Idbi Bank Project

STUDY AND ANALYSIS BANK FINANCES IN AGRICULTURE SECTOR
(CONTRACT FARMING)
Summer Project Report
Submitted
In the partial fulfillment of the Degree of
Master of Business Administration (Agribusiness)
Semester-II
By
Baxi Vishvak P. (02)
Under the Guidance of:
IDBI Bank Ltd. Mehsana
Submitted To:
Dr.Maurvi Pandya
Centre for Management Studies
Ganpat University,
Kherva.
July, 2011
Study and Analysis Bank Finance in Agriculture Sector (Contract Farming) Page 1
CERTIFICATE BY THE GUIDE
This is to certify that the contents of this report entitled “STUDY AND ANALYSIS
BANK FINANCES IN AGRICULTURE SECTOR (CONTRACT FARMING)” about
Agriculture finances at Mehsana by BAXI VISHVAK PARINDRA the student of CMS, Ganpat
University submitted to IDBI Bank Ltd, Mehsana. As a part of summer internship (MBA-
AGRIBUSINESS Sem-II) is original Research work carried out by him under my supervision.
This report has not been submitted either partly or fully to any other University or Institute for
award of any degree or diploma courses.
Dr. MAURVI PANDYA
Centre for Management Studies,
Ganpat University,
Kherva
Date:
Place: Ahmadabad
CERTIFICATE BY THE MENTOR
This is to certify that the contents of this report entitled “STUDY AND ANALYSIS BANK
FINANCE IN AGRICULTURE SECTOR (CONTRACT FARMING)” by BAXI VISHVAK P.
Roll No.02 submitted to Centre for Management Studies (Agribusiness Management) for the
Award of Master of Business Administration (MBA Sem-II) is original research work carried out
by him under my mentoring. I, hereby certify the authenticity of the data and facts mentioned in
the report.
This report has not been submitted either partly or fully to any other University or Institute
for award of any degree or diploma.
Mr. Abhishek Sawant,
IDBI Bank Ltd.

Mehsana.
II
CANDIDATE’S STATEMENT
I hereby declare that the work incorporated in this report entitled “STUDY AND ANALYSIS
BANK FINANCE IN AGRICULTURE SECTOR (CONTRACT FARMING).” in partial
fulfillment of the requirements for the award of Master of Business Administration (Sem. - II) is
the outcome of original study undertaken by me and it has not been submitted earlier to any other
University or Institution for the award of any Degree or Diploma.
Baxi Vishvak P.
(Name & Sign of Student)
Date:
Place:
III
PREFACE
The MBA (Agribusiness) programme is well structured and integrated course of business
studies. The main objective of practical training at MBA level is to develop skill in student by
supplement to the theoretical study of business management in general. Industrial training helps
to gain real life knowledge about the industrial environment and business practices. The MBA
(Agribusiness) programmed provides student with a fundamental knowledge of business and
organizational functions and activities, as well as an exposure to strategic thinking of
management.
In every professional course, training is an important factor. Professors give us theoretical

knowledge of various subjects in the college but we are practically exposed of such subjects
when we get the training in the organization. It is only the training through which I come to
know that what an industry is and how it works. I can learn about various departmental
operations being performed in the industry, which would, in return, help me in the future when I
will enter the practical field.
Training is an integral part of MBA and each and every student has to undergo the training for
Two months in a company and then prepare a project report on the same after the completion
of training.
During this whole training I got a lot of experience and came to know about the
management practices in real that how it differs from those of theoretical knowledge and the
practically in the real life.
In Today‟s globalize world, where aggressive competition is prevailing in the market, theoretical
knowledge is not sufficient. Beside this one need to have practical knowledge, which would help
an individual in his/her carrier activities and it is true that
“Experience is best teacher”
IV
ACKNOWLEDGEMENT
With immense pleasure, I would like to present this project report for IDBI Bank Ltd, Mehsana
It has been an enriching experience for me to undergo my summer training at IDBI BANK, which
would not have possible without the goodwill and support of the people around. As a student of
CENTER FOR MANAGEMENT STUDIES I would like to express my sincere thanks to all
those who helped me during my practical training programme.
Words are insufficient to express my gratitude toward Mr. ABHISHEK SAWANT, the
ASSISTANT MANAGER (AGRI DIVISION) of IDBI Bank Ltd, Mehsana. I would like to give my heartily
thanks to Mr. Vikas Nigam, Branch Manager, who permitted me to get training at IIDBI Bank
Ltd, Mehsana. I am very thankful to Mr. P .R. Patel, who helped me at every step whenever I
needed.
At last but not least my grateful thanks is also extended to Dr. Maurvi Pandya (Programme
Coordinator) and my thanks to all my faculty members for the proper guidance and assistance
extended by them. I am also grateful to my Father Mr. P .H. Baxi without him I can‟t image
myself & Mrs. N .P. Baxi who give me moral support really papa and mom without your
support this project will be not completed. And my friends who give me all required support to
completed my project.
INDEX
Certificate By the Guide………………………………………………………………………………………………………………….I
Certificate by Mentor……………………………………………………………………………………………………………….…...II
Candidate’s Statement …….…………………………………………………………………………………………………………..III
Preface……………………………………………………………………………………………………………………………………….…IV
Acknowledgments…………………………………………………………………………………………………………………………V
List of Tables…………………………………………………………………………………………………………………………………VI
List of Figures & Graphs………………………………………………………………………………………………………………..XII
SR.NO CHAPTER PAGE.NO

CH 1. History of Banking Industries 1
1.1 NABARD Role in Banking Industries 11
1.2 Priority sector in India 16
CH 2. Company profile 32
2.1 IDBI Bank Product & Services 41
2.2 Agricultural Finance Through IDBI Bank 43
2.3 Contract Farming 50
CH 3. Study Research 58
3.1 Map of Location Visited 58
3.2 Bank list of Contract Farming 59
CH 4. Research Design 61
CH 5. Data Interpretation and analysis 66
Hypothesis testing 76
CH 6. Limitation to the study 82
CH 7. Recommendations and Finding 83
7.1 Conclusion & Suggestions 86
CH 8. Appendices 88
8.1 Questionnaire 88
8.2 Recent Case & Studies 91
8.3 Contract Farming Farmer‟s List 93
8.4 Company List of Contract Farming 95
Bibliography 100
List of Tables
Particular Page no.
State bank of India Associated bank list 04
Old Private Sector Bank 06
New Private Sector Bank 07
Foreign Bank 08
Target and Sub Target Priority sector 18
Insurance against fire & other risk 30
Relative valuation 39
IDBI Bank Rating 44
Agriculture Finance ( Shorts terms Loans) 45
Agriculture Finance (Terms Loans) 46
Allied Activates 48
Indirect Finance to Agricultures 49
Sampling details 65
Contract Farming Farmers list 93
Company list of contract farming 95
VI
List of Figures & Graphs
Particular Page no.
North Gujarat visited Map 58
Farmers age analysis 66
Farmers Education analysis 67
Farmers Farm size analysis 68
Contract farming crop produces 69
How to know about contract farming 70
Factor which invites famers for contract 71
farming
Awareness of IDBI Bank Agri finance 72
Farmers Bank ranking 73
Satisfaction towards IDBI Bank 74
Advertisement analysis of IDBI Bank 75
Improving Model of Contract Farming 85
XII
History of Banking Industries
Introduction
In the earlier societies functions of a bank were done by the corresponding institutions dealing
with loans and advances. Britishers brought into India the modern concept of banking by the start
of Bank of England in 1694. In 1708, the bank of England was given the monopoly for the issue
of currency notes by an Act. In nineteenth century various banks started operations, which
primarily were receiving money on deposits, lending money, transferring money from one place
to another and bill discounting.
History of Banking in India
Banking in India has a very old origin. It started in the Vedic period where literature shows the
giving of loans to others on interest. The interest rates ranged from two to five percent per
month. The payment of debt was made pious obligation on the heir of the dead person.
Modern banking in India began with the rise of power of the British. To raise the resources for
the attaining the power the East India Company on 2nd June 1806 promoted the Bank of Calcutta.
In the mean while two other banks Bank of Bombay and Bank of Madras were started on 15 th
April 1840 and 1st July, 1843 respectively. In 1862 the right to issue the notes was taken away
from the presidency banks. The government also withdrew the nominee directors from these
banks. The bank of Bombay collapsed in 1867 and was put under the voluntary liquidation in
1868 and was finally wound up in 1872. The bank was however able to meet the liability of
public in full. A new bank called new Bank of Bombay was started in 1867.
On 27th January 1921 all the three presidency banks were merged together to form the Imperial
Bank by passing the Imperial Bank of India Act, 1920. The bank did not have the right to issue
the notes but had the permission to manage the clearing house and hold Government balances. In
1934, Reserve Bank of India came into being which was made the Central Bank and had power
to issue the notes and was also the banker to the Government. The Imperial Bank was given right
to act as the agent of the Reserve Bank of India and represent the bank where it had no braches.
In 1955 by passing the State Bank of India 1955, the Imperial Bank was taken over and assets
were vested in a new bank, the State Bank of
Bank Nationalization
After the independence the major historical event in banking sector was the nationalization of 14
major banks on 19th July 1969. The nationalization was deemed as a major step in achieving the
socialistic pattern of society. In 1980 six more banks were nationalized taking the total
nationalized banks to twenty.
Various Types of banking services:
The flow chart below shows the various types of banking services:
CENTRAL BANK
Commercial Banks Specialized banks Institutional banks Non Banking Financial

Institutions
Land Mortgage IFCI Mutual Funds

Rural Credit SFCs
Nationalised SBI and
banks (20) Associate Industrial Dev. IRBI Private Sector
Banks
Housing Finance NABARD NBFC
EXIM Bank HDFC
SIDBI
Private Foreign Banks

Sectors Banks
Old private New private

sector banks sector banks
Structure of schedule commercial banks
The composition of the board of directors of a scheduled commercial bank shall consist of whole
time chairman. Section 10A of the Banking Regulation Act, 1949 provides that not less than
fifty-one per cent, of the total number of members of the Board of directors of a banking
company shall consist of persons, who shall have special knowledge or practical experience in
respect of one or more of the matters including accountancy, agriculture and rural economy,
banking, co-operation, economics, finance, law, small-scale industry, or any other matter the
special knowledge of, and practical experience in, which would, in the opinion of the Reserve
Bank, be useful to the banking company. Out of the aforesaid number of directors, not less than
two shall be persons having special knowledge or practical experience in respect of agriculture
and rural economy, co-operation or small-scale industry.
Besides the above the board of the scheduled bank shall consist of the directors representing
workmen and officer employees. The Reserve Bank of India and the Central Government also
has right to appoint their nominees into the board of the banks.
Present scenario of the banks in India:

Banks are extremely useful and indispensable in the modern community. The banks create the
purchasing power in the form of bank notes, cheques bills, drafts etc, transfers funds bring
borrows and lenders together, encourage the habit of saving among people.
The banks have played substantial role in the growth of Indian economy. From the meager start
in 1860 the banks have come to long way. At present in India there are 20 nationalized banks,
State bank of India and its seven Associate banks, 21 old private sector banks and 8 new private
sector banks. Besides them there are more than 30 foreign banks either operating themselves or
having their branches in India. The statistical table hereunder shows the financial position of the
banks as on 31.03.2005.
Statistical table for banks in India (Year 2004-05)
(Rs. In Crores)
State bank of India and its associates
Name of bank Year of No. of Networth Deposits Advances Interest Net

incorporation Offices income NPA
ratio
State Bank of Bikaner 1966 833 1298 19038 12009 1741 1.61
& Jaipur
State Bank of 1941 943 1765 28930 15600 2325 0.61

Hyderabad
State Bank of India 1955* 9161 24072 367048 202374 32428 2.65
State Bank of Indore 1960 456 904 13807 9041 1110 1.00
State Bank of Mysore 1913 639 756 13585 8781 168 0.92
State Bank of Patiala 1917 754 2045 26496 15359 2133 1.23
State Bank of 1902 429 794 12613 6714 1132 1.40

Saurashtra
State Bank of 1945 681 1130 24133 14848 2008 1.81

Travancore
* From 27th January 1921 to 30th June 1955 it was Imperial Bank of India, which came about by
merger of Bank of Bengal (2nd June 1806), Bank of Bombay (15th April 1840) and Bank of
Madras (1st July, 1843).
Name of Year of No. of Networth Deposits Advances Interest Net
Nationalized incorporation Offices income NPA
Bank ratio
Allahabad Bank 1865 2027 2328 40762 21151 3186 1.28
Andhra Bank 1923 1159 1837 27551 17517 2273 0.28
Bank of Baroda 1908 2772 5628 81333 43400 6431 1.45
Bank of India 1906 2668 4465 78821 56013 6032 2.77
Bank of 1935 1330 1543 28844 13062 2368 2.15

Maharashtra
Canara Bank 1906 2627 6109 96908 60421 7572 1.88
Central Bank of 1911 3239 3265 60752 27277 5205 2.98

India
Corporation 1906 799 3054 27233 18546 2250 1.12

Bank
Dena Bank 1938 1072 1104 20096 11309 1725 5.23
Indian Bank 1907 1417 5936 34809 18360 2871 1.35
Indian Overseas 1937 1583 2575 44241 25205 3951 1.27

Bank
Oriental Bank 1943 1166 3327 47850 25299 3572 1.29

of Commerce
Punjab & Sind 1908 787 440 14171 6322 1249 8.11
Bank
Punjab National 1895 4117 8161 103167 60413 8460 0.20

Bank
Syndicate Bank 1925 1905 2199 46295 26729 3758 1.59
UCO Bank 1943 1801 2049 49470 27656 3547 2.93
Union Bank of 1919 2140 3614 61831 40105 4970 2.64

India
United Bank of 1950 1343 1957 25348 11390 2133 2.43

India
Vijaya Bank 1931 966 1590 25618 14336 2094 0.59
Old private Sector Banks
Name of bank Year of No. of Networth Deposits Advances Interest Net NPA
incorporation Offices income ratio
Bank of Rajasthan 1943 388 351 8120 2896 522 2.50
Bharat Overseas Bank 1973 91 199 2749 1651 219 1.56
Catholic Syrian Bank 1920 314 210 4021 2289 368 3.80
City Union Bank 1904 137 241 3095 2013 291 3.37
Development Credit 1995** 88 200 3895 2001 303 6.83

Bank
Dhanalakshmi Bank 1927 180 114 2339 1410 192 3.92
Federal Bank 1931 471 724 15193 8823 1191 2.21
Ganesh Bank of -- 31 11 217 95 18 8.32

Kurundwad
ING Vysya Bank 1930 381 710 12569 9081 991 2.13
Jammu & Kashmir Bank 1938 439 1665 21645 11517 1549 1.41
Karnataka Bank 1924 398 978 10837 6287 840 2.29
Karur Vysya Bank 1926 249 761 6672 4620 591 1.66
Lakshmi Vilas Bank 1926 239 230 3496 2318 298 4.98
Lord Krishna Bank 1940 118 181 2176 1387 195 4.22
Nainital Bank 1922 69 76 933 363 74 0.00
Ratnakar Bank 1943 75 45 784 424 66 5.54
Sangli Bank 1948 192 85 1985 812 137 4.30
SBI Comm. & Intl. Bank 1993 3 88 331 231 26 7.65
South Indian Bank 1929 438 456 8492 5365 709 3.81
Tamilnad Mercantile 1921 183 559 4827 2626 513 2.95

