other hand are the result of a Parliamentary Act and they are

managed by the sponsor bank (which has the experience of running a big bank) with

an equity stake of 35%.

The Central Government and the local State Government hold 50% and 15%

equity stake in RRBs. The board of RRBs constitutes the officials of NABARD and

RBI. Each RRB, like cooperatives is confined to a single or two districts of the

country. RRBs were sought to be a blend of cooperatives and commercial banks.

State governments have no/limited role in the management of the bank.

THE QUESTION OF OWNERSHIP

The approach of the Estimates Committee in looking at the Regional Rural

Banks was unique in that most other official committees in the recent years even

while noting the deteriorating patterns in credit activities by RRBs have completely

bypassed the subject while making the policy recommendations. Instead attention is

held by issues of ownership and requirements for RRBs as necessary steps towards

restructuring. At present there is no capital to risk weighted asset ratio (CRAR)

prescription for RRBs. The Internal Working Group on RRBs (RBI, 2005) has

recommended that the RRBs be asked to maintain a CRAR of 5 percent to begin

with, and over time they may align themselves to the Basle I standards. To wipe out

the accumulated losses, provide for the NPAs, and maintain 5 percent CRAR for the

RRBs in the existing scenario, the Working Group’s calculations show that capital to

the extent of Rs.3, 050 crore would have to be infused.

It is obvious that the RRBs are being restructured along the same lines as the

commercial banks. Is the step necessary? Hold that it is not. Even if one were to

believe in a case for CRAR for commercial banks on the lines that the new freedom

given to banks to determine their portfolio, including investments in stock markets

might result in high levels of risks in the system, which the regulars believe can be

contained through capital requirements, same logic cannot be applied to the RRBs

simply because such Portfolio choices can never be allowed for these institutions. On

the other hand, given that the income recognition and asset classification norms have

already caused these institutions to shy away from credit activities to an unacceptable

extent, further prudential norms involving high risk-weight on most loaning business

can only exacerbate these tendencies further.

It is widely established in the developing country contexts that the response of

banks to hitting regulatory constraints on their capital ratio is mostly through cutting

back loans or by switching from higher to lower risk weight assets, rather than by

raising capital. At a time when most rural areas are starved of credit, it is difficult to

comprehend the urgency to impose capital requirements on the RRBs.

The subject of consolidation of the RRBs as a way of raising their viability

and profitability has recurred several times since the beginning of the reform process

but without any policy outcome. Various working group and committees have

prescribed different measures as also models for reconstructing the RRBs. Pick up the

most recent threads. The chalapathy Rao Committee (2002) had proposed that the

government reduce the number of RRBs to around 40 from the present 196. Option

for mergers could be mergers of RRBs following ‘one-sponsor bank approach’ or

they could be amalgamated with their sponsor banks, and thereafter the RRBs could

operate as ‘commercial entities ’.

The Vyas committee II (June2004), on the other hand, has forwarded a more

logical solution. After weighting the various options for amalgamation, it decided that

it could not consider “the option of merger with the sponsor bank, as it would go

against the rationale of third channel for rural credit with a clear rural focus and

regional orientation.” Instead, it recommended merger of RRBs so as to create a

zonal bank for RRBs in the North-East and Rural banks at the state level for the rest

of the country. These banks would work on a stand alone basis and the sponsor banks

plus NABARD would contribute to equity. In the latest document on the subject, the

Internal Working Group on RRBs (RBI, 2005) has also proposed consolidation of the

RRBs as the merged entities will have a larger area of operation and the merger

process will help in strengthening some of the weak RRBs. Eliminating the option of

merger of RRBs with sponsor banks, the group has put forth two option: merger

between RRBs of the same sponsor bank in same state and merger of RRBs

sponsored by different banks in same state.

Independent of the official deliberations, the All Indian Regional Rural Banks

Employees Associations (AIRRBEA) has proposed that the RRBs be amalgamated to

form zonal or state-level RRBs. They have cited two strong reasons to make the case.

