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Institutional credit is also not exploitative in character.The following are some of the important institutional sources of agricultural credit in India.Nowadays, the long term and short term credit needs of these institutions are also being met by National Bank for Agricultural and Rural Development (NABARD).
Thus, the long term credit requires sufficient time for the repayment of such loan.
In India, agricultural credit are being advanced by different sources.
Out of these institutional sources, co-operatives contributed 40 per cent and commercial banks contributed 30.0 per cent of the total farm credit in 1996.
(i) Moneylenders: From the very beginning moneylenders have been advancing a major share of farm credit.
Thus, the non-institutional sources of farm credit have been facing serious loopholes like exorbitant rate of interest, loan for unproductive purposes, non-repayment of loan etc.
The main motive of institutional credit is to assist the farmers in raising their agricultural productivity and maximising their income.
These loans are a kind of informal loans and carry no interest and are normally returned after harvest.
The importance of this source of farm credit is also declining as its share of agricultural credit has already declined from 14.2 per cent in 1951-52 to 8.7 per cent in 1981 and then to 3.0 per cent in 1995-96.
After independence the Government adopted the institutional credit approach through various agencies like co-operatives, commercial banks, regional rural banks etc.
From the very beginning the prime source of agricultural credit in India was moneylenders.