National Bank for Agriculture and Rural Development
Department of Economic Analysis and Research
2009 Report on the Doubling of Agriculture Credit Programme (2004-05 to 2006-07) -A Study in Select States PREFACE The Government of India, as part of its strategy to boost agriculture production, announced a package to double the flow of institutional credit to agriculture within three years starting 2004-05. Consequently, targets were set and the programme was implemented during the period 2004- 05 to 2006-07. NABARD and RBI were vested with the responsibility of overseeing the implementation of the programme. On completion of the programme, NABARD commissioned studies in select states, viz; Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu and Uttar Pradesh so as to get a feed back on the programme, insights into the mechanisms and strategies adopted by banks in achieving the targets, review the implementation of Kisan Credit Cards(KCC) as a product for ensuring hassle-free credit. Institute of Development Studies, Jaipur, carried out the study in Rajasthan, Xavier Institute of Development Action and Studies, Jabalpur in Madhya Pradesh, Bankers' Institute of Rural Development, Lucknow in Uttar Pradesh, Tamil Nadu Agricultural University, Coimbatore in Tamil Nadu and Gokhale Institute of Politics and Economics, Pune in the State of Maharashtra.A consolidated report based on the findings of the studies in these five States has been prepared by Institute of Development Studies, Jaipur. The studies revealed that there were notable inter-agency and inter-district variations with regard to year of achievement of the doubling of agriculture credit as well as in terms of 'number of times' the target was achieved. In all the States, the commercial banks fared better than the RRBs and Co- operatives. The implementation of the programme resulted in a change in the share of various agencies in the agriculture credit flow between 2003-04 and 2006-07. In Uttar Pradesh and Rajasthan, the share of RRBs declined drastically while that of Co-operatives declined in all the States, excepting Rajasthan. The study also brings out the fact that in the current Management Information System (MIS), there is no precise definition and provision for recording of new farmers / new accounts in any of the Rural Financial Institutions(RFIs). There is a need to evolve a uniform reporting system for "new farmers". Suggestion from farmers included minimal documentation, lower interest rates, flexibility in repayments with rebates in case of crop failure, creation of awareness about KCC, etc. The study has further suggested that there is a need to orient agriculture credit policies in a manner that is more conducive for the marginal and small farmers, tenant farmers, share croppers and oral lessees in accessing credit from formal institutions. 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|||-||| |`-|||`c| -|||-|| |`|||`|-| || || |||||-|| r. ||-|-| :-||||, |`|-| ||| :, -||-| =||| r| ||| || |`||`-| -| ac | ||| ||||`-||| -| -|||-||-||, |`|||| .||`=c ||= | || -| |||=|-|| -|:| |||, ;-|||`: |`||||| | -||--| |;|||| -| |||`-|-| |. |||| | |r -|| |;||| |`-|-|| r |`| || || -||| -| ||`| ~|.| |||`-||| || =-|=| || || |||||-|| r || ||-||||`| ||||| | ~|.| -||--| || -| ||-||-| || -|| |`|||||, ||-||| |`|||||, -||-| |c|;:|| || -|||`=|| -|:|| | |`-|| ||`|| |`r-|||| r|. |||| 29, 2009 =-|| |; ||| -||; ||-| ||||= Chapter No. Particulars Page Chapter 1 Introduction ............................................................. 1 1.1 A Background to Doubling of Agriculture Credit ............ 3 1.1.7 Lending Targets ............................................................ 5 1.3 Objectives .................................................................... 10 1.4 Methodology................................................................. 11 Chapter 2 Trend in Credit Flow, Loan Accounts and Coverage .......................................................... 13 2.1 Doubling of Credit Flow : Aggregate Level ................... 13 2.2 District-wise Credit Disbursed...................................... 22 2.3 Short-term and Long-term Credit Flows ....................... 34 2.4 Coverage of New Farmers ............................................. 39 2.5 Farmers in Distress ..................................................... 42 2.6 Farmers in Arrears....................................................... 44 2.7 One Time Settlement (OTS) .......................................... 45 2.8 Redemption from Informal Sources of Credit ................ 46 2.9 Share Croppers, Tenant Farmers and Oral Lessees....... 47 2.10 Agri Clinics/Agri Business ........................................... 49 2.11 Institutional Credit to Small and Marginal Farmers (SF/MF) ......................................................... 51 2.12 Monitoring Information System (MIS) ........................... 53 Chapter 3 Kisan Credit Cards : Some Issues ........................... 58 3.1 KCC : progress ............................................................. 58 3.2 District/Branch Level KCC Position.............................. 63 3.3 Suggestions for Improvement ....................................... 73 Chapter 4 Credit Flow at Grassroot Level : Farmers' Perceptions .............................................. 74 4.1 Social Category of Farmers........................................... 74 4.2 Land Holding ............................................................... 76 4.3 Primary/Secondary Occupations and Income Therefrom.................................................................... 79 4.4 Cost of Cultivation and Cropping Pattern ..................... 86 4.5 Category of Borrower & Loan Restructured................... 88 4.6 Kisan Credit Card : Issues and Concerns and Farmers in Arrears ................................................ 90 4.7 Projects...................................................................... 103 4.8 Repayment................................................................. 108 4.9 Some Additional Observations .................................... 109 Chapter 5 Summary and Conclusions .................................... 113 Annexure 1 Credit Widening and Deepening through Commercial Banks - 2003-07 ..................................... 127 CONTENTS v vi No. Title Page No. Table 1.1 : Decadal Average Growth Rate of Direct Institutional Credit ............. 2 Table 1.2 : Selected Districts............................................................................ 11 Table 1.3 : Number of Selected Beneficiaries ................................................... 12 Table 2.1 : Credit Flow across States ............................................................... 14 Table 2.2 : Share of Various Types of Banks in Credit Flow ............................ 17 Table 2.3 : Sector-wise Flow of Credit- Term Loan ........................................... 19 Table 2.4 : Credit Flow Share in Term-loan ..................................................... 21 Table 2.5 : Credit Disbursed since 2003-04..................................................... 23 Table 2.6 : District- wise Commercial Banks ................................................... 24 Table 2.7 : District-wise Cooperative Banks ..................................................... 25 Table 2.8 : District wise PLDBs Credit Flow..................................................... 26 Table 2.9 : District- wise Regional Rural Banks Credit Flow ............................ 27 Table 2.10 : District-wise Credit Flow to Agriculture: Tamil Nadu...................... 28 Table 2.11 : Number of times increase in credit during the doubling period .............................................................................. 29 Table 2.12 : District wise Increase of Agricultural Credit in the Doubling Period Number of times increase in credit during the doubling period .............................................................................. 30 Table 2.13 : District-wise Credit Flow to Agriculture: Madhya Pradesh .............. 31 Table 2.14 : Financial Institution- wise Credit Flow under Crop and Term Loans ..................................................................... 35 Table 3.1 : Number and Amount Sanctioned under KCC in Tamil Nadu ......... 59 Table 3.2 : Agency-wise Kisan Credit Cards Issued During the Year ............... 60 Table 3.3 : KCC Issued Since Inception Cumulative Position as On ................ 60 Table 3.4 : Fresh Kisan Credit Cards Issued ................................................... 61 Table 3.5 : Trend in issuing KCCs and the amount sanctioned ....................... 61 Table 3.6 : Achievement of the targets in implementing Kisan Credit Card Scheme ............................................................. 62 Table 3.7 : Share of agencies in Issuing KCCs and the amount sanctioned ...................................................................................... 62 Table 3.8 : Expansion of KCC .......................................................................... 63 Table 3.9 : Number of New and Existing KCCs ................................................ 64 LIST OF TABLES vii No. Title Page No. Table 3.10 : Number of KCCs Renewed and Whose Limit has been Increased ........................................................................ 65 Table 3.11 : Number of Dormant KCCs ............................................................. 65 Table 3.12 : Cumulative Number and Amount Sanctioned under KCC until March, 2007 in Cuddalore and Virudhnagar Districts and Tamil Nadu ............................................................... 67 Table 3.13 : Average Number of KCC accounts per Branch in Cuddalore and Virudhunagar Districts ........................................... 67 Table 3.14 : Average Amount Disbursed under New and Total KCC Accounts per Branch in Cuddalore and Virudhnagar Districts ..................................................................... 68 Table 3.15 : Number of New KCC Issued ........................................................... 69 Table 3.16 : KCCs Performance in Madhya Pradesh .......................................... 70 Table 3.17 : Details on KCC implementation at Branch level ............................. 77 Table 4.1 : Land Holding of Farmers in Madhya Pradesh ................................ 77 Table 4.2 : Average Size of Farm Holdings in Cuddalore and Virudhnagar districts ...................................................................... 78 Table 4.3 : Annual Primary and Secondary Source Income (Rs.) (KCC farmers) ................................................................................. 80 Table 4.4 : Annual Income from Other Source ................................................. 81 Table 4.5 : Total Annual Family Income .......................................................... 82 Table 4.6 : Income and Occupation of the Madhya Pradesh Farmers .............. 84 Table 4.6A : Average Income of the Madhya Pradesh Farmers ........................... 85 Table 4.7 : Category of Borrower: Rajasthan .................................................... 89 Table 4.8 : Coverage of New Beneficiaries: Maharashtra .................................. 89 Table 4.9 : Classification of Beneficiaries who Availed of Crop Loan and Term Loans : Maharashtra .................................... 90 Table 4.10 : Opened KCC A/C Alone or through Some Other Person ................ 91 Table 4.11 : Details on opening of KCC account: Madhya Pradesh.................... 92 Table 4.12 : Actual Utilization of Withdrawal of fund from KCC Account: Uttar Pradesh .......................................................... 94 Table 4.13 : Average Cost Spent by Beneficiaries on Procurement of Documents: Maharashtra ........................................................... 99 Table 4.14 : Withdrawal from KCC (Rs.) ......................................................... 100 Table 4.15 : Category of Borrower .................................................................... 101 Table A1 : Credit Flow through Scheduled Commercial Banks - 2003-07 .......................................................................... 127 viii LIST OF ABBREVIATIONS ACABC Agri Clinics & Agri Business Centres ACP Annual Credit Plan CBs Commercial Bank/s CRR Cash Reserve Ratio DCCB District Central Cooperative Bank DD Dairy Development DLCC District Level Credit Committee DLTC District Level Technical Committee GDP Gross Domestic Product GOI Government of India GLC Ground Level Credit Ha./ ha. Hectare JLG Joint Liability Group KCC Kisan Credit Card LBR Lead Bank Return LI Lift Irrigation LT Long Term MF Marginal Farmers MI Minor Irrigation MIS Management Information System NABARD National Bank for Agriculture and Rural Development NCAER National Council for Applied Economic Research NFS Non Farm Sector NOC No Objection Certificate NPA Non performing Asset OPS Other Priority Sector OTS One Time Settlement PACS Primary Agriculture Credit Society PLP Potential Linked Credit Plan RBI Reserve Bank of India RFI Rural Financial Institution RRB/s Regional Rural Bank/s SACP Special Agricultural Credit Plans SAMIS Service Area Monitoring & Information System SAO Short-term Agricultural Operations SC/ST Schedule Caste / Schedule Tribe SF Small Farmers SHGs Self Help Groups SLBC State Level Bankers Committee SLR Statutory Liquidity Ratio ST Short Term VVV Vikas Volunteer Vahini CHAPTER 1 Introduction In developing countries like India, the development of agriculture sector is important for a variety of reasons. Agriculture is still the primary source of livelihood for majority of people in rural areas and this livelihood needs to be made sustainable for many. It provides demand for industrial goods and in India, whenever agriculture sector has grown at 3-4 percent; industrial sector has grown at more than 6 per cent. It has been observed that the required growth of productivity in agriculture means that more capital must be invested in it. Farmers need much more capital than they can afford to save and small and marginal farmers require a higher input of capital as their savings were meagre. Credit was a condition that enables a person to extend his or her control over ownership of resources. The Indian agriculturist was not only capital starved, but faces vagaries of nature too. Irrigated agriculture forms roughly 40 per cent of total cropped area. Credit is an important input in the development of agriculture. Credit played a critical role in the Green Revolution. However, in the recent past, since the initiation of financial reforms in India, the flow of credit to agriculture in relation to the demand for it has slowed down. Indian agriculture is also facing a crisis. The advent of new technology has raised input costs. Over the years, prices of fertilizers, seeds, diesel and inputs have gone up. Farmers have committed suicide in states like Maharashtra, Punjab, Andhra Pradesh, Karnataka and so on. The 59 th round of NSSO on the status of Indian Farmers presents a sorry picture. Indian agriculture has undergone structural changes in recent times. The nature of Indian agriculture has geared towards small farms. There was marginalization of Indian agriculture; too many small cultivators were cultivating a small proportion of land and few large cultivators were cultivating large tracks of land. This meagre base of Indian agriculture was vulnerable. Indian agriculture has also undergone changes in its output mix and thereby input mix. These changes were reflected by the shift in area from foodgrains to non- food grains, and within foodgrains from coarse cereals to finer cereals. During the nineties and thereafter, the area under foodgrains has declined. The shift towards non-food grains has been observed across states with the exception of Bihar, Haryana, Jammu & Kashmir, Karnataka, Punjab, Uttaranchal, Uttar Pradesh and West Bengal. The 1 maximum shift away from food grain crops was visible in Kerala followed by Jharkhand, Gujarat, Orissa and Assam. In Bihar, 87 per cent increase in foodgrain crop acreage has been observed. In certain quarters, it has been argued that sleeping giant was awake now. The decline in the area under coarse cereals was sharper and widespread. Oilseeds, cotton, tobacco and sugarcane have gained at the expense of cereals in terms of area. These crops have strong links with the market. The credit requirement also goes up with these changes and so does the vulnerability. Changes in cropping pattern towards such crops influence change in input structure. The relative prices of inputs too have changed over time. Subsidies have reduced, but were still significant. Inputs like fertilisers, insecticides, mechanical power and improved seeds were vital parts of the input structure. They have replaced organic manure (though getting back into reckoning), animal power and farm-retained seeds. Farmers expend sizeable part of their resources on purchased inputs. Hence farmers have to take recourse to credit to a much larger extent than in the past for purchase of inputs. The flow of SAO credit in absolute terms has improved. The crop loan from RFIs covers around a quarter of input cost. The result was that farmers have to depend on other sources of credit including own savings to meet more than three-fourths of the cost of material inputs. On the other hand, as a percentage of gross value of output, credit has stagnated at around 5-6 per cent when inputs as a percentage of value of output have been around 25 per cent. Banks dispense two types of credit viz., short-term credit for seasonal agricultural operations and long-term credit for asset creation. Table 1.1 shows flow of credit to agriculture. The growth rate of aggregate short-term credit by all agencies has grown at about 14 percent in all the decades with marginal variations. There has been decline over each decade in growth rate of long-term credit. Among the financial institutions, credit flow to agriculture on both short-term and long- term hectare basis has shown a declining growth over the decades. Cooperative sector has managed to maintain the growth pattern with minor variations across decades. Table 1.1: Decadal Average Growth Rate of Direct Institutional Credit (%) Decades Cooperative Banks Regional Rural Banks Commercial Banks Total Short Term Long Term Short Term Long Term Short Term Long Term Short Term Long Term 1970s 10.6 13.9 334.8 426.8 28.2 29.9 14.5 20.2 1980s 12.5 11.0 19.8 18.5 16.3 18.6 13.9 14.8 1990s 11.9 13.1 32.7 10.6 17.8 12.1 14.6 11.9 Source : NABARD 2 1.1 A Background to Doubling of Agriculture Credit 1.1.1 Ratio of Agricultural Credit to Agricultural GDP and Total Credit Despite a well- developed credit delivery structure, the outreach of banks has remained restricted for various reasons. The ratio of agricultural credit to agricultural GDP increased from 5.4 percent in 1970s to 8.7 per cent in 2001-02, agricultural credit as a proportion of total credit had decelerated from 20.5 per cent to 10.5 per cent during the same period indicating lower deployment of credit in agriculture. 