11th December, 2015 (MAINS)

TODAYs ANSWER WRITING CHALLENGE FROM GS-III

Q1. “In the villages itself no form of credit organisation will be suitable except the cooperative society.” – All Indian rural credit survey. Discuss this statement in the background of agriculture finance in India. What constraints and challenges do financial institutions supplying agricultural finances? How can technology be used to better reach and serve rural clients? [12.5marks/2014/GS-4] 150 words.

Please write answer in the comments section.

  • Kamlesh Twari

    GS3 question solved:

    Q1. “In the villages itself no form of credit organisation will be suitable except the cooperative society.” – All Indian rural credit survey. Discuss this statement in the background of agriculture finance in India. What constraints and challenges do financial institutions supplying agricultural finances? How can technology be used to better reach and serve rural clients?

    My answer:
    Co-operative society will be suitable in the villages because:
    1. Co-operative society is an autonomous institution managed and run by people who are engaged in same area of work and understands the requirements and needs of work.
    2. It helps the farmers for better farming, better business and better living.
    3. Co-operatives in India works on the basis of each for all and all for each, or self-help and mutual help and function on “no profit, no-loss” basis.
    4. Co-operation as principle does not pursue the goal of profit maximisation.

    Constraints and challenges faced by financial institutions supplying agricultural finance:
    1. Poor recovery of loans.
    2. Differential rate of interest when compared to commercial and private banks.
    3. Frequent debt waiver by the government makes farmer undisciplined.
    4. Restricted area of operation of the Primary Agricultural Societies.
    5. High transaction costs as well as the traditional policy of undiversified lending.
    6. Co-operative banks are struggling to conform to the banking norms and to mobilise adequate resources to meet the requirements of the farmers.

    Technology can be used to better reach and serve rural clients:
    1. By creating a data base of farmers, the credit and financial institutions can communicate with and access beneficiaries easily.
    2. Use of smart cards will increase the authencity and reduce identity theft in obtaining credit benefits.
    3. Mobile banking, use of banking correspondence and internet banking facilities increase the reach and brings more awareness among farmers.
    4. Biometric technology makes it possible for financial institutions to withhold new loans from past defaulters and to reward
    responsible past borrowers with increased credit.

    • http://shashidthakur23.blog.com Shashi Thakur

      good points.