CHAPTER I INTRODUCTION, REVIEW OF LITERATURE AND CONCEPTS
Agriculture in India has always been a way of life, rather than a business and has suffered from stagnation due to low productivity arising from inadequate investment. Low investment is caused by low farm income, which follows in turns from low resource productivity completing the vicious circle. To break-through this problem and to bring an upward movement is by the way of increasing capital investment. An initial push which has been characterized as “Big Push” by “Rodden stein-Rodan” “Critical Minimum effort by Leibenstein, Bottleneck breaking” by Ragnar Nurkse, Linkage effects by Hirschman all are conveying that a need for giving greater attention to capital investment. In 1951 census 82.7 percent of the population of the country lived in rural areas it has declined to 72.2 percent in 2001 census. The share of the rural population in the total population was declining at the rate of hardly two percent per decade. Dependence on agriculture for livelihood in the rural areas is 73.3 percent during 2001 census (Vyas V.S. 2007). Agriculture contributes almost 28 percent of India‟s GDP per year. In the era of planned economic growth of India with GDP growth rate of 8 percent per year, more than 32 percent of population is living below the poverty line. The rate of growth of employment in agriculture sector has declined from 2.57 percent in 1987-88 to 1993-94 to 0.02 percent in 1993-94 to 1999-00.
The emergence of green revolution in India by the late sixties has changed the character of Indian agriculture. There was a growing tendency among the farmers to replace the traditional farming practices with scientific and modern practices, which is reflected by the use of HYV seeds, fertilizers, pesticides, irrigation, machinery and equipment etc. These inputs require heavy financial investments, which the majority of the farmers cannot afford from their own savings. Because they are suffer from indebtedness. According to NSSO indebtedness is highest in Andhra Pradesh (82 percent) followed by Tamil Nadu (74.5 percent) Punjab (65.4 percent) Kerala (64.4 percent) Karnataka (61.6 percent) and Maharashtra (54.8 percent). So the farmers therefore have to depend to a large extent on borrowed funds. This has naturally increased the demand for credit of a large number of farmers. 1
Statement of the Problem Indian agriculture is in a state of serious crisis” and the rate of growth in food production had fallen below the population growth rate. “Over 400 million children, women and men belonging to families with small and marginal holdings and landless labour families are in deep distress”. The investment in agriculture has stagnated at 13 percent of the Gross National Product in the last three five-year plans” (Swaminathan M.S. 2005). The annual average farm growth rate has declined from 4.9 percent in the eighth plan to 1.3 percent in the 10th plan. The share of agriculture investment in Gross Domestic Product (GDP) declined from 1.99 percent in the eighth plan to 1.66 percent in the 10th plan. In spite of the low interest the poor borrowers do not rely on banks or in spite of charging higher interest the moneylenders are still dominating the rural credit market, why? To answer these questions, economist like George Stieglitz (1995) developed a theory of asymmetry of information in which he argued that the formal credit still remain unreachable and replace the role of informal credit markets in rural areas due to the lack of information or imperfect information about the individual borrowers in the rural areas particularly the poor. The village money lender by virtue of small area of operation, are able to gather full or perfect information about the individual borrowers particularly the poor borrowers including the honesty of the person, his background, his heirs, his capacity to repay, in this absence the borrow who will be bearing the repayment etc. It is equally risky that the money lenders lend even to strangers without any collateral security and in the event of default he may lose the money. Informal credit accounts for all these and charges a higher interest. This is highly impossible for the formal bank to have all these information and even if it is produced in the application form, it is highly doubt full and difficult to cross check whether the borrower is giving the real and true information, or the lack of knowledge about the poor small borrowers, which make the banks remain unreachable the poor borrowers. Another important problem is financial institutions the delivery of credit to agriculture is neither smooth nor adequate (Veerashekarappa, 1994). There exists a substantial gap between the demand for and supply of agricultural credit (Kaliyaperumal and Loganathan, 1989). The same idea has been reviewed by Benson Kunjukunju and Mohanan and they also found out region-wise, institution sector-wise and scheme-wise credit gap. There is also a wide gap between the application of loan and sanction of loan (Benson Kunjukunju and Mohanan, 2003). So, the farmers borrow money from the informal 2 sources. In the less developed regions, the small farmers highly depend on informal sources (Dandekar and Wadia, 1989). The same view has been expressed by Kaliyaperumal and Loganathan (1989), but Ramachandran Pillai (2003) has stated that not only small farmers, marginal farmers also depend on such traditional sources of funds because they do not have the collateral to obtain institutional loans and timely credit is not available to the farmers. Veerashekarappa, 1996 also stated that timely credit often needs political intervention. Another problem is distribution of formal sector credit is also unequal with regard to region, class, caste and gender (Ramachandran and Madhura Swaminathan, 2002). And uneven distribution of credit existed not only between states, but also between different economic sectors and noted that bank credit was virtually non-available to small borrowers and weaker sections (Rais Ahmad, 1998). Credit institutions are unequally distributed across the region and accessibility to timely credit depends often on political intervention (Veerashekharappa, 1996). Inequalities exist in the spread of credit, across the regions (Nair, 1999) and across landholding (Gadgil, 1986). The inequalities in the banking system across the regions and social classes persisted (Bell, 1990). This was because of the insistence on collateral (Sarap, 1991) which could not be provided by the poor, complicated administration procedures, long distances from the villages to the branches, the cultural gap between bank officials and the poor, political interference, inflexible lending policies and procedures, lack of provision for consumption credit and a widespread belief that the poor were non-bankable. Veerashekerappa, (1994) expressed his views regarding inequality in the distribution of institutional agricultural credit across the districts in Karnataka. He explained that the uneven distribution of credit supply is caused to some extent by operation and attitudinal deficiencies, but the districts which are characterized by relatively high levels of agricultural development, infrastructure development, rural literacy rate, irrigated area, cropping intensity, use of HYV and fertilizer consumption are in a better position in pulling the credit to the regions. Inequalities of credit also exist in the category of farmers. The marginal propensity to save of the progressive farmers is higher than that of less progressive farmers. Ramachandran Pillai, (2003) has observed that assets such as land, agricultural implements, vehicles and transport equipments and pump sets, tube wells, and other machinery are concentrated in the hands of landlords and rich peasants. So, they easily get institutional credit. This skewed distribution of assets has enabled the rich to garner the benefits of 3 productivity and production increases in the rural economy. Bank wise also credit is unequally distributed. The credit disbursements of commercial banks have been higher in southern region (52 percent) of India. Whereas, the co-operative banks have dominated in southern and western regions (56 percent). But the institutional credit flows to northeastern and eastern region are rather insignificant. It shows the regional imbalances in the credit flow by institutional sources (Agrawal K.P. et al., 1997).
Another major problem faced by all these three agencies is the delinquency of loans. While the problem faced by all these three agencies is the delinquency of loans. While the problem became serious among co-operatives by 1970 itself, the commercial banks got into the problem only after 1975-76 because of their late entry into rural credit. Regional rural banks are having higher overdue compared to other agencies (Subramanyam, 2004). According to Bhat both from financial institutions and farmers point of view, overdue is high in commercial banks when compared to other banks. It is due to Government policy, ineffective legislation, indiscriminate financing, inadequacies in proper monitoring, co-ordination and follow up, inadequacies in training and co-ordination, natural calamities, political compulsion (Rao, 2004).
Even though many financial institutions are started, their main objectives are to free the agriculturists from the clutches of moneylenders and non-institutional agencies. Because some study also shows that farmers have committed suicides due to non-repayment of borrowed amounts from the moneylenders. Hence aim is to reduce the problem of moneylenders. Because suicides of farmers in Andhra Pradesh (Parthasarathy, 1998) and northern districts of Karnataka (Muzaffar Assadi, 1998). Under these circumstances, it is essential to find out whether the financial institutions are able to meet all the credit requirements of farmers. What is the proportion of credit disposed by the commercial banks, Co-operative banks and other financial institutions? The financial institutions though provide short-term, medium term and long-term agricultural credit; there is no clear picture with regard to the assessment of the performance of this credit. To what extent the commercial banks, co-operatives and other financial institutions individually meet the demand for and the supply of agricultural credit? How to provide cheap and timely credit particularly to small and marginal farmers without incurring high transaction costs for the lenders as well as
4 borrowers. From the institutional point of view, the financial institutions face the problems of non-recovery of loans in time, political interference and the Government‟s policy to waive the loan & procedural delays. How to reduce the problem of overdue? Finding answers to the above listed questions are the main purpose for which the study has been undertaken.
Objectives of the study 1. To assess the factors that influences the percentage share of agricultural finance from different sources and utilization and repayment pattern of such credit among different categories of farmers. 2. To assess the credit gap, if any and to trace the efforts taken by the farmers (and also government) to bridge the gap in the study area. 3. To estimate the cost incurred by the respondents for availing loans from different sources. 4. To find out the problems faced by the farmers in repaying the loans and steps taken by the banks for recovering the loan.
Hypothesis 1. The socioeconomic background of the farmers, agrarian structure and relationship and the pattern of development are the key factors that influence the percentage share of credit from different sources, credit utilization and repayment patterns. 2. There is no credit gap among the different groups of farmers in the study area.
Period of study Period of study is 2007-08 of the agriculture year July to June
Reviews A review of literature and concepts is useful to explain precisely the terms and concepts used in the present study, to place the problem in proper perspective and to decide the frame of work for analysis and drawing inference. A review of past studies related to flow of agricultural credit to the farmers, the problem faced by the institutions in providing credit (supply side) and the problem faced by the farmers in receiving loan (demand side) also discussed. 5
Bhat (1994) stated that overdue is a serious problem of agricultural finance in India and it adversely affects the recycling of credit and thereby limit the productive use of the scare financial resources at the disposal of the country‟s credit institutions. To identify the factors he had collected information from both beneficiaries as well as financial institutions. This study revealed that both from the financial institution and farmers point of view overdue was high in commercial banks when compared to other banks. He explained the factors affecting the overdue and for the removal of such factors he had provided some suggestions.
Veerashekerappa (1994) expressed his views regarding inequality in the distribution of institutional agricultural credit across the districts in Karnataka. He stated that uneven distribution of credit supply is caused to some extent by operation and attitudinal deficiencies. He also explained that districts which are characterized by relatively high levels of agricultural development, infrastructure development, rural literacy rate, irrigated area, cropping intensity, use of HYV and fertilizer consumption are in a better position in pulling the credit to the region. In the conclusion he had stated that the disparities in the flow of credit show that the advances are concentrated in few districts. Which have high deposits but the share of agricultural advances to total advances show the agrarian development in the region. He found that the growth of advances and deposit would not necessarily spread out the agriculture credit. The deployment of agriculture credit depends on development of agriculture (Minimum critical development) in the region added to it social indicators like education.
Rekha etal., (2003) evidenced that granting loans to the farmers for agricultural purposes. Both banks and farmers were facing several problems. This article makes an attempt to analyze the problems related to agricultural financing with particular reference to Goa and it also said that commercial banks as a source of finance are considered for the study. This study stated the problems faced by the borrowers and bank managers in financing agriculture. In conclusion, they stated that attempts should be made to overcome these difficulties if the commercial banks have to function as the instrument of agricultural development.
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Veerashekharappa (1996) revealed that credit institutions were unequally distributed across region and accessibility to timely credit depend often political intervention. He had analysed the influence of political intervention on the expansion and delivery of institutional credit in Rabareli and Sultanpur districts of ttar pradesh. From this sultanpur is relatively well off in economic terms and rabareli is relatively poor. He concluded that the politically represented district would have better service compared to other and recovery of loan also good.
Gayithiri.K (1993) stated that in her study two blocks were selected. One is relatively well off (Chikamagalur block) in terms of economic development and another relatively less developed (Kadur block). This study found that both advances and deposits has proved that the banking activity with respect to Chikamagalur is higher than Kadur and recovery is also good in Chikmagalur compared to Kadur even though two regions having similar banking conditions and she also explained that three factors were responsible for poor recovery.
1. The banks are not considering the borrowers skills, capacity to maintain the assets while releasing the loan. 2. Lack of co-ordination between the government and bank officials while releasing the loan. It will create great problem during the recovery time. 3. Selection of borrower is also politically motivated.
This analysis also stated that the borrowers faced problems while obtaining the loans. They are complicated procedures, district location of the bank; the borrowers do not have the previous experience and indifferent attitude of the bank.
Kaliyaperumal and Loganathan (1989) stated that to find out the performance of the credit agencies at a village level in providing farm credit. So that the deficiencies of credit supply may be ascertained. It also revealed that the credit requirements of the village were estimated taking into consideration the cost of cultivation of different crops. This study found that the credit requirements of various categories of farmers might vary according to their holding status. With the help of cost of cultivation of the crops and credit requirements of the farmers the study found the credit gap of the village. 7
Dhawan and Kahlon (1978) in their study “Adequacy and productivity of credit on the small farms in the Punjab” stated that the problem of agricultural finance in India is not merely one of inadequate supply of funds; rather it is aggravated by its ineffective utilization credit serves a useful purpose only when it is used for productive purposed to generate a surplus after paying the interest and capital. Otherwise its diversion for consumption purposes would affect the repaying capacity of borrowers and create overdue and defaults.
Venkateshwarlu et.al. (1980)A study undertaken in Guntur district of Andhra Pradesh revealed that a very high percentage of borrowers diverted the loans from the stipulated purpose at some degree or other than the intensity of diversion increased with their farm size. This study indicated direct relationship between the farm size and agricultural credit diverted.
Balishter et.al. (1987) conducted a study in Bichpuri block, observed that percentage of commercial bank credit diverted to unproductive purposes was highest among marginal farmers and lowest among large farmers. Thus indicated negative relationship between diversion and size of landholding and positive relationship between utilization and size of landholding of borrowers.
Satyasai et al., (1988) in their paper on “ supply of institutional credit- an estimation of credit gap‟ had analyzed the farm credit gap and stated that partial budgeting, practiced by the farmers and stressed the need for budgeting by farmers.
Ramachandran pillai (2003) observed that assets such as land, agricultural implements, vehicles and transport equipments and pump sets, tube wells, and other machinery are concentrated in the hands of landlords and rich peasants. So, they easily get institutional credit. This skewed distribution of assets has enabled the rich to garner the benefits of productivity and production increases in the rural economy.
Anuva saikia (1988) has analyzed the adequacy of agricultural credit and some problems of credit utilization arising as a result of the low scale of finance. She has also noted the inter-relation between the scale of finance and the repayment behaviour
8 of the borrowers. She has recommended revision and periodic review of the scale of finance especially in her native state, Assam.
Patel S.A. (1989) has made a study of the recovery performance of direct agricultural advances of scheduled commercial banks in the Surendra Nagar District of Gujarat. He has recorded that the farmer themselves were ready to repay the loans if the harvests were good and agricultural prices remunerative. They were also eager to have further finance and felt that due recognition for full repayment will induce early repayment.
Ramachandra Rao (1990) has studied the evolution of priority sector advances and their monitoring. He has noted with concern the tyranny of the targets and the problems like mis-utilisation of loans, poor recoveries etc., arising out of the under staffing of rural financial institutions.
Veerashakerappa (1993) in his article “priority sector leading: A case study” has examined the structure and pattern of distribution of institutional credit across different social groups in Karnataka and also examined the causes of overdue. He has observed that in Karnataka the expansion of institutional finance has mainly helped the larger farmers and argued in favour of a re-examination of the credit delivery system to prevent the rich from cornering the benefits that are meant for the poor.
Kannan (2004) in his thesis “Institutional credit to Agriculture in Thanjavur district-a comparative analysis of co-operative and commercial banks” and co-operative banks in block levels and he also stated that service area approach is viewed as a contributory factor for the block level development. He also revealed that the share of the commercial banks in the agricultural credit is higher than that of co-operative banks. But both the banks have equally shown their efficiency in the recovery of loan. And the overdue status is also equally maintained by both the banks. He observes that regarding the repayment the marginal farmers difficult to get marketable surplus compare to small and big farmers. The marginal and small farmers get income from the yield over and above the cost of cultivation. But the income left after meeting their household expenditure, is not sufficient to repay the loan without any default. But in the case of big farmers, the marketable surplus is quite sufficient 9 measures to improve the credit to agriculture on the basis of the requirement of the farmers.
Deoghare (1997) stated that adequate capital is essential in order to sustain and accelerate the technological change in agriculture. The main objective of this study is to examine and find out an optimum cropping pattern at varying capital levels both at existing and recommended technology. For this he had selected Mathura district Uttar Pradesh which is well known for ecological backward area. He used the linear programming model for the maximization of the farm net returns. According to him by adopting the recommended level of technology, can substantially increase the income. This technology cannot help much for increasing the income and employment without the availability of adequate credit facilities.
Kurulkar (1983) stated that financial institutions provide financial resources to farmers to enable them to increase their productive capacity. But disbursing credit not creates an equivalent amount of real capital resources. The farmers must properly utilize the available resources. If the gap between the financial resources and their proper utilization widens, and if a major part of the capital expenditure on agriculture is diverted to consumption purposes, inflationary pressures are bound to be generated in our economy. It creates not only inflationary pressures but reduces the cultivator‟s future net income.
Krishna Veni and Ash Narayan sah (2005) expressed their views that direct institutional credit to agriculture and allied activities. The main objectives of the study is to measure the growth rates of direct institutional credit to agriculture and allied activities both at disaggregate and aggregate level during the study is to estimate the centrality measures with respect to direct agricultural credit, short-term and long-term credit by taking the scheduled commercial banks and RRBs as rivals of co-operatives. For this study they selected data for all the institutions from 1975- 76 to 2001-02. They found that the Absolute Member Centrality (AMC) with respect to agricultural credit and the Relative Member Centrality (RMC) with respect to the short-term credit revealed a gradual decline in the share of co-operative banks credit when SCBs and RRBs are taken as rivals during the study period. They also stated that Relative Member Centrality with respect to long-term credit shows the 10 fluctuating trend. According to them credit to agriculture and allied activities has been slowly moving from co-operatives to SCBs and RRBs during the study period. They calculated growth rates for the same period and they found that the growth rate of co- operative banks are relatively lower than the SCBs and RRBs in terms of short-term, long term and total credits. Their study proved that RRBs have recorded the highest growth rates in terms of credit both at aggregate and disaggregate level. The authors suggested that there is an immense need to improve the institutional credit particularly the share of co-operative banks to save the farmers from financial difficulties. They concluded that financial institutions and state governments have to integrate their credit policies for the well being of the farming community in rural sector.
Balister and Pankaj Kumar (1994) stated that to examine the extent of credit available to different categories of farmers from the institutional and non-institutional sources, purpose wise availability of credit, pattern of utilization of credit availed from the institutional sources and repayment and overdues of loans which were availed by the farmers from the institutional sources. For this the study selected Bichpuri village of development blocks Bichpuri (Agra). It was purposively selected on the basis of intensive financing of agriculture by the commercial banks provided major sources of finance to the small and marginal farmers whereas co-operative society in larger in the case of medium and large farmers. So the co-operative institutions are security oriented. This study also revealed that 35 percent of the sample farmers mostly marginal and small also borrowed from the non-institutional agencies mainly from money lenders. Total credit provided by commercial banks was also higher than that of co-operative banks. The availability of credit per hectare was higher in the case of marginal and small farmers. So that he stated that credit flow is high for marginal and small farmers compared to medium and large farmers. The result also shows that 54 percent of the available credit was used for productive purposes by the farmers. The problem of overdues is quite serious in the case of marginal and small farmers.
Anita Gill (1996) stated that informal credit markets are acknowledgedly exploitative, but any attempt to push them out of business completely will adversely affect agricultural activities, and it also explained that given the growing demand for credit which institutional sources are unable to meet. 11
Singh Kushwaha & Singh (1994) in their study with a view to examining the importance of directed lending for agriculture, a study was conducted in Azamgarh district of Uttarpradesh during 1991-92. In this district there are three main farm financing institutions, Viz, Co-operatives, Commercial banks and Regional Rural Banks. Defaulter was highest in the case of RRBs and lowest for the co-operatives. As large as 32 percent of the defaulters failed to make payment of their dues due to poor crop yield because of untimely rainfall. According to this author the main outcome of this study is that the over dues increased mainly because of the weak and unstable financial condition of the farmers. It is necessary to increase the income and earning capacity of the farmers. The farm credit institutions follow the traditional credit need approach with high interest rate which has resulted in poor recovery position. Urgent remedial measures are, therefore, required to make the financial institutions particularly the RRBs a viable proposition. As regards re-defining the priority sector, agriculture and the target groups consisting of the rural poor should be given top priority for the next ten to fifteen years.
Ramachandran and Madura Swaminathan (2002) stated that financial liberalization is a key component of programmes of orthodox structural adjustment, and they explained that financial reform include, among other things, the removal of controls on interest rates and the abolition of programmes of directed credit .In this study the effect of financial sector reform on rural banking and rural credit transactions in India is examined, with particular reference to landless labour households. First they had reviewed the trends in selected indicators of rural banking at the national level over the last 30 years. Secondly they had used the longitudinal data for a village in Tamil Nadu to examine changes in patterns of indebtedness and credit transactions among landless labour households. It was argued that the exploitation of landless labour households in the credit market had intensified with the introduction of financial reforms. And finally they had introduced the policy envisaged as an alternative to the formal credit sector in the countryside- the establishment of micro-credit projects was examined critically. In this study they explained that three broad phases of banking policy with regard to the Indian Countryside: The early phase is called “green revolution” phase that followed the nationalization of major commercial banks. The second phase is an “IRDP phase” of credit based poverty alleviation initiatives, and the recent phase of liberalization and 12 market-guided banking policy.(Due to the first two phases of banking policy a significant expansion and consolidation of banking infrastructure in rural areas at the same time a rise in rural deposit mobilization and advances to rural areas) The first phase concentrated on the expansion of credit to cultivators, particularly landlords and rich peasants in selected areas. Second phase included Credit-based schemes for landless and asset-poor households. The flow of formal sector credit to the rural poor is peaked in late 1980s and during the liberalization phase of banking policy has seen a sharp withdrawal of formal banking instruments and credit supply from rural areas. This study collected information from landless labour households only. This study revealed that the share of formal sector credit to the landless labour households increased from 17 percent in the green revolution phase (1977) to 80 percent in the IRDP phase (1985) and fell sharply to 22.6 percent. This paper argued that current policy statements that view micro credit as the major answer to problems of formal banking are misguided. From this study it is clear that, chronic indebtedness among the rural poor is a problem that cannot be solved by banking policy alone. Agrarian reform and major public investment is necessary for the rural economy.
Sundararaj and Subbaiah (2006) stated that agricultural credit is a major problem for farmers, and there is a credit gap between demand and supply of agricultural credit. The main objectives of the study are to find out the extent of utilization of agricultural credit by the borrowers of Pandyan Grama Bank, and also to know the socio-economic factors influencing the utilization of agricultural credit, finally to study the extent of benefits accruing to the borrowers of Pandyan grama bank. For this study they collected primary data from 100 borrowers. They used the convenience method of sampling and also used utilization scoring scheme, benefit scoring sheet. Chi-square test is used by the authors to find out the relationship between the extent of utilization of agricultural credit and factors influencing the utilization. Regarding the level of utilization the authors stated that 63 respondents utilized their loan at high level and 37 respondents have utilized their loan at medium level. In this study the authors have identified five social factors and 10 economic factors that influence the utilization of agricultural credit. Among these factors residential location of the borrowers, nature of default, level of consumption, borrowing agencies, crop failure significantly influences the utilization. According to this study literacy level of sample borrowers, occupation, size of the family, sources 13 of irrigation, operational holding of land, nature of agricultural operation, monitoring of loan, mode of disbursement of loan, nature of security, period of credit have been found to be not significantly influencing the utilization.
Anandateerth Kittur (1990) in his study “Diversion of Agricultural Loans of Formal Financial Institutions” stated that diversion of institutional credit by the borrowers to unproductive purposes may be due to multiplicity of factors which may be grouped as under a. Borrowers related factors and b. Lenders related factors. Under borrowers related factors he explained that illiteracy and ignorance of borrowers of formal financial institutions, lack of awareness of the consequences of diversion of credit, high marginal propensity to consume goods and services of day to day needs among small and marginal farmers, high marginal propensity to consume goods and services of conspicuous consumption among large and well to do farmers, lack of fear of formal financial institutions among its borrowers in cases of deviation and default, delinquent nature of willful diversion, distorted perception of formal financial institutions and their functioning, pressing financial needs and other obligations, no difference between farm and family budgets, lack of motivation to utilize the credit for productive purpose, etc. Under lender related factors he stated that lending at lower rates of interest, inadequate credit, over financing, without regard to borrowers repaying capacity, supply lending finance target approach dispersed lending rendering supervision difficult, mass lending programmes like „loan melas, policy to please the political higher-ups, inadequate supervisory staff, inadequate vehicular support, lack of seriousness in pre-sanctioning scrutiny, inadequate concern during post-sanction supervision, lack of education of borrowers during sanction and disbursement of loan, with respect to proper utilization of loan, prevalence of corrupt practices, credit in the form of cash rather than kind, inadequate provision for consumption credit, etc. Ravichandran in his study “Implications of overdues on the resources of co-operative credit institutions and the member borrowers- A critical study” stated that the available man power is mostly employed in the recovery process and hence the institutions could not concentrate on promotional works like deposit mobilization. Another noteworthy implication of overdues is that the credit institutions have to incur heavy expenditure to recover overdues. The expenses include charges for vehicles hired, T.A. bill of the staff of the department on deputation, the bank staff and the branch staff, petrol/diesel and maintenance, legal fee paid for disputed cases, 14 prizes and ex-gratia for recovery performance, penal interest waived on settling the disputed account and rebate paid for recovery etc.
Kandarpa kumar barman (1994) explained that financial sector reforms based on the Narasimahm Committee report and to examine their various implications for the rural credit system in India. Even though the remarkable achievements made by financial system in India during the last two decades, several distortions (mis represent) have crept into the financial system. Due to this the productivity and efficiency of the system have suffered the profitability has been eroded and portfolio quality has deteriorated. Therefore, the Narasimham committee, appointed in Aug 1991, It has made several recommendations, among other things, relating to modification of the rural banking structure, interest rates on agricultural loans and directed programmes of rural credit which have a direct bearing on the future of agricultural credit system. He also explained that today we need quality lending, appropriate system of selecting the borrowers and monitoring the loan through disbursement, use and repayment. In his views feature of low returns on agricultural lending is a major constraint in the rural banking system, and that has to be corrected before making any structural changes in the rural banking system. A high lending rate to the agricultural sector leads to reduction in priority sector lending may endanger the very objectives of financial sector reforms. The financial reform proposed by the Narasimaham Committee marks a beginning of a new era towards financial liberalization. But while implementing the policy reforms, we must see that the reforms do not produce any undesirable affects on the economy.
Sharma et.al. (1994) in their study was undertaken with a view to examining the changing nature, purpose and source wise distribution of debt in different states of India. The data were collected from Rural Labour Enquiry Reports for the years 1964-65 and 1987-88 and analysis was done for the pre-green revolution and post- green revolution period. The data pertained to all the major states and union territories and for agricultural labour households. In their study their results reveal that over time more emphasis has been given to kind loan than to cash loan and the share of hereditary loan per household was found to be highest in Rajasthan. They also explained that the percentage amount of debt to total debt for household consumption continued to be important in all the states particularly in Assam, Bihar, 15
Meghalaya and Uttar Pradesh. According to them the analysis of source wise debt shows that although the percentage of non-institutional debt decreased over the 25 years period, yet it was more than 65 percent of the total debt. The institutional sources were restricted mainly because of government regulations and high intrinsic cost of borrowings. Due to the recommendations made by the Narasimham Committee, these bottlenecks can be overcome. This will lead to additional investment in agriculture to get the benefits of untapped farm technology.
Kahlon and Singh (1968) have analyzed the farm business of small, medium and large holdings on the basis of existing and improved farm plants in the Ludhiana district. They have reported that the short-term capital and credit needs varied under existing and improved farm plans even when the size of the farm was the same. The short-term credit requirements were found to increase with the increase in farm size while the medium term credit needs decreased with the increase in farm size.
Guruswami (1995) has conducted a field study during 1972-74 on the utilization of farm finance catered to by a nationalized bank. His study helped to identify that about 18.68 percent of the respondents diverted the loans because of non-availability of finance for consumption purposes, diversions of this sort would negatively influence the repaying capacity of the borrowers since the uses to which the borrowed money was put were not in the nature of improving the economic status of the intended beneficiary.
Gosh Jayati (2006) has analyzed the impact of financial liberalization of Regional Rural Banks which were established in 1975 primarily with the objective of bridging the credit gap in rural areas. These banks are relatively weak financial institution by their very nature and face difficulty to compete with commercial banks operating on market principles. But still as on march 31, 2004 the recovery of loans in the RRBs were 74 percent. And with the changing trend they are playing lending role in financing SHGs and other micro credit institutions. Thus RRBs should be strengthened.
Uthirapathy (1998) in his thesis “A study on overdues in primary land development banks with special reference to Thanjavur district” stated that the problem of overdues 16 had really affected the borrowings, the advances and also the profits of the primary land development banks concerned. However, the impact on borrowings and advances are negative, and the impact upon the profit is positive. But both these positive and negative impacts indicate deterioration in the working of Primary Land Development Banks. As lesser borrowings, result in lesser advances and at the same time increased overdue indicated an increased profit and it indicates a decline in service of the bank. The increase in profit while there is a decline in borrowings and advances will be attributed to squeezing of borrowers rather than serving and helping the borrowers.
Parthasarathy and Shameem (1998) stated that Suicides of cotton farmers in Andhra Pradesh. The main reason for the strain on the cotton peasant in the growing indebtedness to the agriculturist to moneylender-cum-trader. This is because inaccessibility of institutional credit.
Muzzaffar Assadi (1998) stated that more than 20 peasants in the northern districts of Karnataka-bidar, raichur, Gulbarga, Dharwad have committed suicides over the last three months by consuming pesticides. The heavy losses they incurred due to crop failure and also mounting debts to the money lenders seem to be the main reason.
Singh (1976) has conducted a case study on distribution and utilization of co- operative credit in Lucknow district. Regarding the amount of loan advanced to the farmers of different size groups, it was observed that a major share of total advance went to large farmers. This study further shows that the large farmers utilized their borrowed money to greater extend for productive purpose as compared to small farmers.
Pandey (1977) in his study found that loans were issued mostly without keeping in the mind repayment capacity of the borrowers and were not properly supervised by the co-operative supervisors resulting in the diversion of loans for unproductive purposes and accumulation of overdues.
Lal and Lavanya (1986) have found that 78.18 percent of the total co-operative credit was utilized for productive and the rest 21.82 percent for unproductive 17 purposes. The credit utilization on unproductive purposes decreased with the increase in farm size which indicated that large cultivators utilized the highest percentage of credit for productive purposes.
Venkateswara et al. (1987) had analyzed the overdues pattern in a progressive block of west Godavari district of Andhra Pradesh. Their study revealed that overdues per holding increased with increase in farm size while per hectare overdues decreased with increase in farm size.
Kittur (1990) was the opinion that marginal and small farmers tended to use diverted funds to meet the basic necessities of life, whereas large and well to do farmers used the funds towards useful and conspicuous consumption whenever the loans were made in cash, the chances of misuse were higher compared to loans made in kind.
Puyalvannan (1997) has analyzed the overdues, recovery performance and erosion of funds in Central Co-operative Banks and stresses on the fact that, while lending is a fine art requiring sharp commercial acumen, efficient and effective recovery of advances is perhaps a still finer art, requiring a high degree of specialization. It concluded that the percentage of erosion of owned funds of some of the CCBs high. Overdues contribute as the single reason. Further interference of government in the working of the co-operatives is the other cause for heavy overdues.
Radhakrishnan and Mukundan (1988) in their study on the supply and utilization of short-term co-operative agricultural finance in palaghat district in kerala reported that 52 percent of the loan amount was advanced in kind (mainly fertilizer) and the balance in cash. An inverse relationship was found between the amount of loan per hectare, on one hand and size of holding on the other, the smaller holdings obtained relatively more amount of credit than larger holdings.
Viswanath (2001) had made an attempt to analyze the performance of agricultural credit co-operatives and their overdues problems in India in 2001. Initially, an attempt is made to assess the overall performance of agricultural credit co-operatives, by using the development Index. It is followed by an analysis relating to the nature and extent of overdues problem, by using correlation co-efficient technique. Finally, it 18 highlights the main factors causing mounting overdues and suggests remedies to mitigate the same in the coming years. They are a) the seasonality in disbursement and recovery of loans should be strictly adhered to by credit co-operatives. b) In order to minimize the problem of overdues, urgent steps must be taken to create recovery cells in each district headed by district judge.
Gagan Bihari Sahu and Rajesekhar (2005) pointed out that the annual average growth rate during the period 1992-2000 was high compared to 1981-91. One important contributing factor to the rapid growth rate during the reform period was the reduction of CRR and SLR. According to them the credit disbursed to agriculture sectors in the reform period had declined at the all India level. He also stated that the agriculture accounted for about 16.44 percent of the total credit in the early 1980s and the proportion progressively declined to 9.92 percent by 2000. In the net bank credit such a decline was uniform across different bank groups. They also stated that the credit flow to agriculture declined in the net bank credit during the reform period in a proportionate term. The overall bank credit has expanded at a faster rate in favour of non-agricultural sector. The major findings of them are although the share of commercial banks and RRBs in the total agricultural credit disbursed in the country increased during the reform period, the share of these institutions in the net bank credit declined during the same period, and they also stated that the proportion of credit to agriculture in the net bank credit declined during the reform period for both sizes of credit limit (less than 25,000, above 25,000) while the proportion of credit to the non-agricultural sectors continuously increased between these two period. Both pre-reform and reform periods the percentage of number of loan accounts in the agricultural sector to the total banks accounts was declined, and in the case of agricultural loans with credit limit of less than Rs 25,000, the proportion of accounts total account and amounts to the total net bank credit declined. The share of marginal farmers in the total agricultural credit as well as accounts declined during the reform period and closure of number of rural branches during the reform period.
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Methodology Sampling Technique A multi-stage sampling technique has been adopted for the study. I Selection of District The first stage was the selection of a district. Trichirappalli district has selected for the study because traditionally agriculture oriented district, and variety of crops cultivated. This district is having a broad banking network. Two hundred and 30 branches comprising of 193 commercial banks, 40 total co-operative banks and one Tamilnadu Industrial Investment Corporation Limited are functioning in this district. The district has a various agriculture zones viz fed by river and canals (I e) wet lands, garden lands and dry lands. Major part of the repayment capacity of the farmers depends upon these lands
II Selection of a block The second stage was the selection of a block. Out of 14 blocks of the district, one block was selected purposively (Manachanullur). Because banking network was good in this block compare to other blocks. The block is serviced by 14 branches under semi-urban and rural category. Various crops are cultivated in the blocks such as paddy, pulses, oil seeds and cash crops such as banana, sugarcane which contributes different levels of income to farmers. It has easy access to the nearby marketing center (I e) Trichy. These are all the factors contributing to repayment. The average percentage of area cultivation in block is greater than the district average percentage of area cultivation and also the average percentage of cropping intensity of the block is greater than the district average percentage of cropping intensity.
III Selection of Village Manachanullur is having 46 revenue villages. Out of this one village was selected. Seedevi Mangalam was purposively selected for the following reasons. Farmers in the village are provided with credit facilities like working capital and investment capital so they are engaged with various activities such as crop, dairy, pump sets, pipe line, land development, farm mechanization, tractor etc., under various schemes in an integrated way. Since the above facilities are interdependent and for effective recycling of local resources. This determines the per capita income of the farmers, which has direct barring on the repaying capacity of the farmers. 20
IV Selection of sample respondents Stratified random sampling was used for the selection of farmer respondents. In the study area total number of households is 686 and five wards are there. Ward one having172 households, ward two having 100 households, ward three having 115 households, ward four having 275 households and ward five having 24 households only. Each ward 20 percent of respondents is selected. Hence the total number of respondents is 138. This can be explained in chart 1.
Collection of data As the study is aimed to know the demand for agricultural credit for the selected borrowers and supply part of the credit, the farm households in the village of Seedevi Mangalam in Manachanullur block were conducted. To collect information a structure pretested and precoded, schedule addressing the farmers was used. The collected data were processed and analyses and multivariate tables have been prepared. Statistical tools were suitable employed to interpret the table.
Since the study is aimed to know the performance of institutional agencies in lending agricultural credit in Tiruchirappalli district. The major institutions of the village namely, Primary Agricultural Co-operative Bank ltd (PACB) and Union Bank of India, Padalur. Data were collected from the ledgers of bank annual credit plans and reports of lead bank (Indian Overseas Bank). Data were also collected from the ledgers of commercial bank, PACB in study area. To collect information from the banks and co-operatives interview schedule was used. Also data collected from the books, reports, magazines, periodicals etc.
Limitations of the study 1. The study is confined to Tiruchirappalli district particularly Seedevi Mangalam village. 2. Secondary information collected from the banks is 10 years up to 1995-96 to 2004-05. 3. Since this study is the micro level, the findings drawn from the study cannot be generalized.
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As the respondents had to give answers from their memory information were drawn for a period of one year only.
Linear discriminant function analysis Over dues are being the greatest problem facing financing institutions. An attempt has been made to identify reasons for default/non-default by analyzing the socio-economic characteristics of the sample borrowers using discriminant function analysis. The variable utilization of loan is significant compared to other variables. Hence this variable alone is taken for discriminant analysis. This variable tested as a first step in the analysis to measure whether the two groups of borrowers, defaulters, and non defaulters were significantly different from each other as regards the means of the characteristics under study.
Chapter Classification Chapter I Introduction, identify the problem, reviews the literature, highlights in investigational issues, define basic concepts, Methodology and schematic arrangements.
Chapter II The Period can be classified in to two (i) pre-liberalization period, (ii) post liberalization period. In the pre-liberalization period role of multi agency approach in the agricultural credit. Post liberalization period study the impact of liberalization in the agricultural credit whether it shows positive effects or negative effects particularly in the study area.
Chapter III Brief description of these programmes and schemes along with their operational mechanism, profile of the study area as well as characteristics of the respondents. Identifying non-availability of institutional credit as a major factor for agricultural backwardness.
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Chapter IV Access to institutional credit the household respondents. Mode of its utilization and its impact on the borrowing households in terms of improvements in their earnings, identify the transportation cost incurred by the respondents.
Chapter V Evaluates the repayment performance of the borrowing households and brings out certain causal links between credit and non-repayment behavior or overdue problem. Makes an attempt through the application of discriminant function to high light the factors that stand out in determining repayment performance behavior.
Chapter VI Summary of findings, conclusions and policy, and research implications of the study are presented.
Concepts Advance The amount of loan extended by any institution during a particular period, usually a year, is called advances. The reference year could be a calendar year, the financial year of the business year such as an agricultural year for agricultural advances or a sugar year for advances to sugar industry or so. Further in case of seasonal loans, the reference period could be a season only, i.e., kharif and rabi season.
Repayment This is the normal period during which the loan is scheduled to be recovered. In case of medium-term capital investments, the repayment period is usually 3 to 5 years whereas in case of long-term investments it is normally up to 10 years though in few cases it might even exceed up to 15 to 20 years.
Installment It refers to the amount due by a particular date called the due date. The number and frequency of installments depends upon many factors such as the amount of loan, the income and the pattern of cash inflow with the borrower etc. 23
Recovery The amount that has already been realized is called recovery. The recovery also always refers to a particular period or up to a point of time but not at a particular point of time. The recovery is generally related to the demand for recovery during the reference period. Thus a cent percent recovery means that the total amount due up to the reference time only has been recovered. It does not mean that the entire loan has been recovered for there may be installments of loan that are still to fall due.
Outstandings The principal plus interest that remains to be recovered is called outstandings. The outstanding always refer to a particular date e.g. as on December 31 or has on June 30. Amount outstanding = Amount borrowed - Amount repaid.