1.1.2 Agriculture Credit by Commercial Banks Under directed lending, a target of 18 per cent of net bank credit has been stipulated for domestic scheduled commercial banks for lending to agriculture. Although the target for lending to agriculture has not been achieved by most of the public and private sector banks, the amount of outstanding advances to agriculture in absolute terms has increased continuously over the years. The total outstanding agriculture advances of public sector bank increased from Rs.21204 crore as on 31.3.1994 to Rs.73507 crore as on 31.3.2003, registering an annual compound growth rate of 14.81 per cent. The total agriculture advances outstanding of private sector banks has increased from Rs.591 crore as on 31.3.1994 to Rs.11873 crore as on 31.3.2003, registering an annual compound growth rate of 39.57 per cent. In the year 2002-03, only five public sector banks and two private sector banks achieved the 18 per cent target of agriculture lending. 1.1.3 Special Agricultural Credit Plans Public sector banks have been formulating Special Agricultural Credit Plans (SACP) since 1994 with a view to achieve marked improvement in the flow of credit to agriculture. Under SACP, banks were required to fix self-set targets for disbursement during a year (April-March). Banks have been advised by the Reserve Bank to fix the targets showing an increase of about 20 to 25 per cent over the disbursement made in the previous year. With the introduction of SACP, the flow of credit to agricultural sector by public sector banks had increased considerably. 3 1.1.4 Tenth Plan Projections and Achievements According to the Tenth Plan projections, the flow of credit to agriculture and allied activities was expected to be of the order of Rs.736570 crore, as per details given below: Year ST MT/LT Total Growth (%) 2002-03 44929 37144 82073 22.9 2003-04 55442 50516 105958 29.1 2004-05 68582 68703 137285 29.6 2005-06 85041 93435 178476 30.0 2006-07 105707 127071 232778 30.4 Total 359701 376869 736570 Note: ST- short-term, MT/LT- medium term and long term. Source: Working Group on Agricultural Credit and Cooperation, Planning Commission. 1.1.5 Agency-wise Ground Level Credit Flow for Agriculture and Allied Activities Despite the extensive outreach of rural and semi-urban branch network of commercial banks (about 33000), cooperative banks (about 1 lakh) and RRBs (about 14000), the estimated actual flow of credit to agriculture from formal rural financial institutions (RFI) during the first year of the Tenth Five Year Plan, i.e. 2002-03 stood at Rs.69560 crore against the projected amount of Rs.82073 crore. Similarly, the estimated ground level credit flow to agriculture during 2003-04 was Rs.80000 crore as against projected amount of Rs.105958 crore. (amount in Rs. Crore) Agency 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04* Cooperative Banks 14085 15957 18280 20718 23524 23935 30080 Regional Rural Banks 2040 2460 3172 4220 4854 6070 6080 Commercial Banks 15821 18443 24733 27807 33587 39774 43840 Other agencies 103 82 80 80 Total 311958 36860 46268 52827 62045 69560 80000
Note: *- estimated. (Rs. Crore) 4 1.1.6 Lending Targets The key challenge before the banking sector was to double lending to agriculture credit in three years time. In order to achieve the above objective, a target of 30 per cent growth rate was proposed for the year 2004-05. A detailed programme was worked out in consultation with NABARD and Indian Bank Association (IBA) to increase the ground level credit flow to agriculture by 30 per cent during 2004- 05. 1.1.7 Lending Targets of Commercial Banks for 2004-05 IBA prepared an action plan to achieve 30 per cent growth in disbursement, in respect of public sector and private sector commercial banks. IBA also worked out the details of achieving this target with its member banks and monitor the same. With the expected 30 per cent growth rate, disbursement from commercial banks was expected to increase from Rs.43840 crore during 2003- 04 to Rs.56992 crore during 2004-05. IBA was also associated with NABARD in fixing the state-wise/ district-wise targets. As a part of commercial banks effort to enhance the flow of credit, the following additional steps were to be taken by the IBA and its member banks: 1.1.8 Covering 50 Lakh Additional Farmers Under the framework of SCAP, banks were to try to bring into their fold at least 100 new farmers at each branch during the current year. With 33000 rural branches and over 15000 semi-urban branches, this effort was expected to enlarge the universe of new farmers by around 50 lakh. 1.1.9 Kisan Credit Card Scheme Banks were to enlarge the coverage under Kisan Credit Card (KCC) Scheme to all eligible farmers and it was proposed that the Scheme should take care of full production, consumption and investment credit needs of the farmers. 1.1.10 Promoting Investment in Agriculture Each rural branch was to take up at least one large agricultural project in the area of land rejuvenation, irrigation or micro-irrigation, sprinkler irrigation, water-shed management, village ponds development, farm ponds promotion, dry-land farming, etc. 5 1.1.11 Agri-Clinics In every district, banks were to finance at least ten agri-clinics in 2004-05. 1.1.12 Special Scheme for Distressed Farmers A special Scheme was to be worked out for the distressed category of farmers who had suffered production and income losses on account of successive recurrence of natural calamities, for the districts classified as such by the State Governments. Similarly, another special arrangement was to be worked out to meet credit needs of farmers who had earlier defaulted in repayment of loans on account of genuine problems faced by them and their loan accounts were settled through compromise/ write offs. 1.1.13 Tie-ups with Corporate Sector Banks were to enter into increasing tie-ups with corporate sector for establishing linkages for funding farmers in a cost-effective manner. 1.2 Lending Targets of RRBs Lending by RRBs in agriculture stagnated around Rs.6000 crore during 2002-03 and 2003-04. With a view to enable RRBs to increase their credit disbursement, NABARD proposed redeployment of part of their deposits with the sponsor banks. As on 31.3.2003, the investment of the RRBs aggregated to Rs.33063 crore including their deposits with the respective sponsor banks. After accounting for their SLR requirements and leaving adequate margin, RRBs could withdraw Rs.2443 crore from deposits with their sponsor banks for on-lending to small and marginal farmers, rural artisans, etc. under specific schemes drawn up in consultation with NABARD. This initiative apart from increasing the flow of credit to the system was also to enable RRBs to realign themselves with their original mandate. NABARD has been confident that it would be possible to register a growth rate of 40 per cent in RRBs thereby achieving disbursement of Rs.8512 crore during 2004-05. 1.2.1 Lending Targets of Cooperative Credit Institutions A 30 per cent growth in disbursement by cooperatives was to increase their credit flow from Rs.30080 crore to Rs.39104 crore. Of Rs.9024 crore, additional disbursement of Rs.5350 crore was to be made available by NABARD in the following manner : 6 (Rs. Crore) Additional refinance support for crop loans from NABARD 2600* Additional refinance support for Long-term Credit Institutions from NABARD 1200# Liquidity support for drought effected states from NABARD 1500$ Financing tenant farmers by NABARD 50@ Total 5350 Note : * NABARDs refinance support during 2003-04 was Rs. 8700 crore, registering a growth of around 9%. NABARD has reviewed the position and found that ST/SAO refinance support can be increased by Rs.2600 crore in 2004-05. This additional requirement will be met by adjustment in NABARDs sources without any budgetary support. #- NABARDs refinance for investment credit during 2003-04 was Rs.7605 crore. In view of the projected demand, refinance support during the coming years has been revised to Rs.8800 crore, registering an increase of Rs.1200 crore. This additional requirement will also be met by NABARD for adjusting its own resources without any budgetary support. $- Certain states have faced drought and other natural calamities during 2003-04. In terms of extant instructions that DCCBs operating in affected areas have been permitted to extant conversion support (without NABARDs refinance) to the farmers to enable them to take fresh crop loans in the ensuing season. However, on account of conversion, banks were finding themselves short of liquidity for extending fresh crop loans. Therefore, as a one time measure, NABARD will extend an additional SAO liquidity limit to the extent of Rs.50 crore on loan provided by these banks for conversion/ re-schedulement. This was expected to release an additional fund flow of Rs.1500 crore in the affected areas. To facilitate this fIow of finance and to keep cost of funds low, NABARD will need Government of India guarantee for its additional borrowing from the market. @- This was only a token provision and depending upon the coverage of tenant farmers, additional funds would be required for which NABARD may require Government of India guarantee. 1.2.2 Additional Resources from Cooperative Institutions The balance gap in additional requirement of about Rs.3500 crore was to be met by credit cooperatives themselves from their own resources. The deposit level of cooperatives was around Rs.80000 crore with average annual growth rate of 10 per cent. The expected growth in deposits during the year was about Rs.6000 crore of which about 35 per cent would be required for SLR/CRR and additional 15 per cent would be required for investing in other Government securities. It was thus expected that it would be possible to persuade cooperatives to utilize the remaining Rs.4000 crore for agriculture lending. State-wise and bank-wise details of lending by cooperatives during 2004-05 were worked out by NABARD in consultation with State Governments, State Cooperative Banks, Central Cooperative Banks, etc. To achieve this additionally, NABARD worked out action plans with State Governments/Agencies. 7 1.2.3 Disbursements to Small and Marginal Farmers Small and marginal farmers constitute a part of the weaker section in the scheme of priority sector lending. According to the latest data available, landholdings of small and marginal farmers constituted nearly 80 per cent of total holdings and 36 per cent of the total area. Small and marginal farmers would need additional credit support for intensive cultivation. The share of small and marginal farmers in agricultural credit should be commensurate with their holdings and credit needs and, therefore, credit to small and marginal farmers was required to be progressively raised. As part of the extant guidelines, domestic commercial banks were required to extend not less than 10 percent of net bank credit to weaker sections, comprising small and marginal farmers, landless labourers, artisans, borrowers of government sponsored poverty alleviation programmes, etc. As on 31 March 2003, as against the mandate of 10 per cent, the public sector banks had extended credit only to the extent of 6.76 per cent of net bank credit (Rs.32304 crore) to weaker sections. Only 6 out of 27 public sector banks had achieved the 10 per cent goal for financing/ weaker sections while the remaining banks had achieved between 9.4 per cent and 1.97 per cent of the targets. It was, therefore, proposed to request RBI to suitably advise public sector banks to achieve the targeted lending to weaker sections. RBI had advised banks to waive security requirements for agriculture lending up to Rs.50000 and in the case of agri-business and agri-clinics for loans up to Rs.5.00 lakh. An area of concern has been the exclusion of tenant farmers and oral lessees from access to bank credit on account of extant restrictions on recording of oral lease and other legal impediments. To make a modest beginning in addressing this situation, NABARD earmarked Rs.50 crore as a token provision for facilitating formation, linkage and financing of such groups during 2004-05. This exploratory effort was to bring over a lakh tenant farmers, oral lessees, share croppers, etc. within the banking fold. 1.2.4 Kisan Credit Card (KCC) As on 31.3.2004, 4.14 crore Kisan Credit Cards were issued by cooperatives (243 lakh), RRBs (39 lakh) and commercial banks (132 lakh). A large number of farmers were considered ineligible to receive Kisan Credit Card for reasons such as default, lack of clear title deeds, documentation etc. National Council for Applied Economic Research (NCAER) conducted an impact study of KCC Scheme at the behest of RBI. In the light of NCAERs findings, the scheme was to be reviewed 8 by RBI and NABARD so that it served the cause of farmers more effectively. RBI/ NABARD were to also review the scale of finance, number of transactions allowed and purpose covered under the KCC Scheme. 1.2.5 One Time Settlement (OTS) for Farmers Many farmers, especially small and marginal farmers had defaulted in the past and as such they had become ineligible for fresh credit from financial institutions. RBI was to consider introducing a fresh OTS scheme to enable such farmers to settle their accounts in a transparent manner. Based on the RBI scheme, NABARD was to take follow up action in respect of RRBs and Cooperatives. This step was expected to help farmers in settling their accounts and draw fresh credit from the financial institutions. 1.2.6 Raising Scale of Finance At present the scale of finance suggested by the District Level Technical Committees, though only indicative, was adopted by banks as a benchmark. RBI/ NABARD have been requested to review the scales of finance to meet the realistic credit needs of more capital -intensive agricultural operations. Regional Offices of NABARD were being advised to organize State-level and District-level meetings for revising the scales of finance as also to emphasise that they were only scale rather than an absolute amount as of now. 1.2.7 Rate of Interest on Agriculture Credit As a part of reform in the financial sector, interest rates have been deregulated. In the year 2003, public sector banks brought down the interest rate on crop loans up to Rs.50000 to 9 per cent. Subsequently, public sector banks reviewed the position and further reduced the interest rate to 8.5 per cent. Considering the cost of funds, NPA levels and transaction cost, there was little scope for further reduction in interest rates by commercial banks and it was argued that the interest rates on medium and long -term loans vary from 9 to 11.5 per cent. The cost of funds for RRBs was higher as compared to that for commercial banks. RRBs had accepted long-term deposits by offering higher rates of interest and these deposits were yet to mature. Credit from the sponsor banks, one of the components of working funds of RRBs was available at higher rate of interest than the prevailing market rates. However, to compete successfully, RRBs need to bring down their lending rates proportionately. 9 The rates of interest charged to the ultimate borrowers by the cooperatives have been in the range of 12 to 14 per cent. Even in Northeastern States where the two-tier cooperative structure exists, the rates of interest were in the range of 11 to 13 per cent comparable with rates prevailing in some of the states having three-tier system. Only in a few states like Andhra Pradesh where the state government was subsidizing interest to the extent of 5 per cent, the ultimate rate charged to the final borrower was 7 per cent. To enable NABARD to provide direct refinance assistance to District Central Cooperative Banks (DCCBs) by-passing the State Cooperative Banks, the NABARD Act was amended in 2003. The objective was to reduce the rate of interest on crop loans by Cooperatives. The progress was slow as the State Governments have been unwilling to offer guarantees to NABARD for providing direct refinance to ineligible DCCBs. 1.2.8 Target for Agriculture Credit during 2004-05 The following programme for Ground Level Credit Flow to Agriculture during 2004-05 was proposed to be implemented in the manner indicated as below: (Rs. Crore) Banks 2003-04 2004-05 Growth rate( %) Commercial Banks 43840 56992 30.00 RRBs 6080 8512 40.00 Cooperatives 30080 39104 30.00 Total 80000 104608 30.76 Source: NABARD.
It was in this context that Government of India and the Finance Minister showed concern for enhancing credit flow to agriculture sector. It was decided to double the flow of credit to agriculture within three years starting 2004-05. To achieve this target, guidelines were issued to the banking sector to achieve the targets in a mission mode. This was achieved at affordable rates and became an important public policy. Institutional credit to agriculture sector was provided by commercial banks, regional rural banks and cooperatives. 1.3 Objectives The objectives of the study were to Study the trends in ground level credit flow to agriculture, number of loan accounts, coverage of new farmers, etc. 10 Identify factors responsible for decrease, if any, in the number of farmers supported on a year to year basis and suggest strategies to arrest and reverse the trend Study the existing Management Information System (MIS) used by Rural Financial Institutions (RFIs) for reporting number of farmers/new farmers covered and to suggest changes for ensuring effectiveness of the reporting system Assess adherence to guidelines issued by RBI regarding agricultural credit, especially in the post doubling of credit period Study issues relating to investment credit with respect to the factual position in respect of farmers financed for investment purposes. Review implementation of KCC as a product, its effectiveness in ensuring hassle-free credit to farmers as well as to obtain feed- back from farmers regarding the reasons for dormancy of KCCs, wherever such a situation occurred. 1.4 Methodology Five similar studies were launched in states of Rajasthan, Uttar Pradesh, Madhya Pradesh, Tamil Nadu and Maharashtra. It had two components- secondary data based on State Level Bankers Committee quarterly reports, District level PLPs of NABARD and other sources that provided data on credit disbursement and primary data collected from two Districts each in each of the five states. Within the state, two Districts were selected on the basis of doubling of credit achieved, one being agriculturally developed and the other District being agriculturally underdeveloped, according to various parameters like area sown, area irrigated and others. Within the District, two blocks were selected. From each block, effort was made to pick up one commercial bank, one cooperative bank, one land development bank and one regional rural bank. It was ensured that the commercial bank was not repeated in each block. Table 1.2 presents the Districts selected across states. From each district two blocks were chosen based on the same indicators (Table 1.3). Table 1.2: Selected Districts State Districts Rajasthan Ganganagar and Sirohi Uttar Pradesh Moradabad and Jhansi Madhya Pradesh Narsinghpur and Panna Tamil Nadu Cuddalore and Virudhunagar Maharashtra Aurangabad and Latur
