AEE 219 Agricultural Finance and Cooperation: LMAEE219

LABORATORY MANUAL
AEE 219
AGRICULTURAL FINANCE AND COOPERATION
(For private circulation only)
Name of the Student: ……………………………………………………
Registration Number/Roll No……………………………………………
Section and Group……………….............................................................
School of Agriculture
Session: 2020-21 (Autumn Term)
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GENERAL GUIDELINES FOR THE STUDENTS:
1. A Student is expected to maintain the decorum of the laboratory by maintaining proper discipline.
2. Student is expected to be punctual in lab, should keenly perform the experiment allotted him
without moving from one lab to another and even experimental set up should not be left until it
unavoidable.
3. Mobile phones are not allowed in the labs and should be kept in the bags in silent or switch-off
mode.
4. Keep the work area clear of all materials except those needed for your work. Extra books, purses,
bags etc. should be kept in the racks placed in the lab.
5. Clean up your work area before leaving.
Dress code:
1. Shorts and sandals should not be worn in the lab at any time. Shoes are required when working in
the laboratories.
2. Students must have lab coat, gloves and mask with them every time.
3. Compulsory things to be carried by the students in lab:
4. Lab coat, gloves, mask, calculator, butter paper, fractional weights and stationary items.
Safety Guidelines:
1. Do not use any equipment unless you are trained and approved as a user by your supervisor.
2. Wear safety glasses when working with hazardous materials or use such materials in fuming hood.
3. Wear gloves when using any hazardous or toxic agent.
4. If you have long hair or loose clothes, make sure it is tied back or confined.
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TABLE OF CONTENTS
Sr. No. Title of Exercise Page Remarks
No.
1 To determine the most profitable level of capital use 4-9
2 To study the optimum allocation of limited amount of capital 10-16

among different enterprises
3 To analyze the progress and performance of cooperatives using 17-23
published data
4 To analyze the progress and performance of commercial banks 24-28
using published data
5 To analyze the progress and performance of RRB’s using 29-33
published data
6 To visit a commercial bank to have an insight of their 34-37
management, schemes and procedures
7 To visit a cooperative bank/ cooperative society to have an insight 38-42
of their management, schemes and procedures
8 To estimate credit requirement of farm business- A case study 43-47
9 To prepare and analyze balance sheet- A case study 48-52
10 To prepare and analyze income statement- A case study 53-57
11 To study appraisal of a loan proposal- A case study 58-63
12 To study the techno-economic parameters for preparation of 64-68

projects
References:
1. PRODUCTION ECONOMICS AND FARM MANAGEMENT by S.P Dhondyal, Aman
publishing house, New Delhi.
2. AGRICULTURAL ECONOMICS by Subba Reddy, S., Raghu ram, P. , Neelakanta
Sastry T.V., Bhavani Devi, Oxford and IBH publishing co private limited, New Delhi.
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Experiment No. 1
1. Aim: To determine the most profitable level of capital use

2. Equipment required: NA
3. Materials required: NA
4. Learning Objectives: To enable the students to have an understanding of the use of capital in
agriculture and thereby determining the most profitable level of capital use.
5. Theory/principle/Background of the topic:
Capital use in agriculture:
Capital has been defined as that part of a person’s wealth, other than land, which yields an
income or which aids in the production of further wealth. According to J.R. HICKS, capital consists
of all those goods, existing at present time which can be used in anyway, so as to satisfy wants during
the subsequent years. Resources lying idle are wealth but not capital. So capital is known as the man-
made means of production.
Features of Capital
 Capital is a passive factor of production. It needs labour to be productive.
 Capital is variable in nature. It increases and decreases according to the needs of the firm
 Among all the other factors of production, capital is the most mobile. Transportation of capital is an
easy activity
 Also capital is destructible in nature. It’s not permanent like land. For example, a machine will
wear and tear and may even completely break down with time.
Role of capital in agriculture
Supply of Raw Materials:
Capital aids in supply of raw materials such as seeds, fertilizers, insecticides and other such
inputs to agricultural sector
Supply of Appliances and Machinery:
Another equally necessary function that capital performs is the supply of tools, implements
and appliances. It is clear that these things are essential for production. Without their aid large-scale
production is impossible.
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Provision of Subsistence:
Capital provides subsistence to the labourers while they are engaged in production. They must
have food, clothes and lodging.
Provision of Means of Transport: Goods have not only to be produced, they have also to be
transported to the markets and put into customers’ hands. For this purpose, means of transport, like
railways and motor-trucks, are essential.
Provision of Employment:
In modern times, capital is performing another very important function, viz., to provide
employment. This function is of special importance to under-developed or developing economies.
Importance of Capital:
(i) Essential for production
(ii) Increases productivity
(iii) Importance in economic development
(iv) Creating employment opportunities
Most profitable level of capital use
The economic principles form the basis for making decisions pertaining to farm finance. These
principles can be used for selecting the most-profitable enterprises, the amount of inputs to be used,
comparing the cheapest source of farm finance and amounts to be borrowed from each source. Thus,
the most profitable use of capital mainly depends upon: (a) determining the size of each enterprise
(factor-product relationship) (b) determining the most economic production techniques (factor-factor
relationship) and (c) selection of most profitable enterprises or combination of enterprises (product-
product relationship). All these principles help in maximizing the returns from an investment.
Cost concepts & interrelations - Optimum level of input use and optimum production
Production costs play an important role in the decisions of the farmers. Explicitly or implicitly,
most of the producers keep in mind the cost of producing additional units of output. In general, at
given level of prices, a farmer can increase his farm income in two ways, i.e., i) by increasing
production and / or ii) by reducing the cost of production. Since cost minimization is an individual
skill, degree of success in this direction directly adds to the profits of the farm.
Money value of all inputs used in the production process is termed as the total cost. If the
inputs used are represented by X1, X2,..., Xn and the respective prices by Px1, Px2, ..., Pxn, then the
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total cost (TC) can be expressed as:
TC = Px1.X1 + Px2.X2 + ... + Pxn Xn.
a) Total costs:
The total cost comprises of two components, i.e., fixed and variable costs. Costs of fixed inputs are
called fixed costs, while costs of variable inputs are called variable costs. TVC and TC increase as
output increases. Fixed costs do not change in magnitude as the amount of output of the production
process changes and are incurred even when production is not undertaken, i.e., and interest on capital
for the use of fixed resources,
b) Average Fixed Costs (AFC):
Average fixed costs, (AFC) are computed by dividing total fixed costs by are amount of output. AFC
varies depending on the amount of production.
AFC=TFC/Y
c) Average variable cost, AVC:
It is computed by dividing total variable cost by the amount of output. AVC varies depending
on the amount of production. The shape of the AVC curve depends upon the shape of the production
function while AFC always has the same shape regardless of the production function.
6. Outline of the procedure
Table-1: Methods of determine optimum level the product cost relationship
Inputs Output AP MP TFC TVC Rs.2 TC AFC= AVC= ATC= MC= MR=
=Y/X per unit TFC+TVC ∆TC/Y ∆TR/∆Y
(Units) X (Units) ∆Y/∆X (Rs.) TFC/Y TVC/Y TC/Y
(Units)
Y (Units)
0 0
1 2
2 5
3 9
4 14
5 19
6 23
7 26
8 28
9 29
10 29
11 28
d) Average Variable Cost and Average Physical Product:

Average variable cost is inversely related to average physical product. When APP is
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increasing, AVC is decreasing. When APP is at its maximum, AVC attains a minimum value. When
APP is decreasing, AVC is increasing. Thus, for a production function, APP measures the efficiency
of the variable input, while AVC provides the same measure for cost curves. When AVC is
decreasing, the efficiency of the variable input is increasing; efficiency is at a maximum level when
AVC is a minimum and is decreasing when AVC is increasing.
e) Average Total Costs, ATC:
It can be computed in two ways. Total costs can be divided by output or AFC and AVC can
be added.
ATC = TC / Y. (or) ATC = AFC+AVC.
f) Marginal Cost, MC: It is defined as the change in total cost per unit increase in output. It is the
cost of producing an additional unit of output. MC is computed by dividing the change in total
costs
Example-2: Response of paddy to nitrogen application of profit maximization principle.
Variable Output (APP) (MPP) (TVP) MVP MIC

Inputs (X) (Y) Y@Rs.5 MP@ Rs.5
1 15
2 38
3 66
4 96
5 120
6 126
7 126
8 120
9 90
10 50
*Optimum input level
The problem here is to determine the most profitable point of operation for an enterprise in the
short-run. This can be done by determining either the most profitable amount of input or the most
profitable level of output. As the production function relates the input to output in a unique manner
in stage II, either method results ultimately the same answer. In economic terminology, the “most
profitable” amount can be called the “optimum” amount. This is done by working out and
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comparing marginal value product (MVP) and marginal input cost (MIC) as prepared in table 2.
7. General Calculations:
The economic principles form the basis for making decisions pertaining to farm finance. These
principles can be used for selecting the most-profitable enterprises, the amount of inputs to be used,
comparing the cheapest source of farm finance and amounts to be borrowed from each source.
Thus, the most profitable use of capital mainly depends upon:
(i) Determining the size of each enterprise (factor-product relationship)
(ii) Determining the most economic production techniques (factor-factor relationship)
(iii) Selection of most profitable enterprises or combination of enterprises (product-product
relationship).
8. Results: Through this practical the students will be able to calculate the most profitable level of
capital use.
9. Caution: NA
10. Suggested reading: AGRICULTURAL ECONOMICS by Subba Reddy, S., Raghu ram, P. ,
Neelakanta Sastry T.V., Bhavani Devi, Oxford and IBH publishing co private limited, New Delhi.
11. Weblinks:https://lecturenotes.in/materials/19538-note-of-agricultural-finance-cooperation
http://www.hillagric.ac.in/edu/coa/AgriEcoExtEduRSocio/lectures/AgEcon12 2FSM.pdf
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Worksheet of the student
Date of performance:.......................... Registration No:..................
Aim: To determine the most profitable level of capital use
Observations:
Calculations:
Result and Discussion:
Learning Outcomes: (What I have learnt)
To be filled in by the faculty
S.No. Parameters Marks Max.

obtained Marks
1. Understanding of student About the performance 20
2 Observations And analysis including learning outcomes 20
3. Completion of experiments, Disciplines and Cleanliness 10
Signature of Faculty Total marks Obtained
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Experiment No. 2
1. Aim: To study the optimum allocation of limited amount of capital among different enterprises
4.Learning Objectives: The practical guides the farmer in allocating scarce capital among alternative
enterprises
5. Theory/principle/background of the Topic:
Law of Equi-Marginal Return
The optimum allocation of limited amount of capital among alternative enterprises is guided
by the principle of equi-marginal returns. The farmer has limited resources which has alternative
uses. He has to allocate these resources effectively among various alternative crops / allied
enterprises so as to earn higher net income from the farm. The equi-marginal principle guides the
farmer in selecting crops / allied enterprises such that the net income from the farm could be
maximized.
If a farmer has unlimited capital he can take up any number of activities as long as they are
technically feasible. Under such circumstances the farmer can keep on investing in activities as long
as the added returns are equal to the added cost. Generally, the farmers have limited resources. He
can select an optimum combination of enterprises based on the principle of Equi-marginal returns.
The law of equi-marginal return states that profit from a limited amount of variable input is
maximized when that input is used in such as way that marginal return from that input is equal in all
the enterprises.
 Symbolically,
VMPx1 = VMPx2 = …… = VMPxn
 Suppose a farmer has 5 units of capital (X), he will allocate each successive unit of X to the
enterprise in which VMP is the largest.
Returns from various enterprises
Example: A farmer has Rs 5000 to invest on crops, dairy or poultry. What amount of capital he
should invest on each enterprise to get highest profit? Marginal Return to capital on these are
enterprises.
4. Opportunity
(PY1= 2, PY2 = 1 and PY3 =2)
 First unit of X can earn 20 in Y1, 18 in Y2 and 14 in Y3. So first unit is applied to Y1 since, it has
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got largest VMP.
 Second unit of X can earn 16 in Y1, 18 in Y2 and 14 in Y3, so second unit is applied to Y2
(largest VMP). Allocation of remaining three units of capital must be done in a similar manner.
 All the five units will earn Rs.81 No other combination of the three enterprises will earn more
than Rs.81.
Equi-marginal returns and Opportunity cost - comparative advantage
Opportunity cost and Marginal criterion for Resource Allocation: Maximum revenue from a
limited amount of input was shown to occur when,
Fig. 1: Maximum revenue combination.