Overdues The amount which, was due on particular date, but has not been repaid by that date is called overdue. A part of the outstanding becomes overdues, if not recovered within specified time period. Overdues = Amounts due for repayment - Amount actually repaid.
Medium term loan Term loans repayable up to a period of 7 years are called medium-term loans.
Short term loan Term loan repayable within a period of 3 years are called short-term loans.
Term loan Term loan repayable in instalments over a period of 3 years and above is called term loan.
Immovable property Property embedded to the earth like land and building and plant and machinery etc is called immovable property.
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Household A household was defined as a group of persons normally living together and taking food from a common kitchen.
Owned land This included land owned as well as land over which there was right of permanent heritable possession.
Credit agency The loans from various credit agencies were classified under 1. Government 2. Co-operative society or co-operative bank 3. Commercial bank 4. Insurance 5. Provident fund 6. Landlord 7. Agriculturist money lender 8. Professional money lender 9.Trader 10 Relatives and friend and 11. Others.
Government All loans borrowed from Government Departments like Revenue, Agriculture, Industries, Community Development/National Extension service blocks, etc., as also those channelized by the Government through the Khadi and village industries board were classified under this category.
Co-operatives All loans from co-operative institutions like primary co-operative credit societies, primary co-operative marketing societies, district or central co-operative banks, primary or central land development banks, handloom weavers‟ co-operative societies and other industrial or other types of co-operative societies were grouped under the head.
Commercial banks Loans from all commercial banks were included under this head.
Insurance All loans from Life Insurance Corporation of India and other insurance funds were classified under insurance.
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Provident fund Loans from all types of provident fund accounts were grouped under provident fund.
Landlord Loans from landlords to their own tenants were classified under this head. Loans advance by land owners to persons other than their tenants were classified under agriculturist tenants were classified under agriculturist money lender, professional money lender, etc., depending on the occupation of the land owner.
Non farm business Non farm business was defined to include all the household economic activities other than those covered in farm business. Thus it comprised mining and quarrying, manufacturing and repairing, trading and transport as also all other professions and services.
Security The types of security against which the loans were obtained have been classified under the major heads 1. Personal security 2. Surety security or guarantee by third party 3. Crops 4. First charge on immovable property 5. Mortgage of immovable property 6. Bullion and ornaments 7. Shares of companies, government securities and insurance policies 8. Agricultural commodities 9. Movable property other than bullion and ornaments, shares, government securities, insurance policies and agricultural commodities 10. No security and 11. Others.
Mortgage of immovable property When a single charge was created on immovable property it was taken as mortgage of immovable property.
Utilization of credit “Utilization of credit refers to the use of credit for the purpose for which it was originally sanctioned by the bank”.
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Mis-utilization and Non-utilization of credit The term „Mis-utilization‟ or „diversion‟ of loan may be defined as the use of credit for a purpose other than the one for which it was originally granted. In this case the mis-direction of loan may be full or partial. In the former case it may be termed as „full mis-utilizaion‟. A part/full of the loan may be used by the cultivator for consumption purposes.
Non-utilization of capital asset means the non-use of investment owing to conditions beyond the control of the borrower.
Purpose Purpose was defined as the occasion such as capital/current expenditure in farm/non-farm business, household expenditure, litigation, etc, for which it became necessary for the household to contract the loan. The purpose-wise classification of cash dues outstanding was based on the purpose for which the amount was originally borrowed which might not necessarily be the same for which it was subsequently utilized. Loans were classified under the purpose-wise heads. 1. Capital expenditure in farm business 2. Current expenditure in farm business 3. Capital expenditure in non-farm business 4. Current expenditure in non-farm business 5. Household expenditure 6. Expenditure on litigation 7. Repayment of debt 8. Financial investment expenditure and 9. Others
Farm business In addition to cultivation including cultivation of plantation and orchard crops, farm business was taken to comprise all activities allied to agriculture such as processing of the produce on the farm, animal husbandry, livestock rearing, fishing, dairying, bee keeping etc.
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Agriculturist money lender Agriculturist moneylender was defined as one is having agriculture as his major occupation and money lending as a subsidiary business.
Professional money lender A professional money lender was defined as a person receiving a major part of his income from money lending.
Trader All loans borrowed from a person having trading as his principal occupation were included under this head.
Relative or friend All loans received from relatives or friends free of interest were classified as from „relative or friend‟. If, however a loan advanced was not interest free, then it was classified under an appropriate agency such as agriculturist money lender, trader etc, depending on the occupation of the person advancing the loan.
Other credit agencies Loans borrowed from credit agencies other than those mentioned above were recorded under this head.
Credit Credit is the name usually given to money borrowed for business purpose. The word “credit” comes from the Latin word credo” meaning “I believe”. Hence, credit is based upon confidence. When one borrows money, the loan is based upon confidence in the future solvency of the person and in his repaying the loan as per agreement. In this sense, credit means ability to command the capital of another in return for promise to pay at some specified time in the future.
Borrowing The word “borrow” means to receive something with the understanding that, it or its equivalent will be returned as agreed upon. In terms of money, borrowing involves obtaining a certain amount of funds to be repaid as specified in the note. 28
Creditor and Debtor Creditor, is one to whom a debt is owed, but a debtor is one who owes a debt.
Gestation period It is also known as the grace period. The period required for the investment in a project to produce visible returns.
Supply of Agricultural Credit Supply of agricultural credit provided by all the agencies for cultivation of crops.
Demand for agricultural credit It refers to the credit requirements of the farmers for raising various crops.
Credit gap The difference between the credit requirements and credit supplied by all the agencies for crop production during one year period is considered as credit gap.
Jewel loan Jewel loan is the loan provided against the pledge of jewels or gold ornaments for meeting agricultural expenses and is granted normally for one year period.
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CHART 1 METHODOLOGY
Selection of households Total households in the selected village 686
Ward 172 Ward 5 Ward 2 Ward 4 24 172 100 Ward 3 275 24 115
5 35 20 55 23
By random sampling method
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CHAPTER - II AGRICULTURAL CREDIT SYSTEM IN INDIA
This chapter explains the importance of agriculture and the structure of agriculture credit system in India. It is essential to study the history of commercial banking in India to know the background of the banking activities. The status of agriculture lending explains the position of agriculture finance in before independence and after independence period. The 1991 reform period explains the position of agricultural finance whether it affects positively or negatively explained in this chapter.
Agriculture plays an important role in India providing employment to large number of people living in villages. It contributes nearly one-half of the national income. It provides raw materials for most of the industries and accounts for nearly 48 percent of the country‟s foreign exchange earnings. It requires free flow of inputs, institutional and organizational reforms. Credit is one of the inputs, essential for modernizing the agriculture sector and improving the productivity (Peeran and Raghavulu Naidu, 2003). Credit is the name usually given to money borrowed for business purpose. The word “Credit” comes from the Latin word credo” meaning I believe. Hence, credit is based upon confidence. When one borrows money, the loan is based upon confidence in the future solvency of the person and in his repaying the loan as per agreement. In this sense, credit means ability to command the capital of another in return for a promise to pay at some specified time in the future. It capitalizes farmers and entrepreneurs to undertake new investments or adopt new technologies. Now the government neglects the farm sector. The percentage of credit allocation to the agriculture and allied sectors declined continuously from 14.9 percent in the I plan to 4.9 percent in the IX plan (Vasudevachary A.K.2006).
The beginning of institutional finance for agriculture in India came in to existence 1793. During that year Taccavi loans was introduced by the government. The land improvement loans act was 1883 and the agriculturists‟ loans act was 1884. These two enactments intended to advance loans to the farmers for their agricultural needs and were treated to be satisfactory by the royal commission on agriculture in India. The agricultural credit act was passed in 1883 and in 1891 the government of 31
Madras stressed the need for the establishment of an Agricultural land bank. For this purposes the government of Madras sent Fredrick Nicholson to Germany in 1892 for the study of the system of the rural credit. Finally, the co-operative societies act was passed in 1904 and co-operatives were seen as premier institutions for disbursing agricultural credit. The state has always played an important role in rural finance particularly agricultural finance. At the time of independence finance was being advanced to the farmers by the government, departmentally in the form of loans and grants and also through the co-operative system. The early years of the twentieth century were characterized by continuous official attention to the provision of rural credit. Later on a new act was passed in 1912 giving legal attention to credit societies and importance also given to the micro finance.
The Maclagan committee on co-operation in India issued a report in 1915 advocating the establishment of provincial co-operative banks. Hence that was established in almost three tier co-operative credit structure. The Royal commission on agriculture further examined the program of rural credit in 1926-27. Sir Malcolm Darling submitted another report on co-operative credit to the government of India in 1935 just before the founding of RBI. The RBI was conducted two studies in agricultural credit during 1936 and 1937. It was found that almost entire finance required by agriculturists was supplied by money lenders and co-operatives and other agencies played a negligible part. The Agricultural Refinance Corporation (ARC) was set up by the RBI in 1963 to provide funds by way of refinance, but credit co- operation still do not function well. The all India rural credit survey 1954 stated that agricultural credit fell short of the right quantity, was not of the right type, did not the right people. Due to the introduction of the production-oriented system and the spread of green revolution that the co-operatives alone would not able to meet the full requirements of agriculture credit. This led to the introduction of social control of commercial banking followed by the nationalization of 14 major private commercial banks in 1969 (and six more private banks nationalized in 1980). On the recommendations of the Gadgil study group (1968) appointed by the National credit council, the RBI introduced the lead bank scheme towards the end of 1969. Under this scheme, all the districts in the country, except metropolitan cities and some union Territories were to come under a lead bank to be chosen from among the banking institutions in the area. The concept of priority sector was introduced in 1969. Banks 32 are now reserve 40 percent of the total advances for this sector. The gap in agriculture credit continued to be large and so a working group was appointed by the government of india under the chairmanship of shri M. Narasimham to review the rural credit structure and suggest ways to ensure the smooth flow of adequate credit to the weaker sections. The Narasimham working group recommended the establishment of a new type of scheduled bank, Regional Rural Banks (RBI) in selected regions to extend credit to the target group only. The Government of India accepted the recommendations and the RBI act were passed in 1975. It was to focus exclusively on the weaker sections of the rural society (i.e.) small and marginal farmers, agricultural labourers, artisans and small entrepreneurs for development of agriculture, trade, commerce and other productive activities. The first sets of five RRBs were established in Oct 1975, the number has since increased to 196 with as many as 14,443 branches. The deposits of RRB as on March 31, 2003 accounted to Rs. 48,345 crore and loans outstanding at only Rs 21,733 crore. By the end of 1977, there emerged three separate institutions for providing rural credit which is often described as “multi-agency approach”. Following the recommendations of the “Committee to Review Arrangements for institutional credit for Agriculture and Rural Development” the National Bank for Agriculture and Rural Development (NABARD) was set up in 1982. NABARD took over the entire undertaking of the ARDC and refinancing functions of the RBI in relation to state co-operatives and RRBs. It also administers the Rural Infrastructure Development Fund (RIDF), which was set up in 1995-96 and it has been playing a catalytic role in micro-credit through the conduit of Self-Help Groups (SHGs). The Union Finance Minister in his budget speech of Feb 29, 1988 announced the introduction of the service area approach in rural lending, the newest scheme in the banking sector in India. The service area approach has been most important and concrete reform in the rural credit system since the nationalization of banking in India. The scheme lays emphasis on the following five important aspects of rural financing.
1. Preparation of an effective annual credit plan for each bank/branch 2. Identification and allocation of each service area for a specific bank/branch. 3. Integrated and effective co-ordination between the lending agencies and development agencies for the successful implementation of the credit plan. 4. Survey of villages in the service area under reference for evaluating the 33
credit needs and identifying the deserving beneficiaries and 5. Regular monitoring of the progress with a view to ensuring an effective implementation of the plans formulated for rural construction.
The rural credit is a diversified and complex subject. It can be approached from several different angles. The existence of a strong and efficient credit institution is more than half the battle, particularly in the developing countries. The success of the credit oriented development projects is significantly dependent upon the credit institution and the credit system. The main aim of these institution is to provide credit to farmers, production units, supply agents and servicing organizations engaged in the process of rural development, at the right times, at the right places and in the right amounts, to ensure that it was used for the right places and in the right amounts, to ensure that it was used for the right purposes for which it was extended, to monitor the incremental incomes generated, to effect appropriate recovery system and to mobilize the surpluses generated for the growth of the financial institutions in particular, and to activate the economic development in the area at large.
The sources of credit can be classified into institutional and Non-institutional sources. Each of these is further categorized according to the specific sources because the organization and management, terms and conditions, and lender- borrower relations vary from one source to another. The following main sources of funds exist in most of the developing countries.
I Institutional sources includes a. Co-operatives (Providing short term medium term and long term credit) b. Government loans c. Commercial banks/specialized bank
II Non institutional sources includes d. Money lenders (Professional money lenders and Agricultural money lenders) e. Commission agents f. Others including relatives and friends.
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A very large number and types of institutions has been set-up to provide credit to the rural poor to achieve the main objective of national credit policy i.e., “development through credit. There are multi type agencies but also these agencies function at multi levels. For example commercial banks operate at state as well as field level through their regional and branch offices respectively. Likewise the Regional Rural Banks (RRBs) also operate at the district level as well as at the field level. Further, functionally these institutional agencies can be grouped into three categories. Category one are the institutions which indulge in refinancing only. In category two are institutions as provide refinance as well as direct lending to the rural people. State co-operative banks, commercial banks and RRBs at the district level come under this category. In category three primary land Development banks (PLDBs), Commercial banks, Regional Rural Banks (RRBs), Primary Agricultural Credit Societies (PACS) Farmers Service Societies (FSSs) and Large Sized Advasi Multi Purpose Societies (LAMPs) are the agencies engaged in direct lending to the farmers. The institutions at the national level provide financial and non-financial support to the state, district and field level institutions. Even though these institutions are primarily engaged in refinancing other agencies and also provide direct lending if they need.
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Table 2.1 Existing Institutional Set-Up for Rural Finance in India
Functional Level Number Name of the Institution Category 1 2 3 4 National 5 1. The Reserve Bank of India (RBI) Refinance 2. The Agricultural Refinance and Refinance Development Corporation (since taken over by (NABARD) (ARDC)
3. The Agricultural Finance Refinance and Corporation (AFC) Consultancy
4. The National Co-operative Refinance and Development Corporation (NCDC) Consultancy 5. The National Bank for Agriculture Refinance, and Rural Development (NABARD) Consultancy and Monitoring State 4 1. State Land Development Banks Refinance (SLDB) 2. State Co-operative Banks (SCB) Refinance and Finance 3. State/Central Industrial Co- Refinance and operative Banks Finance
4. Commercial Banks (CBs) Refinance and Finance District 2 1. Regional Rural Banks (RRBs) Refinance and Finance 2. Central Co-operative Banks (CCBs) Refinance and Finance Field 6 1. Primary Land Development Banks Financing (PLDBs) 2. Commercial Banks (CBs) Financing 3. Regional Rural Banks (RRBs) Financing 4. Primary Agricultural Credit Societies Financing (PACS) 5. Farmers Service Societies (FSS) Financing 6. Large- sized Adivasi Multi purpose Financing Societies (LAMPs)
The structure of agricultural credit system in India explained in following chart.
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CHART 2
Structure of Agricultural credit system in India
Government of India Reserve bank of India
NABARD
Commercial Rural co-operative credit Regional Rural Banks Banks institutions
Long-term credit structure Short-term credit State level (SCARDBs) structure State level (SCBs)
State Co-operative Agriculture State Co-operative Banks & Rural Development Banks
District level (DCCBs) Taluk/block (PCARDBs) District Central Primary Co -operative Agriculture Co-operative banks & Rural Development Banks Village level (PACS)
Primary Agricultural credit societies
Depositors and Borrowers
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Before independence a complete absence of a banking institution both at the national level and field level for a very long period of the time led to the growth and virtual monopoly of money lenders in supplying credit to the rural people. The near total dependence of Indian rural people on the local moneylenders for their credit needs and their exploitation by the latter has been one of the darkest spots on the Indian agricultural economy. The credit to bring the Reserve Bank of India into existence goes to the Indian Central Banking Enquiry Committee (1931), the recommendations of which were so strong that the bank saw its inauguration on April 1, 1935. The first time, the Government of India under the British rule thought of developing a rural credit institutional structure. Keeping this in view the framers of the RBI laid down in section 54 of the act that the RBI shall create a special agricultural credit department with the following broad functions.
a. To maintain an expert staff to study all problems of rural credit and be available for consultation by central Government, State Governments, State Cooperative banks, and other banking organizations and b. To co-ordinate the operations of the bank in connection with agricultural credit and its relations with state co-operative banks and other banks or organizations engaged in the business of agricultural credit.
Thus, it is evident that the special feature of the RBI act was the provision made for granting financial accommodation to the co-operative sector for financing agricultural operations and the marketing of crops. Moreover, in accordance with the mandate of the act, the bank set up the Agricultural Credit Department mainly to study and provide consultative services to the Government and banks, and to generally co-ordinate its activities in the area of rural credit with those of the agencies engaged in purveying such credit. After one year of its inception the RBI conducted a study of the rural credit problems in the country and its revealed that the money lenders enjoyed a complete monopoly and the co-operative system failed it make a dent on the rural credit system even though after 30 years of its operations at that fame. In the first few years, the RBI through its Agricultural Credit Department, made attempts to establish contacts with the co-operative agencies operating in different parts of the country. In the mean time, the Second World War caused a boom in the prices of agricultural commodities which resulted in lack of demand for 38 funds from co-operatives. The instability of economy during the struggle for independence and subsequently, the partition of the country were the factors due to which the RBI could not achieve something substantial in the sphere of rural credit.
After independence the All India Rural Credit Survey Committee (Popularly called the committee of Direction) was appointed by the RBI in Aug 1951, to conduct a comprehensive rural credit survey. The findings of the committee also revealed that the dominant position occupied by the money lender in the provision of rural credit. The total credit supplied by all agencies in 1951-52 was estimated at Rs 750 crores. The committee observed that co-operative credit system in the country was deficient and least unsatisfactory channel of credit to the rural poor. The committee recommended a scheme named as “Integrated Scheme of Rural Credit”. The scheme was concerned with three main items, viz, development of co-operative credit, expansion of co-operative economic activity and training of co-operative personnel. The RBI has assigned a crucial role under the scheme.
Due to the recommendations of the committee RBI established two funds. They are National Agricultural Credit (Long-term operations) Fund and the National Agricultural Credit (Stabilization) Fund. The NACF (L.T.O) was meant to finance institutions such as Agricultural Refinance and Development Corporation (ARDC), State Co-operative Banks and State Land Development Banks for long periods and to other institutions for refinancing medium term requirements. The NACF (stabilization) was meant to make medium-term loans and advances to State Co- operative Banks when they were unable to pay their dues in time owing to drought, famine or other natural calamity. During the last one and a half decade after the nationalization of commercial banks, more than 50 study teams, and working committees have been appointed. The RBI‟s concern about rural credit is clear from the fact that nowhere in the world a central bank has over appointed such a vast number of committees/study teams or panels on rural credit problems.
The third five year plan document emphasized the urgent need for the creation of a national level institution to rural credit institutions engaged in providing long- term credit to the rural masses. The All India Rural Credit Survey Committee had already strongly recommended making of permanent arrangements for provision of 39 long-term credit for agricultural development. Third five year plan document emphasizing the need for a separate national level institution and recommendations of All India Rural Credit Survey Committee for making permanent arrangements for term-loans in rural credit were the factors that led to the creation of Agricultural Refinance corporation.
The Agricultural Refinance Corporation was established by an Act of parliament and it started functioning from July 1, 1963. Besides refinancing, as corporation had a significant developmental and promotional role (as assigned to it) it was renamed in 1975 as Agricultural Refinance and Development Corporation (ARDC) instead of ARC, with a view to emphasize on its development role. The corporation used to refinance 75 percent to 95 per cent of the project financed by land development banks, Commercial banks, Regional rural banks and Co-operative banks at a rate of interest ranging from 6.25 to 7.5 per cent per annum for a period ranging from 7 to 15 years depending on the nature of the project. The corporation had a technical division manned by experts in different fields –ground water, soil conservation, water management, animal husbandry, plantation and horticulture, forestry, farm mechanization and fisheries. The rural credit institutions had to submit their projects to the corporation where the experts used to study its technical feasibility and financial soundness before refinancing it. The field level rural credit agencies had to submit complete details of the project to the ARDC before financing it. The ARDC carried out investigations with regard to its technical, commercial, financial viability and its repaying capacity. Once ARDC approved the project, the field level agency could finance the project and get it refinanced from the ARDC.
Purpose-wise, Minor irrigation accounted for the major share of refinancing followed by farm mechanization, storage and market yards, Plantation and Horticulture, Integrated Rural Development Programme and Land Development. The corporation had been making considerable efforts to bring development in states classified as less developed or backward. In spite of these achievements, the ARDC‟s working was found to be deficient on several grounds. The original act contained a provision prohibiting ARDC from provision providing short-term, I I.e., Working capital finance. However, this restriction was removed by an amendment to the act in 1975, thereafter in a period of almost four years, the corporation could not provide 40 short-term credit of any significant size. In this regard Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD, 1981) observed:
“As regards ARDC, the major deficiency is its inability under the present arrangements, to ensure that the borrowers under its scheme do always get the necessary supporting short-term credit and thus build up their earning or repaying capacities to the extent envisaged”. ARDC‟s support for the non-land based or tertiary activities in spite of the enabling amendments in the ARDC act was far from being satisfactory. Another drawback is the ARDC could not make a satisfactory response to the increasing demand from state governments and others for direct financing as distinguished from refinancing. Finally ARDC which after 1975 was supposed to play a significance role in the field of institution building, training and research, failed to come up to the expectation.
In the wake of social control over commercial banks in 1967 and their induction in the field of rural credit much earlier, a need was felt to set-up an institution at the national level to help commercial banks in financing agricultural projects. The commercial banks had been working as credit institution since long but they had little experience in the field of rural credit that is financing agriculture. The Agricultural Finance Corporation was promoted by the Indian Bank‟s Association (IBA), It was incorporated on April 10, 1968 under the Indian Companies Act, 1956, with an authorised share capital of Rs 100 crores. The public sector banks contributed 86 percent of the shares of the AFC.
Agricultural Finance Corporation is a consortium of commercial banks and has been acting as technical appraisal and consultancy agency for the member banks in the area of project formulation in rural and backward areas. The corporation has also been working in very close association with various state governments in preparing viable schemes which could be supported by rural credit institutions. The objects of the corporation have been wide enough to enable it to finance or assist in the financing of activities connected with production, supply, transport and distribution of inputs for agricultural production, marketing, transport and storage of agricultural produce, farm mechanization, animal husbandry, forestry and all other 41 activities and operations incidental to or connected with agriculture, agricultural produce or agricultural operations.
In the first three years of its working, the corporation had sanctioned in all 29 schemes. of these three were in 1968 with a financial involvement of Rs 1.20 crores each, of which the share of the corporation amounted to 25 percent, 20 schemes in 1969 with a financial involvement of Rs 90.06 crores of which its share amounted to Rs 1.36 crores and in 1970, the corporation sanctioned six schemes with a total financial involvement of Rs 26.92 crores of which its commitment was Rs 1.97 crores. Besides direct financing of agriculture, the corporation had been assisting member banks in project formulation and financing. Notable among the projects formulated by the corporation are rubber cultivation in Kerala, horticulture marketing project in Jammu and Kashmir, eucalyptus plantation in Karnataka, forest plantation in Kerala and dairy development in Maharashtra. Currently the corporation is some what like a research and development wing of banking industry rather than an independent financial institution. There fore no further discussion on this finds place in our endeavour hear to trace the evolution and appraise the working of national level credit disbursing institutions except to reiterate the suggestion made by CRAFICARD abut the future role of AFC to quote;
“Taking into account the nature and magnitude of rural development work in which commercial banks have to play a catalytic role and keeping in mind the efforts needed to nurturing and bringing up a rural development consultancy organization, our view is that not only is there a need for an independent all India body like the AFC but also for regional or specialized consultancy bodies to cater to the specific problems or specific areas”.
The All India Rural Credit Survey Committee in its Report (1954) clearly stated the need for developing the co-operative credit system which was then considered as the only viable method of supplying credit to the rural poor. A need was, there fore, felt to set-up an institution at the national level to provide financial assistance to the co-operative engaged in purveying credit under the schematic lending. The National Co-operative Development Corporation (here in after referred to as NCDC) was set in 1963 for promoting various economic programmes in the co- 42 operative sector and providing financial assistance in the form of loan and subsidy to the co-operatives under the schematic pattern of assistance evolved for different schemes. The corporation was assigned the responsibility of implementing programmes covering poultry, fisheries, minor forest produce, handloom, coir, sericulture and dairy farming in the co-operative sector, basically meant for weaker sections of the society. The total assistance provided by the NCDC during the year `983-84 was Rs 127 crores, showing an increase of 32.3 per cent over the assistance provided in previous year (Rs 96 crores).
Although the corporation has been very actively engaged in the development of co-operative sector, the overall progress in different fields is far from being satisfactory commenting on the performance of NCDC during 1983-84 based on the annual reports, Raj Gill observes:
“The corporation wants the world to believe that it has exceeded its targets, a fact, if true, is really a feat in government circles. The reality is that the corporation has failed all over the country in most of the areas of its operation”.
The major failure of NCDC has been a creating additional storage capacity to an area is most crucial. Because of the vagaries of weather one cannot be sure of a good food production situation in the country in any year. There fore, the storage capacity, not only to accommodate the current year‟s produce, but also to maintain reserves, becomes most vital. Further, the corporation has failed to achieve the targets in opening of additional fertilizer retail outlets. It has also not been successful in achieving its targets in the field of distribution of agricultural inputs.
To expand the RBI‟s role in the field of rural credit, the RBI has been adding from time to time within its own organizational structure not only various departments such as Agricultural Credit Department (ACD), Rural Planning and Credit Cell(RPCC) and Department of Banking operation and Development (DBOD) but also appointing committees and boards example Standing Advisory Committee on Rural and Co-operative Credit (SACRCC) and Agricultural Credit Board (ACB).Addition to this it played an instrumental role in establishing national level institution, I e., the ARDC to meet the increasing requirements of rural credit. By the 43 end of 1970‟s at the national level, there were primarily two refinancing institutions viz., the RBI looking after short and medium term credit and ACDC providing long term refinancing facilities. a. The need for a New Institution and Emergence of NABARD The All India Rural Credit Review Committee (AIRCRC-1969) had also expressed its doubts about the functioning of the RBI:
“The present time seems to us appropriate for a major structural change and that certain changes are warranted in regard to the manner in which the direction of this work is at present organized in the Reserve Bank”. The AIRCRC recommended the setting up of a statutory Agricultural Credit Board (ACB) and entrustment of the formulation, review and modification of the Bank‟s policy in the sphere of rural credit to it. However, these recommendations of the AIRCRC were accepted in part and then existing standing Advisory Committee on Rural and Co-operative Credit, was replaced by the Agricultural Credit Board (ACB) through an executive order. The ACB was not given a statutory status and it remained only an advisory body. Even ACB was not able to perform its functions as envisaged due to the increase in the volume and complexity of rural credit.
ARDC failure is due to the inability to provide short-term credit, support non land based activities, meet increasing demand from states for financing and refinancing and do anything towards institution building. Thus, the performance of both the RBI and ARDC was found to be lacking as against the demand on them in view of the adoption of 20 point Economic Programme and poverty alleviation programmes under the Five year plans. In addition to the dismal performance of both these institutions, the problem of co-ordination under multi-agency approach to rural credit in a big way. In the RBI all co-operatives rural as well as urban m were looked after by Agricultural Credit Department (ACD) while the commercial banks were the subject of Department of Banking Operations and Development (DBOD). Regional Rural Banks were looked after by Rural Planning and Credit Cell (RPCC). The lead bank scheme and the progress of lending to priority sectors including agriculture were monitored by the DBOD while the District Credit Plans (DCPs) were entrusted to the RPCC. 44
Financing of cottage, small scale and village industries, handicrafts and other rural crafts achieved higher significance in the wake of new 20 point economic programme and the extension of Integrated Rural Development Programme (IRDP) and National Rural Employment Programme (NREP) to a much wider are than before exploiting the self-employment opportunities offered by the secondary and tertiary sectors of the rural economy was a major challenge for the IRDP. In this area the experience of both the refinancing institutions, viz, RBI and ARDC was, relatively limited as there were primarily engaged in agricultural lending in rural areas.
The objectives of the establishment of NABARD have been well defined in the preamble to the NABARD act as passed by the parliament in 1982, it read as “An act to establish a bank to be known as the National Bank of Agriculture and Rural Development for providing credit for the promotion of agriculture, small scale industries , cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural area with a view to promoting integrated rural development and securing prosperity of rural areas and for matters connected there with or incidental there to
The following principles which have come to be known as NABARD principles 1. Credit must be used in accordance with the most suitable method of science and technology (effectiveness) 2. The terms and conditions of credit or what is known as techno-economic parameters must be fully respected(Feasibility) 3. Work must be carried out with the desired skill so as to realize optimum increase in productivity and income (Producitivity) 4. A part of the additional income created by credit must be saved (Capital Farmation) 5. Loan instalments must be repaid in time and regularly so as to recycle the credit.
Based on the objectives and principles NABARD has been performing the following functions since its inception.
45 a. The main functions of the NABARD are: 1. Developmental policy, planning and operational matters relating to credit for agriculture, allied activities, rural artisans and industries and other rural development activities. 2. Training, research and consultancy relating to credit for agriculture and rural development. 3. Refinance to the co-operatives and RRBs including co-operative marketing and distribution. 4. Refinance to commercial banks against term lending, short-term accommodation for special purposes. 5. Direct lending singly or through consortium arrangements in special cases. 6. Co-ordination and monitoring of all agricultural and rural lending activities with a view to trying them up with extension and planned development activities in the rural sector 7. Inspection of co-operative banks and RRBs and 8. Advice and guidance to State Governments, Federations of Co-operatives, the NCDC, etc., in regard to the co-operative movement in close collaboration with the RBI and Central Government.
NABARD has taken over the complete undertaking of ARDC and a part of the functions performed by the RBI. A comparative assessment is possible with the data available from secondary sources, viz., the Annual Reports of the RBI, the ARDC and the NABARD. NABARD could achieve just in two years around 57 percent of what ARDC achieved in its whole life of 19 years. Similarly, NABARD‟s refinance to RRBs (in two years) work out to be 251 percent of what ARDC refinanced them in 4 years of their existence. Thus, the refinance function is concerned NABARD‟s performance is indicative of a good start. The percentage share of SLDBs in total refinance over the years has been declining year after year (from 87 percent in 1970- 71 to 35 percent in 1983-84). Mounting overdues at the primary level and lack of diversification of business were the main factors responsible for lower share of SLDBs in obtaining refinance. The NABARD has taken rehabilitation measures for weak SLDBs due to which their percentage share in getting refinance increased from 33 in 1982-83 to 35 in 1983-84.
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Table 2.2 Refinance facilities provided by NABARD Type of Refinance No. Purpose for which sanctioned Eligible Institutions Accommodation 1. Short-term(ST) a. Crop Loans, State Co-operative (up to 18 months) b. Marketing of Crops, Banks (SCBs) on behalf c. Input Distribution, of Central Co-operative d. Working Capital to Co- Banks (CCBs) in the operative States with three-tier e. Procurement of Raw co-operative credit materials structure. Where such f. Production and Marketing structure does not exist, Activities of Weavers and limits are sanctioned to other Industrial Societies, SCBs g. Production and Marketing Activities of Rural Artisans. 2. Medium-term (MT) a. Approved Agricultural SCBs and RRBs (18 months to Purposes SCBs 7 years) b. Purchase of Shares of Processing Societies. SCBs and RRBs, c. Conversion of ST crop loans into MT loans due to Natural Calamities and Enemy action 3. Medium and Long- Fixed investment in agriculture SCBs, LDBs, RRBs, term and non-farm rural activities CBs (Not exceeding 25 under Schematic lending years) 4. Loans to State For contribution to Share State Governments Government (not Capital of Co-operative Credit exceeding 20 years) Institutions. 5. Composite Credit All Purposes mentioned RRBs Limit against 1and 2 above except 1 (d) and 2(b)
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One of the outstanding features of NABARD‟s working is the availability of huge foreign assistance to it from agencies such as International Development Association (IDA), International Bank for Reconstruction and Development (IBRD), International Fund for Agricultural Development (IFAD) and Kreditanstalt Fur wiederaufbau (RFW) Of Federal Republic of west Germany.
Mounting overdues, to some extent, are a corollary to increasing loan disbursements. But the health and vigour of the entire banking system is jeopardized, if the overdues rise beyond a manageable limit. The recycling of funds which is the key to development banking is severely restricted and in some cases completely blocked due to the rising overdues. The eligibility of institutional credit agencies at the field level to obtain refinance from higher level agencies depends mostly on the recovery performance. The same is true in the case of national-level institutions when they want to borrow from international funding agencies. For example, the International Development Association (IDA) has laid down a criterion for providing funds to the NABARD on the basis of recovery performance. The findings of a survey (1980) conducted in 17 states covering 19 commercial banks sponsored by the Standing Committee on Loans through Commercial Banks (SCOLCOB) has shown that there is substantial preponderance of the willful defaulters amongst those who have not been repaying their borrowed funds.
Realizing the seriousness of the non-repayment problem and finding that the inculcation of the banking habit including repayment ethic among beneficiaries is of paramount importance for the survival of the rural institutional credit structure. NABARD developed its credit delivery system popularly known as Vikas Volunteer Vahini (here in after referred to as VVV). It was inaugurated by the late Prime Minister Indira Gandhi on 5 Nov 1982 at the time of dedication of NABARD to the Nation.
The two important elements of VVV are: 1. Technocrate volunteers who are to guide the rural borrowers in the proper maintenance and upkeep of the assets acquired with the help of borrowing. 2. The setting up of an institution known by different names such as, Friends of NABARD clubs‟, NABARD Mitra Mandal or „Friends of Bank‟s club‟ 48
Consisting of borrowers who have never defaulted in repayment of loans. VVV is a movement to promote the repayment ethic amongst the borrowers. It provides for the active participation and involvement of co-operatives, commercial banks and regional rural banks under guidance, and overall supervision of NABARD.
A typical VVV programme is launched in a full day itinerary commencing in the morning, the pre-lunch session is an inter-action session in which the NABARD officers, Technocrat Volunteers, VV Volunteers, and bankers explain to the assembled villagers the concept of „Development through credit‟ and interalia the „Repayment ethics‟ philosophy. An important aspect of this programme is the narration of success stories by Vikas Volunteers and /or some other successful borrowers of the village who relate how they could derive economic benefit from the credit they obtained and how they repaid it on time. This is followed by a problem solving session wherein the villagers express their difficulties with regard to their access to credit. There after, the members of NABARD club hold election to appoint a president of their clubs. The post-lunch session starts with credit disbursement and recovery of earlier granted loans. Initially, the VVV programme was launched in the State of Tamil Nadu in two districts namely. Madurai and Tiruchi in May 1983. The second State covered by VVV is Gujarat where Sabarkantha and Rajkot districts were selected. It has also been extended to the State of Orissa where Gnajam and Dhenkanal districts were identified for the purpose. Thus, so far VVV has covered around 200 villages in 6 districts, extending credit to around 5364 beneficiaries amounting to Rs 213.93 lakhs and approximately a sum of Rs 25 lakhs was recovered from 2700 inveterate defaulters. If people are convinced that the rural institutional credit structure has been built for their development and that they have a moral duty to repay the borrowed amount, a lot can be automatically achieved.
History of commercial banking in India The origin of banking in India is traceable in ancient time through the modern banking is hardly 200 years old. The main functions of a bank are to accept deposits and grant loans. There are evidences of these functions being performed by a section of the community in the Vedic period. There are many references of Rna or „debt‟ in the Vedic literature. During the Ramayana and Mahabharata eras banking was a side 49 business and during the Vedic period, became a full time business activity for the people. During the Smriti period, which followed the Vedic period and the epic age, bankers performed the functions of the modern banks. The banking business was carried on by the members of the Vaish community and Manu speaks of earning through interest as the business of vaishyas. He accepted deposits from the public, granted loans against pledges and personal security, granted simple open loans, acted as bailee for his customers, subscribed to public loans by granting loans to kings, acted as treasurer and banker to the state and managed the currency of the country. Indigenous bankers used to maintain a regular system of accounts and borrowers used to sign the loan deeds (rnapatras).
Before the Buddhist period, banking was practiced only by the „vaishyas‟, but during the Buddhist period, banking business was decentralized and Brahmins and kshatriyas also entered the lucrative business of banking. During this period further refinements were made in the banking business. Money changing came into vogue and the state regulation of the business became more systematic. Hundis or indigenous bills of exchange came also in use. The people who charged high rates were looked down upon by the society. People who did this business were known as „Srethis‟ or Sahukar or Mahajan and various other names were used for them. During this period, these bankers became influential people in the community life throughout the kingdom and they were often the royal treasurers.
Sources on Indian history reveal that during early Muslim and Moghul rule in india, indigenous bankers provide loan both for domestic and foreign trade. They assisted the state during period of crisis. Hundies were most commonly used. The issue of various kinds of metalic money in different parts of the country gave the indigenous bankers great opportunities for developing the very profitable business of money changing and most important among them were appointed, mint officers, revenue collector, bankers and money changers to government in various parts of the empire. The famous indigenous bankers were known as Jagat seths (world bankers) and possessed as great a power as the private banker‟s of any western country. They were considered trusted custodian of the deposits of people and royalty alike and financed not only the trade of the country but also requirements of the royal treasury.
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These are the views expressed in U.P. banking enquiry committee and Bombay banking enquiry committee.
The English traders came to India in the 17 century. Due to the ignorance of the latter‟s language and the latter‟s inexperience of the finance of former‟s trade the business and power of the indigenous bankers began to decline. The English traders first few years collected a portion of the land revenue through the indigenous bankers and English agency houses in Calcutta and Bombay began to conduct banking business besides their commercial business. The continuous wars and chaos that resulted from the break up of the moghul empire weakened the system of indigenous banking a great deal. When a uniform currency was established through out the country the indigenous banking lost their profitable money changing business from 1835. The decline of indigenous banking and the gradual expansion of English trade and power in India led the establishment of banks on western line.
Though indigenous bankers lost their business in the urban areas, they continued to have a separate existence in the rural areas. In spite of the progress of the joint stock banks, a large amount of banking business is still carried on by the indigenous bankers through out India it is mainly concentrating on agriculture and internal trade in these indigenous bankers also serve as middleman between the internal traders and the banks, discounting the hundis of the former and re-discounting them with latter. Banking on modern lines began with the foundation of the agency houses of Calcutta and Bombay in the eighteenth and early nineteenth centuries. These agency houses began to serve as bankers to the east India Company, the members of the services and the European merchants in India, had no capital of their own, and depended upon deposits for their funds. In contrast to these agency houses, the indigenous bankers conducted their business mainly with their own resources. The agency houses financed the movement of crops, issued paper money and paved the way for the establishment of joint stock banks.
The first joint stock bank established in the country was the bank of Hindustan founded in 1770 by one of agency houses in Calcutta and its business was closely connected with this house and 1832 it was failed. The Bengal bank and the general bank of India were established about 1785. The bank of Bombay and the banks of 51
Madras were established in 1840 and 1843 respectively. These banks were given the monopoly of government banking. After 1823 they were also given the right of note issue which was taken over by the government in 1862. In 1962 these presidency banks were amalgamated and a new bank imperial bank of India was formed. This step was taken to protect these banks against the competition of foreign banks. In 1935 the Reserve Bank of India was established as the central bank of the country. The same imperial bank of India was nationalized into the state bank of India in 1955.