11 T a b l e
1 . 3 :
N u m b e r
o f
S e l e c t e d
B e n e f i c i a r i e s B a n k s
B r a n c h e s
V i l l a g e s
S a m p l e
B r a n c h e s
V i l l a g e s
S a m p l e
B r a n c h e s
V i l l a g e s
S a m p l e
M a h a r a s h t r a
A u r a n g a b a d
L a t u r
T o t a l
C B s
4
1 5
5 8
4
1 8
4 7
8
3 4
1 0 5
C o o p
2
7
3 0
2
1 1
2 8
4
1 8
5 8
R R B s
2
8
2 7
2
1 5
2 6
4
2 3
5 3
T o t a l
8
3 1
1 1 5
8
4 4
1 0 1
1 6
7 5
2 1 6
T a m i l
N a d u
C u d d a l o r e
V i r u d h u n a g a r
T o t a l
C B s
1
4
4 0
1
4
4 0
2
8
8 0
C o o p
1
3
3 0
1
3
3 0
2
6
6 0
R R B s
1
3
3 0
1
3
3 0
3
6
6 0
T o t a l
3
1 0
1 0 0
3
1 0
1 0 0
6
2 0
2 0 0
U t t a r
P r a d e s h
M o r a d a b a d
J h a n s i
T o t a l
C B s
2
4 0
2
4 0
4
8 0
C o o p
2
3 5
2
3 5
4
7 0
R R B s
1
4 0
1
4 0
2
8 0
T o t a l
5
1 1 5
5
1 1 5
1 0
2 3 0
M a d h y a
P r a d e s h
N a r a s i n g h p u r
P a n n a
T o t a l
C B s
4
4 4
5
5 4
9
9 8
C o o p
4
3 6
4
2 4
8
6 0
R R B s
2
2 0
3
2 2
5
4 2
T o t a l
1 0
1 0 0
1 2
1 0 0
2 2
2 0 0
R a j a s t h a n
G a n g a n a g a r
S i r o h i
T o t a l
C B s
2
1 0
3 1
2
9
3 0
4
1 9
6 1
C o o p
3
1 1
4 2
4
1 0
5 9
7
2 1
1 0 1
R R B s
2
3
3 7
2
4
3 1
4
7
6 8
T o t a l
7
2 4
1 1 0
8
2 3
1 2 0
1 5
4 7
2 3 0
12 CHAPTER 2 Trend in Credit Flow, Loan Accounts and Coverage Credit plays a very important role in enhancing agricultural production and investment. In 2003-04, total institutional credit flow to agriculture stood at Rs.86,981 crore. During 2004-05 (the first year of the programme), the figure stood at Rs.1,25,309 crore which increased to Rs.1,80,486 crore in the next year and further rose to Rs.2,03,297 crore in 2006-07(the last year of the programme). Thus, the credit flow to farm sector doubled during two years as against the stipulated time period of three years. Though Government of India and Reserve Bank of India have initiated some steps in this direction, the public and private sector banks were also recognizing business potential of rural credit (may not be purely for crop production) and reorienting their policies accordingly. The share of commercial banks in total agricultural credit increased from 54 per cent in 2001-02 to around 69 per cent in 2004-05. It may also be noted that the share of investment credit increased from 35 per cent in 2001-02 to around 41 per cent in 2004-05, despite the negative growth achieved by the long-term cooperative credit structure. Despite these changes, there were serious quantitative and qualitative concerns. The poor outreach of the formal institutional credit structure was a serious issue that requires to be corrected expeditiously. NSSO 53 rd round revealed that only 27 per cent of total number of cultivator households received credit from formal sources. The rest comprising mainly small and marginal farmers had no access to credit. Comprehensive measures aimed at financial inclusion in terms of innovation of products and services to increase access to institutional credit were urgently required. Other issues such as credit flow to tenant farmers, oral lessees and women cultivators, complex documentation processes, high transaction costs, lack of availability of quality inputs across all regions, inadequate and ineffective risk mitigation arrangements, poor extension services, weak marketing links and sectoral and regional issues in credit were also required to be addressed expeditiously. 2.1 Doubling of Credit Flow: Aggregate Level In June 2004, Government of India announced a credit package envisaging doubling of agriculture credit over a period of three years beginning from 2004-05 and 30 per cent growth of credit flow to 13 agriculture every year thereafter. In this chapter the attempt was to analyze the trend in credit flow to agriculture, number of loan accounts and coverage of farmers of various categories in five states since June 2004. Table 2.1 shows that in Uttar Pradesh doubling of credit was achieved by commercial banks in 2005-06 when RRBs did it in 2006- 07 and cooperatives did not achieve it. At the aggregate level, doubling in credit flow was achieved in 2006-07. Except for cooperative banks, in others there has been continuous increase in flow of credit in Uttar Pradesh. In Madhya Pradesh, commercial banks achieved doubling target in 2004-05 while the RRBs did it in 2005-06 and cooperatives did not touch the doubling target. At the aggregate level, in 2005-06 doubling of credit flow was achieved. Table 2.1: Credit Flow across States (Rs.lakh) States CBs RRBs Coops Total Uttar Pradesh 2003-04 394838 191891 198078 784807 2004-05 620818 261931 213505 1096254 2005-06 848782 320576 205805 1375163 2006-07 1116553 401161 230944 1748658 Times increase over 2003-04 2004-05 1.6 1.4 1.1 1.4 2005-06 2.1 1.7 1.0 1.8 2006-07 2.8 2.1 1.2 2.2 Madhya Pradesh 2003-04 139034 43349 148503 329887 2004-05 291371 74353.43 197458 563182 2005-06 361626 112550 221266 695444 2006-07 485652 130654 271916 888222 Times increase over 2003-04 2004-05 2.1 1.7 1.3 1.7 2005-06 2.6 2.6 1.5 2.1 2006-07 3.5 3.0 1.8 2.7
In case of Rajasthan, doubling of credit flow was achieved by commercial banks and cooperative banks in 2005-06 while RRBs did so in 2006-07. This meant doubling of credit at the state level in 2005- 06 which further increased in 2006-07. During 2006-07, Rs.8129.59 crore agriculture credit was disbursed which showed a growth of 190 per cent over disbursements made during 2003-04. The achievement during 2005-06 and 2006-07 under farm credit witnessed an annual 15 growth of 40 and 16 per cent respectively over the previous years 1 . In Rajasthan, none of the institutions achieved doubling of credit in the first year, but all except regional rural banks achieved doubling in the second year. Regional rural banks achieved doubling in the final year. At the state level doubling was achieved in the second year- 2005-06. If we look at doubling of credit flow on the basis of activities financed under term lending we find that it was basically horticulture financing that achieved doubling. Commercial banks in Maharashtra were able to achieve the target of doubling of credit in 2004-05 itself while RRBs did so in 2006-07 and cooperative banks could not achieve the doubling of credit in 2006-07. At aggregate level doubling target was met in 2006-07. In Tamil Nadu, commercial banks and RRBs achieved the target of doubling of credit flow to agriculture in 2005-06 when cooperative banks could not even maintain the flow of credit level of 2003-04 in 2006-07. For the state as a whole, in 2006-07 credit flow to agriculture was doubled from its 2003-04 base. Thus we find that commercial banks performed better than other types of banks across states with cooperative sector banks faltering in most states. 2.1.1 Share of Institutions in Credit Flow/Agency-wise share in GLC disbursement In achieving the doubling of credit flow target, commercial banks in Uttar Pradesh continuously increased their share in total credit flow from 50.31 per cent to 63.85 per cent in 2006-07 and this appears to be at the expense of cooperative sector banks (Table 2.2). This would mean possible shift of clients of cooperative banks to commercial banks. A similar pattern was observed in Madhya Pradesh though the decline in share of cooperative banks was significant. In Rajasthan, though commercial banks observed increase in share so did the cooperative banks. This has been at the expenses of RRBs. In 1 (In this context figure of Rs.2802.03 crore in 2003-04, the performance in terms of percentage during 2006-07 (and even during 2005-06) needs clarification. The mandated target to double the disbursement made during the year 2003-04 (Rs.2802.03 crore) within three years. By that yardstick, the target for 2006-07 would have been to the level of Rs.5604.06 crore (giving 30% annual increases). However, during 2005-06 and 2006-07, 30 per cent increase was loaded on achievement rather than the target, leading to self-regulated target to the level of Rs.9300.03 crore). 16 Maharashtra, the share of commercial banks has been fluctuating during these 4 years and cooperative banks have played a major role in agriculture credit delivery, though observed a falling share since 2003-04. RRBs have almost no role in agriculture credit in Maharshtra during these 4 years. In Tamil Nadu, commercial banks have a high share of 86.51 per cent in total credit flow to agriculture in 2006-07, up from 70.34 per cent in 2003-04. This has largely been at the expense of cooperative banks which observed a decline in share from 25.01 per cent in 2003- 04 to 8.34 per cent in 2006-07. The share of RRBs in credit flow has almost remained constant. Thus different states witnessed not only changing roles of institutions, but also relative importance of some institutions. 2.1.2 Term Loan Doubling If we look at doubling of credit flow on the basis of activities financed Table 2.2: Share of Various Types of Banks in Credit Flow (%) States CBs RRBs Coops. Total Uttar Pradesh 2003-04 50.31 24.45 25.24 100 2004-05 56.63 23.89 19.48 100 2005-06 61.72 23.31 14.97 100 2006-07 63.85 22.94 13.21 100 Madhya Pradesh 2003-04 41.84 13.14 45.02 100 2004-05 51.74 13.20 35.06 100 2005-06 52.00 16.18 31.82 100 2006-07 54.68 14.71 30.61 100 Rajasthan 2003-04 41.23 44.88 13.89 100 2004-05 43.21 42.42 14.37 100 2005-06 50.97 33.99 15.04 100 2006-07 52.99 31.10 15.91 100 Maharashtra 2003-04 32.51 2.31 65.18 100 2004-05 50.72 2.79 46.49 100 2005-06 47.34 2.61 50.05 100 2006-07 42.54 3.57 53.89 100 Tamil Nadu 2003-04 70.34 4.65 25.01 100 2004-05 73.50 4.86 21.64 100 2005-06 78.07 5.21 16.72 100 2006-07 86.51 5.15 8.34 100
17 under term lending we find that it was basically horticulture financing that achieved doubling (Table 2.3) in Rajasthan. In Maharashtra, in 2005-06, doubling over 2004-05 took place in poultry and SMY activities, while in 2006-07 over 2004-05 doubling took place in Plantation & Horticulture, Farm Mechanisation, Poultry, Forestry/ Waste Land Development and Bio-Gas. This means performance in Maharashtra was better than Rajasthan in case of term loan doubling. As data was not available for 2003-04 from the same source for Maharashtra and Rajasthan, growth performance has been erratic for most activities. In case of Tamil Nadu data for 2003-04 was available and so we find that in 2004-05, doubling of credit flow took place in case of fisheries, forestry and storage/ market yards. In 2005-06 over 2003-04, doubling as observed in activities like farm mechanization, agri- others, animal husbandry, fisheries, forestry, and storage/ market yards. In 2006-07 over 2003-04, doubling as observed in activities like farm mechanization, agri- others, animal husbandry, fisheries and storage/ market yards. The devolvement of credit to forestry fell in the third year. At the aggregate level, doubling took place in the second year and also in the third year over the base year. An analysis of market share brings out an interesting feature that though there was an increase in credit flow in absolute terms, surprisingly all agencies have retained their market share over the three years beginning 2004-05 (Table 2.4) in Rajasthan. There was no vertical movement in market share, which calls for renewed action on the part of all the agencies. However, purpose-wise analysis of credit flow under term lending reveals continued dominance of farm mechanization, but it significantly declined from 47.69 per cent in 2004-05 to 30.95 per cent in 2006-07. Dairy development, storage godowns/market yards and others were three major purposes attracting significant credit. However, it was only storage/ market yards that increased their share from 0.37 per cent in 2004-05 to 9.32 per cent in 2006-07. Dairy development has observed declining share over the period, but others have presently 41 per cent share in total term lending which improved from mere 11.4 per cent in 2004-05. Significant decline was observed for Minor irrigation. The same was the case with all animal based activities. 18 Table 2.3: Sector-wise Flow of Credit- Term Loan (Rs.crore) Particulars 2004-05 2005-06 2006-07 Times increase over 2004-05 in 2005-06 2006-07 Rajasthan Minor Irrigation 140.40 152.83 144.10 1.09 1.03 Land Development 76.87 100.24 131.71 1.30 1.71 Farm Mechanization 499.07 810.23 949.47 1.62 1.90 Horticulture 10.02 21.54 52.19 2.15 5.21 Dairy Development 124.67 140.54 200.79 1.13 1.61 Poultry 5.03 3.02 2.44 0.60 0.49 Sheep/Goat/Piggery 46.59 50.08 42.40 1.07 0.91 Fisheries 2.04 0.64 0.81 0.31 0.40 Forestry/wasteland 18.71 1.74 2.60 0.09 0.14 Storage/MY 3.89 7.37 285.78 1.89 73.47 Others 119.28 551.63 1255.56 4.62 10.53 Total 1046.57 1839.86 3067.85 1.76 2.93
19 (Rs.crore) Table 2.3: Sector-wise Flow of Credit- Term Loan (Contd.) In Maharashtra, minor irrigation and dairy development account for 70.78 per cent of total term loan disbursed in 2004-05 and this share fell to 24.52 per cent in 2005-06 and further improved to 26.13 per cent in 2006-07. The other activities gained in share were FM and P&H. In Tamil Nadu, major activities funded were agri-others and animal husbandry cornering more than half the term credit flow across the years. Tamil Nadu 2003-04 2004-05 2005-06 2006-07 Times increase over 2003-04in 2004-05 2005-06 2006-07 Minor irrigation
20 Table 2.4: Credit Flow Share of Term-loan (%) Particulars 2004-05 2005-06 2006-07 Rajasthan Minor Irrigation 13.42 8.31 4.70 Land Development 7.34 5.45 4.29 Farm Mechanization 47.69 44.04 30.95 Horticulture 0.96 1.17 1.70 Dairy Development 11.91 7.64 6.54 Poultry 0.48 0.16 0.08 Sheep/Goat/Piggery 4.45 2.72 1.38 Fisheries 0.19 0.03 0.03 Forestry/wasteland 1.79 0.09 0.08 Storage/MY 0.37 0.40 9.32 Others 11.40 29.98 40.93 Total 100 100 100 Maharashtra MI 33.95 15.05 17.95 LD 8.21 3.52 3.01 FM 4.22 9.58 18.75 P&H 6.17 21.53 17.85 DD 36.83 9.47 8.18 Poultry 0.50 1.90 1.15 S / G /P 0.79 1.87 1.16 Fisheries 0.46 0.87 0.56 F /WLD 0.49 1.07 5.14 SMY 1.51 13.50 4.59 BG 0.02 0.00 0.35 Others 6.84 21.63 21.30 Total 100 100 100 Tamil Nadu Minor irrigation 8.60 9.70 7.01 Land development 5.95 4.04 3.63 Farm Mechanization 12.54 13.06 14.96 Plantation & Horticulture 12.43 9.31 9.29 Agri-Others 36.75 37.70 34.14 Animal Husbandry 18.55 22.69 27.84 Fisheries 2.18 1.73 1.90 Forestry 1.65 0.69 0.46 Storage/Market Yard 1.35 1.08 0.76 Total 100 100 100
21 2.2 District-wise Credit Disbursed In this section we look at District level performance in doubling of credit across states. 2.2.1 Rajasthan Situation It has been observed at the aggregate level that doubling of credit flow to agriculture was achieved within a year after 2003-04 in Rajasthan. Tables 2.5 to 2.9 show District-wise performance of credit disbursed since 2003-04. Table shows that doubling was achieved in credit disbursement in 2004-05 in Churl, Dungarpur, Jaisalmer, Jalore, and Sirohi, while in 2005-06 doubling in all Districts was achieved except Ajmer, Dholpur, Ganganagar, Hanumangarh, Kota, Pali and Rajsamand. By 2006-07 doubling in credit disbursed was achieved in all the Districts. There were wide variations across Districts and this would mean wide variations within the District among different tehsils/ blocks. In case of commercial banks, doubling of credit disbursement was achieved in 2004-05 over 2003-04 in 13 of the 32 Districts while in 2005-06 it was not achieved in Dholpur, Ganganagar, Hanumangarh, Kota, Pali and Rajsamand. In the final year, 2006-07, all Districts achieved doubling and still Rajsamand failed to get to the target. There was a clear picture emerging that it has been little difficult in Districts to achieve the doubling target where base year disbursement has been high. Cooperative banks had achieved doubling of credit disbursement in 2004-05 over 2003-04 in 9 of 32 Districts. In 2005-06, cooperative banks had achieved doubling in half the Districts only. In the final year, Ganganagar and Pali could achieve doubling of credit target. PLDBs largely finance long term activities the target achievement of doubling was highly variable. In 2004-05, except for Jaisalmer and Kota doubling in credit over 2003-04 was not achieved, while in 2005- 06, Churu, Dholpur, Jaisalmer and Pali PLDBs could achieve the target of doubling. In the final year, Jaipur, Jalore, Jodhpur and Kota were added to list of achiever Districts. In case of regional rural banks, doubling of credit disbursement was achieved in 2006-07 over 2003-04 in all Districts but for Karauli and Rajsamand. In 2004-05- the first year, doubling was achieved in 12 of 32 Districts while in 2005-06 over 2003-04, doubling was achieved in all but Dausa, Ganganagar, Jodhpur, Karauli, Kota, Pali, Rajsamand and Sawai Madhopur. It was also observed that credit disbursement has fluctuated over these three years. 22 Table 2.5: Credit Disbursed since 2003-04 (Rs. lakh) District 2003-04 2004-05 2005-06 2006-07 Times Increaseover 2003-04 in 2004-05 2005-06 2006-07 Ajmer 8262 13816 15689 20813 1.67 1.90 2.52 Alwar 20104 29784 52896 59438 1.48 2.63 2.96 Banswara 3589 6911 9008 12940 1.93 2.51 3.61 Baran 9244 15492 21317 25670 1.68 2.31 2.78 Barmer 10960 19760 25376 37802 1.80 2.32 3.45 Bharatpur 18898 27552 55205 73476 1.46 2.92 3.89 Bhilwara 6911 11009 14788 21240 1.59 2.14 3.07 Bikaner 6911 11009 14788 21240 1.74 3.13 4.06 Bundi 6146 10722 19215 24942 1.73 2.48 3.38 Chittorgarh 7244 12544 17934 24513 1.73 2.48 3.38 Churu 3556 8071 10768 19985 2.27 3.03 5.62 Dausa 5220 9103 11362 12621 1.74 2.18 2.42 Dholpur 5609 9149 11145 12820 1.63 1.99 2.29 Dungarpur 2175 4557 5294 7914 2.10 2.43 3.64 Ganganagar 37455 57898 65575 87968 1.55 1.75 2.35 Hanumangarh 24854 35307 43414 61398 1.42 1.75 2.47 J aipur 15773 23716 80301 171156 1.50 5.09 10.85 J aisalmer 1210 2779 4872 7902 2.30 4.03 6.53 J alore 8107 17470 23974 32348 2.15 2.96 3.99 J halawar 6750 13108 16025 NA 1.94 2.37 J hunjhunu 8626 14689 18132 23980 1.70 2.10 2.78 J odhpur 10318 16523 21891 28578 1.60 2.12 2.77 Karauli 4811 7844 10282 12981 1.63 2.14 2.70 Kota 8428 16007 13277 23438 1.90 1.58 2.78 Nagaur 8748 21681 24158 29615 1.11 2.76 1.37 Pali 12936 14218 20942 31506 1.10 1.62 2.44 Rajsamand 2629 2881 4369 5302 1.10 1.66 2.02 S.Madhopur 7411 11683 16232 18934 1.58 2.19 2.55 Sikar 13160 22877 34247 45514 1.74 2.60 3.46 Sirohi 2999 6535 9027 11017 2.18 3.01 3.67 Tonk 6596 10939 15239 27069 1.66 2.31 4.10 Udaipur 3275 6302 8192 11177 1.92 2.50 3.41