Where ΔY1 is negative. But the decrease inY1could only be caused by shifting some amount of
input, X, from enterprise (Y1)to enterprise Y2. Denote the amount of input shifted by ‘ΔX’. Dividing
both sides of the above expression by ΔX and multiplying both sides of the equality by minus
Thus, revenue from the limited amount of input, X, will be a maximum when the value of the
marginal product of the input is the same in each enterprise. (The notation, MPPxy1 and VMPxy2, is
used to denote the MPP of X on Y1 and VMP of X used on Y2 respectively).
6. Outline of the procedure:
Table-1: Comparing the marginal criteria for resource allocation and production possibility curve
Variabl Output MPPxy1 VMP xy1, Variabl Output MPPxy2 VMP xy2,
e Inputs (Y1) @ e Inputs (Y2) @
(X) PY1=Rs.1/unit (X) PY2=Rs.2/unit
0 0 - - 0 0 - -
1 12 12 12 1 7 7 14
2 22 10 10 2 13 6 12
3 30 8 8 3 18 5 10
4 36 6 6 4 22 4 8
5 40 4 4 5 25 3 6
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Equating the VMP’s of the input in the two enterprises leads to the identical solution obtained
from the production possibility curve. The two criteria are compared in Table 1 and 2 . For two units
of input, one to Y1 where it would earn Rs.12 and the second to Y2 for an earning of Rs.14, the total
revenue would be Rs.26. The second unit could also go to Y2 and the earning would be unchanged.
From the production possibility curve for 2 units of input, in Fig.1 maximum revenue combination.
Table 2: Comparing the marginal criteria for resource allocation and production possibility curve
Units of Solution Equation VMP Solution using Production Possibility
Inputs Curve
Available Y2 Y1 TR Y2 Y1 TR
2 7 12 26 9 9 27.0
4 13 22 48 15.5 17.5 48.5
7 22 30 74 21.5 31.5 74.5
9 25 36 86 25.5 35.0 86.0
Py1=Rs.1; Py2=Rs.2
of outputs is 9 each of Y1 and Y2 and the total revenue is Rs.27 which is slightly more than the
allocation using “average” marginal criteria. The numbers 2, 4, 7 and 9 given the fig.12.7 are input
levels of production possibility curves. The numbers 27, 48.5, 74.5 and 86 are revenue levels of iso
revenue lines. Thus, the geometric approach is more accurate. This allocation of inputs between
products can also be viewed in terms of opportunity cost. It demonstrates the cost in terms of the
value of an alternative product that is given up rather than the purchase price of variable input. As
long as VMP in one enterprise, that is sacrificed, equals the VMP in the other enterprise, that is
gained, the opportunity costs for both enterprises are equal and total returns are maximum.
Equi - marginal principle
In input-output relationship, MC=MR is the economic principle used to determine the most
profitable level of variable input. But it is under the assumption of unlimited availability of variable
input. Such an assumption of unlimited resources is unrealistic. So, in real world situations, the equi-
marginal principle is useful in determining how to allocate limited resources among two or more
alternatives. The principle says: If a scarce resource is to be distributed among two or more uses, the
highest total return is obtained when the marginal return per unit of resource is equal in all alternative
uses.
i) One Input –
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Several Products: Suppose, there is a limited amount of a variable input to be allocated among several
enterprises. For this, the production function and product prices must be known for each enterprise.
Next, the VMP schedule must be computed for each enterprise. Finally, using the opportunity cost
principle, units of input are allocated to each enterprise in such a way that the profit earned by the
input is a maximum. Profit from a limited amount of variable resource is maximized when the resource
is allocated among the enterprises in such a way that the marginal earnings of the input are equal in all
enterprises. It can be stated as: VMPxy1 = VMPxy2 = VMPxyn where, VMPxy1 is the value of
marginal product of X used on product Y1; VMPxy2 is the value of marginal product of X used on
product Y2; and so on.
Table 3: Allocation of limited variable input among three enterprises.
Enterprise-1 (Maize) Y1 Enterprise-2 (Sorghum) Y2 Enterprise-3 (Ragi) Y3
X Y1 VMPXY1 X Y2 VMPXY2 X Y3 VMPXY3
0 0 0 0 - 0 0 -
1 10 20 1 18 18 1 7 14
2 18 16 2 31 13 2 13 12
3 24 12 3 42 11 3 18 10
4 29 10 4 51 9 4 22 8
5 33 8 5 58 7 5 25 6
6 36 6 6 64 6 6 27 4
(P Y1 = Rs2; P Y2 = Rs1; P Y3 = Rs2)
Suppose that the farmer has five units of X. According to the opportunity cost principle, he will
allocate each successive unit of input to the use where its marginal return, VMP, is the largest; i.e.,
first unit of X used in I earns Rs.20; second on first unit of II earns Rs18; third on second unit of I
earns Rs.16; fourth on first unit of III earns Rs.14; and fifth on second unit of II earns Rs.13. Two
units of inputs go on I, two on II and one on III. Used in this manner, the five units of inputs will earn
Rs.81. No other allocation of the five units among the three enterprises will earn as much. What is the
maximum amount of input needed for enterprises I, II and III? To find out this, the manager must
determine the most profitable amount of input for each enterprise. When input cost is Rs.6.5 per unit,
the optimum amounts are 5 for I, 5 for II and 4 for III. Cost is Rs.91 (5+5+4=14) (6.5)=Rs 91. Thus,
the manager would never use more than a total of 14 units of inputs on I, II and III, no matter how
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many units of inputs he could afford to buy.
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ii) Algebraic Example
Corn response to nitrogen production function is: C=65.54+1.084NC 0.003NC2. . .
(1) Sorghum response to nitrogen function is: S = 68.07+0.830NS – 0.002 NS2..............
(2) Assume that the farmer has 100 kgs of nitrogen available for 2 acres- one acre to be used for corn
and one to be used for sorghum and that the price of corn is Rs.3 per kg and the price of grain sorghum
is Rs2.50 per kg.
The allocative equations would be VMPNC =VMPNS (or) Pc MPPnc =Ps MPPns VMP Nc=(1.084 –
0.006 Nc ) (3) = Rs. (3.252 – 0.018 Nc)
VMP Ns = (0.830 – 0.004 Ns) (2.50) =Rs. (2.075 – 0.01 Ns)
Substituting Ns = 100 – Nc, we get, 3.252 – 0.018Nc = 2.075 – 0.01 (100 – Nc), and Ns = 100 – 77.8 =
22.2.
C = 65.54 + 1.084 Nc + 0.003 Nc2 = 131.71668 x 3 = Rs.395.15
S = 68.07 + 0.83 Ns – 0.002 Ns2 = 85.51o32 x 2.5 =Rs. 213.78
7. General calculation:
For determining the allocation of limited capital among alternative enterprises, the principle
of equi-marginal returns is applied. The law states that profit from a limited amount of variable input
is maximized when that input is used in such as way that marginal return from that input is equal in
all the enterprises.
Symbolically,
VMPx1 = VMPx2 = …… = VMPxn
8. Results: This practical will help the students to have an understanding of how to allocate limited
capital among various alternative enterprises.
9. Caution: NA
11. Weblinks:http://www.hillagric.ac.in/edu/coa/AgriEcoExtEduRSocio/lectures/AgEcon122FSM.p
df
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Aim: To study the optimum allocation of limited amount of capital among different enterprises
Observations:
Calculations:
SI.No. Parameters Marks Max.

