OVERVIEW OF LONG TERM CREDIT STRUCTURE

>Rural Cooperative Credit System in India evolved into two separate streams for ST credit and LT credit. The Long Term Credit Structure had its beginning in the early 1920s with the establishment of Land Mortgage Banks to provide long term loans to farmers to redeem debts on land. The first Land Mortgage Bank was established in 1920 in Punjab followed by establishment of a large number of such banks in all provinces. The first Central Land Mortgage Bank started functioning in Madras to centralize the issue of debentures and to coordinate the working of Primary Land Mortgage Banks. The Bombay Banking Enquiry Committee (1930) mentioned about the inadequacy of resources of primary credit societies to undertake long term lending and advocated formation of Land Mortgage Banks to meet long term credit needs of farmers. The 1930s and 40s witnessed mushroom growth of Land Mortgage Banks throughout the country without any uniform pattern with regard to their size and operations. The All India Rural Credit Survey Committee recommended reorganization of Land Mortgage Banks with a State level apex body and Primary Land Mortgage Banks at taluka level affiliated to it. The Committee also recommended diversifying their operations into investment credit for agriculture. Central Land Mortgage Banks were established in almost all States during the IInd Five Year Plan which came to be known as State Cooperative Land Development Banks which were renamed as State Cooperative Agriculture & Rural Development Banks with further diversification into rural non-farm sector in the 80s.

The contributions of Agriculture & Rural Development Banks (ARDBs) to the development of Indian agriculture have been quite significant in the post-Independence era. ARDBs played a very important role in improving the productivity of land especially through development of minor irrigation and facilitating farm mechanization in the 60s and 70s. While continuing to promote capital formation in agriculture, these banks started financing rural non-farm sector projects in a big way in the 80s and 90s which helped rural families to increase their incomes substantially through value addition to their produce apart from providing opportunities for alternate employment. It will not be out of place to mention that till the 1980-1990 the ARDBs were effectively the only banks which were engaged in providing investment credit for agriculture. The role of the commercial banks was limited primarily to financing corporate sector in plantation, commercial poultry and dairy units.

The Long Term Cooperative Credit Structure comprises of SCARDBs in 16 States operating either through their own branches at ground level or through Primary Agricultural and Rural Development Banks affiliated to the state level Apex. In Andhra Pradesh, the SCARDB was merged with Andhra Pradesh State Cooperative Bank in 1995 to form an integrated structure. Chhattisgarh State Cooperative Agriculture & Rural Development Bank was also merged with Chhattisgarh State Cooperative Bank in October 2014. In most of the states formed after 1960, State Cooperative Banks also perform investment credit operations in agriculture and rural sectors in the absence of separate structure for Long Term credit.

Formation of the National Federation was a land mark event in the history of the Structure. Since its inception, the Federation has been playing an important role in the growth of institutions in the sector. It has established effective coordination and promoted understanding among member banks and liaison with Central and State Governments, NABARD and financing agencies of SCARDBs.

Other activities of the Federation include organizing Seminars and Workshops, undertaking research studies and formulation of Plans and programmes through its Planning, Research and Development Cell, compilation and publishing of statistics of member banks' operations, sponsoring of study teams, co-coordinating investments in debentures, undertaking special training programmes, publicity work, providing guidance and advice on issues relating to operations and governance. The quarterly Land Bank Journal published by the Federation since the last 54 years has gained considerable popularity. The Federation is also assisting member banks in business development and expansion by designing new products.

Lobbying with the Government for implementing revival package comprising of recapitalisation and reforms, guiding SCARDBs in self-driven reform initiatives and guidance and support to member banks in resource mobilization, recovery and NPA management and business expansion and diversification continued to be the thrust areas of Federation's activities during the year.