Source: District PLPs, NABARD. 24 Source: District PLPs, NABARD. Table 2.7: District-wise Cooperative Banks (Rs. lakh) District 2003-04 2004-05 2005-06 2006-07 Times Increase over 2003-04in
Source: District PLPs, NABARD. 27 2.2.2 Tamil Nadu Situation The District wise flow of agricultural advances in Tamil Nadu during 2003-04 to 2006-07 was given in Table 2.10. As could be seen from the table, the flow of agricultural credit increased from Rs.7135 crores in 2003-04 to Rs.16137 crores in 2006-07 accounting for an increase of 126 per cent during this period. Among the different Districts, Tirunelveli District topped the list with an increase of 219 per cent while the performance was the lowest in Thoothukudi District with Table 2.10: District-wise Credit Flow to Agriculture: Tamil Nadu (Rs. crore) Districts 2003-04 2004-05 2005-06 2006-07 Times increase over 2003-04 2004-05 2005-06 2006-07 Kancheepuram 113 164 201 294 1.5 1.8 2.6 Thiruvallur 134 184 267 318 1.4 2.0 2.4 Cuddalore* 302 384 566 672 1.3 1.9 2.2 Villupuram* 272 442 544 708 1.6 2.0 2.6 Vellore 243 272 308 501 1.1 1.3 2.1 Thiruvannamalai 227 341 427 536 1.5 1.9 2.4 Salem 240 381 559 498 1.6 2.3 2.1 Namakkal 230 355 562 456 1.5 2.4 2.0 Dharmapuri* 224 177 263 353 0.8 1.2 1.6 Krishnagiri* NA 241 325 408 1.3 1.7 Coimbatore 618 805 1051 1334 1.3 1.7 2.2 Erode 519 738 949 919 1.4 1.8 1.8 Tiruchirapalli 298 372 536 712 1.2 1.8 2.4 Karur 142 203 242 329 1.4 1.7 2.3 Perambalur 193 337 389 423 1.7 2.0 2.2 Pudukottai* 257 378 442 407 1.5 1.7 1.6 Thanjavur 340 502 742 837 1.5 2.2 2.5 Thiruvarur 133 236 290 368 1.8 2.2 2.8 Nagapattinam 165 307 336 437 1.9 2.0 2.6 Madurai* 280 383 499 654 1.4 1.8 2.3 Theni 199 260 354 463 1.3 1.8 2.3 Dindigul* 311 408 537 535 1.3 1.7 1.7 Ramanathapuram* 173 293 335 424 1.7 1.9 2.5 Virudhunagar* 179 262 382 483 1.5 2.1 2.7 Sivagangai* 216 297 368 500 1.4 1.7 2.3 Tirunelveli* 296 467 654 942 1.6 2.2 3.2 Thoothukudi* 327 529 609 513 1.6 1.9 1.6 The Nilgiris 123 171 213 261 1.4 1.7 2.1 Kanya Kumari 380 564 696 851 1.5 1.8 2.2 State 7135 10452 13646 16137 1.5 1.9 2.3
Note: * Districts in which RRBs were functioning. Source: State Level Bankers Committee Report, Chennai. 28 57 per cent. In Tamil Nadu, doubling of agricultural credit was not done in seven Districts. The District where maximum agricultural credit flow (Tirunelveli) and the District where minimum flow (Thoothukudi) were both located in the Southern Zone of the state. Table 2.10 shows that in the first year none of the Districts achieved doubling of credit, but in 2005-06 over 2003-04, Thiruvallur, Villupuram, Salem, Namakkal, Perambalur, Thanjavur, Thiruvarur, Nagapattinam, Virudhunagar and Tirunelveli Districts achieved doubling target (10 of 29 Districts). In 2006-07, only Dharmapuri, Krishnagiri, Erode, Pudukottai, Dindigul and Thoothukudi did not get to the target (6 of 29 Districts). Thus, there were inter-District performance problems in achieving doubling of credit to agriculture in Tamil nadu. 2.2.3 Madhya Pradesh Situation As shown in the Table 2.11, among the 48 Districts of Madhya Pradesh, only 38 Districts have achieved the target of doubling of Table 2.11: Number of times increase in credit during the doubling period Rank District Times increase Rank District Times increase 1 Bhopal 10.5 26 Barwani 2.3 2 Dhar 4.0 27 Harda 2.3 3 Khargone 3.6 28 Indore 2.3 4 Gwalior 3.6 29 Morena 2.3 5 Guna 3.4 30 Neemuch 2.3 6 Damoh 3.4 31 Shahdol 2.3 7 Raisen 3.3 32 Bhind 2.3 8 Dewas 3.2 33 Katni 2.1 9 Burhanpur 3.2 34 Balaghat 2.1 10 Narsinghpur 3.2 35 Sidhi 2.1 11 Shajapur 3.1 36 Chhindwara 2.1 12 Panna 2.8 37 Rewa 2.0 13 J abalpur 2.8 38 Rajgarh 2.0 14 Shivpuri 2.6 39 Datia 1.9 15 Satna 2.6 40 Sheopur 1.9 16 J habua 2.6 41 Dindori 1.9 17 Sehore 2.6 42 Tikamgarh 1.9 18 Ujjain 2.6 43 Ashoknagar 1.8 19 Mandla 2.5 44 Anuppur 1.8 20 Vidisha 2.5 45 Seoni 1.8 21 Ratlam 2.4 46 Umariya 1.7 22 Khandwa 2.4 47 Chhatarpur 1.6 23 Betul 2.4 48 Hoshangabad 1.6 24 Mandsaur 2.4 Total 2.7
29 agricultural credit disbursement. The bottom 10 Districts in the table have not achieved the target of doubling. Among these 38 Districts, the data were available only for 35 Districts and not for East Nimar, West Nimar and Burhanpur because of the re-organisation of the Districts. Table 2.13 shows that in Madhya Pradesh, in 2004-05 Shajapur, Ujjain, Dhar, Dewas, Vidhisha, Harda, Satna, Dindori and Mandla Districts observed doubling of credit over 2003-04 while Khargone Bhopal, Shajapur, Indore, Dhar, Dewas, Sehore, Vidhisha, Gwalior, Burhanpur, Satna, Guna, Damoh, Morena, Panna and Neemuch doubled credit disbursement in 2005-06 over 2003-04. However, even Table 2.12: District wise Increase of Agricultural Credit in the Doubling Period Number of times increase in credit during the doubling period Rank District Crop loan Term Loan Rank District Crop loan Term Loan Top 25 Districts Bottom 23 Districts 1 Bhopal 7.4 14.0 26 Barwani 2.3 2.2 2 Dhar 4.2 3.5 27 Harda 2.3 2.2 3 Khargone 3.3 5.4 28 Indore 2.8 1.5 4 Gwalior 4.3 2.9 29 Morena 3.2 1.6 5 Guna 5.6 1.8 30 Neemuch 2.4 1.6 6 Damoh 4.3 1.4 31 Shahdol 3.8 1.3 7 Raisen 3.5 2.5 32 Bhind 4.4 0.8 8 Dewas 3.3 2.9 33 Katni 3.1 1.2 9 Burhanpur 3.1 3.8 34 Balaghat 2.2 1.7 10 Narsinghpur 3.8 1.8 35 Sidhi 2.2 2.0 11 Shajapur 3.1 2.9 36 Chhindwara 2.3 1.4 12 Panna 3.1 2.1 37 Rewa 2.4 1.7 13 J abalpur 3.3 2.2 38 Rajgarh 2.0 1.9 14 Shivpuri 4.7 0.8 39 Datia 2.1 1.7 15 Satna 3.5 1.8 40 Sheopur 2.8 0.8 16 J habua 2.5 3.2 41 Dindori 3.3 1.1 17 Sehore 3.0 1.0 42 Tikamgarh 1.9 1.9 18 Ujjain 2.5 2.9 43 Ashoknagar 4.3 0.7 19 Mandla 3.4 1.8 44 Anuppur 3.3 1.1 20 Vidisha 2.6 1.9 45 Seoni 2.3 0.7 21 Ratlam 2.5 2.1 46 Umariya 2.8 0.8 22 Khandwa 2.6 1.5 47 Chhatarpur 1.8 1.0 23 Betul 2.8 1.7 48 Hoshangabad 1.9 0.8 24 Mandsaur 2.8 1.3 Total 2.9 2.1 25 Sagar 2.5 2.1 30 Table 2.13: District-wise Credit Flow to Agriculture: Madhya Pradesh (Rs. lakh) Districts 2003-04 2004-05 2005-06 2006-07 Times increase over 2003-04
31 by 2006-07, Hoshangabad, Tikamgarh, Chhatarpur, Ashoknagar, Seoni, Sheopur, Dindori, Umariya and Anuppur did not fulfil the doubling of credit target. This shows that though at the state level doubling target has been achieved, at the District level few Districts were not able to get to the target. Inter district variations does exist in the GLC disbursement in the state. 2.2.4 Uttar Pradesh It may be observed that GLC flow (in absolute terms) to agricultural term loan in 3 Districts, total agriculture in one District declined during 2006-07 from the 2003-04 level. Out of 69 Districts in the state of UP, for which data for all the four years was available, 16 Districts could not achieve the target of doubling of agricultural credit during the policy package period. These 16 Districts were Jaunpur, Faizabad, St. Ravidas Nagar, Chandauli, Allahabad, Varanasi, Firozabad, Unnao, Growth Pattern during 2003-04 to 2006-07 No. of Districts Name of Districts Tot Ag NFS OPS 52 Agra, Allahabad, Aligarh, Badaun, Bahraich, Balrampur, Barabanki, Bareilly, Basti, Bijnore, Bulandshahar, Deoria, Etah, Etawah, Farukkhabad, Fatehpur, GB Nagar, Ghaziabad, Ghazipur, Gonda, Gorakhpur, Hamirpur, Hardoi, Jalaun, Jhansi, JP Nagar, Kannauj, Kanpur (D), Kanpur (N), Kushinagar, Lakhimpur, Lucknow, Mahoba, Manpuri, Mau, Meerut, Mirzapur, Moradabad, Muzaffarnagar, Pilibhit, Pratapgarh, Rae Bareli, Rampur, Saharanpur, Shahjahanpur, Siddharth- nagar, Sitapur Tot Ag NFS OPS 12 Sonebhadra, Shravasti, St. Kabir Nagar, Sultanpur, Unnao, Mathura, Baghpat, Banda, Maharajganj, Ballia, Firozabad, Ambedkarnagar, Lalitpur, Chitrakoot, Varanasi, Kaushambi, Faizabad Tot Ag NFS OPS 1 St. Ravidas Nagar Tot Ag NFS OPS 3 Azamgarh, Auraiyya, Chandauli Tot Ag NFS OPS 1 Jaunpur
Note: NFS- Non farm Sector, OPS- Other Priority Sector 32 Kaushabi, Kushinagar, Kanpur (N), Rampur, Badaun, Ambedkar Nagar, Azamgarh and Mathura. Further, as many as 24 District in case of crop loan and 26 Districts in case of agricultural term loan failed to achieve the target of doubling the ground level credit within three years period of policy package from 2004-05 to 2006-07. However, Mahamaynagar (Hathras) District recorded 105.4 per cent increase in case of crop loan, 91.4 per cent increase in case of agricultural term loan, 115.3 per cent increase in case of agriculture (total), during 2005-07 (within two years) over 2003-04 period. 2.2.5 Maharashtra In Maharashtra, though at State level, doubling of agricultural credit over the three years was achieved at the growth rate of 46 per cent, 18 per cent and 50 per cent in the respective years, the inter-District variation in growth rates amongst the Districts/regions was wide during 2004-05, 2005-06 and 2006-07. Out of the 33 Districts the target of doubling of agriculture credit was achieved in 24 Districts. In other words, doubling of credit was not achieved in 9 Districts over the period. The disturbing issue was of the significant inter-District/ inter-regional disparity in the flow of credit. As it was, the average share of agricultural credit in Western Maharashtra has been around 60 to 61 per cent of the total credit in Maharashtra during 2004-05 to 2006-07. For the same period, it was around 16 to 17 per cent in Marathwada, 16 to 18 per cent in Vidarbha and 4 to 6 per cent in Konkan region. The disbursement of credit to agriculture in western region was as high as 60 to 61 per cent of the total credit to agriculture in the State. The disbursement of agricultural credit in Marathwada, Vidarbha and Konkan regions during the last three years was only between 16 to 17 per cent in Marathwada, 16 to 18 per cent in Vidarbha and 4 to 6 per cent in Konkan regions of the total flow of credit to agriculture in the State. In this respect, the most privileged Districts were Kolhapur, Nasik, Sangli, Satara and Pune in western Maharashtra. The problem of inadequacy of credit appears to be more serious in almost all Districts of Vidarbha and Marathwada region of the State. The situation of inadequacy of credit equally prevails in three Districts of Konkan, but not so bad in Thane District of the state. 33 2.3 Short-term and Long-term Credit Flows What was the situation by type of credit disbursed viz., short-term and long-term. 2.3.1 Rajasthan Table 2.14 shows credit disbursed by institutions and type of credit flows since 2003-04 in Rajasthan. Data shows that in case of commercial banks achieved doubling of credit disbursed in both crop and term loans in 2005-06 over 2003-04, though in case of term loans the achievement was four times the base year. The situation further improved during the terminal year. Regional Rural Banks almost achieved doubling of crop loans disbursement in 2005-06, but in the terminal year it exceeded the doubling target only in crop loans and not term loans. Cooperative banks though achieved doubling of crop loans in 2005-06, it went on to further achieve four times disbursement of the crop credit in 2006-07. The doubling of term loans was achieved in the terminal year. At the aggregate level, crop loan and term loan were doubled in 2005-06 and situation further improved in 2006-07. It was also noticed in this doubling process that commercial banks improved their share in crop loan from 38.21 per cent in 2003-04 to 40.38 per cent in 2006-07 and share in term loan from 55.35 per cent to 82.03 per cent during the same period. Also, the share in credit disbursement increased from 42.10 per cent in 2003-04 to 53 per cent in 2006-07. In case of Regional Rural Banks, deterioration was observed in credit disbursement share of crop loans from 47.63 per cent in 2003-04 to 40.50 per cent in 2006-07 and significant reduction in share in term loans from 30.39 per cent to 9.46 per cent during the same period. Overall also, Regional Rural Banks observed a decline in share in credit disbursement from 43.72 per cent to 31.10 per cent. In case of Cooperative Banks, improvement was observed in credit disbursement share of crop loans from 14.16 per cent in 2003-04 to 19.12 per cent in 2006-07 and significant reduction in share in term loans from 14.26 per cent to 8.50 per cent during the same period. Overall also, cooperative banks observed a marginal increase in share in credit disbursement from 14.19 per cent to 15.91 per cent. 34 Table 2.14: Agency- wise Credit Flow under Crop and Term Loans (Rs. lakh) Institutions Commercial Banks RRBs Co-ops Total Years Amount %share Amount %share Amount %share Amount %share Rajasthan 2003-04 Crop loan 88359 38.21 110159 47.63 32757 14.16 231275 100 Term loan 37577 55.35 20630 30.39 9683 14.26 67891 100 Total 125936 42.10 130789 43.72 42440 14.19 299166 100 2004-05 Crop loan 145933 37.69 183460 47.39 57764 14.92 387157 100 Term loan 68108 62.94 26680 24.66 13418 12.40 108206 100 Total 214041 43.21 210140 42.42 71182 14.37 495363 100 2005-06 Crop loan 210259 40.48 219684 42.30 89414 17.22 519357 100 Term loan 154479 78.71 23586 12.02 18210 9.28 196275 100 Total 364738 50.97 243270 33.99 107624 15.04 715632 100 2006-07 Crop loan 291655 40.38 292511 40.50 138126 19.12 722291 100 Term loan 257255 82.03 29681 9.46 26670 8.50 313606 100 Total 548910 52.99 322192 31.10 164796 15.91 1035897 100
Disbursement Times Base Year 2004-05 over 2003-04 CBs RRBs Co-ops Total Crop Loan 1.65 - 1.67 - 1.76 - 1.67 - Term Loan 1.81 - 1.29 - 1.39 - 1.59 - 2005-06 over 2003-04 Crop Loan 2.38 - 1.99 - 2.73 - 2.25 - Term Loan 4.11 - 1.14 - 1.88 - 2.89 - 2006-07 over 2003-04 Crop Loan 3.30 - 2.66 - 4.22 - 3.12 - Term Loan 6.85 - 1.44 - 2.75 - 4.62 -
100 100 100 100 100 100 100 100 37 2.3.2 Tamil Nadu Data shows that commercial banks achieved doubling of credit disbursed in both crop loans in 2006-07 and term loans in 2005-06 over 2003-04. Regional Rural Banks achieved doubling of crop loans disbursement in 2005-06, while term loan doubling was achieved in 2006-07. Cooperative banks did not achieve the doubling target in either crop loans or term loans during the entire period of three years. At the aggregate level, crop loan doubled in 2006-07 while the term loan in 2005-06. It was also noticed in this doubling process that commercial banks improved their share in crop loan from 70.41 per cent in 2003-04 to 85.43 per cent in 2006-07 and share in term loan from 70.01 per cent to 92.78 per cent during the same period. In case of Regional Rural Banks, a marginal improvement was observed in credit disbursement share of crop loans from 4.91 per cent in 2003-04 to 5.37 per cent in 2006-07 and marginal improvement in share in term loans from 3.41 per cent to 3.87 per cent during the same period. In case of Cooperative Banks, significant reduction was observed in credit disbursement share of crop loans from 24.69 per cent in 2003-04 to 9.19 per cent in 2006-07 and significant reduction in share in term loans from 26.57 per cent to 3.34 per cent during the same period. Thus in Tamil Nadu the space vacated by cooperatives and RRBs has been occupied by commercial banks. 2.3.3 Madhya Pradesh Data shows that commercial banks achieved doubling of crop loan disbursement in 2005-06 and term loan disbursement in 2006-07 over 2003-04, though in case of crop loans the achievement was more than four times the base year in 2006-07. Cooperatives achieved doubling of crop loans disbursement in 2006-07, but did not get to the target in term loan. Regional Rural Banks though achieved doubling of crop loans in 2005-06, it did not do so in case of term loans. At the aggregate level, crop loan was doubled in 2005-06 while the term loan doubled in 2006-07. It was also noticed in this doubling process that commercial banks improved their share in crop loan from 31.59 per cent in 2003-04 to 46.67 per cent in 2006-07 and share in term loan from 67.34 per cent to 80.70 per cent during the same period. In case of Regional Rural Banks, share improved to 16.25 per cent in 2006-07 from 14.14 per cent in 2003-04 of crop loan, while the share of term loan reduced 38 from 10.75 per cent to 9.71 per cent. In case of Cooperative Banks, deterioration was observed in credit disbursement share of crop loans from 54.27 per cent in 2003-04 to 37.08 per cent in 2006-07 and significant reduction in share in term loans from 22.93 per cent to 9.59 per cent during the same period. 2.3.4 Maharashtra Data shows that commercial banks achieved doubling of credit disbursed in crop loans in 2004-05 and in case of term loans in 2005- 06 over 2003-04, though in case of term loans the achievement was more than four times the base year in 2006-07. Cooperatives achieved doubling of crop loans disbursement in 2006-07, but the target in term loans by 2005-06, though in case of term loans the achievement was more than four times the base year in 2006-07. Regional Rural Banks achieved doubling of crop loans and term loans in 2006-07, the achievement was more significant in case of term loans rather than crop loans. At the aggregate level, crop loan was doubled in 2006-07 while the term loan doubled in 2005-06. It was also noticed in this doubling process that commercial banks had reduced share in crop loan from 29.94 per cent in 2003-04 to 28.93 per cent in 2006-07 and share in term loan from 71.05 per cent to 68.91 per cent during the same period. In case of Regional Rural Banks, share improved to 3.83 per cent in 2006-07 from 2.85 per cent in 2003-04 of crop loan, while the share of term loan improved from 2.40 per cent to 3.08 per cent. In case of Cooperative Banks, the share in crop loan remained the same in credit disbursement and there was some improvement in share in term loans from 26.55 per cent to 28.02 per cent during the same period. 