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Cooperative Credit Organisation
Cooperatives play a very important role in disbursement of agricultural credit. Credit is needed both by the distribution channel as well as by the farmers. The distribution channel needs it to finance the fertiliser business and farmers need it for meeting various needs for agricultural production including purchasing fertilisers. The credit needed by the farmers for purchase of fertilisers and other inputs is called 'short term' credit or 'production credit' whereas credit needed by the distribution channel is called 'Distribution Credit'.
Cooperatives also play a very important role in disbursement of 'Medium Term' and 'Long Term' credit needed by the farmers' for purchasing agricultural equipments viz tractors, installation of tubewells and land development. In India, 78 per cent of the farmers belong to the category of small and marginal farmers. They depend heavily on credit for their agricultural operations. These farmers will not be able to adopt the modern agricultural practices unless they are supported by a system which ensures adequate and timely availability of credit on reasonable terms and conditions. Cooperatives accounts for a large proportion of the agricultural credit made available to the farmers. A significant share of the finance for agriculture is provided by co-operative societies.
With the passing of Reserve Bank of India Act 1934, District Central Co-op. Banks Act and Land Development Banks Act, agricultural credit received impetus and there were improvements in agricultural credit. A powerful alternative agency came into being. Large-scale credit became available with reasonable rates of interest at easy terms, both in terms of granting loans and recovery of them. Both the co-operative banks advance credit mostly to agriculture. First bank advances short-term and medium term loans while the second bank advances long-term loans. The Reserve Bank of India as the Central bank of the country took lead in making credit available to agriculture through these banks by laying down suitable policies.
Although the co-operative banks started financing agriculture with their establishments in 1930's real impetus was received only after Independence when suitable legislation were passed and policies were formulated. There after, bank credit to agriculture made phenomenal progress by opening branches in rural areas and attracting deposits.
Short term and Medium term loans (three- tier system)
Long term (two- tier system)
Primary Agricultural Cooperative Societies (PACS)
PACS functions on the basis of cooperative principles of voluntary participation, democratic control, limited area of operation and limited liability. These societies work at the village level and are meant for the farmers regarding provision of requisite short term and medium term loans. Supply of agricultural inputs and other essential commodities is also taken up by these societies. The PACS are associated with following functions:
(i) they borrow adequate and timely funds from DCCBs and help the members in financial matters;
(ii) they attract local savings in the form of share capital and deposits from the villagers, thereby inculcating the habit of thrift;
(iii) they supervise the end use of credit;
(iv) they make available fertilizers and insecticides etc. to the needy farmers;
(v) they provide machinery on hire basis to the farmers;
(vi) they associate with the programmes and plans meant for the socio-economic development of the village;
(vii) they are also involved in the marketing of farm produce on behalf of the farmer-borrowers;
(viii) they provide storage facilities and marketing finance; and
(ix) they supply certain consumer goods like rice, wheat, sugar, kerosene, cloth etc. at fair prices.
District Central Cooperative Banks (DCCBs)
DCCBs function as a link between the PACS and State Cooperative Banks (SCBs). They are basically meant for meeting the credit requirement of PACS. They also undertake banking business such as accepting deposits from public, collecting bills, cheques, drafts etc. and providing credit to the needy persons. The area of operation varies from taluk to district but in most of the states their operations are confined to the taluk level. Membership of the DCCBs is open to individuals and societies working in its area of operation. Marketing societies, consumer societies, farming societies, urban banks and PACS are usually enrolled as members of this bank. The specific functions of the bank are:
(i) to supervise and inspect the activities of PACS and help the credit societies run smoothly;
(ii) to maintain close and constant contact and guide the primary societies and provide
leadership to them;
(iii) to undertake non-credit activities like supply of seeds, fertilizers besides sugar, kerosene and other consumer goods;
(iv) to provide requisite funds to societies under their control; and
(v) to accept deposits from the member societies as well as from public.
State Cooperative Bank (SCB)
SCBs are at the apex of the cooperative credit organization present at the state capitals. They perform the same functions for the DCCBs as the latter does for the PACS. The membership comprises of DCCBs and individuals. It finances and controls the working of the DCCBs in the state. It also serves as a link between the RBI and DCCBs. The Specific functions of SCBs:
(i) SCBs perform as the banker's bank for the DCCBs;
(ii) SCBs banks facilitate the respective Sate Governments to draw up cooperative and other development plans as well as their implementation;
(iii) they act as a link between the DCCBs and the RBI;
(iv) they supervise, control and guide the activities of DCCBs;
(v) these banks also perform normal banking operations;
(vi) they grant subsidies to DCCBs for development of cooperative activities;
(vii) they formulate and implement uniform credit policies; and
(vii) these banks coordinate their own policies with those of the cooperative movement of the government.
Primary Land Development Banks (PLDBs)
The establishment of the Land Mortgage Bank (LMBs) on cooperative lines dates back to the year 1920 in Punjab. Later during the period 1920-29, a number of LMBs were established in the states of Punjab, Madras, Mysore, Assam and Bengal. After that not much growth was observed in the number of LMBs till 1945. However, during 1945-53 a rapid growth was observed in the number of these banks. During this period only rich and affluent farmers derived benefits of these banks and small and marginal farmers remained untouched of the developments. LMBs got massive support from the RBI, SBI, LIC and Agricultural Refinance Corporation. As a result LMBs had to reorient its lending policies in favour of marginal and small farmers. LMBs were renamed as Land Development Banks (LDBs) in 1974. Primary LDBs are generally organized to serve the farmers at Taluk level. Its pecific functions are:
(i) to provide long term finance to the needy farmers for the development of land, increasing production and productivity of land;
(ii) to provide long term loan for minor irrigation and for redemption of old debts and purchase of land;
(iii) to provide long term finance for purchase of tractors, machinery and equipments and
construction of farm structures; and
(iv) to mobilize rural savings.
Central Land Development Bank (CLDBs)
In many states PLDBs are federated into CLDBs. Branches of CLDBs, PLDBs and individual entrepreneurs are the members of the CLDB. NABARD and LIC subscribe for its debentures in large amounts. In fact, NABARD is the refinance agency of CLDBs. It acts as a link between NABARD and the Government in long-term business transactions. It supervises and guides the PLDBs. It inculcates the practice of thrift among member banks by mobilizing savings and stimulating capital formation. The CLDBs provides loans to member banks for the redemption of old debts, improvement, reclamation and development of land, purchase of agricultural machinery and equipment and development of minor irrigation.