Bank
United Western Bank 1936 237 244 6453 3976 487 5.97
** Converted to a private sector commercial bank on 31st May, 1995. Started as a Credit Society
set up by the followers of His Highness the Aga Khan in the 1930s and later converted into Co-
operative Bank.
New Private Sector banks
Name of bank Year of No. of Networth Deposits Advances Interest Net NPA ratio
incorporation Offices income
Bank of Punjab* 1995 120 241 4307 2417 329 4.64
Centurion Bank 1994 77 590 3530 2194 346 2.51
HDFC Bank 1994 446 4520 36354 25566 3093 0.24
ICICI Bank 1994 519 12900 99819 91405 9410 1.65
IDBI Bank Ltd. 1994 157 5929 15103 45414 2656 1.74
IndusInd Bank 1995 127 830 13114 9000 1134 2.71
Kotak Mahindra 1985 54 757 4300 4017 420 1.56

Bank
UTI Bank 1994 249 2422 31712 15603 1924 1.39
Yes Bank 2003 3 217 663 761 30 0.00
* now merged with Centurion Bank
Foreign Banks
Name of bank No. of Networth Deposits Advances Interest income Net NPA ratio
Offices
ABM Amro Bank 19 1347 7077 9831 907 0.35
Abu Dhabi 2 71 1663 90 150 12.73

Commercial Bank
American Express 8 301 2264 1483 270 0.99

Bank
Antwerp Diamond 1 128 50 434 26 0.00

Bank
Arab Bangladesh 1 45 23 22 3 0.28

Bank
Bank International 1 74 11 20 1.81 10.49

Indonesia
Bank of America 5 1437 1993 3219 257 0.00
Bank of Bahrain & 2 67 394 264 34 5.53

Kuwait
Bank of Ceylon 1 54 104 59 8 13.76
Bank of Nova 5 257 1602 2053 159 3.08

Scotia
Bank of Tokyo 3 369 532 559 57 0.01

Mitsubishi
Barclays Bank 1 698 75 2 31 0.00
BNP Paribas 9 333 1674 1719 176 0.00
Calyon Bank 4 328 1306 674 117 0.30
Chinatrust 1 45 48 59 9 6.02
Commercial Bank
Cho Hung Bank 1 72 97 69 0.99 0.00
Citibank 35 3310 21484 18111 2203 1.00
DBS Bank 1 556 611 560 30 0.00
Deutsche Bank 5 1232 3625 2541 390 0.00
Hongkong & 39 3578 17013 12621 1627 0.50

Shanghai Banking
Corpn.
JP Morgan Chase 1 266 930 150 40 0.00

Bank
Krung Thai Bank 1 40 34 16 4 0.00
Mashreq Bank 2 58 269 19 29 0.00
Mizuho Corporate 1 164 110 267 17 0.00

Bank
Oman International 2 161 225 13 18 55.05

Bank
Societe Generale 2 321 527 159 37 0.00
Sonali Bank 1 6 22 6 1 1.90
Standard Chartered 85 3234 22522 19970 2493 1.12

Bank
State Bank of 3 126 148 222 36 4.08

Mauritius
UFJ Bank 1 228 71 102 16 0.00
(Source: A profile on banks 2004-05, RBI))
The banks in India are operating through 55530 branches. All the banks together had the net
worth of Rs. 149385 crores as on 31st March, 2005. The banks also had the deposit base of Rs.
1836985 crores and the advances of Rs. 1151113 crores taking the total business to Rs. 2988098
crores. During the year 2004-05 the banks had earned the interest income of Rs. 154761 crores.
The average net NPA ratio of the banks was also less 3.84% in year 2005.
Future is bright:
The Information Technology (IT) is becoming an important component of the banking sector.
The customers have become more demanding and they need value added services from the
banks. The foreign banks have raised the expectations of the customers causing the bank to
invest strongly on IT. The Indian banks have started to meet the expectations of the people by
opening both onsite and offsite ATMs. Banks have also started telebanking, anytime/anywhere
banking, mobile banking and Internet banking to give the facilities to the customers. Banks have
also following the RBI sponsored technology programmes like mail messaging, Electronic fund
transfers (EFT), Structured Financial Messaging System (SFMS), (Real Time Gross Settlement
(RTGS), Centralized Fund Management System (CFMS) and Negotiated Dealing System /
Public Debt Office (NDS/PDO).
Banks have been given more teeth to tackle the Non performing assets by passing the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002. Under this Act, the banks can take over the assets of the defaulters either by themselves or
with the help of Court. The power is in addition to the power to recover through the Debt
Recovery Tribunal. The Asset Reconstruction Companies have been formed which also take
over the distress assets from the banks.
NABAD Role in Banking Industries
NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for
promotion and development of agriculture, small-scale industries, cottage and village industries,
handicrafts and other rural crafts. It also has the mandate to support all other allied economic
activities in rural areas, promote integrated and sustainable rural development and secure
prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is
entrusted with
1. Providing refinance to lending institutions in rural areas
2. Bringing about or promoting institutional development and
3. Evaluating, monitoring and inspecting the client banks
Besides this pivotal role, NABARD also:
• Acts as a coordinator in the operations of rural credit institutions
• Extends assistance to the government, the Reserve Bank of India and other organizations
in matters relating to rural development
• Offers training and research facilities for banks, cooperatives and organizations working
in the field of rural development
• Helps the state governments in reaching their targets of providing assistance to eligible
institutions in agriculture and rural development
• Acts as regulator for cooperative banks and RRBs
• Extends assistance to the government, the Reserve Bank of India and other organizations
in matters relating to rural development
• Offers training and research facilities for banks, cooperatives and organizations working
in the field of rural development
• Helps the state governments in reaching their targets of providing assistance to eligible
institutions in agriculture and rural development
• Acts as regulator for cooperative banks and RRBs
Some of the milestones in NABARD's activities are:
• Refinance disbursement under ST-Agri & Others and MT-Conversion/ Liquidity support
aggregated Rs.19452 crore during 2009-10.
• Refinance disbursement under Investment Credit to commercial banks, state cooperative banks,
state cooperative agriculture and rural development banks, RRBs and other eligible financial
institutions during 2009-10 aggregated Rs.12009.08 crore.
•
Through the Rural Infrastructure Development Fund (RIDF) Rs.12387.54 crores were disbursed
during 2009-10. With this, a cumulative amount of Rs.86939.74 crore has been disbursed as on 31
March 2010 covering irrigation, rural roads and bridges, health and education, soil conservation,
drinking water schemes, flood protection, forest management and the Bharat Nirman Project
(BNP).
• Under Watershed Development Fund with a corpus of Rs.1102 crore as on 31 March 2008, 513
projects in 14 states have benefited.
• Farmers now enjoy hassle free access to credit and security through 906.40 lakh Kisan Credit
Cards that have been issued through a vast rural banking network.
•
Under the Farmers' Club Programme, a total of 54805 clubs covering 104648 villages in 587
districts have been formed, helping farmers get access to credit, technology and extension services.
NABARD MISSINON
Promoting sustainable and equitable agriculture and rural development through effective credit
support, related services, institution building and other innovative initiatives.
In pursuing this mission, NABARD focuses its activities on:
Credit functions, involving preparation of potential-linked credit plans annually for all districts
of the country for identification of credit potential, monitoring the flow of ground level rural
credit, issuing policy and operational guidelines to rural financing institutions and providing
credit facilities to eligible institutions under various programmes
Development functions, concerning reinforcement of the credit functions and making credit
more productive
Supervisory functions, ensuring the proper functioning of cooperative banks and regional rural
banks
NABARD OBJECTIVES
NABARD was established in terms of the Preamble to the Act, "for providing credit for the
promotion of agriculture, small scale industries, cottage and village industries, handicrafts and
other rural crafts and other allied economic activities in rural areas with a view to promoting
IRDP and securing prosperity of rural areas and for matters connected therewith in incidental
thereto".
The main objectives of the NABARD as stated in the statement of objectives while placing the
bill before the Lok Sabha were categorized as under :
1. The National Bank will be an apex organisation in respect of all matters relating to policy,
planning operational aspects in the field of credit for promotion of Agriculture, Small Scale
Industries, Cottage and Village Industries, Handicrafts and other rural crafts and other allied
economic activities in rural areas.
2. The Bank will serve as a refinancing institution for institutional credit such as long-term,
short-term for the promotion of activities in the rural areas.
3. The Bank will also provide direct lending to any institution as may approved by the Central
Government.
4. The Bank will have organic links with the Reserve Bank and maintain a close link with in.
Major Activities
• Preparing of Potential Linked Credit Plans for identification of exploitable potentials under
agriculture and other activities available for development through bank credit.
• Refinancing banks for extending loans for investment and production purpose in rural areas.
• Providing loans to State Government/Non Government Organizations (NGOs)/Panchayati

Raj Institutions (PRIs) for developing rural infrastructure.
• Supporting credit innovations of Non Government Organizations (NGOs) and other non-
formal agencies.
• Extending formal banking services to the unreached rural poor by evolving a supplementary
credit delivery strategy in a cost effective manner by promoting Self Help Groups (SHGs)
• Promoting participatory watershed development for enhancing productivity and profitability

of rainfed agriculture in a sustainable manner.
• On-site inspection of cooperative banks and Regional Rural Banks (RRBs) and iff-site
surveillance over health of cooperatives andRRBs.
Role and Functions
• NABARD is an apex institution accredited with all matters concerning policy, planning and
operations in the field of credit for agriculture and other economic activities in rural areas.
• It is an apex refinancing agency for the institutions providing investment and production
credit for promoting the various developmental activities in rural areas
• It takes measures towards institution building for improving absorptive capacity of the credit
delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of
credit institutions, training of personnel, etc.
• It co-ordinates the rural financing activities of all the institutions engaged in developmental
work at the field level and maintains liaison with Government of India, State
Governments, Reserve Bank of India and other national level institutions concerned with
policy formulation.
• It prepares, on annual basis, rural credit plans for all districts in the country; these plans form
the base for annual credit plans of all rural financial institutions
• It undertakes monitoring and evaluation of projects refinanced by it.
• It promotes research in the fields of rural banking, agriculture and rural development
LENDING TO PRIORITY SECTOR
At a meeting of the National Credit Council held in July 1968, it was emphasized that
commercial banks should increase their involvement in the financing of priority sectors, viz.,
agriculture and small scale industries. The description of the priority sectors was later formalized
in 1972 on the basis of the report submitted by the Informal Study Group on Statistics relating to
advances to the Priority Sectors constituted by the Reserve Bank in May 1971. On the basis of
this report, the Reserve Bank prescribed a modified return for reporting priority sector advances
and certain guidelines were issued in this connection indicating the scope of the items to be
included under the various categories of priority sector. Although initially there was no specific
target fixed in respect of priority sector lending, in November 1974 the banks were advised to
raise the share of these sectors in their aggregate advances to the level of 33 1/3 per cent by
March 1979.
At a meeting of the Union Finance Minister with the Chief Executive Officers of public sector
banks held in March 1980, it was agreed that banks should aim at raising the proportion of their
advances to priority sectors to 40 per cent by March 1985. Subsequently, on the basis of the
recommendations of the Working Group on the Modalities of Implementation of Priority Sector
Lending and the Twenty Point Economic Programmed by Banks, all commercial banks were
advised to achieve the target of priority sector lending at 40 per cent of aggregate bank advances
by 1985. Sub-targets were also specified for lending to agriculture and the weaker sections
within the priority sector. Since then, there have been several changes in the scope of priority
sector lending and the targets and sub-targets applicable to various bank groups.
On the basis of the recommendations of the Internal Working Group, set up in Reserve Bank to
examine, review and recommend changes, if any, in the existing policy on priority sector
lending including the segments constituting the priority sector, targets and sub-targets, etc. and
the comments/suggestions received thereon from banks, financial institutions, public and the
Indian Banks Association (IBA), it has been decided to include only those sectors that impact
large segments of population & the weaker sections, and which are employment-intensive, as
part of the priority sector.
I. CATEGORIES OF PRIORITY SECTOR
The broad categories of priority sector for all scheduled commercial banks are as under:
(i) Agriculture (Direct and Indirect finance): Direct finance to agriculture shall include
short, medium and long term loans given for agriculture and allied activities directly
to individual farmers, Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) of
individual farmers without limit and to others (such as corporates, partnership firms
and institutions) up to Rs. 20 lakh, for taking up agriculture/allied activities.
(ii) Small Scale Industries (Direct and Indirect Finance): Direct finance to small scale
industries (SSI) shall include all loans given to SSI units which are engaged in
manufacture, processing or preservation of goods and whose investment in plant and
machinery (original cost) excluding land and building does not exceed the amounts
specified in Section I, appended. Indirect finance to SSI shall include finance to any
person providing inputs to or marketing the output of artisans, village and cottage
industries, handlooms and to cooperatives of producers in this sector.
(iii) Small Business / Service Enterprises shall include small business, retail trade,
professional & self employed persons, small road & water transport operators and
other service enterprises as per the definition given in Section I and other enterprises
that are engaged in providing or rendering of services, and whose investment in
equipment does not exceed the amount specified in Section I, appended.
(iv) Micro Credit: Provision of credit and other financial services and products of very
small amounts not exceeding Rs. 50,000 per borrower to the poor in rural, semi-urban
and urban areas, either directly or through a group mechanism, for enabling them to
improve their living standards, will constitute micro credit.
(v) Education loans: Education loans include loans and advances granted to only
individuals for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20
lakh for studies abroad, and do not include those granted to institutions;
(vi) Housing loans: Loans up to Rs. 15 lakh for construction of houses by individuals,
(excluding loans granted by banks to their own employees) and loans given for
repairs to the damaged houses of individuals up to Rs.1 lakh in rural and semi-urban
areas and up to Rs.2 lakh in urban areas.
(2) Investments by banks in securitised assets, representing loans to agriculture (direct or
indirect), small scale industries (direct or indirect) and housing, shall be eligible for classification
under respective categories of priority sector (direct or indirect) depending on the underlying
assets, provided the securitised assets are originated by banks and financial institutions and fulfil
the Reserve Bank of India guidelines on securitisation.
(3) The targets and sub-targets under priority sector lending would be linked to Adjusted Net
Bank Credit (Net Bank Credit plus investments made by banks in non-SLR bonds held in HTM
category) or Credit Equivalent of Off-Balance Sheet Exposures, whichever is higher, as on
March 31 of the previous year.
(4) In order to encourage banks to increasingly lend directly to the priority sector borrowers, the
banks' deposits placed with NABARD/SIDBI on account of non-achievement of priority sector
lending targets would not be eligible for classification as indirect finance to agriculture/SSI, as
the case may be.
II. TARGETS/SUB-TARGETS
The targets and sub-targets set under priority sector lending for domestic and foreign banks
operating In India are furnished below:
Domestic commercial banks Foreign banks