Indian stock banks Several joint stock banks were established, after 1813 by the British settlers in India, but they are not stay for long. In 1860, an important act was passed. That permitted the starting of joint stock banks on the basis of limited liability. In 1856 the Allahabad bank was established under European management. That is one of the nationalized banks, the Oudh commercial bank established in 1881 was the first banks on limited liability basis under Indian management. In 1894, the Punjab national bank also established under India management. This bank is also one of the nationalized banks at present.
There have been a large number of bank failures during the period 1913-36. That period 480 banks failed and another 620 banks failed over a shorter period of 1937-48. This current bank failure was the main feature of the growth of banking in India over this period. The establishment of the Reserve bank of India in 1935 as the central bank of India of the filled a big gap in India‟s banking structure and met one of the necessary conditions for a healthy growth of banking in the country. The progress of banking during the Second World War period (1939-45) and saw an over rapid expansion and large scale failure of banks. Independent India inherited an extremely weak banking structure, with 640 banks of which only 96 were scheduled banks and the rest small non-scheduled banks. The year 1949 marks the beginning of a new era in the history of Indian banking and comprehensive legislation was passed to control the activities of other commercial banks.
Status of Agriculture Lending in India In the Pre-independence period, there was practically no institution for providing loans to farmers and they were totally dependent on moneylenders, rich 52 farmers, friends and relatives. Moneylenders charged very high rates of interest and also manipulated accounts by not showing money returned and interest paid. They also compelled farmers to sell the output to them at a low rate. Sometimes they even seized the land, through of their mall practices. The All India Rural Credit Survey (AIRCS) 1951-52 stated that the share of informal sources had 92.7 percent whereas formal sources of credit had only 7.3 percent. All India Rural Debt and Investment Survey (AIRDIS) (1961-62) also revealed that the informal credit had slightly declined to 81.3 percent. The following table shows the percentage share of agricultural finance from institutional as well as non institutional agencies.
Table 2.3 Relative share of borrowing of cultivator households from different sources Sources of credit 1951 1961 1971 1981 1991 Non-institutional 92.7 81.3 68.3 36.8 30.6 Money lenders 69.7 49.2 36.1 16.1 17.5 Institutional 7.3 18.7 31.7 63.2 66.3 Co-operative 3.3 2.6 22.0 29.8 35.2 banks Commercial banks 0.9 0.6 2.4 28.8 35.2 Unspecified - - - - 3.1 Total 100 100 100 100 100 Source: All India Debt and Investment Survey and RBI bulletin, February 2000.
The table shows that during the year 1951 the major share of credit was provided by non-institutional sources (i.e.) 92.7 percent. Out of this, money lenders had provided 69.7 percent. After that the percentage share of non-institutional credit had declined during 1991, its share was only 30.6 percent. The percentage share of moneylenders also declined to 17.5 percent in the same year. Simultaneously the percentage share of institutional credit had increased 7.3 percent in 1951 to 66.3 percent in 1991. Out of this co-operative banks performed well. Due to nationalization of banks, bank branches have expanded all over India. Hence the percentage share of co-operative banks had declined.
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Table 2.4 Decadal average share of institutions in direct agricultural credit (disbursements) Decades Co-operative RRBs Commercial banks 1970s 79.5 2.3 21.0 1980s 55.9 5.3 38.9 1990s 51.5 6.2 42.3 2001-02 44.0 11.0 45.0 Source: Reserve Bank of India bulletin. Note: Direct agricultural credit (disbursements) from 1975-76 for RRBs and 1971-72 for commercial banks.
Table depicts during 1970s the average share of institutions in direct agricultural credit was high (i.e.) 79.5 percent and it declined continuously. Its share was 44 percent in 2001 to 02. Next to co-operatives commercial banks performed well. Its share has increased from 21 percent in 1970s to 45 percent in 2001-02. Though the share of RRB has increased, it was less than these two banks.
Even though the nominal rate of interest is lower for a formal loan than the informal loan, the transaction costs of borrowing are higher for formal loans (Shahidur R Khandkar, Rashidur R.Faruqee). Whereas the informal credit always have the features of collateral free lending, proximity, timely delivery and flexibility in loan transactions. But it is expensive in terms of interest rate. It is largely used for consumption purpose rather than investment and growth (cited in Xavier Gine). In informal credit moneylenders play a dominant role. During 1951, major share of credit i.e., 92.7 percent was provided by informal lenders (Rakesh Mohan, 2004). Before independence, co-operative bank alone had provided the loan. Due to the introduction of the production-oriented system and the spread of green revolution the co-operatives alone would not be able to meet the full requirements of agriculture credit. This led to the introduction of social control of commercial banking followed by the nationalization of major private commercial banks in 1969. The rural bank offices share has increased form 17.6 percent in 1969 to 36 percent in 1972 in total bank offices (Ramachandran V.K. Madhura Swaminathan, 2005). The concept of priority sector was also introduced in 1969. So, the banks reserve 40 percent of the
54 total advance for these sectors. Since the gap in agricultural credit continued to be large, a working group was appointed by the government of India under the chairmanship of Narasimham to review the rural credit structure and suggest ways to ensure the smooth flow of adequate credit to the weaker sections. Hence, Regional Rural Bank Act was passed in 1975. Due to the introduction of commercial banks and RRBs, the share of co-operative bank credit to agriculture declined continuously. It was 79.5 percent in 1970s but declined to 30.9 percent in 2003-04. But the share of commercial bank has increased i.e., 60.3 percent during the year 2003 (Rakesh Mohan, 2006).
In the case of disbursement of Institutional credit to agriculture and allied activities (short –term and long-term) at all India shows that disbursement is high in southern region and very low in the North region (table 2.5).
Table 2.5 Disbursement of loans for agriculture and allied activities (st and lt)- Share in total disbursements (%) Region/State 1990-91 1995-96 2001-02 Northern region 12.9 11.6 19.9 North eastern region 0.4 0.4 0.5 Eastern region 8.3 6.4 7.4 Central region 16.9 16.4 14.1 Western region 13.6 17.1 14.4 Southern region 47.9 48 43.8 All India 100 100 100
Table 2.6 &2.8 depicts the flow of institutional credit to agriculture. During 1986-87 the growth rate is high i.e. 14.4 percent and it has declined to 5.2 percent after that it has increased slightly during 1988-89 to 1989-2000 (i.e.) 7.8 percent and 8.0. The increased may due to rate on interest on agricultural loan was reduced by a range of 1.5 percent to 2.5 percent with effect from 1 march 1988 for loans ranging up to Rs 15,000. Again with effect from 1 march 1989 interest charged on crop loans between Rs 15,000 and Rs 25,000 was reduced to 12 percent from the existing
55 maximum rate of 14 percent. During 1990-91 the growth rate has experienced a great decline (i.e.) negative growth rate. This may due to liberalization. To increase the credit flow to agriculture government stressed the banks 18 percent of net bank credit must be flow to the agriculture. So again the growth rate has increased 1991-92 and there is fluctuation in the growth rate of agriculture credit. The growth rate has increased from 2002-03 and it has reached the highest growth rate during 2004-05 (i.e.) 44.1 percent. It may be due to the doubling of credit within three years introduced during 2003-04 by the honorable finance minister Mr. P. Chidambaram and 30 percent of credit must be achieved within one year and this increase is reflected in the year 2004-05. In the case of proportion of credit the share of co- operative credit was high during 1985-86. But it has declined severely during 1990- 91 and again it has increased till 1993-94 after that it is declining continuously. This is due to the role played by the commercial bank and co-operative bank. In the case of Commercial bank and Regional Rural Bank the combined share had very low during 1980s and it was increasing trend from 1992-93. Even though both short-term, medium/long term credit increased continuously for all the institutions the short-term credit is greater than the medium/long-term, credit for both co-operatives and Regional Rural Banks. Table 2.6 Flow of institutional credit to agriculture in India (Rs. in crores) Institutions 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 Co-operative banks 3874 2407 4420 4851 5082 3408 (55.3) (52.5) (52.4) (53.4) (51.9) (38.5) Short-term 2787 3007 3120 3594 3689 2306 Medium/Long-term 1087 1200 1300 1257 1393 1102 Commercial and 3131 3809 4009 4233 4719 5438 Regional Rural Banks (44.7) (47.5) (47.6) (46.6) (48.1) (61.5) Grand Total 7005 8016 8429 9084 9801 8846 - (14.4) (5.2) (7.8) (8.0) (-9.7) Source: Economic Survey Figures in brackets indicate percentage share to the grand total
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Centrality measures of institutional credit to agriculture To estimate the centrality measures by tanking the commercial banks and RRBs as rivals of co-operative banks in the provision of credit to agriculture in institutional finance during the period 1991-92 to 2002-03 (table 8). There are three types of centrality measures by using the NABARD data for the above mentioned period by taking the commercial banks and the RRBs as rivals of co-operative banks (Datta S. K and Kapoor S. (1996).
Absolute member centrality with respect to total agricultural credit Total credit of co-operative banks (short and long term/total credit of co- operatives, SCBs and RRBs.
Relative member centrality with respect to the short-term credit Short-term credit of co-operative banks/total short-term credit of co- operatives, RRBs and SCBs.
Relative member centrality with respect to the loan-term credit Medium and long-term credit to co-operative banks/total medium and long- term credit of co-operatives, SCBs and RRBs.
Table 2.7 Centrality measures with respect to agricultural credit (SCBS and RRBs are taken as rivals of co-operative banks) Year AMC RMC RMC* 1991-92 0.44223 0.56496 0.28854 1992-93 0.61823 0.71053 0.38683 1993-94 0.61337 0.69550 0.43615 1994-95 0.50181 0.91333 0.19952 1995-96 0.47562 0.57356 0.28613 1996-97 0.45223 0.54877 0.27791 1997-98 0.44076 0.52786 0.28190 1998-99 0.43291 0.52592 0.26132 1999-00 0.41309 0.50752 0.24006 2000-01 0.44123 0.56798 0.24945 2001-02 0.38043 0.46478 0.22177 2002-03 0.34312 0.43748 0.16507
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AMC - absolute member centrality with respect to total agricultural credit RMC - relative member centrality with respect to short-term credit RMC* - relative member centrality with respect to long-term credit
Table 2.7 revealed that the value of “Absolute member Centrality with respect to Agricultural credit (AMC) has increased 1992-93 and then it has been declining continuously and slightly increased during 2000-01 after that declined. The relative member centrality with respect to short-term credit reveals the fluctuating trend up to 1999-00 after that declined when SCBs and RRBs are taken as rivals. The relative member centrality with respect to long-term credit (RMC*) also shows the fluctuating trend of co-operatives like short term credit, when SCBs and RRBs are taken as rivals. It has increased from 0.28 to 0.43 and fluctuating trend up to 1999-00 after that declined. This table shows through AMC that the share of co-operatives in aggregate credit is declining when SCBs and RRBs are taken as rivals. It is clear that the credit to agriculture has been slowly moving from co-operatives to SCBs and RRBs. The failure of co-operatives is due to institutional bottlenecks. “The contribution of co- operatives to farm credit has dropped sharply from 70 percent to about 30 percent leading to distress in the farming community” (Prime Minister Man Mohan Singh, 2005).
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Table 2.8 Flow of institutional credit to agriculture in India (Rs. In Crores) Institutions 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 Co- 5800 9378 10117 11916 10479 11944 14085 15957 18363 20801 23604 24296 operative (51.7) (61.8) (61.3) (55.6) (47.6) (45.2) (44.1) (43.3) (39.6) (39.4)165 (38.0) (34.3) banks 4403 7170 7839 9462 8331 9328 10895 12571 14845 83 18828 20247 Short-term 1397 2208 2278 11916 2148 2616 3190 3386 3518 4218 4776 4049 Medium/Lo ng-term Regional 596 831 977 1252 1381 1684 2040 2460 3172 4219 4854 5467 Rural (5.3) (5.5) (6.0) (5.8) (6.3) (6.4) (6.4) (6.7) (6.9) (8.0) (8.0) (7.7) Banks 336 489 732 775 849 1121 1396 1710 2423 3245 3777 4156 Short-term 260 342 245 477 532 563 644 750 749 974 1077 1311 Medium/Lo ng-term Commercia 4806 4960 5400 8256 10172 12783 15831 18443 24733 27807 33587 41047 l banks (43.0) (32.7) (32.7) (38.5) (46.1) (48.4) (49.5) (50.0) (53.5) (52.6) (54.0) (58.0) Short-term 2341 2432 2700 3972 5345 6549 8349 9622 11697 13486 17904 21878 Medium/Lo 2465 2528 2700 4284 4827 6234 7482 8821 13036 14321 15683 19169 ng-term
Grand 11202 15169 16494 21424 22032 26411 31956 36860 46268 52827 62045 70810 Total (26.6) (35.4) (8.7) (29.9) (2.8) (19.9) (20.9) (15.3) (25.5) (14.2) (17.4) (14.1) Growth rate Source: Economic Survey Figures in brackets indicate percentage share to the Grand total 59
Agricultural credit 1991 reform period In the 1980‟s the low profitability, low capital base, high non performing assets, ostensible, inefficiency and lack of transparency of public sector banks. Due to such criticisms committee on the financial system established in 1991 under the chairmanship of Narasimham to pave the way for liberalization of banking practices. But liberalization affects the agricultural lending. Under liberalization , the public sector banks have been forced to reduce agriculture lending to 15 percent of their total lending, while that of private banks has been reduced to 9 percent. These are all at the all India level. But in west Bengal they are only 9 percent and 0.5 percent respectively (Benoy konar, 2003). The share of agriculture in total bank credit (both direct and indirect) reached a peak of 15.9 percent in March 1990. After that it has been declining steadily, touching a low of 9.9 percent in March 2000. In 1993 the RBI asked the banks to prepare special agricultural credit plans and increase their credit disbursals to agriculture by 20 percent annually, so that the effective target of 18 percent of net bank credit could be met. Even so, the target remains unfulfilled. (Chandrasekhar, Parthapratim pal, 63). The dependency of small and marginal farmers on money lenders for credit is much higher. Moreover, the growth rate of credit for small and marginal farmers declined in the 1990‟s as compared with the 1980‟s (Ramachandran, Madhura Swaminathan ,2003) but there was no decline of growth in credit for large farmers during the same period (RBI, 2002). Liberalisation policies, based on the retreat of the state and surrender to the capitalist market, have aggravated the crisis in agriculture further. The liberalization process is biased in favour of the rich and against the interest of the poor, who are mainly agricultural labourers, poor peasants and middle peasants (S. Ramachandran Pillai, 2003). The reform period expect the following positive as well as negative influences of banking sector reform on the credit flow to agriculture.
(1) Deregulation of interest rate may have helped the formal agencies to enhance the proportion of disbursement to agricultural sector in the overall net bank credit. (2) Widening scope of priority sector may have resulted in the greater availability of credit to priority sector, in general and agricultural sector in particular. (3) Increasing the availability of funds to the banks as a result of reduced CRR and SLR may have a positive impact on the credit flow to agriculture. 60
(4) Since most of the loss-making bank branches during the pre-reform period were located in rural areas, the closure of bank branches my lead to reduced supply of credit to agriculture. (5) The recommendation of the Gupta Committee that the quality of lending is to be improved may provide ample access to institutional credit by marginal and small farmers.
Several studies show that 1991 reform period adversely affected the credit flow to agriculture (Ramachandran V.K. Madhura Swaminathan, 2002). According to Gagan Bihari Sahu, Rajesekhar D (2005) overall bank credit has expanded at a faster rate in favour of non-agricultural sector during reform period but it is adverde to the agriculture sector in the net bank credit and they also stated that the closure of most of the loss-making bank branches during the reform period led to reduce supply of agriculture credit. Most of the rural bank offices were closed in the 1990s. According to Ramachandran V.K. and Madhura Swaminathan (2005)2723 rural bank offices were closed between March 1994 and March 2000. The pattern of structural adjustment and government‟s macro economic strategy since 1991 have actually been associated with a reduced rate of overall agricultural growth, decline in percapita food grain output and inadequate employment generation (Sunil Phougat, 2006). To know the direct institutitonal credit flow to agriculture and allied activities (short-term and longterm) in the pre-reform period and reform period and also to know the loan outstanding of direct institutional credit for agriculture and allied activities in the Pre- reform period and reform period 1982 -83 to 2001-02 period has taken for analyze.
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Table 2.9 Annual average growth rate of loans issued to the direct institutional credit for agriculture and allied activities in india for different sources -total (short-term and long-term) (In percent) Period Co-operatives State governments SCBs RRBs Total Pre-reform period 7.940 18.69 19.07 9.82 11.54 (1982-83 to 1990-91) Post-reform period 12.443 6.23 15.02 22.89 13.96 (1991-92 to 2001-02) Total period 10.960 10.86 16.08 20.30 12.89 (1982-83 to 2001-02)
The annual average growth rates of co-operatives and RRBs in the pre-reform period were less 7.94 and 9.82 percent. But it has increased to 12.44 percent for co- operatives and 22.896 percent for RRBs in the reform period. But this trend has reversed for state governments and scheduled commercial banks. In the reform period the annual average growth of state governments and SCBs were declined to 6.23 percent and 15.02 percent. This growth rates also less that the total period annual average growth rate.
Table 2.10 Annual average growth rate of loans issued to the direct institutional credit for agriculture and allied activities in India for different sources (short-term) (In percent) Period Co-operatives SCBs RRBs Total Pre-reform period 8.25 18.27 9.45 10.70 (1982-83 to 1990-91) Post-reform period 13.16 18.65 27.89 16.29 (1991-92 to 2001-02) Total period 11.14 18.26 27.59 14.01 (1982-83 to 2001-02)
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The annual average growth rate of co-operative and RRBs (short-term) in the pre-reform period were low compare to SCBs i.e. 8.24 percent and 9.45 percent. But it has increased to 13.06 percent and 27.89 percent in reform period. This growth rate was greater than the total period. The annual average growth rate of SCBs has depicted slight increase in the reform period.
Table 2.11 Annual average growth rate of loans issued to the direct institutional credit for agriculture and allied activities in India for different sources (long-term) (In percent) Period Co-operatives SCBs RRBs Total Pre-reform period 8.305 20.03 12.09 13.39 (1982-83 to 1990-91) Post-reform period 11.07 10.48 12.38 10.55 (1991-92 to 2001-02) Total period 11.21 13.62 12.88 11.67 (1982-83 to 2001-02)
The annual average growth rate of (long term credit) co-operative in the pre- liberalization period was less compared to reform period but this trend has reversed in the case of SCBs i.e. the growth rate has declined to 10.48 in the reform period and RRBs having same growth rate in both the period. According to Rakesh mohan the percentage share of co-operative credit was greater in 1970s, but it declined continuously, due to emergence of commercial banks and RRBs. The percentage share of co-operative credit was 100 percent in 1970-71 to 44 percent in 2001-02. Next to co-operatives commercial banks are having higher percentage. It was 38.4 percent in 1980-81 and it has increased to 45 percent during 2001-02. The percentage share of RRBs also increased continuously but it was very meager amount compared to commercial and co-operative banks. Its share was 11 percent during 2001-02 (Rakesh Mohan, 2006). The same trend also reveals above table.
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Table 2.12 Percentage share of direct institutional credit for agriculture and allied activities for different sources-total (short-term and long-term) Triennium ending with Co-operatives State governments SCBs RRBs 1982-83 62.43 4.32 28.14 5.11 1986-87 47.94 2.72 43.17 6.18 1990-91 47.30 3.52 45.89 3.28 1994-95 52.60 2.17 39.46 5.77 1998-99 46.18 1.28 44.85 7.69 2001-02* 43.52 1.06 44.56 10.87 *Between years 1998-99 to 2001-02 only two years gap. The table depicts that the percentage share of credit to the total. The percentage of credit for all the sources except co-operatives declined during the period (1994-95) i.e. after the reform period. The percentage share of co-operative banks declined continuously except one year. But in the case of scheduled commercial banks the percentage share has increased continuously except 1994-95. But there is a fluctuation of credit in the percentage share of stage governments and RRBs.
Table 2.13 Percentage share of direct institutional credit for agriculture and allied activities for different sources-(short-term) Triennium ending with Co-operatives SCBs RRBs 1982-83 74.21 21.98 3.81 1986-87 60.88 34.44 4.67 1990-91 61.34 36.43 2.22 1994-95 60.69 33.33 5.97 1998-99 52.98 38.35 8.67 2001-02* 43.96 43.07 12.96 *Between years 1998-99 to 2001-02 only two years gap. The percentage share of credit (short-term) scheduled commercial banks and co-operatives has declined during 1994-95 i.e. after the reform period. The percentage share of credit for co-operatives declined continuously for all the period. But RRBs has fluctuating trend up to 1990-91 after that increased continuously.
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Table 2.14 Percentage share of direct institutional credit for agriculture and allied activities for different sources (long-term)
Triennium ending with Co-operatives SCBs RRBs
1982-83 50.77 41.42 7.81
1986-87 33.70 57.69 8.59
1990-91 32.58 62.44 4.98
1994-95 42.09 52.13 5.78
1998-99 36.41 57.26 6.33
2001-02* 44.02 49.84 6.14 *Between years 1998-99 to 2001-02 only two years gap.
The percentage share of credit (long term) for scheduled commercial banks fluctuating trend all the period particularly reform period (1994-95) it was low compare to previous year. The percentage share of co-operatives and RRBs shows fluctuating trend through out the period.
To find out the Annual Average Growth of different sources of Direct Institutional Credit (loan outstanding) in the pre-reform and reform period also calculated. A study was conducted by Gagan Bihari Sahu, D. Rajasekhar to know the share of the agriculture sector in total net bank credit (outstanding credit) during 1981-2000. They found that the share of credit to agriculture in total net bank credit had significantly declined, especially after the introduction of banking sector reforms. The same view has expressed by Chandrasekhar, Parthpratim Pal (2006).
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Table 2.15 Annual average growth rate for outstanding of direct institutional credit for agriculture and allied activities in India for different sources -total (short-term and long-term) (In percent) Period Co-operatives SCBs RRBs Total Pre-reform period 9.42 19.51 21.59 14.95 (1982-83 to 1990-91) Post-reform period 7.66 10.33 15.39 9.74 (1991-92 to 2001-02) Total period 8.82 13.64 17.89 11.75 (1982-83 to 2001-02)
The table 15 reveals that annual average growth rate for outstanding direct institutional credit for agriculture and allied activities (short-term and Long-term). The annual average growth rate for outstanding credit of all the sources shows higher growth rate in the pre-reform period. But it had declined total period for all the banks particularly in the post reform period was declined all the banks.
Table 2.16 Annual average growth rate for outstanding of direct institutional credit foragriculture and allied activities in india for different sources - (short-term) (In percent) Period Co-operatives SCBs RRBs Total Pre-reform period 11.31 15.47 23.97 13.40 (1982-83 to 1990-91) Post-reform period 9.28 15.22 21.79 13.22 (1991-92 to 2001-02) Total period 9.58 15.02 22.36 12.82 (1982-83 to 2001-02)
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The annual average growth rate for outstanding of direct institutional credit for agriculture and allied activities in India for different sources (short-term) shows that declined for total period for all the banks particularly in post reform period the annual average growth rate for outstanding has declined. Compare to other banks co- operative banks have very low percentage (i.e.) 9.28.
Table 2.17
Annual average growth rate for outstanding of direct institutional credit for agriculture and allied activities in India For different sources - (long-term)
(In percent) Period Co-operatives SCBs RRBs Total Pre-reform period 8.01 21.19 20.55 15.86 (1982-83 to 1990-91) Post-reform period 6.54 7.89 10.46 7.57 (1991-92 to 2001-02) Total period 8.50 12.89 14.80 11.05 (1982-83 to 2001-02)
Annual average growth rate for outstanding of direct institutional credit for agriculture and allied activities in India for different sources (Long-term) shows that the total period growth rate has slight increased for co-operatives, scheduled commercial banks. But in the case of post reform period the growth rate has declined for all the banks particularly it was very low in co-operatives and scheduled commercial banks.
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Table 2.18 Percentage share of out standing direct institutional credit for agriculture and allied activities For different sources-total (short-term and long-term)
Triennium ending with Co-operatives SCBs RRBs
1982-83 53.25 42.80 3.94 1986-87 41.75 52.32 5.93 1990-91 35.92 58.09 5.98 1994-95 41.26 51.35 7.39 1998-99 38.56 52.03 9.40 2001-02* 32.17 57.30 10.53 *Between years 1998-99 to 2001-02 only two years gap.
Percentage share of out standing direct institutional credit for agriculture and allied activities for different sources-total (short-term and long-term) shows that the percentage share of co-operatives had declined continuously except 1994-95. But the percentage share of scheduled commercial banks had increased and fluctuation and again increased during 2001-02. The percentage share of RRBs was very meager amount compare to other banks but it has increased continuously.
The following table 2. 19 explains that Percentage share of outstanding direct institutional credit for agriculture and allied activities for different sources- (short- term) shows that the percentage share has declined continuously for co-operative banks. But the commercial banks share has increased continuously. The RRBs share has very meager amount compare to other banks but it has increased all the period.
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Table 2.19 Percentage share of out standing direct institutional credit for agriculture and allied activities for different sources- (short-term)
Triennium ending with Co-operatives SCBs RRBs
1982-83 60.38 36.66 2.96 1986-87 53.81 41.99 5.19 1990-91 51.76 42.34 5.89 1994-95 49.38 42.86 7.76 1998-99 44.48 46.01 9.51 2001-02* 33.79 52.76 13.45 *Between years 1998-99 to 2001-02 only two years gap.
Table 2.20 Percentage share of out standing direct institutional credit for agriculture and allied activities for different sources- (long-term)
Triennium ending with Co-operatives SCBs RRBs
1982-83 48.87 46.58 4.56 1986-87 35.83 57.84 6.33 1990-91 27.72 66.26 6.02 1994-95 36.84 55.98 7.18 1998-99 34.64 56.06 9.29 2001-02* 30.82 61.08 8.09 *Between years 1998-99 to 2001-02 only two years gap.
Percentage share of out standing direct institutional credit for agriculture and allied activities for different sources- (long-term) shows that the share of co-operative banks has decreased all the years except 1994-95 i.e. reform period. But the share of commercial banks has the fluctuating trend and the share of RRBs has increased continuously.
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Table 2.21 Annual average growth rate of credit by scheduled commercial banks for different sectors in Tamil Nadu state
Period Agriculture Industries Services Total Pre –reform period 53.759 65.224 53.082 54.423 (1983-1991) Reform period 16.689 23.033 23.929 91.85 (1992-2005) Total period 29.886 37.885 32.978 74.412 (1983-2005) Source: State level bankers‟ committee, Chennai.
The annual average growth rate of total credit has increased in the reform period compare to pre-reform period. It may due to the policy decision to reduce the CRR and SLR to increase availability of funds to the banking sector. But this credit is less than the overall period credit (1983-2005). The sector-wise flow of credit is less in the reform period compare to pre-reform period for all sectors. But the agriculture credit is very low in the reform period compare to other sectors. Overall credit (1983-2005) also shows the same trend. The same view has expressed by Gagan Bihari sahu , D Rajasekhar (2005) stated that the credit disbursed to agriculture sectors in the reform period had declined at the all India level
Table 2.22 Annual average growth rate of credit by scheduled commercial banks For different sectors in tiruchirappalli district Period Agriculture Industries Services Total Pre –reform period 65.534 47.723 54.1905 59.112 (1983-1991) Reform period 18.189 34.32 30.134 20.088 (1992-2005) Total period 34.725 36.342 38.627 33.247 (1983-2005) Source: State level bankers‟ committee, Chennai.
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Table 10 shows the annual average growth rate of credit by scheduled commercial banks for different secors in Tiruchirappalli district. The annual average growth rate of total credit (all sectors) and sector-wise flow of credit also declined in the reform period compare to pre-reform period. But this credit very low in agriculture sector compare to other sectors. Hence all these evidences show that agriculture credit is low in the reform period in Tiruchirappalli district as well as Tamil Nadu state.
This chapter elaborately explained the structure of agricultural credit system India. Before independence the trends in sources of agricultural credit explained that non-institutional sources dominated i.e. 92.7 percent during 1951 and its share has declined continuously and reached 30.6 percent in 1991 but the institutional credit during 1951 was 7.3 percent but the share has increased and reached 66.3 percent during 1991 period. Within institutional sources co-operative banks mainly dominated during 1970s and it has declined to 44.0 percent in 2001-02. This decline was due to the emergence of commercial banks. Because the percentage share of commercial banks during 1970s was 21.0 percent. But its share has increased and reached 45.0 percent during 2001-02. In 1991 reform period explained that the annual average growth rate of loan issued to the direct institutional credit for agriculture and allied activities in India for different sources (both short-term and Long-term) has declined for state governments and scheduled commercial banks. But the annual average growth of co-operatives, RRBs has increased. In the case of annual average growth rate for outstanding of direct institutional credit for agriculture and allied activities in India for different sources (short-term and long-term) declined during post reform period. The annual average growth rate of sector-wise credit flow in Tamil Nadu state shows that declining trend during the reform period for all sectors but particularly agriculture sector it has declined widely compare to other sectors. Likewise the annual average growth rate of sector-wise credit for Tiruchirapalli district also shows the same trend. Hence, India level, state level and district level data shows that reform period affects agricultural lending.
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CHAPTER III PROFILE AND PERFORMANCE OF THE TIRUCHIRAPALLI DISTRICT
Agro-climatic factors such as soil, rainfall, climate, irrigation, cropping pattern, land utilization, existence of financial institutions greatly influence farm income, savings, investment and employment in any area and comprehensive knowledge about these characteristics of the study area is of much understand the background for the study. Hence the chapter presents a brief description of the study area. It is also essential to study the lead bank and the District Rural Development Agency (DRDA) are two principal agencies concerned with the flow of credit and implementation of rural development programme in Tiruchirapalli district. Performance of credit agencies in Tiruchirapalli district explain the demand, recovery, overdue position and credit flow to the different purposes i.e. crops, minor irrigation, land development, farm mechanization, plantation and horticulture, forestry and waste land development and investment credit for allied activities like dairy development, poultry, sheep/goat/piggery. This chapter also explains banks provide support for government sponsored programmes. The performance of the banks in the study area is essential to know the flow of credit to that area.
Tiruchirappalli district is a centrally located district of the state with headquarters at Tiruchirappalli. The city is situated on the banks of the river Cauvery and it is the fourth largest city in Tamil Nadu. Geographically, the district is bound by Namakkal district on the North, Karur district on the west, Pudukottai and Thanjavur districts on the south and Perambalur district on the east. The total geographical area of the district is 4403.83 sq.km. It accounts for 3.4 percent of the area of state.
The total population of district as per 2001 census was 24.18 lakh. Out of which 12.08 lakh were males and 12.10 lakh were females. The composition of total population living in rural and urban areas is 12.79 lakh and 11.39 lakh respectively. The percentage of rural population to the total population is 52.89 percent. The density of population of the district per sq.km was 549 persons. Out of the total geographical area net sown area is 1, 72,854 ha and the gross sown area is 1, 88,136 72 ha.The net area under irrigation is 83,132 ha and gross irrigated area is 98063 ha. The economy of the district mainly depends on agriculture. Nearly 57 percent of the workforce depends on agriculture and about 36 percent of the geographical area (188136 ha) has been brought under cultivation. The area sown more than once was 15282 ha.
The district has been divided into three revenue divisions viz., Tiruchirappalli, Lalgudi and Musiri and it is having eight taluks (Tiruchirappalli, Srirangam, Manapparai, Lalgudi, Manachanallur, Musiri, Thottiam and Thuraiyur (Table 1). These taluks further are sub-divided into 14 blocks comprising 408 village panchayats and 507 revenue villages. The district has Tiruchirappalli City Corporation, two municipalities (Manapparai and Thuraiyur) and 18 town panchayats.
Cauvery is the major river flowing across the central region and has a canal system covering a length of 494 km. The district is having a clear weather throughout the year with low humidity. The hottest period is from April to June. The topography of the district almost plain except for a short range of Pachaimalai hills in the North. The district lies in the southern plateau and hill zone of agro-climatic regional planning with characteristic semi arid climate. The soil is predominantly alluvial sandy loam (Central region), loamy soil (in Andanallur, Manachanallur and Lalgudy blocks) red soil and a small patch of black soil in dry track of the district. The average annual rainfall of the district is 867.80 mm which is less than 946.9mm, the normal rainfall of the state. The precipitation during the northeast monsoon, southwest monsoon and remaining winter and hot weather period accounts for 48.3 percent, 31.5 percent and 20.2percent respectively of the annual rainfall. However during the year 2005-2006, the district faced severe drought condition.
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Table 3.1 Tiruchirapplli district administrative setup Name of the Revenue Division Name of the Taluks Name of the Panchayat Union 1.Tiruchirappalli 1. Tiruchirappalli 1. Thiruverumbur 2. Srirangam 2. Andhanallur 3. Manapparai 3. Manikandam 4. Manapparai 5. Marungapuri 6. Vaiyampatti 2. Lalgudi 4. Lalgudi 7. Lalgudi 5. Manachanallur 8. Pullambadi 9. Manachanallur 3. Musiri 6. Musiri 10. Musiri 7. Thottiam 11. Thottiam 8. Thuraiyur 12. Thathiengarpet 13. Thuraiyur 14. Uppiliapuram Source: Annual credit plan 2007-2008.
The district is having a good network of banks, educational and research institutions and well-developed surface transport. About 154.86 km of broad gauge and 29.63 km meter gauge provide adequate connectivity in the district. Another advantage is International Airport is there in the district. The district is also having synthetic gem cutting and polishing, leather tanning, textile products and mechanized korai mat weaving. Handloom is also another major activity in the district. It is also having important cottage industry spinning of coir fibre. Government of India identified as one of the potential districts for handicraft development. There is tremendous scope for agro processing sector in the district particularly banana and milk products. Ready made garments are another important area in this district. NABARD has already sanctioned REDPs for readymade garments in Inamkulathur and Kattur through NGOs. Hand-made greeting cards, tera-cotta and processed food items like pickle, snacks etc are coming up in a big way.
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Paddy, Groundnut, Banana, Sugarcane, Cotton and Millets are the important crops in the district. Mango, Coconut and Oil-palm are the major plantation and horticultural crops. Another important activity is vegetable cultivation. Because it is provide remunerative price realization to both producers and customers. Due to drought conditions, farmers have adopted cultivation of maize in a big way in Thuraiyur, Musiri, Uppiliapuram, Lalgudy and Pullambady blocks. They are marketed in Namakkal for poultry feed preparation.
There are two major industrial estates in the district. One is at Velayathankudy for women entrepreneurs and another for leather industries at Kumbakudy village. This will motivate more and more entrepreneurs especially womenfolk, to set up industries. There is also a tremendous increase of village level weekly markets. Many new “Santhai” which obtained approval of the district administration commenced operations, leading to increase in market avenues in rural villages. NABARD has sanctioned grant assistance of Rs 3 lakh for rural haat at Valady of Lalgudy block under DRIP (District Rural Industries Project). One more village market has been constructed under RIDF at Vairachetty palayam of Uppiliapuram block. These act as a boon for the rural producers.
There is one Internet club at Anbil attached to the Farmers‟ Club in the village. The International Rice Research Institute (IRRI), Manila, Philippines and TNAU have jointly supported for creation of a facility with computer, web camera, and printer to be used by the farmers. It is encouraging to note that the farmers are assessing the internet to find the market prices and even send e-mail seeking technical advice on disease management, package of practices, etc. Some more clubs have evinced interest in learning computer and internet based agriculture. Tiruchirappalli district profile and Eonomic indicaters of the credit delivery system also shown in appendix 1 & 2.
Flow of credit in the study area The Lead Bank and the District Rural Development Agency (DRDA) are two principal agencies concerned with the flow of credit and implementation of rural development programme in Trichy district.
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Lead Bank Scheme (LBS) It was introduced in 1969 by the Reserve Bank of India on the recommendations of a study Group on “Organizational framework for the implementation of social objectives “appointed by the National Credit Counsil, under the chairmanship of Prof D.R. Gadgil. The study group highlighted the main deficiencies and inadequacies of the Indian Banking system as follows.
1. Uneven spread of bank offices and banking business as between different states and population groups. 2. Flow of resources from the smaller to the larger population centres and to the larger population centres and from the rural to the urban centres. 3. In contrast to the commercial banking system, the co-operative banking has penetrated into the rural areas and has provided credit at numerous and well dispersed centres. 4. The effective coverage of co-operative credit is also uneven. 5. Uneven distribution of credit as between different economic sectors and virtual non-availability of credit to small borrowers and weaker sections of society, though there is a large potential demand for credit from them.
The main recommendation of the study group was the adoption of “area approach” for the development of credit and banking in the country on the basis of local conditions.
The main specific functions of the Lead Bank, laid by RBI, were as follows 1. Survey the resources and potential for banking development in the district. 2. Survey the number of industrial, commercial and other establishments. 3. Examine the facilities for the marketing of agricultural produce and industrial products, and storage, warehousing etc. 4. Survey the facilities for the stocking of fertilizers and other agricultural inputs and repairing and servicing of machinery and equipments. 5. Assist other primary lending agencies and 6. Maintain contacts and liaison with government/quasi government agencies. 7. The preparation of district credit plan by the allotted lead bank is also a continuing process. This plan was first launched in Jan 1980, besides the 76
preparation of District Credit Plan (DCP) and Annual Action Plan (AAPs ) the Lead Bank (IOB) acts as a convener of various committees set up to look into the flow of credit for prescribed sectors and selected beneficiaries. There are three committees functioning in the Trichy district. 1. District Consultative Committee (here in after referred to as DCC) 2. A small sub-Committee of DCC (i.e, Standing Committee) and 3. District Level Review Committee (here in after referred to as DLRC).
1. The District Consultative Committee (DCC) The DCC was set up in 1980 as the overall plan approving body. It aims at bringing a balanced development of the district by coordinating the functioning of the governmental agencies and credit disbursing institutions. The Development Commissioner is the chairman and Lead Bank officer acts as convener of the DCC. It draws its members from various departments such as animal husbandry, industries, co-operatives etc. The DCC meeting is convened generally once in a quarter to review the progress of Annual Action Plan (AAP) to identify difficulties faced by the members in its implementation and to consider ways of overcoming them. Apart from the government sponsored schemes the review of banking development in the district covering statuary norms stipulated by RBI will be reviewed. For example deposits, advances , coverage of credit deposit ratio (CDR), priority sector (40%) out of total advances, agriculture and allied activities (18%), SSI, DRI, weaker section, women beneficiaries, physically handicapped etc.
2. The Standing Committee of the DCC (SC) Since the DCC has a very large membership, it has a small sub committee called Standing Committee headed by the development commissioner. The standing committee is meant for policy making for the projects and evaluates the progress of project level activities and formulates some constructive suggestions. It members are generally senior officers from lead bank, District Rural Development Agency (DRDA), National Bank for Agriculture and Rural Development (NABARD) and energy development agency etc. The formation of standing committee as a compact forum has helped in solving day to day problems effectively.
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3. District Level Review Committee (DLRC) In addition to the DCC and SC, the DLRC has been constituted to review policy matters relating to the flow of institutional finance for credit based rural development programmes of government implemented in the area. The committee is chaired by the development commissioner and other members are senior officers from DRDA, NABARD, Khadi and Village Industries Commission (KVIC), RBI, Block Development Office and all bank branches operating in the area. The total members exceed 60. The members are divided in to groups and each group reviews the working of a particular scheme or sector example agriculture, industry, service etc. The Annual Action Plan is discussed in details in the meeting of DLRC and agreement is reached with regard to the adoption (or deletion) of schemes and the procedure for implementation.