“The RRBs must be restructured into zonal or state level RRBs under any public

sector apex banking institutions or NABARD, so as to ensure the unity of command

and cross subsidization…... As in any banking institution, if the central balance sheet

is prepared at the apex level, the losses of the few RRBs (in the Eastern, North-

Eastern and Central regions)…..can easily be taken care of with the huge aggregate

profit of a majority of the RRBs.” Further, a national body like that of NABARD

should monitor the activities of such RRBs. Opposing the demands of All-India RRB

officers Federation for amalgamation of RRBs with the sponsor banks as the only

route to sustainability, AIRRBEA has demanded de-linking of the RRBs from the

sponsor banks so as to ensure functional autonomy for the rural banks, and to relieve

the burden of ‘sole’ commercial orientation so that the rural credit activities can be

pursued more freely. (Emphasis ours)

The AIRRBEA statement clearly takes the issue of ownership beyond the

current preoccupation with profitability, and asserts that not only can viability issues

be handled better by restructuring the RRBs along the lines suggested by them, but

more importantly it can enable improved performance vis-à-vis credit activities,

which is the urgent need today. The control of sponsor banks on RRBs needs to be

seriously revaluated. At a time when the sponsor banks are themselves constrained to

make cuts in the manpower and credit to agriculture or the SSI sector, they are unable

to extend the help to the RRBs on which their sponsorship was premised. In a view, it

is necessary that along with the Vyas Committee recommendations, which have

astutely defined the post-merger banking structure in terms of state-level banks, the

policymakers also take into consideration the legitimate demand for functional

autonomy and to rid the RRBs of the ‘sole’ commercial orientation such that the

present decline of rural banking might be reversed.

REGIONAL RURAL BANKS TODAY

At the end of fiscal 2005-2006, there were 133 RRBs spread over 23

states/Union Territories and with a network of 14,494 branches, accounting for 44.5

per cent of the total rural network of all scheduled commercial banks (including

RRBs). The rural and semi-urban branches of RRBs constitute 98 per cent of their

network. Their deposits and advances as on March 31, 2003, were Rs. 71,329 crore

and Rs.22, 028 crore respectively. Thus RRBs have done well in mobilizing rural

deposits and infusing the thrift habit in their clients.

Out of 196 RRBs, in 2002-2003 the number of profit making banks stood at

167 in 2001-2002 as compared with 170 in 2000-2001.However 111 RRBs out of

total 133 registered profits in the year 2005-06. The combined Net Profit of RRBs for

the year 2001-2002 aggregated Rs.608 crores as against the combined net profit of

Rs.601 crores in the previous year. The aggregate accumulated losses of RRBs

declined from Rs.2752.59 crores as on 31 March 2001 to Rs 2637 crores as on 31

March 2006.

As a result of the various reforms measures, the RRBs showed substantial

turn-around in their performance. The RRBs also displayed qualitative improvement

in their NPA management and gross NPAs as percentage of gross advances stood at

3.99% as on 31-3-2006, down from 32.8 at March-end 1998.Similarly, the recovery

performance of the RRBs steadily improved with the percentage of recovery to

demand raised at 80% as on 2005-2006 from 61.2% at end-June 1998(41.2% at end-

June 1993).

The bulk of the loans from RRBs have been to priority sectors, which

accounted for over 70 per cent of the total. Agriculture alone took up 46 per cent of

the priority sector advances. The involvement of RRBs in providing credit support to

small and retail trade and other non-farm rural activities is better than that of co-

operative and commercial banks. As on March 31, 2002, the outreach of RRBS in

terms of number of deposits and advances was 50.02 million and 11.94 million

respectively. Clientele for loans and deposits in the rural sector are low-value, but

large volume. RRBs have served this clientele in a more productive and efficient

manner vis-à-vis other Banks.

Per-employee, 885 accounts are handled by RRBs against the national average

of 464 accounts per employee in the banking industry.

RRBs have also taken a lead role in financing of Self Help Groups (SHGs)

mostly comprising of women leading to their economic and social empowerment.

The share of RRBs in SHG-Bank linkage programme is equally commendable as

under:

BACKGROUND

NABARD was established on 12th July 1982 to implement the National Bank

for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit

Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of

India, and Agricultural Refinance and Development Corporation (ARDC).

MISSION

NABARD being an Apex Development Bank promotes agriculture and rural

development through refinance support to all banks for investment credit and to co-

operatives and RRBs for production credit. The objective of providing refinance to

eligible institutions is to supplement their resources for delivering credit for

agriculture, cottage & village industries, SSIs, rural artisans, etc. thus influencing the

quantum of lending in consonance with the policy of Govt. of India. It directs the

policy, planning and operational aspects in the field of credit for agriculture and

integrated rural development.

STRUCTURE

NABARD operates throughout the country through its 28 Regional Offices

and one Sub-office, located in the capitals of all the states/union territories. It has 336

District Offices across the country, one Sub-office at Port Blair and one special Cell

at Srinagar. It also has 6 training establishments.

NABARD ROLE AND FUNCTIONS

OVERVIEW

NABARD is set up by the Government of India as a development bank with

the mandate of facilitating credit flow for promotion and development of agriculture

and integrated rural development. The mandate also covers supporting all other allied

economic activities in rural areas, promoting sustainable rural development and

ushering in prosperity in the rural areas. With a capital base of 2,000 crore provided

by the Government of India and Reserve Bank of India.