obtained Marks
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Experiment No. 3
1. Aim: To analyze the progress and performance of cooperatives using published data
3. Materials required: NA.
4. Learning Objectives: Students will be able to analyze the published data to evaluate the progress
and performance of cooperatives.
5. Theory/principle/Background of the Topic:
Co-operation and Co-operative Credit
According to Calvert, “Co-operation is a specialized form of economic organization in which
people voluntarily associate together on a basis of equality for the promotion of their common
economic interests”. A Co-operative Society is an enterprise formed and directed by an association of
users, applying within itself, the rules of democracy, and directly intended to serve both its own
members and the community as a whole - Lambert.
Principles of Co-operation:
A co-operative society is a special type of business organization different from other forms of
organization. The characteristics / principles of co-operative society are:
i) Open Membership /Universality: The membership of a Co-operative Society is open to all those
who have a common interest, those who are convinced of its benefits and those who are prepared to
share the benefits and responsibilities involved in such a membership. A minimum of ten members are
required to form a cooperative society. The Co–operative Societies Act does not specify the maximum
number of members for any co-operative society. However, after the formation of the society, the
member may specify the maximum number of members.
ii) Unity or Political and Religious Neutrality: Unity is the fundamental force behind all co
operative organizations. It is above all beliefs, faiths and convictions.
iii) Voluntary Association: Members join the co-operative society voluntarily, that is, by choice. A
member can join the society as and when he likes, continue for as long as he likes, and leave the
society at will.
iv) State Control: To protect the interest of members, co-operative societies are placed under state
control through registration. While getting registered, a society has to submit details about the
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members and the business it is to undertake. It has to maintain books of accounts, which are to be
audited by government auditors.
v)Sources of Finance: In a co-operative society, capital is contributed by all the members. However, it
can easily raise loans and secure grants from government after its registration.
vi) Democratic Management: Co-operative societies are managed on democratic lines. The society
is managed by a group known as “Board of Directors”. The members of the board of directors are the
elected representatives of the society. Each member has a single vote, irrespective of the number of
shares held. For example, in a village credit society the small farmer having one share has equal
voting right as that of a landlord having 20 shares.
vii) Service Motive / Limited Interest on Capital: The main aim of the society is not to earn
abnormal profit but to enable the members to improve their economic conditions. If there is any
excess income, it will be used to meet unforeseen loss or strengthening the funds of the society so
that cheaper services may be made available to the members. Co-operatives are not formed to
maximize profit like other forms of business organization. The main purpose of a Co-operative
Society is to provide service to its members. For example, in a Consumer Co-operative Store, goods
are sold to its members at a reasonable price by retaining a small margin of profit. It also provides
better quality goods to its members and the general public.
viii) Separate Legal Entity: A Co-operative Society is registered under the Co-operative Societies
Act. After registration a society becomes a separate legal entity, with limited liability of its members.
Death, insolvency or lunacy of a member does not affect the existence of a society. It can enter into
agreements with others and can purchase or sell properties in its own name.
ix) Distribution of Surplus: Every co-operative society in addition to providing services to its
members, also generates some profit while conducting business. Profits are not earned at the cost of
its members. Profit generated is distributed to its members not on the basis of the shares held by the
members (like the company form of business), but on the basis of members’ participation in the
business of the society. For example, in a consumer co-operative store only a small part of the profit
is distributed to members as dividend on their shares; a major part of the profit is paid as purchase
bonus to members on the basis of goods purchased by each member from the society.
x)Self-help through Mutual Cooperation: Co-operative Societies thrive on the principle of mutual
help. They are the organizations of financially weaker sections of society. Co-operative Societies
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convert the weakness of members into strength by adopting the principle of self-help through mutual
co-operation. It is only by working jointly on the principle of “Each for all and all for each”. The
members can fight exploitation and secure a place in society.
xi) Principles of Publicity: The co-operative organizations do not believe in maintaining secrecy
about their working and progress. Members should have the spirit of dedication and service with
absolute honesty and unquestionable integrity. Hence, co-operation is the movement of the people,
for the people and by the people.
History of cooperative in India:
Cooperative movement in India was started primarily for dealing with the problem of rural
credit. The history of Indian cooperative banking started with the passing of Cooperative Societies Act
in 1904. The objective of this Act was to establish cooperative credit societies “to encourage thrift,
self-help and cooperation among agriculturists, artisans and persons of limited means.”
Many cooperative credit societies were set up under this Act. The Cooperative Societies Act,
1912 recognised the need for establishing new organisations for supervision, auditing and supply of
cooperative credit. These organisations were- (a) A union, consisting of primary societies; (b) the
central banks; and (c) provincial banks.
Although beginning has been made in the direction of establishing cooperative societies and
extending cooperative credit, but the progress remained unsatisfactory in the pre-independence period.
Even after being in operation for half a century, the cooperative credit formed only 3.1 per cent of the
total rural credit in 1951-52.
Structure of Cooperative Banking:
There are different types of cooperative credit institutions working in India. These institutions
can be classified into two broad categories- agricultural and non-agricultural. Agricultural credit
institutions dominate the entire cooperative credit structure.
Agricultural credit institutions are further divided into short-term agricultural credit institutions and
long-term agricultural credit institutions.
The short-term:
The short-term agricultural credit institutions which cater to the short-term financial needs of
agriculturists have three-tier federal structure- (a) at the apex, there is the state cooperative bank in
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each state; (b) at the district level, there are central cooperative banks; (c) at the village level, there are
primary agricultural credit societies.
The long-term:
Long-term agricultural credit is provided by the land development banks. The whole structure
of cooperative credit institutions is shown in the chart given.
Progress and Performance of Primary Agricultural Cooperative societies in India

Table 1: Progress and performance of PACS in India (crores)
Particulars 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2005-06 2016-17
Number 1.05 2.12 1.61 0.94 0.83 0.99 1.06 0.96
Members 44.08 170.41 309.63 576.53 801.15 999.18 1251.97 1312.35
Owned Funds 17.26 75.57 265.31 757.95 1642.03 5593.75 9292.01 32981.86
Deposits 4.48 14.50 69.40 291.34 1348.97 13481.07 12561.19 115884.20
Borrowings 19.21 179.59 675.19 2957.42 7778.59 25889.66 41017.60 124830.95
Working Capital 40.96 309.92 1153.46 4036.03 11871.92 53867.47 73386.67 239966.99
Loans advanced 22.90 202.70 577.88 1769.41 4678.85 25698.31 42919.59 200678.39
Loans outstanding 29.13 218.00 784.48 2450.64 6877.23 34522.33 51778.99 170459.25
Overdue 6.41 44.00 322.00 1086.20 3139.34 10037.88 15476.23 53292.98
Proportion of NA 53.00 37.00 32.40 32.87 46.57 36.80 39.64
borrower
Average Members
Per society
Note: Number and Members are in Lakhs
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Question 1: Find out the average members per society and interpret the results?
Question 2: Calculate the Growth rate of owned funds, deposits, working capital, loans advanced and
loans outstanding from 1950-51 to 1990-91 and 1990-91 to 2016-17?
Table 2: Institutional credit flow to agriculture by Cooperative bank (Rs Crores)
Year Cooperative banks Total Per cent Share of Cooperative
banks in total
1984-85 3440 6230
1997-98 14090 31960
2001-02 23524 61965
2002-03 23636 69480
2003-04 26875 86897
2004-05 31231 125116
2005-06 37252 157480
2006-07 42480 229400
2007-08 48258 254658
2008-09 45966 301682
2009-10 63497 384514
2010-11 78007 468177
2011-12 87963 511029
2012-13 111203 607375
2013-14 119964 730123
2014-15 138469 845328
2015-16 153295 915509
2016-17 142758 1065755
2017-18 150242 1179428
2018-19
According to Calvert, “Co-operation is a specialized form of economic organization in
which people voluntarily associate together on a basis of equality for the promotion of their common
LMAEE219 Page 21
economic interests”. A Co-operative Society is an enterprise formed and directed by an association of
users, applying within itself, the rules of democracy, and directly intended to serve both its own
members and the community as a whole - Lambert. The characteristics / principles of co-operative
society are:
a) Open Membership /Universality
b) Unity or Political and Religious Neutrality
c) Voluntary Association
d) State Control
e) Democratic Management
f) Limited Interest on Capital
g) Separate Legal Entity
h) Self-help through Mutual Cooperation
i) Principles of Publicity
8. Results: This practical will help the students to analyze the progress and performance of
cooperatives with the help of published data.
9. Caution: NA
11. Weblinks:http://www.hillagric.ac.in/edu/coa/AgriEcoExtEduRSocio/lectures/AgEcon122FSM.p
df.
LMAEE219 Page 22
Aim: To analyze the progress and performance of cooperatives using published data
Observations:
Calculations:
SI.No. Parameters Marks Max.

obtained Marks
LMAEE219 Page 23
Experiment No. 4
1. Aim: To analyze the progress and performance of commercial banks using published data
2. Equipment required: Calculator
4. Learning Objectives: Students will be able to analyze the published data to evaluate the
progress and performance of commercial banks.
Co-operation and Co-operative Credit
What is a Commercial Bank?
A commercial bank is a type of financial institution that accepts deposits, offers checking
account services, makes various loans, and offers basic financial products like certificates of
deposit (CDs) and savings accounts to individuals and small businesses. A commercial bank is
where most people do their banking, as opposed to an investment bank.
Commercial banks make money by providing loans and earning interest income from those
loans. The types of loans a commercial bank can issue vary and may include mortgages, auto
loans, business loans, agricultural loans and personal loans. A commercial bank may specialize in
just one or a few types of loans.
Customer deposits, such as checking accounts, savings accounts, money market accounts,
and CDs, provide banks with the capital to make loans. Customers who deposit money into these
accounts effectively lend money to the bank and are paid interest. However, the interest rate paid
by the bank on money they borrow is less than the rate charged on money they lend.
Number of commercial banks in India:
As of now, India has 27 Public Sector Banks. This number includes SBI, its 5 associates
and 19 other nationalized banks. Two other banks, namely IDBI and Bhartiya Mahila Bank are
two banks which have been categorized by RBI as “Other Public Sector Banks”.
 Andhra Bank
 Allahabad Bank
 Bank of Baroda
 Bank of India
 Bank of Maharashtra
 Canara Bank
 Central Bank of India
LMAEE219 Page 24
 Corporation Bank
 Dena Bank
 Indian Overseas Bank
 Indian Bank
 Oriental Bank of Commerce
 Punjab National Bank
 Punjab and Sind Bank
 Syndicate Bank
 Union Bank of India
 United Bank of India
 UCO Bank
 Vijaya Bank
 SBI and its associates:
State Bank of India (SBI) is India’s largest bank by assets. It has around 17,000 branches
and around 200 foreign offices. In 1959, SBI had 8 associate banks. Currently, it has 5 associate
banks. They are:
 State Bank of Bikaner and Jaipur
 State Bank of Hyderabad
 State Bank of Mysore
 State Bank of Patiala
 State Bank of Travancore
Scheduled Commercial Private Sector Banks:
Private sector banks are those whose majority stake is in private hands. Some of the
important private sector banks are:
 Axis Bank Limited
 Bandhan Bank Limited
 DCB Bank Limited
 HDFC Bank Limited
 ICICI Bank Limited
 IndusInd Bank Limited
 IDFC Bank Limited
 Kotak Mahindra ING Vysya Bank
 YES Bank Limited
LMAEE219 Page 25
Commercial banks and rural credit:
i) Direct finance by commercial banks
When Social control of banks was introduced in 1967, rapid expansion in bank
branches in rural areas was started. Commercial banks in India extends loans to farmers
directly and indirectly, Directly commercial banks are extending term loans for varying
periods for purchasing pump sets, tractors and other agricultural machinery, for
construction of wells and tube-wells, for development of fruit and garden crops etc. are
provided.
Table 1: Institutional credit flow to agriculture by Scheduled commercial banks
(Rs Crores)
Year Commercial Total(Commercial+RRB’s Per cent Share of
banks cooperatives) commercial banks in
total (%)
1984-85 2790 6230
1997-98 15830 31960
2001-02 33587 61965
2002-03 39774 69480
2003-04 52441 86897
2004-05 81481 125116
2005-06 106152 157480
2006-07 166485 229400
2007-08 181088 254658
2008-09 228951 301682
2009-10 285800 384514
2010-11 345877 468177
2011-12 368616 511029
2012-13 432491 607375
2013-14 527506 730123
2014-15 604376 845328
2015-16 642954 915509
2016-17 799781 1065755
2017-18 886771 1179428
2018-19
ii) Indirect finance by commercial banks

