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Indian Economic Policy

Notes co-operation must succeed.” It was the All India Rural Credit Survey Committee (1969) which
recommended the adoption of “multi-agency approach” to finance the rural sector. For the first time,
the Government openly accepted that rural credit could not be met by co-operative societies alone
and that commercial banks should play an important role in the rural sector.
On the recommendations of this committee, RBI took a series of measures to strengthen the co-operative
movement. The State Bank of India was set up in 1955 after nationalising the Imperial Bank of India
to show a special concern for agricultural credit.
In 1969 14 leading banks were nationalised. This was followed by the setting up of Regional Rural
Banks (RRBs). Thus, the multi-agency approach of institutional credit to agriculture was evolved
over a number of years.
While RBI was helping the co-operative sector directly, it was felt that the multi-agency approach to
rural finance required a special banking institution to coordinate and help all the institutions
specialising rural finance. It was for this reason that NABARD was set up as the apex bank for rural
finance in 1982.
Growth of Institutional Credit for Farmers

The extent of institutional credit for farmers in recent years is given in table 1.
Table 1 shows that total agricultural credit from institutional sources had steadily increased from `
6,230 crores in 1984-85 to ` 2,03,300 crores in 2006-07. The contribution of co-operatives was 55 per
cent of total institutional credit in 1984-85 but was only 21 per cent in 2005-2006. Correspondingly
commercial banks including RRBs have raised their share from 45 per cent to 69 per cent during this
period.
The Tenth Plan (2002-07) projected a substantial jump in institutional credit flow to the agricultural
sector to the tune of ` 7,36,600 crores - almost three times, as compared to the Ninth Plan) — and the
annual average credit flow would be ` 1,49,120 crores — as against ` 46,000 crores during the Ninth
Plan.
Table 1 : Institutional Credit to Agriculture

Year Cooperative RRBs Commercial
Banks % Amount % Banks % Total %
Amount Amount

1984-85 3,440 55 – _ 2,790 45 6,230 100
1997-98 14,090 44 2,040 6 15,830 50 31,960 100
2002-03 23,720 34 6070 9 39,770 57 69,560 100
2006-07 42,480 21 20,440 10 1,40,380 69 2,03,300 100
2007-08 48,258 19 25,312 10 1,81,088 71 2,54,658 100
2008-09 36,762 13 26,724 9 2,28,951 78 2,59,337 100
2009-10 63,492 17 35,218 9 2,85,799 74 3,84,514 100
2010-11 29,450* 15 19,141 10 1,45,801 75 1,94,392 100
Source : Economic Survey, 2010-11
* Upto Sept. 2010
Table 1, however, shows that during Tenth Plan (2002-03 and 2007-08), there was substantial increase
in institutional credit flow and by the year 2009-10, it reached ` 3,84,514 crores.
Table 1 shows that even though total institutional credit to agriculture, has been steadily rising, there
has been
(a) Steady decrease in percentage terms, in the contribution of cooperative banks in rural credit -
from 55% in 1984 to 17% in 2009-10.

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