ques1. explain medium term and long term rural credit.

ques2. what are the demerit of moneylender in rural credit in india?

ques 3. what is the multi agency approach or national policy of rural credit ?discuss its objective

Ans 1.

Medium Term Credit: Granted for a time period between 15 months to 5 years. The rationale to take such credit is to purchase productive capital goods such as farm machinery and livestock, undertake land improvements, etc. Such credits are also taken to meet the social obligations such as daughter's marriage, medical expenses, etc.

Long Term Credit: Granted for a period of 5years to 20 years. Usually required for purchase of land-farms, undertake modernisation and mechanisation by purchasing sophisticated and modern machinery.

Ans 2. In rural areas, moneylenders form the most popular source of credit. They account for more than 90% of the total rural credit requirements. However, the money lenders often exploit the poor farmers. They charged exorbitant rates of interest for them and also manipulate their accounts. As a result, the farmers remain caught in a never ending debt-trap. 

Ans 3. In India, the structure of rural banking is called the multi agency system and comprises of the following institutions.

(i) Co-operative Banks and Co-operative Credit Societies

(ii)Regional Rural Banks

(iii) Commercial Banks

(iv)Land Development Banks

The following are some of the broad objectives of this approach.

a) To eliminate the role of money lenders as a source of credit.

b)To provide easy and adequate credit to the farmers.

c) To expand the flow of credit in rural areas.

d) To satisfy the credit needs of the small and marginal workers 

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