Indirectly, commercial banks are financing co-operative societies to enable them
to expand their production credit to the farmers. More especially, they increasingly
finance co-operatives engaged in the marketing and processing of agricultural produce or
LMAEE219 Page 26
in activities ancillary to agriculture such as dairy farming, Poultry farming etc. They also
finance the operations of the Food Corporation of India, the State Government and others
in the procurement, storage and distribution of food grains. Finally, commercial banks
increasingly subscribe to the debentures of the central land development banks also
extend advances to the latter. This enables land development banks to expand their
medium and long-term advances to farmers for purpose of land improvement and land
development.
A commercial bank is where most people do their banking, as opposed to an investment bank. It
makes money by providing loans and earning interest income from those loans. As of now, India has 27
Public Sector Banks. This number includes SBI, its 5 associates and 19 other nationalized banks.
Commercial banks provide finance by two ways
i) Direct financing
ii) Indirect financing
8. Results: Through this practical, the students will be able to analyze the progress and
performance of any commercial bank.
9. Caution: NA
Neelakanta Sastry T.V., Bhavani Devi, Oxford and IBH publishing co private limited, New
Delhi.
11. Weblinks:http://www.hillagric.ac.in/edu/coa/AgriEcoExtEduRSocio/lectures/AgEcon122FSM.
pdf.
LMAEE219 Page 27
Aim: To analyze the progress and performance of commercial banks using published data
Observations:
Calculations:

obtained Marks
LMAEE219 Page 28
Experiment No. 5
1. Aim: To analyze the progress and performance of RRB’s using published data
2. Equipment required: Calculator
4. Learning Objectives: Students will be able to analyze the published data to evaluate the
progress and performance of RRB’s.
Regional Rural Banks
Regional Rural Banks (RRBs) are Indian Scheduled Commercial Banks (Government
Banks) operating at regional level in different States of India. They have been created with a view
of serving primarily the rural areas of India with basic banking and financial services. However,
RRBs may have branches set up for urban operations and their area of operation may include
urban areas too. The area of operation of RRBs is limited to the area as notified by Government of
India covering one or more districts in the State.
History:
Regional Rural Banks were established under the provisions of an Ordinance passed on
26th September, 1975 and the RRB Act 1976 to provide sufficient banking and credit facility for
agriculture and other rural sectors. As a result Five Regional Rural Banks were set up on 2nd
October, 1975, Gandhi Jayanti. These were set up on the recommendations of The Narshimham
committee Working Group during the tenure of Indira Gandhi's Government with a view to
include rural areas into economic mainstream since that time about 70% of the Indian Population
was of Rural Orientation.
The development process of RRBs started on 2nd October,1975, Gandhi Jayanti with the
forming of the first RRB, the Prathama Bank, Head Office at Moradabad (U.P.) with authorised
capital of Rs 5 crore at its starting. As on 2nd October, 1975 Out of the remaining four RRBs in
the country one was Set up at Malda in West Bengal under the name of Gour Gramin Bank, which
was the first RRB in the Eastern Region of India.
The Regional Rural Banks were owned by the Central Government, the State Government and the
Sponsor Bank (Any commercial bank can sponsor the regional rural banks) who held shares in the
ratios as follows Central Government – 50%, State Government – 15% and Sponsor Banks – 35%.
Objectives of Regional Rural Banks:
In view of the above preamble of the Act the objects and activities of RRBs can be briefed
as under:
LMAEE219 Page 29
1) Bridging the credit gaps in rural areas.
2) To develop measures to restrict the outflow of rural deposits to urban areas.
3) To reduce regional imbalances and increase rural employment generation activities.
For achieving its objectives the RRBs provide financial assistance to different segments of rural
population engaged in rural activities.
Functions of Regional Rural Banks:
RRBs perform a variety of different functions. RRBs perform various functions in following
heads:
 Providing banking facilities to rural and semi-urban areas.
 Carrying out government operations like disbursement of wages of MGNREGA workers,
distribution of pensions etc.
 Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking,
internet banking, UPI etc.
 Small financial banks.
Role of Regional Rural Banking for Rural Development:
Regional Rural Banks were established with the following responsibilities in mind:
1) Taking the banking services to the doorstep of rural masses, particularly in hitherto unbanked
rural areas.
2) Identify the financial need especially in rural areas.
3) Making available institutional credit to the weaker section of the society who had by far little or
no access to cheaper loans and had perforce been depending on the private money lenders.
4) To enhance banking & financing facilities in backward or unbanked areas.
5) Mobilize rural savings and channelize them for supporting productive activities in rural areas.
6) To provide finance to the weaker sections of society like small farmers, rural artisans, small
producer, rural labourers’ etc.
7) To create a supplementary channel for the flow the central money market to the rural areas
through refinances.
8) To provide finance to co-operative societies, Primary Credit societies, Agricultural marketing
societies.
9) Generating employment opportunities in rural areas and bringing down the cost of providing
credit to rural areas.
10) Enhance & improve banking facilities to semi urban, rural & other untapped market.
LMAEE219 Page 30
Number of Regional Rural banks in India:
As of now, India has 56 Regional rural banks. Some of the important RRBs are:
 Allahabad UP Gramin Bank
 Assam Gramin Vikash Bank
 Baroda Gujarat Gramin Bank
 Bihar Gramin Bank
 Central Madhya Pradesh Gramin Bank
 Chhattisgarh Rajya Gramin Bank
 Dena Gujarat Gramin Bank
 Gramin Bank of Arayavart
 Himachal Pradesh Gramin Bank
 J&K Grameen Bank
 Kerala Gramin Bank
 Maharashtra Gramin Bank
 Meghalaya Rural Bank
 Odisha Gramya Bank
 Paschim Banga Gramin Bank
 Punjab Gramin Bank
 Rajasthan Marudhara Gramin Bank
 Sarva Haryana Gramin Bank
 Uttarakhand Gramin Bank
 Vidharbha Konkan Gramin Bank
Table 1: Branch expansion of RRB’s in India
Year No. of RRB’s No. of branches No. of districts
covered
2000-01 196 14468 482
2001-02 196 14486 511
2002-03 196 14462 516
2003-04 196 14484 518
2004-05 196 14433 523
2005-06 133 14372 525
2006-07 96 14422 534
2007-08 91 14558 594
2008-09 86 15010 616
2009-10 82 15303 618
2010-11 82 15658 620
2011-12 82 16170 620
Percentage change
(𝐹𝑖𝑛𝑎𝑙 𝑣𝑎𝑙𝑢𝑒−𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑣𝑎𝑙𝑢𝑒)
X
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑣𝑎𝑙𝑢𝑒
100
LMAEE219 Page 31
Table 2: Institutional credit flow to agriculture by regional rural banks
(Rs Crores)
Year RRBs Total (Commercial banks+ % share of RRB’s
RRB’s + cooperative banks) in total (%)
1984-85 0 6230
1997-98 2040 31960
2001-02 4854 61965
2002-03 6070 69480
2003-04 7581 86897
2004-05 12404 125116
2005-06 14076 157480
2006-07 20435 229400
2007-08 25312 254658
2008-09 26765 301682
2009-10 35217 384514
20010-11 44293 468177
2011-12 54450 511029
2012-13 63681 607375
2013-14 82653 730123
2014-15 102483 845328
2015-16 119260 915509
2016-17 123216 1065755
2017-18 142415 1179428
Regional Rural Banks (RRBs) are Indian Scheduled Commercial Banks
(Government Banks) operating at regional level in different States of India. They have been
created with a view of serving primarily the rural areas of India with basic banking and financial
services. Percentage change in the number of RRB’s in calculated using formula
(𝐹𝑖𝑛𝑎𝑙 𝑣𝑎𝑙𝑢𝑒−𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑣𝑎𝑙𝑢𝑒)
 Percentage change = X 100
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑣𝑎𝑙𝑢𝑒
8. Results: The practical will enable the students to have an idea of historical development,
objectives and functions of the RRB’s and will be able to analyze the progress and
performance of RRB’s with the help of published data.
9. Caution: NA
Neelakanta Sastry T.V., Bhavani Devi, Oxford and IBH publishing co private limited, New
Delhi.
http://www.hillagric.ac.in/edu/coa/AgriEcoExtEduRSocio/lectures/AgEcon12 2FSM.pdf.
LMAEE219 Page 32
Aim: To analyze the progress and performance of RRB’s using published data
Observations:
Calculations:

obtained Marks
LMAEE219 Page 33
Experiment No. 6
1. Aim: To visit a commercial bank to have an insight of their management, schemes and
procedures
2. Equipment and apparatus: NA
3. Materials: NA
4. Learning Objectives: It will guide banks' systems should be oriented towards providing
better customer services.
Policy for general management of the banks
Banks' systems should be oriented towards providing better customer service and they
should periodically study their systems and their impact on customer service. Banks should have a
Board approved policy for general management of the branches which may include the following
aspects:-
(a) Providing infrastructure facilities by branches by bestowing particular attention to providing
adequate space, proper furniture, drinking water facilities, with specific emphasis on pensioners,
senior citizens, disabled persons, etc.
(b) Providing entirely separate enquiry counters at their large / bigger branches in addition to a
regular reception counter.
(c) Displaying indicator boards at all the counters in English, Hindi as well as in the concerned
regional language. Business posters at semi-urban and rural branches of banks should also be in
the concerned regional languages.
(d) Posting roving officials to ensure employees' response to customers and for helping out
customers in putting in their transactions.
(e) Providing customers with booklets consisting of all details of service and facilities available at
the bank in Hindi, English and the concerned regional languages.
(f) Use of Hindi and regional languages in transacting business by banks with customers, including
communications to customers.
(g) Reviewing and improving upon the existing security system in branches so as to instil
confidence amongst the employees and the public.
(h) Wearing on person an identification badge displaying photo and name thereon by the
employees.
(i) Periodic change of desk and entrustment of elementary supervisory jobs.
(j) Training of staff in line with customer service orientation. Training in technical areas of
banking to the staff at delivery points. Adopting innovative ways of training/delivery ranging from
job cards to roving faculty to video conferencing.
(k) Visit by senior officials from Controlling Offices and Head Office to branches at periodical
intervals for on the spot study of the quality of service rendered by the branches.
(l) Rewarding the best branches from customer service point of view by annual awards/running
shield.
(m) Customer service audit, Customer surveys.
LMAEE219 Page 34
Views of bank officials on the following services offered: (Circle your views as Strongly
Disagree – SD , Disagree – DA, Not Sure – NS, Agree – A, Strongly Agree – SA )
Table-1: Questionnaire time to express your views on the following questions and statements
S. N. Banker’s views SD DA NS A SA
1 The bank strictly follows the service area approach
2 The bank offers financial literacy programme such as arithmetic,

writing, reading, operating bank a/c
3 The bank offers no-frills a/c to the individual who are BPL
4 The bank provides KCC/ GCC / OD facilities to customers
5 The bank has appointed BC/BF/USB in its service area
6 The bank provides Educational loan to students
7 The bank provides Vehicle loan to the customers
8 The bank provides Personal loan to the customers
9 The bank provides Crop loan to the customers
10 The bank provides Business loan to the customers
11 The bank strictly follows on the KYC norms
12 The bank doesn’t offer Insurance/ Pensionp roducts