2.4 Coverage of New Farmers Under the financial inclusion, there was a component under doubling of farm credit that the Commercial Banks would try to bring in their fold at least 100 new farmers by each branch during the period. As such there was no such condition for Cooperatives and RRBs. In Maharashtra the cooperatives having 3332 rural and semi--urban branches brought 6.08 lakh new farmers in their fold. This worked out to 182 new farmers per branch. The performance of RRBs in this respect was significant. All the 564 branches of RRBs taken together financed 1.60 lakh new farmers during the period which accounted for 283 new farmers per branch. The amount of loan disbursed to 39 new farmers accounted between 7 per cent and 9 per cent of the total loan in the case of the cooperatives and exceptionally high between 31 per cent and 69 per cent in respect of RRBs during the period. Further, of 6.08 lakh new farmers financed during the period, 3.3 lakh farmers were SF/MF in the case of cooperatives accounting for 55.0 per cent of the total new farmers. Among the 1.60 lakh new farmers financed by the RRBs, 0.75 lakh farmers were SF/MF which account for 47.0 per cent of the total new farmers. In Rajasthan, overall new farmers coverage declined from 4.69 lakh in 2004-05 to 4.57 lakh and further to 3.57 lakh in 2006-07. In Madhya Pradesh, the total number of new farmers covered has increased by 18.81 percent in 2005-06 as compared to previous year, while it has shown a decline of about 16.27 percent in 2006-07. As compared to total number of farmers accounts the commercial banks performance in terms of coverage of new farmers was better as compared to that of co-operative and RRBs. As far as financing of new farmers was concerned as against the target of achieving at least 100 new farmers by each of the bank branches in an year, the commercial banks have surpassed the target by financing 126 new farmers per branch in 2004-05 and 134 in 2005-06 and 122 new farmers per branch in 2006-07. The co-operatives has achieved 2-3 times higher than the target while, RRBs were lagging behind in achieving the target by financing only 91 new farmers/branch in 2005-06 and 80 new farmers per branch in 2006-07. On an average in Madhya Pradesh, over the three years, about 473330 farmers were covered per year by all the agencies put together considering that there were no overlaps. In 2005-06 out of the total farmers financed in the state around 17 per cent were new farmers. This figure stood at 10 per cent in 2006-07. In Uttar Pradesh, the data on coverage of new farmers during the implementation period indicates of an enthusiastic beginning of the programme as the figure of number of new farmers covered (14,96,373 farmers) during first year (2004-05) of implementation could not be touched again during the next two years of the implementation i.e., 2005-06 (1316399 farmers) and 2006-07 (1487213 farmers). Further, number of fresh Kisan Credit Cards issued during a particular year also declined from 2061135 during 2004-05 to 1673307 during 2005- 06 and then increased slightly to 1811073 during 2006-07 but fell short of the level achieved in 2004-05. 40 However, during 2005-06 & 2006-07, banks adopted a different strategy to upscale the credit flow to agriculture sector and allowed frequent withdrawals in KCC accounts without taking into account the season-wise limits sanctioned to the borrowers which was not the case during 2004-05 where the withdrawals were restricted to some extent (unofficially) both in terms of quantity and frequency of withdrawals. Since every withdrawal in KCC accounts was treated as a fresh disbursement (irrespective of the quantum of limit sanctioned), allowing more number of KCC withdrawals during 2005-06 and 2006- 07 led to increase in total disbursement during these two years without issuing more number of fresh loans to new borrowers. This resulted in decline in number of accounts and increase in total amount disbursed during 2005-06 and 2006-07. During the implementation period (2004-05 to 2006-07), the new farmers accounted for 62 per cent in number and 53 per cent in total loan to agriculture in case of commercial banks and 56 per cent in number and 61 per cent in total loan to agriculture in case of RRBs in the state of Uttar Pradesh which indicates better efforts on the part of these two agencies as far as share of new farmers in total credit extended to agriculture sector was concerned. On the other hand, in case of cooperative banks, the new farmers accounted for only 6 per cent of total farmers covered and 4.8 per cent of total amount disbursed to new farmers which may be on account of poor efforts, poor financial status of cooperative banks and non-willingness of most of the farmers to have business with the cooperative bank due to various reasons viz. delay in disbursement of cash component and delivery of kind components. The efforts made by commercial banks and RRBs in covering more number of new farmers in extending credit to agriculture sector helped them to corner 68.8 per cent and 29.9 per cent share respectively by covering 47.7 per cent and 37.7 per cent of total number of new farmers who were extended the bank loan for agriculture sector. The small and marginal farmers accounted for 67.63 per cent of total number of farmers covered and 57.88 per cent of total amount of loan granted to new farmers during the implementation of programme in the state of Uttar Pradesh. The small and marginal farmers were given lower amount of loan per account (Rs.39997) as compared to other categories of farmers. The average loan granted per account to new farmers was Rs.46731. 41 In Tamil Nadu, opening up of a new bank account for the purpose of getting agricultural credit in the current year was treated as a new loan 2 . The percentage change in the number of new farmers in 2006- 07 over 2004-05 was more in RRBs accounting for 69 per cent followed by commercial banks with 11 per cent. In case of co-operative banks, there was a decline in the coverage of new farmers by 46 per cent. Overall, there was an increase in the coverage of new farmers by all the lending institutions in Tamil Nadu to the extent of 10 per cent. As far as the amount sanctioned under new farmer category was concerned, there was a decline in the amount sanctioned between 2004-05 and 2006-07 by co-operative banks, while there was an increase in the amount sanctioned by RRBs for the same period. The coverage of new farmers by commercial banks was more in 2004- 05 with 86.2 percent of the total number of new farmers covered in the state and they were followed by co-operative banks (7.1 per cent) and RRBs (6.7 per cent). However, the share was more in commercial banks followed by RRBs and co-operative banks during 2005-06 and 2006-07. 2.5 Farmers in Distress A special scheme was announced for the distressed category of farmers who have suffered production and income losses on account of successive recurrence of natural calamities like drought, flood, 2 A new farmer is one who did not borrow any loan from any of the credit institutions, so far and he comes forward to get bank loan (KCC/AGL/ATL) afresh (during the current year) after being persuaded by the banker/ other borrower farmers to do so. However, bankers find it difficult in categorizing new farmers separately from the general category of farmers. In view of operational conveniences, bankers categorized farmers as new farmers under the following conditions: A New farmer is one who is new to either KCC (crop loan/ term loan) or AGL (Agricultural Gold Loan) during the current year. If he approaches the present bank for the first time, he has to submit No Objection Certificate (NOC) from other bank (Co- op/ Commercial bank / RRB) in which he had dealings previously. Even if he produces such NOC from other bank, he will be treated as a new farmer if he gets agricultural credit from the present bank for the first time. Even though he has regular bank transactions like maintaining Savings Bank Account, Current Account, Fixed Deposit, etc., currently in the same bank, if he borrows crop loan (KCC/ AGL) during the current year he is treated as a new farmer. Even though a farmer borrows for non - farm activities, with or with out pledging Jewels, in the current year in the same bank, he is treated as a new farmer, if he borrows Crop Loan afresh. If a farmer borrowed crop loan two years back, repays the entire outstanding amount and then borrows crop loan again during the current year after a gap of one or more than a year, then also he is treated as new farmer. 42 infection of pests and diseases, etc. Their dues were restructured/ rescheduled over a suitable period (3 to 5 years) and they were made eligible for availing fresh loans. Regarding the restructuring of loans, data of Cooperatives and RRBs was not available for 2004--05 for Maharashtra. During 2005-06 and 2006-07, the cooperatives restructured 7.21 lakh and 8.45 lakh accounts of the farmers in distress amounting to Rs.1424.31 crore and Rs.1743.73 crore in the respective years. Similarly, the RRBs restructured 638 and 137 accounts of the farmers involving loan amount of Rs.1.95 crore and Rs.0.37 crore respectively. As a result, DCCBs and RRBs taken together financed fresh loans against restructuring to 1.69 lakh and 2.94 lakh accounts of the farmers and financed them fresh loan of Rs.180.63 crore and Rs.500.19 crore during 2005--06 and 2006-07 respectively. In Rajasthan, farmers in distress covered increased from 1.27 lakh in 2004-05 to 1.41 lakh in 2005-06. The data for latter period was not available. In Tamil Nadu, farmers were more benefited under relief measure extended to farmers who were in distress from co-operative banks with 54.7 per cent of the total amount sanctioned under the relief measures and they were followed by commercial banks (44.6%) and RRBs (0.7%) during 2004-05. However, in 2006-07, commercial banks provided more relief than that of the co-operative banks and RRBs. As far as the percentage change in the amount sanctioned between 2004-05 and 2006-07 was concerned, all the three banks showed a negative trend. The rescheduling of loans would allow farm borrowers an extension in repayment with revised terms. At the same time, bankers were also simultaneously carrying out a restructuring exercise to alleviate the debt burden on the farm sector. The restructuring implied that rescheduled farm loans would not have any penal interest rates. Instead, on a merit basis, interest charges on some of the loans would be pegged to the current rates. This would bring down the borrowing costs considerably. Farmers under the relief restructuring of loans to borrowers in distress in Tamil Nadu, were more benefited from commercial banks with 84.6 per cent of the total amount sanctioned for the purpose and they were followed by co-operative banks (14.6%) and RRBs (0.8%). However, in 2006-07, commercial banks provided more relief followed by RRBs and co-operative banks. The relief came down between 2004-05 and 2006-07. 43 In Madhya Pradesh, in total, 25097 farmers in distress were settled in 2004-05 and 5874 farmers in 2005-06 and 1950 farmers in 2006- 07. In aggregate for these 3 years the total amount was to the tune of Rs. 11,249 lakh. Among these farmers, the majority were from commercial banks followed by RRBs in 2005-06. In 2006-07, other than a few (5) farmers settled by RRBs, most of the farmers belonged to commercial banks. In Uttar Pradesh, in 2004-05, 80806 farmers who were in distress saw restructuring of Rs.212.58 crore while in the next year no farmers was reportedly helped, though in 2006-07, 22649 farmers with loan amount of Rs.97.43 crore were assisted through restructuring. In all during these two years, 103455 farmers in distress were helped through restructuring of Rs.310.01 crore loans. Of these 1755 farmers were given fresh loans of Rs.5.04 crore in 2004-05, 1151 farmers given Rs.3.39 crore loans in 2005-06, 957 farmers given Rs.4.62 crore loan in 2006-07. 2.6 Farmers in Arrears Like in the case of farmers in distress, similar arrangement was made to meet the credit needs of farmers in arrears. During 2005-06 and 2006-07, the cooperatives restructured 1.73 lakh and 1.17 lakh accounts of the farmers in arrears amounting to Rs.378.73 crore and Rs.385.13 crore respectively in Maharashtra. Because of restructuring of loans of farmers in arrears, cooperatives financed fresh loans to 4.07 lakh accounts of the farmers in arrears and issued fresh loans to them to the tune of Rs.712.98 crore during the period of three years. In Rajasthan, farmers in arrears also increased from 0.25 lakh in 2004-05 to 0.34 lakh in 2005-06. The data for latter period was not available. In Madhya Pradesh, in 2004-05, 6292 farmers were reported to be in arrears and Rs.36.81 crore loans were settled while in 2005-06, 1235 farmers who were in arrears could get Rs.9.35 crore loans settled. Of these, majority were from commercial banks (1020 with Rs.8.75 crore loan) and RRBs (215 farmers with Rs.0.60 crore loans). In the next year, 533 accounts of arrears with Rs.4.02 crore loan were settled and again 368 came from commercial banks and 135 with RRBs. In Uttar Pradesh, in the three years 297741 farmers with arrears were benefited and Rs.404.86 crore loans were settled. Of these, 44 241867 farmers were in 2004-05 followed by 44472 farmers in 2005- 06 and 11402 farmers in 2006-07. In 2004-05 the loan amount settled was Rs.256.65 crore followed by Rs.61.64 crore in 2005-06 and Rs.86.57 crore in 2006-07. Once this was done, fresh loans were issued to 29196 farmers to the tune of Rs.27.18 crore of which 20507 farmers were in 2004-05, 8235 farmers in 2005-06 and 454 farmers in 2006-07. The fresh loans issued were Rs.15.34 crore, Rs.10.27 crore and Rs.1.57 crore respectively for 2004-05, 2005-06 and 2006-07. 2.7 One Time Settlement (OTS) This scheme was applicable to SF/MF whose accounts have turned into Non-Performing Assets (NPA) and their cases have been filed and decreed debts. The end of 31 March 2001 was fixed as a cut of off date for the NPA accounts. Total number of accounts settled under OTS in the case of co-operatives during the three years was 26368 and their amount of settlement was Rs.175.93 crore in Maharashtra. In the case of RRBs, the number of OTS accounts settled during the period was 573 and their amount of settlement was Rs.0.75 crore. In other words, the cooperatives and RRBs taken together, nearly 27000 SF/MF became eligible for fresh credit from the banks. In Rajasthan, farmers in OTS marginally increased from 0.10 lakh in 2004-05 to 0.12 lakh in 2005-06. The data for latter period was not available. In Tamil Nadu, the farmers under One Time Settlement (OTS) Relief in Tamil Nadu were benefited more from commercial banks with 96.7 per cent of the total amount disbursed for the purpose during 2004- 05 and they were followed by RRBs (2.5%) and co-operative banks (0.8%). However, co-operative banks provided more benefits under OTS in 2006-07 followed by commercial banks and RRBs. The co-operative banks increased the OTS benefit to the farmers in between 2004-05 and 2006-07 significantly while there was a negative trend in case of commercial banks and RRBs. In Madhya Pradesh, in 2004-05, 87555 farmers were benefited under OTS and Rs.90.92 crore loans were settled while in 2005-06, 10948 farmers were benefited when loans worth Rs.33.62 crore were settled. Of these majority were from commercial banks (3526 with Rs.14.76 crore loan) followed by cooperatives (4724 farmers and Rs.9.71 crore loans) and RRBs (2698 farmers with Rs.9.15 crore loans). In the next year, 9098 accounts were settled under OTS with Rs.15.72 crore loan 45 settled and again 3566 came from commercial banks and 5527 from RRBs. The amount settled by commercial banks in 2006-07 was Rs.10.83 crore, cooperatives Rs.0.18 crore and Rs.4.71 crore by RRBs. In Uttar Pradesh, in the three years, 107990 farmers (SF/MF) benefited from OTS and Rs.191.09 crore loans were settled. Of these, 63036 farmers were in 2004-05 followed by 18991 farmers in 2005- 06 and 25973 farmers in 2006-07. In 2004-05 the loan amount settled was Rs.88.04 crore followed by Rs.28.78 crore in 2005-06 and Rs.74.27 crore in 2006-07. Once this was done, fresh loans were issued to 17006 farmers to the tune of Rs.28.29 crore of which 8270 farmers were in 2004-05, 3510 farmers in 2005-06 and 5226 farmers in 2006-07. The fresh loans issued were Rs.8.44 crore, Rs.6.56 crore and Rs.13.29 crore respectively for 2004-05, 2005-06 and 2006-07. 2.8 Redemption from Informal Sources of Credit The advances granted against the farmers indebtedness to informal sources like moneylenders, etc. were Rs.11 lakh to 58 farmers in the case of cooperatives in Maharashtra. While in the case of RRBs, this amount was Rs.473 lakh for 241 farmers. The banks were advised to give wide publicity to this scheme among the eligible farmers. However, it was reported by the banks that they found difficult to identify such farmers mainly because the farmers themselves could not come forward and apply in writing to the bank and comply with relevant details which they found difficult. In Rajasthan, It was also found that loans against indebtedness benefited 2164 farmers in 2004-05 and only 539 farmers in 2005-06 and 182 farmers in 2006-07. During these two years, Rs.27.20 crore and Rs.1.07 crore were advanced to these farmers. It was also noticed in Rajasthan that fresh loans after relief measures were given to 62000 farmers in 2004-05 and were disbursed Rs.331 crore. This number went up to 89000 in 2005-06 and amount disbursed declined to Rs.179 crore. The number further declined to 2251 in 2006-07 and the amount of credit disbursed was mere Rs.2.08 crore. In Madhya Pradesh, in 2004-05, 282 farmers were benefited under redemption of moneylenders loans and Rs.1.04 crore redeemed while in 2005-06, 172 farmers were benefited when loans worth Rs.1.63 crore were settled. Of these all were from commercial banks. In 2006- 07, 82 farmers were benefited with Rs.0.03 crore loan settled and they belonged to RRBs. 46 In Uttar Pradesh, in the three years 11610 farmers benefited from moneylender loan redemption and Rs.40.83 crore loans were settled. Of these, 5004 farmers were in 2004-05 followed by 2422 farmers in 2005-06 and 4184 farmers in 2006-07. In 2004-05 the loan amount settled was Rs.21.88 crore followed Rs.4.89 crore in 2005-06 and Rs.14.66 crore in 2006-07. 