Total Priority 40 per cent of Adjusted Net 32 per cent of ANBC or
Sector Bank Credit (ANBC) or credit credit equivalent amount
advances equivalent amount of Off- of Off-Balance Sheet
Balance Sheet Exposure, Exposure, whichever is
whichever is higher. higher
Total 18 per cent of ANBC or credit No target.
agricultural equivalent amount of Off
advances Balance Sheet Exposure,
whichever is higher Of this,
indirect lending in excess of
4.5% of ANBC or credit
equivalent amount of Off-
Balance Sheet Exposure,
whichever is higher, will not
be reckoned for computing
performance under 18 per cent
target. However, all agricultural
advances under the categories
'direct' and
'indirect' will be reckoned in
computing performance under
the overall priority sector target
of 40 per cent of ANBC or
credit equivalent
amount of Off-Balance Sheet
Exposure, whichever is higher
SSI advances Advances to SSI sector will be 10 per cent of ANBC or
reckoned in computing credit equivalent amount
performance under the overall of Off-Balance Sheet
priority sector target of 40 per Exposure, whichever is
cent of ANBC or credit higher
equivalent amount of Off-
Balance Sheet Exposure,
whichever is Higher.
Micro (i) 40 per cent of total SSI Same as for domestic
enterprises advances should go to units banks
within SSI having investment in plant and
machinery up to Rs 5 lakh,
(ii) 20 per cent of total SSI
advances should go to units with
investment in plant &
machinery between Rs 5 lakh
and Rs. 25 lakh (Thus, 60 per
cent of SSI advances should go
to the micro enterprises).
Export credit Export credit is not a part of 12 per cent of ANBC or
priority sector for domestic credit equivalent amount
commercial banks. of Off-Balance Sheet
Exposure, whichever is
higher
Advances to 10 per cent of ANBC or credit No target
weaker equivalent amount of Off-
sections Balance Sheet Exposure,
whichever is higher.
Differential 1% of total advances No target
Rate of outstanding as at the end of the
Interest Scheme previous year. It should be
ensured that not less than 40 per
cent of the total advances
granted under DRI scheme go to
scheduled caste/scheduled
tribes. At least two third of DRI
advances should be granted
through rural and semi-urban
branches.
Agricultural Direct Finance and Indirect Finance
DIRECT FINANCE
Finance to individual Farmers [including Self Help Groups (SHGs) or Joint Liability Group
(JLGs), i.e. groups of individual farmers] for Agriculture and Allied Activities
 Short-term loans for raising crops, i.e. for crop loans. This will include
traditional/nontraditional plantations and horticulture.
 Advances up to Rs. 10 lakh against pledge/hypothecation of agricultural produce

(including warehouse receipts) for a period not exceeding 12 months, irrespective of
whether the farmers were given crop loans for raising the produce or not.
 Working capital and term loans for financing production and investment requirements for
agriculture and allied activities.
 Loans to small and marginal farmers for purchase of land for agricultural purposes.
 Loans to distressed farmers indebted to non-institutional lenders, against appropriate

collateral or group security.
 Loans granted for pre-harvest and post-harvest activities such as spraying, weeding,
harvesting, grading, sorting, processing and transporting undertaken by rural and semi
urban households or groups/cooperatives of rural and semi-urban households.
 Finance to others up to an aggregate amount of Rs. 20 lakh per borrower for the purposes
listed at 1.1.1 to 1.1.3 above.
INDIRECT FINANCE
Finance for Agriculture and Allied Activities
 Loans to entities covered less than 1.2 above in excess of Rs. 20 lakh in aggregate per
borrower for agriculture and allied activities. In such cases, the entire amount outstanding
shall be treated as indirect finance for agriculture.
 Loans to food and agro-based processing units with investments in plant and machinery
up to Rs. 10 crore, undertaken by other than rural and semi-urban households.
 Loans to Non-Banking Financial Companies (NBFCs) for on lending to individual

farmers.
 (i) Credit for purchase and distribution of fertilisers, pesticides, seeds, etc. (ii) Loans up
to Rs. 40 lakh granted for purchase and distribution of inputs for the allied activities such
as cattle feed, poultry feed, etc.
 Finance for setting up of Agriclinics and Agribusiness Centres.
 Finance for hire-purchase schemes for distribution of agricultural machinery and

implements.
 Loans to farmers through Primary Agricultural Credit Societies (PACS), Farmers‟

Service Societies (FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS).
 Loans to cooperative societies of farmers for disposing of the produce of members.
 Financing the farmers indirectly through the co-operative system (otherwise than by
subscription to bonds and debenture issues) provided a certificate from the State
Cooperative Bank/State Cooperative Agriculture and Rural Development Bank
(SCARDB), as the case may be, is produced, certifying the end use of such loans.
 Investments by banks in special bonds issued by NABARD with the objective of

financing exclusively agriculture/allied activities (not eligible for classification under
priority sector lending with effect from April 1, 2007)
 Loans for construction and running of storage facilities (warehouse, market yards, god
owns, and silos), including cold storage units designed to store agriculture
produce/products, irrespective of their location. If the storage unit is registered as SSI
unit, the loans granted to such units may be classified under advances to SSI, provided
the investment in plant and machinery is within the stipulated ceiling.
 Advances to Customs Service Units managed by individuals, institutions or organizations

who maintain a fleet of tractors, bulldozers, well-boring equipment, threshers, combines,
etc., and undertake work for farmers on contract basis.
 Finance extended to dealers in drip irrigation/sprinkler irrigation system/agricultural

machinery, irrespective of their location, subject to the following conditions:(a) The
dealer should be dealing exclusively in such items or if dealing in other products, should
be maintaining separate and distinct records in respect of such items. (b) A ceiling of up
to Rs. 30 lakh per dealer should be observed.
 Loans to Arthias (commission agents in rural/semi-urban areas functioning in

markets/mandies) for extending credit to farmers, for supply of inputs as also for buying
the output from the individual farmers/ SHGs/ JLGs.
 Fifty per cent of the credit outstanding under loans for general purposes under General
Credit Cards (GCC).
SMALL SCALE INDUSTRIES
DIRECT FINANCE
Direct Finance in the small scale industry sector will include credit to:
 Small Scale Industries: Units engaged in the manufacture, processing or preservation of

goods and whose investment in plant and machinery (original cost) excluding land and
building does not exceed Rs. 5 crore.
 Micro Enterprises: Small scale units whose investment in plant and machinery (original
cost) excluding land and building is up to Rs. 25 lakh, irrespective of the location of the
unit, are treated as Micro Enterprises.
 KVI Sector: All advances granted to units in the KVI sector, irrespective of their size of
operations, location and amount of original investment in plant and machinery. Such
advances will be eligible for consideration under the sub-target (60 per cent) of the SSI
segment within the priority sector.
INDIRECT FINANCE
Indirect finance in the small-scale industrial sector will include credit to:
 Persons involved in assisting the decentralised sector in the supply of inputs to and
marketing of outputs of artisans, village and cottage industries.
 Advances to cooperatives of producers in the decentralised sector viz. artisans village

and cottage industries.
 Subscription to bonds issued by NABARD with the objective of financing exclusively

nonfarm sector (not eligible for classification under priority sector lending with effect
from April 1, 2007).
 Loans granted by banks to NBFCs for on lending to SSI sector.
SMALL BUSINESS / SERVICE ENTERPRISES
 Loans granted to small business and service enterprises such as, Small Road and Water
Transport Operators, Small Business, Professional & Self Employed Persons, etc.
engaged in providing/rendering of services (which are industry or non-industry related),
and whose investment in equipment (original cost and excluding land and building) does
not exceed Rs. 2 crore.
 Advances granted to retail traders dealing in essential commodities (fair price shops),
consumer co-operative stores, and; (ii) Advances granted to private retail traders with
credit limits not exceeding Rs. 20 lakh.
 Loans to NBFCs for the purpose of on-lending to various categories of small business
and service enterprises.
MICRO CREDIT
 Loans of very small amount not exceeding Rs. 50,000 per borrower, provided by banks to
the poor in rural, semi-urban and urban areas, either directly or through a group
mechanism, for enabling them to improve their living standards.
 Loans to urban poor indebted to informal sector Loans to distressed urban poor to prepay
their debt to lenders in the informal sector would be eligible for classification under
priority sector. Urban poor for this purpose may include those families in the urban areas
who are below the poverty line. Such loans to urban poor may be classified under weaker
sections within the priority sector.
STATE SPONSORED ORGANIZATIONS FOR SCHEDULED CASTES/SCHEDULED

TRIBES
 Advances sanctioned to State Sponsored Organizations‟ for Scheduled Castes/ Scheduled

Tribes for the specific purpose of purchase and supply of inputs to and/or the marketing
of the outputs of the beneficiaries of these organizations.
EDUCATION
 Educational loans should include only loans and advances granted to individuals for
educational purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies
abroad, and not those granted to institutions.
HOUSING
 Loans up to Rs. 15 lakh, irrespective of location, for construction of houses by

individuals, excluding loans granted by banks to their own employees.
 Loans given for repairs to the damaged houses of individuals up to Rs. 1 lakh in rural and
Semi-urban areas and up to Rs. 2 lakh .
 Assistance up to Rs. 1.25 lakh per housing unit given to any governmental agency/
nongovernmental agency (approved by the NHB for the purpose of refinance) for
construction/reconstruction of houses or for slum clearance and rehabilitation of slum
dwellers.
Weaker Sections
The weaker sections under priority sector shall include the following:
a) Small and marginal farmers with land holding of 5 acres and less, and landless labourers,
tenant farmers and share croppers.
b) Artisans, village and cottage industries where individual credit limits do not exceed Rs.
50,000.
c) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY).
d) Scheduled Castes and Scheduled Tribes.
e) Beneficiaries of Differential Rate of Interest (DRI) scheme.
f) Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY).
g) Beneficiaries under the Scheme for Liberation and Rehabilitation of Scavangers (SLRS).
h) Advances to Self Help Groups.
i) Loans to distressed urban/rural poor to prepay their debt to non-institutional lenders,
against appropriate collateral or group security.
Export Credit
This category will form part of priority sector for foreign banks only.
PENALTIES FOR NON-ACHIEVEMENT OF PRIORITY SECTOR LENDING
TARGET / SUBTARGETS
Domestic scheduled commercial banks – Contribution by banks to Rural Infrastructure

Development Fund (RIDF):
 Domestic scheduled commercial banks having shortfall in lending to priority sector

target (40 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure,
whichever is higher) and / or agriculture target (18 per cent of ANBC or credit equivalent
amount of Off Balance Sheet Exposure, whichever is higher) shall be allocated amounts
for contribution to the Rural Infrastructure Development Fund (RIDF) established with
NABARD. The concerned banks will be called upon by NABARD, on receiving
demands from various State Governments, to contribute to RIDF.
 The corpus of a particular tranche of RIDF is decided by Government of India every year.
Fifty per cent of the corpus shall be allocated among the domestic commercial banks
having shortfall in lending to priority sector target of 40 per cent of ANBC or credit
equivalent amount of Off-Balance Sheet Exposure, whichever is higher, on a pro-rata
basis, and fifty per cent of the corpus shall be allocated among the banks having shortfall
in lending to agriculture target of 18 per cent of ANBC or credit equivalent amount of
Off-Balance Sheet Exposure, whichever is higher, on a pro-rata basis. The amount of
contribution by banks to a particular tranche of RIDF will be decided in the beginning of
the financial year.
 The interest rates on banks‟ contribution to RIDF shall be fixed by Reserve Bank of India
from time to time.
 Details regarding operationalisation of the RIDF such as the amounts to be deposited by

banks, interest rates on deposits, period of deposits etc., will be communicated to the
concerned banks separately by August of each year to enable them to plan their
deployment of funds.
Foreign Banks – Deposit by Foreign Banks with SIDBI
 The foreign banks having shortfall in lending to stipulated priority sector target/sub-
targets will be required to contribute to Small Enterprises Development Fund (SEDF) to
be set up by Small Industries Development Bank of India (SIDBI).
 The corpus of SEDF shall be decided by Reserve Bank of India on a year to year basis.
The tenor of the deposits shall be for a period of three years or as decided by Reserve
Bank from time to time. Fifty per cent of the corpus shall be contributed by foreign banks
having shortfall in lending to priority sector target of 32 per cent of ANBC or credit
equivalent amount of Off Balance Sheet Exposure, whichever is higher, on a pro-rata
basis, and fifty per cent of the corpus shall be contributed by foreign banks having
aggregate shortfall in lending to SSI sector and export sector of 10 per cent and 12 per
cent respectively, of ANBC or credit equivalent amount of Off-Balance Sheet Exposure,
whichever is higher, on a pro-rata basis.
 The concerned foreign banks will be called upon by SIDBI, as and when required by
them, to contribute to SEDF, after giving one month‟s notice.
 The interest rates on foreign banks‟ contribution to SEDF shall be fixed by the Reserve
Bank of India from time to time.
COMMON GUIDELINES FOR PRIORITY SECTOR ADVANCES
Banks should follow the following common guidelines prescribed by the Reserve Bank for all
Categories of advances under the priority sector.
PROCESSING OF APPLICATIONS
 Completion of Application Forms: In case of Government sponsored schemes such as

SGSY, the concerned project authorities like DRDAs, DICs, etc. should arrange for
completion of application forms received from borrowers. In other areas, the bank staff
should help the borrowers for this purpose.
 Issue of Acknowledgement of Loan Applications: Banks should give acknowledgement

for loan applications received from weaker sections. Towards this purpose, it may be
ensured that all loan application forms have perforated portion for acknowledgement to
be completed and issued by the receiving branch. Each branch may affix on the main
application form as well as the corresponding portion for acknowledgement, a running
serial number. While using the existing stock of application forms which do not have a
perforated portion for acknowledgement is separately given, care should be taken to
ensure that the serial number given on the acknowledgement is also recorded on the main
application. The loan applications should have a check list of documents required for
guidance of the prospective borrowers.
 Disposal of Applications: (I) All loan applications up to a credit limit of Rs. 25,000/-
should be disposed of within a fortnight and those for over Rs. 25,000/-, within 4 weeks.
(ii) All loan applications for SSI up to a credit limit of Rs. 25,000/- should be disposed of
within 2 weeks and those up to Rs. 5 lakh within 4 weeks, provided the loan applications
are complete in all respects and are accompanied by a 'check list'.
 Rejection of Proposals: Branch Managers may reject applications (except in respect of

SC/ST) provided the cases of rejection are verified subsequently by the
Divisional/Regional Managers. In the case of proposals from SC/ST, rejection should be
at a level higher than that of Branch Manager.
 Register of Rejected Applications: A register should be maintained at the branch, wherein

the date of receipt, sanction/rejection/disbursement with reasons therefore, etc., should be
recorded. The register should be made available to all inspecting agencies.
MODE OF DISBURSEMENT OF LOAN
With a view to providing farmers wider choice as also eliminating undesirable practices, banks
may disburse all loans for agricultural purposes in cash which will facilitate dealer choice to
borrowers and foster an environment of trust. However, banks may continue the practice of
obtaining receipts from borrowers.
REPAYMENT SCHEDULE
 Repayment programme should be fixed taking into account the sustenance requirements,
surplus generating capacity, the break-even point, the life of the asset, etc.,and not in an
"ad hoc" manner. In respect of composite loans, repayment schedule may be fixed for
term loan component only.
 As the repaying capacity of the people affected by natural calamities gets severely
impaired due to the damage to the economic pursuits and loss of economic assets, the
benefits such as restructuring of existing loans, etc. as envisaged under our circular
RPCD.CO.PLFS.NO. BC 16/05.04.02/2006-07 dated August 9, 2006 may be extended to
the affected borrowers.
RATES OF INTEREST
 The rates of interest on various categories of priority sector advances will be as per RBI
directives issued from time to time.
 In respect of direct agricultural advances, banks should not compound the interest in the
case of current dues, i.e. crop loans and instalments not fallen due in respect of term
loans, as the agriculturists do not have any regular source of income other than sale
proceeds of their crops
 When crop loans or instalments under term loans become overdue, banks can add interest
to the principal.
 Where the default is due to genuine reasons banks should extend the period of loan or
reschedule the installments under term loan. Once such a relief has been extended, the
over dues become current dues and banks should not compound interest.
 Banks should charge interest on agricultural advances in respect of long duration crops, at
annual rests instead of quarterly or longer rests, and could compound the interest, if the
loan/installment becomes overdue.
PENAL INTEREST
 The issue of charging penal interests that should be levied for reasons such as default in
repayment, non-submission of financial statements, etc. has been left to the Board of each
bank. Banks have been advised to formulate policy for charging such penal interest with
the approval of their Boards, to be governed by well accepted principles of transparency,
fairness, incentive to service the debt and due regard to difficulties of customers.
 No penal interest should be charged by banks for loans under priority sector up to Rs
25,000 as hitherto. However, banks will be free to levy penal interest for loans exceeding
Rs 25,000, in terms of the above guidelines.
SERVICE CHARGES / INSPECTION CHARGES
 No service charges/inspection charges should be levied on priority sector loans up to

