Boctor of in ECONOMICS

THESIS ROLE OF REGIONAL RURAL BANKS IN AGRICULTURAL DEVELOPMENT WITH SPECIAL REFERENCE TO ALIGARH DISTRICT Thesis Submitted for the award of the degree of Boctor of IN ECONOMICS (By Miss Nighat Parveen UNDER THE SUPERVISION OF Prof. A. Z. RIZVI EX-CHAIRMAN DEPARTMENT OF ECONOMICS ALIGARH MUSLIM UNIVERSITY ALIGARH (INDIA) T6002 DEPARTMENT OF ECONOMICS ALIGARH MUSLIM UNIVERSITY ALIGARH (INDIA) DATED: '^t • / ^ T^fiis is to certify that the thesis entitkcC"ROLE OF REGIONAL RURAL BANKS IN AGRICULTURAL DEVELOPMENT WITH SPECIAL REFERENCE TO ALIGARH DISTRICT" is a record of genuine research carried out By Miss 9{igfiat ârveen, ^nrofment [N'o. X-S679. The candidate has completed the research worûndermy supervision and guidance for thefu[[periodprescriSed under cCause ofVl and of the (ph.(D. ordinance and that the thesis embodies the resuCt of her own investigation conducted during the period She wor^dasfuCC time (Ph.(D. research schoCar. l^he present workjs suitaSCe to 5e submitted for the award of (Doctor of (PhiCosophy degree in Economics, JiCigarh MusCim "University, JL Cigarh (India) I recommended this thesis for evaluation. /.J (Prof.AKHTARZAHEE Jonotn^c* SUPERVISOR m ACKNOWLEDGEMENT This study has been completed under the supervision of able guidance of Dr. Akhtar Zaheer Rizvi, Professor and Ex-Chairman, Department of Economics, Aligarh Muslim University, Aligarh. It is really a matter of pride to work under such a great scholar. No words would suffice to express my deep sense of gratitude to him, because his invaluable guidance, valuable suggestions and encouragement at every stage of the work have enabled me to complete this thesis. He provided me the opportunity and liberty of encroaching upon his precious time and also allowed me to use his personal library. The training which I was provided by him during the course of study will continue to be a source of inspiration to me in my life. I feel proud in expressing my profound gratitude to him. I am greatly obliged to Dr. Ashok Mittal who extended his helping hands whenever I faced any difficulty in the completion of this thesis. I would also like to express my feeling of gratefulness to all of my teachers and staff of the Department who always encouraged me during the work. I shall be failing in my duties if I forget to express my sense of gratitude to my parents (specially my mother Mrs. Halima Begum) and my brothers Danish, Asif, Suhail, Niyaz and my sisters Saba, Arshi, Farah, whose blessings have been a source of inspiration to me. My thanks are also due to a number of my friends (specially Naseem sahib) who help me during the time of need. Thanks is still due to Mr. Shakil Ahmad Khan for typing this thesis with full cooperation. (NIGHATPARtÊN) PREFACE India is still a pre-dominantly agricultural country as agriculture contributes significantly towards her national income employment & household activities. Although it has not taken a great leap forward, it has remained the many sector of Indian economy. It raised expectation during the first five year plan as it grew at a fast rate to give coverage to the whole economy. But during the second plan, policies which were heavily titled towards creating an industrial base, involved heavy investments and jeopardized the overall growth of the economy. Credit is considered as an important instrument for agricultural and rural development which is available to the villagers from two types of sources, i.e. institutional and non-institutional credit agencies. Inspite of rapid expansion of institutional credit agencies co-operatives and commercial banks in the country a large segment of rural population consisting of small and marginal farmers, were not availing facilities of institutional credit agencies and were dependent upon money lenders for borrowing both for production and consumption purposes, who exploited them by charging veiy high rate of interest and they became victim of various other mal-practices. Banking institutions are very helpful in creating such an atmosphere in the areas where the money lender exploited the villagers by charging high rates of interest. And therefore, it is conclusively said that development follows the bank. It was in conformity of this theory alone that bank branches were opened all over the country to save the rural people exploitation as well as to assess the rural credit requirement, regional Rural Banks came into existence in 1975 with a view to provide financial assistance to the neglected section of the rural economy. The Regional Rural Banks were set up in the areas where commercial and co-operative banking facilities have been lacking. Regional Rural Banks improving the flow of credit to the rural sector of the economy these banks provide finance to meet the short and medium term finance needs of the weaker sections, small and marginal farmers, land-less labourers, village artisans trade and businessmen in the rural areas. Especially the agricultural sector has