Indian literature is replete with examples of unscrupulous money lenders, who were the chief source of agricultural credit. To curb their inadequate, extortive and exploitative practices a multi-agency approach consisting of cooperatives, commercial banks and regional rural banks have been put in place in India to assist farmers. The financial requirements of the Indian farmers range from buying agricultural inputs - seeds, fertilisers, fodder etc., to personal loans in order to support their families in the poor crop production years. Credit is also requisitioned when farmers buy additional land, make improvements on the existing land, or purchase agricultural machinery. Farmers also seek loans to increase farm efficiency - such as hiring of irrigation water lifting devices, labour or other machinery.
In the pre-Independence era, The Cooperative Societies Act, 1904 was enacted which empowered cooperatives to become the premier institutions to disburse agricultural credit. Following this, the Reserve Bank of India (RBI) Act, 1934 came into force â€“ wherein Section 54 mandated the creation of an Agriculture Credit Department with competent staff to advise the central and state governments; state cooperative and othe