Rs.25,000/-.
 For loans above Rs. 25,000/- banks will be free to prescribe service charges with the prior
approval of their Boards, in terms of circular No. DBOD.Dir.BC.86/03.01.00/99-2000
dated September 7, 1999.
INSURANCE AGAINST FIRE AND OTHER RISKS
Banks may waive insurance of assets financed by bank credit in the following cases:
No. Category Type of Risk Type of Assets

(a) All categories of priority sector advances Fire & other Equipment and current
up to and inclusive of Rs. 10,000/- risks assets
(b) Advances to SSI sector up to and inclusive Fire Equipment and current
of Rs. 25,000/- by way of – Assets,
 Composite loans to artisans, village and Equipment,
cottage industries Current Assets
 All term loans
 Working capital where these are
against non-hazardous goods
Where, however, insurance of vehicle or machinery or other equipment/assets is compulsory

under the provisions of any law or where such a requirement is stipulated in the refinance
scheme of any refinancing agency or as part of a Government-sponsored programmes such as
SGSY, insurance should not be waived even if the relative credit facility does not exceed Rs.
10,000/- or Rs. 25,000/-, as the case may be
PHOTOGRAPHS OF BORROWERS
While there is no objection to taking photographs of the borrowers for purposes of

identification, banks themselves should make arrangements for the photographs and also bear the
cost of photographs of borrowers falling in the category of Weaker Sections. It should also be
ensured that the procedure does not involve any delay in loan disbursement.
DISCRETIONARY POWERS
All Branch Managers of banks should be vested with discretionary powers to sanction proposals
from weaker sections without reference to any higher authority. If there are difficulties in
extending such discretionary powers to all the Branch Managers, such powers should exist at
least at the district level and arrangements be ensured that credit proposals on weaker sections
are cleared promptly
MACHINERY TO LOOK INTO COMPLAINTS
There should be machinery at the regional offices to entertain complaints from the borrowers if
the branches do not follow these guidelines, and to verify periodically that these guidelines are
scrupulously implemented by the branches.
AMENDMENTS
These guidelines are subject to any instructions that may be issued by the RBI from time to time
Company profile
Government of India (GoI) Undertaking & Historical Events
IDBI Bank Ltd. (IDBI) is one of India's larger commercial Banks and for over 40 years it has
essayed a key nation-building role, first as the apex Development Financial Institution (DFI)
(July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service
commercial Bank (October 1, 2004 onwards). Post merger of erstwhile IDBI Bank with its
parent company (IDBI Ltd.) and The United Western Bank Ltd. undertook the entire gamut of
banking activities while continuing to play its secular DFI role.
New Initiative
IDBI is poised to become one of the 'TOP 5' banks in terms of asset size with reorganization of
business model by FY12. Moving towards this goal, IDBI has taken several steps like focusing
on retail segment and leveraging government and industrial relationships for future business
growth. IDBI has reorganized its businesses around nine verticals consisting of six customer
verticals and three business verticals, each focusing on distinct customer segments. To increase
its global presence IDBI has set up an overseas branch at Dubai and also plans to open
representative offices across the globe.
IDBI formed subsidiaries & joint ventures across diverse areas of Banking & Financial System.
IDBI Capital Market Services
A wholly owned subsidiary, offers a full suite of financial products. Its business includes stock
broking, distribution of financial products, Portfolio management of Pension / PF funds &
Research services, etc.
IDBI Gilts Ltd.
A wholly owned subsidiary presently focuses on Bond trading, underwriting in auctions of G-sec
and T-bills.
IDBI Intech Ltd.
A wholly owned subsidiary, deals in the Information Technology Services, Information Security
Practice, Knowledge Management Services.
IDBI Home Finance
A wholly owned subsidiary, deals in the Home finance arena.
IDBI Asset Management
Asset Management Company of IDBI Mutual Fund is a whollyowned subsidiary of IDBI Bank
Ltd. Its mission is to promote financial inclusion, by assisting in investment choices, through
mutual funds.
IDBI Federal Life Insurance Company Ltd.
A joint venture with Federal Bank and Fortis Insurance International. It primarily deals in Life
insurance space.
Management Brief
MR. R.M Malla who has track record of turning around IFCI from serious liquidity crisis to
comfortable liquidity position and helping SIDBI's business to increase three fold during his
tenure, has been appointed as a new CMD of IDBI Bank Ltd. Mr. Malla is supported by Mr. B.
P. Singh who is the Deputy Managing Director and Mr. P. Sitaram the CFO of IDBI Bank Ltd.
Industry Outlook
Sector at Glance
Over the last few years Indian banks in comparison to its global peers have performed well on
growth, asset quality and profitability. To strengthen the banking sector, policy makers have
made some notable changes in policy and regulation, which has helped it to overcome the global
financial crisis. Following the financial crisis, new deposits have gravitated towards public sector
banks which account 50.5% of the aggregate deposits. With respect to gross bank credit also,
nationalized banks hold the highest share of 50.5% in the total bank credit. Other scheduled
commercial banks at 17.8%, foreign banks and regional rural banks had a share of 5.5% and
2.5% respectively in the total bank credit.
Favourable economic conditions for Indian banking industry
The macro picture for India has been constructive with GDP (8.8% in Q1FY11) and industrial
production (13.8% in July 2010) registering a stronger growth. Indian economy is expected to
register ~8.5% in FY11 (IMF forecast of 9.7%) and double digit growth in next 5-10 years which
will support the banking industry. In future the increase in domestic consumption demand will
strengthen the growth of banking industry.
Infrastructure sector to boost growth
According to BCG report, Infrastructure debt will surpass INR 45 tn (2020) half of which will be
on bank's books. It will touch the Asset Liability Management (ALM) limits of banks and will
require a significant upgrade of banks' risk management systems. Also banks to discover the
importance of the Small and Medium Enterprises (SME) segment for profitability and growth
and new models to serve SME segment will be found
Evolving Indian income demographics
According to BCG report evolving income demographics will spur new demand for banking
industry and rapid accumulating of wealth will drive weal the management business to 10X size.
Channel penetration to drive business growth
In comparison to the other countries channel (interms of branches & ATMs) penetration in India
is low. This will accentuate the demand for low cost banking solutions, branches and ATMs need
to grow 2x and 5x (Source BCG).This provide huge opportunity for banking industry to expand
its business.
Low Channel Penentration in India
The strong credit growth of ~20% in the industry is expected to continue in future on the back of
strong demand for capex, infrastructure and agriculture. Banks are on expansion spree as the RBI
has sanctioned licenses to banks which will be focusing more on rural and unbanked areas. By
expanding branch network banks are expected to improve their margins by increasing their
CASA base. Moreover recapitalization measures (infusing INR 165 Bn) initiated by the
government will improve balance sheet strength of the weaker banks, which will help them to
expand their business and provide stability to the banking system. Also the introduction of Basel
III norms (FY13-16) is unlikely to impact the Indian banking industry, given the current high
capital adequacy norms.
Capital Infusion to drive business growth
Tier I capital of IDBI Bank as on 31st March 2010 stands at 6.2% is far below the RBI's
stipulated level of 8%. To raise the Tier I capital within RBI limit, the government of India
infused INR 31 Bn in IDBI through preferential placement of equity at the prevailing market
price of INR 120. This infusion will increase the Tier I capital to 8% and Government of India's
(GoI) holding to ~65%. Moreover, the increase in government holding would provide headroom
for the bank to raise further capital through FPO, there by maintaining the required minimum
government holding at the previous levels of 52%. However, management has stated that FPO
would depend on internal capital requirement of the bank and market conditions. This also
provides an opportunity for bank to raise capital through Tier II and innovative perpetual debt
instruments. Capital infusion might dilute the EPS, but it will help in improving the margins and
achieve its lending targets and to strengthen IDBI's balance sheet.
Capital Adequacy Ratio
With the capital infusion, IDBI would be in position to grow its business above the industry
average. We believe that the total business of IDBI will grow at CAGR of 29% from FY09 to
FY12E.
We expect strong growth prospects in the infrastructure sector supported by the government
spending of INR 1 Turnover FY17E. IDBI loan book substantially consists of corporate lending
and we expect IDBI to continue to focus on corporate segment with infrastructure lending as
major growth driver. IDBI is also focusing more on Agriculture, Micro Small and Medium
Enterprises (MSME) and Retail segment to exploit potential of these high yielding segments.
Also IDBI will continue to invest in retail business which would begin to gain traction over the
medium to long term and further diversify the fee based revenue streams. IDBI's business model
of tapping wholesale banking potential to generate revenues while continuing to invest in long
gestation retail liability franchisee is remarkable. This has enabled IDBI to scale up its balance
sheet and infrastructure and at the same time deliver impressive return ratios, giving comfort on
both near term profitability as well as long term growth potential.
IDBI to roll out more branches
In FY11, bank is expected to open ~260 branches and 80% of these banks will be opened in the
CASA rich northern and southern region of the country. These branches are expected to focus
more on Agriculture and MSME segment in a bid to accelerate revenue growth in future. Branch
expansion will enable to improve its CASA ratio and will help IDBI to achieve financial
inclusion as well and increase its CASA per branch ratio.
In order to increase its geographical presence, IDBI has opened a branch at Dubai, which will
provide a full range of corporate banking services including financial advisory and syndication
of credit. The branch will meet the corporate financing needs of not only its vast Indian clientele
but also clients in the Middle-East. This will provide a strong foothold for IDBI to increase its
global presence going forward. It has initiated the process of setting up branch offices at
Singapore and representative office at Shanghai.
Focus on Current Account and Saving Account (CASA) growth - near inflexion point
IDBI's CASA ratio remains one of the lowest in the industry at 14.6% during FY10. Historically,
IDBI has been depending on borrowings to support its lending business. With change in its
strategy IDBI is emphasizing on deposits to support its lending business. We expect deposits of
IDBI to grow at CAGR of 29% over FY09-12E and this will result in lower costs as CASA
deposits would be the target. The CASA ratio we estimate to increase from 14.78% in FY09 to
22% by FY12E.
CASA growth drivers
We believe that 100% Core banking solution (CBS) provided by the bank will help it to bring
more current account deposits. Moreover, waiving of all charges on a host of services will
increase low cost of deposits. These efforts will not only retain customers but also increase its
customer base which in turn will improve CASA deposits. Also management is trying to build
stronger product portfolio and increase its service quality. Near doubling of branch network will
act as a major contributor in the growth of low cost deposits over medium to long term.
Solving legacy Issues
IDBI has brought forward many non performing assets from its erstwhile domestic financial
institution business to its current business model, which was weighing a little heavy on its
balance sheet. Periodically, legacy NPA accounts have showed on the profitability of the bank,
but with sustain efforts bank has been able to reduce these NPAs considerably. Going forward,
we believe IDBI will be taking care of these accounts inorder to clean up its balance sheet and
improve asset quality. We expect Gross NPAs & Net NPAs to decline to 1.46% and 0.77% in
FY12E from 1.54% and 1.02% in FY10 respectively.
New Management to act as a catalyst to growth
We believe that one of the key strength of IDBI bank has been experienced management team
which has the ability to scale IDBI's business model. Also, recent change in the management to
bring fresh approach to IDBI's business model; will get reflected positively over long term.
Improved Productivity
IDBI has consistently improved its performance through optimum utilization of staff and
branches. Also IDBI has highest Business per employee ratio which we expect it to continue in
future. To further improve staff productivity, various steps have been taken by the bank: like
specialized training, recruitment of specialized officers & new talent, incentive schemes,
customer centric grooming etc.
Business per Employee
IDBI's total business per employee improved to INR 250 Mn in FY10 from 211 in FY09 and
profit per employee maintained at 0.84 Mn in FY10. Going forward, we expect business per
employee to increase to INR 333 Mn in FY12E and profit per employee toimprove to 1.61 Mn in
FY12E.
Per Employee Profitability
They expect IDBI bank to post a 38% CAGR (FY09-12E) growth in bottom line driven by a
25% CAGR (FY09-12E) in total assets, healthy NIMs, superior fee income. We have forecasted
improvement in CASA which we believe has the potential to surprise positively. We expect Net
Interest Income to grow by 73%, while operating profit to grow 62% CAGR (FY09-12E)
respectively
NIMs
Bank's thrust to garner more shares of CASA deposits in its total deposits which will enhance its
NIMs. This will largely be helped by reducing cost of deposits which is currently at 6.5%, we
expect a further reduction by 40 bps in cost of deposits and lead to an expansion in NIMs to
1.8% in FY11E and 2.31% in FY12E from 1.23% in FY10.
ROE & ROAA
Due to better yields, growth in advances and improving profitability and better NIM see expect,
return on equity (RoE) to improve to 11.78% in FY11E and 14.57% in FY12E respectively from
10.53% in FY10. Also return on average assets (RoAA) to improve to 0.57% & 0.74% in FY11E
& FY12E respectively from 0.51% in FY10.
Operating Costs as percentage of assets
Operating costs as a percentage of total assets are likely to trend higher on back of investments
made in expanding branch network and staff. Further higher focus no retail assets would also
increase bank's overhead costs. However, in future these investments will result in higher profits
for IDBI.
GNPA & NNPA
Asset quality has been a concern for IDBI due to legacy issues. Going forward, we expect IDBI
to take appropriate measures to reduce its NPA levels. We expect Gross NPAs to reduce to
1.46% in FY12E from 1.54% in FY10 and Net NPAs to reduce considerably to 0.77% in FY12E
from 1.02% in FY10
Investments
IDBI has been maintaining a steady growth in its investment book, in FY10 74% of the total
book has been held in HTM category, 21% in AFS and 4% in HFT category. We expect the
investment book to grow at a CAGR of 24% between FY09 to FY12E. In terms of amount, this
growth translates to increase in the book size from INR 500 bn in FY09 to INR 943 bn in
FY12E.
Economic downturn to increase NPAs
Any further downturn in the economy and of hardening interest rates may lead to an increase in
NPAs and thereby require more provisioning to be made, which will impact IDBI's future
profitability.
Concentrated asset book
IDBI's advances tilted towards few segments mostly infrastructure sector which largely depend
on the performance of the Indian economic growth. Also there are still inherent risks of higher
asset quality risk in having a less diverse portfolio. However, given the strong banking norms in
the country, emphasis on infra funding with favourable policy support and strong resilience of
Indian banking industry during the economic crisis is likely to offset this risk.
Inability to deliver on growth
We assign premium multiples to IDBI Bank primarily on expectation that it would perform on
all growth parameters. Inability of the bank to deliver growth along expected levels on a
sustained basis could impact stock performance.
Relative Valuation
Market
Cap (INR
Company Price (INR) mn) RoA* ROE* P/E* P/BV*
IDBI Bank Ltd 171 15,745 0.67 14.57 7.4 1

ICICI Bank Ltd 1131 129,685 1.41 11.26 20 2.2
Union Bank of India 417 20,336 1.15 23.14 6.9 1.5
Oriental Bank of
Commerce 502 12,290 0.98 18.58 6.6 1.2
Central Bank of India 238 9,046 0.73 22.53 5 1.2
Corporation Bank 788 10,540 1.1 21.51 6.2 1.2
Valuation and Outlook
We believe that with thrust on improving NIMs, CASA ratio, better core operating income and
return ratios, IDBI would be one of the fastest growing Indian banks over next few years. At the
CMP of INR 171 the stock trades at 1.1x FY12E adjusted book value (ABV) and 7.4 of its
FY12E EPS. Currently at INR 171, the stock is available at price to book value (P/BV) of 1x of
FY12E. We expect margins to improve from here on for the bank i.e. ROE to reach to 14.57% in
FY12E from 10.5% in FY10. Thus, we value the bank's business at 1.3x FY12E P/BV, thereby
evaluating it at INR 228. We initiate coverage on IDBI Bank India Ltd with a price
recommendation of INR 228, an upside of 34% from the current market price.
IDBI Bank Product & Services
1. Preferred Banking
 PowerPlus Account
 Preferred Banking
 Royale Account
2. Deposits
 Regular Savings Account