2.9 Share Croppers, Tenant Farmers and Oral Lessees The area of concern has been the exclusion of tenant farmers, lessees and share croppers from access to bank credit on account of extant restrictions on recording of oral lease and other legal impediments. To make modest beginning in addressing this situation, it was expected that the banks would make some token provision for facilitating formation, linkage and financing such groups during the implementation of the scheme. However, the cooperatives and RRBs expressed their inability to identify such beneficiaries mainly due to lack of evidence/proof of lease and adequate security. In Rajasthan, information on small and marginal farmers, tenant farmers, share croppers and oral lessees was available only for 2004- 05. During this year 174909 small and marginal farmers were benefited with credit of Rs.687.11 crore. There were only 288 oral lessees covered in 2004-05 in Rajasthan with credit disbursement of Rs.1.13 crore. The data for latter period was not available. There were only 939 sharecroppers covered in 2004-05 in Rajasthan with credit disbursement of Rs.1.52 crore. The data for latter period was not available. There were only 1774 tenant farmers covered in 2004-05 in Rajasthan with credit disbursement of Rs.4.21 crore. The data for latter period was not available. In Madhya Pradesh, to address the problem of exclusion of tenant farmers, oral lessees and sharecroppers from access to bank credit, the banks were directed to finance them. As a response to the norms, in Madhya Pradesh in 2005-06, only 148 tenant farmers were financed by commercial banks, which declined drastically in the next financial year 2006-07 to 43 tenant farmers. The other agencies have not financed any farmers in this category. No financing has been done to 47 oral lessees and sharecroppers by formal banking institutions in Madhya Pradesh. In Maharashtra, 3621 SHGs of tenant farmers were formed and financed by cooperatives and 474 by RRBs during the period. This was possible because of the efforts of the NGOs who could identify the tenant farmers and formed their SHGs. In Maharashtra, agriculture credit was not extended to share croppers and oral lessees for lack of records on land use. In Tamil Nadu, in 2004-05, in terms of extent of financial support provided to the SHGs of tenant farmers, commercial banks contribution was more (92 %) followed by RRBs(5%) and co-operative banks (3%). In 2006-07 also, commercial banks played a leading role followed by RRBs. The percentage change in the financial assistance extended to tenant farmers between 2004-05 and 2006-07 was more in RRBs and a declining trend was observed in case of commercial banks and co-operative banks. In 2004-05, commercial banks supported tenant farmers through 1002 SHGs, RRBs and cooperatives formed 91 and 34 SHGs respectively. A total of Rs.17.63 crore was loaned during 2004-05 and commercial banks led with Rs.16.24 crore followed by RRBs Rs.0.96 crore and cooperatives another Rs.0.44 crore. In 2005-06, commercial banks supported 484 tenant farmer SHGs followed by 20 by RRBs and only 4 SHGs by cooperatives. During the year, Rs.6.5 crore was loaned of which 97 per cent was through commercial banks followed by 1.8 per cent by RRBs and 1.2 per cent by cooperatives. During 2006-07, commercial banks supported 286 tenant farmer SHGs while RRBs supported only 94 tenant farmer SHGs. During the year, Rs.3.3 crore was loaned of which 59.5 per cent was through commercial banks followed by 40.5 per cent by RRBs. No SHG was formed by co- operatives during 2006-07. In Uttar Pradesh, in the three years, 39380 tenant farmers were covered of which 15835 were during 2004-05, 7306 during 2005-06 and 16239 during 2006-07. It was also revealed that of the total number of new farmers the share of tenant farmers was 1.06 per cent in 2004-05, 0.55 per cent in 2005-06 and 1.09 per cent in 2006-07. In 2004-05, tenant farmers were issued loans of Rs.44.30 crore which reduced to Rs.25.61 crore in 2005-06 and then increased to Rs.103.83 crore in 2006-07. 48 In case of oral lessees, in the three years, 7911 such farmers were covered of which 1684 were during 2004-05, 3338 during 2005-06 and 2889 during 2006-07. It was also revealed that of the total number of new farmers the share of oral lessees was 0.11 per cent in 2004-05, 0.25 per cent in 2005-06 and 0.19 per cent in 2006-07. In 2004-05, oral lessees were issued loans of Rs.8.03 crore which reduced to Rs.2.77 crore in 2005-06 and then increased to Rs.6.52 crore in 2006-07. In case of share-croppers, in the three years, 19951 share croppers were covered of which 3309 were during 2004-05, 5018 during 2005- 06 and 11624 during 2006-07. It was also revealed that of the total number of new farmers the share of share croppers was 0.22 per cent in 2004-05, 0.38 per cent in 2005-06 and 0.78 per cent in 2006-07. In 2004-05, share croppers were issued loans of Rs.9.62 crore which improved to Rs.13.85 crore in 2005-06 and then increased to Rs.52.91 crore in 2006-07. Surprisingly, the tenant farmers were giver higher dose of loan per account (Rs.44120) as compared to the average loan. The oral lessees and the share-croppers were given an average loan of Rs.21897 and Rs.38284 per account respectively. 2.10 Agric-Clinics/Agri-Business The programme on agri-clinic and agri-business was launched by Ministry of Agriculture, Government of India, in association with NABARD with an objective to facilitate the farmers by extending new technologies of farming through trained agricultural graduates. In view of the policy package announced for doubling of agriculture credit, the banks had to sponsor and finance at least 10 agri-clinic/ business centres in each District as per the government directives. The objectives of the agri-clinic scheme were: (i) to supplement the efforts of government extension system, (ii) to make available supplementary sources of input supply and services to needy farmers, and (iii) to provide gainful employment to agriculture graduates in new and emerging areas in agriculture sector. Thus, NABARD took the initiative of providing training to those eligible graduates and also provides capital subsidy for setting up of the unit as well as interest subsidy on the loans availed under the scheme. The units could be established for host of activities which could result in sustainable income for the graduates apart from increasing the productivity in rural areas by adopting scientific measures and protocols. Greater emphasis was 49 being given on formation of atleast 10 ACABC units in each District. The banks have been encouraged to finance a group of entrepreneurs belonging to different disciplines. The project may be taken up by agriculture graduates individually or on joint/ group basis. The group may normally be of five, of which one could be a management graduate with qualification or experience in Business Development and Management. In Rajasthan, in 2004-05, 36 agri-clinics/ agri-business units were devolved credit of Rs.0.69 crore while in 2005-06, 179 agri-clinics/ agri-business units were devolved credit of Rs.0.65 crore. The number further reduced to 5 in 2006-07 which were disbursed Rs.0.14 crore. In Madhya Pradesh, to encourage the entrepreneurship in agriculture and allied sector and to imbibe the educated youth in this sector, guidelines have been formed in SACP that in every District atleast 2-3 agri-clinics/agri-business centres should be funded by commercial banks. Accordingly, it has been reported that Rs.0.83 crore loan was sanctioned to 30 agri-clinics/agri-business centres in 2005- 06, while it has drastically declined to only one agri-clinic in 2006- 07. RRBs have also funded around 8 units in 2005-06 and 2 units in 2006-07. In Uttar Pradesh, the data on the financing of agri-clinics/ business centres indicates that the achievement was only 27 per cent (570 against the target of 2100 agri-clinics in the state (@10/ District/year). The financing of all the 570 agri clinics/ agri-business Centres in the State was done by Commercial banks and RRBs only. For example, during 2005-06, out of 252 centres financed in the state, 162 were financed by Commercial banks and the rest 90 centres by RRBs and during 2006-07, 154 centres were financed by commercial banks and the rest 21 centres by RRBs. The Cooperative banks did not finance any agri clinics/ agri-business Centres in the state. However, Banks have financed around 392473 new investment projects during the policy package period, which can be termed as excellent as far as mandatory expectations were concerned. Of these new projects, 159116 were financed during 2004-05 (Rs.944.36 crore), 92598 in 2005-06 (Rs.889.45 crore) and 14059 in 2006-07 (Rs.1468.84 crore). In Tamil Nadu, more agri-clinics were started through co-operative banks which were followed by commercial banks and RRBs. It could 50 also be observed that more efforts have been taken during 2006-07, to start agri-clinics as 2626 clinics were supported. Of these 2589 were set up with assistance from cooperative banks with a loan of Rs.4.22 crore while commercial banks supported only 36 clinics. In 2004-05 only 69 clinics were set up by commercial banks. And this number declined to 38 in 2005-06. In these two years, commercial banks supported 107 clinics while cooperative banks set up 114 clinics. In Maharashtra, the total number of ACABC financed by the banks in the State was 129 upto 31 March 2007. The total amount of loan sanctioned to them was Rs. 5.61 crore against which disbursement of loan was Rs.4.70 crore. Only 14 new ACABC were financed by the bank during the last three years, though a large number of private centers as reported have been opened in the State without taking credit from the formal sources. Regarding deployment of credit to ACABC, out of 129 units financed in the State, as much as 92 units were financed in Western Maharashtra alone, leaving 12, 15 and 10 for Marathwada, Vidarbha and Konkan regions respectively. 2.11 Institutional Credit to Small and Marginal Farmers (SF/MF) The land operated by SF/MF was around 39.0 per cent of the total operated area in Maharashtra, though they account for about 73.0 per cent of the total holdings. Regarding the credit flow, it was observed that disbursement of credit to SF/MF in the case of cooperatives and RRBs during the period of doubling of credit was more than commensurate with the land operated by them. For instance, flow of credit to them was between 37.0 per cent and 47.0 per cent in the case of co-operative banks and between 45.0 per cent and 48.0 per cent in respect of the RRBs. On the other hand, however, the number of accounts of SF/MF financed, during the same period was between 38.0 per cent and 51.0 per cent of the total accounts financed by cooperative banks, while their proportion was between 36.0 per cent and 50 per cent in the case of RRBs. In Madhya Pradesh, 30 per cent of the total agricultural credit was extended to small/marginal farmers in 2004-05, which declined to 15.53 per cent in 2005-06 and 19.17 per cent in 2006-07. The share of number of accounts showed an increasing trend with about 32.35 per cent share in the total number of accounts. The agency-wise financing of SF/MF farmers shows that commercial banks have financed 36.75 per cent out of their total agricultural credit 51 disbursement in 2004-05, which reduced in 2005-06 to 9.73 per cent and then to 11.05 per cent in 2006-07. Among the total number of farmers financed by commercial banks, small/marginal farmers accounted for around 20 per cent in 2005-06 and 2006-07. As far as co-operatives were concerned, the amount of credit to SF/MF farmers accounted for 14.8 per cent in 2004-05, which increased to 19.92 per cent in 2005-06 and 29.59 per cent in 2006-07. In case of RRBs the credit to SF/MF farmers accounted for about 47.7 per cent, which showed a declining trend over the years. In RRBs, the number of SF/ MF farmers account about 34 per cent to the total number of accounts. In Tamil Nadu, the performance of co-operative credit institutions in terms of share of number and loan amount issued to small / marginal farmers to their respective totals during 2006-07. There were 22 DCCBs in 2006-07 operating with 661 branches, 4489 PACBs and 44.15 lakh members. The share of small and marginal farmers to total number of beneficiaries was 56 per cent and they received 51 per cent of the total loan amount disbursed during 2006-07. This share varied from 26.4 per cent in Salem DCCB to 100 per cent in Nilgiris DCCB. The share of loan amount issued to SF/ MF to total loan amount disbursed varied from 10.5 per cent in Salem DCCB to 100 per cent in Nilgiris DCCB. Average loan amount disbursed by DCCBs per borrower in Tamil Nadu was Rs.19501 ranging from Rs.36024 in Coimbatore DCCB to Rs.9964 in Sivagangai DCCB. Although the loan amount outstanding was higher in Salem DCCB, i.e., Rs.811.5 crore, the coverage of SF/ MF was lesser in this DCCB region. In Uttar Pradesh, the small and marginal farmers accounted for 67.63 per cent of total number of farmers covered and 57.88 per cent of total amount of loan granted to new farmers during the implementation of programme in the state of Uttar Pradesh. The small and marginal farmers were given lower amount of loan per account (Rs.39997) as compared to other categories of farmers. The average loan granted per account to new farmers was Rs.46731. During the three years a total of 2907951 small/marginal farmers were provided loans and of these 1023745 (68.42% of new farmers) were given loans in 2004-05 and the number declined to 858043 (65.18% of new farmers) in 2005-06, but increased to 1026163 (69% of new farmers) in 2006-07. The loans disbursed to these farmers stood at Rs.3507.87 crore in 2004-05, Rs.3277.76 crore in 2005-06 and Rs.4845.22 crore in 2006-07. 52 2.12 Monitoring Information System (MIS) Under the Service Area Approach (SPA), Service Area Monitoring Information System (SAMIS) was introduced to facilitate meaningful analysis of sectoral credit flow as well as to build up a strong and uniform data base on agricultural credit. It was envisaged that the bank branches would codify the data and submit in Lead Bank Return (LBR) format regularly and the Lead Bank would arrange to generate the reports utilizing the software supplied to them for the purpose. Although the system was in vogue for nearly one and a half decades, it could not be stabilized. Rather, it was withdrawn while dispensing with the SAA in December 2004. Subsequently, NABARD formed the Working Group and reviewed the SAMIS reporting system in consultation with major CBs, IBA and RBI and forwarded the recommendations to RBI for its approval. Some of the recommendations of the Working Group were: SAMIS to be renamed as Priority Sector MIS, LBRs to be made statutory, SAMIS to follow BSR Coding System to facilitate integration, avoid multiple entries at branches and to ensure error free and timely reporting, supply of District-wise consolidated data to SLBC, etc. Subsequently, NABARD made some revision in the format of new MIS and again forwarded to RBI for its approval in April 2007. The new MIS would be effective only after the issue of operational guidelines by RBI. 2.12.1 Maharashtra Concerns As on today, whatsoever may be the status of the new MIS, the overall rate of submission of LBRS was not at all satisfactory. Controlling offices were neither serious about the submission of LBRs by the branches and forwarding the District-wise consolidated data to SLBC, nor the SLBC was serious in making follow up of the same at District/ branch level of the banks. While seeking information on the same from the officials of the bank branches, no ones response was satisfactory. Rather, they were reluctant to update us on the issue. Nevertheless, all of them informed that so far they had not forwarded such data/ LBRs to their controlling offices. Further, they were not aware of MIS/ any statement for reporting the number of total accounts financed, and further, number of accounts of SF/MF and new farmers covered during the period of doubling of agriculture credit. The officials of the SLBC, while seeking information on the status of the MIS, reported that doubling of agricultural credit was one of the many activities to be performed by the SLBC in a given period. Moreover, a few more financial schemes were introduced in the 53 subsequent years. As a result, the scheme which was introduced in the recent past was almost forgotten in the light of the new schemes. Therefore, the SLBC could hardly get any time to postmortem the data of completed/closed scheme when already a few new schemes were on hand to be monitored by the Committee. To cite an example, they reported that the existing shortage of staff in the banks was the biggest constraint in monitoring the performance of priority sector lending. Moreover, once the scheme of doubling of agricultural credit was closed by the end of March 2007, two more schemes viz., Financial Inclusion and Loan Waiver Scheme of 2008 announced by the GOI were to be implemented and monitored in the subsequent year. As a result, the officials further added: In the situation when one scheme was recently closed, but there was already a new scheme on hand to look into on priority, we can work only in present situation and not in past. We were unable to probe further in this matter. 2.12.2 Madhya Pradesh Case The rural branches face lot of problems in reporting the data because of frequent power failure, which makes it difficult to maintain the daily database. In Panna, many co-operative banks were yet to be computerized and the data was managed manually. The lack of professionals also add to their problems, as they get struck up for 2- 3 days with even minor problems related to software, in rural branches. Moreover, different banks follow different software in managing the database and they take extra efforts while preparing LBRs. There was often divergence between the data reported at the SLBC level and that submitted directly by the banks. The co-ordination between the LDMs and the bank branches was poor regarding the database management as the LDMs has little hold over the bank branches. There was no uniformity in the reporting formats. SLBC, DLCC and their controlling office burden the banks with preparation of different formats of data for different review meetings. SAMIS was able to collate data based on the service area. This creates problems while consolidating the data at District level and block level, as the concept of service area approach was slowly vanishing as almost all the banks were covering all the villages. The consolidation of data at the District level was not done efficiently as it involves lot of compilation work for the lead banks. Mostly the SLBC directly receives the LBRs from the bank branches/ computer agencies and this hampers the review at the District level, and usually the physical targets set by government were generally ignored. Hence LBR formats has to be revised in such a way that all the banks follow an uniform 54 format for reporting at all level such as SLBC, DLCC etc. All the bank branches should submit the periodical data to the controlling offices of bank branches at each District, instead of lead banks as they exercise better control over their respective branches than the LDMs. A uniform reporting system has to be formulated for all the banks so that there were no differences at different levels and it will reduce the workload related data base management at each level. In the current MIS, there was no provision for accounting migrant farmers who has shifted from one bank to another and there exists no clear definition for the new farmers or new accounts. According to them, any new account (whether old costumer) was called as new farmers. Thus, all the banks do not follow uniform accounting for new farmers and they were still confused about the concept of new farmers. During the field study some of the contradictions were even observed. Number of farmers Particulars Reported rightly Reported contradictory Migrated