NABARD’S ROLES AND FUNCTIONS ARE SUMMARIZED BELOW

DEVELOPMENT AND PROMOTIONAL FUNCTIONS

Credit is a critical factor in development of agriculture and rural sector as it

enables investment in capital formation and technological up gradation. Hence,

strengthening of rural financial institutions, which deliver credit to the sector, has

been identified by NABARD as a thrust area. Various initiatives have been taken to

strengthen the cooperative credit structure and regional rural banks, so that adequate

and timely credit is made available to the needy.

In order to reinforce the credit function and to make credit more productive,

NABARD has been undertaking a number of developmental and promotional

activities such as:-

Help cooperative banks and Regional Rural Banks to prepare development

actions plans for themselves.

Enter into MoU with state governments and cooperative banks specifying

their respective obligations to improve the affairs of the banks in a stipulated

timeframe.

Help Regional Rural Banks and the sponsor banks to enter into MoUs

specifying their respective obligations to improve the affairs of the Regional

Rural Banks in a stipulated timeframe.

Monitor implementation of development action plans of banks and fulfillment

of obligations under MoUs.

Provide financial assistance to cooperatives and Regional Rural Banks for

establishment of technical, monitoring and evaluations cells.

Provide Organization development intervention (ODI) through reputed

training institutes like Bankers Institute of Rural Development (BIRD),

Lucknow www.birdindia.com, National Bank Staff College, Lucknow

www.nbsc.in and College of Agriculture Banking, Pune, etc.

Provide financial support for the training institutes of cooperative banks.

Provide training for senior and middle level executives of commercial banks,

Regional Rural Banks and cooperative banks.

Create awareness among the borrowers on ethics of repayment through Vikas

Volunteer Vahini and Farmer’s clubs.

Provide financial assistance to cooperative banks for building improved

management information system, computerization of operations and

development of human resources.

CREDIT FUNCTIONS

REFINANCE AGAINST INVESTMENT CREDIT

This is a long-term refinance facility. It is intended to create income

generating assets in the following

Investment in agriculture and allied activities such as minor irrigation

projects, farm mechanization, land development, soil conservation, dairy,

sheep rearing, poultry , piggery, plantation/horticulture, forestry, fishery,

storage and market yards, biogas and other alternative sources of energy,

sericulture, apiculture, animals and animal driven carts, agro-processing, agro-

service centers, etc.

Investment for artisans, small scale industries, tiny sector, village and cottage

industries, handicrafts, handlooms, power looms, etc.

Activities of voluntary agencies and self help groups working among the rural

poor.

Investment in share capital/securities of institutions involved in agriculture

and rural development

The credit is normally provided for a period of 3 to15 years

Sr.no. Year Amount (Rs.Lakhs)

1 1995-96 83.000

2 1996-97 128.484

3 1997-98 261.364

4 1998-99 467.486

ELIGIBLE INSTITUTIONS

NABARD provides refinance support to SCARDBs, SCBs, RRBs, CBs,

scheduled primary urban cooperative banks, North East Development Finance

Corporation Ltd. (NEDFI) etc. against their investment credit in the rural sector

PURPOSES

Some of the major purposes covered under investment credit are farm

mechanization, minor irrigation, plantation / horticulture, animal husbandry, storage /

market yards, fisheries, post harvest management, food / agro processing, non-farm

sector including rural industries, microfinance, purchase of land ( for small/marginal

farmers, share croppers etc.), rural housing and disbursements under poverty

alleviation programmes like SGSY and SC/ST Action plan etc. Hi-tech projects and

agri – export zones are identified as thrust areas and NABARD helps in techno-

financial appraisal of such projects besides providing refinance.

In recent years, refinance support has been extended to new activities like

financing of diesel generator sets in Madhya Pradesh and LPG kits to rural

households all over the country.

CRITERIA

The technical feasibility of the project, financial viability and generation of

incremental income to ultimate borrowers thereby, enabling them to have a

reasonable surplus after repayment of the lone installments are the necessary

conditions to be satisfied for sanctioning investment credit. The period of loan ranges

between 3 and 15 years depending on the purpose for which it is provided.

The refinance is provided to SCARDBs, SCBs, CBs and RRBs. However, the

beneficiaries of the programme are partnership concerns, companies, state-owned

corporations or cooperative societies. But, finally the assistance reaches the

individuals, who are members of the primary credit institutions.