13 The bank regularly conducts awareness programme on money
management
14 The bank regularly conducts awareness programme on debt
counseling
15 The bank regularly conducts awareness programme on financial
Knowledge
16 The bank offers Debit Card facilities to all eligible bank customers
17 The bank has Automatic Teller Machine facilities in its service area
18 The bank has Bio-metric ATM facilities to its rural customers
19 The bank remits payment for MGNREGS/any other government

remittances to the customers
20 Customers can borrow from the bank without any hassle
21 The bank has good Customer Relationship

Management
22 The bank instructs their customers about their right on using banking
services
23 The bank redresses grievances if any to its Customers
24 The bank has covered all the households with a bank a/c in its service
area
25 The bank offered more Agri Gold Loan rather than ordinary loan to
the farmers
26 The bank offers E – Banking/ NEFT/RTGS/Net Banking/E –
Payment to the customers
LMAEE219 Page 35
Express your views on financial inclusion initiative taken by your branch
Write your opinion for attaining full financial inclusion with suitable bankable products:
7. General Calculations: Filling the above schedule will help the students to have an
understanding of the
 Functioning of the commercial banks
 Management pattern of the commercial banks
 Ongoing schemes and procedures of commercial bank.
8. Results: This practical will help the students to know about the functioning,
management, schemes and procedures of any commercial bank.
9. Caution: NA
10. Suggested reading: AGRICULTURAL ECONOMICS by Subba Reddy, S., Raghu
ram, P., Neelakanta Sastry T.V., Bhavani Devi, Oxford and IBH publishing co
private limited, New Delhi.
11. Weblinks:https://lecturenotes.in/materials/19538-note-of-agricultural-finance-
cooperation
http://www.hillagric.ac.in/edu/coa/AgriEcoExtEduRSocio/lectures/AgEcon12
2FSM.pdf
LMAEE219 Page 36
Aim: To visit a commercial bank to have an insight of their management, schemes and
procedures
Observations:
Calculations:

obtained Marks
LMAEE219 Page 37
Experiment No. 7
1. Aim: To visit a cooperative bank/ cooperative society to have an insight of their management,
schemes and procedures
4. Learning Objectives: To enable the students to have an understanding of the use of capital in
agriculture and thereby determining the most profitable level of capital use.
Highlights of the Union Budget 2018-19 in Terms of Agriculture
 The Union Budget aimed to help farmers generate higher incomes from the same land parcel by
obtaining a minimum of 50% more than their initial investment on crops.
 In case the cost of the produce market becomes less than the Minimum Support Price (MSP),
the Government is liable to purchase the agricultural produce at MSP or help farmers receive
MSP with the help of Niti Aayog.
 The Government will establish a committee that will not only impose relevant policies and
practices applicable to the price and demand, but will also take decisions pertaining to the
imports and exports within the country.
 The Finance Minister also stated that 22,000 rural hats will be upgraded to Gramin Agricultural
Markets (GrAMs) allowing farmers to sell directly to the customers or purchase goods in bulk.
 An Agri-Market Infrastructure Fund of Rs.2,000 crore will be allocated for the development of
the GrAMs and Agricultural Produce Market Committees (APMC).
 The Prime Minister Gram Sadak Yojana Phase III will be put in place to provide all-weather
roads to areas that are still uncovered.
 The Government will further promote cluster-based development of agri-commodities to alter
the entire chain of production and marketing.
 The Union Budget also emphasised in the development of small and cottage industries by
allocating Rs.200 crore to this end.
 The allocation for the Ministry of Food Processing is doubled from the previous financial year
to amount to Rs.1,400 crore.
 The Government will also allocate a corpus of Rs.500 crore towards agri-logistics, Farmer
Producers Organizations (FPOs), and processing facilities.
 To offer more benefits to small and marginal farmers, animal husbandry farmers and fisheries
will be offered Kisan Credit Cards.
LMAEE219 Page 38
 The Government also intends to promote the bamboo sector by allocation a sum of Rs.1,290
crore.
 The 2018-19 Union Budget emphasised on the adoption of solar-powered systems for
agricultural purposes. To this end, the Government will not only encourage distribution
companies to purchase the additional power generated by the farmers, but will also expand the
scope of Long Term Irrigation Fund (LTIF).
 For the infrastructural development of the fisheries and animal husbandry sector, the
Government will allocate a total corpus of Rs.10,000 crore.
 The meeting also witnessed a rise in the institutional credit for the agriculture sector which is
proposed to be Rs.11 lakh.
Questionnaire to Commercial/ Cooperative bankers
In this respect, I request you to spare your valuable time to express your views on
the following questions and statements. I also assure you that the responses given by you
will be kept confidentially and used for the Awareness to farmers purpose only.
Name of Commercial/ Cooperative bank…………………………………………
Address…………………………………………………...
1. Designation of the Official (√ whichever is applicable): A. Chief Manager [ ] B.
Senior Manager [ ] C. Manager [ ] D. Assistant Manager [ ] E. Officers [ ]
2. Bank Type: A. Public Sector Bank [ ] B. Private Sector Bank [ ] C. RRB [ ]
3. Place: A. Rural [ ] B. Semi - urban [ ]
4. Age: A. 18 – 30 [ ] B. 31 – 45 [ ] C. 46 – 60 [ ]
5. Sex: A. Male [ ] B. Female [ ]
6. Education: A. Graduation [ ] B. Post Graduation [ ] C. Professionals [ ]
7. Years of Service: A. Up to 5 Years [ ] B. 6 – 10 years [ ] C. 11 – 15 Years [ ]
D. 16 – 20 Years [ ] E. 21 – 25 Years [ ] F. 26 – 30 Years [ ] G. 31 Years and Above [ ]
8. Views of bank officials on the following services offered: (Circle your views as Strongly
Disagree – SD , Disagree – DA, Not Sure – NS, Agree – A, Strongly Agree – SA )
LMAEE219 Page 39
Table-1: Questionnaire time to express your views on the following questions and statements
S. N. Banker’s views SD DA NS A SA
1 The bank strictly follows the service area approach
2 The bank offers financial literacy programme such as arithmetic,

writing, reading, operatingbank a/c
3 The bank offers no-frills a/c to the individual who are BPL
4 The bank provides KCC/ GCC / OD facilities to customers
5 The bank has appointed BC/BF/USB in its service area
6 The bank provides Educational loan to students
7 The bank provides Vehicle loan to the customers
8 The bank provides Personal loan to the customers
9 The bank provides Crop loan to the customers
10 The bank provides Business loan to the customers
11 The bank strictly follows on the KYC norms
12 The bank doesn’t offer Insurance/ Pensionp roducts
13 The bank regularly conducts awareness programme on money

management
14 The bank regularly conducts awareness programme on debt counseling
15 The bank regularly conducts awareness programme on financial

Knowledge
16 The bank offers Debit Card facilities to all eligible bank customers
17 The bank has Automatic Teller Machine facilities in its service area
18 The bank has Bio-metric ATM facilities to its rural customers
19 The bank remits payment for MGNREGS/any other government

remittances to the customers
20 Customers can borrow from the bank without any hassle
21 The bank has good Customer Relationship

Management
22 The bank instructs their customers about their right on using banking
services
23 The bank redresses grievances if any to its Customers
24 The bank has covered all the households with a bank a/c in its service
area
25 The bank offered more Agri Gold Loan rather than ordinary loan to the
farmers
26 The bank offers E – Banking/ NEFT/RTGS/Net Banking/E – Payment
to the customers
LMAEE219 Page 40
5. Express your views on financial inclusion initiative taken by your branch:……………..
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
--------------------------
6. Write your opinion for attaining full financial inclusion with suitable bankable
products………………………………………………………………………………
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------
7. General Calculations: The schedule designed to collect relevant data from any cooperative
society/ bank will help the students to have an understanding of
 the functioning of the cooperatives
 the management pattern of the cooperatives
 Ongoing schemes of the cooperatives
 Procedures of any cooperative bank/ society
8. Results: The practical will enable the student to have an insight of the management, schemes
and procedures of a cooperative bank/ society.
9. Caution: NA
http://www.hillagric.ac.in/edu/coa/AgriEcoExtEduRSocio/lectures/AgEcon12 2FSM.pdf
LMAEE219 Page 41
Aim: To visit a commercial bank/ cooperative bank/ cooperative society to have an insight of their
management, schemes and procedures.
Observations:
Calculations:

obtained Marks
LMAEE219 Page 42
Experiment No. 8
1. Aim: To estimate credit requirement of farm business- A case study.
3. Materials: NA
4. Learning Objectives: It will guide you order to have a smooth flow of credit to the farm sector
Agricultural credit is any credit that is availed by a farmer to fund seasonal agricultural
operations or related activities like animal farming, pisci-culture or purchase of land or agricultural
tools. While seasonal agricultural operations routine activities like include preparing and ploughing
land for sowing, weeding, and transplantation where necessary, buying inputs such as fertilizers,
seeds, insecticides etc. and engaging labour for cultivating and harvesting the crops.
1. Short-term credit
The short-term credit refers to the amount of money required by the farmer to meet the costs of
inputs and to modernize the equipment during a given period of time. The duration of the short term
period does not exceed 15 months. The farmers require this type of credit to meet the expenses for
ongoing agricultural operations on the farm like sowing, fertilizer application, plant protection
measures, payment of wages to the workers etc.
2. Medium term credit
The medium term credit is given for a period ranging from 15 months to 7 years (section 24 of
the NABARD Act) for the purpose of medium type of farm investment for buying bullocks, carts,
milch animals, agricultural equipments, construction of farm house, digging of wells etc. The PACS
and commercial banks issue medium term credit. Mortgaging of land is still insisted upon as security
for the credit. But credit for machines are issued on the hypothecation of such machines.
3. long-term credit
The long-term credit is mostly required by the farmers to get agents of production, which help
in the production process over a long period of time. This type of credit is needed normally for the
purchase of land and machinery or to effect permanent improvements on land. The farmers can repay
the credit in periods exceeding 5 years to 20 years out of the extra income secured by their
investments. They can repay the credit in installments over a period. The short term and long term
credit are necessary for agricultural development. The Land Development Banks provide term credit
to the farmers.
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Criteria for a sound system of agricultural credit
The famous agricultural economist Louis Tardy (1938) has laid the following criteria for good
system of agricultural credit.
1. Credit should be granted for a sufficiently long period commensurate with the length of operation,
which it is designed to facilitate.
2. It should be granted at a reasonable rate of interest.
3. It should be adequately secured to avoid any abuse of credit facilities, but the security need not
necessarily be material.
4. The security should, if necessary, be in the form of a personal credit secured mainly by the
borrowers’ socio-moral standing and farming ability.
5. It should be related to the average yield and capacity for repayment of the farms, particularly during
period of economic depression.
6. It should be placed in the hands of institutions the directors, which have received special training
and had actual banking experience.
The lending institutions and policy makers must keep in mind the above-mentioned criteria in
order to have a smooth flow of credit to the farm sector. Among the Rural Financial Institutions the
co-operatives are the best-suited agencies for the provision of agricultural credit in India in all
respects. All the above aspects of sound credit system may be found in the functioning of co
operatives.
Documentation Required for Agricultural Credit
Banks sanction agricultural credit, both long-term and short-term to farmers for agricultural
activity. Keeping in view the illiteracy of farmers, the documentation requirement is few. However
banks insist on the following documentation for agricultural credit:
 ID proof-Voter ID, Photo ration card. Aadhar etc
 Residence proof-Ration card
 Land ownership proof-records of rights, revenue receipt etc
 Kisan Credit Card-This is a card issued to all farmers including small and marginal farmers, tenant
farmer, share croppers and oral lessees.
 Please note that required documents may vary from bank to bank.
Agricultural Credit Eligibility
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Agricultural credit are extended to all types of farmers such as small and marginal farmers,
tenant farmer, share croppers and oral lessees.
Agricultural Credit Interest Rate
As per government notification, for crop credit the interest rate and collateral requirement is as
follows:
On crop credit: For 2013-14, as per Govt of India notification, crop credit worth Rs. 3 lakh or below
would carry an interest rate of 7% p.a. For those farmers promptly repaying credit, Govt. of India also
provide allows interest subvention of 3% p.a-effectively bringing down interest rate to 4% p.a.
Crop credit beyond Rs. 3 lakh, banks charge interest rate as approved by RBI and other conditions as
approved by their Board of Directors.
As per RBI directive, crop credit till an amount of Rs. 1 lakh requires no security. Credit over
Rs. 1 lakh may require security as per the lending banks terms and conditions.
Post-harvest: Post-harvest credit is available to farmers at a concessional rate of 7% with interest rate
subvention. For farmers availing post-harvest credit against the negotiable warehouse receipts, the
banks may charge interest at commercial rates.
For land purchase: Banks extend credit for purchase of land within 5 km of the farmers residence at
interest rate as determined from time to time. There is no margin for such credit up to Rs 50,000 and
amounts higher than this require a margin of 10%. The land is supposed to mortgaged in favour of the
Bank and is considered the security.
1. Can credit be availed for purchase of land?
Yes, banks do extend credit to farmers for purchasing lands. However, banks usually finance
purchase of land within a radius of 3 to 5 Kms of their residence or within village boundary.
2. Who can apply for such land purchase?
Farmers who own less than 2.5 acres of irrigated land or 5 acres of non-irrigated land, i.e-
marginal and small farmers-are eligible to buy land by availing a bank credit. Sharecroppers and
tenant farmers can also be covered under the scheme.
3. Can credit be availed for purchasing land in the name of women?
Yes, it is possible. As per Govt policy women owning land could lead to their empowerment.
Hence, purchase of land in women can be financed and preference can be given to women in distress,
SHG members and widows etc.
4. What are the other allied activities eligible for agricultural credit?
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In addition purchasing of land, or purchasing of agricultural tools, storage of produce and
transport also are included under purview of agricultural credit.
5. How much agricultural credit can be availed without any security?
To encourage institutional borrowing among farmers, banks have relaxed security or collateral
for agricultural credit.
As per RBI directive, crop credit till an amount of Rs. 1 lakh requires no security. Credit over
Rs. 1 lakh may require security as per the lending banks terms and conditions.
Similarly, there is no margin for credit for purchase of land up to Rs 50,000 and amounts higher than
this require a margin of 10%. The land is supposed to mortgage in favour of the Bank and is
considered the security.
A GST rate of 18% will be applicable on banking services and products from 01 July, 2017.
7. General Calculations: Banks sanction agricultural credit, both long-term and short-term to
farmers for agricultural activity in the following way.
i) Crop credit till an amount of Rs. 1 lakh requires no security.
ii) Farmers who own less than 2.5 acres of irrigated land or 5 acres of non-irrigated land, i.e-
marginal and small farmers-are eligible to buy land by availing a bank credit.
iii) Banks usually finance purchase of land within a radius of 3 to 5 Kms of their residence or within
village boundary
iv) Banks extend credit for purchase of land within 5 km of the farmers residence at interest rate as
determined from time to time.
8. Results: Agricultural credit are any credit that are availed by a farmer to fund seasonal
agricultural operations or related activities like animal farming, pisci-culture or purchase of land
or agricultural tools..
9. Caution: NA
11. Weblinks:https://lecturenotes.in/materials/19538-note-of-agricultural-finance-cooperation,
LMAEE219 Page 46
Aim: To estimate credit requirement of farm business- A case study.
Observations:
Calculations:

obtained Marks
LMAEE219 Page 47
Experiment No. 9
1. Aim: To prepare and analyze balance sheet- A case study
3. Materials: NA
4. Learning Objectives: It will guide you through a step-by-step process to create a balance
sheet for your company
A balance sheet (also known as a statement of financial position) is a formal document that
follows a standard accounting format showing the same categories of assets and liabilities regardless
of the size or nature of the business.
What to expect
This Business Builder will introduce you to accounting terminology and examine the concepts
of assets, liabilities and net worth in a way that will help you relate them to your business. It will
guide you through a step-by-step process to create a balance sheet for your company and explain how
to use a balance sheet to analyze your business' liquidity and leverage.
Garbage-in, garbage-out. The integrity of any financial statement is directly related to the
information that goes into its construction. You may want to consider revamping of your record-
keeping, if necessary, before you begin compiling financial statements.
This Business Builder will explain what data is necessary for accurate financial statements, but
answering the following questions might be a good place to start.
 Are the financial records for all (or most) of the company's assets (equipment, inventory, furniture)
and liabilities (personal loans, bank loans) in one place?
 Is there a record of the amounts and sources of cash expended to begin the business and acquire
inventory?
 Do you know what is currently owed to the bank, creditors, or others?
 Do you know how much of what is owed is due in the next 12 months?
 Can you estimate what percentage of accounts receivable may not be received?
What Does the Balance Sheet Report?
For a given date, the Balance sheet shows the following for the company:
 Firstly, total Assets. Items of value the firm owns or controls, which it uses to earn revenues.
 Secondly, total Liabilities. What the firm owes.
LMAEE219 Page 48
 Thirdly, total Owners Equities. What the firm owns outright.
More accurately, the Balance sheet shows end-of-period balances in the firm's Assets, Liabilities, and
owner’s equity accounts. However, its name includes "Balance" for another reason. The three
main B/S sections represent the accounting equation:
Assets = Liabilities + Owners Equity
Why Create a Balance Sheet?
A balance sheet provides a snapshot of a business' health at a point in time. It is a summary of
what the business owns (assets) and owes (liabilities). Balance sheets are usually prepared at the close
of an accounting period such as month-end, quarter-end, or year-end. New business owners should not
wait until the end of 12 months or the end of an operating cycle to complete a balance sheet. Savvy
business owners see a balance sheet as an important decision-making tool.
Over time, a comparison of balance sheets can give a good picture of the financial health of a
business. In conjunction with other financial statements, it forms the basis for more sophisticated
analysis of the business. The balance sheet is also a tool to evaluate a company's flexibility
and liquidity.
How to prepare a balance sheet:
A balance sheet is a summary of a firm's assets, liabilities and net worth. The key to
understanding a balance sheet is the simple formula:
Assets = Liabilities + Net Worth
All balance sheets follow the same format:
If it is in two columns, assets are on the left, liabilities are on the right, and net worth is
beneath liabilities. If it is in one column, assets are listed first, followed by liabilities and net worth.
a) Current Assets: Cash on hand or in the bank and other assets in the possession of the farm, which
may be liquidated in the normal operation of the business like products held for sales and supplies are
called current assets. The liquidation of these items will have the least effect on the business to
continue its operation.
b) Working Assets or Intermediate Assets: Assets which are normally used up during the life of the
business such as farm equipment and machinery, breeding and producing livestock can be categorized
under this. They have the life of one to ten years. The liquidation of these assets would have a
significant influence on business activity. These assets are somewhat more difficult to liquidate than
current assets.
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c) Fixed Assets or Long Term Assets: Assets like land, building and land improvements are difficult
to convert into cash. They are long-term permanent assets. These are not likely to be liquidated. If a
major portion of these assets were liquidated, the business would also be terminated in most cases.
The sum of current, intermediate and long-term assets is the total assets of the business. The claim
against is divided between debts of the business and owner’s equity (net worth).
Table-1: Analyze balance sheet net worth is estimated by subtracting total liabilities from total assets.
ii) Liability: A liability is defined as, “a claim by others against the farm business, like mortgages
and accounts payable”. Liabilities can be classified into
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a) Current Liabilities: Liabilities, which call for immediate payment, generally within one year and
which cannot be deferred, are called the current liabilities. They include rents, taxes and interest, plus
that portion of principal on intermediate and long-term debt due within the next twelve months.
b) Intermediate Liabilities: They are also known as medium term liabilities, which can be deferred
for the present. They are not of immediate concern but have to be paid between one and ten year
period.
c) Long-term Liabilities: Any deferred liability, which has to be met after ten years and generally
upto 20 years, is called the long-term liability. They consist of mortgages and land contracts.
iii) Net Worth: Net worth is estimated by subtracting total liabilities from total assets. It reflects the
owner’s equity in the business and in other personal property. The net worth statement is one of the
primary documents used by lending agencies in evaluating requests for new loans or extension of
existing loans. It is also useful for calculating financial ratios of the farm business.
It will guide you through a step-by-step process to create a balance sheet for your company
and explain how to use a balance sheet to analyze your business' liquidity and leverage.
i) Firstly, total Assets. Items of value the firm owns or controls, which it uses to earn revenues.
ii) Secondly, total Liabilities. What the firm owes.
iii) Thirdly, total Owners Equities. What the firm owns outright.
iv) Assets = Liabilities + Net Worth
8. Results:
This examines the concepts of assets, liabilities and net worth in a way that will help you relate
them to your business. It reflects the owner’s equity in the business and in other personal property.
The net worth statement is one of the primary documents used by lending agencies in evaluating
requests for new loans or extension of existing loans.
9. Caution: NA
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Aim:
Observations:
Calculations:

