UPSC Prelims 2013 Q100: Indian Economy – Agriculture & Rural Development
Which of the following grants/grant direct credit assistance to rural households?
1. Regional Rural Banks
2. National Bank for Agriculture and Rural Development
3. Land Development Banks
Select the correct answer using the codes given below:
- (a) 1 and 2 only
- (b) 2 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Answer: (c) 1 and 3 only
Explanation
Who gives direct credit to rural households?
| Institution | Direct credit to rural households? | Role |
|---|---|---|
| 1. Regional Rural Banks | Yes | Lend directly to small and marginal farmers, artisans and labourers |
| 2. NABARD | No | An apex refinance body; lends to banks, not to households |
| 3. Land Development Banks | Yes | Give long-term loans to farmers against land |
Rural credit structure:
| Institution | Set up | Function |
|---|---|---|
| Regional Rural Banks | 1975 | Owned by the Centre (50 percent), the State (15 percent) and a sponsor bank (35 percent) |
| NABARD | 1982, on the Sivaraman Committee report | Refinance, supervision of RRBs and cooperatives, Rural Infrastructure Development Fund |
| Cooperative credit | Early 20th century | Short-term: PACS, district and State cooperative banks; long-term: land development banks |
Answer: (c) 1 and 3 only.
Why each option is right or wrong
- (a) Incorrect. NABARD does not lend directly to rural households.
- (b) Incorrect. NABARD is a refinance body, not a direct lender to households.
- (c) CORRECT. Regional Rural Banks and Land Development Banks lend directly.
- (d) Incorrect. NABARD only refinances other institutions.
Key point
Direct rural lenders: RRBs (1975), cooperatives, land development banks, commercial banks. NABARD (1982) is the apex refinance and supervisory body.
Remember
NABARD refinances; RRBs and land banks lend.
Common mistakes
- Thinking NABARD gives loans straight to farmers.
- Forgetting the ownership of RRBs: 50 : 15 : 35.
- Confusing short-term cooperative credit with long-term land development banks.
Exam tip
NABARD is the banker's bank for rural credit. It refinances; others lend.
Sources
- National Bank for Agriculture and Rural Development — About NABARD
- Regional Rural Banks Act, 1976