 Corporate Payroll Account
 Core Current Account
 Premium Current Account
 Premium Special Current Account
 Suvidha Fixed Deposit
 Suvidha tax saving fixed deposit
3. Loans
 Home Loan
 Loan Against Property
 Education Loan
 Personal Loan
 Auto Loan
 Loan Against Securities
 Reverse Mortgage Loan
 Corporate Banking
4. CARDS
 Cash at POS facility on Debit Cards

 Online payment through Debit Cards
 International Debit Cum ATM Cards
 Gold Debit cum ATM Cards
 IDBI Bank Cash Card
 IDBI Bank Gift Card
 Kids Debit Card
 Platinum Card
 World Currency Card
 Women‟s Debit Card
 Debit Card offers
5. 24 Hours Banking
 Phone Banking
 Mobile Banking
 Account Alert
 Internet Banking
 Mobile Payment Services (PayMate)
6. Corporate Banking
 Project Appraisal
 Debt Syndication
 Advisory Services
 Environmental services
 Secu and Structured product services
 Film Financing Scheme
 Carbon Credit
 Cash Management services
 Trade Finance
 TAX Payments
 TUFS for Textiles Industry
 Foreign Currency Product
7. Investment Advisory
 Mutual Fund
 Life Insurance
 New Pension Scheme
8. SME Finance
9. NRI Services
10. Lockers
11. Foreign Currency Products
12. Treasury
13. Services
 Dynamic Currency Conversion Services At ATM‟s
Agri Finance through IDBI Bank
Agri Business Group
IDBI Bank's total agriculture advance was Rs.1387 Cr for year ended March 2007. It has gone
up by Rs.6924 Cr (around 500%) to Rs.8311 Cr as on March 31, 2009.
India is a nation of villages. Agriculture and allied activities have been the main source of
livelihood of our rural populace since times immemorial. The sector provides source of
employment and livelihood to over 60% of the population. Its linkages with industry are growing
with increasing stress on food and agri processing industry on account of changing demand
patterns for processed food by consumers. With this background Corporate India has started
finding new opportunities in Agriculture.
Priority Sector constitutes Agriculture and allied activities. The emergence of modern economic
system has institutionalized agriculture sector on business models. Agribusiness is a broad term
that encompasses a number of businesses in agriculture including food production, farming,
agrochemicals, farm machinery, warehousing, wholesale and distribution, and processing,
marketing and sale of food products.
IDBI Bank constantly emphasizes on lending to Agricultural sector. Bank has several Agri
products viz. Loan against crop receivables, Warehouse receipt, Contract farming etc. to uplift
the socio–economic status of rural population.
IDBI BANK VISION
IDBI BANK RATING
Ratings for Rupee Borrowings (As on September 30 , 2010)
CRISIL ICRA Fitch
Fixed Deposit FAAA/Stable MAA+ tAAA(ind)
Short Term Borrowings P1+ A1+ F1+(Ind)

(Certificate of Deposits)
Long Term Rupee Bonds AA+/Stable LAA+/Stable AA+(Ind)

(Senior & Lower Tier II bonds)
Hybrid - Upper Tier II AA/Stable LAA/Stable AA–(Ind)
Hybrid - Innovative Perpetual AA/Stable LAA/Stable ----

Debt Instrument (IPDI)
Ratings for Foreign Currency Borrowings (As on September 30 , 2010)
Rating Agency Long term rating
Moody's Investor Services (Moody's) Baa3
Standard & Poor's (S&P) BBB - /Stable
PRODUCT CATEGORY
1. Agricultural Finance ( Short Terms Loans)
Type Eligibility Eligibility Extent of Tenor

Commodity Exposure
Crop Loans All Farmers/ Owner - As per scale of The card
/ KCC cultivators, tenant finance specific to would be
cultivators and Share the crop and KCC valid for 5
croppers / Individual norms. years
farmer having
agreement with
institution.
Gold Loan farmers against pledge - Minimum Minimum
Scheme of gold for meeting the Rs.10,000 and tenor is 1
temporary cultivation Maximum Rs.5 month and
needs social obligations lacs. maximum
and medical 24 months
emergencies and Small
business / Traders/
Distributors and Self
employed professionals
for provision of finance
for Business needs.
Warehouse Individual farmers, Soya bean, Cotton Farmer :Min Rs. Maximum
Receipt Partnerships, Limited (including bales), 25,000 and Max of 12
Finance Companies. Mustard, Maize, Rs. 10 lacs, months from
Scheme Wheat, Sugar, Traders: Min Rs. the date
Paddy, Cashew, 25,000 and Max lodging
Castor, Chilli and Rs. 5 Crores, commodities
Turmeric only Processor:Min Rs. or shelf life
10 lacs, and Max of the
Rs. 100 Crores. product
Loans Individual farmers, Indicative list of Corporate: Min.
Against Group of farmers, Co- crops covered under Rs.1 crore; Max.
Crop operative Societies, the scheme are Rs.100 cror,
Receivables Agents acting on behalf Cereals, cash crops, Farmer: Min.
of a group of individual fruits, flowers, Rs.10,000 • Max.
farmers medicinal/ aromatic 100% of
plants, vegetables cumulative limit
and oilseeds for co-operative
societies
2. Agricultural Finance (Terms Loans)
Type Eligibility Extent of Tenor

Exposure
Farm Mechanization For pump set/ Irrigation Minimum:30,000
equipments Farmer should and maximum: Rs.
own a minimum of 2 acres of 30 lakh
irrigable land. For Farm
machinery, following is the
Minimum irrigated land
Dug Wells All categories of farmers Unit cost

including small, marginal and recommended by
other farmers are eligible for NABARD will
finance form the basis, for
deciding loan
amount
Minor Irrigation (Lift All types of farmers (small /
Irrigation) marginal / other farmer) either
individually or alongwith co-
owner of the land.
Purchase of land for Individual Small Term loan is Maximum

Agricultural Purposes Farmers/Marginal available to the period of 9
Farmers/Share cropper/ tune of Rs. 50000/- years
Tenant farmers for purchase to Rs. 10 lakhs including 2
of land. years
moratorium.
Land Development Individual farmer with good

repayment record is the
eligibility criteria
Horticultural & Forestry Individuals and group of Min. Rs. 20,000. Fixed based
Development farmers Max. Rs. 50 lacs. on the
gestation
period of
different crops
Purchase of bullock & Farmer Small, Marginal and Loan amount is 4 to 5 year
bullock Cart Other Farmers /Agricultural sanctioned on the including 3
and landless labourers for basis of NABARD months
purchases of Bullock pair with Unit cost. gestation
Bullock cart. period
Two Wheeler loans to Grants term loan upto Rs.

farmers 50000/- for purchase of two-
wheeler to the farmers.
Biogas Plant Many agencies, such as Z.P. /

State Govt./ Central Govt. are
providing subsidy, which is
treated as margin for the loan.
3. Allied Activities

Exposure
Dairy Farming Individuals and group Min. Rs. 20,000 5 – 6 yr
of farmers experienced Max. Rs. 10 lakh
in Dairy farming and
are actively engaged in
such activity
Poultry Farming The entrepreneur Loan amount will

should have thorough be decided by unit
knowledge of poultry cost
farming substantiated recommended by
by training certificate/ NABARD.
experience certificate
etc
Sheep and Goat Individual / Group/ Grants term loans
Rearing Shepard co-op society / of Rs. 50,000/- to
Federation / Limited Rs. 50 lakhs
companies that are
experienced and
actively engaged in
such activity.
Fisheries Individual, fishermans,
co-op societies,
companies can avail
loan
Sericulture Experienced Small
Farmers / Marginal
Farmers / Other
Farmers and trained
individuals are eligible
Bee Keeping Madhu Individual‟s farmers / 5 to 7 years by

Makshika Palan non-farmers, group of quarterly / half yearly
(Apiculture) farmers, SHGs, NGO, installment inclusive of
Partnership / 11 months gestation
proprietary firm, co-op. period
Societies.
4. Indirect Finance to Agriculture

Exposure
Loan for construction & running storage Individual farmers, Minimum Rs.1 Not to
finance Group of farmers, lac; Maximum exceed 9
NGO's, Association Rs.20 Crore years
of Growers, including
Partnership/ max.
Proprietary Firms, Moratoriu
Private & Public m of two
Limited Companies, years
Corporations,
Cooperative,APMCs
, Marketing Boards/
Committees.
Agri Clinic & Agri Business Centers Graduates in Individuals: 5 to 10
(ACABCs) Agriculture and Minimum Rs.2 years
allied activities lakh and
trained by Maximum
MANAGE Rs.10 lac ,
recognized Training Group of
Institutes (MRTIs) Individuals:
intending to set up Minimum Rs.2
Agri Clinics and lac and
Agri Business Maximum
Clinics. Rs.10 lac
Dealer Finance Program Dealers in agri Rs.10 lacs to Tenor of
inputs, Dealers of Rs.500 lacs loan for
inputs of Agri & OD/CC is
allied activity, one year
Dealers in agri and for
machinery,Dealers term loan is
in irrigation upto 3
systems,Arthias/ years.
Commission
Agents,Dealers in
essential
commodities,
Dealers in mineral
oils.
Contract Farming
Contract Farming can be traced back to colonial period when commodities like Collin
Indigo were produced by the Indian farmers for English factories. Seed production has been
carried out through contract farming by the seed companies quite successfully for more than four
decades in the country. The new agricultural policy of 2000 sought to promote growth of private
sector participation in agribusiness through contract farming and land bearing arrangements to
accelerate technology transfers, capital inflows and assured market for crops .The colonial period
saw the introduction of cash crops such as tea, coffee, and rubber, poppy and indigo in various
parts of the country, mostly through a central expatriate-owned estate surrounded by small out
growers model. ITC introduced cultivation of rainier tobacco in Coastal Andhra Pradesh in the
1920‟s incorporating most elements of a fair contract farming system and met with good farmer
response. This was replaced by auctions in 1984. Organized public and private seed companies
which emerged in the 1960‟s. The Pepsi-co introduced tomato cultivation in Punjab in the 1990‟s
under farming to obtain inputs for its paste-manufacturing facility established as apre-condition
to its entry in to India. This was sold to Hindustan Lever in2000, which had earlier acquired the
Kissan Karnataka.
Contract Farming was the strategy of choice for almost all food processing projects contemplated
in the 1980‟s and 1990‟s.ContractFarming is again vogue, and even tried for bulk production of
subsistence crops, such as paddy rice, maize and wheat. Commodity co-operatives, which
emerged in the1950‟s, provided most services envisaged under ideal contract farming to their
members and bought back the supplies offered at contracted prices, although these were not
strictly contract arrangements. The succeeded enormously, leading to their replication and
compelling private companies also to adopt similar approaches. Contract Farming is now
considered to be a corrective to market imperfections and serving a useful purpose in India in its
own limited sphere. Contract Farming has been promoted in the recent three decades as an
institutional innovation to improve agricultural performance in less developed countries. This
system was accepted and used as one of the promising institutional frameworks for the delivery
of price incentives, technology and other agricultural inputs. Local Governments, private local
firms, Multinational companies, some international aid and lending agencies etc have been
involved in these contract farming schemes
Contract farming generally involves: a pre-agreed price between the company and the farmer,
along with measures of quality, quantity, acreage to be farmed, and/or duration of the contract. In
this system, the contractor supplies all the inputs required for cultivation, and the farmer
irresponsible for land and labor.
However, the terms and nature of the contract vary according to the crops grown, the agencies
involved, the farmers themselves, and the technologies and context in which contract farming is
taken up. The farmers' participation is generally limited to production.
At a very fundamental level, contract farming is essentially a means of allocating the distribution
of risk, between processor & grower. The latter assumes risks associated with production while
the former assume the risks of marketing the final produce. As has been observed however
impractical terms, there exists, considerable interdependence between the two parties. The
development of contract farming will succeed if both parties share the risk & rewards.
THE BROAD OBJECTIVES OF PROMOTING CONTRACT FARMING WOULD BE:
• To reduce the load on the central & state level procurement system.
• To increase private sector investment in agriculture.
• To bring about a market focus in terms of crop selection by Indian farmers.
• To generate a steady source of income at the individual farmer level.
• To promote processing & value addition, thereby generating gainful rural employment.
• To reduce migration from rural to urban areas.
Managed correctly, contract farming can facilitate a response and adjustment mechanism to
changing economic forces. Identifying the nature of the crop, its marketability and then evolving
the technology to be used for production and processing are critical determinants of contract
farming. In general, crops easily incorporated in the contract farming are those that have high
revenue per hectare and where the technological model gives significant improvements in yields.
Recognizing that Indian agriculture holds the key to its own development, it will be required to
Create our own region & crop specific contract farming models.
THE MAIN AGRICULTURAL PRODUCTS OF INDIA UNDER THE PROCESS OF

CONTRACT FARMING ARE AS FOLLOWS
• Food Grains - Rice, Wheat, Pulses, Cereals, Corn, Maize, Rice Bran Extractions, Sorghum,
Soymeal, Suji, Parmal, Lentils, Jowar, Bajra, Chick pea,
• Fruits & Nuts - Cashew Kernels, Cashew Nut, Cashews, Almonds, Roasted Dry Fruits,
Peanuts,Groundnut, Walnut Kernels, Walnuts, Indian Peanuts, HPS Groundnuts
• Fruits - Bananas, Beans, Cherry, Cucumbers, Dried Fruits, Dried Truffles, Carrots, Lemon,
Mandarins, Mango, Meslin, Shallots, Apples, Asparagus, Grapes, Oranges, Gherkins, Turnips,
Oranges, Papaya, Pineapple,
• Vegetables – Potatoes, Bitter gourd, Stripe Gourd, Pumpkin, cauliflower, Cabbage, Tomato,
Onion, Green Pepper, Drum Sticks, Lady's finger, Banana, Papaya, Spinach, Cucumber,
Mushroom, Mushroom Spawn, Radiata, Seeds, Buds,
• Plantation & Related Products - Basil Seed, Cumin seeds, Dill Seed, Buds, Celery Seed,
Hybrid Seeds, Sesame Seeds, Sesbania Seed, Sunflower Seeds, Mustard Seeds, Oil Seeds,
PlantProducts, Plantation, Plants, Psyllium Seed, Fennel Seed, Fenugreek Seed, Herb Seeds,
TamarindSeed, Vegetable Seeds
• Spices - Black Pepper, Chilly, Cinnamon, Cloves, Coriander Powder, Cumin, Dry Ginger, Dry
Red Chilly, Cardamom, Anise, Salt, Pepper, Fenugreek, Clove, Ginger, Turmeric, Turmeric
Powder,
• Tea & Coffee - Black Tea, Coffee, Coffee Beans, Darjeeling Teas, Assam Teas, Instant
Coffee, Leaf Coffee, Leaf Tea, Packaged Tea, Green Tea, CTC Teas,
• Tobacco & Tobacco Products - Betel nut Leaves, Betel nut, Bidi Leaves, Chewing Tobacco,
Arecanut, Snuff, Opium, Pan, Jute, Tobacco, Rubber etc
Farmers’ perspective
ADVANTAGES FOR FARMERS
The prime advantage of a contractual agreement for farmers is that the sponsor will normally
undertake to purchase all produce grown, within specified quality and quantity parameters.
Contracts can also provide farmers with access to a wide range of managerial, technical and
extension services that otherwise may be unobtainable. Farmers can use the contract agreement
as collateral to arrange credit with a commercial bank in order to fund inputs. Thus, the main
Potential advantages for farmers are:
1. Provision of inputs and production services