The refinance is usually 50% to 95% of the project cost. The balance will be

met by the banks or the concerned state governments or the Government of India in

the case of SCARDBs.With a view to ensure credit flow to certain thrust areas, the

quantum of refinance is enhanced to 100% as in the case of special category

beneficiaries like SC/ST members and self help groups

SUPERVISORY FUNCTIONS

OVERVIEW

As an apex bank involved in refinancing credit needs of major financial

institutions in the country engaged in offering financial assistance to agriculture and

rural development operations and programmes, NABARD has been sharing with the

Reserve Bank of India certain supervisory functions in respect of cooperative banks

and Regional Rural Banks (RRBs)

As part of these functions, it:

Undertake inspection of Regional Rural Banks (RRBs) and cooperative bank

(other than urban/primary cooperative banks) under the provisions of Banking

Regulation Act, 1949.

Undertakes inspection of state Cooperative Agriculture and Rural

Development Banks (SCARDBs) and apex non-credit cooperative societies

on a voluntary basis.

Undertakes portfolio inspections, system study, besides off-site.

Surveillance of cooperative banks and Regional Rural Banks (RRBs).

Provides recommendations to Reserve Bank of India on opening of new

branches by State Cooperative Banks and Regional Rural Banks (RRBs).

Administering the Credit Monitoring Arrangements in SCBs and CCBs

CORE FUNCTION

NABARD has been entrusted with the statutory responsibility of conducting

inspections of State Cooperative Banks (SCBs), District Central Cooperative Banks

(DCCBs) and Regional Rural Banks (RRBs) under the provision of the Banking

Regulation Act, 1949. In addition, NABARD has also been conducting periodic

inspections of state level cooperative institutions such as State Cooperative

Agriculture and Rural Development Banks (SCARDBs), Apex Weavers Societies,

Marketing Federations, etc.on a voluntary basis.

OBJECTIVES OF INSPECTION

To protect the interest of the present and future depositors.

To ensure that the business conducted by this banks is in conformity with the

provisions of the relevant acts, rules, regulations bye-laws etc.

To ensure observance of rules guidelines etc. formulated and issued by

NABARD/RBI/Government.

To examine the financial soundness of the banks.

To suggest ways and means of strengthening the institutions so as to enable

them to play more efficient role in rural credit.

IMPORTANT SCHEMES OF NABARD

RURAL INFRASTRUCTURE DEVELOPMENT FUND (RIDF)

In 1995-96 RIDF-I set up with a corpus fund of Rs. 2000 crore for the purpose

of financing rural infrastructure projects such as irrigation projects, construction of

rural roads and bridges, etc. The RIDF fund has been continued in subsequent years.

The RIDF IX (last in the Series) was introduced in 2003-04.

The RIDF came to an end with the commencement of the Lok Nayak Jai

Prakash Narayan fund in February 2004.

LOK NAYAK JAI PRAKASH NARAYAN FUND (AGRICULTURE

INFRASTRUCTURE AND CREDIT FUND)

The fund came into existence in Feb-2004.It replaced the RIDF.NABARD has

prepared this scheme with the following three components:

Finance for infrastructure through State Governments (Rs. 30000 crore).

Activities includes minor irrigation, rain fed agriculture, and flood control,

public sector cold storage facilities, etc. Eligible clients are state

Governments, state undertakings, and local bodies.

Finance for investments in agriculture and commercial infrastructure

through banking system (Rs.18000 crore).

Activities includes priority areas like micro irrigation, rain fed agriculture,

post-harvest related support, agriculture marketing, investment credit, etc.

Eligible clients are corporate, NGOs, and individual, etc.

Development measures and Risk Management Mechanism (Rs. 2000

crore).

REHABILITATION OF COOPERATIVE BANKS SCHEME

NABARD undertakes a rehabilitation programme for weak CCBs and SCBs.

Under this programme, it assists CCB and SCBs, which are financially and

administratively weak due to large overdue and untrained staff.

KISAN CREDIT CARD (KCC) SCHEME

This scheme was introduced in 1998-99 with a view to facilitate the flow of

timely and adequate short-term credit to the farmers. This scheme is operated through

cooperative banks, RRBs and commercial banks. The cooperative banks, RRBs and

commercial banks together issued about 414 lakh KCCs involving credit of about

Rs.97, 710 crore up to March 2004.

The KCC scheme is an ongoing scheme, which is envisaged to gradually

replace the traditional system and procedures in the issue of shot-term crop loan.

REFINANCE UNDER SGSY

NABARD has issued operational instructions to cooperative banks and RRBs

with regard to implementation of self employment projects under SGSY on similar

lines as was issued by RBI to commercial banks.