obtained Marks
LMAEE219 Page 52
Experiment No. 10
1. Aim: To prepare and analyze income statement- A case study.
3. Materials: NA
4. Learning Objectives: It will guide you through a step-by-step process to create a balance
sheet for your company
A Income statement indicates how well the farm business has performed during the accounting
period. From this, we can get an idea of the returns to various resources after deducting the expenses
and also about overall earnings of the farm. This is an important financial record because it measures
the financial progress and profitability over a period of time. It is a summary of both cash and non-
cash transaction of the farm business. In non-cash financial transaction, we get capital gain and
depreciation. Income statement is divided into two major categories, viz., income and expenses.
Income includes cash receipts, capital sales of business and changes in inventory value of items
produced in the farm. Expenses include operating and fixed expenses.
The Purpose of the Income Statement
The primary purpose of any income statement is to report a company's earnings to investors
and managers over a specific period of time, so they can understand how the firm is performing on a
core, economic basis. In olden days, people tended to refer to the income statement as the P&L
Statement, which was short for "Profit and Loss Statement."
i) Inventory: It is a complete listing of all assets. Items like supplies, grain and feed held for sale are
listed on the inventory form.
ii) Capital Sales of the Business: The sale of milch animals and equipment are major items under this
heading. These types of receipts are separated from normal cash receipts because they must be
reported differently on tax forms.
iii) Changes in Inventory: In making adjustment for changes in inventory value, both changes in
price and quantity should be taken into consideration. If the ending inventory value is greater than the
beginning inventory value, it should be treated as a form of income. If opposite holds true it should be
considered as negative income.
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iv) Operating and Fixed Expenses: Operating expenses generally vary with the size of the business
operation. But fixed expenses do not significantly vary with changes in volume of business done
under the period of reporting.
Table-1: Using Income Statement Analysis to Calculate Expenses, Earnings, Financial
Ratios, and Profit Margins
Receipts Amount Expenses Amount
I) Cash Receipts I) Operating Expenses
Paddy sales 7500 1.Hired labour 3000
Sugar cane sales 5500 2. Hired bullock labour 4000
Ground-nut sales 12000 3.Fuel and repairs for machineries 2500
Milk sales 6500 4. Fertilizers 1500
Broiler sales 12000 5. Other crop expenses (seed and 2400
6.Miscellaneous income (hired out 1500 6.Livestock and veterinary expenses. 1000
human and bullock labour)
Sub-Total 45000 7. Interest on current debt 600
I) Net Capital Gain Income 8. Other miscellaneous expenses 700
1. Sale of purchased milch animal 2000 Sub-Total 15700
2. Sale of farm bred animal 2000 II) Fixed Expenses
3. Sale of machinery 2000 1. Land rent 3000
Sub-Total 6000 2.Land revenue, cess and surcharge, 800
III) Change in Inventory Value 3. Land development 4200
1.Crop inventory 4000 4. Interest on intermediate and long 1000
2. Livestock inventory 1000 5. Equipment depreciation 1500
Sub-Total 5000 6. Livestock inventory change 1000
Gross Farm I 56000 7. Imputed value of family labour 1000
Net Farm Income 25700 8. Building inventory change 600
9. Imputed value of operator’s 1500
Sub-total 14600
Total Expenses 30300
Even with these drawbacks, income statement analysis reveals much more than a
company's earnings to the serious investor or analyst. It provides important insights into how
effectively management is controlling expenses, the amount of interest income and expense, and
the taxes paid.
Investors can use income statement analysis to calculate financial ratios that will reveal the
rate of return the business is earning on the shareholders' retained earnings and assets (in other words,
LMAEE219 Page 54
how well they are investing the money under their control). They can also compare a company's
profits to its competitors by examining various profit margins such as the gross profit
margin, operating profit margin, and net profit margin.
The Limitations of the Income Statement
 There is a mistake that many new investors make in assuming that the income statement is the most
important financial statement. As a result, it is too often the sole source of attention as equally
important considerations such as capital structure and cash flow are ignored; considerations that
can make or break a firm.
 After all, right up to the collapses that destroyed their stockholders, Wachovia, AIG, and Lehman
Brothers looked profitable. The dangers there were buried in the footnotes, balance sheet, and cash
flow statements, not the income statement so be aware of the limitations.
 One of these limitations is the use of estimates. For better or worse, the income statement requires
the use of certain approximations. These estimates can vary among reasonable people of good
intent but they necessarily introduce an element of ambiguity in the figures.
 No one really knows how long a desk or computer, copy machine or corporate jet is going to last
but depreciation expenses must be estimated nevertheless. (We'll get into that later in this lesson.)
Banks don't know ahead of time exactly how much of their loan book is going to go bad but they
need to record reserves against earnings they think are reasonable.
 High profile lawsuits can't be predicted ahead of time but in the event of probable losses, charges
need to be made on the income statement to sit in reserves on the balance sheet.
 The downside is that economic reality can sometimes be obfuscated intentionally or non-
intentionally. You get things like "cookie jar" accounting abuse where management overestimates
reserves during good times only to reverse these charges when things get tough so they can pad the
numbers and make themselves look good.
core, economic basis.
i) Inventory: It is a complete listing of all assets. Items like supplies, grain and feed held for sale are
listed on the inventory form.
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ii) Capital Sales of the Business: The sale of milch animals and equipment are major items under this
heading. These types of receipts are separated from normal cash receipts because they must be
reported differently on tax forms.
iii) Changes in Inventory: In making adjustment for changes in inventory value, both changes in
price and quantity should be taken into consideration.
iv) Operating and Fixed Expenses: Operating expenses generally vary with the size of the business
operation. But fixed expenses do not significantly vary with changes in volume of business done
under the period of reporting.
8. Results:.
core, economic basis. In olden days, people tended to refer to the income statement as the P&L
Statement, which was short for "Profit and Loss Statement
9. Caution: NA
LMAEE219 Page 56
Aim: To prepare and analyze income statement- A case study.
Observations:
Calculations:

obtained Marks
LMAEE219 Page 57
Experiment No. 11
1. Aim: To study appraisal of a loan proposal- A case study.
3. Materials: NA
4. Learning Objectives: How does a lender assess the creditworthiness of an individual borrower.
Whenever you discuss personal loans or read about loans in general, you may have come
across the term ‘credit appraisal’. Credit appraisal basically refers to assessing a particular loan
application or proposal in a thorough manner in order to gauge the repayment ability of the loan
applicant. A lender conducts a credit appraisal chiefly to make certain that the bank gets back the
money that it lends to its customers.
How Does a Lender Assess the Creditworthiness of an Individual Borrower?
In the context of loans and credit, creditworthiness broadly refers to the financial character of a
particular individual. When a person applies for a loan, the lender will check this financial character to
get an idea of how the applicant treats his or her debts.
The lender will check the borrower’s credit history. This will comprise checking his or her repayment
behavior, time taken to pay different equated monthly installments (EMIs), how a borrower has
treated his or her different debt obligations, etc.
What is Credit Score?
In order to compute the creditworthiness of a borrower, a credit analysis needs to be
performed. Apart from checking the credit history of a borrower, a lender will also evaluate his or her
credit score. A credit score refers to a particular score that is given to a borrower depending on his or
her credit history. This score is provided by credit bureaus who will evaluate one’s full repayment
behaviour and give them a score. It will be based on credit reports created by credit bureaus. Hence, if
one is interested in applying for a personal loan, a car loan or any other loan, he or she should make
sure that their credit score is good. In India, the credit score of any loan applicant should ideally be
750 and above.
Factors Evaluated During a Credit Appraisal Process
A lender’s credit appraisal process will typically check and evaluate the following important
factors:
 Income
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 Age
 Repayment ability
 Work experience
 Present and former loans
 Nature of employment
 Other monthly expenses
 Future liabilities
 Previous loan records
 Tax history
 Financing pattern
 Assets owned
6. Outline of the Procedure:
Appraisal of credit proposal
Any types of lending procedure starts with building up relationship with customer through
account opening. Control of credit operations is done at branch and Corporate Office Level.
Step-One: Loan application:
Most bank loans to individuals arise from a direct request from a customer who approaches a
member of the bank’s staff and asks to fill out a loan application. Business can requests, on the other
hand, often arise from contacts the bank’s loan officers and sales representatives make as they solicit
new accounts from firms operating in the banks market area. Sometimes loan officers will call on the
same company for months before the customer finally agrees to give the bank a try by filling out a
loan application.
A loan procedure starts with a loan application from a client who must have an account with
the Bank. At first it starts form the branch. Branch receives application from client for a loan facility.
In the application client mention what type of credit facility he/she wants form the Bank including his
personal information and business information. Branch Manager or regarding Officer- in charge of
credit department conducts the initial interview with the customer.
Once a customer decides to request a loan, an interview with a loan officer usually follows
right away, giving the customer the opportunity to explain his or her credit needs. That interview is
particularly important because it provides an opportunity for the bank’s loan officer to assess the
customer’s character and sincerity of purpose.
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Step-Two: credit investigation:
After receiving the loan application form, sends a letter to Bangladesh Bank for obtaining a
credit report of the customer from there. This report is called CIB (Credit information Bureau) report.
This report is usually collected if the loan amount exceeds Tk. 50 thousands. The purpose of this
report is to be informed that whether the borrower has taken loan from any other Bank or not; if ‘yes’
then whether these loans are classified or not.
Step-Three: Document collection:
If Bangladesh Bank sends positive CIB report on that particular borrower and if the Bank
thinks that the prospective borrower will be a good one, then the Bank will scrutinize the documents.
Required documents are;
 In case of Corporate Client Financial documents of the company of last three to five years. If the
company is new then projected financial data are required.
 Personal net worth of the borrower/Borrowers.
 In this stage, the Bank will look whether the documents are properly filled up and signed. Credit in
charge of the relevant branch is responsible to know about the ins and outs of the client’s business
through discussing with him.
Step-Four: Inspection:
If a business or mortgage loan is applied for, a site visit is usually made by an officer of the
bank to assess the customer’s location and the condition of the property and to ask clarifying
questions. The loan officer may contact other creditors who have previously loaned money to this
customer to see what their experience has been. Project for which the loan is applied is inspected by
Bank officials. Project’s existence, distance from Bank office, viability, monitoring cost and other
possibilities are also examined.
Step-Five: Evaluation of credit:
If all is favorable to this point, the customer is asked to submit several crucial documents the
bank needs in order to fully evaluate the loan request, including complete financial statements and, in
the case of a corporation, board of directors’ resolutions authorizing the negotiation of a loan with the
bank. Once all documents are on file, the credit analysis division of the bank conducts a thorough
financial analysis of them aimed at determining whether the customer has sufficient cash flows and
backup assets to repay the loan. The credit analysis division then prepares a brief summary and
recommendation, which goes to the loan committee for approval.
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Any loan proposal needs to be evaluated on the Basis of financial information provided by the
applicant. Credit Risk Grading (CRG) is a technique by which the risk of the loan is calculated.
Banker must analyze CRG when loan application is above 1 crore. Experienced people of Credit
department in the branch do this analysis. It is a ranking whose total score is 140. Among this score,
120 is for Total Business Risk and 20 for Total Security Risk.
In CRG, following aspects are analyzed:
 Financial Risk
 Business/Industry Risk
 Management Risk
 Security Risk
 Relationship Risk
Step-Six: Collateral collection:
If the loan committee approves the customer’s request, the loan officer or the credit committee
will usually check on the property or other assets to be pledged as collateral in order to ensure that the
bank has immediate access to the collateral or can acquire title to the property involved if the loan
agreement is defaulted. This is often referred to as perfecting the bank’s claim to collateral. Once the
loan officer and the bank’s loan committee are satisfied that both the loan and the proposed collateral
are sound, the note and other documents that make up a loan agreement are prepared and are signed
by all parties to the agreement, whether those are properly submitted – regular and up to date or else
those documents will be asked to regularize by the client.
Step-Seven: Issuance of sanction letter to client:
If the proposal meets PBL’s lending criteria and is within the manager’s discretionary powers,
the credit line disapproved. The manager and the sponsoring officer sign the credit line proposal and
issue a sanction letter to client. If the value of the credit line is above the branch managers’ limit then
it is send to head office for final sanction with detailed information regarding clients, business or
purpose of the loan, security papers.
Step-Eight: Review of credit proposal by credit committee:
Head office processes the credit proposal and afterwards puts up a memorandum to credit
committee. The credit committee reviews the credit proposal and accepts or rejects the proposal.
Step- Nine: Loan approval:
After approval by the Credit Committee head office gives an approval letter to the branch and
branch gives a sanction letter. The client should accept sanction advice with seal which will prove his
agreement with the terms and condition offered by the Bank.
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Step-Ten: Collection of charge document:
After the sanction advice, bank will collect necessary charge document. Charge documents
vary on the basis of types of facility, types of collateral. Generally the following charge documents are
required as per the nature of the loan.
1. D.P. Note (Demand Promissory Note)
2. GLCA (General Loan & Collateral Agreement)
3. Letter of Continuity
4. Letter of Lien – [In case of loan against any instruments or documents]
5. Continuing Guarantee
6. Letter of Hypothecation
7. Hypothecation of Debts & Assets
8. Counter Indemnity
9. Trust Receipt
10. Authority for Borrowing Limited Liability Company.
Step-Eleven: Loan disbursement:
Finally loan is disbursed and monitoring of loan starts as well.
Any types of lending procedure starts with building up relationship with customer through
account opening. Control of credit operations is done at branch and Corporate Office Level.
i) In case of Corporate Client Financial documents of the company of last three to five years. If the
company is new then projected financial data are required.
ii) Personal net worth of the borrower/Borrowers.
iii) In this stage, the Bank will look whether the documents are properly filled up and signed. Credit
in charge of the relevant branch is responsible to know about the ins and outs of the client’s
business through discussing with him.
8. Results:
In the context of loans and credit, creditworthiness broadly refers to the financial character of a
particular individual. When a person applies for a loan, the lender will check this financial character to
get an idea of how the applicant treats his or her debts
9. Caution: NA
LMAEE219 Page 62
Aim: To study appraisal of a loan proposal- A case study.
Observations:
Calculations:

obtained Marks
LMAEE219 Page 63
Experiment No. 12
1. Aim: To study the techno-economic parameters for preparation of projects.
3. Materials: NA
4. Learning Objectives: Guidelines for preparing a detailed project report (DPR)/ techno economic
feasibility report (TEFR)
Your company seeking financial assistance for implementation of its business idea is required
to prepare a Project Report covering certain important aspects of the project as detailed below:
Promoters background/experience
Product with capacity to be built up and processes involved
Project location
Cost of the Project and Means of financing thereof
Availability of utilities
Technical arrangements
Market Prospects and Selling arrangements
Environmental aspects
Profitability projections and Cash flows for the entire repayment period of financial assistance
Spread sheets formats attached with this document will help you prepare a Detailed Project
Report for your Bank. You may omit the manufacturing related information in case you are applying
for a nonmanufacturing project. Since the appraisal of the Project involves evaluation of the Project in
the following areas, your company/you would be required to submit certain documents/information in
the matter.
A) Management Evaluation
 Memorandum and Articles of Association: Object, authorized and paid-up share capital,
promoter’s contribution, borrowing powers, list of directors on the Board, terms of appointment of
directors
 Your company as the Promoter:
Corporate plan of the Company, projects promoted/implemented/under implementation,
Bankers' report on dealings and repayment of past loan assistance, details of group companies,
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operations, balance sheet and profit & loss account of the promoter company.
 New Promoters:
Educational background, any industrial experience, family background, sources of income,
details of personal properties, banker's reference, and income tax / wealth tax returns.
 Management and Organization set up:
Broad composition of the Board, details of full time directors and their responsibilities, details
of Chief executive and functional executives including qualification, experience, and organization set-
up for existing company and during project implementation for new company.
B) Technical Feasibility
 Technology and manufacturing process:
Proven/new technology, basis of selection of technology, competing technologies,
performance data of plants based on the technology, details of licensor of technology, process flow
chart and description.
 Location of the Project:
Locational advantage, availability of raw material and other utilities, infrastructure facilities,
availability of labour, environmental aspects.
 Plant and Machinery:
List of machinery & equipment, details of suppliers, competitive quotations, technical &
commercial evaluation of major equipment.
 Raw material, Utilities and Manpower:
Details of raw materials and suppliers, electricity and water supply, basis of manpower
estimates, details of manpower eg. managerial, supervisory, skilled/unskilled, training needs.
 Contracts:
Agreement with contractors detailing on know-how, engineering, procurement, construction,
financial soundness and experience of contractors.
 Project monitoring and implementation:
Mode of implementation, details of monitoring team, detailed schedule of implementation.
 Environmental Aspects:
Air, Water and Soil Pollution, list of pollutants / Hazardous substances, their safety, handling
and disposal arrangements, compliance with national and International Standards, Clearances and No
objection certificates required and obtained etc.
LMAEE219 Page 65
C) Commercial Viability
 Existing and potential market demand and supply for the proposed product in respect of volume
and pattern.
 Share of the proposed product of the company in the total market through marketing strategy.
 Selling price of the product and export potential, if any.
 Buy-back arrangements, if any.
D) Financial Appraisal
 Cost of the Project:
This includes the cost of land & site development, building, plant & machinery, technical
know-how & engineering fees, miscellaneous fixed assets, preliminary & preoperative expenses,
contingencies, margin money for working capital. Your company is expected to submit realistic
estimates and reasonableness of the cost of the project will be examined with reference to various
factors such as implementation period, inflation, various agreements, quotations etc.
Means of Financing:
Means of financing shall have to conform to proper mix of share capital and debt. This
includes share capital, unsecured loans from Promoters/associates, internal accruals, term loans,
Government subsidy/grant. Reasonableness of Promoters' contribution in the form of equity and
interest-free unsecured loans, if any, is ascertained in view of commitment to the Project.
Profitability Projections:
Past records of financial performance of Your company will be examined. Your company
needs to submit profitability estimates, cash flow and projected balance sheet for the project and for
the Company as a whole. Based on the projections, various financial ratios such as Debt -Equity ratio,
Current ratio, Fixed asset coverage ratio, Gross profit, Operating profit, Net profit ratios, Internal rate
of return(over the economic life of the project), Debt Service Coverage ratio, Earning per share,
Dividend payable etc. would be worked out to ascertain financial soundness of your Project.
E) Economic Viability
 Your company will have to take real value of input as against the value accounted in financial
analysis for the purpose of economic evaluation of the project.
 Your company should carry out social cost benefit analysis as a measure of the costs and benefits
of the project to Society and the Economy.
 Economic analysis is therefore aimed at inherent strength of the Project to with stand International
competition on its own.
LMAEE219 Page 66
Your company seeking financial assistance for implementation of its business idea is required
to prepare a Project Report covering certain important aspects of the project as detailed below:
i) Promoters background/experience
ii) Product with capacity to be built up and processes involved
iii) Project location
iv) Cost of the Project and Means of financing thereof
v) Availability of utilities
vi) Technical arrangements
vii) Market Prospects and Selling arrangements
viii) Environmental aspects
ix) Profitability projections and Cash flows for the entire repayment period of financial assistance.
8. Results:
Your farm seeking financial assistance for implementation of its business idea is required to
prepare a Project Report covering certain important aspects of the project . This includes share capital,
unsecured loans from Promoters/associates, internal accruals, term loans, Government subsidy/grant.
Reasonableness of Promoters' contribution in the form of equity and interest-free unsecured loans, if
any, is ascertained in view of commitment to the Project.
9. Caution: NA
.
LMAEE219 Page 67
Aim: To study the techno-economic parameters for preparation of projects.
Observations:
Calculations:

obtained Marks
LMAEE219 Page 68

AEE 219 Agricultural Finance and Cooperation: LMAEE219

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AEE 219 Agricultural Finance and Cooperation: LMAEE219

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LABORATORY MANUAL

Name of the Student: ……………………………………………………

Registration Number/Roll No……………………………………………

Section and Group……………….............................................................

Session: 2020-21 (Autumn Term)

2 To study the optimum allocation of limited amount of capital 10-16

9 To prepare and analyze balance sheet- A case study 48-52

10 To prepare and analyze income statement- A case study 53-57

11 To study appraisal of a loan proposal- A case study 58-63

12 To study the techno-economic parameters for preparation of 64-68

1. Aim: To determine the most profitable level of capital use

d) Average Variable Cost and Average Physical Product:

Variable Output (APP) (MPP) (TVP) MVP MIC

Aim: To determine the most profitable level of capital use

Result and Discussion:

Learning Outcomes: (What I have learnt)

To be filled in by the faculty

S.No. Parameters Marks Max.

Fig. 1: Maximum revenue combination.

Result and Discussion:

Learning Outcomes: (What I have learnt)

To be filled in by the faculty

SI.No. Parameters Marks Max.

Progress and Performance of Primary Agricultural Cooperative societies in India

Result and Discussion:

Learning Outcomes: (What I have learnt)

To be filled in by the faculty

SI.No. Parameters Marks Max.

ii) Indirect finance by commercial banks

Result and Discussion:

Learning Outcomes: (What I have learnt)

To be filled in by the faculty

Result and Discussion:

Learning Outcomes: (What I have learnt)

To be filled in by the faculty

S.No. Parameters Marks Max.

2 The bank offers financial literacy programme such as arithmetic,

4 The bank provides KCC/ GCC / OD facilities to customers

5 The bank has appointed BC/BF/USB in its service area

6 The bank provides Educational loan to students

7 The bank provides Vehicle loan to the customers

8 The bank provides Personal loan to the customers

9 The bank provides Crop loan to the customers

10 The bank provides Business loan to the customers

11 The bank strictly follows on the KYC norms

12 The bank doesn’t offer Insurance/ Pensionp roducts

18 The bank has Bio-metric ATM facilities to its rural customers

19 The bank remits payment for MGNREGS/any other government

21 The bank has good Customer Relationship

Result and Discussion:

Learning Outcomes: (What I have learnt)

To be filled in by the faculty

S.No. Parameters Marks Max.

2 The bank offers financial literacy programme such as arithmetic,

4 The bank provides KCC/ GCC / OD facilities to customers

5 The bank has appointed BC/BF/USB in its service area

6 The bank provides Educational loan to students

7 The bank provides Vehicle loan to the customers

8 The bank provides Personal loan to the customers