CBs New farmers 42 3 4 Old farmers 38 3 8 Coops New farmers 28 1 0 Old farmers 23 2 6 RRBs New farmers 19 3 2 Old farmers 12 2 4 Total New farmers 89 7 6 Old farmers 73 7 18 Grand total 162 14 24
Among the farmers surveyed, there were contradictions in information observed in case of 14 farmers. There was no accounting for 24 farmers who had migrated across banks. Of the 89 new farmers reported by the banks in the sample, 7 farmers reported that they were old customers of the same banks and 6 farmers had shifted from other banks. Moreover, there was a common complaint that at the 55 top level that there was frequent policy changes which generally do not percolate down quickly. The staff gets confused whether to follow the new system or stick on to the older one. These things have to be taken care of. 2.12.3 Rajasthans Views This was very important issue. However, across the board ad-hocism was practiced. No proper records were kept and were prepared only when asked for by District or State offices of banks. There was large number of inconsistencies found in data reported as has been the case with this survey. There was no verification process of how data was sent upward. All bank managers reported that they collate information on agriculture sector largely when NABARD seeks it. The poor data management was reflected in PLPs and SLBC information also. It has been found that in two subsequent pages data do not match on the same item. Forms/structure schedules that were supposed to be sent to upper level offices were not sufficient to track all that happens at the branch level. It was attitude of staff that was largely to be blamed and also information on all items was not sought. 2.12.4 Tamil Nadu Regarding the Management Information System (MIS), in Tamil Nadu, it was articulated that although each financial institution was trying to improve the format and the methodology of preparing the monthly, quarterly and annual statements taking advantage of the technology and computer software, still it has a long way to go. Since the format that was being submitted to the State Level Bankers Committee by the institutions remains the same, at institution level also there can be a common format so as to avoid errors in reporting. Apart from this, some of the classifications such as categorizing the farmers according to the size of the holding, possession of the property, etc., could be linked with the software so that the data will be readily available. The banking information had been computerized in commercial banks and RRBs. The PACBs, however, have started to computerize the information very recently. There was no uniformity in the MIS maintained by different institutional agencies like commercial banks, RRBs and PACBs. In RRB Kurinjipadi, there was no categorization of farmers into marginal, small and large farmers. The Branch Managers and Secretaries could not suggest any improvement in the existing 56 MIS, as they did not have any clear understanding about the utility of MIS. They were simply sending the data to their head quarters as and when the returns were demanded. However, all bankers suggested that all the banking information should be made available at one apex level institution. At the State level, there was no web site of either NABARD or SLBC to browse the District-wise information on banking development over years. The available information was highly truncated and it would be very difficult to make any policy decision based on the available information. Apart from lack of uniformity in the data provided by different financial institutions, in some returns only outstanding or cumulative information was available, while in some other returns only current year information was available. Although, the information on agricultural advances extended to marginal and small farmers and other weaker sections of the rural community were required for policy making, such information were either not available or incomplete. In some returns, only number of accounts was given, while in others amount of loan disbursed alone has been given. Thus, in view of the above inadequacies in the existing MIS (i) a web site may be created by SLBC for Tamil Nadu for providing the following banking development indicators like District-wise information, bank- wise (commercial banks, RRBs, Co-operative Banks), information on different category of farmers (marginal, small and large farmers, tenants and oral lessees, new farmers, beneficiaries of crop insurance and other beneficiaries of the banking system), information on both number of accounts and loan disbursed for all schemes and categories of farms, information on both current and outstanding loan and, information on banking indicators yearly. 57 CHAPTER 3 Kisan Credit Cards : Some Issues The Kisan Credit Card (KCC) scheme, introduced in August 1998 for short-term (ST) loans for Seasonal Agricultural Operations (SAO), with the objective of providing adequate, timely, cost effective and hassle free credit support to farmers was being implemented across the country by all public sector commercial banks, RRBs and Co-operative banks. To cater to the comprehensive credit requirements of farmers under a single window, the scope of KCC was broad-based by NABARD, from time to time. In addition to short-term credit and term loans for agriculture and allied activities, a certain component of loan through KCC also covers consumption needs. 3.1 KCC : Progress 3.1.1 Tamil Nadu The number and amount sanctioned under Kisan Credit Card (KCC) Scheme for Tamil Nadu was presented in Table 3.1. About 64 per cent of the total number of KCC were issued from commercial banks and the amount sanctioned through KCC by these banks accounted for 43 per cent of the total amount sanctioned under KCC during 2003- 04. Co-operative banks issued 33 per cent of the total number of cards but disbursed a relatively larger amount accounting for 56 per cent of the amount sanctioned for the same period (Table 3.1). As RRBs had lesser number of branches in the state, the number and amount sanctioned also were lower. Similar trend was seen in Tamil Nadu during 2006-07 also. However, the percentage increase between 2003- 04 and 2006-07 in the number as well as the amount sanctioned under KCC by RRBs were higher than that of commercial and co- operative banks. In sum, the total number of KCC increased by 7.6 per cent in Tamil Nadu during 2006-07 over 2003-04. However, there was an increase by 62 per cent in the amount sanctioned under KCC during the same period. The amount sanctioned through KCCs per farm household by commercial banks in Tamil Nadu was Rs.20351 during 2003-04 and increased to Rs.38037 accounting for an increase of 87 per cent. Amount sanctioned under KCC by all the lending institutions put together was Rs.30328 per household in 2003-04 and it increased to Rs.45615 in 2006-07 accounting for an increase of 50.4 per cent. The 58 amount sanctioned per household under KCC in Tamil Nadu was very low when compared with that of all India level. Table 3.1: Number and Amount Sanctioned under KCC in Tamil Nadu (amount in Rs.lakhs) Number of Cards Amount Sanctioned Years CBs Coops. RRBs Total CBs Coops. RRBs Total 2003-04 309408 159749 12491 481648 62968 82067 1039 146074 (64.2) (33.2) (2.6) (100.0 (43.1) (56.2) (0.7) (100.0) 2004-05 340149 174730 23998 538877 87093 173946 3508 264547 (63.1) (32.4) (4.5) (100.0) (32.9) (65.8) (1.3) (100.0) 2005-06 430953 64795 32144 527892 126966 55972 7441 190379 (81.6) (12.3) (6.1) (100.0) (66.7) (29.4) (3.9) (100.0) 2006-07 309731 181082 27390 518203 117813 105706 12859 236378 (59.8) (34.9) (5.3) (100.0) (49.8) (44.7) (5.5) (100.0)
Figures in parentheses indicate percentages to total 3.1.2 Rajasthan During 2004-05, 843943 fresh KCCs were issued of which 67 per cent were issued by cooperative banks followed by commercial banks and regional rural banks (Table 3.2). During 2005-06, a lower number of KCCs were issued- 340000 of which 63.1 per cent were issued by Commercial Banks followed by 19.4 per cent by Cooperative Banks and 17.54 per cent by Regional Rural Banks. During 2006-07, 333374 fresh KCCs were issued of which 49.26 per cent were issued by Commercial Banks followed by 28.78 per cent by Cooperative Banks and 21.96 per cent by Regional Rural Banks. Keeping in view GoIs emphasis on increasing credit flow to agriculture sector, NABARD had advised banks to bring into the KCC fold all farmers including defaulters, oral lessees, tenant farmers, etc., and to identify new farmers. The banks were advised to issue KCCs in a hassle-free manner, extend and renew crop loans only through KCC to ensure quality in operation. By March end 2007, a cumulative number of 4301374 KCCs were issued by RFIs and 64.23 per cent belonged to cooperative banks followed by 27.48 per cent by commercial banks and 8.29 per cent by regional rural banks (Table 3.3). The total eligible farmers in the State was 6085837. 59 3.1.3 Uttar Pradesh Fresh Kisan Credit Cards issued during a particular year declined from 2061135 during 2004-05 to 1673307 during 2005-06 and then increased slightly to 1811073 during 2006-07 but fell short of the level achieved in 2004-05 (Table 3.4). However, during 2005-06 & 2006- 07, banks adopted a different strategy to upscale the credit flow to agriculture sector and allowed frequent withdrawals in KCC accounts without taking into account the season-wise limits sanctioned to the borrowers which was not the case during 2004-05 where the withdrawals were restricted to some extent (unofficially) both in terms of quantity and frequency of withdrawals. Since every withdrawal in a KCC account was treated as a fresh disbursement (irrespective of the quantum of limit sanctioned), allowing more number of KCC withdrawals during 2005-06 and 2006-07 led to increase in total disbursement during these two years without an increase in the number of fresh loans to new borrowers. This resulted in decline in number of accounts and increase in total amount disbursed during 2005-06 and 2006-07. Table 3.3: KCC Issued Since Inception Cumulative Position Source: SLBC, Rajasthan. Agencies 2004-05 2005-06 2006-07 CBs 803558 1017971 1182196 RRBs 223582 283210 356413 DCCBs 2600860 2666819 2762765 Total 3628000 3968000 4301374
Table 3.2: Agency-wise Kisan Credit Cards Issued During the Year Source: SLBC, Rajasthan. Agency 2004-05 2005-06 2006-07 Cumulative as on March 2007 Coop 565389 65959 95946 2762765 RRBs 76126 59628 73203 356413 CBs 202428 214413 164225 1182196 Total 843943 340000 333374 4301374 Distribution % Coop 66.99 19.40 28.78 64.23 RRBs 9.02 17.54 21.96 8.29 CBs 23.99 63.06 49.26 27.48 Total 100 100 100 100
( ) 60 Table 3.4: Fresh Kisan Credit Cards Issued Particulars CBs RRBs Coops. All banks 2004-05 Number of A/c 737562 608726 714847 2061135 Amount (Rs. lakh) 249487.99 183129.43 62883.11 495500.53 2005-06 Number of A/c 665147 626693 381467 1673307 Amount (Rs. lakh) 313493.84 240918.52 159310.10 713722.46 2006-07 Number of A/c 710886 797103 303084 1811073 Amount (Rs. lakh) 433940.26 311557.81 187357.91 932855.98
3.1.4 Madhya Pradesh In Madhya Pradesh, the progress in implementation of KCC Scheme is shown in the Table 3.5. Table 3.5: Trend in issuing KCCs and the amount sanctioned (amount in Rs.lakh) CBs Coops. RRBs Total Years No. Amount No. Amount No. Amount No. Amount 2004-05 184391 105564 529710 540250 74614 36353 788715 682168 2005-06 203578 168534 221007 705100 79401 44022 503986 917656 2006-07 192659 162374 157446 777839 89082 42510 439187 982723
The amount sanctioned under KCC has shown an increasing trend from Rs 682168 lakhs to Rs.982723 lakhs while the number of KCC issued has gone down from 788715 to 439187 KCCs, which might be due to increase in credit limit for old KCC holders. This trend was obvious in the co-operatives, which show drastic decline in the number of KCCs as compared to commercial banks. The RRBs have improved both in terms of number of accounts and the amount of credit sanctioned through KCC. The achievement of the targets in implementing KCC schemes by various agencies was shown in Table 3.6 and it was obvious from the table that the cooperatives have failed as compared to other agencies in achieving the target both in terms of physical and financial target. While commercial banks have achieved physical targets by at least above 85 per cent after 2005-06, the performance of RRB in achieving the targets related to KCC implementation was quite impressive both in terms of number of KCCs and the amount sanctioned under KCC scheme. 61 Table 3.6: Achievement of the targets in implementing Kisan Credit Card Scheme Year Commercial banks Cooperatives RRBs Total %target achieved in issuing KCC %amount disbursed outof limit sanctioned %target achievedin issuingKCC %amount disbursed outof limit sanctioned %target achieved in issuing KCC %amount disbursed outof limit sanctioned %target achieved inissuing KCC %amount disbursed outof limit sanctioned 2004-05 10 96 50 31 153 134 60 101 2005-06 92 93 72 2 102 181 83 27 2006-07 85 112 74 32 94 175 82 52 Total number of operational holdings inMP (Census, 2001) 7360000 Total number of KCCs issuedsinceinception(2007-08) 4556632 %KCCs issuedsinceinception(2007-08) to Total operational holdings 61.91
In Madhya Pradesh, since inception of KCC schemes till now, 4556632 cards have been issued which account for about 61.97 percent of the total operational holdings. Table 3.7 shows that co-operatives contribute the major share both in number of KCCs and the amount sanctioned followed by commercial banks. The share of co-operatives in terms of number of KCCs indicates a decreasing trend over the years, while the commercial banks and RRBs show an increasing trend. Table 3.7: Share of agencies in Issuing KCCs and the amount sanctioned (%) Year CBs Coops. RRBs
Share in total no. of KCC A/Cs. Share in total amount through KCC Share in total No. of KCC A/Cs Share in total amount through KCC Share in total no. of KCC A/Cs. Share in total amount through KCC 2004-05 23 15 67 79 10 6 2005-06 40 18 44 77 16 5 2006-07 44 17 36 79 20 4 3.1.5 Maharashtra Maharashtra was at the forefront in implementation and expansion of KCC scheme accounting for 10 per cent of the cards in the country as a whole. The Cooperatives and RRBs have issued 44.17 lakh and 2.17 lakh KCCs respectively, while CBs have issued 17.41 lakh cards up to 31 March 2007. Thus, the cumulative total of the cards issued by all banks work out to 63.76 lakh. Considering the number of land holdings, membership of PACS, level of borrowing membership, extent of defaulters, etc., the quantitative coverage by the end of 2006-07 62 appears to be satisfactory in the State. During the last three years, the number of cards issued by cooperatives alone was 39.35 lakh forming 61.72 per cent of the total cards in the State as on 31 March 2007 (Table 3.8). This speaks about the extent of expansion of KCC by cooperatives. The credit limit sanctioned by co-op. during the period of three years against 39.35 lakh KCC was Rs.6867.82 crore. In the case of RRBs, 1.13 lakh KCC were issued and the credit limit sanctioned was Rs.282.61 crore during the period of three years. The banks have been advised for extensive coverage of KCC through expanding its outreach by lending to all eligible farmers including non-willful defaulters, oral lessees, tenant farmers, share croppers and agricultural labourers. 3.2 District/ Branch Level KCC Position In Rajasthan two Districts Sirohi and Ganganagar were selected. In Sirohi District, the maximum number of new KCCs were issued by cooperative banks in 2004-05 and 2006-07 and that too by two branches in each of the blocks (Table 3.9). The performance of commercial banks in Sirohi with regard to issue of new KCCs was poor and PLDBs do not issue KCCs. In Ganganagar, cooperative bank in Raisinghnagar issued more KCCs than any other branch, but the performance of cooperative bank branch in Karamu was poor as it issued only 15 KCCs in four years. Commercial bank in Raisinghnagar again out performed the commercial bank in Karanpur. The doubling period 2004-05 to 2006-07, saw regional rural bank branch in Raisinghnagar perform better than the one in Karanpur. PLDB in Ganganagar issued few KCCs (99) during doubling period. The cooperative bank branches in Sirohi had cumulative number of KCCs at 5485 and this was the highest among all the branches covered in the two Districts. Pindwara cooperative bank branch was followed by cooperative bank branch in Sheoganj with 3225 KCCs. Table 3.8: Expansion of KCC (Rs. in lakh) 2004-05 2005-06 2006-07 Total Bank KCC No. Credit Limit sanc. KCC No.