SELF-HELP GROUPS SCHEME

NABARD has been active in promoting and linking more and more self-help

groups (SHGs) to the banking system. The banks provide finance to SHGs.

NABARD provides 100% refinance assistance to banks at an interest rate of 6.5%

p.a. for financing SHGs.

The concept pf SHGs promoted by NABARD for financing the poor was

introduced in 1991-92 under this scheme, the SHGs are linked with formal credit

agencies (banks). By March 2004, over 1.7 crore rural poor families accessed

financial services and credit through 10.79 lakh credit linked SHGs. Around 90% of

these SHGs are exclusive women SHGs. More than 30,000 branches and 500 banks

which participate in the programme have extended loans amounting to Rs.3,904 crore

by March 31,2004 backed by refinance support of Rs.2,124 crore from NABARD.

MILESTONES OF NABARD

Some of the milestones in NABARD’s activities are:-

With its effective overseeing and monitoring of the implementation of the

Government of India’s programme to double the flow of credit to agriculture

over.

A three-year period from 2004-2005, the total disbursement of credit reached

Rs. 1, 25,309 during 2004-2005. Ground level credit flow to agriculture and

allied activities reached Rs 1, 57,480 crore in 2005-2006.

Refinance disbursement to commercial banks, state cooperative banks, state

cooperative agriculture and rural development banks, RRBs and other eligible

financial institutions aggregated Rs 8,622.37 crore.

As on 31 January 2007 through the Rural Infrastructure Development

Fund (RIDF), Rs. 59,795.35 crore have been sanctioned for 2,31,702 projects

covering irrigation, rural roads and bridges, health and education, soil

conservation, drinking water schemes, etc. Development among hosts of other

infrastructures, RIDF will create 20971 schools, 6239 primary health centers

and provide drinking water supply in 7267 villages.

Watershed Development Fund, with cumulative sanctions of Rs. 578.95

crore for 427 projects in 124 districts of 14 states, has created a People’s

Movement in rural India.

Farmers now enjoy financial access and security through 582.50 lakh Kisan

Credit Cards that have been issued through a vast rural banking network.

District Rural Industries Project (DRIP) has generated employment for 23.34

lakh persons with 10.95 lakh units in 105 districts.

NABARD TODAY

Initiates measures towards institution building for improving absorptive

capacity of the credit delivery system including monitoring formulation of

rehabilitation schemes restructuring of credit institutions, training of personnel

etc.

Promotes research in the fields of rural banking, agriculture and rural

development.

Functions as regulatory authority, supervising, monitoring and guiding

cooperative and regional rural banks.

Undertakes monitoring and evaluation of projects refinance by it.

Prepares on annual basis rural credit plans for all the districts in the country.

These plans form the base for annual credit plans of all rural financial

institutions.

Coordinates the rural financing activities of all the institutions engaged in

developmental work at the field level and maintain liaison with the

government of India, state governments, Reserve Bank of India and other

national level institutions concerned with policy formulation.

COMMERCIAL BANK’S CONTRIBUTION

STATE BANK OF INDIA

State Bank of India Caters to the needs of agriculturists and landless

agricultural specialized branches which have been set up in different parts of the

country exclusively for the development of agriculture through credit deployment.

These branches include 427 Agricultural Development Branches (ADBs) and 547

branches with Development Banking Department (DBDs) which cater to

agriculturists and 2 Agricultural Business Branches at Chennai and Hyderabad

catering to the needs of hi-tech commercial agricultural projects.

Their branches have covered a whole gamut of agricultural activities like crop

production, horticulture, plantation crops, farm mechanization, land development and

reclamation, digging of wells, tube wells and irrigation projects, forestry, construction

of cold storages and godowns, processing of agri-products, finance to agri-input

dealers, allied activities like dairy, fisheries, poultry, sheep-goat, piggery and rearing

of silk worms. The branch also has farmer’s meet in villages to explain to farmers

about various schemes offered by the bank.

To give special focus to agriculture lending Bank has set up agri business unit.

Bank has also agri specialists in various disciplines to handle projects/ guide farmers

in their agri ventures. Advances are given for very small activity covering poorest of

the poor to hi-tech activities involving large fund outlays. They are the leaders in agri

finance in the country with a portfolio of Rs. 18,000 crores in agri advances to around

50 lakhs farmers.

State Bank of India has sponsored 30 RRBs, which operate in 102 districts of

16 States viz. Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chattisgarh,

Himachal Pradesh, Jammu & Kashmir, Jharkhand, Karnataka, Madhya Pradesh,

Meghalaya, Mizoram, Nagaland, Orrissa, Uttaranchal and Uttar Pradesh, with a

network of 2336 branches.

