Vijayanagar rulers gave due importance to provincial administration. The administration which existed in the provinces was called as ‘Nayankara system’. It was similar to that of feudalism in Europe. According to the system, all the land were owned by the rulers. He distributed the lands to his generals. They functioned under his control and acted as feudal lords.

Based on the system most of the lands were distributed among the Nayaks (land lords). They lived with pomp and show and constructed forts for their protection. They accepted the supremacy of the Vijayanagar rulers and acted as their protectors.
The Nayaks who received the lands from the ruler, distributed them to the tenants for cultivation. In turn the Nayaks collected land tax regularly from the tenants.

The Nayaks gave half of the revenue to central government. Rest of the amount was utilised by the Nayaks for administration, military and other charitable works.

The Vijayanagar rulers during their administration in the Ayyangar system instead of traditional local administration in the villages. According to the new system the administration of the village was entrusted in the hand of a committee which consisted of twelve members.

The government took keen interest for the development of Ayyangar system. Hence, the traditional local bodies weakened