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Banking & Credit :: LAND DEVELOPMENT BANKS (LDB)
The special banks providing Long Term Loans are called Land Development Banks (LDA). The history of LDB’s is quite old. The first LDB was started at Jhang in Punjab in 1920. But the real impetus to these banks was received after passing the Land Mortgage Banks Act in 1930’s (LDB’s were originally called Land Mortgage Banks). After passing this Act LDB’s were started in different states of India.
The Agriculture Credit Review Committee (ACRC) in 1989 emphasised the bigger role for the LDBs and recommended to incorporate development of agriculture and its allied activities including wastelands and non-farm sector development. The banks in due course diversified their activities and at the instance of the NABARD in the year 1982 they started financing for agriculture and rural development activities including wastelands. However, late eighties and the beginning of nineties were the crucial period in which LDBs adopted financing long term loans for more significant rural development activities like, village and cottage industries, rural artisans etc. Besides financing for rural housing schemes under NHB refinance was introduced by the banks in selected states like Kerala, Karnataka, Uttar Pradesh, Maharashtra, West Bengal etc. In view of broader role of LDBs they are now known as State Co-operative Agriculture and Rural Development Banks (SCARDBs).
The main objective of the land development bank is to promote the development of agriculture and increase the agricultural production. The CLDBs provide long-term finance to PLDBs affiliated to them or finance directly through their branches.
These Banks have two-tier structure
1. Primary Land Development Bank at district level with branches at taluka level.
2. State Land Development Bank. All primary Land Development Banks are federated into Central Land Development Bank at the State Level. In some States, there is “ Unitary structure” wherein, there is only one State Land Development Bank at the state level operating through its branches and sub-branches at district and below levels.
Primary Land Development Banks (PLDB)
These banks were originally organized to cover one or a few taluks in the district. At present they are eligible to cover one development block. All land owners are eligible to become members and borrow funds by mortgaging their land. The principal borrower is enrolled as ‘A’ class member and others who have interest in the mortgaged property are admitted as ‘B’ class members.
Central Land Development Bank (CLDB)
These members of the CLDBs are the PLDBs and a few individual promoters. It grants long-term loans to agriculturists through the PLDBs and branches of CLDBs. It raises funds through floating debentures, which are guaranteed by the State Government. When PLDB obtains loan from the CLDB, it assigns the mortgage deeds obtained from the borrowers to the CLDB. The CLDB floats debentures and raises funds against the security of these properties. The NABARD and LIC subscribe for the debentures in large amounts and the former also extends refinance assistance to LDBs.
The main function of raising funds is carried out be the Central or State Land Development Bank which can really deal with the money market of the country effectively and advance loans to primary LDB’s. The sources of funds of State LDB’s are:-
1. Share capital.
Issue of debentures is the main source of funds for the LDB’s. Debentures is a `Bond’ conveying and acknowledging the debt and also containing the provision of promise for payment of interest at stipulated rate and return of the principal amount. The period of debentures varies from 7 to 15 years. As LDB’s require funds of longer duration to advance LT loans to borrowers, the debenture is a convenient instrument of raising funds. Because it guarantees that funds will remain with the Banks for a specified period.
There are three types of debentures
1. Regular debentures
These debentures are mostly purchased by financial institutions like LIC, Commercial Banks, Co-op. Banks, NABARD, and State Govts. As there is limited response from the public. The State Govt. give incentive subsidies for many development activities by individual farmer including purchase of tractor. The amounts of subsidies are reimbursed to the LDB’s.
The rates of interest for LT Loans are generally low and within the paying capacity of farmers. They are around 11 to 12%.
The Branch offices receive applications from the prospective borrower. Then Agricultural Finance Officer or Inspector scrutinises these applications, they visit places of the application and ascertain the purpose of borrowing, verify the genuineness of the proposal and it economic viability, repaying ability of the farmers, adequacy of security,etc. After completing those formalities, the loan is granted by the appropriate authority at appropriate level depending upon the delegation of powers by the Banks.
Financing of the long-term credit (5 years and above) for agriculture and its allied activities and also for NFS, Rural Housing, Wastelands development is the main objective of the SCARDBs. Thus, the credit delivery system of SCARDBs may be divided broadly into three sectors. Farm sector, non-farm sector and rural housing sector.
A. Farm sector
Under farm sector the purposes for which the long-term loans are advanced by the SCARDBs are as follows:
i. Minor Irrigation works i.e
(a) Digging/renovation of wells
ii. Farm Mechanisation
(a) Tractor/power tillers with accessories
iii. Land Development/Land Reclamation including water conservation
iv. Horticulture development (fruit crops, floriculture, mushrooms, vegetables etc)
v. Plantation crops (coconut, cashew, arecanut, rubber, coffee, cardamom, tea, bamboo etc.)
vi. Diversified activities (dairy, poultry, piggery, rabbit, fishery, sheep & goat rearing, gobar gas/bio-gas, farm house, sericulture, rural godowns, bullocks and bullock carts/camel carts, APMC, cold storages/storages etc.)
vii. Wastelands development/afforestation, dry land development.
viii. Payment of old debts
ix. Purchase of land
B) Non-farm Sector
i) Village and cottage industries
C) Rural Housing
i) Construction of new houses upto Rs.5 lakhs
Terms & Conditions
i. Upto 95% loan may be sanctioned to borrowers depending upon the purposes for which loan is required.
LT loan is granted on land/agricultural land mortgage as main security. Besides hypothecation of assets, surety etc., will be treated as collateral security.
iii. Land Valuation
The eligibility criteria of loan will be fixed on land valuation 60 per cent of which will be taken as loan value.
iv. Repayment period
LT loans are granted for five years and above upto 15 years depending upon the loan purpose. Grace period is granted on specific projects.
Whom to approach for loan/details of scheme
Primary Agriculture and Rural Development Banks/Branches of SCARDBs are located at each taluka/block in the country. The needy person may contact Manager of the PCARDBs/Branches during working hours for details for detailed enquiry about schemes, terms and conditions, loan application etc.
To strengthen the resource base of SCARDBs, RBI has granted permission for accepting rural deposits from the borrowers/non-borrowers of SCARDBs in rural areas. SCARDBs have formulated their various deposit mobilisation schemes and are accepting deposits ranging from one year onwards.
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