VARIOUS SCHEMES OFFERED BY STATE BANK OF INDIA

CROP LOAN (ACC)

PURPOSE

To provide financial assistance to meet cultivation expenses for various crops.

ELIGIBILITY FOR CROP LOAN

Agriculturists, Tenant farmers and share Croppers who actually cultivate the lands are

eligible for these loans. All categories of farmers – Small/Marginal (SF/MF) and

others are included.

LOAN AMOUNT

Loan amount is worked based on the cost of cultivation incurred for each crop per

acre of crop cultivated and 90% of the cost of cultivation (Scale of Finance) is given

as loan.

KISAN CREDIT CARD SCEME (KCC) :-

PURPOSE

To extend adequate and timely support to farmers for their short term credit needs.

ELIGIBILITY FOR THE LOAN

Farmers with excellent repayment record for 2 years and new farmers with sizeable

deposits with branches for 3 to 4 years are eligible. Borrowers with good track record

in other Banks are also eligible. Farmers who have defaulted in repayment but have

liquidated the outstanding are also eligible.

LOAN AMOUNT

Loan amount is decided based on the cropping pattern, ancillary and contingency

needs of the farmer for the full year. 90% of the cost of cultivation (Scale of Finance)

is given as loan per acre. 100% of the cost is available as loan up to Rs. 50,000/- and

85% of the cost is available as loan above Rs. 1, 00,000/-

FARM MECHANISATION SCHEMES

PURPOSE

Credit for purchase of farm equipment and machinery for agricultural operations. The

scheme covers activities ranging from purchase of tractors and accessories, trailers.

Power tillers, combine harvesters, power sprayers, dusters, threshers etc.

ELIGIBILITY FOR TERM LOANS

Farmers owning mare than minimum acreage of perennially irrigated lands are

eligible (for power tillers 2 acres, for tractors 4 acres for > 35 HP and 6 acres for

above 35 HP and for combine 8 acres). Eligibility for purchase of other farm

equipment is decided on the income generated by the agri activity undertaken by.

LOAN AMOUNT

Up to Rs. 50,000/- 100% of the cost of the asset is provided as loan. Above Rs.

50,000/- up to 85% of the cost of the asset provided as loan.

LAND DEVELOPMENT SCHEMES

PURPOSE

To provide credit solution for land development projects in the form of direct finance

to cultivators for better productivity.

Loans under this head cover various activities like land clearance ( removal bushes,

trees, etc.), land leveling and shaping, contour/ graded bunding, bench terracing for

hilly areas, contour stone walls, staggered contour trenches, disposal drains,

reclamation of saline/ alkaline soils and fencing etc.

ELIGIBILITY FOR TERM LOANS

All farmers owning agricultural land are eligible.

LOAN AMOUNT

Up to Rs. 50,000/- 100% of the cost of the asset / project cost is provided as loan.

Above Rs. 50,000/- up to 85% of the cost of the asset / project is given as loan.

LOAN AGAINST WAREHOUSE RECEIPTS / COLD STORAGE RECEIPTS

PURPOSE

The Bank extends financial assistance to farmers storing produce in private /

government warehouse/ cold storages against pledge of warehouse / cold storage

receipt to prevent distress sale. The maximum repayment period of the loan is 6

months.

WHO IS ELIGIBLE FOR THE LOAN

All categories of farmers availing crop loan.

LOAN AMOUNT

The lone amount will be 60% of the value (minimum support price) of the produce

stored.

MINOR IRRIGATION SCHEMES

PURPOSE

To provide credit for creating irrigation facilities from underground / surface water

sources. All structures and equipments connected with it are also financed. Loans

cover various activities like digging of new wells (open/bore wells), deepening of

existing wells (traditional/in well bore), energisation of wells (oil engine/electrical

pump set), laying of pipe lines, installing drip/ sprinkler irrigation system and lift

irrigation system.

ELIGIBILITY FOR TERM LOANS

All farmers having a known source of water which can be exploited for irrigation

purpose.

LOAN AMOUNT

Up to Rs. 50,000/- 100% of the cost of the asset/ project cost is provided as loan.

Above Rs. 50,000/- up to 85% of the cost of the asset / project is provided as loan.

