A

SYNOPSIS REPORT
ON
A STUDY ON AGRICULTURE INSURANCE IN INDIA
AT
STATE BANK INDIA

Submitted
By
ANDUGULA NIKHIL RAO
H.T.NO: 1302-20-672-261
PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE
OF

MASTER OF BUSINESS ADMINISTRATION

Department of Business Administration

AURORA’S PG COLLEGE
RAMANTHAPUR
(Affiliated to Osmania University)
2019-2021

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 Aurora’s PG College (MBA), Ramanthapur
Department of Management

SYNOPSIS

Title of the Project : A STUDY ON AGRICULTURE

INSURANCE IN INDIA

Student Name : ANDUGULA NIKHIL RAO

Hall Ticket Number : 1302-20-672-261

Signature of the Student :

Signature of the Guide :

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 ABSTRACT

Agricultural insurance can be dealt at both micro level and macro level. Macro- finance deals
with different sources of raising funds for agriculture as a whole in the economy. It is also
concerned with the lending procedure, rules, regulations, monitoring and controlling of
different agricultural credit institutions. Hence macro-finance is related to financing of
agriculture at aggregate level. Agricultural insurance in India is an examination of credit to
farm borrowers for the financing and liquidity services. It is also regarded as studying those
financial intermediaries who provide the financial markets and agriculture with loan funding
where those intermediaries receive their loan capable funds. "Agricultural financing is just as
important as other inputs for agricultural production. Only if the farmers have money (funds)
can technical inputs be bought and used. Yet his own money is always insufficient and he
needs money or credit outside of it. Capitalizing farmers into new investment and/or adoption
of new technologies is farm finance. The significance of agricultural credit is further
strengthened by the unique role of Indian agriculture and its important role in alleviating
poverty in the macroeconomic framework.

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INTRODUCTION
Agricultural insurance in India is an examination of credit to farm borrowers for the financing
and liquidity services. It is also regarded as studying those financial intermediaries who
provide the financial markets and agriculture with loan funding where those intermediaries
receive their loan capable funds. "Agricultural financing is just as important as other inputs
for agricultural production. Only if the farmers have money (funds) can technical inputs be
bought and used. Yet his own money is always insufficient and he needs money or credit
outside of it. Capitalizing farmers into new investment and/or adoption of new technologies is
farm finance. The significance of agricultural credit is further strengthened by the unique role
of Indian agriculture and its important role in alleviating poverty in the macroeconomic
framework. Since the start of the planned development era in India, the emphasis on the
institutional framework for agricultural credit is stressed in recognition of the importance of
agricultural credit in promoting agricultural growth and development. It aims to address and
assess the development of India's history and need for agricultural funding, sources and
magnitude of Agricultural insurance in india.

Until 1935, the money lenders had been farming the only source of credit. They used to
charge excessively high interest rates and follow severe practices while lending and
recovering. As a result, farmers had to pay heavy debts and many of them continued debt. By
the Reserve Bank of India Act of 1934 the Central Co-op of District. Agricultural lending and
improved agricultural lending have received momentum as well as the Bank's Act and Land
Development Banks Act. There was created a powerful alternative agency. A large credit was
easily available in terms of both granting and recovery loans at reasonable interest rates.

While the co-operative banks began financing agriculture in 1930 with their establishments,
the real impetus came only after the Independence, when appropriate legislation and policies
had been enacted. Then, by opening branches in rural areas and drawing deposits, bank
lending to agriculture has made phenomenal progress.

Until 14 major trade banks were nationalized in 1969, the major financial agencies for
agriculture were cooperative banks. Following nationalization, the banks were required to
provide financing as a priority to agriculture. These banks have conducted special branch
expansion programs and have created a nationwide banking service network and have begun

4
large-scale funding of agriculture. Thus, the credit for agriculture has become multi-agency.
New technologies and financing available are being developed and adopted together.