Block Level Banker’s Committee (BLBC) Lead bank Manager is the chairman, and local branch manager is the convener. All the member banks in the particular block are the members. The BLBC meeting held every quarter. Every quarter achievement under Annual Credit Plan, Branch-wise, Sector-wise progress under all the government sponsored schemes will be reviewed, representatives from RBI and NABARD are the special invitees. We find that in the study area, commercial banks and co-operatives are the two institutional credit agencies which function through a fairly widespread network of branches. The Indian Overseas Bank (IOB) has been lead bank for Tiruchirapalli district. The Lead bank prepares District Credit Plan and Annual Action Plans for all the blocks in Tiruchirapalli district. The implementation of these plans rests collectively with the District Rural Development Agency, Block Development Offices and the credit disbursing agencies in the area. Decisions pertaining to the implementation of schemes, their evaluation and follow up are taken at the District Consultative Committee and its standing committee. District Level Review Committee reviews policy matters relating to the flow of credit through institutional agencies.
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Table 3.2 Block profile at a glance – Manachanallur Block Particulars No. of Revenue Villages 46 No. of Panchayats 37 No. of Town Panchayats 2 Population 2001 census 1,44,685 No. of Males 72,452 No. Of Females 72,233 No. of SC 28,015 No. of ST 106 Literacy 50% Male 48,841 Female 32,645 Total Workers 56,958 Agriculture Labourers 24,252 Cultivators 16,640 Non Agriculture Labourers 16,066 Geographical Area in Ha. 37,149 Net Area Grown in Ha. 16,029 Gross Cropped Area 17,816 Major Crops Area 1. Paddy 4,437 2. Groundnut 620 3. Banana 1,238 4. Sugarcane 304 5. Cholam 4,311 Normal Rainfall in mm 924 Banking Network No. of Commercial Banks 13 District Central Co-operative Bank 2 Primary Land Development Bank - Total No. of Bank Branches 15 Source: Annual credit plan 2007-2008.
Performance of credit agencies in Tiruchirapalli District Tiruchirapalli District is a centrally located district of the state with head quarters at Tiruchirapalli. The city is situated on the bank of the river Cauvery and it is fourth largest city in Tamil Nadu. The district is having a clear weather throughout
79 the year with low humidity. The district lies in the southern plateau and hill zone of agro-climatic regional planning with characteristic semi arid climate. The soil is predominantly alluvial sandy loam (central region), loamy soil (in Andanallur, Manachannallur and Lalgudy blocks) red soil and a small patch of black soil in dry track of the district. Nearly 57 percent of workforce depends on agriculture and 42 percent of the geographical area has been brought under cultivation. The cropping intensity of the district is 166.7 percent.
As at the end of March 2006, there were 194 branches of 36 commercial banks operating in Tiruchirapalli district. The short-term co-operative structure includes the Tiruchirapalli District Central co-operative Bank with its 31 branches and 142 PACs, affiliated to it. But the long-term co-operative structure includes five PCARDBs operative in the district. It may be noted that Tiruchirapalli DCCB caters to the needs of three districts viz, Tiruchirapalli, Karur and Perambalur. Apart from the above, one branch of the Tamil Nadu Industrial Investment Corporation Ltd is also operating in this district. The regional office of TIIC located at Tiruchirappalli covers Tiruchirapalli, Perambalur, Karur and Pudukkottai, Thanjavur, Nagapattinam and Tiruvarur districts. In total there are 236 branches in the district. There is no RRB in the district.
March 2006, the total deposit of the banking sector is Rs 4504.37 crore registering a growth of Rs 667.42 crore (17.40 percent) over March 2005. The total advances of the banking sector for the year 2005-06 is Rs 3419.90 crore registering a growth of Rs 865.10 crore (33.86 percent) over the previous year. The priority sector advances has increased from Rs 955.99 crore to Rs 2039.31 crore, which forms 59.63 percent of total advances. The outstanding under agricultural advances is Rs 670.05 crore which is 19.59 percent of total advances. The share of weaker section advances is Rs 450.87 crore which is 13.18 percent of total advances. The credit deposit ratio of the district shows a steady increase over the years. It has increased to 75.92 percent in the current year from 66 percent. Commercial banks have involved 79 percent of their total outstanding loan in direct agriculture loan and 56 percent in priority sector. DCCB has involved 22.64 percent in direct agriculture loan and 24.58 percent priority sector.
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Commercial bank analysis In the case of commercial banks 194 branches of 36 commercial banks operating in the district, 69 are located in the rural areas 28 are in the semi-urban and 97 are in urban areas. At the end of March 2006 total deposits mobilized by the commercial banks were Rs 4221.06 crore representing an increase of 16.64 percent over the previous year. Total loans under priority sector as on 31 March 2006 stood at Rs 1712.26 crore compared to Rs 1141.43 crore last year. All advances put together stood at Rs 3058.33 crore. The credit-deposit ratio during 2005-06 was 72.45 percent compared to that of 63 percent of the previous year. Credit deposit ratio has been increasing steadily over the years. Outstanding under agricultural advances stood at Rs 585.11 crore as on 31st March 2006 as against Rs 403.35 crore for the previous year. The percentage of agricultural advances to total advances stood at 19.13 percent. The SSI advances was Rs 193.88 crore.
Tiruchirapalli District Central Co-operative Bank Ltd (TDCCB)–Analysis The Tiruchirapalli District Central Co-operative Bank Ltd caters to the credit needs of Tiruchirapalli, Perambalur and Karur districts. It is operating with 31 branches, of which 7 are located in rural areas, 7are in the semi-urban and 17 branches in urban areas. The bank received the NABARD‟s best performance award for the year 1996-97 and 2000-01. The bank has issued jewel loans to the extend of Rs 50 crore as of Aug 2003 reaching a peak in the history of the bank. Similarly the PACBs (Primary Agricultural Co-operative Bank) also have issued jewel loans to the limit of Rs 53 crore during this period. As on 30 June 2006, the paid up share capital of the bank stood at Rs 2329.76 lakh. This was subscribed by co-operative institutions and state government in the ratio of 93:7 respectively.
The total deposits of the bank as a whole for the period ending 31.3.2006 was Rs 499.65 crore. That was Rs 456.70 crore for the corresponding period last year. In the case of outstanding loans and advances for this period (2005-06) was Rs 621.10 crore which was 584.36 crore last year. The credit deposit ratio was 122.61 percent. The ST (Seasonal Agricultural Operation) formed 22.21 percent of the total advances. Whereas, the share of MT and Schematic was at 6 percent and 0.20 percent respectively. The ST (SAO) outstanding was Rs 13791.42 lakh. The share of Non Farm Sector was 1.2 percent. In case of Jewel loans (direct) it was 17.95 percent 81 recording a growth of 3.7 percent over last year. The priority sector advances stood at 24.58 percent where as, the weaker section advances stood at 26.70 percent of the total advances. The bank received the NABARD‟s award for linking maximum number of SHG‟s in the year 2001-02, 2002-03 as well as in 2003-04.
PACSs (Primary Agricultural Co-operative Society) – Analysis There are 339 PACSs affiliated to TDCCB Ltd operating in three districts namely Tiruchirapalli, Karur and Perambalur districts. Out of this 214 PACSs are having transactions of more than Rs 25 lakh. Out of 339 PACSs, 142 are in Tiruchirapalli district. As on 31st March 2006 the total deposits mobilized by PACBs in Trichy district aggregate Rs 164.71 crore. The total borrowings were at Rs 336.86 crore. Of the deposits Rs 17.61 crore was at a rate of interest above 7 percent forming 10.69 percent of the deposits. This ratio has been further reduced to 8.99 percent for the period ending 30.6.06. The recovery performance by PACs in Tiruchirapalli district was 70.28 percent.
PCARDB (Primary Co-operative Agriculture and Rural Development Bank) Ltd –Analysis The long term co-operative structure includes 5 PCARDBs operating in the district and all of them are located in semi-urban and urban areas. The regional office located at Tiruchirapalli caters to three districts namely Tiruchirapalli, Karur and Perambalur. No fresh lending was done during the year 2005-06 and only the spill over amount was disbursed to the extent of Rs 171.59 lakh compared to the lending of previous year at Rs 15.07 lakh. The major problem faced by the bank is poor recovery. For the year 2006-07 all PCARDB are eligible for lending as they had recovery of `more than 30 percent. Due to the various initiatives taken, the recovery performance has improved to more than 30 percent in case of all PCARDBs at the end of June 2005. Loan and interest waiver schemes announced by the state government make all the PCARDBs eligible for lending. There are three farmers clubs functioning under Tiruchirapalli and Manaparai PACARDBs and these club member associate for the recovery drives.
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Table 3.3 The performance of primary co-operative agriculture and rural development bank (PCARDB) In Tiruchirapalli district (Rs Lakh) Outstanding as on 31.03.2006
Other Jewel Loans issued Percent of recovery PCARDB Total loans loans during 2005-06 as on 30.06.2005
Lalgudi 470.98 7.59 478.57 14.01 33.22
Manaparai 431.04 77.16 508.20 103.05 34.60
Musiri 524.63 14.17 538.80 30.33 31.00
Thuraiyur 292.42 5.00 297.42 11.43 41.30
Trichy 255.70 6.58 262.28 12.77 34.80
Total 1974.77 110.50 2085.27 171.59 34.40
Source: Potential linked credit plan 2004-05 &2007-08.
Recovery position The recovery performance in the district as at the end of June 2005 is about 70.74 percent. The recovery of the DCCB has shown increase over the last year where as that of Land Development Bank continues to deteriorate. Sector-wise, the recovery position as on 30th June 2004 was at 75 percent under primary sector, 64 percent and 69 percent under the industries and service sectors respectivel
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Table 3.4 Demand, Recovery and Overdue of different banks in Tiruchirapalli district (RS Lakh)
Year June 03 Year June 04 Year June 05
% of % of % of Agency Demand Collection Demand Collection Demand Collection Recovery Recovery Recovery
CBs 307.99 234.15 76.03 327.67 252.29 77.00 344.22 248.24 72.12
DCCB 42.33 24.46 57.78 54.99 28.35 51.55 48.62 41.21 84.76
PCARDBs 15.51 4.07 26.24 19.43 5.61 28.87 16.31 0.00 0.00
Total 365.83 262.68 71.80 402.09 286.25 71.19 409.15 289.45 70.74
Source: Potential linked credit plan 2004-05 &2007-08.
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Crop loans Cauvery is the lifeline of the district. Seventy five percent of the farmers are small and marginal farmers. Paddy, Sugarcane, Banana are the preferred crops in the irrigated belts. Millets, pulses, sunflower, groundnut and cotton are preferred in rain fed conditions. Two crops of paddy in delta blocks (i.e.) Kuruvai and samba depends on timely release of water in Mettur tempts. Out of the 80,000 ha of irrigated area 53000 ha are Cauvery delta and the rest of the irrigated acreage depends on small rivers and canals, which fill tanks. Kuruvai crop is the first crop season and sunflower, groundnut as alternate rain fed crops. Rice productivity is one of the highest in the country stagnated over the years. Effective strategy to increase the area under food grains, commercial crops and plantation crops with increased productivity should be systematically planned by the district. Integrated irrigation structures that not only feed but also drain out excess rainfall and which would cater to rain fed lands will make agriculture much more dependable. Land holding pattern in the district is typical of any delta region in the country. The share of gross cropped area (188136ha) to geographical area is 46 percent in the district. Cropping intensity of the district is 106 percent. The normal average cropping pattern over the years reflects the predominance of cereals followed by oilseeds, pulses and commercial crops.
Table 3.5 Credit flow to the crops in Tiruchirapalli district (Rs. Lakh)
Year Target Achievement
2000-01 12803.46 12534.50
2001-02 14540.87 20696.60
2002-03 15547.47 14828.35
2003-04 22384.61 25656.32
2004-05 33480.22 28508.48
2005-06 38552.29 36934.46
Source: Potential linked credit plan 2004-05 &2007-08.
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The credit flow during the year 2002-03 was reduced mainly due to the drought conditions prevailed in the district. The KCC are to be issued to all the eligible farmers by the year end (2002-03). So that the issue of crop loans will pick up. The credit flow during the year 2005-06 has increased to 36934.46 lakh. The commercial banks have provided 89 percent of total crop loan (i.e) Rs 32905.95 lakh. Whereas the TDCCB has provided Rs 4028.51 lakh. All banks are taking efforts to cover 100 new farmers per year in the rural and semi urban branches. Now farmers are also going in for diversification of crops like sunflower, Gingelly etc and are using KCC. Hence issue of crop loans is likely to pick up at a fast rate.
Kisan Credit Card (KCC) scheme was introduced in 1998-99 to provide eligible farmers, adequate and timely credit support farmers, adequate and timely credit support farmers, adequate and timely credit facility, in the form of revolving cash credit facility, to meet the entire production credit needs for full years and also for ancillary activities related to crop production in a cost effective and flexible manner. The limit is to be fixed to this card on the basis of operational land holding, cropping pattern and scale of finance. The KCCs are valid for three years. It is subject to annual review and each drawl to be repaid within 12 months. Conversion/reschedulement of loan is also permissible in the case of damage to crops due to natural calamities.
This scheme not only provides adequate credit support to farmers throughout the year but also ensures reduction in workload in terms of appraisal, supervision, documentation etc, to the bankers. It is cost effective to both the farmers and banker. The crop loans are issued only against the KCC with effect from April 2004.
Personal Accident Insurance Scheme (PAIS) covering up to Rs 50,000 is available for KCC holder at very nominal premium. KCC cardholders of the co- operative bank in the district have already received the benefits, which underlines that the insurance part of the scheme has stabilized. The study conducted on the scheme has brought out many advantages of the scheme like good coverage of crops, timeliness in issue, good recovery, less dependence on moneylenders etc. Major banks in the district have issued KCCs through most of their branches. During the year 2005-06 TDCCB has issued 9795 KCC and sanctioned a loan of Rs 2091.66 86 lakh, whereas the commercial banks have issued 7226 cards and sanctioned a loan of Rs 2814.75 lakh. The status of cumulative issue of KCC up to 31 March 2006 is given below.
Table 3.6 Number of Kisan Credit Card issued by different banks in Tiruchirapalli District (Rs. Lakh)
Agency No. of cards issued Credit limit sanctioned
Commercial banks 109856 24880.18
DCCB 74722 12019.47
Total 184578 36899.65
Source: Potential linked credit plan, 2007-08.
Among the commercial banks, the Indian overseas banks has issued more number of cards (38470) followed by Canara bank (11224) State bank of India (8646) Punjab national bank (4618) Bank of India (3955) and Bank of baroda (3550). To have effective control and to monitor progress over implementation of the KCC scheme, review meets are periodically arranged by the banks at the controlling offices level.
Tamil Nadu Agricultural University (TNAU) jointly with a few NGOs in the district has promoted a demonstration plot of about 22.50 ha in Muthianallur village of Musiri block by introducing the ko-4 variety of sunflower and the SHGs have also cultivated the land successfully. This crop requires only less water and it has suitable to all seasons. Service branches in these areas provide loan to the edible oil companies through tie up arrangement. Establishment of small units of oil extraction in the village shall improve the employment opportunity particularly for educated unemployed youth.
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Agriculture clinics and Agriculture Business Centers (ACABC) also function in the district. This scheme was introduced all over India to provide expert services and advice to farmers on cropping practices, technology dissemination, crip protection from pests and diseases, market trends and prices of various crops in the market and also clinical services for animal health , etc. with a view to enhance productivity of crops/animals. Agri business centres are envisaged to provide input supply, farm equipments on hire and other services, project activities include soil and water testing laboratories, pest control services, seed processing units, vermi-composing unit, post harvest management centers for sorting, grading, storage & packaging, setting up of information technology kiosks in rural areas, setting up of Apiaries, Hatcheries and production of fish fingerlings for aqua culture, fish processing and testing units, private veterinary clinics and artificial insemination centres etc. NABARD extends 100% refinance support to the banks for this scheme.
Term loan includes minor irrigation, land development, farm mechanization, plantation and horticulture, dairy development, sheep/goat/piggery, forestry and wasteland development, storage godown/market yard, biogas, sericulture and others. Out of these term loans more credit is flow to the dairy development, secondly credit flow to the farm mechanization. Third, fourth and fifth position respectively plantation and horticulture, minor irrigation and land development. Other activities are getting only fewer amounts in terms of term loan.
Minor Irrigation Minor irrigation investments are one of the major infrastructures. That can lead to accelerated food production and productivity. In this district dug wells, bore wells, water lifting devices, distribution and conservation systems are most reliable and cost effective structures. Dwindling utilizable surface water resources in the district are development of ground water through minor irrigation structures, attains paramount importance for the development of agriculture and allied sector. Banks need to focus special attention to step up credit flow to Minor irrigation investments, it will increase credit flow for agriculture.
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Table 3.7 Credit flow to the minor irrigation in Tiruchirapalli district (Rs. Lakh)
Year Target Achievement
2000-01 329.49 123.27
2001-02 248.74 137.70
2002-03 382.20 276.78
2003-04 546.15 572.16
2004-05 743.81 482.89
2005-06 989.97 842.31
Source: Potential linked credit plan 2004-05 &2007-08.
The share of minor irrigation in the total lending portfolio of the banks in the district has doubled during the year 2002-03 when compared to previous two years. This may be due to the increased demand for dug wells (Rs 103.51 lakh) lift irrigation (Rs 44.72 lakh) and bore wells (Rs 28.03 lakh). But this share has reduced during the year 2004-05. It is due to reduced demand for dug wells (Rs 69.63 lakh) and bore wells (Rs 287.24 lakh). Commercial banks have contributed to 97 percent of the total loans and DCCB was only 2.5 percent. The land purchase schemes of TAHDCO subsidy schemes of AED (Agricultural Engineering Department) and watershed Development schemes are expected to give a boost to the sector for increased credit flow in the future.
LAND DEVELOPMENT Tiruchirappalli district with nearly half of its area under rain-fed conditions, having patches of problem soil, is prone to natural calamities. Due to the maximum exploitation of ground water and surface water, crop production in the state can be increased only by land reclamation, soil and water conservation through watershed approach and through increasing the productivity of various crops. Farming community by conscious approach to improve and sustain higher levels of crop
89 production and productivity need to be highly focused on this. In the watershed approach also post watershed development activities such as water harvesting tanks, integrated farming system, alternative land use, farm implement etc. could be supported for integrating and sustaining the capital structures created out of budgetary resources. Table 3.8 Credit flow to the land development In Tiruchirapalli district (Rs. lakh)
Year Target Achievement
2000-01 59.18 83.32
2001-02 83.88 62.98
2002-03 118.03 105.16
2003-04 215.49 108.90
2004-05 141.57 86.71
2005-06 468.33 189.68
Source: Potential linked credit plan 2004-05 &2007-08.
Farm Mechanisation Farm Mechanisation reduces drudgery, time and cost of labour besides putting factors of production to optimum advantage and increases the productivity. Farm mechanization helpful for modern cultivation. In the case of farm power tractors and power tillers are the most popular sources in the district. Tractors are used for rural vehicle and farm ploughing. There is a demand for tractor on hire for ploughing operating and for transport operations mainly due to increase in area under sugarcane and paddy. Development of agriculture depends on the use of improved technology of cultivation to increase the cropping intensity and productivity per unit of land. Investments in farm mechanization is essential because of predominance of irrigated area, seasonal shortage of labour force, extensive coverage of field crops etc.
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Table 3.9 Credit flow to the farm mechanization in Tiruchirapalli district (Rs lakh) Tractors Power Tillers Others Total Year Target Achievement Target Achievement Target Achievement Target Achievement
2000-01 1402.58 544.62 305.15 58.48 259.52 80.28 1967.25 683.38
2001-02 1482.70 383.03 250.25 33.65 127.9 48.67 1860.85 465.35
2002-03 1649.00 269.16 331.61 28.1 246.03 52.25 2226.64 349.51
2003-04 1541.33 840.97 284.23 84.36 168.02 37.59 1993.58 962.92 2004-05 800.00 1049.66 200.00 120.50 251.80 19.07 216.20 230.15
2005-06 1961.95 2060.67 230.14 241.80 1251.80 1189.23 2408.29 2532.62 Source: Potential linked credit plan 2004-05 &2007-08.
Credit flow for tractors as well as power tillers has reduced during 2002-03 compared to last two years. Poor recovery may be attributed as the main reason for this. However the credit flow to other farm equipments has shown an increase during 2001-02. The credit flow to the sector up to 2002-03 has registered a negative growth and it may be due to the successive drought conditions prevailed in the district and 2003- 04 to 2005-06 shows credit flow for tractors and power tillers has increased substantially. But the credit flow to other farm equipments was showing decrease because of combined harvester. But during 2003-04 to 2005-06 overall trend shows a positive growth and it may be due to the increased level of awareness.
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Plantation and Horticulture There is good scope for development and stabilization of the income levels of small and medium farmers with development of plantation and horticulture crops in the district. There is a good potential for dry land horticultural crops such as guava, mango, nelli and sappotta in Tiruchirappalli, Thuraiyur and Mabaooarau taluks. Floriculture is popular in major towns like Tiruchirappalli, Lalgudi, Manaparai and Musiri. Oilpalm cultivation has been identified as a thrust crop in the district. The development of plantation and horticulture sector is highly location-specific and depends largely on the agro-climatic features, land utilization pattern, agronomy practices and marketing infrastructure, price stability, extension support etc. This district is in the third position in lemon cultivation by producing 11.64 percent of the state‟s yield. This activity is mainly concentrated in Manachanullur, Pullambadi, Musiri, Vaiyampatty, Marungapuri and Manapparai blocks. The district stands fourth in production of tapioca that is being cultivated in 5602 ha in uppiliapuram, Thuraiyur and Thathaiyangarpet blocks. The produce is sent to Athur and Salem for industrial use. Table 3.10 Area and production of popular crops in Tiruchirapalli district during 2004-05 Crop Area (ha) Production(t) Fruits 12452 394.479 Vegetables 10214 300.490 Plantation 824 2.200 Spices 4475 23925.00 Flowers 882 8.026 Medicinal plants 35 700.00 Total 28882 25330.195 Source: Potential linked credit plan 2007-08.
This district occupies a leading position in the state in the production of chilies, turmeric, tamarind, tapioca, fruits, vegetables and flowers. This district is an important position in the production of banana, onion, vegetables etc. Mango, coconut and oil-palm are the other major plantation and horticulture crops in the district. Medicinal and Aromatic plants are grown in Thottiam, Uppliapuram Marungapuri and Vaiyampatti blocks.
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Table 3.11 Credit Flow to the plantation & horticulture in Tiruchirapalli district (Rs. lakh)
Year Target Achievement
2000-01 163.38 338.73
2001-02 297.57 117.34
2002-03 149.28 313.97
2003-04 158.09 338.87
2004-05 440.53 361.92
2005-06 457.87 601.23*
*includes sericulture also Source: Potential linked credit plan, 2004-05 &2007-08.
Substantial improvement in performance during 2002-03 reflects the general trend among the medium & large farmers to take up horticultural crops in their marginal lands. But the credit flow to the sector which had reduced in 2001-02, has regained its position. Overall lending major contribution in lending to this sector is from commercial bank followed by the DCCB and by the SCARDB in the district.
Forestry and waste land Development This district is having 4, 40,383 ha of geographical area. Out of this 36,246 ha has been classified as forest area another 12,710 ha is classified as cultivable waste lands. Further 1, 20,484 ha are classified as current and other fallows. These fallow which are not suitable for Arabic farming would be suitable for development with cultivation of tree crops. Development of these lands requires a package of treatments which include soil erosion control measures, improvement in water availability and suitable production system. Promotion of forestry and wasteland development helps in increasing the vegetative cover, better distribution of rainfall besides checking soil erosion which indirectly helps in improved productivity of food grains, availability of more fuel, fodder and timber trees.
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Table 3.12 Credit flow to the forestry and waste land development in Tiruchiraplli district (Rs. lakh) Year Target Achievement 2000-01 12.69 12.45 2001-02 13.70 14.11 2002-03 13.00 26.02 2003-04 39.10 37.55 2004-05 48.82 906.50 2005-06 180.66 92.48 Source: Potential linked credit plan, 2004-05 &2007-08.
During the year 2004-05, banks have extended credit to the tune of Rs 108.33 lakh for social forestry Rs 47.69 lakh for farm forestry and Rs 750.48 lakh under miscellaneous wasteland development.
Investment credit for allied activities Dairy development Dairy farming is an important subsidiary occupation in Trichy district. It has large number of agricultural labourers and marginal farmers. It is popular even with large progressive farmers and SHGs who are interested in adopting mixed farming. It is very popular among poor rural women folk and it has provided supplementary occupation and income to a large number of small farmers in the district. Table 3.13 Credit flow to the dairy development in Tiruchirapalli district (Rs. lakh) Year Target Achievement 2000-01 1228.18 626.98 2001-02 1205.78 418.72 2002-03 1469.71 521.19 2003-04 668.43 1475.33 2004-05 1971.93 1745.71 2005-06 2803.91 3677.37 Source: Potential linked credit plan, 2004-05 &2007-08.
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During the year 2002-03, the banks financed to the extent of Rs 521.19 lakh registering an increase over the previous year. However, there were hesitations by the banks in extending credit to this sector due to over production as well as declared holidays for procuring milk by Aavin. Private entrepreneurs can be encouraged to collect and process the milk. During the year 2004-05 the banks have financed to the extent of Rs 17.45 crores registering a substantial increase over the previous year Rs 1429.83 lakh. Out of this commercial bank has provided Rs 3315. 17 lakh and Rs 362.20 lakh by DCCB. This may due to the economic assistance extended under SGSY.
Poultry The district is climatically and vocationally suitable for poultry farming. So that it take advantage of the infrastructure and expertise developed in the adjoining districts. Eventhough commercial poultry farming in Tiruchirappalli district is largely confined to small poultry units around major towns. There is huge demand for this sector. Twin benefits are attaining for poultry farming. First one is raising the income levels in the rural areas and second one is improving the nutritional status of the growing population. Bird flu reports made an adverse impact on the layer and broiler units of the district. To minimize loss many units downsized by culling or selling to neighboring states like kerala at distress prices. Table 3.14 Credit flow to the poultry in Tiruchirapalli district (Rs. lakh) Year Target Achievement 2000-01 63.15 8.51 2001-02 67.80 20.72 2002-03 227.85 20.04 2003-04 200.90 26.54 2004-05 70.50 371.54 2005-06 143.59 186.62 Source: Potential linked credit plan, 2004-05 &2007-08.
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Poultry sector is showing signs of recovery after two years of slackness due to dispersal/expansion of units from Namakkal to near by areas, taking adequate care on the bio-security front. The credit flow has increased to Rs 371.54 lakh in 2004-05. Out of this Rs 346.54 lakh has been finance by commercial banks and 25 lakh by DCCB. The credit flow has decreased to Rs 186.62 lakh during 2005-06. Poultry sector after showing signs of recovery previous year has suffered because of avian flu.
Sheep/Goat/Piggery The district has a fairly good share of sheep and goat population. Out of the total population of the district, nearly 70 percent are non-vegetarians and hence there is constant demand for meat and meat products. Sheep/Goat rearing is a widely preferred economic activity in the dry areas of the district by the small/marginal farmers and agricultural labourers. The semi arid climate with nearly half of net sown area under rain fed conditions has made financing of sheet and goat rearing an important segment of the povery alleviation programmes.
Table 3.15 Credit flow to the sheep/goat/piggery in Tiruchirapalli district (Rs. lakh)
Year Target Achievement
2000-01 253.04 92.48
2001-02 349.38 204.13
2002-03 261.46 140.45
2003-04 436.41 130.31
2004-05 405.38 638.91
2005-06 574.28 498.36
Source: Potential linked credit plan, 2004-05 &2007-08.
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During 2002-03, there was steep reduction in the credit flow to this sector. Out of Rs 140.45 lakh total credit flow, Rs 110.46 lakh has been financed only for sheep rearing followed by Rs 21.30 lakh for goat rearing last year. Successive drought may be the reason for the reduced credit flow. During 2005-06 the credit flow to this sector was moderate in comparison to that of the previous year as always happens when there is a huge increase compared to earlier years, the sheep financing has stabilized and there is a reduction in goat financing. Commercial banks have extended Rs 418.36 followed by DCCB at Rs 80 lakh.
Crop loans are sanctioned for raising the marketable crops. The loans are short term in nature, repayable after the particular crop is harvested. They are sanctioned for meeting the expenses connected with the raising of the crops, starting from preparatory cultivation to harvesting of crops. Accordingly crop loan assistance will also include assistance for purchase of agricultural inputs such as seeds, fertilizers, pesticides, insecticides etc. and also for meeting labour expenses. The crop loan system suggested by the survey committee, 1854 “concentrates on productive purposes, provides short term loans on the basis that a crop is anticipated and not primarily that a title exists, relates such loans in amount to the estimated out lay on raising the crop, and as and when the crop is sold, recovers the loans from the proceeds of the sale. The loans should to the maximum extent possible be disbursed in kind”.
The technical committee which is a sub-committee under district consultative committee includes representatives of farmers, technical institutions, departments of agriculture and of the lead bank analyses and decides the cost of cultivation for various crops grown in the district every year. The scale of finance, the periodicity of disbursement and the mode of disbursement arrived at for various crops for the district for the year will be approved by the district consultative committee. The approved recommendations will be circulated to all banks operating in the district every year by the lead bank.
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Table 3.16 Total flow of ground level credit by institutions in Trichirappalli district (Rs in lakh) Term loan Total Growth Crop Growth Growth Year (MT agricultural rate loan rate rate <) credit 1996-97 - 8306.67 - 3428.26 - 11734.93
1997-98 4.8 8707.43 -8.9 3121.18 0.8 11828.61
1998-99 24.5 10840.04 -19.1 2526.35 13.0 13366.39
1999-00 31.3 14237.94 -1.1 2498.13 25.2 16736.07
2000-01 -11.9 12534.50 0.38 2507.72 -10.1 15042.22
2001-02 65.1 20696.60 3.4 2593.13 54.8 23289.73
2002-03 -28.4 14828.35 -9.1 2357.24 -26.2 17185.59
2003-04 73.0 25656.32 72.4 4064.00 72.9 29720.32
2004-05 11.1 28508.48 85.7 7545.09 21.3 36053.57
2005-06 29.6 36934.46 54.4 11651.84 34.8 48586.30
Source: Source: Potential linked credit plan, 2003-04, 2004-05 &2007-08.
The total flow of ground level credit by institutions in Tiruchirapalli district shows that the growth rate of crop loan was 4.8 percent during 1997-98. It has increased up to 1999-00 after that it has reached a negative growth rate. This is due to the flood during 1999. Hence it is reflected in 2000-01. The growth rate of crop loan reached 65.1 percent after that it has declined to negative growth rate (-28.4 percent). It was due to the drought affected during 2002-03. Again there is a decline of growth rate during 2004-05 flood affected the crops. The growth rate of term loan shows that during 1997-98 shows the negative growth rate till 2002-05. After that it has reached 85.7 percent during 2004-05 and declined to 54.4 percent.
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Table 3.17 Ground level credit under agriculture and allied activities by different institutions in Trichirappalli district (Rs. In lakh) Crop Loan Term Loan (MT <) Co- Co- Commercial Commercial Year operative operative LDB/SCARDB Total banks banks banks banks 1996-97 6057.67 2249.00 2738.82 274.65 414.79 11734.93
1997-98 6473.38 2234.05 2104.10 599.85 417.23 11828.61
1998-99 7645.60 3184.65 1566.34 504.92 455.09 13366.39
1999-00 10743.64 3490.85 1594.99 350.38 552.76 16736.07
2000-01 9952.63 2581.87 1721.97 442.92 342.83 15042.22
2001-02 17713.46 2983.14 1902.87 509.91 180.35 23289.73
2002-03 7772.99 7055.36 336.84 1636.47 383.93 17185.59
2003-04 16944.95 8711.37 3784.53 133.72 145.75 29720.32
2004-05 25633.87 2874.61 5440.90 2090.39 13.80 36053.57
2005-06 32905.95 4028.51 10924.27 727.57 0 48586.30 Source: Potential linked credit plan, 2003-04, 2004-05 &2007-08.
The major problem faced by all the three agencies (Co-operative bank, Commercial bank, Regional rural bank) is the delinquency of loan or overdue. This problem arises due to large number of farmers still outside the purview of Institutional credit. While the problem became serious among co-operatives by 1970 itself, the commercial banks got in to the problem only after 1975-76 because of their late entry into rural credit, Regional rural banks are having higher overdue compared to other agencies(Subramanyam, 2004). According to Bhat both from financial institutions and farmers point of view, overdue is high in commercial banks when compared to other banks. It is due to government policy, ineffective legislation, indiscriminate financing, and inadequacies in proper monitoring, co-ordination and follow up, inadequacies in training and co-ordination, natural calamities, political compulsion (Rao, 2004). Aging of overdues has added another dimension to the problem as the
99 overdues for more than three years have increased from Rs. 1492 crore in 1986-87 to Rs 2842 crore in 1991-92. It is more than one fourth of the total overdues (NABARD 1994). The problem of overdue has been aggravated because of short sighted political interventions (K.P. Agrawal, V.Puhazhendhi, and K.J.S. Satyasai). Because of overdue the available manpower is mostly employed in the recovery process and hence the institutions could not concentrate on promotional works like deposit mobilization. Another noteworthy implications overdues is that the credit institutions have to incure heavy expenditure to recover overdues. The expenses include charges for vehicles hired, T.A. bill of the staff of the department on deputation, the bank staff and the branch staff, Petrol/diesel and maintenance, Legal fee paid for disputed cases, prizes and ex-gratia for recovery performance, penal interest waived on settling the disputed account, rebate paid for recovery etc., Table 19 shows overdue are high in commercial banks compare to co-operative bank in Trichirappalli district.
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Table 3.18 Recovery of agricultural credit in Trichirappalli district (Rs in lakhs)
Particulars 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04
Co-operative 4928.83 3023.75 3388.52 3370.72 3062.46 3457.41 2661.82 2442.09 banks - (-38.7) (12.1) (-0.5) (-9.1) (12.9) (-23.0) (-8.3) Commercial 6688.03 6590.37 7712.04 8288.24 9919.29 12927.29 10773.82 13747.41 banks - (-1.5) (17.0) (7.5) (19.7) (30.3) (-16.7) (27.6) 11616.86 9614.12 11100.56 11658.96 12982.04 16384.7 13435.64 16189.5 Total - (17.2) (15.5) (5.0) (11.3) (26.2) (-1.5) (20.5) Source: Data compiled from the records of Annual Credit Plan.
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Table 3.19 Overdue of agricultural credit in Trichirappalli district (Rs in lakhs)
Particulars 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04
Co-operative 706.84 647.71 776.54 729.71 3231.81 3856.09 3035.31 2590.64 banks - (-8.4) (19.9) (-6.0) (12.9) (19.3) (-21.3) (-14.6) Commercial 2396.78 2562.07 2900.16 2861.31 907.60 1286.12 2451.46 2749.85 banks - (6.9) (12.6) (-1.3) (68.3) (41.7) (90.6) (66.1) 3103.62 3209.78 3676.70 3591.02 4139.41 5142.21 5486.77 5340.49 Total - (3.4) (14.5) (-2.3) (15.3) (24.2) (6.7) (-2.7) Source: Data compiled from the records of Annual Credit Plan.
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In Tiruchirappalli district if analyze the demand, recovery and overdue position in state bank group, public sector banks, private sector banks during (1996- 2004) in state bank group the percentage of overdue in the beginning low then increased in(1997-2000) and at the end of 2004 fallen. If we compare all the banks the overdue was 51 percent. In the case of public and private sector banks the percentage of overdue was same (i.e.) 22 percent during 1996. After that public sector banks overdue has increased slightly up to 1998 and there is a fluctuation and decreased from 2002. But the private sector banks overde has slight fallen during 1997 and then steep increased 1998 and fluctuation and then fall to very low i.e. 10 percent 2004. In state bank group in the year 1996 the overdue was 35 percent after that increased 44 percent up to 2000 after fluctuation and than fall during 2004.
Table3.20 Demand, recovery and overdue of state bank group in Tiruchirappalli district (Rs in lakhs) % of % of Year Demand Recovery Overdue recovery overdue
1996 756.89 488.31 268.58 65 35
1997 579.11 337.41 241.70 58 42
1998 756.89 432.50 324.39 57 43
1999 1109.87 624.26 485.61 56 44
2000 1121.81 628.42 493.39 56 44
2001 2955.70 2240.84 714.86 76 24
2002 3342.68 2152.30 1190.38 64 36
2003 2281.36 1356.95 924.41 59 41
2004 3676.47 2679.86 996.61 73 27
Source: 1999-98, 2001-02 to 2003-04 & 2005-06.
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Table 3.21 Demand, recovery and overdue of public sector banks in Tiruchirappalli district (Rs in lakhs) year Demand Recovery Overdue % of % of recovery overdue 1996 6491.74 5072.04 1419.70 78 22 1997 8060.50 5970.39 2090.11 74 26 1998 8123.51 6044.02 2079.49 74 26 1999 7964.57 6020.97 1943.60 76 24 2000 8617.39 6655.96 1961.43 77 23 2001 8977.02 6821.85 2155.17 76 24 2002 11693.75 9746.95 1951.34 83 17 2003 10765.65 8903.91 1861.74 83 17 2004 11931.36 10266.92 1664.44 86 14 Source: 1999-98, 2001-02 to 2003-04 & 2005-06.
Table 3.22 Demand, recovery and overdue of private sector banks in Tiruchirappalli district (Rs in lakhs) year Demand Recovery Overdue % of % of recovery overdue 1996 313.34 244.14 69.20 78 22 1997 445.20 380.23 64.97 85 15 1998 272.04 113.85 158.19 42 58 1999 1537.76 1066.81 470.95 69 31 2000 1410.35 1003.86 406.49 71 29 2001 1218.67 856.89 361.78 70 30 2002 1746.95 1032.58 714.37 59 41 2003 762.32 512.96 249.36 67 33 2004 889.43 800.63 88.80 90 10 Source: 1999-98, 2001-02 to 2003-04 & 2005-06.
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Table 3.23 Demand, recovery and overdue of Co-operative sector banks in Tiruchirappalli district (Rs in lakhs) % of % of year Demand Recovery Overdue recovery overdue
1996 3540.34 3012.27 528.07 85 15
1997 5635.65 4928.83 706.82 87 13
1998 3671.46 3023.75 647.71 82 18
1999 4165.06 3388.52 776.54 81 19
2000 4100.43 3370.72 729.71 82 18
2001 3970.06 3062.46 907.60 77 23
2002 4743.53 3457.41 1286.12 73 27
2003 5113.28 2661.82 2451.46 52 48
2004 5032.73 2442.09 2590.64 48 51 Source: 1999-98, 2001-02 to 2003-04 & 2005-06.
Support for government sponsored programmes Total number of educated unemployed registered during July 2006 in the live registers of district employment exchange is about 172600 persons, of which 114352 are male and 58247 are female. Of educated unemployed registered, 67134 are with technical background and 105466 are non technical. They are the potential entrepreneurs who can be trained and start income generating units. Rural entrepreneurship development programme and skill development initiatives of NABARD help in equipping youth with self employment skills. NGOs in the district are involved in creating awareness on rural health, sanitation, primary education and other areas to maintain good health. The subsidy linked schemes in rural sanitation and insurance package of Government of India for rural un-organized workers have been a great boon to the people.