OTHER SCHEMES INCLUDES

PRODUCE MARKETING LOAN SCHEME

FINANCE TO HORTICULTURE

FARM MECHANISATION SCHEMES

AGRICULTURAL TERM LOANS (ATL)

LAND DEVELOPMENT SCHEMES

MINOR IRRIGATION SCHEMES

LEAD BANK SCHEME

FINANCING OF COMBINE HARVESTERS

KISAN GOLD CARD SCHEME

BROILER PLUS SCHEME

KRISHI PLUS SCHEME

ARTHIAS PLUS SCHEME

DAIRY PLUS SCHEME

LAND PURCHASE SCHEME

KEY PERFORMANCE INDICATORS: RRBS

Amount in Rs. Crore

Nos. Indicators Year

31.03.2004 31.03.2005 31.03.2006

1. No. of RRBs 196 196 133

2. No. of districts

covered

518 523 525

3. No. of branches 14446 14484 14494

4. No. of staff 69249 68912 68629

5. Credit-deposit

(CD) ratio (%)

46% 53% 56%

KEY PERFORMANCE INDICATORS: RRBS

Amount in Rs. Crore

Nos. Indicators Year

31.03.2004 31.03.2005 31.03.2006

1. Owned Funds 5438 6181 6647

2. Deposits 56350 62143 71329

3. Borrowings 4595 5524 7303

4. Investments 36135 36761 41182

5. Loans

outstanding

26114 32870 39713

KEY PERFORMANCE INDICATORS: RRBS

Amount in Rs. Crore

Nos. Indicators Year

31.03.2004 31.03.2005 31.03.2006

1. Loans issued 15579 21082 25427

2. No. of RRBs

having

accumulated

losses

90 83 58

3. Accumulated

losses

2725 2715 2637

4. No. of RRBs in

profit

163 166 111

5. Net NPA (%) 8.55% 4.84% 3.99%

KEY PERFORMANCE INDICATORS: RRBS

Amount in Rs. Crore

Nos. Indicators Year

31.03.2004 31.03.2005 31.03.2006

1. Recovery (%)

(as on 30 June)

73% 78% 80%

2. Per branch

Productivity

5.71 6.56 7.66

3. Per staff

Productivity

1.19 1.38 1.62

IMPORTANT TRENDS

111 RRBs out of total 133 registered profit in the year 2005-06.

CD Ratio has been increasing from 46% on 31 March 2004 to 53% on 31

March 2005 and further to 56% on 31 March 2006.

Recovery percentage has been improving from 73% during 2003-04 to 80%

during 2005-06.

Consequently, net NPAs have declined from 8.55% on 31 March 2004 to

3.99% on 31 March 2006.

Loans disbursement registered an impressive 35% annual growth in 2004-05

and 21% in 2005-06.

Per branch productivity has increased from Rs. 5.71 crore on 31 March 2004

to Rs. 7.66 crore on 31 March 2006.

Per staff productivity has increased from Rs. 1.19 crore on 31 March 2004 to

Rs. 1.62 crore on 31 March 2006.

MUHAMMAD YUNUS & GRAMEEN BANK

NOBEL PEACE PRIZE WINNER MUHAMMAD YUNUS

Muhammad Yunus’ ideas about lending to the poor to lift millions out of

poverty. Have changed lives in his native Bangladesh and beyond. Known as the

“banker to the poor,” Yunus, winner of the 2006 Nobel Peace Prize, has helped

people rise above poverty by giving them small, usually unsecured loans through his

Grameen Bank.

Through Yunus’s efforts and those of the bank he founded, poor people

around the world, especially women, have been able to buy cows, a few chickens or

the cell phone they desperately needed to get ahead.

Yunus is the first Nobel Prize winner from Bangladesh, a poverty-stricken

nation of about 141 million people located on the Bay on Bengal.

Yunus received a Ph.D. in economics from Vanderbilt University in 1970 and

taught at Middle Tennessee University from 1969 to 1972. After returning to

Bangladesh, he joined the University of Chittagong as head of the Economics

Department. He also holds honorary doctorate degrees from dozens of universities

around the world.

Yonus has won dozens of international awards, including the Simon Bolivar

Prize, the Indira Gandhi Peace Prize, the Seoul Peace Prize and the Freedom Award

of the International Rescue Committee.

He has also been appointed as an International Goodwill Ambassador for

UNAIDS by the United Nations and inducted as a member of France’s Legion

d’Honneur.

From 1993 to 1995, Yunus was a member of the International Advisory

Group for the Fourth World Conference on Women, a post to which he was appointed

by the U.N. secretary general. He has served on the Global Commission of Women’s

Health, the Advisory Council for Sustainable Economic Development and the U.N.

Expert Group on Women and Finance.

In addition to Grameen Bank, Yunus has created numerous other companies

in Bangladesh to address poverty and development issues. Those companies are

involved in a range of industries, including mobile telephony, Internet access, capital

management and renewable energy.