assumed the increased importance in the country in recent years. As 75 % of the total population live in the rural areas and they contribute about 45% of the total national income by agriculture production, therefore, economic development and progress of the country really means reconstruction and resurgence of the rural economy of the country Regional Rural Banks (RRBs) plays very important rate in the construction and development of rural economy in particular and the whole country in I' S general. Regional growth in the main purpose of all of the development programmes. Salient Features of Regional Rural Banks: The salient features of regional rural bank are as follows: i) The Regional Rural Bank combine the local feel and familiarity with rural problems which the cooperatives possess and the degreed of organization ability to mobilize deposits, access to central money market and modernized outlook which the commercial banks have. ii) Every rural bank will operate in a limited area or region comprising of one or more districts in a state. Each of its branches will serve a compact group of villages having a population of 5000 to 20,000. The area should be comparatively backward or a tribal area or where coverage by commercial banks and cooperatives is relatively poor. The area chosen should have a real potential for development and should be poised for a break through once the flow of credit is assured. iii) The regional rural will grant loans and advances mainly to small and marginal farmers, agricultural labourers artisans and small entrepreneurs iv engaged in productive activities in there area of operation. The repaying capacity of the borrower over a reasonable period of time would be the basis for sanctioning the loans. iv) These banks adopt the pattern of operations to suit their requirements. To start with a branch may be managed by a manager, an agriculture officer , a clerk-cum-cashier and a peon. v) The forms and procedures for the operations of rural banks will be very simple. All the business would be conducted in the regional languages. Forms would be filled up on behalf of the employees of the banks themselves so that brokers and intermediaries may not exploit them. vi) The rates of interest charge by the regional rural banks __will be comparable with those charge by the cooperatives. The thesis in hand is representing "Role of Regional Rural Bank in Agricultural Development with special reference to Aligarh District." CONTENTS Page No. Chapter-1 Introduction 1-42 a) Importance of Agriculture in Indian Economy b) Role of Finance in Agricultural Developrnent. c) Various Aspect of Rural Finance in India. d) Review of Literature. e) Objective of Study f) Framework of Study g) Scope of Study h) Limitation of the Study i) References Chapter-II Need and Sources of Agricultural (rural) Credit- 43 - 92 a) Requistic of good credit system b) Sources of Rural Credit-Institutional and non- Institutional c) Policy of the government in respect of rural credit d) Conclusion- Suggestion for farther improvement & Finding e) References Chapter-Ill Growth and Development of Regional Rural 93 135 Banks in India. a) Historical Resume of Regional Rural Bank b) The Banking Commission (1972) c) The working group (M. Narasimaham, 1975) d) Evolution of RRBs e) Committees on RRBs f) Objectives of RRBs g) Growth of RRBs(1975-1996) h) Management of RRBs i) Role of RRBs j) Cooperative verses RRBs k) Commercial Banks verses RRBs 1) Prospects m) References Chapter- IV Problems and Prospects of RRBs 136-165 a) Lack of banking habits among rural population b) Lack of local participation c) Difficulties of Recovery of Loan and problems of overdue. d) More Loses and less profit. e) Lack of Infrastructural facilities and marketing Management. f) Inadequate deposit mobilization g) Rate of Vested interest group h) Lack of Demand or Agricultural credit i) Un-certain features of RRBs j) Poor attitude and behaviour k) Absence of suitable staff 1) Organizational constraints m) Personal constraints n) Lack of political maneuvering 0) Environmental constraints p) Procedural problems q) Lack of Adequate support from development programme r) Prospects: Role and viability s) References Chapter-V Profile of Aligarh District 166-191 a) Location and Area b) Population c) Language and Religion d) Geographical Physical features. e) Town, Villages amenities f) Agriculture g) Irrigation h) Education 1) Employment generating schemes j) Banking progress in Aligarh District credit plan k) Industries 1) Animal Husbandry m) Trade Commerce and Export n) Tourism o) Fair and Festivals p) References Chapter-VI Aligarh Gramin Bank, Aligarh 192-220 a) Canara Bank as Lead Bank of Aligarh District b) Management and Organization structure of AGB c) Objectives of AGB d) Credit Scheme of eligible borrowers e) Fund Management of AGB f) Investment policy adopted by AGB g) Breaking tiie vicious circle of poverty through Micro credit.

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