APPROACH TO RURAL LENDING and APMC

There are basically two types of approaches through which banks lend in rural areas. One is branch based, in which all activities like sourcing, disbursal, post sanction follow up are controlled by the staff working at the branch. Other is non-branch delivery based model in which a more holistic approach is taken. Banks get into partnerships with other financial institutions and franchisees.

Identifying models for rural lending

1. The most basic requirement is to ensure that the actual producer benefits from a higher return for their produce. At present the market is highly disorganized and the producer is therefore unable to take any advantage. In the current market practice a lot of intermediaries are involved, such as Dalals and Arathias, who just take care of their own interest. And the farmer, who is the producer, gets minimal to sustain him, and most of profit is taken by taken by the middle men.

2. There is a very little support for the farmers to store their produce and take the advantage of an anticipated increase in price for their produce as proper and cheap storage facilities are not available. The farmer has no capacity to wait and get better return in the market. The produce gets disposed off at the depressed prices levels, because everybody sells his produce during the post harvest period.

3. The very primitive condition of the roads coupled with the lack of adequate and cheap transportation facilities, makes it impossible for the farmers to transport their produce directly to the consumers and by-pass the middle men. And also the markets are far off the capacity of farmer that better price, they could get.

In recent times, considerable head way has been made for regulating the marketing of the agricultural commodities through a model called Agricultural Produce Market Committee Act (APMC). Through this a lot of malpractices prevailing in the agriculture commodities market are sought to be removed. A notable feature is the encouragement provided for public-private partnership inn developing and managing the agricultural commodity market.

Large integrated cooperative marketing societies exist, which serve the cause of producers in effectively marketing their produce, such as cotton, sugarcane, potato, tobacco and fertilizers.

Advantages of APMC model

1. Storage and grading of commodities are done by APMC.

2. It provides farmers with a better capacity to wait and obtain better prices.

3. Interim finances are made available to farmer’s pending sale of produce thereby enhancing their capacity to wait for better prices.

4. Provides the farmers the ability to move the bulk of their commodity to the market at cheap rate.

5. Helps to even out the imbalances in the market.

6. Farmers are provided with High Yield Variety (HYV) seeds and other agriculture inputs required for increasing the farm production.