Indirect Finance by Copmmercial Banks

abhishreshthaa

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Even though the scope for direct financing by commercial banks would be limited for some years to come, there is a considerable scope for indirect financing by commercial banks. For instance, 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 marketing and processing of agricultural produce or in the activities ancillary to agriculture such as dairy farming, poultry farming, etc. In this connection, the Stated Bank of India and its subsidiaries are already playing an active role in financing co-operative marketing and processing.


Commercial banks are providing indirect finance for the distribution of fertilizers and other inputs.


Commercial banks extend credit to manufacturing or distribution firms and agencies and co-operatives engaged in the supply of pump-sets and other agricultural machinery on the hire-purchase basis.


They finance the operations of the Food Corporation of India, the state governments 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 and also extend advances to the latter.


This enables land development banks to expand their medium and long-term advances to farmers for the purpose of land improvement and land development.
 
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