Many formal agencies, such as Co-operatives, Rural Regional Banks, SCBs and SCBs, Non-
Banking Financial Institutions (NBFIs), self-help groups, etc. are involved in the satisfaction
of farmers ' short-and long-term needs. Several initiatives were taken to strengthen the rural
credit system institutional mechanism. The White Revolution and the Yellow Revolution
have played a crucial role in bringing "Green Revolution" finance. The share of commercial
banks in overall agricultural credit rose steeply in the first half of the 2000s. In the 1990s
there was a growing share of short-term farm credit in total farm loans. To ensure easy access
to credit, new credit delivery systems have been introduced in the form of Kisan Credit Card
(KCC).

The procedures and amount of loans for various purposes have been standardized.
Among the various purposes

The biggest share of' crop loans' (short-term loans). Farmer farmers also have loans to buy
electric motors with pumps, tractors and other equipment, digging wells, pike lines,
irrigation, fruits orchards planted, dairy animals and their feed, poultry and cattle farming,
and for many more allies. Furthermore, farmers are awarded loans for pumps and tractors.

The flow of ground level credit increased dramatically in the 12-year period from 2000-01 to
2011-12, in particular after the' doubling' period (2004-07), showing nearly ten times more.
In the next five years of FYP XIII, another Rs35 to 42,000 lakh crore has been paid (12th
Five Year Plan Estimates) in the amount of roughly Rs 28 lakh crore. Agricultural credit has
obviously come to be an important strategy for accelerating farm investment.

In India, agriculture is highly sensitive to risks such as droughts and flooding. Farmers must
be protected from natural disasters and their credit for the next season. To this end, the
Government of India has implemented numerous agricultural schemes across the country.

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Pradhan Mantri Fasal Bima Yojana

On 13 February 2016, Prime Minister Narendra Modi launched the Pradhan Mantri Fasal
Bima Yojana.[1][2] A uniform premium of only 2 percent to be paid by farmers for Kharif
crops, and of 1.5 percent to Rabi crops, was envisaged. The program was launched by Prime
Minister Bima Yojana of India. The annual premium for commercial and horticultural crops
is 5%.

Awareness
Awareness of farmers ' awareness would show public sector banks the areas of concern to
attract more borrowers. Being aware that the sensitivity level of the borrower is a qualitative
factor, a sensitivity index has been developed. In order to measure awareness, several
relevant and related factors were taken into account13 factors relating to Agricultural
insurance in indias provided by public sector banks, such as lending schemes for loan
accessible security, margin required money, rate of interest, method of calculating interest,
penal interest rate, the loan sanction time required, documents required, repayment period
allowed, pre-closurefacility, the cost of a transaction, insurance and non-repaid consequences
HISTORY OF FINANCING AGRICULTURE IN INDIA
Until 1935, the money lenders had been farming the only source of credit. They used to
charge excessively high interest rates and follow severe practices while lending and
recovering. As a result, farmers had to pay heavy debts and many of them continued debt.
The Reserve Bank of India Act 1934 was adopted.
Central Co-op District. Agricultural lending and improved agricultural lending have received
momentum as well as the Bank's Act and Land Development Banks Act. There was created a
powerful alternative agency. A large credit was easily available in terms of both granting and
recovery loans at reasonable interest rates. Though the co‐operative banks began financing
their farmers in the 1930s, their real impetus was only received after independence, when
appropriate legislation had been adopted and policies had been drawn up. Then, by opening
branches in rural areas and drawing deposits, bank lending to agriculture has made
phenomenal progress. Until 14 major trade banks were nationalized in 1969, the major
financial agencies for agriculture were cooperative banks. Following nationalization, the
banks were required to provide financing as a priority to agriculture. These banks have
conducted special branch expansion programs and have created a nationwide banking service
network and have begun large-funding of agriculture. Thus, the credit for agriculture has
become multi-. New technologies and financing available are being developed and adopted