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Government sponsored programmes and other programmes for poverty alleviation Rural development programmes helps to eliminate poverty through special employment generation programmes, creation of productive assets through credit, area development programmes, rural housing etc. Increasing productivity and profitability of agriculture in rural areas is another important area, which can contribute this goal. According to the Expert Committee on Rural credit (ECRC), Credit remains a valid and important instrument of poverty eradication among women but only financially viable institutions can provide sustainable support to anti poverty programmes. There are 312645 rural families of which 83868 families (in percentage 27 percent) are below poverty line. Table below shows the block wise details of number of rural families, number of BPL (below poverty line) families and percentage of BPL families are furnished in this table. Out of the 14 blocks in the district, BPL families are found maximum in Manikandam block and minimum in Uppliapuram block. Table 3.24 Number of Rural families and Below Poverty Line (BPL) families in different blocks in Tiruchirapalli district No. of Rural No. of BPL % of BPL Sl.no Block Families Families Families 1 Manikandam 14,903 6,488 43.53 2 Andhanallur 17,225 7,053 40.94 3 Thottium 22,934 8,290 36.14 4 Lalgudi 25,463 8,241 32.36 5 Musiri 21,899 6,997 31.95 6 Thiruverumbur 27,807 7,803 28.06 7 Mannachanallur 31,340 8,956 28.57 8 Pullambadi 20,072 5,244 26.12 9 Thuraiyur 24,381 5,263 21.58 10 Thathayangarpet 19,768 4,052 20.49 11 Manaparai 19,253 3,861 20.05 12 Vaiyampatty 19,037 3,487 18.31 13 Marungapuri 24,278 4,369 17.99 14 Uppliapuram 24,285 3,764 15.5 Total 312,645 83,868 26.83 Source: 1999-98, 2001-02 to 2003-04 & 2005-06.
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(i) Swarnjanthi Gram Swarozgar yojana(SGSY) It was announced and effect in April 1999. It envisages development of large number of micro enterprises on a cluster basis, to generate a higher level of income, with a higher level of investment over a period of time through self help groups and provides access to the poor, for creation of better assets with assured skill upgradation, mark of linkage and other essential infrastructure and support services, DRDA implemented two components of subsidy linked programme. One is Revolving fund assistance and another one is Economic assistance loan. The aim of this programme is establishing large number of micro enterprises in rural areas on a cluster basis by the people living below the poverty line in an organized and supportive environment. It contemplates organization of the rural poor into SHGs and their capacity building, planning of activity cluster, Infrastructure build up, technology, credit and marketing support by adopting project approach for each activity selected and involve closely the banks and other financial institutions in preparing the project reports. SGSY aims to cover 30 percent of the poor in each block in the next five years. Table 3.25 Fund disbursed by banks under SGSY to the SHGs in Tiruchirapalli district (Rs. Lakh) Revolving fund Sr. Economic assistance disbursed by banks Year Disbursed By banks No No. of SHGs No. of SHGs Subsidy Loan 1 1999-00 47 - - - 2 2000-01 394 - - - 3 2001-02 470 31 37.13 77 4 2002-03 105 47 63.78 78.58 5 2003-04 783 82 71.51 108.38 6 2004-05 81 19 36.25 46.85 7 2005-06 1018 - - - Source: Potential linked credit plan, 2007-08. During the year 2005-06 the DRDA released revolving fund assistance to 1069 groups of which banks have disbursed RF loan for 1018 SHGs. Regarding loan for economic activity, the DRDA has released subsidy to 29 SHGs in the year 2004- 05 of which banks have disbursed loans to the extent of Rs 46.85 lakh for 19 groups.
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(ii) Prime Minister Rozgar Yojana (PMRY) It was introduced during the year 1993-94, and extended to rural areas in 1994-95. It has been designed to provide employment to educated unemployed poor. The scheme covers all educated unemployed youth with a minimum qualification of Viii standard (Passed between the age of 18 and 35 years) with an annual family income upto Rs.40, 000. In this scheme assistance will be provided for all economically viable activities including agricultural and allied activities but excluding direct agricultural operations like raising crop, purchase of manure etc. A borrower under the scheme will be eligible for sanction of a composite loan (working capital + term loan) based on project cost up to Rs 2 lakh for other than business sector. The project cost for the business sector will be restricted to Rs. 1 lakh. Subsidy eligible is 15 percent of the project cost subject to ceiling of Rs 7500 per borrower. The subsidy is available to the Government of India in advance and passed on to the banks through Reserve Bank of India. The subsidy portion will be kept as fixed deposit with the banks in the name of the borrower for the duration of the term loan component and will earn interest at the rate applicable to the relevant term of maturity.
Table 3.26 Loan Sanctioned by banks under PMRY in Tiruchirapalli district (Rs. lakh) Achievement Year Target No. of beneficiaries Loan Sanctioned (Rs.) 1998-99 675 743 319.46
1999-00 560 603 272.60
2000-01 680 728 299.08
2001-02 800 804 320.82 2002-03 800 813 319.10 2003-04 800 808 285.89 2004-05 1000 1002 319.86 2005-06 1080 1208 na Source: Potential linked credit plan, 2007-08.
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(iii) Scheme for rain water harvesting structures by SC/ST farmers Irrigation potential is essential to achieve accelerated growth, increased per capita income of the farmers through agricultural development. The centrally sponsored scheme with credit linked back ended subsidy scheme, will be implemented through NABARD for three years up to 2007-08. The subsidy will be at 50 percent of the project cost and remaining will be the bank loan. Two models suitable to the district has been worked out with the approved project cost of Rs 15,000 for the harvesting pit of 5x5x1.5m in one acre area and Rs 30,000 for the harvesting pit of 10x10x1.5m in one ha area. Besides these two models various models and dimensions have been formulated so as to select the model suitable to the location. Union bank of India Padalur branch has disbursed two such units in Mannachanallur block.
(iv) Scheme for financing farmers for purchase of land of agricultural purpose It was implemented from Auguest 2001. It aims at providing term finance to small and marginal farmers including share croppers and tenant cultivators to purchase agricultural land/fallow/wasteland and develop it with a view to increasing production and productivity. The main objectives of the schemes are (1) to make small and marginal holdings economically viable (2) to bring fallow lands and waste lands under cultivation (3) To increase the agricultural production & productivity (4) To increase the income of the share croppers/tenant farmers. The eligibility condition of the scheme is small and marginal farmers (I e) those who would own maximum of 5 acres of irrigated land including purchase of land under this scheme and the second eligibility is share croppers/tenant farmers. In the case of margin security up to Rs 50,000 loan amount no margin is stipulated. But the loans for higher amount a minimum of 10 percent margins will be stipulated. The land purchased out of the bank loan and mortgaged in favour of the bank will form the security for the loan from borrowers. Interest rates issued time to time as per RBI directives. For fixing the quantum of financial assistance, the valuation of the land indicated by the farmers may be cross checked with the last five years‟ average registration value available with the Registrar/sub-registrar of the area and a view may be taken by the bank. Quantum of loan will depend on the area of the land to be purchased and its valuation and also development cost. In the case of repayment loan may be repaid in a period ranging from seven to twelve years in half yearly/yearly installments, including a 109 maximum moratorium period of 24 months. The moratorium period may be fixed taking into account the gestation period of the project and cash flow. The financing bank should satisfy itself that the borrower‟s would have adequate surplus income from their production activities on the land being purchased and other income to repay the bank loan with interest and the repayment period may be fixed accordingly.
(v) Credit linkage – scheduled castes/scheduled tribes Under scheme for financing farmers for purpose, sc/st women between 18 to 55 years of age were also included as beneficiaries. Land is required to be registered in the name of women beneficiary only. Tamil Nadu Adi Dravidar Housing & Development Corporation (TAHDCO) set up initially for construction of houses for sc/st. Under TAHDCO‟s land purchase scheme, sc/st women are being empowered and landless sc/st tillers are being enabled to own land. Under centrally sponsored rain water harvesting scheme for sc/st, the main aim to provide irrigation facilities to their homestead/farmlands. Supplementary domestic and fresh water aquaculture wherever feasible can also be taken up. 5000 units are proposed to be developed in Tamil Nadu in three years period starting from 2004-05, with a total financial outlay of Rs 200 crore, comprising of Rs 100 crore of subsidy from the Government of India and Rs 100 crore of bank loan. The scheme envisages 50 percent back-ended subsidy, to be routed through NABARD.
(vi) New Anna Marumalarchy Thittam (NAMT) To generate employment opportunities in rural areas and to improve rural economy the Government of Tamil Nadu have announced this scheme to promote agro-based and food processing industries with minimum capital investment of Rs 1 crore and above in each of the 385 blocks of the state. This scheme is implemented through DIC (District Industries centre). The special package and incentives to each project are 15 percent additional capital investment. Subsidy on plant and machinery, 5 percent additional capital investment subsidy for employment of women more than 50 percent of the total work force, 15 percent generator subsidy on the cost of the generator. Low tension power tariff subsidy at the rate of 30 percent 20 percent and 10 percent for the first, second and third year respectively. The escort support in the preparation of project reports access to funding obtaining statutory clearance and power connection for the projects are provided by the District Collector and General 110
Manager District Industries Centre(DIC). Utilizing the locally available agricultural produce each block can have a maximum of five units each with a minimum capital investment of Rs 20 lakh to satisfy the Rs 1 crore norm of capital investment for each block.
(vii) Swarna Jayanthi Shahari Rozgar yojana (SJSRY) A centrally sponsored programme was introducted by the Government of India in Dec 1997 for encouraging urban self employment (25 percent) and urban wage employment (75 percent) by providing subsidy assistance to individuals or groups for setting up gainful self employment ventures as well as providing training to beneficiaries, others concerned. The task force selects the beneficiaries for assistance under self employment programme.
(viii) Under TAHDCO three schemes were implemented in the district. 1. Scavenger Liberation and Rehabilitation schemes (SLRS), 2.Self employment and agriculture and allied activities schemes. 3. Individual entrepreneurs scheme. These schemes are being supported by banks and targets for years from 1996-97 have been achieved except under SLRS. There is a need for closer co-ordination and participation between the nodal agency and banks. In the silver jubilee year of TAHDCO, a comprehensive review of schemes has been done and some of the old schemes have been removed and new schemes introduced. One such new scheme is the Adi Dravida women entrepreneurship development programme envisaging SHGS‟, NGO‟s intermediation with subsidy and margin money assistance to the tune of Rs 5 lakh.
(ix) Rural Employment Generation Programme (REGP) of KVIC (Khadi and Village Industries Commission) envisages promotion of khadi village industries. The scheme is applicable to village industries only and the total project cost should not exceed Rs. 25 lakh. The pattern of margin money assistance is 25 percent of the project cost up to Rs 10 lakh plus 10 percent for remaining cost of project. But in the case of weaker section beneficiaries viz, sc/st/obc/women/physically handicapped/ex-servicemen/ minority community/institutions, the margin money grant will be 30 percent of the project cost up to 10 lakh plus 10 percent for remaining cost of project. The subsidy pattern is same for KVIC and KVIB (Khadi and Village Industries Board). With 111 effect from 2004-05 the nodal banks are implementing the scheme. KVIC has earmarked Rs 10 lakh as subsidy for the district and the scheme will be implemented through banks like Bank of India, Canara bank, and Union Bank of India and Indian bank. Whereas KVIB has allotted a subsidy of Rs 10 lakh to be implemented through Bank of Maharashtra, Indian Overseas Bank, Central Bank of India and State Bank of India.
(x) Sampoorna Grama Rozgar Yojana (SGRY) This scheme replaces Jawahar Grama Swarozgar Yojana (JGSY) and Employment Assurance Scheme (EAS) dedicated entirely to the development of rural infrastructure at the village level. This scheme is implemented by village panchayats, and it aims at creation of durable assets /infrastructure at the village level, creation of productive assets exclusively for sc/st for sustained development and generation of supplementary employment to the rural poor. About 22.5 percent of allocation is for sc/st individual beneficiaries and the balance amount for wage employment to below poverty line families. The works can include infrastructure support for SCSY, for supporting agricultural activities, community infrastructure for health, education and road and social infrastructure. However, construction of building for religious purposes, for higher secondary schools, construction of bridges, desilting of irrigation tanks and block tapping/cementing of roads other than those leading to villages should not be taken up under this scheme.
(xi) Scheme for self- employment for ex-servicemen (SEMFEX-II) This scheme was introduced in Jan 1988 and the Directorate of Resettlement in the nodal agency co-ordinating the programme with financial assistance from the banks and refinance from NABARD. The objective of the scheme is to provide a comprehensive package of credit assistance to Ex-servicemen, disabled service personnel, war widows of Ex-servicemen to undertake farm and non- farm activities in the rural areas. The scheme needs to be given due priority by the banks as nearly 60,000 armed force personnel retire every year, in our country, at a comparatively young age after serving for the country during prime of their youth. The services of the other category of eligible persons to their mother land cannot be expressed in words and they rightly deserve a resettlement package through the banking institutions.The achievement under the scheme is very negligible and not encouraging 112 and needs to be focused to provide the needed assistance to the ex-defence personnel. An awareness workshop was organized to motivate the potential entrepreneurs. This progress under this scheme is very negligible and discouraging.
(xii) Scheduled castes/Scheduled tribes In Tiruchirappalli district 3, 99,493 persons belong to Scheduled Caste (SC) of which 2, 01,576 are women, 18,912 belong to Scheduled Tribe (ST) of which 9,316 are women. Regarding occupational pattern, 29,357 are marginal farmers, 5,086 are small farmers, 2,112 are medium farmers and only 70 are large farmers. Most of them (36985) are agricultural labourers. As regards the activity 6,548 persons are involved in dairy, 4,346 are rearing goat, 1,824 are rearing sheep, 7,540 undertaking poultry farming and 248 are involved in piggery and other domestic animal rearing. With regard to operational land holding 321330 are landless of the total 33,043 SC/ST families living below the poverty line, of which 31671 families belong to scheduled caste. Out of the 14 blocks, scheduled tribe families below the poverty line are found only in Andhanallur (147 Nos), Tiruverumbur (85), Manachanallur (10), Thuraiyur (819) and Uppliapuram (317) blocks. The BPL families of SC community are found in all the blocks with maximum in Thathaiyangarpet (1250) block, they are benefited from Government sponsored Schemes like TAHDCO, SGSY, PMRY etc.
Performance of banks in the study area Union bank of india (UBI) in padalur and Primary agricultural co-operative bank ltd (PACB) in perahambi is the service branch for the village. The UBI has provided loan to three types of farmers (i.e.) small, marginal and large farmers. A small farmer means 2.5 to 5 acres, up to 2.5 acres for marginal farmers and large farmers‟ means above 5 acres. Total disbursement of loan during April 2004 was 616 accounts and the amount 1, 01, 92,220. The bank has provided maximum loan for animal husbandry. They give per cow 12,000 Rs and it has increased to 15,000 Rs. Usually cow loan is 60 months installment (i.e.) per month Rs 300. More than 60 percent of jewel loan has provided to the small farmers (1 gram 425 Rs). Deposit receipt means receipt pledged and amount borrowed. For this 75 percent loan has provided by the bank for crop loan. 1 percent interest rate over the deposit rate. The repayment period for deposit receipt is 1 year or before the deposit maturity. In the case of deposit maturity for period April 2004 was 350 accounts and 80,000 amounts. 113
UBI has provided term loans to the farmers. The period for short term loan is one year. The bank has provided loan for all crops. For banana and sugarcane the duration of loan period is 10 months. The bank has provided medium term loans to the farmers (i.e.) allied activities. The duration for the medium term loan is 36 month-60 month. Long term loan has provided for the period of 37 -120 months. Generally long term loan is provided for agriculture machinery, to purchase tractors, land development and minor irrigation. In the case of NPA (Non Performing Assets) means if the loan was not repaid up to 24 months then it will be considered as a NPA. Short term and medium term loan has provided to the small farmers. Long term loan should not provide for small farmers. Like wise small farmers marginal farmers also get the short term and medium term loan. If the farmers do the joint cultivation the bank will provide long term loan to the marginal farmers. In the case of large farmers all types of loan has provided. The bank manager stated that the farmers did not repaid the loan on due date. To recover the loan the first step being adopted is to send the notice to the borrower, personal meet, and send the registered notice. For small and marginal farmers the bank does not take any legal action. He stated the normal time for loan period is 15 days and refusal of application means out of 10 only one application due to security problem. From the manager point of view 70 percent of farmers used the loan for productive purposes. Regarding overdue he stated that due to marketing period, monsoon failure and willful defaulter the overdue has increased. In the case of political influence is only in schemed loan and small and marginal farmers are difficult repay the loan amount due to monsoon failure. Farmers not go to the moneylenders for crop loan. Regarding loan provided the credit limit of less than 25,000 with out security. In the case of 25,000 to 50,000 credit limit guarantee is essential or well identity person signature (having assets). Above 50,000 Rs required security. The entire loan having pre-sanction inspection and post –sanction inspection.
Primary Agricultural Co-operative Bank ltd (PACB) Seedevi Mangalam village This bank has provided loan for crop loan, to purchase bullock for plough the land, to purchase bullock cart, cow, and goat rearing etc. It has provided loan to two categories of farmers (i.e.) small and large farmers. It does not provide loan to marginal farmers. According to the PACB manager point of view duration for borrow money from the bank was seven days up to Rs 50,000 and 15 days for above 50,000. The borrowers‟ capacity to repay the loan was determined by the manger borrowers‟ 114 possession of land and movable and immovable assets. The bank has provided loan for one installment and partly kind and partly cash. If the borrowers not repay the loan in particular time period then the manger send the usual information letter, registered information letter or take action as per the law. According to the manager point of view reason for overdue was 1. Due to lack of rain, productivity is low 2. Rain is not at the right time and 3. The price is not reasonable for the crops.
Table 3.27 Purpose-wise loan advanced by primary agricultural co-operative bank in study area Bullock & Growth Growth Growth year Crop loan bullock Total rate rate rate cart loan 1995-96 11.52 (91.7) - 1.04 (8.3) - 12.56(100) -
1996-97 9.92 (86.7) -90.08 1.52(13.3) 98.48 11.44(100) -88.56
1997-98 9.03(55.9) -90.97 7.13(44.1) -92.87 16.16(100) -83.84
1998-99 10.29(77.9) -89.71 2.92(22.1) -97.08 13.21(100) -86.79
1999-00 14.78(79.3) -85.22 3.86(20.7) -96.14 18.64(100) -81.36
2000-01 13.92(98.4) -86.08 0.22(1.6) -99.78 14.14(100) -85.86
2001-02 21.87(81.8) -78.13 4.85(18.2) -95.15 26.72(100) -73.28
2002-03 34.22(97.9) -65.78 0.75(2.1) -99.25 34.97(100) -65.03
2003-04 29.37(91.3) -70.63 2.78(8.6) -97.22 32.15(100) -67.85
2004-05 25.01(97.4) -74.99 0.68(2.6) -99.32 25.69(100) -74.31
Note: Figure in brackets indicate percentage to total
Crop loan is greater than bullock and bullock cart loan in PACB. It is explained in percentages in brackets. The growth rate of crop loan is negative growth rate overall period. Likewise the growth rate of bullock and bullock cart loan is also negative.
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Table 3.28 Flow of agricultural credit in primary agricultural co-operative bank in study area Total Total Growth Total Growth Total Growth Total Growth Total Overdue in Year farmers advances rate outstanding rate demand rate recovery rate overdue percent 1995-96 751 75.89 - 56.21 - 53.19 - 52.11 - 1.08 2 1996-97 819 80.78 -19.22 59.54 40.46 48.21 -51.79 46.4 -53.6 1.81 4 1997-98 841 91.22 -8.78 65.89 -34.11 43.74 -56.26 41.26 -58.74 2.48 6 1998-99 850 88.99 -11.01 75.25 -24.75 51.31 -48.69 49.44 -50.56 1.87 4 1999-00 868 99.67 -0.33 79.85 -20.15 67.04 -32.96 64.61 -35.39 2.43 4 2000-01 877 95.19 -4.81 78.2 -21.8 69.3 -30.7 65.85 -34.15 3.45 5 2001-02 941 110.82 10.82 66.29 -33.71 61.78 -38.22 61.78 -38.22 0 0 2002-03 979 119.99 19.99 74.1 -25.9 69.56 -30.44 69.56 -30.44 0 0 2003-04 982 122.47 22.47 87.9 -12.1 76.6 -23.4 76.6 -23.4 0 0 2004-05 1110 143.81 43.81 95.33 -4.67 83.1 -16.9 83.1 -16.9 0 0
The growth rate of total advance shows negative growth rate up to 2000 to 2001. After that it has increased. The growth rate of outstanding shows the declining trend overall period. The overdue was meager amount up to 2000 to 01. After that there was no overdue.
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Table 3.29 Age-wise total overdue & no. of defaulters in primary agricultural co-operative bank in study area
Overdue age-wise 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Within one year 1.08(18) 1.81(23) 1.88(30) 0.87(23) 1.68(27) 2.16(26) - - - -
1 year-2 years - - 0.60(5) 0.48(10) 0.41(8) 0.77(12) - - - -
2 years -5 years - - - 0.52(4) 0.34(3) 0.52(10) - - - -
Above 5 years ------
Total 1.08(18) 1.81(23) 2.48(35) 1.87(37) 2.43(38) 3.45(48) - - - -
Note: figures in brackets indicates no. of defaulters
Above five years there are no overdues and 2 to 5 years very meager number of persons has overdue. Regarding overdue in primary agricultural bank data only 1year to 2 years period. The defaulters and overdue has increased year after year up to 2000 to 01. After that there is no overdue from 2001-02 up to 2004-05. From 2005-06 again overdue has increased. Because 2004-05 the government has announced loan waiver scheme. Due to political intervention the defaulters has increased.
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The performance of credit agencies in Tiruchirapalli district explain the demand and recovery position of commercial banks, district central co-operative banks and Primary Co-operative Agriculture and Rural Development Bank Ltd (PCARDB) show that the percentage of recovery is high in commercial banks compare to other banks. Credit flow to the different purposes i.e. crops, minor irrigation and horticulture, forestry and waste land development and investment credit for allied activities like dairy development, poultry, sheep/goat/piggery shows that credit flow to the crops are high compare to other purposes. The second importance for credit flow is farm mechanization and minor irrigation. In the case of waste land development the credit flow is very low. Likewise in the case of investment credit for allied activities shows that credit flow is high in the case of dairy development. The second importance for credit flow is sheep/goat/piggery. The credit flow for poultry is very low. Total flow of ground level credit by institutions in Tiruchirapalli district (Table 3.16) the growth rate of crop loan shows that fluctuating trend and reached 73 percent and it has declined to 11.1 percent. But the growth rate of term loan shows that during 1997-98 shows the negative growth rate till 2002-03 after that it has reached 85.7 percent during 2004-05 and declined to 54.4 percent.
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CHAPER IV DISPARITIES IN BANKING IN TAMIL NADU
This chapter reveals that there exists disparities in the regional spread of banking activities in Tamil Nadu; and, the concentration directly varies with the economic status of the regions. Location co-efficient used to find out the disparity in the spread of banking activities (bank branches, deposits and advances to agriculture sector) for Tamil Nadu state and for Tiruchirapalli district. Rank correlation co- efficient used for Tamil Nadu state and Tiruchirapalli district between the location co- efficient.
Statement of the problem The history of economic development suggests that development of institution is one of the fundamental requirements for achieving economic development (Hicks, 1969). Banking is one of the modern institutions developed for promoting economic development through supplying credit to those who are in need of them. In India farmers, who have been in debt trap for long, depend on banks, besides other sources, for fulfilling their credit requirements. The extent to which the farmers‟ credit thirst is quenched by the banks depends upon, inter alia, the spread and availability of banking facilities. Hence, this paper attempts to understand as to how the banking activities are spread in Tamil Nadu and in one of the agriculturally prosperous districts namely Tiruchirappalli.
The commercial and co-operative banks are the major formal institutional sources of credit to the farmers in India. However, it has been reported (Veerashekharappa, 1994) that the delivery of credit to agriculture is neither smooth nor adequate. In spite of the efforts taken by the Reserve Bank of India and government of India. After the nationalization of banks the commercial banks were obliged to estabilish their branches in the rural areas too. Even then, the locational spread of the branches are not even and disparity exists across the regions (Veerashekharappa, 1996), States and Districts (Shetty S. L. 2004) and blocks (kannan, 1997). Veerashekharappa (1996) observes that the disparities are mainly due to the political intervention. 119
Development of banking in Tamil Nadu state and Tiruchirappalli district Development of banking depends upon a number of factors. In this study, total number of branches, total deposits, total advances and advances to priority sector and agricultural sector are identified as the indices of the development of banking in Tamilnadu state and Trichirappalli district. During 1997 the number of rural branches was 1872 in Tamilnadu. It has declined to 1726 in 2005. This decline is due to financial liberalization (Ramachandran V.K. and Madhura Swaminathan, 2002). The growth rates of all the indicators considered for the state for the period 1997-2005 are lower than those during the period of 1985-1997 (Table 1). For Trichirappalli district, the growth rates for the periods 1980 to 1995-96 and 1996-97 to 2005 have been worked out because Karur and Perambalur (including Ariyalur) districts were carved out of Tiruchirappalli district in the year 1995. Hence, for the same reason, the growth rates for those periods are not comparable. When the data for the year 1996-97 are compared with that of 2005, small increases are observed in the district (Table 2). This is due to the policy announcement made by Honorable Finance Minister Mr. P. Chidambaram July 2004 i.e., doubling of the flow of agricultural credit in three years.
Location Coefficients The disparity in the spread of banking activities (bank branches, deposits and advances to agricultural sector) is quantified by using a location co-efficient defined as below for Tamilnadu state and for Tiruchirappalli district.
Percentage share of the district i in the Banking aspect of the Tamilnadu state Location co-efficient of a particular Banking aspect of the district i = ------Percentage share of the district i in the total Human population of Tamilnadu state.
Similarly, location co-efficients of a particular banking aspect for the blocks in Tiruchi district are given by
Percentage share of the block i in the banking aspect of Tiruchirappalli district ------Percentage share of the block i in the total human population of Tiruchirappalli district 120
The location co-efficients‟ for the districts in Tamilnadu state and for the blocks in Tiruchirappalli district presented in Table 3 and 4 respectively show the wide disparities in banking activities among the districts and among the blocks. Chennai district comes top in the list with very high level of concentration of banking activities followed by Coimbatore district. Dharmapuri district appears to be lagging far behind in the banking facilities availability. Thiruvannamalai, Thiuvallur, Thiruvarur, Vellore, Villupuram, Salem and Nagapattinam districts also have very thin spread of banking activities.
In Tiruchirappalli district, Marungapuri and Vaiampatti blocks appear to be very backward in terms of availability of banking facilities while Lalgudi, Manachanullur, Thottiam and Andanallur blocks have got better banking facilities.
Association among the banking activities Generally there would be close association among the banking activities. That is, the districts and blocks with higher concentration of bank branches would have contributed more to bank accounts and attracted more bank advances. The correlation co-efficients worked out and presented in Table 6 corroborate the above relationship both in the state and in district. This relationship also suggests that therefore, the districts and blocks with more branches have contributed more deposits and have collected more advances from the banks.
The above inferences suggest some association existing between the availability of banking facilities and the development indicators. Since, literacy level is the single reliable result of development, correlation co-efficients were worked out for the literacy levels and banking activities and presented in Table 6. Those co- efficient suggest a positive association between development (literacy levels) and banking activities.
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Conclusion A look into the history of economic development suggests that many countries have achieved economic development by innovation new institutions and/or renovating the existing institutions according to the requirement. Banking is one such modern institution, which could be easily extended and or modified according to the need and be used as an instrument for achieving economic development. It is observed from the available evidences that the developed blocks in Tiruchirappalli district and developed districts in Tamilnadu state have greater proportion of banking facilities compared to their share in total population of the district/state. However, it is unfortunate that in the recent years the number of bank branches in rural areas has declined due to closure of some branches in the state. This trend must be reversed if balanced development has to be achieved.
Table 4.1 Growth rates of banking activities for Tamilnadu
1985-1997 1997-2005
Actual Actual Growth Actual Actual Growth Component 1985 1997 rate % 1997 2005 rate % No. of commercial 3882 4707 21.3 4707 4779 1.5 bank branches
Total deposits 5013.44 46717.38 831.8 46717.38 105811.65 126.5
Total advances to 4409.23 41211.89 834.7 41211.89 102801.46 149.4 all sectors Priority sector 1902.42 14185.94 645.7 14185.94 38518.65 171.5 advances Agriculture 855.4 5159.15 503.1 5159.15 12566.59 143.6 advances Source: State Level Bankers‟ Committee, Chennai.
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Table 4.2 Growth rates of banking activities for Tiruchirappalli district
1980 to 1995-96 1996-97 to 2005 Component Actual Actual Growth Actual Actual Growth 1980 1995-96 rate % 1996-97 2005 rate % No. of 221 326 47.5 189 193 2.1 commercial bank branches Total deposits 138.36 1395.33 908.5 1148.03 3618.8 215.2 Total advances 107.57 934.35 768.6 642.43 2264.6 252.5 to all sectors Priority sector 52.14 512.47 882.9 297.59 1141.4 283.5 advances Source : Annual Credit Plan, Tiruchirappalli.
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Table 4.3 District-wise location co-efficient for Tamilnadu state Location co-efficient for districts in Tamilnadu state Sl.no Districts Total no. of Total Total Agriculture bank branches deposits advances advances 1 Chennai 2.41 6.43 7.71 2.50 2 Coimbatore 1.27 1.45 1.99 1.22 3 Cuddalore 0.80 0.46 0.28 0.94 4 Dharmapuri 0.28 0.10 0.10 0.39 5 Dindigul 0.92 0.43 0.44 0.89 6 Erode 1.06 0.75 0.67 1.35 7 Kancheepuram 0.87 0.87 0.42 0.50 8 Kanyakumari 1.01 0.72 0.65 1.12 9 Karur 1.06 0.67 0.64 1.07 10 Krishnagiri* - - - - 11 Madurai 1.03 0.83 0.59 1.02 12 Nagapattinam 0.82 0.54 0.32 0.78 13 Namakkal 0.89 0.69 0.01 1.27 14 Nilgiris 1.09 0.62 0.46 1.02 15 Perambalur 1.72 0.60 0.49 2.57 16 Pudukottai 0.79 0.30 0.21 0.86 17 Ramanathapuram 0.88 0.32 0.21 0.92 18 Salem 0.74 0.59 0.56 0.85 19 Sivaganga 1.22 0.65 0.33 1.35 20 Thanjavur 0.96 0.62 0.39 1.14 21 Theni 1.02 0.38 0.41 1.48 22 Thiruvannamalai 0.58 0.23 0.16 0.68 23 Tiruchirappalli 1.04 0.89 0.57 0.83 24 Tirunelveli 0.96 0.59 0.36 0.69 25 Tiruvallur 0.62 0.49 0.27 0.38 26 Tiruvarur 0.81 0.42 0.22 0.92 27 Tuticorin 1.14 0.66 0.51 0.98 28 Vellore 0.73 0.39 0.27 0.53 29 Villupuram 0.67 0.20 0.17 0.70 30 Virudhunagar 0.94 0.55 0.65 0.59 Source: State Level Bankers‟ Committee, Chennai. *Population data are not available for this district. Note: Data on Population for the year 2005 have been used to calculate the location co-efficient. Data on number of banks, amount of deposit and advances are for the year 2005. Data on Population for the year 2005 have been obtained from www.census India.net.
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Table 4.4 Block-wise location co-efficient for Tiruchirappalli district
Location co-efficient for blocks in Tiruchirappalli district No. of No. of co- Total no. No. of Agriculture commercial Sl.no Blocks operative of bank accounts advances bank bank branches branches branches 1 Manachanullur 0.94 1.03 1.23 1.04 1.19 2 Pullambadi 1.08 1.16 0.95 0.81 0.93 3 Lalgudi 1.14 1.26 1.12 1.14 1.12 4 Uppliapuram 1.13 1.28 0.87 0.74 0.85 5 Thuraiyur 0.92 0.89 0.85 1.23 0.91 6 Musiri 0.96 1.06 0.92 1.34 0.99 7 Thathiengarpet 1.26 0.94 0.98 0.84 0.96 8 Thottiam 1.24 1.28 0.98 1.25 1.03 9 Vaiampatti 0.76 0.78 0.75 0.95 0.79 10 Manapparai 1.11 0.98 0.89 1.30 0.96 11 Marungapuri 0.79 0.65 0.57 0.73 0.59 12 Andanullur 1.46 1.68 1.91 - 1.59 13 Manikandam 0.58 0.38 0.68 1.38 0.79 14 Thiruverumbur 0.63 0.61 1.35 0.77 1.26 Source: Annual Credit Plan for the year 2005 in Tiruchirappalli district. *There is no co-operative bank in that block Note: The location co-efficient have been worked out for the data of the year 2005. Data on population for the year 2005 have been obtained from ACP, Tiruchirappalli district.
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Table 4.5 Rank correlation co-efficient for Tamilnadu state &Tiruchirappalli district between the location co-efficient
Sl.no Level Variables Results 1 State No. of bank branches & total deposits 0.74 2 State No. of bank branches & advances 0.77 3 State Total deposits & total advances 0.75 4 State Total advances & advances to agriculture 0.43 5 State No. of bank branches & advances to agriculture 0.78 6 District No. of bank branches & no. of accounts 0.45 7 District No. of bank branches & advances to agriculture 0.46 8 District No. of accounts & advances to agriculture 0.84 Source: This analysis has been done for the data available in table 3&4.
Table 4.6 Simple correlation co-efficient for Tamilnadu state and Tiruchirappalli district
Sl.no Level Variables Correlation results 1 State No. of bank branches & literacy rate 0.337 2 State Total deposits & literacy rate 0.302 3 District No. of bank branches & literacy rate 0.698 4 District No. of accounts & Literacy rate 0.051 Source: This analysis has been done for the data available in tables 3&4.
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CHAPTER V ANALYSIS, RESULTS AND DISCUSSION
The present study has been conducted in Manachanullur block, particularly in Seedevi Mangalam village in Tiruchirapalli district. One hundred and thirty eight respondents are interviewed through questionnaire method. This village is having five wards, and in each ward 20 percent of respondents are selected. Socio economic characteristics of the respondents are necessary to study the distribution of credit.
Distribution of respondents by social groups Caste is relevant to the hereditary group and that enjoys a certain status in the social hierarchy of the community (Gupta S.C. 1987). The respondents belong with seven castes. They are classified as Oorali gaundor, Moopanar, Yadhava, Musilim, Rettiar, Chettiar, SC/ST. Majority of the respondents (51.4 percent) come from Oorali gaundor, followed by Moopanar (23.9 percent) and SC/ST (18.1 percent). Other respondents belong with Yadhava, Rettiar, Chettiar communities and Muslim religion. MBC includes such castes as Oorali gaundor & Kurumba gaundor, BC includes Moopanar and others belong to Yadhava, Muslim, Rettiar, and Chettiar.
Distribution of respondents by Education Education is an important aspect that will develop better awareness of the environment, determine living style and expenditure behavior. The normal expectation is that an educated person can makes a better use of credit. That will yields good returns from investment. In this study 49 are having education of primary (1-5) level, 59 are having high school level and only 17 are illiterate.
Respondent’s exposure to mass media Individual levels of awareness directly depend on his exposure to mass media, (i. e.) news papers, radio and television. Higher degree of various media of communication will help the farmers better with more information about schemes and government efforts to promote rural welfare. Ignorance of farmers will lead to exploitation in the outer world.
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Distribution of respondents by occupation Occupation is the main factor responsible for one‟s family income and also essential to lead a better life. In this study maximum percentage of respondents (63 percent) are not only engaged in agriculture but also having allied activities like dairy farming. Thirty percent of the respondents (42) are engaged only in agriculture. Respondents in the study stated that they earn more income from the dairy farming and 55.8 percent of respondents are engaged in dairy farming. They also possess bullock. Twenty four percent of respondents stated that they are having bullocks and they used the bullocks for agricultural purposes and they sent the bullocks for rental purposes for others‟ farm land. Per day rent for one pair bullock is Rs 300. Respondents in the study area also state that goat rearing is also important business and earn more income from those activities. They buy the lamb in Rs 500 and bring up and sell it for Rs 4000. In the case of dairy farming, per day a cow gives milk 12- 15 litre. They sell the milk in the society within the village at the price of a litre is Rs 15. Two societies are available in the village. Government milk society per litre milk is reasonable than the private milk society for the sellers. Nineteen percent respondents have the goat (i.e. 26 respondents in number). The respondents in the village also engaged in other activities like centering work, money lending business, leather bag company, tiffen and tea shop, pookkadai, and some of the respondent engaged in Tailoring work, cable connection work, two wheeler service, & bus driving.
Distribution of respondents by land holding Land holding plays a very vital role in the rural economy. Credit also depends upon land owned and also the size of the land. There is a direct relationship among the land holding and availability of credit (higher the landholding leads to higher the credit and vice versa). Land is also a source of prestige and social identity and not merely a means of livelihood. The size of an individual‟s landholding determines his social status in Indian economy (Gupta S.C. 1987). In this study landholding size classification is based on the rules followed by the bank to advance loan. Study area is basically a dry area. Seedevi Mangalam north is having total area of 676.45.5 hectare and south that is hamlet (Maniyangurichi) is having 8.33.49.0 hectare. But the total dry area is 3.59.59.5 hectare in the Seedevi Mangalam south and north is having 610.57.0 hectare (information collected from the VAO). In Seedevi Mangalam 128
(north) out of 676.45.5 hectare 48.60.0 hectare is purambokku land. But the Seedevi Mangalam (south) i.e. Maniyankurichi out of this 8.33.49.0 hectare 4.57.68.5 hectare is purambokku land. It means purambokku land is greater than area land used for agriculture. This study classifies the operating land only. This study covered 138 respondents. Out of this small farmers are maximum (i.e.) 47.8 percent (66 respondents), large farmers are 31.9 percent (i.e. 44 respondents), and 19 respondents are marginal farmers and only 9 respondents are landless. In study area two banks are service area branches. 1. Union bank of India, PACs in Perahambi (Primary Agricultural Credit Societies). Union bank of India has provided loan to all types of farmers (small, marginal and large farmers). But the Perahambi PACB has provided loan only for small farmers and large farmers. It neglected the marginal farmers. Hence these farmers may be going to the money lender in the village.
Distribution of respondents by income levels The study of respondents‟s income level is important because it helps to know the status of the respondents and their capacity to purchase things, maintain family expenditure, medical expenditure etc. In this study income of the respondents are calculated sources which they get income. Income from dairy farming, income from goat, income from bullock. (Bullock owners used the bullock for rental purposes for other‟s farm land). Agriculture income means income from agriculture and non- agriculture income means income from other than agriculture. (i.e.) money lending business, tailoring work, cable connection, income from leather bag company, teashops, centering work income from house rent etc. All these income are calculated as respondents‟ income.
Conditions of dwelling units In the study area the most pressing need is owned a house. In the study area, except three all the respondents are having house whether it may be thatched, tailed, concrete etc. Thohuppu house means government has provided the house or provided the amount for SC/ST persons to build a house (30, 000 per house).
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Type of crops cultivated The following crops namely onion, groundnut sugarcane, cotton, cholam, rice are cultivated for sale. Chilli, cowfood, coriyander are cultivated for their self consumption. In the case of onion they used the fertilizers for base (bathambathu) and second fertilizers (potash, sulpet, and urea). The duration for onion is 75 days. For onion weekly once have to spray the pesticides. The expenditure for cultivating onion per acre is Rs 10,000 (including spray pesticides, wage to the cooli etc) stated by the respondents in the study area. But the scale of finance for different crops as approved by DLTC (District Level Technical Committee) has provided for onion Rs 8000 per acre. Hence here the credit gap is Rs 2000. The cost is bared by the farmers. For availability of onion for per acre are 60 bags.
According to the farmers prevailing rate of study period is Rs 500. Hence the availability of the amount is 30,000. Like wise in the case of cotton they used the fertilizers (base TAP, bathambathu) and second fertilizers (urea, potash). For cotton four times spray the pesticides (Rs 400) and duration is 150 days expenditure for cotton is per acre Rs 5000. But the scale of finance provided by the government for cotton is Rs 7700 for irrigated and Rs 3000 for rain fed. But respondents in the study area, they are cultivated cotton crop in the rain fed areas except one or two. The price of per kg cotton is Rs 20. The availability of cotton for per acre is 850 kg. Hence the availability of amount is 17,000. Like wise in the case of ground nut essential fertilizers are (fertilizers, punnakku). For ground nut three times spray the pesticides for Rs 2,000. But the required time for spray the pesticides are six times. Hence the cost is Rs 4,000.