Grameen Bank was the first lender to hand out microcredit, giving very small

loans to poor Bangladeshis who did not quality for loans from conventional banks.

No collateral is needed and repayment is based on an honor system.

Grameen, which means rural in the Bengali language, says the method

encourages social responsibility.

A LOOK AT GRAMEEN BANK

WHAT IS IT: The Grameen Bank hands out microcredit, or very small loans, to the

poor peoples of Bangladesh who, do not qualify for loans from conventional banks.

No collateral is needed and repayment is based on an honor system.

HOW DID IT START: In 1974, Yunus, then an economics professor recently

returned from the United States, lend a total of $27 to 42 villages who, made bamboo

furniture. The loans, which were all paid back, allowed them to cut out the

middlemen and purchase their own raw materials. Emboldened by his experiment,

Yunus won government approval in 1983 to open Grameen, Bengali for “rural.”

WHO QUALIFIES: Anyone can qualify, but they must belong to a five-member

group. Once the first two members begin to pay back their loans, the others can get

theirs. While there is no group responsibility for returning the loans, the bank believes

it creates a sense of social responsibility, ensuring all members pay back their loans.

DOES IT WORK: Grameen claims a 99 percent repayment rate. According to a

recent Grameen survey, 58 percent of the families of Grameen borrowers have

crossed the poverty line.

WHO OWNS THE BANK: The government of Bangladesh owns 6 percent of the

bank while the borrowers own the other 94 percent.

WHAT ARE THE NUMBERS: The bank has handed out $ 5.72 billion since its

inception to 6.61 million people had been repaid $ 5.07 billion. Women account for

97 percent of the loan takers. Grameen Bank has 2,226 branches, works in 71,371

villages and has a total staff of 18,795.

OTHER INFORMATION

Earns Profit-Ever since Grameen Bank came into being, it has made profit

every year except in 1983, 1991 and 1992. It has published its audited balance-sheet

every year, audited by two internationally reputed audit firms of the country.

Revenue and Expenditure: Total revenue generated by Grameen Bank in 2006

was Tk 9.43 billion (US $134.90 million). Total expenditure was Tk 8.03 billion (US

$ 114.90 million). Interest payment on deposits of Tk 3.47 billion (US $ 35.35

million) was the largest component of expenditure (43 per cent). Expenditure on

salary, allowances, and pension benefits amounted to Tk 2.03 billion (US $ 28.97

million), which was the second largest component of the total expenditure (25 per

cent). Grameen Bank made a profit of Tk 1398 million (US $ 20.00 million) in 2006.

Entire profit is transferred to a Rehabilitation Fund created to cope with disaster

situations. This is done in fulfillment of a condition imposed by the government for

exempting Grameen Bank from paying corporate income tax.

Low Interest Rates: Government of Bangladesh has fixed interest rate for

government-run micro credit programmes at 11 per cent at flat rate. It amounts to

about 22 per cent at declining basis. Grameen Bank’s interest rate is lower than

government rate.

There are four interest rates for loans from Grameen Bank : 20% (declining

basis) for income generating loans, 8% for housing loans, 5% for student loans, and

0% (interest-free) loans for Struggling Members (beggars). All interests are simple

interest, calculated on declining balance method. This means, if a borrower takes an

income-generating loan of say, Tk 1,000, and pays back the entire amount within a

year in weekly installments, she’ll pay a total amount of Tk 1,100, i.e. Tk 1,000 as

principal, plus Tk 100 as interest for the year, equivalent to 10% flat rate.

Deposit Rates:

Grameen Bank offers very attractive rates for deposits. Minimum interest

offered is 8.5 per cent. Maximum rate is 12 per cent.

BEGGARS AS MEMBERS

Begging is the last resort for survival for a poor person, unless he/she turns

into crime or other forms of illegal activities. Among the beggars there are disabled,

blind, and retarded people, as well as old people with ill health. Grameen Bank has

taken up a special programme, called Struggling Members Programme, to reach out

to the beggars. About 100,505 beggars have already joined the programme. Total

amount disbursed stands at Tk. 107.16 million. Of that amount of Tk. 74.39 million

has already been paid off.

BIBLIOGRAPHY

BOOKS

Development Issues of INDIAN ECONOMY: - Mario Dias

NEWS PAPERS

The Economic Times.

WEBSITES

www.indiatogether.org

www.thehindubusinessline.com

www.nabard.org

www.sbi.co.in

ARTICLES REGARDING MUHAMMAD YUNUS & GRAMEEN BANK:-

The Grameen Bank & Associated Press.