6
together The farmers ' short-and long term needs are met by a wide number of formal
agencies, such as Cooperatives, Regional Rural Banks (RRBs), Scheduled Commercial
Banks and Non Banking Financiers (NBFIs) as well as Self-Help Groups (SHGs). Several
initiatives were taken to strengthen the rural credit system institutional mechanism. The
White Revolution and the Yellow Revolution have played a crucial role in bringing "Green
Revolution" finance. The share of commercial banks in total agricultural loans increased
dramatically during the first half of the 2000s In the 1990s there was a growing share of
short-farm credit in total farm loans. To ensure easy access to credit, new credit delivery
systems have been introduced in the form of Kisan Credit Card (KCC). The procedures and
loan amounts have been standardized for various purposes. "Crop loans" (Short-term credit)
have the biggest share of the diverse purposes. Farmer farmers also have loans to buy electric
motors with pumps, tractors and other equipment, digging wells, pike lines, irrigation, fruits
orchards planted, dairy animals and their feed, poultry and cattle farming, and for many more
allies. Furthermore, farmers are awarded loans for pumps and tractors. The flow of ground
level credit increased dramatically in the 12-year period from 2000-to 2011-, in particular
after the' doubling' period (2004-), showing nearly ten times more In the next five years of
FYP XIII, another Rs35 to 42,000 lakh crore has been paid (12th Five Year Plan Estimates)
in the amount of roughly Rs 28 lakh crore. Agricultural credit has obviously come to be an
important strategy for accelerating farm investment.

7
NEED OF THE STUDY
1) Agriculture insurance assumes vital and significant importance in the agro – socio –
economic development of the country both at macro and micro level.
2) It is playing a catalytic role in strengthening the farm business and augmenting the
productivity of scarce resources. When newly developed potential seeds are combined with
purchased inputs like fertilizers & plant protection chemicals in appropriate / requisite
proportions will result in higher productivity.
3) Use of new technological inputs purchased through farm insurance helps to increase the
agricultural productivity.
4) Accretion to in farm assets and farm supporting infrastructure provided by large scale
financial investment activities results in increased farm income levels leading to increased
standard of living of rural masses.
.

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SCOPE OF THE STUDY
In India, traditionally risk would be managed either privately or through implicit contracts
within the family or network (caste groups/extended families/joint families). Such contracts
can be quite useful to handle non covariant risks. However, yield risks are often locally
covariant, implying that these traditional contracts within village and families would not
perform well to insurance against yield risks. Another form of risk coping strategy among
farmers is income diversification/crop diversification that will reduce variance of their
income. If benefits of reduced risk exposure from such crop diversification are large, then
farmers may be willing to forego some of the possible gains from trade/specialization; that is
they would diversify crop rather than specialize in the activities in which they have a
comparative advantage. This strategy is may seems optimal from individual point of view,
but it may undermine the competitive advantage of a nation through specialization that
hinders national development. Productivity labour would likely increase under specialization.
Also, agricultural research could focus on fewer products and thereby increase its
effectiveness in developing new technologies.

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OBJECTIVES OF THE STUDY
1. To develop rural economy.
2. To provide credit for agriculture and allied activities.
3. To encourage small scale industries, artisans in the villages.
4. To reduce the dependence of weaker sections (Marginal farmers, small farmers and
rural artisans) on private money lenders.
5. To fill the gap created by the moratorium on borrowings from private money lenders.
6. To make backward and tribal areas economically better by opening new bank
branches.
7. To help the financially poor people in their consumption needs.

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RESEARCH METHODOLOGY
TYPES OF RESEARCH

RESEARCH:
Research is an art of scientific investigation. Research is defined as a “scientific and
systematic search for information on a specific topic”.
The purpose of search is to discover answers to questions through the application of scientific
procedures.
METHODOLOGY:
The data used for analysis & interpretation is received from the responses of employees for
the questionnaire. Comparison of response is used for interpreting the data.
The project is presented by using tables, column charts, with their interpretation. A survey is
undertaken to know the facts about the training.
AREA OF RESEARCH : Hyderabad
DATA COLLECTION:
The researcher has wide varieties of methods to consider either single or in combination they
were grouped first according to whether this use secondary or primary sources of data.