The expenditure for ground nut per acre is 10,000 Rs. The selling price of ground nut per bag is Rs 800. The availability of ground nut per acre is 25 bags. Hence the availability of amount is Rs 20, 000 for ground nut. But the scale of finance fixed by the government is Rs 6,000 for irrigated ground nut and rain fed area Rs 45, 000. In the case of rice the fertilizers used are TAP, urea, and potash. The required time for spray the pesticides are two times (Rs 500). The expenditure for per acre is Rs 5,000. The availability of rice per acre is 25 bags. The price for one bag is Rs 500. Hence the total availability of amount is Rs 12,500. For sugarcane the duration period is ten months. The price for sugarcane per tone is Rs 900. The 130 availability of sugarcane per acre is 50 tones. Hence the availability of amount for sugarcane per acre is Rs 45,000. The expenditure for sugarcane is Rs 22,000. Scale of finance for this crop is Rs 18,600 (source: Scale of finance for different crops as approved by DLTC taken from potential linked credit plan 2007-08). In the case of cholam fertilizers used like urea, potash. The farmers expected expenditure for cholam is Rs 5,000. Regarding scale of finance provided for this crop is Rs 7,700 for irrigated land and Rs 3,000 for rain fed land. The duration for crop cholam is three months. In the case of crop loan interest rate is 7.50 percent. The farmers have to repay after the harvest. Bank will provide the crop loan yearly once and repayment is also yearly repayment.
In the study area respondents has stated that there is fluctuation in the price for fertilizers. Due to the scarcity of fertilizers the price is very high. Hence the theory of law of demand is applicable for this product. In the case of summer season the wage for the person is Rs 60. But it will become Rs 100 in the winter season. These are all the problems faced by the farmers in the study area. Regarding cultivation 92 respondents stated that three time cultivation and 37 respondents (i.e.) 26.8 percent stated that two time cultivation.
Family size Expenditure pattern depend size of one‟s family. There is a positive relationship among size of family and expenditure pattern. If the size of family is large with the absence of adequate sources of income then it will create poverty. The repayment behavior of the borrower is some extent depends upon family size. Maximum number of respondents i.e.93 (67.4 percent) having the family size of four to 6.
Distribution of credit by sources In the case of sources of loan, loan from all sources (commercial bank, co- operative bank and money lenders) borrowed by the respondents are 9.4 percent (13). The respondents borrow from commercial bank alone is 25. Like wise respondents borrow from co-operative bank alone is ten respondents. In the study area the commercial bank is Union Bank of India (UBI) in Padalur and co-operative bank is Primary Agricultural Co-operative Bank (PACB) in Perahambi. Respondents not 131 borrow from any source is 24 i.e. 17.4 percent. If the total respondents (138) are classified only three category i.e. Institutional, non-institutional and both (institutional and non-institutional), then the maximum number of respondents are borrowed from institutional sources is 55, Non-institutional alone is 13 and both institutional and non-institutional is 46.
Non-institutional borrowers In the case of respondents borrowed from non institutional sources are 59 (i. e.) 42.7 percent. All these borrowers are borrowed from money lenders only. Money lenders providing loan at the rate of interest rupees two for out of Rs 100 (i.e. every hundred rupees the interest rate is rupees two). Some time it is rupees three, rupees five, up to Rs 10. These interest rates are too high compared to institutional sources. Due to lack of timely credit in institutional sources they go for non institutional sources. In the study area out of the 138 respondents four respondents are doing money lending business.
Table 5.1 Distribution of members of respondents‟ families by education
No. of respondent No. of Education level percentage families persons illeterate 57 63 14.5
studying 67 122 28.1 Educated Primary education (1-5) 63 69 15.9 High school (6-10) 91 132 30.4 Higher secondary 20 25 5.8 Degree holder 6 6 1.4 professional 7 9 2.1 Post graduate 4 8 1.8
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In the case of respondent families‟ education 14.5 percent are illiterate. Respondents‟ educations are not included in this table. Major portion of the person i.e. 30.4 percent had completed high school and 15.9 percent are in the primary education.
Table 5.2 Distribution of respondents by caste and religion
Religion
Caste Hindu Muslim Total
OC 7 (5.1) 2 (100) 9 (6.58)
BC 33 (24.3) 0 33 (23.9)
MBC 71 (52.2) 0 71 (51.4)
SC/ST 25 (18.4) 0 25 (18.1)
Total 136 (100) 2 (100) 138 (100)
Note: Figures in brackets indicate percentages to the column total
The table depicts that in study area the maximum number of respondents comes from Hindu family. Major portion of respondents i.e. 71 belong with MBC caste. This includes Oorali gaundor and Kurumba gaundor. Here OC means other caste includes Yadhava, Rettiar, Chettiar and two from Muslim religion.
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Table 5.3 Distribution of respondents by caste and sources of loan
Sources of loan Commercial Co-operative Commercial Loan from Loan from Commercial Co-operative Money Caste and Co- and money and money any sources Total all sources bank bank lender operative lender lender is zero OC 0 4 (44.4) 1 (11.1) 2(22.2) 1 (11.1) 0 0 1 (11.1) 9 (100) BC 4 (12.1) 5 (15.2) 3 (9.1) 3 (9.1) 4 (12.1) 0 7 (21.2) 7 (21.2) 33 (100) MBC 8 (11.3) 11 (15.5) 6 (8.5) 3 (4.2) 14 (19.7) 7 (9.9) 15 21.1) 7(9.9) 71 (100) SC/ST 1 (4.0) 5 (20.0) 0 5 (20.0) 1 (4.0) 1 (4.0) 3 12.0) 9(36.0) 25 (100) Total 13 (9.4) 25 (18.1) 10 (7.2) 13 (9.4) 20 (14.5) 8 (5.8) 25 (18.1) 24 (17.4) 138 (100) Note: Figures in brackets indicate percentages to the row total
This table explains distribution of respondents sources of loan and caste. The respondents 25 borrow from commercial bank and 25 from commercial bank and money lender. The respondents not get loan from any sources are 13. In the SC/ST group nine respondents (36 percent) not get loan from any sources. They stated that very difficult to get loan from banks because they do not have any land and also stated that the banks delayed the loan more than two months.
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Table 5.4 Distribution of respondents in sources of loan group and caste Sources of loan group Non- Not get loan from caste Institutional Both Total institutional any sources OC 6 (10.9) 2 (15.4) 0 1 (4.2) 9 (6.5) BC 12 (21.8) 3 (23.1) 11 (23.9) 7 (29.2) 33 (23.9) MBC 31 (56.4) 3 (23.1) 30 (65.2) 7(29.2) 71 (51.4) SC/ST 6 (10.9) 5 (38.5) 5 (10.9) 9(37.5) 25 (18.1) Total 55 (100) 13 (100) 46 (100) 24(100) 138 (100) Note: Figures in brackets indicate percentages
The table depicts that distribution of respondents from sources of loan group and caste. The respondents borrow from both the sources i.e. institutional and non-institutional was 46. The non-institutional loan alone was borrowed by 13 respondents. The maximum number of respondents borrow from institutional loan was come from MBC caste and 30 respondents borrow from both institutional and non-institutional also from MBC caste. Table 5.5 Distribution of respondents in caste name and sources of loan group Sources of loan group Not get loan Non- Caste name Institutional both from any institutional Total sources Oorali gaundor 31 (56.4) 3 (23.1) 30 (65.2) 7 (29.2) 71 (51.4) Moopanar 12 (21.8) 3 (23.1) 11 (23.9) 7 (29.2) 33 (23.9) Yadhava 3 (5.5) 1 (7.7) 0 0 4 (2.9) Muslim 1 (1.8) 0 0 1 (4.2) 2 (1.4) Rettiar 2 (3.6) 0 0 0 2 (1.4) Chettiar 0 1 (7.7) 0 0 1 (0.7) Sc/st 6 (10.9) 5 (38.5) 5 (10.9) 9 (37.5) 25 (18.1) total 55 (100) 13 (100) 46 (100) 24 (100) 138 (100) Note: Figures in brackets indicate percentages to column total. Both means institutional and non institutional
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In institutional loan borrowed by 31 respondents from Oorali gaundor and both institutional and non-institutional borrowed was 30 respondents. In the Muslim religion only one borrows from institutional sources. In the case of yadhava three has borrowed from institutional and Oorali gaundor only seven not get loan from any sources. Table 5.6 Distribution of respondents in caste name and sources of loan Sources of loan Co- Not get Loan Co- Commercial Commercial Commercial Money operative loan from Caste name from all operative and co- and money Total bank lender and money any sources bank operative lender lender sources Oorali gaundor 8 (61.5) 11 (44.0) 6 (60.0) 3 (23.1) 14 (70.0) 7 (87.5) 15 (60.0) 7 (29.2) 71 (51.4) Moopanar 4 (30.8) 5 (20.0) 3(30.0) 3 (23.1) 4 (20.0) 0 7 (28.0) 7 (29.2) 33 (23.9) Yadhava 0 1 (4.0) 1 (10.0) 1 (7.7) 1 (5.0) 0 0 0 4 (2.9) Muslim 0 1 (4.0) 0 0 0 0 0 1 (4.2) 2 (1.4) Rettiar 0 2 (8.0) 0 0 0 0 0 0 2 (1.4) Chettiar 0 0 0 1 (7.7) 0 0 0 0 1 (0.7) Sc/st 1 (7.7) 5 (20.0) 0 5 (38.5) 1 (5.0) 1 (12.5) 3 (12.0) 9 (37.5) 25 (18.1) Total 13 (100) 25 (100) 10 (100) 13 (100) 20 (100) 8 (100) 25 (100) 24 (100) 138 (100) Note: Figures in brackets indicate percentages
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The number of respondents has borrowed was high in commercial and money lender. In Oorali gaundor the respondents borrow from all sources is eight. The maximum number of respondents are borrow was commercial and money lender and commercial bank i.e. 25. The respondents in the study are stated that in commercial bank the number of days delayed was less to sanction the loan compared to co- operative bank. Hence the number of respondents was high in commercial bank compared to co-operative.
Table 5.7 Distribution of respondents by caste and total institutional loan (Amount in Rs) Total institutional loan 1,95,001 2,60,001 3,25,001 No Less than 65,001 to Caste to to to institutional 65,000 1,30,000 Total 2,60,000 3,25,000 3,90,000 loan OC 6 (8.1) 0 0 0 0 3 (8.1) 9 (6.5) BC 16 (21.6) 5 (23.8) 0 1(33.3) 1 (50.0) 10 (27.0) 33 (23.9) MBC 41 (55.4) 16 (76.2) 1 (100) 2 (66.7) 1 (50.0) 10 (27.0) 71 (51.4) SC/ST 11 (14.9) 0 0 0 0 14 (37.8) 25 (18.1) Total 74 (100) 21 (100) 1 (100) 3 (100) 2 (100) 37 (100) 138 (100) Note: Figures in brackets indicate percentages
The table depicts that distribution of respondents by caste wise and total institutional loan. The loan amount less than Rs 65,000 the number of respondents borrowed was high compared to higher loan amount. In the case of less than Rs 65,000, 41 respondents come from the MBC caste, 16 from BC, and 11 from SC/ST and only six from other castes (OC). The respondents not borrow from institutional sources was high in SC/ST (37.8 percent).
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Table 5.8 Distribution of respondents by caste and land holding size in acres Land holding in acres .01 to 1.25 1.26 to 2.50 Above 2.51 acres Caste Land less acres (small acres (large Total (marginal farmers) farmers) farmers) OC 0 1 (5.3) 5 (7.6) 3 (6.8) 9 (6.5) BC 2 (22.2) 5 (26.3) 15 (22.7) 11 (25.0) 33 (23.9) MBC 2 (22.2) 6 (31.6) 34 (51.5) 29 (65.9) 71 (51.4) SC/ST 5 (55.6) 7 (36.8) 12 (18.2) 1 (2.3) 25 (18.1) Total 9 (100) 19 (100) 66 (100) 44 (100) 138 (100) Note: Figures in brackets indicate percentages
The table explains distribution of respondents in caste and land holding size (acres). The number of respondent was high in small farmers‟ category (1.26 to 2.50) i.e.66 respondents. The classification of land holding size is followed from the bank to advance loan. The numbers of respondents are high in both small size farmers and large size farmers come from MBC caste respectively 34 and 29. The landless respondents are high in SC/ST group i.e. five.
Table 5.9 Distribution of respondents by caste and diversion of institutional loan in percentage Diversion of institutional loan in percentage No Caste 40 50 60 70 Total diversion OC 7 (77.8) 2 (22.2) 0 0 0 9 (100) BC 20 (60.6) 4 (12.1) 1(3.0) 8(24.2) 0 33 (100) MBC 41 (57.7) 5 (7.0) 15 (21.1) 9 (12.7) 1(1.4) 71 (100) SC/ST 22 (88.0) 0 3 (12.0) 0 0 25 (100) Total 90 (65.2) 11 (8.0) 19 (13.8) 17 (12.3) 1(0.7) 138 (100) Note: Figures in brackets indicate percentage to the row total.
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The table depicts that distribution of caste and diversion in percentage i.e. diversion of loan for unproductive purposes. In SC/ST 88 percent and 77.8 percent in other castes (OC) the respondents are not used the loan for unproductive purposes. The diversion of loan is occurring because they are not satisfying the day to day expenses. Sixty percent of loan was diverted in BC and MBC i.e. eight and nine respondents. In MBC only one respondent has diverted 70 percent of loan amount. Overall 90 respondents not divert the loan amount.
Table 5.10 Distribution of respondents by size of the family and diversion of loan in percentage
Diversion in percentage Size of No 40 50 60 70 Total the family diversion 2 to 4 58 (64.4) 5 (45.5) 11 (57.9) 10 (58.8) 1 (100) 85 (61.6) 5 to 6 27 (30.0) 5 (45.5) 8 (42.1) 7 (41.2) 0 47 (34.1) Above 6 5 (5.6) 1 (9.1) 0 0 0 6 (4.3) Total 90 (100) 11 (100) 19 (100) 17 (100) 1 (100) 138 (100) Note: Figures in brackets indicate percentages
The table reveals that size of the family and percentage of diversion of loan for unproductive purposes. In family size (2 to 4) 58 respondents are not divert the loan amount, maximum number of respondents (11) are diverted the 50 percent of loan amount for unproductive purposes and only one respondent 70 percent of loan was used for unproductive purposes. There is an indirect relationship among size of loan and divert the loan for unproductive purposes. If the size of family is small (2 to 4) the number of respondents used the loan for diversion was high and vice versa.
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Table 5.11 Distribution of respondents by land holding size and delay of loan in commercial bank Delay of loan in commercial bank 6 to 10 11 to 20 21 days to Farmer type 5 days Total days days 1 month .01 to 1.25 acres 0 0 0 8 (100) 8 (9.8) (marginal farmers) 1.26 to 2.50 acres 0 3 (75.0) 42 (100) 0 45 (54.9) (small farmers) Above 2.51 acres 28 (100) 1 (25.0) 0 0 29 (35.4) (large farmers) Total 28 (100) 4 (100) 42 (100) 8 (100) 82 (100) Note: Figures in brackets indicate percentages
The table depicts that distribution of respondents by land holding size and delay of loan in commercial bank. The maximum number of days i.e. 21 day to one month was delayed for marginal farmers in commercial bank. In the case of small farmers the maximum number of days delayed were 11 to 20 days and six to ten days delayed only three respondents. Large farmers are stated that the number of days delayed was five days, only small and marginal farmers affected to get loan from commercial bank. Hence inverse relationship among size of farmers and number of days delayed.
Table 5.12 Distribution of respondents by land holding size and delay of loan in co-operative bank Delay of loan in co-operative bank 21 to one Above one Farmer type 10 days 11 to 20 days Total month month 1.26 to 2.50 acres (small 0 0 29(100) 5 (100) 34 (65.4) farmers) Above 2.51 acres (large 8 (100) 10 (100) 0 0 18 (34.6) farmers) Total 8 (100) 12 (100) 29 (100) 5 (100) 52 (100) Note: Figures in brackets indicate percentages
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The table shows that distribution of respondents in size and delay of loan in co- operative bank. Co-operative bank did not provide any loan to marginal farmers. The number of days was delayed for small farmers were 21 to one month stated by the 29 respondents and above one month delayed was stated by five respondents. But the large farmers stated that the maximum number of delayed was 10 days and 11 to 20 days. The number of delayed was high in co-operative bank compared to commercial bank. Hence here also there is an inverse relation among size and delay of loan in co- operative bank.
Table 5.13 Distribution of respondents by landholding size and income group
Land holding size
.01 to 1.25 1.26 to 2.50 Land acres Above 2.51 Income group acres (small Total less (marginal acres (large farmers) farmers) farmers)
Less than 7700 9 (100) 16 (84.2) 24 (36.4) 2(4.5) 51 (37.0)
7701 to 15400 0 3 (15.8) 40 (60.6) 23 (52.3) 66 (47.8)
15401 to 23100 0 0 2 (3.0) 13 (29.5) 15 (10.9)
23101 to 30800 0 0 0 3 (6.8) 3 (2.2)
30801 to 38500 0 0 0 1 (2.3) 1 (0.7)
46201 to 53900 0 0 0 1 (2.3) 1 (0.7)
53901 to 61600 0 0 0 1 (2.3) 1 (0.7)
total 9 (100) 19 (100) 66 (100) 44 (100) 138 (100)
Note: Figures in brackets indicate percentages
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The table depicts that distribution of respondents by landholding size and income group. The income groups less than 7700 the maximum number of small farmers are 24 and 16 farmers are marginal farmers. The income group 7701 to 15400 the maximum number of small farmers are 40 and large farmers are 23. The income group 15401 to 23100 was 13 respondents in large farmers. The income greater than 23100 was only large farmers. Totally maximum number of respondents was high in income group was 7701 to 15400.
Table 5.14 Distribution of respondents by caste and income group
Income group
23101 30801 46201 53901 Less than 7701 to 15401 to Caste to to to to Total 7700 15400 23100 30800 38500 53900 61600
OC 1 (2.0) 4 (6.1) 4 (26.7) 0 0 0 0 9 (6.5)
33 BC 13 (25.5) 15 (22.7) 3 (20.0) 0 0 1 (100) 1 (100) (23.9) 71 MBC 28 (54.9) 36 (54.5) 4 (26.7) 2 (66.7) 1 (100) 0 0 (51.4) 25 SC/ST 9 (17.6) 11 (16.7) 4 (26.7) 1 (33.3) 0 0 0 (18.1) 138 Total 51 (100) 66 (100) 15 (100) 3 (100) 1 (100) 1 (100) 1 (100) (100) Note: Figures in brackets indicate percentage to column total.
Table reveals that distribution of respondents by caste and income group. The income group 7701 to 15400 the maximum number of respondents come from MBC i.e. 36 and income group less than 7700. The respondents (28) come from MBC caste. The income group 15401 to 23100 the respondents come from BC and MBC caste. OC and SC/ST are below this income group.
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Table 5.15 Distribution of respondents by income group and sources of loan group Sources of loan group Both Non- institutional & Not get loan Income group Institutional Total institutional non from any sources institutional Less than 51 18 (32.7) 6 (46.2) 18 (39.1) 9 (37.5) 7700 (37.0) 7701 to 66 28 (50.9) 6 (46.2) 22 (47.8) 10 (41.7) 15400 (47.8) 15401 to 15 7 (12.7) 1 (7.7) 3 (6.5) 4 (16.7) 23100 (10.9) 23101 to 1 (1.8) 0 1 (2.2) 1 (4.2) 3 (2.2) 30800 30801 to 1 (1.8) 0 0 0 1 (0.7) 38500 46201 to 0 0 1 (2.2) 0 1 (0.7) 53900 53901 to 0 0 1 (2.2) 0 1 (0.7) 61600 138 Total 55 (100) 13 (100) 46 (100) 24 (100) (100) Note: Figures in brackets indicate percentages
The table reveals that distribution of respondents in income group and sources of loan group. The income group 7701 to 15400 maximum number of respondents (i.e.) 28 borrowed from institutional and 22 respondents borrowed from institutional and non-institutional. Income group less than 7700 the respondents 18 borrowed from institutional and 18 respondents borrowed from both institutional and non- institutional. Nine respondents not borrowed from any sources was less than 7700 income group like wise ten respondents not borrowed from any sources was 7701 to 15400 income group.
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Table 5.16 Distribution of respondents by educational status and expenditure per month
Expenditure per month Less 5001 10001 15001 20001 30001 35001 Educational than to to to to to to Total status 5000 10000 15000 20000 25000 35000 40000 Less than 4 8 1 1 0 0 0 14 (10.1) 3 (9.8) (11.9) (4.3) (25.0) 17 32 15 1 4 to 6 0 1(100) 0 66 (47.8) (41.5) (47.8) (65.2) (100) 17 21 6 2 7 to 9 0 0 0 46 (33.3) (41.5) (31.3) (26.1) (50.0) 1 4 1 1 10 to 12 0 0 0 7 (5.1) (2.4) (6.0) (4.3) (25.0) 2 2 1 13 to 15 0 0 0 0 5 (3.6) (4.9) (3.0) (100) 41 67 23 4 1 1 1 total 138 (100) (100) (100) (100) (100) (100) (100) (100) Note: Figures in brackets indicate percentages
The table explains distribution of respondents in education status and expenditure per month. The expenditure Rs 5,001 to Rs 10,000 the maximum number of respondents i.e. 32 come from four to six education status and 21 respondents come from seven to nine educational statuses. The expenditure less than 5,000 the educational status of the respondents four to six was 17 respondents and seven to nine educational status 17 respondents are the same expenditure group. The expenditure greater than 15000 the educational status was less than three, and four to six.
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Table 5.17 Distribution of respondents by income group and impact of institutional credit
Impact of institutional credit Income per Land less Construction of Income Purchased Not borrow Total month house increases assets tractor No development from banks Less than 7700 9(100) 0 0 0 29 (37.2) 13 (50.0) 51(37.0) 7701 to 15400 0 3 (60.0) 9 (47.4) 0 43 (55.1) 11 (42.3) 66 (47.8) 15401 to 23100 0 2 (40.0) 5 (26.3) 0 6 (7.7) 2 (7.7) 15 (10.9) 23101 to 30800 0 0 3 (15.8) 0 0 0 3 (2.2) 30801 to 38500 0 0 1 (5.3) 0 0 0 1 (0.7) 46201 to 53900 0 0 0 1 (100) 0 0 1 (0.7) 53901 to 61600 0 0 1 (5.3) 0 0 0 1 (0.7) Total 9 (100) 5 (100) 19 (100) 1 (100) 78 (100) 26 (100) 138 (100) Note: Figures in brackets indicate percentages
The table explains the impact of institutional credit and income per month. The nine respondents in income group Rs 7,701 to Rs15, 400 stated income increases after got the institutional credit and five respondents income group Rs 15,401 to Rs 23,100 has stated income increases. Three respondents stated that they construct a house in income group Rs 7,701 to Rs 15,400 and two respondents in the income group 15401 to 23100 stated construction of house. Only one respondent stated that purchased tractor in Rs 46,201 to 53,900 income groups.
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Table 5.18 Distribution of respondents by caste and non-institutional loan
Non-institutional loan Less than 37401 to 93501 to Caste 18701 to 37400 74801 to 93500 Not borrow Total 18700 56100 112200 OC 1 (6.3) 1 (3.6) 0 0 0 7 (8.9) 9 (6.5) BC 4 (25.0) 6 (21.4) 4 (33.3) 0 0 19 (24.1) 33 (23.9) MBC 6 (37.5) 16 (57.1) 8 (66.7) 2 (100) 1 (100) 38 (48.1) 71 (51.4) SC/ST 5 (31.3) 5 (17.9) 0 0 0 15 (19.0) 25 (18.1) Total 16 (100) 28 (100) 12 (100) 2 (100) 1 (100) 79 (100) 138 (100) Note: Figures in brackets indicate percentages
The table reveals that distribution of respondents in caste and non-institutional loan. In MBC caste 16 respondents borrowed the amount Rs18, 701 to 37,400 in non-institutional sources and six respondents in BC caste borrowed the same amount in non-institutional loan four from BC caste and six from MBC caste. The maximum amount of non-institutional loan i.e. 93501 to 112200 was only one borrower from MBC caste.
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Table 5.19 Distribution of respondents by education (respondents alone) and expenditure per month
Expenditure per month Education of the Less than 10001 to 15001 to 20001 to 30001 to 35001 to 5001 to 10000 Total respondent 5000 15000 20000 25000 35000 40000 Uneducated 6 (14.6) 8 (11.9) 3 (13.0) 0 0 0 0 17 (12.3) Preliminary (1-5) 12 (29.3) 32 (47.8) 3 (13.0) 1 (25.0) 0 0 1 (100) 49 (35.5) High school (6-10) 21 (51.2) 21 (31.3) 13 (56.5) 2 (50.0) 1 (100) 1 (100) 0 59 (42.8) Higher secondary 1 (2.4) 2 (3.0) 2 (8.7) 1 (25.0) 0 0 0 6 (4.3) Degree holder 0 1 (1.5) 0 0 0 0 0 1 (0.7) Post graduate 1 (2.4) 2 (3.0) 0 0 0 0 0 3 (2.2) Professional 0 1 (1.5) 2 (8.7) 0 0 0 0 3 (2.2) Total 41 (100) 67 (100) 23 (100) 4 (100) 1 (100) 1(100) 1 (100) 138 (100) Note: Figures in brackets indicate percentages The table explains that the number of respondents in education and expenditure of the respondents. The maximum respondents i.e. 32 having preliminary education was 5001 to 10000 expenditure and 21 respondents having same expenditure in high school education. But the expenditure greater than 15000 was preliminary, high school and higher secondary educated respondent. The uneducated respondents are having expenditure up to 15000. Hence here less educated respondents more expenditure and higher educated respondents less expenditure.
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Table 5.20 Distribution of respondents by caste and institutional overdue
Institutional overdue Caste Less than 12600 12601 to 25200 25201 to 37800 37801 to 50400 75601 to 88200 No overdue total OC 0 0 0 0 0 9 (9.6) 9 (6.5) BC 3 (50.0) 8 (30.8) 0 0 0 22 (23.4) 33 (23.9) MBC 2 (33.3) 15 (57.7) 8 (100) 3 (100) 1 (100) 42 (44.7) 71 (51.4) SC/ST 1 (16.7) 3 (11.5) 0 0 0 21 (22.3) 25 (18.1) Total 6 (100) 26 (100) 8 (100) 3 (100) 1 (100) 94 (100) 138 (100) Note: Figures in brackets indicate percentages
The table reveals that distribution of respondents by caste and institutional overdue. The maximum number of overdue was 15 respondents in 12,601 to 25,200 overdue in MBC caste and eight respondents in BC in same amount of overdue. Large numbers of respondents are having overdue in this amount RS 12, 601 to RS 25, 200. Lower caste the number of respondents are having less overdue than the higher caste.
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Table 5.21 Distribution of respondents by size of the family and expenditure per month Size of the family Expenditure per month(Rs) 2 to 4 5 to 6 Above 6 Total Less than 5000 31 ( 36.5) 9 (19.1) 1 (16.7) 41 (29.7) 5001 to 10000 38 (44.7) 26 (55.3) 3 (50.0) 67 (48.6) 10001 to 15000 11 (12.9) 11 (23.4) 1 (16.7) 23 (16.7) 15001 to 20000 3 (3.5) 0 1 (16.7) 4 (2.9) 20001 to 25000 1 (1.2) 0 0 1 (0.7) 30001 to 35000 0 1 (2.1) 0 1 (0.7) 35001 to 40000 1 (1.2) 0 0 1 (0.7) Total 85 (100) 47 (100) 6 (100) 138 (100) Note: Figures in brackets indicate percentages
The table depicts that size of the family and expenditure per month. The maximum number of respondents that is 38 in two to four size of the family having the expenditure Rs5001 to Rs10, 000 and 31 respondents having less than Rs 5000 expenditure in the same size. In the case of five to six size of the family 26 respondents having expenditure of Rs 5001 to 10,000 and 11 respondents having Rs 10,001 to 15,000. The expenditure was greater than Rs 20,000 was two to four family size. It means when size of family is low and expenditure is high and vice versa. So, there is inverse relationship among the two.
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Table 5.22 Distribution of respondents by income per month and expenditure per month Expenditure per month Less than 5001 to 10001 to 15001 to 20001 to 30001 to 35001 to Income per month Total 5000 10000 15000 20000 25000 35000 40000 Less than 7700 39 (95.1) 12 (17.9) 0 0 0 0 0 51 (37.0) 7701 to 15400 2 (4.9) 55 (82.1) 9 (39.1) 0 0 0 0 66 (47.8) 15401 to 23100 0 0 12 (52.2) 3 (75.0) 0 0 0 15 (10.9) 23101 to 30800 0 0 2 (8.7) 1 (25.0) 0 0 0 3 (2.2) 30801 to 38500 0 0 0 0 1 (100) 0 0 1 (0.7) 46201 to 53900 0 0 0 0 0 1 (100) 0 1 (0.7) 53901 to 61600 0 0 0 0 0 0 1 (100) 1 (0.7) Total 41 (100) 67 (100) 23 (100) 4 (100) (100) 1 (100) 1 (100) 138 (100) Note: Figures in brackets indicate percentages The table explains the relationship between distribution of respondents by income per month and expenditure per month. The income group less than Rs7700 maximum number of respondents are having expenditure less than Rs. 5000. The income group Rs7701 to Rs 15,400 the maximum number of respondent i.e. 55 is having the expenditure of Rs 5001 to 10,000. The correlations for income and expenditure at 99 percent confidence level in two tailed test the Pearson correlation co-efficient are 0.963. There is positive relationship among income and expenditure.
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Table 5.23 Distribution of respondents by age and total institutional loan
Institutional loan Less than 65001 to 195001 to 260001 to 325001 to No institutional Respondent age Total 65000 130000 260000 325000 390000 loan Below 33 14 (18.9) 4 (19.0) 0 0 0 6 (16.2) 24 (17.4) 34 to 44 23 (31.1) 9 (42.9) 1 (100) 1 (33.3) 0 11 (29.7) 45 (32.6) 45 to 55 24 (32.4) 6 (28.6) 0 2 (66.7) 2 (100) 11 (29.7) 45 (32.6) 56 to 66 10 (13.5) 2 (9.5) 0 0 0 9 (24.3) 21 (15.2) 67 to 77 3 (4.1) 0 0 0 0 0 3 (2.2) Total 74 (100) 21 (100) 1 (100) 3 (100) 2 (100) 37 (100) 138 (100) Note: Figures in brackets indicate percentages
The table explains the distribution of respondents by age and total institutional loan. The institutional loan less than Rs 65,000 the number of respondents was high that is 74. The age group 45 to 55 the number of respondents was high i.e. 24 in less than Rs 65,000. Another highest number of respondents were 23 in 34 to 44 age group the same less than Rs 65,000. The high level of institutional loan was borrowed by age group 34 to 44 to 45 to 55. Hence middle age group is having higher institutional loan compared to low and high age group correlation.
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Table 5.24 Distribution of respondents by age and non- institutional loan Non institutional loan Less than 93501 to Respondent age 18701 to 37400 37401 to 56100 74801 to 93500 Not borrow Total 18700 112200 Below 33 3 (18.8) 4 (14.3) 2 (16.7) 0 1 (100) 14 (17.7) 24 (17.4) 34 to 44 7 (43.8) 10 (35.7) 4 (33.3) 0 0 24 (30.4) 45 (32.6) 45 to 55 5 (31.3) 9 (32.1) 4 (33.3) 1 (50.0) 0 26 (32.9) 45 (32.6) 56 to 66 1 (6.3) 4 (14.3) 2 (16.7) 1 (50.0) 0 13 (16.5) 21 (15.2) 67 to 77 0 1 (3.6) 0 0 0 2 (2.5) 3 (2.2) Total 16 (100) 28 (100) 12 (100) 2 (100) 1 (100) 79 (100) 138 (100) Note: Figures in brackets indicate percentages
The table depicts the distribution of respondents by age and non-institutional loan. The number of respondents was high in non-institutional loan in Rs 18,701 to 37,400 amounts and 12 respondents borrowed non-institutional loans in Rs 37, 401 to 56,100 amounts. In the less than 18,700 non-institutional loans 16 respondents has borrowed.
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Table 5.25 Distribution of respondents by total institutional loan and land holding size in acres Land holding size in acres .01 to 1.25 acres (marginal 1.26 to 2.50 acres Institutional loan Above 2.51 acres landless Total farmers) (small farmers) No institutional loan 7 (36.8) 11 (16.7) 10 (22.7) 9 (100) 37 (26.8) Less than 65000 11 (57.9) 48 (72.7) 15 (34.1) 0 74 (53.6) 65001 to 130000 1 (5.3) 5 (7.6) 15 (34.1) 0 21 (15.2) 195001 to 260000 0 0 1 (2.3) 0 1 (0.7) 260001 to 325000 0 1 (1.5) 2 (4.5) 0 3 (2.2) 325001 to 390000 0 1 (1.5) 1 (2.3) 0 2 (1.4) Total 19 (100) 66 (100) 44 (100) 9 (100) 138 (100) Note: Figures in brackets indicate percentages
The table explains distribution of respondents by total institutional loan and land holding size in acres. The maximum number of small farmers i.e. 48 respondents borrowed institutional loan is less than Rs 65,000 amount and large farmers 15 respondents borrowed the same amount. Institutional loan Rs 65001 to 1, 30,000 amounts was borrowed by large farmers (15 respondents). The amount greater than 1, 30,000 institutional loan was borrowed by small and large farmers.
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Table 5.26 Distribution of respondents by non institutional loan and land holding size in acres
Land holding in acres .01 to 1.25 acres (marginal 1.26 to 2.50 acres Non Institutional loan Above 2.51 acres landless Total farmers) (small farmers) Not borrow 15 (78.9) 33 (50.0) 25 (56.8) 6 (66.7) 79 (57.2) Less than 18700 1 (5.3) 11 (16.7) 3 (6.8) 1 (11.1) 15 (11.6) 18701 to 37400 1 (5.3) 15 (22.7) 11 (25.0) 1 (11.1) 28 (20.3) 37401 to 56100 2 (10.5) 6 (9.1) 3 (6.8) 1 (11.1) 12 (8.7) 74801 to 93500 0 0 2 (4.5) 0 2 (1.4) 93501 to 112200 0 1 (1.5) 0 0 1 (0.7) Total 19 (100) 66 (100) 44 (100) 9 (100) 138 (100) Note: Figures in brackets indicate percentages
The table explains distribution of respondents by land holding in acres and non-institutional loan. The maximum number of respondents are borrowed non-institutional loan was 15 respondents in Rs 18,701 to 37,400 amounts and 11 respondents borrowed the amount less than Rs 18,700. In the case of large farmers 11 respondents borrowed non-institutional loan Rs 18,701 to 37,400 amounts. Land less farmers are borrowed from non-institutional sources only. The marginal farmers 21 percent borrow only non-institutional loan.
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Table 5.27 Distribution of respondents by non institutional loan and overdue of non-institutional loan
Overdue of non institutional loan Less than 9901 to 19801 to 29701 to 39601 to Non Institutional loan Not borrow No overdue total 9900 19800 29700 39600 49500 Not borrow 0 0 0 0 0 79 (100) 0 79 (57.2) Less than 18700 6 (85.7) 1 (8.3) 0 0 0 0 9 (40.9) 16 (11.6) 18701 to 37400 1 (14.3) 10 (83.3) 7 (77.8) 0 0 0 10 (45.5) 28 (20.3) 37401 to 56100 0 1 (8.3) 2 (22.2) 6 (75.0) 1 (100) 0 2 (9.1) 12 (8.7) 74801 to 93500 0 0 0 1 (12.5) 0 0 1 (4.5) 2 (1.4) 93501 to 112200 0 0 0 1 (12.5) 0 0 0 1 (0.7) Total 7 (100) 12 (100) 9 (100) 8 (100) 1 (100) 79 (100) 22 (100) 138 (100) Note: Figures in brackets indicate percentages
The table reveals that the distribution of respondents by non-institutional loan and overdue of non-institutional loan and overdue of non- institutional loan. The number of respondents was high in Rs 18,701 to 37,400 non-institutional loan and having overdue of Rs 9,901 to 19,800. The respondents 79 are not borrowed the non-institutional and 22 respondents have no loan overdues.
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Table 5.28 Distribution of respondents by institutional loan and institutional overdue
Institutional overdue Less than 12601 to 25201 to 37801 to 75601 to Total institutional loan No overdue Total 12600 25200 37800 50400 88200 No institutional loan 37 (39.4) 0 0 0 0 0 37 (26.8) Less than 65000 44(46.8) 6 (100) 20 (76.9) 4 (50.0) 0 0 74 (53.6) 65001 to 130000 9 (9.6) 0 6 (23.1) 4 (50.0) 2 (66.7) 0 21 (15.2) 195001 to 260000 1 (1.1) 0 0 0 0 0 1 (0.7) 260001 to 325000 1 (1.1) 0 0 0 1 (33.3) 1 (100) 3 (2.2) 325001 to 390000 2 (2.1) 0 0 0 0 0 2 (1.4) Total 94 (100) 6 (100) 26 (100) 8 (100) 3 (100) 1 (100) 138 (100) Note: Figures in brackets indicate percentages
The table depicts distribution of respondents by institutional loan and institutional overdue. The maximum respondents i.e. 20 borrowed less than Rs 65,000 loan amount and having overdue of Rs 12,601 to 25,200. The institutional loan greater than Rs 1, 30,000 the overdue was higher amount. Hence large farmers having more amount of overdue compared to small farmers.
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Table 5.29 Distribution of respondents by caste and educational status of the respondent family Educational status of the respondent family caste Less than 3 4 to 6 7 to 9 10 to 12 13 to 15 total OC 1 (7.1) 5 (7.6) 2 (4.3) 1 (14.3) 0 9 (6.5) BC 0 16 (24.2) 15 (32.6) 0 2 (40.0) 33 (23.9) MBC 8 (57.1) 33 (50.0) 25 (54.3) 4(57.1) 1 (20.0) 71 (51.4) SC/ST 5 (35.7) 12 (18.2) 4 (8.7) 2 (28.6) 2 (40.0) 25 (18.1) total 14 (100) 66 (100) 46 (100) 7 (100) 5 (100) 138 (100) Note: Figures in brackets indicate percentages The table explains the distribution of respondents from caste and educational status of the respondents family. The number of respondents i.e. 66 is having four to six education statuses. 46 respondents are having educational status of seven to nine. In the case of ten to 12 educational status the number of respondents is only seven and 13 to 15 educational statuses the number of respondents are only five.
Table 5.30 Distribution of respondents by size of the family and educational status of the respondents‟ family Educational status of the respondent family Size of the Less than 3 4 to 6 7 to 9 10 to 12 13 to 15 total family 2 to 4 10 (71.4) 41 (62.1) 26 (56.5) 3 (42.9) 5 (100) 85 (61.6) 5 to 6 4 (28.6) 23 (34.8) 16 (34.8) 4 (57.1) 0 47 (34.1) Above 6 0 2 (3.0) 4 (8.7) 0 0 6 (4.3) Total 14 (100) 66 (100) 46 (100) 7 (100) 5 (100) 138 (100) Note: Figures in brackets indicate percentage The table explains the size of family and educational status of the respondents‟ family. The numbers of respondents are high in 4 to 6 educational status and size of the family two to four. 23 respondents are having same educational status with five to six family sizes. There is a relationship between the size of the family and educational status. Size of the family is less, higher the educational status and vice versa.