2. Access to credit
3. Introduction of appropriate technology
4. Skill transfer
5. Guaranteed and fixed pricing structures; and
6. Access to reliable markets.
PROBLEMS FACED BY FARMERS
For farmers, the potential problems associated with contract farming include:
1. Increased risk;
2. Unsuitable technology and crop incompatibility;
3. Manipulation of quotas and quality specifications;
Corporate perspective
For a corporate, the objective of contract farming is to integrate the supply chain and ensure
timely availability of materials, both in quality and quantity. It also reduces the procurement cost
by eliminating the middlemen. Not only do the corporate‟ get produce as per their specifications,
The cost is much lower.
The main disadvantages faced by contract farming are:
1. Land availability constraints;
2. Social and cultural constraints;
3. Farmer discontent;
4. Extra-contractual marketing,and
5. Input diversion.
Changes in the rural scene because of contract farming
The process of Contract Farming in India Rural Economy is a new concept. The process of
contract farming involves cultivating and harvesting for and on behalf of big business
establishments or Government agencies and forwarding the produce at a pre-determined price. In
return, the contracted farmers are offered high price against their farm produce. The role of
contract farming in India rural economy is becoming more and more important, since organized
farming practice has become the need of the hour in the world of rapid industrialization. The
rapid industrialization process in India has created shortage of farmland, which in turn has
necessitated organized farming practice in India.
One of the most critical issues associated with contract farming is that there will be a shift from
staple crops such as rice and wheat to crops required by the food-processing industry and those
catering to the overseas market. The switch to contract farming leads to a rise in exports as well.
But this may affect the country‟s food security, and increase dependence on imports. With
agriculture increasingly seen as a risky proposition, the promise of economic security within the
contract farming system is rather very attractive.
The process of contract farming in India involves scientific and optimum use of land and farm
resources for maximum output of agriculture produce. Small time farmers practicing primitive
agricultural methods for cultivation and harvesting of crops dominate the Indian agriculture
sector. But, with the liberalization of India economy, there has been a sudden spurt in contract
farming in India. Moreover, today more and more established business houses are taking interest
in the business of contract farming in India. This has happened as a result of rapid growth of
retail industry in India. The growth of retail industry in India has propelled the growth of farm
retail in India, which caters fresh vegetables and fruits from the farms to the Indian mass. The
process of contract farming in India involves, engaging rural Indian farmers for the cultivation of
agricultural produce under strict government policies. The role of Contract Farming in India
Rural Economy involves government and private participation along with the rural workers.
Further, it engages a good number of farmers and other rural workers to discharge other
agriculture related activities
Government’s involvement
The Indian institutes engaged for marketing agricultural products under contract marketing are as
Follows:-
• Karnataka State Agricultural Marketing Board

• Krishi Maratavahini
• Madhya Pradesh State Agricultural Marketing Board
• Maharashtra State Agricultural Marketing Board, Pune
• Meghalaya State Agricultural Marketing Board
• Orissa State Agricultural Marketing Board, Bhubaneswar
• Punjab State Marketing Board
• Rajasthan State Marketing Board
• AP Agricultural Marketing Board
• Domestic & Export Market Intelligence Cell
• Tamil Nadu Agricultural University and Agri Marketing Board
• HP State Agricultural Marketing Board
The acts and rules that governs the process of Contract Farming in India Rural Economy are as
follows –
• Agricultural Produce (Grading and Marking) Act, 1937 as amended in 1986.

• Agricultural Produce Grading and Marking Act, 1937
• Schedule Appended to AP (G&M) Act 1937
• General Grading and Marking Rules, 1988
• Commodity Grading and Marking Rules
• List of commodities who‟s Agmark Grade Standards have been covered under AP Act 1937
• Manual on Standards of Paddy
• Manual on Standards of Wheat
• Manual on Standards of Maize
• Manual on Standards of Mustard an
Better price for farmers
Farmers will get a better price and can avoid the market with all its fluctuations, they say.
According to a company source, as of now, the local aggregator and the farmer determine the
price. Forthe farmer, it works out well as he has a ready market and gets cash on the spot. We are
studying how thisworks." Pepsi is keen on harnessing the agriculture/horticulture potential in
these areas.
Of late, the belt of Chitradurga, Davangere, Haveri, Bellary and Belgaum has seen a sudden
increase in maize cultivation.
According to the statistics provided by the Agriculture Department, Advancer had an yield of 7.9
lactones‟, followed by Belgaum with 3.37 lakh tonnes, Haveri 2.21 lakh tonnes, Chitradurga 1.88
lactones‟, and Bellary 1.41 lakh tonnes.
Future
The Dark Side
The green revolution is part of India‟s history. Grey revolution is the future. At least that‟s what
the blue print for agricultural reforms.
Agricultural reforms being introduced in the name of increasing food production and minimizing
the price risks for farmers will actually destroy the production capacity of the farm lands and
lead to further marginalization of the farming communities. Encouraging contract farming, future
trading in agriculture commodities, land leasing, was forming land-sharing companies, allotment
of homestead-cum-garden plots.
Direct procurement of farm commodities and setting up of special purchase centers‟ will drive
out a majority of the 600 million farmers out of subsistence agriculture. Already contract farming
has done irreparable damage to agriculture in countries like the Philippines, Zimbabwe,
Argentina and Mexico.
Allowing direct procurement of farm commodities, setting up special markets for the private
companies tomop up the produce, and to set up land share companies, are all directed at the
uncontrolled entry of the multinational corporations in the farm sector. Coupled with the
introduction of the genetically modified crops, and the unlimited credit support for the
agribusiness companies, the focus is to strengthen the ability of the companies to take over the
food chain. Significantly, the state governments have opposed the agriculture reforms, terming it
as a recipe for the entry of multinational corporations in agriculture. Two year earlier, the state
governments had opposed the government‟s plan to decentralize the food procurement system
terming it as an effort to dismantle the procurement structure
Future Growth
Pepsico India Holding Ltd: Frito laid division started off with a pilot project in 100 acres in
Jharkhand in 2005-06 to grow potatoes for their chips, which spread to 500 acres next year and
today, it covers 800acres. They introduced seeds of Atlantic variety, Chipsona and Fritolay-1553,
but Atlan- tic proved to yield the best potato in this region. Properly taken care of under the
supervision of the technical hands of the organization, the yield could be 14 times of what is
sown.
Organic farming
Consumers are becoming conscious and critical about the quality of food and by-products that
affect their health though the toxicity depends, to some extent, on the type of food consumed.
The organic agriculture includes growing of crops by a set of guidelines that prohibit the use of
synthetic products/chemicals such as fertilizers, pesticides, plant growth promoters and
livestock additives.
There is an increasing demand throughout world for organic food and fiber. In India, efforts are
being made for organic crop production through contract farming. Experiences showed that
farmers are benefited from technical guidance, supply of quality farm inputs and assured
purchasing at remunerative price. This venture, executed by a tripartite agreement, would bring
about favorable changes in the present conventional agriculture to make it sustainable and
commercial. Likewise, consumers would get certified organic products at reasonable price. Since
the average growth for organic farming is about 20–25% and higher prices (15–50%) are
possible in the international trade, export of organic food produced by contract farming will
certainly increase in near future, as India is recognized as an international agricultural hub.
Map of Location Visited
Bank list of Contract Farming
Existing Role of Financial Institutions
Currently, the financial institutions are playing an important role in contracting and agricultural
financing in India. On the contracting front, financial institutions provide production credit to the
farmers due to the RBI‟s Priority Lending Sector norms. These institutions also act as payment
channels for companies and provide crop insurance products to the farmers.
On the agricultural financing front, banks offer various banking products such as warehouse
receipt financing and commodity based financing for their clients (farmers). They also assess and
evaluate the project viability. However, even though the financial institutions in India have
started providing these facilities, there are a number of lacunas in the system which needs to be
identified and dealt with.
The first setback, which is perhaps the biggest one, is the conservative approach of financial
institutions towards agriculture. The primary reason behind lending to farmers is in order to meet
the PSL targets. Agricultural financing is not treated as equivalent to other financing avenues
like the manufacturing industries or the services sector. Due to this approach, the financial
institutions tend not to provide their services to farmers at the same level of commitment and
zeal as they do to their other customers. This has inadvertently led to farmers not really
benefiting from their products like crop insurance etc. Thus there is need to realize the increasing
importance of agriculture and in particular contract farming which provides a channel to link up
the financial sector with the farmers.
Indian Experience
In India there have been quite a few initiatives that have taken off on contract farming lines.
There have been different models of contract farming that have been adopted across regions,
agencies and crops. In some cases the government has played a direct role (for example through
Safal, NDDB etc) whereas there are other instances where the government has not been so
directly involved. A number of private companies like Reliance, Pepsi Co and Pantaloon among
others have already started contract farming projects in the various parts of the country.
Here the list of bank which provides the facility of contract farming to farmer‟s development:
 Allahabad Bank
 Andhra Bank
 Bank Of Baroda
 Bank of India
 Dena Bank
 Indian Bank
 Oriental Bank of Commerce
 Punjab National Bank
 State Bank of Hyderabad
 State Bank of India
 Syndicate Bank
 Vijaya Bank
 National Bank for Agriculture and Rural Development (NABARD)
 Bank of Rajasthan
 Canara Bank
 Central bank of India
 Corporation Bank
 Indian Bank
 Indian Overseas Bank
 Industrial Development bank of India
 Jammu & Kashmir Bank Ltd
 State Bank of Mysore
 Union Bank of India
 United Bank of India
 Axis Bank
Research Design
“Advertising is a paid form of non-personal presentation and promotion of ideas, goods or

services by an identified sponsor.”
1. RESEARCH PROBLEM
 Analysis the awareness level of Contract Farming in Farmers.
 Seek the general perception of IDBI BANK Agriculture Finance towards Farmers and
Company.
 To find the performance of Contract Faming in IDBI BANK to other BANK.
2. RESEARCH OBJECTIVES & RELATED SUB OBJECTS

 To know the Interrelation between Company, Farmer and Bank.
 To know in which segment Contract farming is are mostly like/preferred.
 To know the preference of IDBI Bank with comparison to other competitive Banks.
 To know the factor affecting preference for seeking the Agri loan from IDBI.
3. INFORMATON REQUIREMENT
 First, I had to know about all the competitors present in the Banking industries who
providing Contract farming.
 Before going for the survey I had to know the comparative Company which existing in
the market with engaged with farmer and doing contract farming.
 Since RBI Act of financing in direct and indirect sector and which are the priority sector
of financing I had Learn.
4. CHOICE OF RESEARCH DESIGN – ALTERNATIVE AND CHIOCE
Despite the difficulty of establishing an entirely satisfactory classification system, it is helpful to

classify marketing research on the basis of the fundamental objectives of the research.
Consideration of the different types, their applicability, their strengths, and their weakness will
help the student to select the type best suited to a specific problem.
The two general types of research are
 EXPLORATORY RESEARCH
 CONCLUSIVE RESEARCH
5. RESEARCH INSTRUMENT USED - DETAILS & WHY?
If one wants to know what type of dentifrice people use, what they think of, television
commercials, or why they buy particular brands of cars, the natural procedure is to ask them.
Thus, the questionnaire method has come to be the more widely used of the two data collection
method. Many consumers are now familiar with the telephone caller who greets them with “We
are making a survey”, and then proceeds to ask a series of questions. Some interviews are
conducted in person, others by telephone, and others by mail. Each of these has its special
advantages and disadvantages and limitations. The questionnaire method in general, however,
has a number of pervasive advantages and disadvantages. Discussion of particular variations will
be more meaningful if these characteristics of the general methods are brought out first. A
questionnaire consists of list of questions to be asked from the respondents and the space
provided to record the answer /responses. Questionnaire can be used for the personal interviews,
focus groups, mails and telephonic interviews. The choice among these alternatives is largely
determined by the type of information to be obtained and by the type of respondents from whom
it is to be obtained.
The common factor in all varieties of the questionnaire method is this reliance on verbal
responses to question, written or oral
Questionnaire in the project consists of:

 Multiple choice questions
 Dicthomus
MULTIPLE CHOICE QUESTIONS:
Questions of this type offer the respondents an alternative to choose the right answer among
others. It is faster, time saving and less biased. It also simplifies the tabulating process.
OPEN END QUESTIONS:
In this type respondents are free to answer in their own words and express the ideas they think
are relevant, such questions are good as first questions or opening questions. They introduce the
subject and obtain general reaction.
DICTHOMUS:
These are the questions which are Boolean in nature. These answers are straight forward and
respondents have to answer them in as straight way. That means the answer can only be either
„Yes” or „No‟.
6. SAMPLING TECHNIQUE USED & SAMPLE SIZE - WHY?
Sample design is a definite plan of obtaining some items from the whole population. The sample
design used in this project is three states sampling i.e. Cluster, Convenience and Simple random
sampling scale. In the probability sampling methods, each items in the sample is chosen one at a
time from a complete list of universe elements. In marketing research practice, it will sometimes
be more expedient to select clusters or groups of universe elements, rather than to choose sample
items individually.
NONDISGUISED, STRUCTURED TECHNIQUES
The non structured techniques for attitude measurement are primarily of value in exploratory
studies, where the researcher is looking for the salient attributes of given products and the
important factors surrounding purchase decisions as seen by the farmers. Structured techniques
can provide a more objective measurement system, one which is more comparable to a scale or a
yardstick. The term scaling has been applied to the efforts to measure attitudes objectively, and a
number of useful scales have been developed.
SAMPLING METHODS
Sample design is a definite plan of obtaining some items from the whole population. The sample
design used in this project is two state sampling i.e. cluster sampling and convenience sampling.
And the whole zone was divided into some geographical areas and I have chosen
 Vijapur
 Viramgam
 Sanand
 Daskoi
 Kadi
 Bechraji
 Gondliya
 Kalol
 Chiloda
 Mandal
TOTAL SAMPLE SIZE WAS 100.
CLUSTER SAMPLING
Here the whole area is divided into some geographical area and definite number of Farmer which
can divide in to pure farming and contract farming was to be surveyed.
CONVINIENCE SAMPLING
This type of sampling is chosen purely on the basis of convenience and according to
convenience. I visited according to bank advice and contract farming company which takes
me on field to meet farmers.
SAMPLING
Hypothesis  To identify signification level of

beneficial use of contract farming by
farmers.
 To study IDBI bank awareness of

Agricultural finance product in farmers.
Sampling Technique Non probability sampling
Sample Unit available

Farmers who doing contract farming with
company and IDBI bank which finance farmers
for contract Farming
Sample size
100 respondents
Method Direct Interview through Questionnaires And

Telephone Interview
Data analysis method Graphical method
Area of survey North District
Timing Of Survey As per Availability and Convinced of farmers
FIELD WORK- METHOD USED FOR DATA COLLECTION
 Questionnaire was prepared keeping the objective of research in mind.
 Questions were asked to respondents as regards to their Willingness to give answer of