PRIMARY DATA:

Data originally collected for an investigation known as primary data concluding personal
interviews through questionnaire. Most of the study for this project is based on primary data
itself.

SECONDARY DATA:

Data which is not originally collected rather obtained from published or unpublished sources,
is know as secondary data. It can be defined as data collected by someone else for purposes
other than solving the problems.

Secondary data for the present study is retrieved from company profile and text books.

RESEARCH INSTRUMENT:

The structural questionnaire with multiple choices.

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 The data collected from the survey has been tabulated and analyzed. The data is
represented graphically by using column charts for easy understand ability.
METHOD OF SAMPLING
The methodology used for this purpose is Survey and Questionnaire Method. It is a time
consuming and expensive method and requires more administrative planning and supervision.
It is also subjective to interviewer bias or distortion.

Sample Size: 100 respondents

Sampling Unit: Businessmen, Government Servant, Retired Individuals

PERIOD OF STUDY
 A Project Of 45 Days
Pre-Testing Or Pilot
In this chapter, we detail the possibilities and pitfalls presented by pretesting, the methods of
validating the survey instrument and its measurements, and pilot testing, the “dress rehearsal”
of survey administration and procedures Pretesting and pilot testing are invaluable
components of survey research, affording researchers a valuable opportunity for reflection
and revision of their project before the costs of errors begin to multiply later on. We begin
this chapter with a discussion of the goals of and guidelines for pretesting followed by a
summary checklist to help you make the most of this procedure. Then we provide an
elaboration of the broader process of pilot testing the entire project from start to finish.

Survey Tools using in the study

Statistical Tools: MS-excel and pie and bar diagrams are used to analyze the data.

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 REVIEW OF LITERATURE

DEFINITION OF AGRICULTURAL INSURANCE:

Murray (1953) defined agricultural. finance as “an economic study of borrowing funds by
farmers, the organization and operation of farm lending agencies and of society’s interest in
credit for agriculture.”
Tandon and Dhondyal (1962) defined agricultural. finance “as a branch of agricultural
economics, which deals with and financial resources related to individual farm units.”
Nature and Scope:
Agricultural insurance can be dealt at both micro level and macro level. Macro- finance deals
with different sources of raising funds for agriculture as a whole in the economy. It is also
concerned with the lending procedure, rules, regulations, monitoring and controlling of
different agricultural credit institutions. Hence macro-finance is related to financing of
agriculture at aggregate level.
Micro-finance refers to financial management of the individual farm business units. And it is
concerned with the study as to how the individual farmer considers various sources of credit,
quantum of credit to be borrowed from each source and how he allocates the same among the
alternative uses with in the farm. It is also concerned with the future use of funds.
Therefore, macro-finance deals with the aspects relating to total credit needs of the
agricultural sector, the terms and conditions under which the credit is available and the
method of use of total credit for the development of agriculture, while micro-finance refers to
the financial management of individual farm business.

INSURANCE IN INDIA
Insurance in India started without any regulations in the nineteenth century. It was a typical
story of a colonial era: a few British insurance companies dominating the market serving
mostly large urban centers. After the independence, the Life Insurance Company was
nationalized in 1956, and then the general insurance business was nationalized in 1972. Only
in 1999 private insurance companies were allowed back into the business of insurance with a
maximum of 26 per cent of foreign holding (World Bank Economic Review 2000). The entry
of the State Bank of India with its proposal of bank assurance brings a new dynamics in the
game. On July 14, 2000 Insurance Regulatory and Development Authority bill was passed to

13
protect the interest of the policyholders from private and foreign players. The following
companies are entitled to do insurance business in India.