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Table 5.31 Distribution of respondent by caste and Occupation Occupation Landless Agriculture Caste Land less agriculture and allied and allied Total activities activities OC 0 5 (11.9) 0 4 (4.6) 9 (6.5) BC 1 (14.30 16 (38.1) 1 (50.0) 15 (17.2) 33 (23.9) MBC 2 (28.6) 12 (28.6) 0 57 (65.5) 71 (51.4) SC/ST 4 (57.1) 9 (21.4) 1 (50.0) 11 (12.6) 25 (18.1) Total 7 (100) 42 (100) 2 (100) 87 (100) 138 (100) Note: Figures in brackets indicate percentages
The table depicts the distribution of respondents by occupation and caste. The maximum number of respondents i.e. 87 engaged in agriculture and allied activities. Forty two respondents are engaged only in agriculture and two are land less engaged in allied activities. The maximum number of respondents 57 engaged in agriculture and allied activities are from MBC caste and 15 from BC caste. The maximum number of respondents is engaged in agriculture come from BC caste and 12 from MBC caste. The land less the seven respondents engaged in other than agriculture. The maximum number of respondents in land less is SC/ST.
Table 5.32 Distribution of respondents by caste and commercial bank loan Total commercial loan caste No ommercial Less than 69001 to 138001 to 276001 to Total loan 69000 138000 207000 345000 OC 4 (7.1) 5 (7.4) 0 0 0 9 (6.5) BC 13 (23.2) 16 (23.5) 2 (25.0) 1 (50.0) 1 (25.0) 33 (23.9) MBC 24 (42.9) 37 (54.4) 6 (75.0) 1 (50.0) 3 (75.0) 71 (51.4) SC/ST 15 (26.8) 10 (14.7) 0 0 0 25 (18.1) Total 56 (100) 68 (100) 8 (100) 2 (100) 4 (100) 138 (100) Note: Figures in brackets indicate percentages
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The table explains the distribution of respondents from caste and commercial loan. The maximum number of respondents i.e. 68 borrowed less than Rs 69, 000 loan amount. Out of this 37 respondents are from MBC caste, 16 from BC and ten from SC/ST. The commercial bank loan amount Rs 69, 001 to 1, 38,000 only eight respondents borrowed. Higher loan amount was borrowed by MBC and BC caste. Because they have the land hence there is a direct relationship among caste and loan amount.
Table 5.33 Distribution of respondents by caste and co-operative loan
Total co-operative loan No co- Less than 20701 to 41401 to 62101 to 82801 to Caste operative Total 20700 41400 62100 82800 103500 loan OC 7 (8.0) 1 (5.6) 1 (5.3) 0 0 0 9 (6.5) BC 22 (25.3) 5 (27.8) 2 (10.5) 1 (12.5) 2 (40.0) 1 (100) 33 (23.9) MBC 36 (41.4) 10 (55.6) 15 (78.9) 7 (87.5) 3 (60.0) 0 71 (51.4) SC/ST 22 (25.3) 2 (11.1) 1 (5.3) 0 0 0 25 (18.1) Total 87 (100) 18 (100) 19 (100) 8 (100) 5 (100) 1 (100) 138 (100) Note: Figures in brackets indicate percentages
The table explains the distribution of respondents‟ caste and co-operative loan. The number of respondents not having co-operative loan are 87. The maximum number of respondents that is 15 borrowed the loan amount in co-operatives are Rs 20,701 to 41,400 come from MBC caste and other caste it was meager amount. In the case of loan amount less than Rs20, 700 the number of respondents was high i.e. ten come from MBC caste and five from BC. The number of respondents in co-operative loan was low compared to commercial bank.
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Table 5.34 Distribution of respondents by Nature of house and caste Nature of house OC BC MBC SC/ST Total Rent 1 (11.1) 0 1 (1.4) 0 2 (1.4) Thatched 0 5 (15.2) 4 (5.6) 11 (44.0) 20 (14.5) Tailed 5 (55.6) 13 (39.4) 27 (38.0) 3 (12.0) 48 (34.8) Concrete 3 (33.3) 9 (27.3) 29 (40.8) 1 (4.0) 42 (30.4) Thatched & concrete 0 1 (3.0) 0 0 1 (0.7) Tailed & concrete 0 5 (15.2) 10 (14.1) 0 15 (10.9) Thohuppu house 0 0 0 6 (24.0) 6 (4.3) Tailed & thohuppu 0 0 0 3 (12.0) 3 (2.2) Government land kottagai 0 0 0 1 (4.0) 1 (0.7) Total 9 (100) 33 (100.0) 71 (100.0) 25 (100) 138 (100) Note: Figures in brackets indicate percentages The table reveals that distribution of respondents by occupation and caste. In MBC caste the maximum number of respondents are having concrete house i.e. 29 and 27 respondents are having tailed house. Ten respondents have both tailed and concrete houses. In BC caste the maximum numbers of respondents are having tailed and concrete i.e. 13 and nine. Thohuppu house means the amount gave by the government to SC/ST group for construct a house. The amount is 30,000 and it has increased to Rs 50,000. Some time the government will give constructed house. In study area the SC/ST people stated that they will sell the house to the other caste people.
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Table 5.35 Distribution of respondents by caste and wet land
.01 to 1.25 Above 2.51 1.26 to 2.50 acres Caste Land less acres(marginal acres (large No wet land Total (small farmers) farmers) farmers) OC 0 1 (2.1) 5 (11.9) 2 (6.5) 1 (12.5) 9 (6.5) BC 2 (22.2) 9 (18.8) 9 (21.4) 10 (32.3) 3 (37.5) 33 (23.9) MBC 2 (22.2) 26 (54.2) 23 (54.8) 19 (61.3) 1 (12.5) 71 (51.4) SC/ST 5 (55.6) 12 (25.0) 5 (11.9) 0 3 (37.5) 25 (18.1) Total 9 (100) 48 (100) 42 (100) 31 (100) 8 (100) 138 (100) Note: Figures in brackets indicate percentages to the column total.
The table explains that distribution of respondents by caste and wet land. Land less are high in SC/ST caste compare to other caste. The number of respondents is high marginal farmers in MBC caste. The number of respondents in small farmers and large farmers are less than the marginal farmers but higher than the other caste respondents. Eight respondents stated that no wet land.
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Table 5.36 Distribution of respondents by caste and dry land
Above 5.01 .01 to 2.50 acres 2.51 to 5 acres( small Caste Land less acres(large No dry land Total (marginal size) size) size) OC 0 6 (7.7) 1 (3.2) 0 2 (12.5) 9 (6.5) BC 2 (22.2) 21 (26.9) 3 (9.7) 1 (25.0) 6 (37.5) 33 (23.9) MBC 2 (22.2) 38 (48.7) 22 (71.0) 3 (75.0) 6 (37.5) 71 (51.4) SC/ST 5 (55.6) 13 (16.7) 5 (16.1) 0 2 (12.5) 25 (18.1) Total 9 (100) 78 (100) 31 (100) 4 (100) 16 (100) 138 (100) Note: Figures in brackets indicate percentages
The table depicts that distribution of respondents by caste and dry land. The number of respondents is high in marginal size of land holding and small size of land holding. It was 38 and 22 respectively come from MBC caste. Sixteen respondents stated that not having dry land. The above5.01 acres only four farmers are there.
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Table 5.37 Caste-wise flow of credit from different sources Caste Total Total co- Borrow from Borrow from commercial loan operative loan institutional non-institutional OC 1,63,000(5) 50,000(2) 2,13,000(6) 40,000(2) BC 11,66,000(20) 4,40,000(11) 16,06,000(23) 3,80,000(14) MBC 27,60,000(47) 11,80,500(35) 39,40,500(61) 10,60,000(33) SC/ST 2,25,000(10) 47,000(3) 2,72,000(11) 1,60,000(10) Grand total 43,14,000 (82) 17,17,500(51) 60,31,500(101) 16,40,000(59) Note: figure in brackets indicates number of borrowers The table depicts that caste-wise flow of credit from different sources. The number of respondents borrow from institutional loan was 101. Out of this 46 borrow from institutional and non-institutional. In the case of non-institutional loan the number of respondents borrows from non-institutional loan were 59. Out of this 46 borrow from institutional sources. In the case of total commercial loan 82 respondents has borrowed. 51 borrow from co-operative loan. The amount advance by commercial bank was high compared to co-operative loan and total institutional loan was higher than non-institutional loan amount. Table 5.38 Caste-wise overdue of different sources Caste Borrow from Overdue of non- Total Institutional non-institutional institutional institutional overdue loan OC 40,000(2) 25000(1) 2,13,000(6) 0 BC 3,80,000(14) 1,58,000(8) 16,06,000(23) 2,05,000(11) MBC 10,60,000(33) 4,20,000(22) 39,40,500(61) 7,90,000(29) SC/ST 1,60,000(10) 79,000(6) 2,72,000(11) 67,000(4) Grand total 16,40,000(59) 6,82,000(37) 60,31,500(101) 10,62,000(44) Note: figure in brackets indicates number of borrowers The table explains that caste-wise overdue of different sources. When we compare the institutional loan with institutional overdue, the percentage of overdue was 17.6 percent. But in the case of non-institutional loan with non-institutional overdues was 41.6 percent. Due to the higher rate of interest in non-institutional sources the farmers unable to repay, the loan amount. They are still suffering from high rate of interest and clutches of money lender.
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Accessibility of agricultural credit Types of credit and duration period Types of needs Credit used for Time period Non recurring Purchase of land ,construction Long term (i.e.) 5 to 10 (i) Occupational and repairs of well, other years or more irrigation facilities, purchase of farm implements, their repairs, purchase of any other loan term assets like buffaloes, goats , cows, bullocks or transport equipments etc. (ii) Non occupational Social functions, birth, death, Long term up to 5 years marriage and religious or more. ceremony buying of gold or silver ornaments, purchase, construction or major repairs of dwelling units. Recurring Acquisition of agricultural Medium-term up to one (i) occupational inputs such as seeds, year and in some castes fertilizers etc, payment of more than one year but wages, land revenue, hire not exceeding 5 years. charges for using some agricultural machinery repayment of borrowed funds (installments and interest for that) etc. (ii) Non occupational Purchase of food, clothes, Short period not utensils, medical and exceeding one year. education expenses house rent, transportation expenditure and other day to day domestic expenditure. Note: Types of credit classification followed from Gupta S.C. (1987)
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1. To identify the different types of needs for which farmers generally require credit. 2. Find out the extent to which rural people have an access to institutional credit (i.e.) the extent to which they have obtained credit. 3. Ascertain the degree of relationship that may exist between accessibility of credit and characteristics of the beneficiaries such as caste, education, income, purpose and land holding etc. 4. Assess the impact of credit on earnings of the borrowing households (i.e.) the extent to which earnings increased due to the use of credit
Farmers require credit different needs of credit and used the credit different purposes. These needs are classified two types. They are non-recurring and recurring, occupational and non-occupational. If we judge this data in terms of Maslow hierarchy of needs the most pressing needs are recurring consumption needs. The non recurring occupational needs will receive attention only if the recurring consumption needs are reasonably well satisfied.
Table 5.39 Distribution of credit by sources of loan Credit Agency No. of Borrowers Amount of Borrowings Institutional Sources 55(48.2) 31,23,000(40.7) Non-Institutional Sources 13(11.4) 3,60,000(4.7) Both (Institutional & Non- 46 (40.4) 41,88,500 Institutional) (54.6) Total 114 (100) 76,71,500(100) Note: out of 138 respondents the borrowers are 114 and 24 respondents not borrowing from any sources.
Respondents in the study area borrow from institutional sources alone 48.2 percent i.e. 55 respondents. Likewise borrow from non-institutional alone 13 respondents (11.4 percent). But 46 respondents borrow from both institutional and non-institutional sources. In percentage term it is (40.4 percent). Respondents borrowed from institutional sources alone 31, 23,000 (i.e.) 40.7. But in the case of respondents borrow from both sources (i.e.) institutional and non-institutional the
165 amount was 41, 88,500. Hence it is greater than the respondents borrowed from institutional sources alone. But respondents borrowed from non-institutional sources alone only meager amount (4.7 percent). The main aim of the study is to find out the availability of credit, repayment behavior of the borrowers from institutional sources and non-institutional sources. So the respondents classified only institutional and non- institutional sources then 101 respondents from institutional sources and 59 respondents from non-institutional sources. This overwhelming proportion of institutional finance indicates a considerable degree of accessibility these institutions to these households. Table 5.40 Distribution of credit by sources of loan institutional and non-institutional loan only Credit Agency No. of Borrowers Amount of Borrowings Institutional Sources 101 60,31,500 Non-institutional Sources 59 16,40,000 Total 160 76,71,500
Distribution of credit by social groups and sources of loan In institutional credit out of 101 respondents the major portion of respondents (i.e.) 61 from Oorali gaundor. Second major portion of respondents are Moopanar i.e. 23 and 11 from SC/ST castes. In the case of amount borrowed from institutional sources 65.5 percent has borrowed by Oorali gaundor and 26.5 percent amount had borrowed by Moopanar and 4.5 by SC/ST. In non-institutional credit out of 59 respondents the major portion of respondent (i.e.) 33 from Oorali gaundor and 14 from Moopanar castes and 10 from SC/ST castes. In the case of amount borrowed from non-institutional sources 64.6 percent amount has borrowed by Oorali gaundor and the second major group has borrowed from non-institutional sources by Moopanar (i.e.) 23.2 percent and only 9.8 percent of amount has borrowed by SC/SC castes.
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Table 5.41 Distribution of respondents by caste name and sources Non Non institutional Institutional loan Institutional Caste name institutional loan (percentage to loan loan (percentage to total) total) Oorali 10,60,000(33) 64.6 39,40,500(61) 65.3 gaundor Moopanar 3,80,000(14) 23.2 16,06,000(23) 26.6 Yadhava 30,000(1) 1.8 95,000(3) 1.6 Muslim 0 0 45,000(1) 0.7 Rettiar 0 0 73,000(2) 1.2 Chettiar 10,000(1) 0.6 0 0 Sc/st 1,60,000(10) 9.8 2,72,000(11) 4.6 Total 16,40,000(59) 100 60,31,500(101) 100 Note: figures in brackets indicate no. of respondents
Distribution of credit by land holding and sources Major portion of credit has provided to the small farmers (1.26 to 2.5 acres). Out of the 101 respondents received institutional credit 55 respondents borrowed from institutional sources. Landless respondents not borrowed from institutional sources. Out of the nine landless respondents three has borrowed from non-institutional sources. Non-institutional sources also highest borrowers are small farmers (33 respondents). Marginal farmers are out of 19 respondents 12 persons has received institutional credit. Institutional credit from marginal farmers in the study area is only provided by commercial bank (union bank of India). Because Primary Agricultural credit society (PACs) has not provided loan to the marginal farmers. Out of 19 respondents four persons has borrowed from non-institutional sources. In the case of large farmers 34 respondents has received institutional credit and 19 from non- institutional sources. In the case of institutional credit number of respondents in small farmers are received credit is high compare to number of respondents received credit in large farmers. But the amount of institutional credit is high in the case of large farmers compare to small farmers (i.e.) 34 respondents in large farmers received 49.7 percent credit than the 55 respondent in small farmers received 44.6 percent credit.
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Table 5.42 Distribution of respondents by land holding size and sources Non Non institutional Institutional Land holding Institutional institutional loan loan (percentage size loan loan (percentage to to total) total) Land less 70,000 (3) 4.3 0 0 .01 to 1.25 acres (marginal 1,20,000(4) 7.3 3,45,000(12) 5.7 farmers) 1.26 to 2.50 acres (small 8,65,000(33) 52.7 26,72,500(55) 44.3 farmers) Above 2.51 acres (large 5,85,000(19) 35.7 30,14,000(34) 50.0 farmers) Total 16,40,000(59) 100 60,31,500(101) 100 Note: figures in brackets indicate number of respondents
Table 5.43 Distribution of credit by purpose and source
Purpose of No. of borrowers Amount of Amount in borrowings (Institutional) borrowings percentage Crop loan 90 22,85,000 37.8 Cow loan 52 10,93,000 18.1 Bullock loan 3 43,500 0.8 Jewel loan 43 13,50,000 22.4 Pipe loan 2 3,50,000 5.8 Land leveling 2 2,10,000 3.5 Housing loan 3 7,00000 11.6
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In the study area commercial bank has provided crop loan, cow loan, jewel loan, pipe loan, land leveling, housing loan etc. This bank has focus major portion of credit to the crop and cow. Regarding crop loan 51 respondents has borrowed 14, 03,000 amount. In the case of cow loan 38 respondents has borrowed 8, 23,000 amount. Another loan was jewel loan borrowed by 28 respondents 82, 8000 Rs. Pipe loan, land leveling and housing loan respectively two, two and three. Likewise in the case of co-operative bank in the study area has provided crop loan, cow loan, goat loan, tractor loan, bullock loan and jewel loan. Here also major number of credit i.e. 40 respondents to the crop loan and cow loan was 14 respondents and jewel loan, bullock loan respectively 15 and three respondents. Both the banks union bank of India and Primary agricultural Credit Society are provided tractor loan but the sample respondents on our study area not borrowed.
If add all the purposes of commercial bank and co-operative bank separately then 82 respondents have borrowed 43, 14,000 in commercial bank. Likewise in the case of total co-operative loan 51 respondents has borrowed 17, 17,500. In commercial bank in the study are has not provided loan to the land less and co- operative bank has not provided loan to the land less and also marginal farmers. So, they go for non-institutional sources like money lenders. Hence the availability of institutional sources not reached the each farmer in the study area. The proverb also true in the case of institutional credit rich will become riches and poor will become poorer.
In the case of purpose wise sources of loan jointly (co-operative bank and commercial bank) i.e. total institutional credit then crop loan alone was 22, 85,000 i.e. 37.8 percent and cow loan was 52 respondents jointly 10, 93,000 i.e. 18.1 percent. In the case of jewel loan 43 respondent has borrowed 13, 50,000 amount (i.e.) 22.4 percent. When we compare the cow loan and jewel loan number of respondent was high in the case of cow loan (i.e.) 52 than the jewel loan (43). But the borrowed amount high in the case of jewel loan compared to cow loan i.e. 13,50,000 in jewel loan and the 10,93,000 in the cow loan.
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In the case of purpose wise borrowing from non-institutional sources explained that out of the 59 respondents major number of person (i.e.) 37 (62.7 percent ) borrowed from non-institutional sources for consumption purposes, nine respondents borrowed to purchase fertilizers. Out of the 59 respondents major percentage (i.e.) 76.3 percent borrowed loan from non-institutional sources for unproductive purposes (i.e.) consumption and marriage purposes. The total non institutional sources was 16, 40,000. Due to the easy and timely availability of credit in non-institutional sources to meet day to day expenses and unexpected expenses like marriage etc.
Distribution of credit by rate of Interest In co-operative banks the interest rate for crop loan is seven percent in Rs 70 paise during the study period (2007-08). But the rate of interest for jewel loan for jewel loan is 14 percent during the study period. But it has reduced to one rupee and 25 paise during 2007-08. If the farmers ask loan for agricultural purposes then the interest rate is 75 paise. In co-operative banks loan waiving was announced during 2005. Hence up to 31.3.2006 not repaid the loan amount was waived by the government. After that the Central Government announced that if the loan is properly repaid at the particular time then rate of interest was not charged for the borrowers. If the loan delayed only one day after the date of repayment the same interest rate (original interest rate fixed by the Governement) will be charged for the borrowers. In the case of commercial bank rate of interest is low compared to co-operative bank except crop loan.
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Table 5.44 Rate of interest and institutional loan amount from different sources (Amount in Rupees) Commercial bank Co-operative bank Purpose Interest No. of Amount Interest No. of Amount Total of loan rate respondent of loan rate respondent of loan amount Crop 75 51 14,03,000 70 40 8,82,000 22,85,000 loan paise (61.4) paise (38.6) (48.3) Cow 95 38 8,23,000 1.25 14 2,70,000 10,93,000 loan paise (75.3) paise (24.7) (23.1) Jewel 1.10 28 8,28,000 1.25 15 5,22,000 13,50,000 loan paise (61.3) paise (38.7) (28.6) Note: Total amount percentage is percentage to the column total Amount of loan is percentage to the Row total.
The table depicts that rate of interest amount of loan in institutional sources. There is an indirect relationship among rate of interest and amount of loan. Lower the interest rate and higher the amount of loan and vice versa. Number of respondents is higher in crop loan compared to cow loan in both the banks. The total percentage share of crop loan is greater (48.3 percent compared to other loan. The total percentage of jewel loan is 28.6 percent and cow loan is 23.1 percent. In the case of commercial bank crop loan is percentage of amount of loan (61.4 percent) is higher than the percentage of amount of crop loan (38.6 percent) in co-operative bank. In commercial bank the number of respondents is higher in cow loan compared to jewel loan but the amount was higher in jewel loan compared to cow loan.
Repayment performance Financing and recovery represent two sides of the same coin. Financing without recovery bears no fruits and recovery without financing has no seeds. These two aspects are inter-linked interdependent and inseparable. Recovery of loans assumes greater importance in the sound functioning of banks. Timely recovery of loans strengths the resource position of banks and enables them to disbursed loan in time. Recovery of loans in time with minimum number of defaulters not only easeto
171 improve borrowing power from financing institution but also enables the bank to advance maximum amount of loans to the borrowers. On the other hand, poor recovery not only results in maximum number of defaulters and overdues but also reduces the borrowing power, consequently reduction in the turnover of loan. The impact of repayment behavior is essential for continuous of recycling of funds. The present chapter explains assess the repayment performance behavior of the borrowing households. The higher the level of overdues of rural credit institutional agencies will hinder the expansion of their coverage and lending. Poor recovery performance will affect the progress of these institutions and ineligibility to draw fresh finance from the refinancing agencies. Most of the rural credit institutional agencies in the study area are plagued with this problem of non-recovery of credit extended, an attempt has been made first to study the pattern of overdues by source, caste, income, landholding, purpose of borrowings and second, to analyze the factors responsible for the repayment performance of the borrowing households.
Table 5.45 Source wise distribution of overdues
Sources of No. of Amount of No. of Amount Col. 4 Col. 5 credit borrowing borrowings households of as as households with overdues percent percent overdues of col. of 2 col.3 1 2 3 4 5 6 7 Institutional 101 60,31,500 44 10,62,000 43.6 17.6 (63.1) (78.6) (54.3) (60.9) Non- 59 16,40,000 37 6,82,000 62.7 41.6 institutional (36.9) (21.3) (45.7) (39.1)
Total 160 76,71,500 81 17,44,000 50.6 22.7 (100) (100) (100) (100)
Note: 46 borrowers borrow from both institutional and non-institutional. Due to this total number of borrowing households are 160 instead of 114.
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The table presents the position of overdues of the borrowing households. Forty nine percent of the borrowers repaid their loan full amount and the remaining was overdues (50.6 percent). In the case of overdues (judged in terms of amount of loan remaining unpaid) was 22.6 percent of total lending. In the case of distribution of overdues according to the source the table indicates that 43.6 percent of institutional borrowers reported overdues. It means 56.4 percent of borrowers repay the loan amount in full. In the case of amount of institutional loan remaining unpaid is worked out 17.6 percent. It means that recovery rate was 82.4 percent. The position of overdues towards the non-institutional agency presents that 37.3 percent repaid their loan full. It means 62.7 percent not repaid their loan. It shows that non- institutional overdues were high compared to the institutional sources. In the case of amount of non-institutional loan remaining unpaid was 41.6 percent. It means recovery rate was 58.4 percent. Recovery rate also high in the case of institutional sources compared to non-institutional sources.
Within the institution the overdue of commercial bank alone 30 respondents and overdue of co-operative bank alone 17 respondents. But in this study needed total institutional overdue. Hence it shows 44 respondents having overdues. Because three respondents having overdues both the institutions (commercial bank and co-operative bank). In the case of amount of overdue within institution the percentage of overdue is high in commercial bank (69.1percent) compared to co-operative bank (30.9 percent) In the case of bank statement in commercial bank shows 14 percent overdue during 2004-05. After that due to non-availability of secondary information the researchers not compared. In study area co-operative bank (2001-02 to 2004-05) secondary information stated that no overdue (100 percent recovery). But 2005-06 government waives the loan amount. After that the overdue was slowly increased in co-operative bank stated by bank manager PACB (Primary Agricultural Co-operative Bank)
Distribution of overdues by landholding Generally the size of land holding indicates repaying capacity of a borrower. That is the larger the land holdings, lower is the overdues or vice versa. Land less are not get loan from institutional sources but they borrowed from non-institutional sources only. The overdues of landless borrowers from non-institutional sources were 173
33.3 percent. Both institutional and non-institutional sources jointly overdues borrowers are high in small farmers. Next to small farmers number of borrowers in both the sources was high in marginal farmers. But within the institution the institutional overdue was very low in marginal farmers and high in small farmers (49.1 percent). It means they repaid 50.9 percent. In the case of non-institutional borrowers overdues was very low in landless borrowers. Marginal farmers not repaid the loan amount fully. It means 100 percent overdue. In the case of small farmers numbers of overdues borrowers are high in non-institutional sources (75.8 percent) than the institutional sources (49.1 percent). But in large farmers‟ number of borrowers having overdue was high in institutional sources (41.2 percent) than the non-institutional sources. They have only 36.8 percent Overdue in non-institutional sources. It was due to high rate of interest in non-institutional loan compared to institutional sources. Even though they are having more income they are not willing to repay institutional sources. Hence they are come under willful defaulters. The overdue of institutional sources in all categories of farmers shows less compared to non-institutional sources. The non-institutional sources particularly money lenders still dominating and exploiting the farmers. In the case of amount of overdues with the total borrowings the amount was high in marginal farmers (31.4 percent). In the case of non-institutional loan it was 82.5 percent of amount was overdue. The amount of overdue was high in small farmers (20.9 percent) in institutional sources but less than the non-institutional sources overdue (52.9 percent). In the case of large farmers the amount of overdue was slightly less in institutional sources compared to non- institutional overdue. The total amount of overdue in institutional sources all categories of farmers less (17.5 percent) compared to non-institutional sources overdue (41.6 percent).
Distribution of overdues by social groups In the study area major number of people 51.4 percent from Oorali gaundor. In the case of number of respondents are having overdues in both the sources particularly in Oorali gaundor 54.3 percent. Next to them the number of respondents having overdues in Moopanar group 51.4 percent and third group is SC/ST 47.6 percent. In the case of institutional alone the number of respondents having overdue was high in Moopanar caste (47.8 percent). It was slightly low in Oorali gaundor 47.5 percent. The borrowers belonging to lower caste scheduled castes having a lower 174 status in the social hierarchy who are referred to as the rural disadvantage (Gupta S.C. 1987). The number of respondents having overdues in this group in institutional sources is 36.4 percent only. The other castes Muslim, Rettiar, Chettiar meager number only and they are not having overdue. In the case of non-institutional sources all the group having overdue greater compared to institutional sources. In the case of institutional sources SC/ST group better repayment compared to other groups. The other groups of borrowers have good contacts with lending agencies. So that better accessibility of credit to them and defaulting behavior is also high towards repayment. In the case of amount of overdues both institutional and non-institutional the percentage was high SC/ST group i.e. 37.8 percent. The second group was 24.1 percent. If we compared both institutional and non-institutional the percentage of amount of overdue was less in institutional sources than the non-institutional sources. In the case of institutional sources alone the percentage of amount of overdue was high in SC/ST groups 24.6 percent. The non-institutional overdue was also high in SC/ST, yadhava, moopanar. Due to non availability of institutional credit to each farmer they borrow from non-institutional sources and faced lot of problems in the study area.
Overdues and educational background of the borrower Normally educated person have a better awareness about the environment and the ways in which the borrowed funds can be effectively utilized. In order to know the impact of borrower‟s education on his repayment behavior, data collected in this regard were tabulated. Rank has given to the educational status of the respondents and his family i.e. illiterate means zero, high school and higher secondary means two, degree holder and post graduate means three and professional means four. These ranks are given and calculated to the total family for each and every respondent. Number of respondent having overdues in both institutional and non-institutional are high in higher secondary and post graduate. If we compare institutional and non- institutional sources the number of respondent having overdue was high in higher secondary, post graduate, and professional in institutional sources. The number of respondents in lower education the percentage of borrowing was high in non- institutional sources due to higher rate of interest not repaid. Higher education like post graduate, professional not borrowed from non-institutional sources. In the case of amount of borrowings in institutional sources higher educated people i.e. post 175 graduate, professional having higher overdues compared to other education groups. In the case of illiterate the percentage of amount of overdue was very low in institutional sources. It shows that education of the borrower play a very significant role in determining his repayment behavior. The percentage of overdues to borrowings increases with the increase in the proportion of educated borrowers. It also increases with the level of education. Hence better educated people having better contacts with the lending agencies and they utilizes their contacts in protecting his defaulting behavior and they also not borrow from the non institutional sources due to high rate of interest. Hence illiterate and low educated people having lower overdues in institutional sources and borrow from non-institutional sources and they faced the problems
Distribution of overdues by income levels In the case of amount of overdues in institutional credit the overdue was high in middle income groups. The lower income groups and higher income groups having less overdue in institutional credit. But the income greater than higher income groups the overdue was high in institutional credit. But in the case of non-institutional credit the overdue was high in low income group. But income greater than higher income groups no overdue in non-institutional credit. Hence the lower income groups mainly affected due to non-repayment of non-institutional credit. But the middle income and higher income groups having higher overdues in institutional credit
Distribution of overdues by size of the family The repayment behavior of the borrower is some extent depends upon family size (Gupta S.C., 1987). In institutional credit the number of respondents having overdue was high in medium size of family (four to six) i.e. 46.7 percent and number of respondents having overdue was very low in small size of family (one to three) i.e. 33.3 percent. But the non-institutional credit the number of respondents having overdue was high in large size family (seven to nine) i.e. (66.7) and very low in small size of family (one to three) i.e. 58.3 percent. Hence in non-institutional credit there is a direct relationship among size of family and overdue. In the case of institutional credit amount of overdue was high in medium size of family i.e. 18.1 percent and amount of overdue was very low in small size of family i.e.15.3 percent. The same trend also reveals in amount of overdue in non-institutional credit. 176
Table 5.46 Distribution of overdues by land holdings No. of borrowing No. of households with Amount of borrowing (in rupees) Amount of overdues (in rupees) households overdues Land holding Non- Non- Non- Inst. total Inst. Non-inst. total Inst. total Inst. total (in acres) inst. inst. inst. 1 2 3 4 5 6 7 8 9 10 11 12 13 Land less 0 3 3 0 70,000 70,000 0 1 1 0 20,000 20,000 .01 to 1.25 12 4 16 3,45,000 1,20,000 4,65,000 3 4 7 47,000 99,000 1,46,000 (marginal f) 1.26 to 2.50 55 33 88 26,72,500 8,65,000 35,37,500 27 25 52 5,64,000 4,58,000 10,22,000 (small f) Above 2.51 34 19 53 30,14,000 5,85,000 35,99,000 14 7 21 4,51,000 1,05,000 5,56,000 (large f) Total 101 59 160 60,31,500 16,40,000 76,71,500 44 37 81 10,62,000 6,82,000 17,44,000
Col. 8 as Land holding Col. 10 as Col. 9 as percent of Col. 13 as percent Col. 11 as percent Col.12 as percent of (in acres) percent of col.4 col.3 of col.7 of col.5 percent of col.6 col.2 1 14 15 16 17 18 19 Land less 33.3 0 33.3 28.6 0 28.6 .01 to 1.25 (marginal f) 43.8 25 100 31.4 13.6 82.5 1.26 to 2.50 59.1 49.1 75.8 28.9 21.1 52.9 (small f) Above 2.51 39.6 41.2 36.8 15.4 14.9 17.9 (large f) Total 50.6 43.6 62.7 22.7 17.6 41.6
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Table 5.47 Distribution of overdues by social groups No. of borrowing No. of households with Amount of borrowings (in rupees) Amount of overdues (in rupees) households overdues Non- Non- Caste name Inst. total Inst. Non-inst. total Inst. total Inst. Non-inst. total inst. inst. 1 2 3 4 5 6 7 8 9 10 11 12 13 Oorali 61 33 94 39,40,500 10,60,000 50,00,500 29 22 51 7,90,000 4,20,000 12,10,000 gaundor Moopanar 23 14 37 16,06,000 3,80,000 19,86,000 11 8 19 2,05,000 1,58,000 3,63,000 Yadhava 3 1 4 95,000 30,000 1,25,000 0 1 1 0 25,000 25,000 Muslim 1 0 1 45,000 0 45,000 0 0 0 0 0 0 Rettiar 2 0 2 73,000 0 73,000 0 0 0 0 0 0 Chettiar 0 1 1 0 10,000 10,000 0 0 0 0 0 0 Sc/st 11 10 21 2,72,000 1,60,000 4,32,000 4 6 10 67,000 79,000 1,46,000 Total 101 59 160 60,31,500 16,40,000 76,71,500 44 37 81 10,62,000 6,82,000 17,44,000
Col. 10 as percent Col. 8 as percent Col. 9 as percent of Col. 13 as percent Col. 11 as percent Col.12 as Caste name of col.4 of col.2 col.3 of col.7 of col.5 percent of col.6 1 14 15 16 17 18 19 Oorali gaundor 54.3 47.5 66.7 24.2 20.0 39.6 Moopanar 51.4 47.8 57.1 18.3 12.8 41.6 Yadhava 25 0 100 20 0 83.3 Muslim 0 0 0 0 0 0 Rettiar 0 0 0 0 0 0 Chettiar 0 0 0 0 0 0 Sc/st 47.6 36.4 60 37.8 24.6 49.4 Total 50.6 43.6 62.7 22.7 17.6 41.6
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Table 5.48 Distribution of overdues by Educational status No. of borrowing No. of households with Amount of borrowings (in rupees) Amount of overdues (in rupees) households overdues Education Non- Non- Inst. total Inst. Non-inst. total Inst. total Inst. Non-inst. total status inst. inst. 1 2 3 4 5 6 7 8 9 10 11 12 13 Less than 3 5 6 11 1,77,000 2,25,000 4,02,000 2 6 8 30,000 1,30,000 1,60,000 4 to 6 47 32 79 25,46,000 7,70,000 33,16,000 21 19 40 4,23,000 3,42,000 7,65,000 7 to 9 41 19 60 24,65,500 5,25,000 29,90,500 18 11 29 5,02,000 2,000,00 7,02,000 10 to 12 5 1 6 6,98,000 80,000 7,78,000 2 0 2 85,000 0 85,000 18 to 15 3 1 4 1,45,000 40,000 1,85,000 1 1 2 22,000 10,000 32,000 Total 101 59 160 60,31,500 16,40,000 76,71,500 44 37 81 10,62,000 6,82,000 17,44,000
Col. 8 as Col. 10 as Col. 9 as percent of Col. 13 as percent Col. 11 as percent Col.12 as Educational status percent of percent of col.4 col.3 of col.7 of col.5 percent of col.6 col.2 1 14 15 16 17 18 19 Less than 3 72.7 40.0 100.0 39.8 16.9 57.8 4 to 6 50.6 44.7 59.4 23.1 16.6 44.4 7 to 9 48.3 43.9 57.9 23.5 20.4 38.1 10 to 12 33.3 40.0 0 10.9 12.2 0 18 to 15 50.0 33.3 100.0 17.3 15.2 25.0 Total 50.6 43.6 62.7 22.7 17.6 41.6
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Table 5.49 Distribution of overdues by income groups No. of borrowing No. of households with Amount of borrowings (in rupees) Amount of overdues (in rupees) households overdues Non- Income group Inst. total Inst. Non-inst. total Inst. Non-inst. total Inst. Non-inst. total inst. 1 2 3 4 5 6 7 8 9 10 11 12 13 Less than 7700 29 18 47 9,91,000 4,85,000 14,76,000 9 14 23 1,50,000 3,02,000 4,52,000 7701 to 15400 53 36 89 33,75,500 9,40,000 43,15,500 28 21 49 6,76,000 3,15,000 9,91,000 15401 to 23100 13 4 17 10,16,000 1,65,000 11,81,000 6 2 8 1,51,000 65,000 2,16,000 23101 to 30800 3 1 4 2,05,000 50,000 2,55,000 0 0 0 0 0 0 30801 to 38500 1 0 1 45,000 0 45,000 0 0 0 0 0 0 46201 to 53900 1 0 1 3,24,000 0 3,24,000 1 0 1 85,000 0 85,000 53901 to 61600 1 0 1 75,000 0 75,000 0 0 0 0 0 0 Total 101 59 160 60,31,500 16,40,000 76,71,500 44 37 81 10,62,000 6,82,000 17,44,000
Col. 10 as percent Col. 8 as percent Col. 9 as percent of Col. 13 as percent Col. 11 as percent Col.12 as percent Income group of col.4 of col.2 col.3 of col.7 of col.5 of col.6 1 14 15 16 17 18 19 Less than 7700 48.9 31.0 77.8 30.6 15.1 62.3 7701 to 15400 55.1 52.8 58.3 22.9 20.0 33.5 15401 to 23100 47.1 46.1 50 18.3 14.9 39.4 23101 to 30800 0 0 0 0 0 0 30801 to 38500 0 0 0 0 0 0 46201 to 53900 100 100 0 26.2 26.2 0 53901 to 61600 0 0 0 0 0 0 Total 50.6 43.6 62.7 22.7 17.6 41.6
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Table 5.50 Distribution of overdues by family size
No. of borrowing No. of households with Amount of borrowing (in rupees) Amount of overdues (in rupees) households overdues Non- Non- Non- Family size Inst. total Inst. Non-inst. total Inst. total Inst. total inst. inst. inst. 1 2 3 4 5 6 7 8 9 10 11 12 13 1 to 3 18 12 30 6,59,000 3,60,000 10,19,000 6 7 13 1,01,000 1,49,000 2,50,000 4 to 6 75 44 119 49,47,500 11,20,000 60,67,500 35 28 63 8,94,000 4,68,000 13,62,000 7 to 9 8 3 11 4,25,000 1,60,000 5,85,000 3 2 5 67,000 65,000 1,32,000 Total 101 59 160 60,31,500 16,40,000 76,71,500 44 37 81 10,62,000 6,82,000 17,44,000
Col. 10 as Col. 8 as Col. 9 as percent of Col. 13 as percent Col. 11 as percent Col.12 as percent Family size percent of col.4 percent of col.2 col.3 of col.7 of col.5 of col.6 1 14 15 16 17 18 19 1 to 3 43.3 33.3 58.3 24.5 15.3 41.4 4 to 6 52.9 46.7 63.6 22.4 18.1 41.8 7 to 9 45.5 37.5 66.7 22.6 15.8 40.6 Total 50.6 43.6 62.7 22.7 17.6 41.6
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Table 5.51 Distribution of overdues by caste No. of borrowing No. of households with Amount of borrowings (in rupees) Amount of overdues (in rupees) households overdues Non- Non- Caste Inst. total Inst. Non-inst. total Inst. total Inst. Non-inst. total inst. inst. 1 2 3 4 5 6 7 8 9 10 11 12 13 OC 7 4 11 4,27,000 1,95,000 6,22,000 4 3 7 1,10,000 1,00,000 2,10,000 BC 26 15 41 16,53,000 3,35,000 19,88,000 14 9 23 3,66,000 1,58,000 5,24,000 MBC 53 34 87 32,12,500 9,95,000 42,07,500 19 20 39 4,29,000 3,51,000 7,80,000 SC/ST 15 6 21 7,39,000 1,15,000 8,54,000 7 5 12 1,57,000 73,000 2,30,000 Total 101 59 160 60,31,500 16,40,000 76,71,500 44 37 81 10,62,000 6,82,000 17,44,000
Col. 10 as Col. 8 as Col. 9 as percent of Col. 13 as percent Col. 11 as percent Col.12 as Caste percent of col.4 percent of col.2 col.3 of col.7 of col.5 percent of col.6 1 14 15 16 17 18 19 OC 63.6 57.1 75.0 33.8 25.8 51.3 BC 56.1 53.8 60.0 26.4 22.1 47.2 MBC 44.8 35.8 58.8 18.5 13.4 35.3 SC/ST 57.1 46.7 83.3 26.9 21.2 63.5 Total 50.6 43.6 62.7 22.7 17.6 41.6
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The case of institutional credit the number of borrowing households having overdue was high in OC (other castes) &BC. But the number of respondent having overdue was very low in MBC castes. But in the case of non-institutional credit the number of respondent having overdue was very high in SC/ST groups and very low overdue was MBC castes. But in the case of amount of overdue in institutional credit shows the trend reveals in number of households.