Private and confidential questions.
 The help of questionnaires conducted direct interviews, in order to get accurate

information. And Telephone Interviews which can taken for those farmers who are not
available or far located.
 I visited as many respondents as I can and asked them their real beneficial and preference
of bank and company about contract farming,
Data Interpretation and analysis
Q.1 How old are you?
Particular % Respondents
0-30 11
30-40 20
40-50 22
50 or above 47
Total 100
% Respondents
0-30
11%
30-40
50 or above 20%
47%
40-50
22%
Conclusion: Here chart show that generally more than 50 age farmers are doing contract
farming and young farmers are ignore farming and chose other field.
Q. 2 what is your highest level of formal education?
No education 42
Primary
Education 29
Graduation 18
Master Degree 11
Total 100
% Respondents
Master Degree
11%
Graduation
18% No educaton
42%
Primary
Education
29%
Conclusion: Here mostly farmers have no education. So they are no understand they right
way to farming and not adopt the new technology. But in this which are very near to city
villages have educated farmers and they are grow highly production in farm by using new
agriculture technology.
Q.3 what is your farm size? (In Acres)
1 to 3 8
4 to 6 34
7 to 10 17
10 or above 41
Total 100
% Respondents 1 to 3
8%
10 or above
41% 4 to 6
34%
7 to 10
17%
Conclusion: Here we can understand that which farmer have large size of land they are
interested in contract farming but which framers have low size of land they can’t agree for
contract farming.
Q. 4 which crop is produces for contract farming in your farm?
%
Particular Respondents
potato 37
tomato 11
cotton 31
mugfudi 21
Total 100
% Respondents
mugfudi
21% potato
37%
cotton
31% tomato
11%
Conclusion: In north Gujarat mostly farmers are produce potato, cotton and mugfudi for
contract farming. It is also give good amount of sell in market. So farmers are in interested
in these main three crops only.
Q.5 how do you know about contract farming?
Company employee 39
Other farmer
suggestion 33
Bank guidance 21
Other 7
Total 100
% Respondents
Other
7%
Bank gidence Company

21% employee
39%
Other farmer
suggetion
33%
Conclusion: The main reason to get awareness of contract farming is know from by the
company employee. Company employee and other mediator are main factor to engage
company and farmers for contract farming. An d other factor is give information from
other farmers.
Q.6 what are the factor who invites you for contract farming?
Highly Effecting Natural Highly Lest Mean

effecting lest effecting
Particular effecting
1 2 3 4 5
Minimum Investment 18 9 14 20 12 2.18
High Return 21 34 18 14 16 2.79
Timely Payment By company 27 24 31 24 25 3.88
Crop Facility provided by 4.12
company 18 19 11 32 39
Transportations cost taken by 2.02
company 16 14 26 10 8
Stander Deviation 0.0872 0.1116 0.1164 0.1648 0.101 -
40
Minimum Investment
30
20 High Return
10 Timely Payment By company
0 Crop Facility provided by company

Highly Effecting Natural Highly Lest
effecting lest effecting Transportations cost taken by
effecting company
Conclusion: Here we can understand that there is significant relationship to do contact

farming by adopting minimum investment, get accurate and high return by company and
farmer’s age is more than 50 so they are preferred contract farming.
Q.7 Do you know about IDBI Bank Agri finance Product?
Particular %Respondents
yes 66
no 34
Total 100
% Respondents
yes
29%
no
71%
Conclusion: Here IDBI Bank have no branch in villages so there is no awareness of IDBI
Bank Agri Finance. Mostly Farmers have more transaction with SBI and BOB Bank.
Q.8 Give Agriculture financing providing bank in comes first in your mind? (Rank –order)
%
Particular respondents
SBI 36
BOB 27
Dena Bank 15
IDBI 14
Other 8
Total 100
% respondents
% respondents
36
27
15 14
8
SBI BOB Dena Bank IDBI Other
Conclusion: here we can say that there is relationship between awareness of bank because
of having their located village bank. Farmers get knowledge about bank by other farmers,
company employee, krushi mela and trade fair.
Q.9 which particular option of IDBI bank is most preferable and satisfied by you?
Particular Highly satisfied Natural Highly Lest Mean

satisfied lest satisfied
satisfied
Trusted Nationalized Bank 31 28 37 14 11 3.09
ROI 22 32 26 32 37 4.77
Agri Product Range 27 22 24 18 16 3.25
Customization by bank staff 12 14 10 9 5 1.31
Processing time of 8 4 3 27 31 2.88
disbursement
Stander Deavation 0.1236 0.1908 0.1312 0.0524 0.1152
40
35
30
25 Trusted Nationalized Bank

ROI
20
Agri Product Range
15 Customization by bank staff
10 Processing time of disbursement
0
Highly satisfied Natural Highly lest Lest
satisfied satisfied satisfied
Conclusion: Here we can say that this bank is well prefer by their agricultural product
range, trusted nationalized bank and ROI. But this bank is not prefers because of highly
processing time and less customization.
Q.10 Do you have seen any agriculture advertisement from IDBI Bank?
yes 29
no 71
Total 100
% Respondents
yes
29%
no
71%
Conclusion: Here we can find out that farmers seen any advertisement on TV or in
newspaper and the analysis show that in villages farmers have seen not more advertisement
because of lack of literacy less people are read newspaper. And farmers are more watch
regional channel.
Hypothesis testing
T test for independent sample
 Hypothesis 1
H0 = There is no significant difference in Farmers‟ Education level for contract farming in

Gondliya and Vijapur.
H1 = There is significant difference in Farmers‟ Education level for contract farming in Gondliya
and Vijapur.
Gondliya Vijapur
n 61 39
mean 1.65 1.92
S 0.5549 0.3627
Calculation for SP2

( )( ) ( )( )
( )( ) ( )( )
Calculation for standard Error
SE = 0.093
Calculation of t value
( )
Degree of freedom
= n1+n2-2
= 61+39-2
= 98
Calculated t value is lying in acceptance region so, we accept null hypothesis.
So, there is no significant difference in farmers‟ education level for contract farming in Vijapur
and Gondliya.
Because, Farmers have no more education to understand befits or limits of contract farming.
They are scare of adopting any new farming activity.
 Hypothesis 2
H0 = There is no significant difference in farmers‟ Age level for banking Awareness in Gondliya
and Vijapur.
H1 = There is significant difference in farmers‟ Age level for banking Awareness in Gondliya
and Vijapur.
Gondiya Vijapur
n 51 49
mean 1.76 1.98
S 0.3807 0.4077
Calculation for SP2
( )( ) ( )( )
( )( ) ( )( )
Calculation for standard Error
SE =0.08112
Calculation for t value

( )
Degree of freedom
= n1+n2-2
= 51+49-2
= 98
Calculated t value is lying in acceptance region so, we accept null hypothesis.
So, there is no significant difference in Farmers Age level for banking Awareness in
Gondliya and Vijapur.
Bank provides equal facility to each village. They motivated farmers for better
production by giving various agri finance product and they give guideline for better
handling there transaction with bank and other.
Limitation to the study
 I had questionnaires as the primary mean to collect data and sometime it was a hard task
to handle with rude type of farmers because they were not ready to disclose some of the
questions ask in questioners.
 It was too hard to find out contract farming farmers and get information from then.
 There were also so many illiterate farmers and it was also tough to fill up questionnaire
from them.
 Survey done among the references‟ by the farmers. As per our task we hav to find out
contract farming farmers on located in north zone.
 We also have to find out the companies which are engage in contract farming and they
are associated from which bank.
Recommendations and Finding
Miles to Go
There is the need for a new thinking to boost Indian agriculture with special focus on building
capabilities and promoting investment. Technology enhancement with the focus on adoption of
hi-tech production practices is needed. Further, the government R&D system needs to link up
with private sector initiatives for better dissemination of new technologies to farmers. Therefore,
the “public private partnership” approach between private sector contract farming initiatives &
Govt. Research infrastructure is becoming very crucial. Further, efforts should be made to link
up the extension services provided by the private sector to public sector efforts.
Building Blocks for Sustainable Contract Farming
R&D activities, technology transfer and commercialization of agriculture are the three important
building blocks for sustainable contract farming. The main activities under these are
Listed below.
R & D Activities
• Evaluation of promising varieties and hybrids
• Multi-locational trials and short-listing - selection
•Blueprint for agricultural practices after adapting to local conditions, to suit intellectual &
financial means of the farmer
• Evaluation of farmer economics model
• Demonstration farming
Technology Transfer
• The extension services team - selection and training
• Farmer education program
• Field trials at farmer fields- multi-locational & crop timing
Commercialization
• Land preparation & planting,
• Crop monitoring during growing period
• Harvesting & procurement, transportation logistics
• Prompt farmer payment system
Today, the objective of farming has changed towards market demand and with the changing
movement towards a Value Delivery system, the involvement of the private player has changed
more towards defining the value, providing the value and then communicating the value to the
final customers. Therefore, the involvement of the private player has increased across the entire
food value chain as depicted below due to which various models of contract farming have
evolved and are being practiced in the country
Changing Roles
With the fast changing roles of different stakeholders, the role of banks has also changed in the
context of agriculture. Now, banking is beyond the traditional definition of lending and
borrowing. The role of banks has changed to that of knowledge providers through the evolution
of the concept of knowledge banking beyond the normal production financing and insurance
products offered by the banks. Thus, banks are evolving knowledge based products for their
customers across all sectors and agriculture has been one of the important sectors given the
importance of RBI compliance of priority sector lending.
As the agriculture sector is subject to infrastructure and knowledge deficit, the emerging banks
have the backing of knowledge experts from various sectors who are well equipped to provide
the expert advice to the client and thereby helping them in choosing the viable investment option.
In addition, the knowledge banking approach has provided the banks to assist farmers and agri-
entrepreneurs by developing suitable bankable agribusiness projects through adequate private
sector participation. Further, the knowledge banks also assist in assessing and evaluating project
viability, risk assessment and necessary guidelines for adequate land use planning for the
farming community.
This is as a result of the changed financing approach of bankers towards the sector whereby
agricultural financing is being treated as an equivalent to other financing avenues the role of
Government is also very crucial in the overall process of contract farming. Development of a
proper Institutional Mechanism/framework is very important to safeguard the interests of both
farmers as well as corporate. There is the need for suitable laws of contract/and an efficient legal
system to execute a transparent, participatory, comprehensive and flexible contract. There is also
the need to create awareness of unintended consequences of regulation and avoid the tendency to
over-regulate. An institutional arrangement to record/register all contractual arrangements to
promote confidence between the parties and also help in solving any dispute, arising out of the
violation of the contract needs to be put in place. Further, dispute settlement machinery - a single
tier regulatory authority for contract farming at the district level should be in place for resolving
any dispute and for contract enforcement.
Mechanism for Developing Bankable Projects

Developing a viable and bankable project is the key to the successful implementation. This
requires technical and financial expertise which is not in the skill set of micro-stakeholders.
Developing an SPV also involves a special activity set. Specialized knowledge banks have an
in-depth understanding of the Indian agri sector as well as demand side linkages to national and
international corporate level and should be actively involved in this process.
Improved Model for Contract Farming

Given below is an improved model of the contract farming system where the banks play a very
crucial role of being the knowledge and debt providers and thereby knitting various stakeholders
together for attaining the commercial objective.
Improved Model of Contract Farming
In the above mentioned model, the hi-tech agribusiness farm will assist in providing the quality
planting material, R&D support and technology transfer to the farmers along with the requisite
technical assistance. The farm will be established and facilitated by the private players. The
private players will also contract with the farmers for the production as well as the marketing of
the desired product. Thus this model provides the use of innovative high technology in
production, technical assistance along with well structured and customized financial products to
the farme
Conclusion & Suggestions
 Provide the knowledge to farmers about the each financial product. Give more
customization and visit farmers farm and give all kind of information related to agri
finance. It wills increase of farmer‟s satisfaction level and it will help farmer to grow
itself.
 Keep fastest processing time and try to keep lease depend of paper work. Mostly Farmers
are illiterate so it is uncomfortable to fill up all paper from them.
 Give proper training to staff to understand what the actual problem is? And what farmers
want from bank. Proper training give proper guidance to farmers for increase the
production and understanding easily financial terms and condition.
 With the analysis of survey which is most leading bank in rural market is because of
contract farming company affiliation. Company which provide more facility to farmers
are prefer by farmers and bank which is provide both highly facility like less processing
time, more customization, less paper work are prefers by company and farmers.
 As per the survey Farmers having awareness about IDBI Bank because of Large range of
Agri Product. Farmers which are existing customer of IDBI Bank and Non customers of
IDBI bank are believe that bank take high processing time and less customization. For
positive view of bank is bank are highly respected nationalize bank and less ROI more
influation farmers to prefers finance. For more effacing work Bank should improve their
processing time.
 Which farmers has large size of land they are most favorable client and company provide
maximum service to them farmers are more satisfied with the crop facility and timely
payment by company. Factor which had to be improvement is transportation cost and
give more knowledge about investment scheme.
 Less of farmer education cannot understand the whole concept of contract farming and
they believe that because of less land they can‟t grow more crop and they can‟t get high
return on contract farming.
 There is a need to develop a vision and implementation framework for the public private
partnership framework in Indian agriculture across the food value chain especially in the
production front. Therefore, the following steps become crucial for the overall
development of the Indian Agriculture.
 Developing proper PPP institutional mechanisms for contract farming.
 Defining the commodities and area under contracting to avoid any sustainability issues.
 Assisting in creating an appropriate legal framework.
 Database development (Farmers, Crops, Pricing, Land Mapping – W.R.T Contracts)
Therefore, the future vision strategy is very crucial to set up for developing the proper
mechanism for integrating the production potential and capacities with the marketing
system.
Questionnaire
Q.1 How old are you?
Q. 2 what is your highest level of formal education?
education
Q.3 what is your farm size? (In Acres)
Q. 4 which crop is produces for contract farming in your farm?
Q.5 how do you know about contract farming?
Q.6 what are the factor who invites you for contract farming?
Particular Highly Least Natural Highly lest Lest

effecting effecting effecting effecting
Minimum 1 2 3 4 5
Investment
High Return 1 2 3 4 5
Timely 1 2 3 4 5
Payment By
company
Crop Facility 1 2 3 4 5
provided by
company
Transportations 1 2 3 4 5
cost taken by
company
Q.7 Do you know about IDBI Bank Agri finance Product?
Q.8 Give Agriculture financing providing bank in comes first in your mind? (Rank –order)
SBI………………………………..
BOB………………………………
Dena bank………………………...
IDBI……………………………....
Other………………………………
Q.9 which particular option of IDBI bank is most preferable and satisfied by you?
Particular Highly Least Natural Highly lest Lest satisfied
satisfied satisfied satisfied
Trusted 1 2 3 4 5
Nationalized
Bank
ROI 1 2 3 4 5
Agri Product 1 2 3 4 5
Range
Customization 1 2 3 4 5
by bank staff
Processing 1 2 3 4 5
time of
disbursement
Q .10 Is you existing customer of any financial product?
__________________________________________________________________________
Q.11 which bank you take financing facility? Why?
__________________________________________________________________________
Q.12 Do you have seen any agriculture advertisement from IDBI Bank?
PERSONAL DETAILS
Name: __________________________________________
Contact No: ______________________________________
Village name: _____________________________________
Recent cases and studies
May 12 , 2008 : Fruits and Vegetables (DFV) contract farming model has seen more farmers
from Narmada, Vadodara, Surat and other districts of the state queuing up to come under the
contract system. Indrasinh Gohil, a banana contract farmer, said his decision to join DFV‟s
contract farming has benefited him immensely. He said he got minimum guarantee price, plus
market linked incentive, including the production cost, salary and the profit. Gohil said he
received a price of Rs 90 per kg for the production of banana in his field as against a price of Rs
60 per kg from the individual traders. “There is a waiting list of 5,000 farmers willing to come
under DFV‟s brand of contract farming,” said Ajit Desai, DFV chairman and managing director
on Sunday. This enabled DFV to bring 2,500 acres of land from Narmada, Bharuch and Navsari
districts under contract farming out of which 800 acres are under banana cultivation.
Gujarat has some good success story and prospective agreements of Contract farming in
Gujarat
At present among successful contract farming practices undertaken in Gujarat,
 Agrocell Corporation Ltd. is doing contract farming of organic cotton and