The private insurance joint ventures have collected the premium of Rs.1019.09 crore with the
investment of just Rs.3,000 crore in three years of liberalization. The private insurance
players have significantly improving their market share when compared to 50 years Old
Corporation (i.e.LIC). As per the figures compiled by IRDA, the Life Insurance Industry
recorded a total premium underwritten of Rs. 10,707.96 crore for the period under review. Of
this, private players contributed to Rs.1, 019.09 crore, accounting for 10 percent. Life
Insurance Corporation of India (LIC), the public sector giant, continued to lead with a
premium collection of Rs.9,688.87 crore, translating into a market share of 90 per cent. In
terms of number of policies and schemes sold, private sector accounted for only 3.77per cent
as compared to 96.23 per cent share of LIC (The Economic Times, 21 March, 2004).

The ICICI Prudential topped among the private players in terms of premium collection. It
recorded a premium of Rs. 364.9 crore and a market share of 25 per cent, followed by Birla
Sun Life with a premium under- written Rs.170 crore and a market share of 15 percent,
HDFC Standard with 132.7 crore and Max New York Life with Rs.76.8 crore with a market
share of approximately 15 per cent each. Unlike their counterpart in the life insurance
business, private non-life insurance companies have not yet started addressing the retail
market. All is set to change in the coming years. Like in the banking sector, non-life
insurance companies will soon have no choice but to focus on individual buyers.

In case of private non-life insurance players, that their market share rose to 14.13 per cent,
recording a growth of 70.75 per cent on an annual basis, while the market share of public
sector stood at 85.87 per cent, registering a marginal growth of 6.34 per cent. The overall
market has recorded a growth of 12.32 per cent by the end of January 2004. Among the
private non-life insurance players, ICICI Lombard topped the list with a premium collection
of Rs.403.62 crore in one year period with a market share of 3.05 per cent and with an annual
131.6 per cent, followed by ICICI BANK LIFE INSURANCE with a premium of Rs.385.02
crore and 2.91 per cent market share and Tata AIG with 300.49 crore premium and 2.27 per
cent market share with an annual growth rate of 62.60 per cent.

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Among the public sector players, New India garnered a market share of 24.38 per cent,
Rs.3,229.49 crore premium and an annual growth rate of 0.38 per cent, followed by National
with a market share of 21.43 per cent, Rs.2,839.11 crore premium and an annual growth rate
of 19.88 per cent, United India with a market share of 19.47 per cent (Rs.2,578.83 crore
premium) and Oriental with a market share of 18.25 per cent, Rs.2,417.17 crore premium and
an annual growth rate of 1.86 per cent. It is significant to note that HDFC Chubb and Chola
mandalam have registered annual growth rates of 4030.26 per cent and
1101.20 per cent respectively, whereas New India has registered it as 0.38 per cent. If this
trend continues, private insurer would dominate the public sector like New India Insurance
Corporation. It is obviously reflect the insurance sector has facing the challenges with foreign
counter parties as well as private counter parties and lot more opportunities are prevailing to
penetrate the insurance business among the uncovered people and area of India. Further, it
leads to economic development of the country. In this regard, it assumes greater significance
to conduct debate among the inter- disciplinary persons.

Gurudev Singh (2010) examined the crop insurance in India and the dependence of Indian
agriculture on uncertain risk. In addition the farmer‟s experience of other production and
marketing risks relate to different cropping patterns and for different agro climatic and areas.
It also analysed the need for crop insurance as an alternative to manage production risk. It
discussed the presently available crop insurance products for a particular crop and regions
and also it discussed the two important products namely National Agricultural Insurance
Scheme and Weather Based Insurance Schemes. The study conclude identifying some
difficulties in the two major insurance products.