Kaliyaperumal and logananthan (1989) stated that there exists a substantial gap between the demand for and supply of agriculture credit. Benson kunjukunju and Mohanan they also they also found that region-wise, sector-wise and scheme-wise credit gap. Borrowers stated that the disbursed loan amounts were inadequate. If subsidized formal credit is inadequate in supply, a market for informal credit is automatically created (chaudhuri and Gupta 1996).
Table 5.52 Credit gap by farm size No. of Agriculture Total crop Land holding type Credit gap Per acre gap respondent expenditure loan .01 to 1.25 acres 6 86,000 63,000 23,000 21,279 (3546.5) (marginal farmers) 1.26 to 2.50 acres 53 1434500 10,64,000 3,70,500 1,65,915(3130.5) (small farmers) Above 2.51 acres 31 1721500 11,58,000 5,63,500 1,06,491(3435.2) (large farmers) Total 90 32,42,000 22,85,000 9,57,000 2,93,685 Note: figures in brackets indicate per household gap
The table depicts the credit gap by farm size, the number of respondent are 90 borrow from institutional sources has taken. The per acre gap shows that credit gap is wider for large farmers but the per household gap clearly shows that credit gap is wider for marginal farmers only. The correlation co-efficient for credit gap and farm size at 99 percent confidence level in two tailed shows that 0.612. There is a significant relationship between the two variables. The regression co-efficient for credit gap and farm size the value of r square shows that 0.374.
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Table 5.53 Caste wise credit gap No. of Agriculture Total Credit Caste name Per acre gap respondents expenditure crop loan gap Oorali gaundor 55 21,90,000 14,68,000 7,22,000 2,05,057(3728.3) Moopanar 20 6,83,500 5,27,000 1,56,500 52,781(2639.0) Yadhava 3 53,000 40,000 13,000 6,400(2133.3) Muslim 1 49,000 45,000 4,000 800 Rettiar 2 65,000 58,000 7,000 1,514 (757) Sc/st 9 2,01,500 1,47,000 54,500 27,133(3014.8) Total 90 32,42,000 22,85,000 9,57,000 2,93,685 Note: figures in brackets indicate per household gap
The table shows that caste wise credit gap. The per household credit gap is high for Oorali gaundor and SC/ST groups compare to other groups. The correlation for credit gap and caste name shows that negative relationship between the two at 95 percent confidence level in two tailed test. The value of the correlation is -0.240. The regression co-efficient of credit gap and caste, the value of r square is 0.057.
Table 5.54 Credit gap by income group No. of Agriculture Total crop Income group Credit gap Per acre gap respondent expenditure loan Less than 7700 24 5,06,000 3,98,000 1,08,000 60,412 (2517.2)
7701 to 15400 49 16,86,500 12,02,000 4,84,500 1,66,736(3402.8)
15401 to 23100 12 6,59,500 4,61,000 1,98,500 44,177(3681.4)
23101 to 30800 2 1,56,000 75,000 81,000 9,778(4889)
30801 to 38500 1 1,00000 45,000 55,000 6,471
46201 to 53900 1 84,000 74,000 10,000 1,111
53901 to 61600 1 50,000 30,000 20,000 5,000
Total 90 32,42,000 22,85,000 9,57,000 2,93,685 Note: figures in brackets indicates per house hold gap
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The table shows that credit gap and income group. The per household gap is increased by income increases i.e. there is a positive relationship between the income group and credit gap. Here concept of of Markowitz hypothesis applied i.e. small fall in income leads to increase in marginal utility. But the large fall in income leads to diminishing marginal utility of money. Likewise here income increases at large level credit gap diminishes. The correlation of income group and credit gap at 99 percent confidence level in two tailed test the test value is 0.492. There is significance relationship between the two variables. The regression co-efficient of the two variable r square value is 0.242.
Table 5.55 Credit gap by education status Education No. of Agriculture Total crop Credit gap Per acre gap status respondent expenditure loan Less than 3 5 1,75,500 1,22,000 53,500 14,567(2913.4) 4 to 6 44 14,31,500 9,69,000 4,62,500 1,55,494(3533.9) 7 to 9 35 14,06,000 9,91,000 4,15,000 1,15,974(3313.5) 10 to 12 5 1,77,000 1,58,000 19,000 6,251 13 to 15 1 52,000 45,000 7,000 1,400 Total 90 32,42,000 22,85,000 9,57,000 2,93,685 Note: figures in brackets indicates per house hold gap
The table explains credit gap in educational status. Higher the levels of educational status lower level of credit gap and vice versa. The correlation of the credit gap and educational status in two tailed test the correlation value is -0.053. Hence it shows the negative relationship. The regression co-efficient of the two variables the r square value is 0.003.
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Table 5.56 Responses of the respondents for various questions Strongly Strongly Responses of the respondent Agreed No opinion Disagreed agreed disagreed Easy to obtain crop loan 5 87 45 1 0 Loan amount disbursed in time 0 92 45 1 0 Fertilizers are disbursed in time 0 92 45 1 0 Bankers‟ behaviour is encouraging 0 94 43 1 0 Scrutiny of applications is time-consuming 4 90 43 1 0 Procedure for obtaining loan is complicated 3 92 43 0 0 Rate of interest is reasonable 5 98 35 0 0 Surety requirements are not an irritant 0 0 44 92 2 Bankers‟ follow-up action is sufficient 0 95 43 0 0 Institutional finance is cheaper then non institutional 75 50 13 0 0 Overdues increase due to monsoon failure 7 85 46 0 0 Loan assistance helps in the increase of output 1 97 40 0 0 Repayment schedule is reasonable 1 93 43 1 0 Most of the farmers spend the loan amount only for agricultural purposes 1 6 47 84 0 Distribution of crop loan by way of cash and kind is good 0 7 46 85 0
The table depicts that the responses stated by the respondents in the study area. In the case of easy to obtain crop loan agreed by the 87 respondents and 45 respondents stated that no opinion. But in the case of overdue increase due to monsoon failure agreed by 85 respondents and 46 respondents have no opinion. Seventy five respondents stated that institutional finance is cheaper than non-institutional. Distribution of crop loan by way of cash and kind is good agreed by seven respondents. But 85 respondents disagreed because in co-operative banks the fertilizers and other raw materials are second quality provided by the banks. Ninety two respondents stated that surety requirements are irritation to them.
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Table 5.57 Distribution of respondents by type of crops cultivated and willful and non willful defaulters Defaulters in willful and non willful Type of crops cultivated No defaulter Willful defaulter Non willful defaulter Total Land less 9 (9.6) 0 0 9 (6.5) Onion, cholam and cow food 4 (4.3) 1 (3.3) 1 (7.1) 6 (4.3) Onion, rice and cotton 10 (10.6) 1 (3.3) 1 (7.1) 12 (8.7) Onion, rice, cotton and coriyander 2 (2.1) 1 (3.3) 0 3 (2.2) Onion, cotton and groundnut 18 (19.1) 16 (53.3) 5 (35.7) 39 (28.3) Cotton, groundnut and chilli 3 (3.2) 0 1 (7.1) 4 (2.9) Rice and cotton 8 (8.5) 1 (3.3) 1 (7.1) 10 (7.2) Groundnut, chilli and rice 1 (1.1) 1 (3.3) 0 2 (1.4) Onion and groundnut 8 (8.5) 2 (6.7) 2 (14.3) 12 (8.7) Onion , cotton ,cholam & sugarcane 0 1 (3.3) 0 1 (0.7) Onion and cotton 13 (13.8) 2 (6.7) 0 15 (10.9) Onion, cotton and cholam 7 (7.4) 2 (6.7) 2 (14.3) 11 (8.0) Onion,chilli and groundnut 5 (5.3) 2 (6.7) 1 (7.1) 8 (5.8) Groundnut only 1 (1.1) 0 0 1 (0.7) Paddy, groundnut and sugarcane 2 (2.1) 0 0 2 (1.4) Rice and lemon 1 (1.1) 0 0 1 (0.7) Cotton and coconut 1 (1.1) 0 0 1 (0.7) Sugarcane, chilli and rice 1 (1.1) 0 0 1 (0.7) Total 94 (100) 30 (100) 14 (100) 138 (100) Note: Figures in brackets indicate percentages
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The table depicts that distribution of respondents by type of crops cultivated and defaulter in wilful and non-wilful. In the case of crops onion, cotton and groundnut the number of wilful defaulter is high i.e. 16 respondents and non-wilful defaulter is five in the same crops. In the case of onion, cotton, cholam wilful defaulter is two and non-wilful defaulter is also two. The total number of respondent is high in the case of wilful defaulter (30) compared to non-wilful defaultuer (14).
Table 5.58 Distribution of respondents by land type and defaulters in willful and non willful
Defaulters in willful and non willful Willful Non willful Land type No defaulter total defaulter defaulter Land less 9 (9.6) 0 0 9 (6.5)
Land holding 82 (87.2) 29 (96.7) 14 (100) 125 (90.6)
Leased out 2 (2.1) 1 (3.3) 0 3(2.2)
tenant 1 (1.1) 0 0 1 (0.7)
Total 94 (100) 30 (100) 14 (100) 138 (100) Note: Figures in brackets indicate percentages
The table explains the distribution of respondents by land type and defaulter in wilful and non wilful. In the case of land holding 29 respondents are wilful defaulter and 14 are non wilful defaulter. In the case of leased out category one respondent is wilful defaulter.
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Table 5.59 Distribution of respondents by education (respondent education) and defaulters in willful and non willful
Defaulters in willful and non willful Education level No defaulter Willful Non willful total of the defaulter defaulter respondent illeterate 12 (12.8) 4 (13.3) 1 (7.1) 17 (12.3) Preliminary (1- 34 (36.2) 9 (30.0) 6 (42.9) 49 (35.5) 5) High school (6- 40 (42.6) 13 (43.3) 6 (42.9) 59 (42.8) 10) Higher 3 (3.2) 2 (6.7) 1 (7.1) 6 (4.3) secondary Degree holder 1 (1.1) 0 0 1 (0.7) Post graduate 2 (2.1) 1 (3.3) 0 3 (2.2) Professional 2 (2.1) 1 (3.3) 0 3 (2.2) Total 94 (100) 30 (100) 14 (100) 138 (100) Note: Figures in brackets indicate percentages
The table reveals that distribution of respondent education and wilful and non-wilful defaulter. In the case of high school the wilful defaulter is high i.e. 13. But the non-wilful defaulter is six. In the case of preliminary wilful defaulter are nine. But the non-wilful defaulter is six. In the case of illiterate the number of wilful defaulter is four. But the non-wilful defaulter is one. Hence the wilful defaulter is increased with the increasing education level.
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Table 5.60 Distribution of respondents by nature of house and defaulters in willful and non willful
Defaulters in willful and non willful Nature of house No defaulter Willful Non willful total defaulter defaulter Rent 2 (2.1) 0 0 2 (1.4) Thatched 16 (17.0) 3 (10.0) 1 (7.1) 20 (14.5) Tailed 31 (33.0) 10 (33.3) 7 (50.0) 48 (34.8) Concrete 27 (28.7) 12 (40.0) 3 (21.4) 42 (30.4) Thatched & concrete 0 1 (3.3) 0 1 (0.7) Tailed & concrete 9 (9.6) 3 (10.0) 3 (21.4) 15 (10.9) Thohuppu house 5 (5.3) 1 (3.3) 0 6 (4.3) Tailed & thohuppu 3 (3.2) 0 0 3 (2.2) Government land 1 (1.1) 0 0 1 (0.7) kottagai Total 94 (100) 30 (100) 14 (100) 138 (100) Note: Figures in brackets indicate percentages The table reveals the distribution of respondents by nature of house and defaulter in wilful and non-wilful. In the case of concrete house the number of wilful defaulter is 12. But the non wilful defaulters the number of respondents are three. In the case of tailed house wilful defaultuer is 10 and non-wilful defaulter is seven. The respondents having thatched the wilful defaulter are three and non-wilful defaulter is only one. Hence the rich person not repays the loan compare to the poor.
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Table 5.61 Distribution of respondents by income per month and defaulters in willful and non willful
Defaulters in willful and non willful Income group (per No defaulter Willful Non willful Total month) defaulter defaulter Less than 7700 42 (44.7) 4 (13.3) 5 (35.7) 51 (37.0) 7701 to 15400 38 (40.4) 19 (63.3) 9 (64.3) 66 (47.8) 15401 to 23100 9 (9.6) 6 (20.0) 0 15 (10.9) 23101 to 30800 3 (3.2) 0 0 3 (2.2) 30801 to 38500 1 (1.1) 0 0 1 (0.7) 46201 to 53900 0 1 (3.3) 0 1 (0.7) 53901 to 61600 1 (1.1) 0 0 1 (0.7) Total 94 (100) 30 (100) 14 (100) 138 (100) Note: Figures in brackets indicate percentages
The table explains the distribution of respondent by income per month and defaulter in wilful and non wilful. In the case of income group 7701 to 15400 the wilful defaulter is high I.e. 19 respondents. But the non-wilful defaulter the number of respondents is nine. In the case of 15401 to 23100 the wilful defaulter is six.
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Table 5.62 Distribution of respondents by size of land holding and defaulters in willful and non willful
Defaulters in wilful and non-wilful
Willful Non willful Size of land holding No defaulter Total defaulter defaulter
Land less 9 (9.6) 0 0 9 (6.5)
.01 to 1.25 16 (17.0) 1 (3.3) 2 (14.3) 19 (13.8) acres(marginal farmers) 1.26 to 2.50 acres (small 39 (41.5) 16 (53.3) 11 (78.6) 66 (47.8) farmers) Above 2.51 acres (large 30 (31.9) 13 (43.3) 1 (7.1) 44 (31.9) farmers)
Total 94 (100) 30 (100) 14 (100) 138 (100)
Note: Figures in brackets indicate percentages
The table reveals the distribution of size of land holding and defaulters in wilful and non-wilful. In the case of small farmers the number of wilful defaulters are high i.e. 16. But the number of respondents in non-wilful defaulters is 11. In case of marginal farmers wilful defaulters is only one. But the non-wilful defaulter is two.
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Table 5.63 Distribution of respondents by size of the family and defaulters in willful and non willful
Defaulters in willful and non willful
Size of the Willful Non willful No defaulter total family defaulter defaulter
1 to 3 30 (31.9) 5 (16.7) 1 (7.1) 36 (26.1)
4 to 6 58 (61.7) 24 (80.0) 11 (78.6) 93 (67.4)
7 to 9 6 (6.4) 1 (3.3) 2 (14.3) 9 (6.5)
Total 94 (100) 30 (100) 14 (100) 138 (100)
Note: Figures in brackets indicate percentages
The table reveals the distribution of respondents by size of the family and defaulters in wilful and non wilful. In the case of medium size of family (four to six) wilful defaulters are 24. But the non-wilful defaulters are 11. Small size of family the wilful defaulters are five but the non-wilful defaulters are only one. Hence the medium sizes of family wilful defaulters are high compared to other.
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Table 5.64 Distribution of respondents by institutional loan and defaulters in willful and non willful Defaulters in willful and non willful Total institutional No defaulter Willful Non willful total loan defaulter defaulter No institutional 37 (39.4) 0 0 37 (26.8) loan Less than 65000 44 (46.8) 18 (60.0) 12 (85.7) 74 (53.6) 65001 to 130000 9 (9.6) 11 (36.7) 1 (7.1) 21 (15.2) 195001 to 260000 1 (1.1) 0 0 1 (0.7) 260001 to 325000 1 (1.1) 1 (3.3) 1 (7.1) 3 (2.2) 325001 to 390000 2 (2.1) 0 0 2 (1.4) total 94 (100) 30 (100) 14 (100) 138 (100) Note: Figures in brackets indicate percentages The table explains the distribution of respondents by institutional loan and defaulters in wilful and non-wilful. In the case of loan amount less than Rs 65,000 the wilful defaulters are high i.e. 18. But the non-wilful defaulters in the same loan amount are 12. In the case of Rs 65,001 to Rs 1, 30,000 wilful defaulters are 11 but the non-wilful defaulter is one. Table 5.65 Distribution of respondents by sources of loan group and defaulters in willful and non willful Defaulters in willful and non willful Sources of loan No defaulter Willful defaulter Non willful total group defaulter Not get loan from 24 (25.5) 0 0 24 (17.4) any sources Institutional 36 (38.3) 14 (46.7) 5 (35.7) 55 (39.9) Non-institutional 13 (13.8) 0 0 13 (9.4) Both 21 (22.3) 16 (53.3) 9 (64.3) 46 (33.3) total 94 (100) 30 (100) 14 (100) 138 (100) Note: Figures in brackets indicate percentages
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Table 5.66 Distribution of respondent by sources of loan and defaulters in willful and non willful Sources of loan No defaulters Willful defaulters Non willful total defaulters Loan from any source is zero 24 (25.5) 0 0 24 (17.4) Loan from all sources 4 (4.3) 7 (23.3) 2 (14.3) 13 (9.4) Commercial bank 19 (20.2) 3 (10.0) 3 (21.4) 25 (18.1) Co-operative bank 7 (7.4) 2 (6.7) 1 (7.1) 10 (7.2) Money lender 13 (13.8) 0 0 13 (9.4) Commercial & co-operative 10 (10.6) 9 (30.0) 1 (7.1) 20 (14.5) Co-operative & money lender 6 (6.4) 2 (6.7) 0 8 (5.8) Commercial & money lender 11 (11.7) 7 (23.3) 7 (50.0) 25 (18.1) Total 94 (100) 30 (100) 14 (100) 138 (100) Note: Figures in brackets indicate percentages The table depicts that distribution of respondents by sources of loan and defaulters in wilful and non-wilful. In this case the classification of wilful and non-wilful used only institutional credit. Seven wilful defaulters are from respondents borrowing from all sources. In the case of commercial and co-operative nine respondents are wilful, and borrow from commercial and money lender have seven wilful defaulters. Non wilful defaulters are high (seven) in the case of commercial and money lender.
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Table 5.67 Cost incurred by the farmers for one time loan received from Commercial bank
Farmer type Time Transport Food Total cost Total cost spent (in cost expenditure (Rs) (Percentage days) (Rs) and tea (Rs) to the total) .01 to 1.25 1month 300 600 900 52.6 acres (marginal farmers) 1.26 to 2.50 20 days 200 400 600 35.1 acres (small farmers) Above 2.51 7 days 70 140 210 12.3 acres (large farmers) Total 57 days 570 1140 1710 100 Note: Cost is calculated for single farmer in each category.
The table depicts that cost incurred by the farmers for one time loan received from commercial bank. Here the researcher assumes that per day the transport cost for per farmer is Rs 10. Likewise the food expenditure and tea for per day and per farmer is Rs 20. This is calculated for all category of farmers. There is an indirect relationship among delay of loan and farmer size. Hence the cost is also if the size of farmer is small higher the cost incurred and vice versa. Marginal farmer incurred higher cost than other farmers. The percentage also shows that 52.6 percent incurred by the small farmers.
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Table 5.68 Cost incurred by the farmers for one time loan received from Co-operative banks
Farmer type Time Transport Food Total cost Total cost spent (in cost expenditure (Rs) (Percentage days) (Rs) and tea (Rs) to the total) 1.26 to 2.50 50 days 500 1000 1500 71.4 acres (small farmers) Above 2.51 20 days 200 400 600 28.6 acres (large farmers) Total 70 days 700 1400 2100 100 Note: Cost is calculated for single farmer in each category.
The table depicts that the cost incurred by the farmers for one time loan received from co-operative banks. In co-operative bank did not advance loan to the marginal farmers. Like commercial bank here also the researcher assumes that per day the transport cost for per farmer is Rs 10. Likewise the food expenditure and tea for per day and per farmer is Rs 20. This is calculated for all category of farmers. Here also there is an indirect relationship between delay of loan and farmer size. Hence the size of farmer is small, higher the cost incurred and vice versa. The percentage of cost also shows that 71.4 percent of cost incurred by the small farmers.
Repayment performance: an application of discriminant function The analysis of repayment performance behavior in the previous chapter indicates that a multiplicity of factors simultaneously operate to determine the repayment behavior. An application of discriminant function used distinguishes between the defaulter and non defaulters based on their socio economic characteristics. It will explain which categories of people are more prone to default.
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It will also help to identify the dominating factors responsible for poor repayment performance. Mounting overdues will affects the recycling of funds and there by hamper the process of rural development. If the borrowers could be classified into prompt repayers and defaulters and within defaulters willful and non-willful on the basis of some socio economic characteristics. It will assist the rural credit agencies in solving their problem of mounting overdues, on the one had and achieving the main objective of national rural credit policy (development through credit), on the other. It is against this background the present chapter analyses the repayment behavior of the borrowing households in the study area. Out of 138 respondents 49 respondents was classified defaulter. A borrower who has found to have not paid fifty percent of this loan even after the lapse of one and half years from the date when he was supposed to pay the first installment of loan was classified as defaulter. But this definition is dissimilar to that of lending institution. Because the borrower who fails to make payment of his installment on time is immediately termed as defaulter. Among the 44 defaulters 24 as willful defaulter. But the non willful default is due to unfruitful investment, and natural calamity like drought, flood affect the income of the farmers. Another reason is absence of adequate time gap between loan and its repayment schedule etc. Willful default defined as failure to meet the repayment obligation even when the borrower has the ability to repay (judged by his income). Such a default may arise mainly from the borrower‟s attitude towards repayment. Some factors influenced to the borrowers not to repay the loan amount.
1. Influence of social and political groups 2. Certain agencies insisting the borrower not to repay. 3. The extent of difficulties faced by the borrowers in obtaining the loan 4. The high cost of borrowings.
This study is based on the assumption that a demographic and socio-economic variable determines the repayment behavior. Some out pressure influenced the normal repayment behavior (i.e.) social and political. Except under these abnormal conditions the normal repayment behavior is assumed to be determined by a set of variables which have been included in this study.
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Utilization of loan Utilization of loan for a productive purpose has a direct bearing on the repayment behavior of the borrower. Agricultural credit is availed of by the needy people for productive purposes but they are used the credit for consumption or social needs. Such a misutilization causes more harm than good.
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CHAPTER VI SUMMARY, FINDING, CONCLUSIONS AND SUGGESTIONS
A brief summary of the statement of the problem, methodology and findings of the study is presented in this chapter, to draw specific conclusions.
George Stieglitz (1995) developed a theory of asymmetry of information in which he argued that the formal credit is still remain unreachable and replace the role of informal credit markets in rural areas due to lack of information or imperfect information about the individual borrower in the rural areas particularly the poor. The important problem is financial institutions. The delivery of credit to agriculture is neither smooth nor adequate. There exists a substantial gap between the demand for and supply of agricultural credit. In the case of institutional loan there is also a wide gap between the application of loan and sanction of loan. Hence the farmers borrow from informal sources. Veerashekarappa (1996) also stated that timely credit often needs political intervention. Bank-wise credit is unequally distributed. The credit disbursements of commercial banks have been higher in southern region (52 percent) but the co-operative banks have dominated in southern and western regions (56 percent). It shows the regional imbalances in the credit flow by institutional sources. The major problem faced by all these agencies is the delinquency of loans. While the problem became serious among co-operatives by 1970 itself, the commercial banks got into the problem only after 1975-76. Because of their late entry into rural credit. According to Bhat (1994) both from financial institutions and farmers point of view, overdue is high in commercial banks when compared to other banks. It is due to government policy, ineffective legislation, indiscriminate financing, inadequacies monitoring, co-ordination and follow up, inadequacies in training and co-ordination, natural calamities, political compulsion (Rao 2004). Under these circumstances it is essential to find out whether the financial institutions are able to meet all the credit requirements of the farmers, what is the proportion of credit disposed by the commercial banks, co-operative banks and other financial institution? To what extent the commercial banks, co-operatives and other financial institutions individually meet the demand for and the supply of agricultural credit. From the institutional point of view, the financial institutions face the problem of non-recovery of loans in time, political interference and the government‟s policy to waive the loan and procedural 202 delays. How to reduce the problem of overdue? Finding aswer to the above listed questions are the main purpose for which the study has been undertaken.
Objectives 1. To assess the factors that influences the percentage share of agricultural finance from different sources and utilization and repayment pattern of such credit among different categories of farmers. 2. To assess the credit gap, if any and to trace the efforts taken by the farmers (and also government) to bridge the gap in the study area. 3. To estimate the cost incurred by the respondents for availing loans from different sources. 4. To find out the problems faced by the farmers in repaying the loans and steps taken by the banks for recovering the loan.
Tiruchirapalli district has been selected for the study because it is a traditionally agriculture oriented district, a variety of crops are cultivated. This district is having a good banking network. As many as 234 branches comprising of 193 commercial banks 40 co-operative banks and one Tamil Nadu Industrial Investment Corporation Limited are functioning in this district. The district has various agriculture zones viz fed by river and canals i.e. wet lands, garden land and dry lands. Major part of the repayment capacity of the farmers depends upon these lands. Out of 14 blocks one block was selected purposively. Because banking network was good in this block 46 revenue villages are there. Out of this one village was selected. Seedevi Mangalam was purposively selected for the study. Farmers in the village are provided with credit facilities like working capital and investment capital. So they are engaged with various activities such as crop, dairy, pump sets, pipe line, land development, farm mechanization, tractor etc. Stratified random sampling was used for the selection of farmer respondents. In the study area total number of households is 686 and five wards are there. Each ward 20 percent households is selected. Hence the total number of households is 138.
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Findings In study area 136 households out of 138 from Hindu religion and two households belong to Muslim. In the case of caste, major portion of respondents come from Oorali gaundor (71 percent). They come under MBC caste. In the case of occupation 42 respondents are engaged in agriculture activities only and 87 respondents are engaged in agriculture and allied activities. Only few respondents are engaged in other activities like business, bus driving etc. In the case of land holding classification in this study the procedure followed by the bank is adopted to size of credit depends upon one‟s landholding size. There is a direct relationship between the land holding and availability of credit (larger the landholding higher the credit and vice versa). The size of landholding determines one‟s social status in Indian economy (Gupta S.C., 1987). The study village basically a dry area, but it can be classified as wet and dry depends upon the availability of irrigation facilities. In study area the total land of the respondent are 532 acres.
The wet land is 271.50 acres, out of this 256 acres of land having well with pump set and rest of the area having oil engine. The total dry area is 261 acres. It means 50.9 percent of the land is irrigated and rest of the land depends upon the rain. Crop yield depends upon the availability of irrigation facilities. Hence there is a direct relationship between the crop yield and irrigation facilities. In the study area, maximum number of farmers (66 respondents) is small farmers. In this village two banks have service branches. They are Union Bank of India (Padalur) and Primary Agricultural Co-operative bank (PACB) in Perahambi. Union Bank of India provides loan to the all category of farmers but PACs has provided loan for small farmers and large farmers only. Marginal farmers go to the money lenders for loans in the village. Regarding crops the following crops namely onion, ground nut, sugarcane, cotton, cholam, rice, lemon are cultivated for sale. The crops like chilli, cowfood, coriyander are cultivated for their self consumption. In the case of institutional loan the amount of borrowing was high i.e. 78.6 percent compared to non-institutional sources (21.3 percent). Within the institutional loan the percentage of commercial bank loan was high (71.5 percent) compared to co-operative bank (28.5 percent). Like India level data study area also the percentage share of commercial bank loan was high. The study of respondents‟ income level is important because it explains the status of the respondents and their capacity to purchase things, maintain family expenditure and 204 medical expenditure etc. Income is earned from dairy farming, from goat, from bullock (bullock owners used the bullock for rental purposes for other‟s farm land), agriculture operation, non agriculture occupation (money lending business, tailoring work, cable connection, income from leather bag company, tea shops, centering work, income from house rent etc).
Distribution of credit by land holding shows that major portion of credit was received by small farmers (1.26 to 2.5 acres) from institutional sources and non- institutional sources. Out of nine landless respondents three has borrowed from non- institutional sources. Institutional credit from marginal farmers in the study area is only provided by commercial bank. In the case of large farmers 34 respondents has received institutional credit and 19 from non-institutional sources. In the case of institutional credit number of respondents in small farmers are received credit is high compared to number of respondents received credit in large farmers. But the amount of institutional credit is high in the case of large farmers compared to small farmers.
Distribution of credit by social groups and sources of loan shows that 65.5 percent has borrowed by Oorali gaundor and 26.6 percent of amount has borrowed by Moopanar and 4.6 percent by SC/ST. In non-institutional credit out of 59 respondents the major portion of respondent i.e. 33 from Oorali gaundor, 14 from Moopanar castes and 10 from SC/ST caste. Both commercial bank and co-operative bank mainly focus crop loan and cow loan. Regarding crop loan commercial bank has provided crop loan to 51 respondents and the amount was 14, 03,000. But in the case of co-operative bank the crop loan was provided to the 40 respondent and amount was 8, 82,000. In the case of pipe loan (two), land leveling (two) and housing loan (three) was provided by commercial bank only. Bullock loan (three) is provided by co-operative bank only. When we compare the cow loan and jewel loan the number of respondent was high in the case of cow loan i.e. 52 than the jewel loan (43). But the borrowed amount high in the case of jewel loan compared to cow loan i.e. 13, 50,000 in jewel loan and 10, 93,000 in the cow loan. In the case of non-institutional sources out of 59 respondents major percentage i.e. 76.3 percent borrowed loan for unproductive purposes (consumption and marriage). Due to easy and timely availability of credit in non- institutional sources the farmers to meet day to day expenses and unexpected expenses like marriage borrow from that source. 205
Forty nine percent of the borrowers repaid their loan full amount and the remaining was overdues (50.6 percent). In the case of overdues (judged in terms of amount of loan remaining unpaid) was 22.6 percent of total lending. In the case of distribution of overdues according to the source the table indicates that 43.6 percent of institutional borrowers reported overdues. It means 56.4 percent of borrowers repay the loan amount in full. In the case of amount of institutional loan remaining unpaid is worked out 17.6 percent. It means that recovery rate was 82.4 percent. The position of overdues towards the non-institutional agency presents that 37.3 percent repaid their loan full. It means 62.7 percent not repaid their loan. It shows that non- institutional overdues were high compare to the institutional sources. In the case of amount of non-institutional loan remaining unpaid was 41.6 percent. It means recovery rate was 58.4 percent. Recovery rate also high in the case of institutional sources compared to non-institutional sources. In the case of institutional sources even though overdue was low compared to non institutional sources the famers still borrow from non-institutional sources due to the non availability of credit to the farmers and higher rate of interest.
In the case of diversion of credit, 48 respondents stated that they divert the loan amount (Sundaraj R. and Subbaiah A., 2006). As many as 19 respondents are divert the credit to the extent of 50 percent and 17 respondents has diverted 60 percentage of amount for other purposes. A distribution overdue by landholding shows that institutional overdue was very low in marginal farmers and high in small farmers (49.1 percent). It means they repaid 50.9 percent. In the case of non- institutional borrowers overdues was very low in landless borrowers. Marginal farmers not repaid the loan amount fully. In the case of small farmers numbers of overdue borrowers are high in non-institutional sources (75.8 percent) than the institutional sources (49.1 percent). But in large farmers number of borrowers having overdue was high in institutional sources (41.2 percent) than the non-institutional sources. It was due to high rate of interest in non-institutional loan compare to institutional sources. Even though they are having more income they are not willing to repay institutional sources. Hence they are come under wilful defaulter. In the case of amount of overdues with the total borrowings the amount was high in marginal farmers (31.4 percent) in institutional loan, but in non-institutional loan the amount of overdues was 82.5 percent. In the case of amount of overdues with the total 206 borrowings the amount was high in marginal farmers (31.4 percent). In the case of non-institutional loan it was 82.5 percent of amount was overdue. The amount of overdue was high in small farmers (20.9 percent) in institutional sources but less than the non-institutional sources overdue (52.9 percent). In the case of large farmers the amount of overdue was slightly less in institutional sources compare to non- institutional overdue.
In the case of institutional source alone the number of respondent having overdue was high in Moopanar caste (47.8 percent). It was slightly low in Oorali gaundor 47.5 percent. The borrowers belonging to lower caste like SC having a lower status in the social hierarchy who are referred to as the rural disadvantage (Gupta S.C. 1987). The number of respondent having overdues in this group in institutional sources is 36.4 percent only. In the case of institutional sources SC/ST group better repayment compared to other groups. The other groups of borrowers (Oorali gaundor, Moopanar) have good contacts with lending agencies. So that better accessibility of credit to them and defaulting behavior is also high towards repayment. In the case of institutional sources alone the percentage of amount of overdue was high in SC/ST groups 24.6 percent. The non-institutional overdue was also high in SC/ST, Yadhava and Moopanar. Due to non availability of institutional credit to each and every farmer they borrow from non-institutional sources and faced lot of problems in the study area.
Distribution of overdues by educational background of the borrowers reveals that the number of respondent in lower education the percentage of borrowing was high in non-institutional sources due to higher rate of interest not repaid. In the case of amount borrowings in institutional sources higher educated people i.e. post graduate, professional having higher overdues compared to other education groups. In the case of illiterate the percentage of amount of overdues was very low in institutional sources. The percentage of overdues to borrowings increases with the increase in the proportion of educated borrowers. It also increases with level of education. Hence better educated people having better contacts with the lending agencies and they utilizes their contacts in protecting his defaulting behavior and they also not borrow from the non-institutional sources due to high rate of interest.
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Distribution of overdues by income groups shows that amount of overdues in institutional credit the overdue was high in middle income groups. The lower income groups and higher income groups having less overdue in institutional credit. But the income greater than higher income groups the overdue was high in institutional credit. But in the case of non-institutional credit the overdue was high in low income group. But income greater than higher income groups no overdue in non-institutional credit. Hence the lower income groups mainly affected due to non-repayment of non- institutional credit. But the middle income and higher income groups having higher overdues in institutional credit.
In institutional credit the number of respondents having overdue was high in medium size of family (4 to 6) i.e. 46.7 percent and number of respondents having overdue was very low in small size of family (1 to 3) i.e. 33.3 percent. But the non- institutional credit the number of respondents having overdue was high in large size family (7 to 9) i.e. (66.7) and very low in small size of family (1 to 3) i.e. 58.3 percent. Hence in non-institutional credit there is a direct relationship between size of family and overdue. In the case of institutional credit amount of overdue was high in medium size of family i.e. 18.1 percent and amount of overdue was very low in small size of family i.e.15.3 percent. The same trend also reveals in amount of overdue in non-institutional credit.
The correlations of income and expenditure at 99 percent confidence level in two tailed test the Pearson correlation co-efficient are 0.963. Hence there is a positive relationship between income and expenditure. The correlation co-efficient for credit gap and farm size at 99 percent confidence level in two tailed shows that 0.612. Hence there is a significant relationship between the two variables. The regression co-efficient for credit gap and farm size the value of r square shows that 0.374. the correlation co-efficient for credit gap and caste name shows that negative relationship between the two at 95 percent confidence level in two tailed test. The correlation of income group and credit gap at 99 percent confidence level in two tailed test the test value is 0.492. There is a significance relationship between two variables. The regression co-efficient of the two variable r square value is 0.242. The correlation of the credit gap and educational status in two tailed test the correlation value is -0.053. Hence it shows the negative relationship. 208
There is an indirect relationship between rate of interest and amount of loan. Lower the interest rate and higher the amount of loan and vice versa. Number of respondent is higher in crop loan compare to cow loan in both the banks. The total percentage share of crop loan is greater (48.3 percent compared to other loan. The total percentage of jewel loan is 28.6 percent and cowloan is 23.1 percent. In the case of commercial bank crop loan is percentage of amount of loan (61.4 percent) is higher than the percentage of amount of crop loan (38.6 percent) in co-operative bank. In commercial bank the number of respondents is higher in cow loan compared to jewel loan but the amount was higher in jewel loan compared to cow loan.
The cost incurred by the farmers for one time loan received from commercial bank. Here the researcher assumes that per day the transport cost for per farmer is Rs 10. Likewise the food expenditure and tea for per day and per farmer is Rs 20. This is calculated for all category of farmers. There is an indirect relationship between delay of loan and farmer size. Hence the cost is also if the size of farmer is small higher the cost incurred and vice versa. Marginal farmer incurred higher cost than other farmers. The percentage also shows that 52.6 percent incurred by the small farmers.
The cost incurred by the farmers for one time loan received from co-operative banks. In co-operative bank did not advance loan to the marginal farmers. Like commercial bank here also the researcher assumes that per day the transport cost for per farmer is Rs 10. Likewise the food expenditure and tea for per day and per farmer is Rs 20. This is calculated for all category of farmers. Here also there is an indirect relationship between delay of loan and farmer size. Hence the size of farmer is small higher the cost incurred and vice versa. The percentage of cost also shows that 71.4 percent of cost incurred by the small farmers. Discriminate analysis is used for utilization of loan because this variable is significant compare to other variables. The Wilks Lambda is a statistics that assess whether the discriminated analysis is statistically significant. The value of Wilks Lamda was 0.897 and the F value is 11.354. This value shows that statistics is significant at (0.005). To find out the independent variables to predict, the results in the table tests of equality of group means shows that utilization of loan in percentage is highly significant. The overall ability of discriminate function to predict group is 76.2 percent. The group statistics shows the mean value of defaulter (52.27), non defaulter (74.04). The standard 209 deviation of defaulter is (23.905) and non-defaulter (37.314). The mean value of non defaulter is found to be high comparative with defaulter.
The value of Wilks Lamda was 0.967 and the F value is 1.440. This value shows that statistics is significant at (0.010). To find out the independent variables to predict, the results in the table tests of equality of group means shows that utilization of in percentage is significant. The overall ability of discriminate function to predict group is 68.2 percent. The group statistics shows the mean value of wilful defaulter (49.33), non wilful-defaulter (58.57). The standard deviation of wilful defaulter is (21.804) and non-wilful defaulter (27.695). The mean value of non-wilful defaulter is found to be high comparative with defaulter.
Conclusion Co-operative banks in the study area neglected the marginal farmers. Crop loan is higher than that of cow loan and jewel loan. In the case of institutional credit number of respondents in small farmers are received credit is high compared to number of respondents received credit in large farmers. But the amount of institutional credit is high in the case of large farmers compared to small farmers. Commercial bank has provided pipe loan (two), land leveling (two) and housing loan (three). Bullock loan (three) is provided by co-operative bank only. In the case of non-institutional sources out of 59 respondents major percentage i.e., 76.3 percent borrowed loan for unproductive purposes (consumption and marriage). So that people still borrow from non-institutional sources due to easy availability of credit. In the case of diversion of credit, 48 respondents stated that they divert the loan amount. In the case of amount of borrowings in institutional sources higher educated people i.e., post graduate, professional having higher overdues compared to other education groups. Hence better lending agencies and they utilize their contacts in protecting his defaulting behavior and also not borrow from non-institutional sources, due to higher rate of interest.
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Area for further research 1. Inter-state comparison of institutional financing of agricultural sector. 2. A study on how far the institutional agencies have replaced the money lenders in the field of agricultural credit. 3. Performance of commercial banks in lending agricultural credit. 4. Performance of RRBs in lending agricultural credit. 5. Lending procedure and formalities of institutional agricultural credit agencies. 6. Timeliness of the disbursement of agricultural credit. A comparative study among various institutional agricultural credit agencies. 7. Cost of agricultural credit of various institutional agricultural credit agencies. 8. A study on the types of beneficiaries of agricultural credit provided by various institutional agricultural credit agencies. 9. A study on the impact of agricultural credit provided by various institutional agricultural credit agencies.
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