seasame seeds covering about 5000 acres in Kutch and Surendranagar district of
Gujarat since last 8 years. The farmers get 7-8 % more price than ordinary cotton in
current market and concession in certain services from the company.
 Atreyas Agro Organic Pvt. Ltd. Plans to grow Jetrophs Curcas by contract
farming. They have target of covering more than 50,000 acres of irrigated & non-
irrigated land of Gujarat.
 Godrej Agrovat Ltd. Is also planning to grow high quality oil palm under
contract farming in south Gujarat region by providing imported tissue culture
plants and farming technology to the contract farmers.
 Pepsi India, Arvind mills, Jojoba Oil Industries Ltd., are some companies who
have approached the govt. and shown keen interest in doing research and contract
farming in Agro-products in Gujarat under their backward integration projects.
Bangalore: PepsiCo India Holdings is looking at the State for large-scale contract farming
in maize, chillies and tomatoes, for which it has commenced trials in Haveri district. Although
these trials are on a small scale, the company is said to be looking at nearly20,000 hectares of
contract farming in maize to fall in place by next year inhalers and neighboring districts
It is now running on a trial basis "pre-agreed price" system of farming through local aggregators
(local people who deal with the farmers on behalf of the company) and the results should be
known by early next year. "It has to be a win-win situation for both Pepsi and the farmers for the
contract farming plan dematerialize," says Abhiram Seth, Executive Director, PepsiCo India
Holdings. Mr. Seth told The Hindu that trial runs normally would be for a year before Pepsi can
embark upon contract farming here. The company, which is enthused by the success in Punjab
where it has contract farming in chillies, potatoes and basmati, finds the situation in Karnataka
conducive for contract farming.
"We need to study a whole lot of parameters such as agro-climatic conditions, marketing, and
policies and soon before we set off on a project," he says. The State Government has been
helpful and there are no impediments from any quarter, Mr. Seth adds.
Although the company has not firmed up any plans, Mr. Seth says that Pepsi will be
concentrating on maize and later think of exporting. Pepsi is looking at Haveri district as the
maize yield in a hectare of land there is 3.5 tones, higher than the national average of two metric
tons. It is said that maize ingrown on about 80,000 hectares of land in the district with two crops
a year. Sources say that the annual production last year stood at 2.21 lakh metric tons.
With contract farming, there could be improvement in the yield levels as the company will be
doing "hand-holding" and providing technology, good cropping practices and marketing inputs
Conclusion
Contract Farming is not a solution to all the problems of agricultural production, and marketing
systems. But contract farming could be evaluated as a way of providing earlier access to credit,
input, information and technology and product markets for the small scale farming structure.
Contract farming might also be seen as a way or as a part of rural development and promoted to
improve agricultural performance especially in India where productivity is lesser than many
other developed countries. More over the corporate, farmers and government must realize that
the practice will not be sustainable if all the parties are not benefitted. The model is good but can
be made better with more favorable government policies
Contract Farming Farmer’s List
Farmer Name Location District

Daya K. Patel Daskoi Ahmedabad
Sankarbhai Chdhari Visnagar Mahsana
Madhu K. Patel Daskoi Ahmedabad
Rasik R. Patel Daskoi Ahmedabad
Bhikha D. Patel Kheda
Vadi Patel Sanamd Ahmedabad
Ayubhai Momin Sanamd Ahmedabad
Gangarambhai Ambarambhai Chiloda Gandhinagar
Kamal Patel Chiloda Gandhinagar
Ramaesh Jani Sanamd Ahmedabad
Narendra Patel Sanamd Ahmedabad
Bharat Patel Mandal Ahmedabad
Samir Patel Sanamd Ahmedabad
Ganad Patel Kheda
Harshed Patel Daskoi Ahmedabad
Kanu Patel Daskoi Ahmedabad
Namiesh Patel Daskoi Ahmedabad
Vishnu Patel Kadi Mahsana
Ashokbhai Patel Vijapur Ahmedabad
Bhairam Patel Vijapur Ahmedabad
Kamlesh Vagela Vijapur Ahmedabad
Natubhai Zala Viramgam Ahmedabad
A k Sonanki Kalol Mahsana
Laxman Patel Kadi Mahsana
Manojbhai Patel Bechraji Mahsana
Ghansyambhai Gala Bechraji Mahsana
dhulia devendra Ghodiyal Palanpur
gol falgibhai natubhai Ghodiyal Palanpur
gole R. k., Ghodiyal Palanpur
prajapati R.R. Ghodiyal Palanpur
Nai dhulabhai kanjibhai Ghodiyal Palanpur
Mevada Iswar s. Ghodiyal Palanpur
panchal Bharat Ghodiyal Palanpur
patel bhikhji Vijapur Ahmedabad
Nai Dipak D. Vijapur Ahmedabad
patel dipji K. Vijapur Ahmedabad
patel haresh Vijapur Ahmedabad
Rajput Bhavansinh K. Vijapur Ahmedabad
dhulia D.V. Vijapur Ahmedabad
gol D.K. Vijapur Ahmedabad
patel Kesh J. Vijapur Ahmedabad
gol rajesh D. Vijapur Ahmedabad
mevada B.k. Vijapur Ahmedabad
patel bhikhaji Vijapur Ahmedabad
gol G.D. Vijapur Ahmedabad
gol ganesh M. Vijapur Ahmedabad
Vajljiobhai M. (agro) Vijapur Ahmedabad
Bikhabhai Patel Vijapur Ahmedabad
Utkarshbhai Patel Vijapur Ahmedabad
Ranchodbhai Vaghela Vijapur Ahmedabad
I visited Viramgam, Sanad, Kadi, Lalwadi, Daskoi, Vijapur, and Kheda for find out contract
farming farmers. I find out about how they are doing contract farming and which facility and
benefits they get from company. As per the find out of this is base on which companies are doing
contract farming and with which bank they are Associate. Which bank gives them finance at
what percentage? By whom they get bank finance or company provide them to getting finance
by bank. It was find out all detail by meet personally to farmers.
Company List of Contract Farming
Sr Name of the Campany Email Id/ Phone Number States Commodity

No.
1 Appachi Cotton Ph: 04259 234666, 309666, TN, Karnataka Cotton
Company
Zamin Uthukuli, Pollachi E-mail: appachi@vsnl.com
Coimbatore Mob: 093452 33000
2 AVT Natural Products Ph: 044-28584147 Karnataka Marigold
Ltd Caprica Chilly
72-E, Chesney Estate Fax: 044-28584147
Ethiraj Salai E-mail: msa_kumar@avtspice.com
Chennai 600008 latha_rajesh@avtspice.com
Mob: 098460 35959
3 Cargill India Pvt Ltd Ph: 95124-5090402 Madhya Pradesh Wheat, Maize
DLF Gateway Tower Fax: 95124-2358972 and Soybean
11 & 12th Floor, DLF Mobile: 9810095054
City, Phase III
Gurgaon 122 002 E-mail: hardeep_singh@cargill.com
Lata_sachdeva@cargill.com
4 Escorts Ltd Ph: 95129-2250222 Punjab Basmati
Agri Machinery Group Fax: 95129-2284802
18/4 Mathura Road
Faridabad – 121007
5 The Global Green Ph: 080-26632831/2796/4059 Karnataka, AP Gherkin,
Company Pvt Ltd (Naan) Babycorn,
220, Alembic Glass Fax: 080-26637372 Paprika
Complex
Whitefield Hoskote E-mail: rajeev_trehan@hotmail.com
Road
Whitefield Bangalore
6 Hindustan Lever Ltd Ph: 022-22282737 Madhya Pradesh Wheat

165/166, Backbay Fax: 022-22855825
Reclamation
Mumbai -40002 E-mail: dalipsehgal@unilever.com
7 Ion Exchange Ph: 020-7145118/7146108 TN, MP, Gujarat, Organic
EnviroFarms Ltd Haryana, Products of
Neeta Towers Fax: 020-7146109 Maharashtra Banana,
Pineapple,
Pune-Mumbai Highway E-mail:
Papaya, Wheat,
schellappa@ionexchange.co.in
Basmati, Cotton
Dapodi sreeram_c@hotmail.com
Pune - 411012
8 ITC - IBD Phone: +91-124 - 4173172 Madhya Pradesh, Soybean,
ITC Green Centre Fax: +91-124 - 4173175 Gujarat Tobacco
Ist Floor, Sector 32 Email: jai.oberoi@itc.in
10, Industrial Area Web: www.itc.in
Gurgaon 122001
9 Ken Agritech Pvt Ltd Ph: 0836-2205770 Karnataka Gherkin
Factory & Field Fax: 0836-2202805
Operations
#131/1A, Anchatageri E-mail: kenagri@sanchar.net.in
Karwar Road
Hubli (Karnataka) –
580024
10 Marico Ltd Ph: 022-66480480/66480365 Maharashtra, MP, Safflower
Rang Sharda, 5th Floor, Fax: 022-26510701 Gujrat,
K C Marg, Bandra E-mail: vaibhavk@maricoindia.net Karnataka,
Reclamation Chattisgarh,
Rajasthan
Bandra (W) nitink@maricoindia.net
Mumbai- 400050
11 Mahindra Shubhlabh Ph: 022-24905877 Maharashtra, Many crops
Services Ltd Punjab
Mahindra Towers, 3rd Fax: 022-24922726
Floor
Worli E-mail: puri.vikram@mahindra.com
Mumbai rajiv.vidhya@mahindra.com
12 Natural Remedies Pvt Ph: 080-26535891 Karnataka Coleus
Ltd
364, II Fax: 080-26535889
Floor,Ashwathlakshmi
Mansion
16th Main, 4th T Block E-mail:
Jayanagar rkagarwal@naturalremedy.com
Bangalore - 560 041 Web: www.naturalremedy.com
13 Nestle India Ltd Ph: 95124-2389348(D)/2389300 Punjab Milk
Nestle House Fax: 95124-2389388
Jacaranda Marg E-mail: parveshanand@innestle.com
M-Block, DLF City,

Phase-II
National Highway 8
Gurgaon - 122 002
14 Nijjer Agro Foods Pvt Ph: 0183-2431705/3091608 Punjab Tomato and

Ltd Chilly
Maharbhan Pura Fax: 0183-2431805, 2432599
P O Jandiala Guru E-mail: nijjers@glide.net.in
Dist Amritsar 143115
15 Pepsi Foods Pvt Ltd Ph: 95124 - 2355880 Punjab, TN Chillies,

3B, DLF Corporate Park Fax: 95124 -2356270 Groundnut,
S Block, Qutub Enclave, seaweed,
Phase III Tomato and
Basmati Rice
Gurgaon 122 002
16 Rallis India Ph: 022-56652700 Punjab, UP, MP, Basmati, Wheat,

Appejay House, 7th Fax: 022-56352996 Maharashtra, Fruits,
Floor Karnataka, TN Vegetables
3 Dinshaw Vaccha Road, E-mail: annahita@rallis.co.in
Churchgate
Mumbai 400020
17 Suguna Poultry Farm Ltd Ph: 0422-5392503/5392504/05 TN, AP Broiler

Corp Off: 5th Floor Fax: 0422-5392507
Jaya Enclave E-mail: sugies@md3.vsnl.net.in
1057, Avinashi Road
Coimbatore -641018
18 Satnam Overseas Ltd Ph: 51635757 Punjab Basmati
Star Trading House Fax: 51638586/87
201, VIPPS Centre, 2
Community Centre
G K II, Masjid Moth
New Delhi 110048
19 Super Spinning Mills Ltd Ph: 0422-2311711/2314511 (D) Tamil Nadu Cotton
"ELGI Towers" E-mail: 0422-2311611
PB#7113, Green Fields E-mail: super@sshsaraelgi.com
737-D, Puliakulam Road
Coimbatore -641045
20 The Ugar Sugar Works Ph: 08339-272230 Karnataka Barley
Ltd
Ugarkhurd Taathani Fax: 08339 -272232
Distt: Belgaum
Ugarkhurd 591 316
21 Unicorn Agrotech Ltd Ph: 040-27847769/27811554 Karnataka Gherkin
(Zeraim) Fax: 022-
22061592/27842399/7845924
1-7-139/3, Sarojini Devi E-mail: uniagro@hd1.vsnl.net.in
Road
Hyderabad – 500003
22 United Breweries Ph: 080-2272806/7/8 Punjab Barley
UB House Fax: 080-2274884/5/6
1/1, Vittal Mallaya Road E-mail: cmoblr@ubmail.com
Bangalore 560001
23 Venkateshwara Ph: 23413986/87/88 TN Broiler
Hatcheries Ltd
1-5, Upper Ground Floor Fax: 2341398
World Trade Centre, E-mail:
Babar Road shyamkuldeepsingh@rediffmail.com
Cannuaght Place
New Delhi 110001
24 CG Herbals Ph: 0771-3296649 Chattisgarh Patchouli,
S12-Greenparadise, Ph: 09329108116 Orissa Veiver,
Vishalnagar, Telibandha E-mail: Aromatic Crops
for essential Oil
Raipur-492006 cgherbal@airtelbroadband.net
aroma_india@yahoo.com
25 Sanjeevani Orchards Pvt. Ph: 9893384684 Madhya Pradesh Pomegranate
Ltd. E-mail :pomefarms@gmail.com
Balaji Wafers Pvt. Ltd.
Vajdi (Vad), Phone : +91-281-2783755/56 Email: Gujarat,
26 Rajkot. (India) contact@balajiwafers.com Maharastra Potato
Gujarat,
27 Mc cam company Phone : +91-9374950782 Maharastra Potato
Bibliography
 Agricultural book
 Agricultural Magazine
 www.idbi.com
 www.agri.gujarat.gov.in
 www.agriculturalinformation.com
 www.rbi.org.in
 www.indg.in/india
 www.nabard.org
 The Economics times
 The times of India

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STUDY AND ANALYSIS BANK FINANCES IN AGRICULTURE SECTOR

Summer Project Report

In the partial fulfillment of the Degree of

Master of Business Administration (Agribusiness)

Baxi Vishvak P. (02)

Under the Guidance of:

IDBI Bank Ltd. Mehsana

Centre for Management Studies

Dr. MAURVI PANDYA

Centre for Management Studies,

Mr. Abhishek Sawant,

IDBI Bank Ltd.

(Name & Sign of Student)

In every professional course, training is an important factor. Professors give us theoretical

“Experience is best teacher”

Candidate’s Statement …….…………………………………………………………………………………………………………..III

List of Figures & Graphs………………………………………………………………………………………………………………..XII

SR.NO CHAPTER PAGE.NO

Particular Page no.

State bank of India Associated bank list 04

Old Private Sector Bank 06

New Private Sector Bank 07

Target and Sub Target Priority sector 18

Insurance against fire & other risk 30

IDBI Bank Rating 44

Agriculture Finance ( Shorts terms Loans) 45

Agriculture Finance (Terms Loans) 46

Indirect Finance to Agricultures 49

Contract Farming Farmers list 93

Company list of contract farming 95

Particular Page no.

North Gujarat visited Map 58

Farmers age analysis 66

Farmers Education analysis 67

Farmers Farm size analysis 68

Contract farming crop produces 69

How to know about contract farming 70

Factor which invites famers for contract 71

Awareness of IDBI Bank Agri finance 72

Farmers Bank ranking 73

Satisfaction towards IDBI Bank 74

Advertisement analysis of IDBI Bank 75

Improving Model of Contract Farming 85

History of Banking in India

Various Types of banking services:

Commercial Banks Specialized banks Institutional banks Non Banking Financial

Land Mortgage IFCI Mutual Funds

EXIM Bank HDFC

Private Foreign Banks

Old private New private

Present scenario of the banks in India:

State bank of India and its associates

Name of bank Year of No. of Networth Deposits Advances Interest Net

State Bank of 1941 943 1765 28930 15600 2325 0.61

State Bank of 1902 429 794 12613 6714 1132 1.40