SureshKumar et al (2010) analysed the farmer‟s perception and awareness towards crop
insurance as a tool for risk management in Tamilnadu. The study critically examined how the
farmers perceive about the risk mitigation measures provided by the Government and about
their awareness. The study employed on Probit and Tobit model to analyse the awareness on
crop insurance schemes. This study also observed the loss assessment, which is totally
unacceptable and unpleasant to the farmers. The loss due to natural calamities is taken into
account at Firkah level and the individual losses are not at all considered. It concluded that
the factors such as gross cropped area, income other than agricultural source, presence of risk
in farming number of workers in the farm family, satisfaction with the premium rate and the
15
affordability of the insurance premium amount fount to be significantly and positively
influence the adoption of insurance and premium paid by the farmers.

Nair, Rshmy (2010) studied an evaluation of the crop insurance programme in India through
the multi-peril yield based National Agricultural Insurance Scheme. The coverage and
indemnity payments are biased towards a few regions and crops, and there are delays in
settlement of claims and while the emergence of weather-based insurance as an alternative
has addressed several limitations of traditional insurance, it is faced by challenges of a
different kind. Both these forms of insurance must thus be looked upon as complementary to
each other in order to evolve an efficient mechanism for dealing with natural disaster risks in
agriculture.

Woodard, Joshua D. et al (2010) developed a multi-crop insurance model to evaluate crop

insurance decisions when several crops are produced. The results suggest that the
diversification effects derived from producing multiple crops can substantially alter the risk-
reduction impacts of crop insurance versus in the decision is vowed from the perspective of a
single crop. Further, the relatedness of crop production and price responses among crops
differs considerably across insurance products and strategies. As a result insurance strategies
that might provide the maximum risk reduction for an individual crop do not necessarily
carryover to the multi-crop case.

Heenkenda (2011) studied the demand for agricultural micro insurance at Ampara district
in Sri Lanka. This study analysis the willingness to pay and willingness to join among the Sri
Lankan farmers. The study employed Probit Regression model for this analysis. It also
observed production expenditure and the age of the farmers play a significant role in the
determining the decision of farmers to join the scheme of micro insurance and also observed
younger and more educated farmers could likely to pay for the insurance product. The study
suggests that a strong support to launching Index Based Micro Insurance in Sri Lanka.

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PROPOSED OUTCOMES
Customer awareness program is required so that more people become aware about the
consequences of non repayment of the loan. From the survey I have found as more number of
respondents are not aware about the CIBILrecords.
If there are any kind of hidden charges then that must be disclosed to the customer before
giving loan tothem.
From the survey, I have found that there is more number of customers who have taken loans
ownlands.
In my survey, I have found that there are over all customer is satisfied about the terms &
conditions for loans, therefore bank should provide goodservice.

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 BIBLIOGRAPHY
 Meeker Larry G. & Gray Laura (1987), “Indian Banking: 1987”, IBA
Bulletin,March 1993, P 156.
 Toor N.S. (1994). Finance and Growth: Schumpeter Might Be Right. Quarterly
Journalof Economic, 108 (3):717-37.
 S.N. Bidani (2002). Causes of Non-performing Assets in Public
SectorBanks.Economic Research, 17 (1):16-30.
 PaulPurnendu, Bose, Swapan and Dhalla, Rizwan S. (2011), “Performance
Bankswith Non-performing Assets: An Analysis of NPAs, Yojna”, March
2011, PP5-9.
 Selvarajan B. and Vadivalagan, G. (2012), “Anatomy of NPAs of
CommercialBanks, Applied Finance, Volume 6, No.3, July, 2012, pp 14-26.
 Veerakumar, K. (2012). Rooting out Non-performing Assets. Paper presented
at the5th annual conference on Money and Finance in the Indian Economy, at
IGIDR,Mumbai.
ONLINE SOURCES:

http://en.wikipedia.org/wiki/State_Bank_of_India

http://en.wikipedia.org/wiki/State_Bank_of_India#Operations

http://en.wikipedia.org/wiki/State_Bank_of_India#Domestic_presence

http://en.wikipedia.org/wiki/State_Bank_of_India#Associated_banks
www.wikipedia.org
www.google.com

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