Credit Limit sanc. KCC No. Credit Limit sanc. KCC No. Credit Limit sanc. CBs NA NA NA NA 536284 197344 1740541 NA Co-op. 1656035 138899 1282412 151859 996184 396024 4417882 2201407 RRBs 39770 8556 28458 6861 45212 12844 217088 83356 Total 1695805 147455 1310870 158720 1577680 606212 6375511 2284763
63 As regards the renewal of KCCs, RRB in Pindwara though renewed KCCs did not increase the limits. Cooperative bank in Pindwara did not renew any KCC during these four years (Table 3.10). Commercial Bank in Pindwara renewed KCCs totalling 250 during these four years, but enhanced the limit of larger number of KCCs. Commercial bank and Regional Rural Bank in Sheoganj renewed few KCCs, but did not report enhancement of limit of any KCC. Cooperative bank in Sheoganj renewed 3304 KCCs. In Ganganagar, across the bank branches in the two blocks where KCCs have been renewed; maximum number was by RRB in Raisinghnagar followed by commercial bank in Karamu. Both these bank branches enhanced the limit of all renewed KCCs. We found that most renewed KCCs had enhanced credit limit in Ganganagar. Table 3.9: Number of New and Existing KCCs In Sirohi only 4 KCCs were reported to be dormant by commercial bank branch in Shogun (Table 3.11). However, large number of KCCs were dormant in Ganganagar. District Bank
In Rajasthan, bankers at branch level felt that percentage of farmers covered by KCC varies from 70 to 100 percent across institutions. As to why all farmers were not covered, the bankers gave number of reasons: farmers not interested in taking any loan, these farmers were defaulters of government schemes, there was staffing problem and these farmers were covered by other banks. What could be the percentage of farmers holding more than one KCC? The response of bankers in Ganganagar was that this could be 15 to 60 percent farmers. In Sirohi, only one RRB manager reported that it could be 10 percent farmers. For fixing the limit under KCC, land holding was 65 the major component used and farmers face difficulty in submitting this information. A farmer may have to visit the bank one to three times to get a KCC. The main document required to be submitted was land record. Across banks allow only one withdrawal per season on a KCC and full limit amount was allowed to be withdrawn. The impression of bankers was that major share of amount withdrawn was for agriculture purposes and with the exception of two bankers (RRB and cooperative bank in Ganganagar) 70 plus percent was used for agriculture. In Sirohi, 30 to 98 percent cards were regular while in Ganganagar, the proportion was 20 to 97 percent. The repayment months during Rabi were February and March while during kharif the months were May and June and it was early in Sirohi compared to Ganganagar as the crop matures early there. It was informed that KCC owner himself does not come for repayment largely across bank branches in the two Districts. Such percentage ranges between 25 to 100 percent. In Sirohi, 30 to 80 percent farmers get KCC renewed while this percentage was 10 to 90 percent in Ganganagar. Each bank has varied experience and it was because shifting was taking place across institutions in farmers. The reported proportions of farmers who get their limit enhanced vary between 60 to 100 percent in Sirohi and 5 to 100 percent in Ganganagar. Also 5 to 45 percent get their limit enhanced within 1 or 2 years in Sirohi and 5 to 76 percent in Ganganagar. In Sirohi 100 percent withdrawal was not reported while in Ganganagar it was almost 100 percent withdrawal. A large number of KCCs were also dormant and this percentage varied between 2 to 70 percent in Sirohi across banks while the corresponding proportions were 1 to 50 percent in Ganganagar. The reasons cited were that farmers were not interested in taking any loan; lack of publicity; covered by other banks; insurance and land disputes. In Tamil Nadu, in Virudhunagar District, the number of KCCs was 1.1 per cent of that of the state. Cuddalore District had 168886 KCCs when Virudhunagar had only 48613 KCCs issued (Table 3.12).The loan amount under KCC was also much higher in Cuddalore than that of Virudhunagar. In Cuddalore, PACBs issued more KCCs followed by commercial banks and RRBs while, in Virudhunagar, commercial banks offered more KCC facility followed by RRBs and PACBs. At the selected branch level, on an average, the parameters like number of new and existing KCC accounts, KCCs renewed, KCC limit enhanced and dormant KCC were increasing in commercial banks and RRBs while there was a declining trend in PACBs (Table 3.13). In 66 Table 3.12: Cumulative Number and Amount Sanctioned under KCC until March, 2007 in Cuddalore and Virudhunagar Districts and Tamil Nadu (amount in Rs.lakh) Figures in parentheses indicate percentages to their total. CBs RRBs Coop Total District KCCs Amount KCCs Amount KCCs Amount KCCs Amount Cuddalore 78974 26615.3 7816 2194.37 82096 32494.9 168886 61304.6 (46.8) (43.4) (4.6) (3.6) (48.6) (53.0) (100.0) (100.0) Virudhunagar 20435 5382.58 16558 2982.15 11620 1468 48613 9832.73 (42.0) (54.7) (34.1) (30.3) (23.9) (14.9) (100.0) (100.0) Tamil Nadu 2525556 611602 179740 31804 1704803 487589 4410099 1130995 (57.3) (54.1) (4.1) (2.8) (38.7) (43.1) (100.0) (100.0)
Table 3.13: Average Number of KCC accounts per Branch in Cuddalore and Virudhunagar Districts Particulars 2003-04 2004-05 2005-06 2006-07 Commercial bank No. of New KCC 129 224 321 423.5 No. of Existing KCC 140.5 273.5 449.5 630.5 No. of KCC Renewed 124.5 248.5 354 497 No. A/c Limit Enhanced 35.5 17 122.5 180 No. of Dormant KCC A/c 13.5 22.5 42 50 RRB No. of New KCC 614 1263 1834 3771.5 No. of Existing KCC 348 822.5 1167.5 2534.5 No. of KCC Renewed 375.5 560 778.5 1350 No. A/c Limit Enhanced 76 136 197 302 No. of Dormant KCC A/c 66.5 70 81 65 PACB No. of New KCC 23 16 15.5 12 No. of Existing KCC 528.5 584 542.5 122 No. of KCC Renewed 516 565.5 526 97.5 No. A/c Limit Enhanced 5 7 7 0 No. of Dormant KCC A/c 0 0 0 0 All Banks No. of New KCC 766 1503 2170.5 4207 No. of Existing KCC 1017 1680 2159.5 3287 No. of KCC Renewed 1016 1374 1658.5 1944.5 No. A/c Limit Enhanced 116.5 160 326.5 482 No. of Dormant KCC A/c 80 92.5 123 115
67 2006-07, share of number of new KCCs, KCCs renewed, KCC limit enhanced and Dormant KCCs to Existing KCCs accounted for 12.8, 59, 15 and 3.5 per cent respectively. As could be seen from the Table 3.14, the percentage of disbursement under new KCC to total disbursement, on an average, in Cuddalore and Virudhunagar Districts increased from 6 per cent in 2003-04 to 19 per cent in 2006-07. The share of new to total KCC disbursement was increasing in commercial banks and PACB while there was a downward trend in RRBs. Issues relating to the use of KCCs Some farmers were not aware of the revolving fund nature of the KCC. In majority of the cases, the KCC is not operated like a cash credit. One time drawal and one time repayment or renewal was reported. Many KCC holders view that the credit provided to them is not adequate. KCC holders complained that they were forced to lift the fertilizers from the PACBs while the same was not insisted by the commercial banks. Similarly sugarcane growers in the command area of Ambica Sugar Mills at Pennadam (Cuddalore district) were forced to lift fertilizers from the sugar mill owned subsidiary. Bank 2003-04 2004-05 2005-06 2006-07 Commercial Banks Disbursement under New KCC 6.6 15.1 61.1 97.9 Total Disbursement under KCC 47.9 77.2 126.8 202.2 Percentage of New and Total Disbursement 13.8 19.5 48.2 48.4 Regional Rural Bank Disbursement under New KCC 16.5 25.0 45.5 109.0 Total Disbursement under KCC 83.0 305.0 424.5 875.5 Percentage of New and Total Disbursement 19.9 8.2 10.7 12.5 PACB Disbursement under New KCC 4.2 5.3 8.4 2.6 Total Disbursement under KCC 334.1 360.3 344.6 44.3 Percentage of New and Total Disbursement 1.3 1.5 2.4 5.8 All Banks Disbursement under New KCC 27.3 45.4 115.0 209.5 Total Disbursement under KCC 465.0 742.4 895.9 1122.1 Percentage of New and Total Disbursement 5.9 6.1 12.8 18.7
Table 3.14: Average Amount Disbursed under New and Total KCC Accounts per Branch in Cuddalore and Virudhunagar Districts (amount in Rs.lakh) 68 In Maharashtra, during the three years, CBs issued 2879 new KCC, while two other banks issued 3301 and 1005 KCC respectively (Table 3.15). It has been reported that on an average, 10 to 15 per cent of the KCC accounts were dormant per annum. The main reasons for the dormant KCC were lack of awareness among the card holders and operational difficulties. Table 3.15: Number of New KCC Issued Banks 2004-05 2005-06 2006-07 Total CBs 616 811 1452 2879 Co-op. 75 176 3050 3301 RRBs 346 291 368 1005 Total 1037 1278 4870 7185 The bank branches were further probed on the suitability of the KCC as a single window for comprehensive credit, financial inclusion, opening of new account and its operation. All the bank branch managers reported that nearly two-third of the farmers in their operational area hold KCC. It was found that 20 per cent of the crop loan was sanctioned towards consumption purposes. It was reported by the bankers that farmers had to visit 2/3 times for opening of the KCC account if all documents were submitted by them at a time. Nevertheless, farmers by and large, do not comply with all papers on time and hence, they have to visit the banks till all papers were submitted. The farmers were allowed to withdraw as many times as they want up to their sanction of the credit limit. Similarly, they were allowed to withdraw any amount subject to their limit of sanction. As per the branch officials, out of the total credit limit sanctioned on KCC account, the farmers generally use 75 to 80 per cent of the amount to meet the expenditure in agriculture. Also nearly 74 to 82 per cent of the card holders were regular in transactions of banking. Nearly, 70 per cent card holders come for repayment on their own in the case of CBs and Cooperatives. But, about 50 per cent of the card holders of RRBs were invariably persuaded for repayment. Around 25 per cent of the card holders get enhancement in the credit limit at the time of renewal of their account. On an enquiry of KCC as a single window for comprehensive credit product, it was learnt that the scheme was announced on 31 October 2006. Hence, hardly five months were left for its implementation till the closure of the scheme on doubling of credit. All the banks informed that the scheme was promptly advertised at prominent places/ 69 Years NewKCCs %of KCCs renewed %limit enhanced Commercial Banks 2003-04 128 - - 2004-05 142 14.08 8.71 2005-06 230 14.11 8.08 2006-07 286 13.92 8.46 Co-operative Banks 2003-04 157 - - 2004-05 148 45.03 1.61 2005-06 172 41.91 1.73 2006-07 279 43.64 1.78 RRBs 2003-04 30 - - 2004-05 27 2.63 7.89 2005-06 56 10.92 12.07 2006-07 52 15.80 7.40
locations of the villages and bank offices to create awareness among the farmers about the merits of the KCC as a single window for comprehensive credit. In such a short period, however, the scheme could not percolate down below the bank level, and hence could not create enough awareness among the farmers. It was reported by the branch managers that hardly a few farmers were aware of the scheme by March 2007, although its awareness was picked up among them in the subsequent years. As such there was hardly any such KCC with the farmers till the end of the scheme of doubling of credit. Incidentally, it may be mentioned here that the bank mangers were also not aware /clear about making the provision of term credit in the KCC of the farmers. Procedure of sanction of credit limit for crops and consumption purposes was understood by them. However, they were not aware of the procedure of making provision for term loan in the KCC. It was so far so good for the bankers since no one had approached them with such purpose. In Madhya Pradesh, the performance under KCC has been quite impressive and there was very good response for the KCC by both bankers and farmers. To ensure a hassle free credit to farmers, KCC was introduced and still there were some issues which have to be found and sorted out, to make the scheme effective and successful. The number of KCCs issued by commercial bank has increased over the period in 2005-06 and 2006-07 and same with the case of co- operatives and RRBs (Table 3.16). Table 3.16: KCCs Performance in Madhya Pradesh 70 Years NewKCCs %of KCCs renewed %limit enhanced %dormant Commercial Banks 2003-04 128 - - - 2004-05 142 14.08 8.71 7.11 2005-06 230 14.11 8.08 7.12 2006-07 286 13.92 8.46 7.91 Co-operative Banks 2003-04 157 - - - 2004-05 148 45.03 1.61 28.74 2005-06 172 41.91 1.73 26.24 2006-07 279 43.64 1.78 24.76 RRBs 2003-04 30 - - - 2004-05 27 2.63 7.89 22.11 2005-06 56 10.92 12.07 14.94 2006-07 52 15.80 7.40 12.60
As KCCs were renewed once in 3 years based on the repayment of the farmers, 14 per cent of the KCCs have been renewed by commercial banks every year, while 45 per cent KCCs were renewed by Co-operatives in 2004-05 and 2 and 44 per cent during 2005-06 and 2006-07 respectively. RRBs renewed only 2.63 per cent KCCs in 2004-05, but renewed 11 per cent the next year and then 16 per cent in 2006-07. Further, 8 per cent of the KCC holders of commercial banks got enhanced limit every year, while around 1 per cent co- operative KCC holders got increase in limit during each year. In case of RRBs, in 2004-05 credit limit was enhanced to 8 per cent KCCs while in 2005-06 limit was enhanced to 12 per cent KCCs and 7.4 per cent KCCs got limit enhanced in 2006-07. The limit was usually enhanced once in a year by commercial banks based on the repayment pattern of farmers, while RRBs and Co-operatives were bound by certain limitations; they were dependent on the DLTC meeting to enhance the credit limit. As regards the dormant KCCs in Madhya Pradesh, commercial banks reported that about 7 percent of their KCCs were dormant (i.e.) they do not operate their account. It was observed that dormancy was comparatively high in Narsinghpur District. The dominant KCC holders were usually large/big farmers who usually do not need credit and they get the KCC card from banks and keep it without operating it. Some of the farmers were not operating KCC because of the dissatisfaction with the bankers response/behaviour. The percentage of dormant KCCs was high in case of co-operatives (24-28%) followed by RRBs (12-22%). Wilful defaulters were also one of the main reasons for dormant KCCs. As regards opening of the KCC account, the farmers had to visit the bankers 2-3 times to open a KCC account. The common documents asked by the banks were khasra, naksha, patwari map demarcation, loan book, legal search documents, no dues certificate and residence proof. In addition to these documents, commercial banks demand affidavit, Residence proof and photo identity, while RRB, demand hypothecation promissory note, etc. Among these documents according to bank managers, the farmers find it difficult/take time to produce documents such as khasra, naksha, patwari map demarcation, legal search report and no dues certificates. 71 Details of documents to be produced for opening KCC account Agencies Name of the documents Commercial banks Kasra, Naksha, Loan book, Patwari map demarcation, Legal search report, No dues certificate, Residence proof, Affidavit, Photo identity Cooperative banks Kasra, Naksha, Loan book, Patwari map demarcation, Legal search report, No dues certificate RRBs Kasra, Naksha, Loan book, Patwari map demarcation, Legal search report, No dues certificate, Residence proof, Promissory note, Hypothecation Note: Highlighted were the documents which the farmers find it difficult to produce. The farmers find it very difficult to produce these documents as this involves too many departments, which in turn takes a lot of time lag, and sometimes commission amount in each department. Because of these difficulties, some of the farmers were even discouraged from approaching banks for credit. This was against the very prime objective of KCC in extending handle-free credit to farmers through KCCs. Table 3.17: Details on KCC implementation at Branch level (As per response from the branch managers) Particulars CBs Co-ops RRBs No. of times farmers has to visit the bank to open KCC account 3 2 3 Percentage of regular accounts 80 45 87 Repayment Period (range in months) a. Kharif season 6-12 6-8 6-8 b. Rabi 6-12 6-12 6-8 KCC holders who repay regularly by themselves (%) 63 25 42 KCC holders who gets renewal (%) 65 73 85 KCC holders who gets their limit enhanced during renewal (%) 46 35 9 Time limit for credit enhancement (years) 2-3 3 1-3 Farmers who hold KCCs from more than one bank (%) 10 5 5-10 Approx. percentage of credit used in Agrl. 65 85 80
72 In case of commercial banks, it seems approximately 80 per cent of the accounts were regularly operated with the transactions. In the case of RRBs also, the percentage of regular accounts were high (87%) while percentage of regular accounts in case of Co-operatives (45%) was low, the reason being most of the farmers intend to migrate to commercial banks as they demand entire credit in cash. In case of commercial banks, nearly 63 percent of the customers repaid, while, the repayment was 42 percent in case of RRBs and 25 per cent in case of Cooperative banks 3 . Usually their credit limit was enhanced once in 2-3 years. In case of commercial banks, only 65 per cent of the KCC holders were renewed and about 46 per cent of KCC holders got their credit limit enhanced during renewal. About 73 per cent of KCC holders of co-operatives got their card renewed while only 35 per cent farmers got their credit limit enhanced, while in case of RRBs only 9 per cent KCCs got their limit enhanced. As per the bank managers perception, nearly 5-10 percent of farmers hold KCC from more than one bank and they said that approximately 65-85 percent of credit amount was used in agriculture. The rest of the amount was used for consumption purposes, or invested in the business or family functions or festivals. 3.3 Suggestions for Improvement Important suggestions from farmers were that there should be less paper work, interest rates should be lower, there should be flexibility in instalment payment or some rebate in times of hardship/ crop failure and have higher credit limits than the existing ones. Some farmers also felt efforts should be made to build awareness. In order to enhance coverage, the simplification of procedures was required and banks should also stop unnecessary deductions they make. 3 The repayment period given by the commercial bank is generally 6-12 months based on the nature of the crop for both Kari and Rabi. Season crops, while RRB gives 6-8 months repayment period. 73 CHAPTER 4 Credit Flow at Grass Root Level : Farmers Perceptions In this chapter, we look at field impressions based on survey of farmers, who possessed Kisan Credit Cards and also those farmers who had taken term loan, conducted in two Districts in each of five states. In five states, 10 Districts and 20 blocks were covered. In Rajasthan, the two Districts were Sirohi and Ganganagar. The sample comprised of 216 farmers while in Madhya Pradesh, the sample comprised of 200 farmers in two Districts- Narasinghpur and Panna. In Uttar Pradesh, 230 borrowers were selected in two Districts viz., Moradabad and Jhansi while the sample size in Tamil Nadu was 200. In Maharashtra, field work covered 216 farmers in Aurangabad and Latur. 4.1 Social Category of Farmers In Rajasthan, of the sampled 136 farmers (KCC), 88 were from general category (24 of 57 in Sirohi and 64 of 79 in Ganganagar) and most were medium sized farmers, while 10 were OBC (all in Sirohi) and 9 were schedule caste farmers (all but 2 in Ganganagar) and 29 other farmers (21 Scheduled Tribe farmers in Sirohi and 8 in Ganganagar). Of the 94 farmers who took term loan, 22 were Scheduled Caste and 10 were Scheduled Tribe and were largely from Sirohi. OBC farmers were from Ganganagar of the 34 such farmers, while general category farmers were mainly from Sirohi. It was also true that marginal and small farmers were from Scheduled Caste group. 4.1.1 Family Information In Rajasthan, 136 farmer households have 908 family members of which 524 belonged to 79 households in Ganaganagar and 384 members to 57 households in Sirohi. The average family size was 6.7 in Sirohi and 6.6 in Ganganagar. The average family size of marginal farmers was 5.8 in Sirohi and 5.0 in Ganganagar while small farmers Sirohi had high family size of 7.2 compared to 4.7 in Ganganagar. The same was the family size of medium farmers in Sirohi and 6.9 was the family size in Ganganagar. Large farmers also had large family sizes in both the Districts. On an average, families had adults between 2.0 to 5.0, while average number of children was 2.3 to 3.6. There were 171 children in 57 families in Sirohi and 195 children in 79 families in Ganganagar. Marginal and small farmers had more children on an average. 74 94 term loan farmer households had 665 members of which 389 were adults and 276 were children. In Sirohi, the 63 farmer households had 448 members of which 254 were adults and 194 were children while the corresponding figures for Ganganagar were 217 members, 135 adults and 82 children (Table 5.3). The average family size in Sirohi was 7.1 while it was 7.0 in Ganganagar. The family size increased as one moved from marginal farmer household to medium farmer household in Ganganagar and then dropped in case of large farmers. In case of Sirohi, the family size increased from marginal to small farmers and then dropped to increase again in case of large farmers (10 plus). A similar trend was observed in case of children in Ganganagar though adults' average size remained more or less same. In Sirohi, average adult member family size increased as one moved up the land holdings, but fluctuated with average children per family. These trends were more to do with culture and age profile of the parents in the two Districts. In Uttar Pradesh, the average size of family members in Moradabad and Jhansi Districts was found to be 6.3 and 6.47 respectively. It was observed that about 90 per cent families in Moradabad District were having family size less than eight as against 81 per cent families falling in this category in Jhansi District. The higher family size in Jhansi District indicated prevalence of comparatively more number of joint families in the District. Comparatively more number of families comprising more members per family in Jhansi District also resulted in the availability of more number of family labourers for work on own farm as well as agricultural labourers. It may be mentioned here that as many as 16 families in Jhansi and 7 families in Moradabad District having comparatively low operational holding were working on farms of other farmers as daily wage earners. It was interesting to mention that 19 out of 230 sample families reported that none of their family members go to field for work and they fully depend on agricultural laborers for farm activities. In Tamil Nadu, the average family size of the sample households as a whole was 5.6. The contribution of male, female and children constituted 39, 32 and 29 per cent respectively. In Cuddalore District, the family size was less (5.14) while, it was more in Virudhunagar (5.95) when compared with that of the overall. In Cuddalore, male members were more in number followed by female and children as observed in combined Districts also. However, in Virudhunagar, children were more in number followed by female and male members. 75 4.1.1.1 Education Levels Majority of farmers (114 of 230) in Uttar Pradesh were 6-12 class educated with another 80 farmers either being illiterate or below primary educated. Better literacy level of borrowers made them realize the importance of use of modern inputs and made them aware about the available options and the range of a particular input. On enquiry about the use of pesticides and variety of crops, many illiterate borrowers were not able to tell the brand name of pesticides, variety of crops, etc. The unemployment scenario in the country had forced many graduates and postgraduates to stay in the farming business although at least half of them wanted to quit farming. In Maharsahtra, of the 216 beneficiaries, 10 per cent were illiterate, 19 per cent had completed primary education between first and fifth standard, 58 per cent had education between sixth and twelfth standard, eight per cent were undergraduate and hardly five per cent had done graduation and above. 4.2 Land Holding In Rajasthan, of the sampled farmer households, in Sirohi the average holding size was 3.66 hectares while it was 5.94 hectares in Ganganagar. There was wide difference between the marginal and large farmers, especially in Ganganagar. Irrigated area was significant in Ganganagar while 169.91 hectares out of 208.38 hectares was irrigated in Sirohi. It was surprising that average irrigated area of marginal and small farmers was higher than large farmers in both the Districts. Marginal and small farmers in both the Districts did not lease-out land while they do lease-in land, while medium and large farmers do both with average leased-out land higher than the leased- in land for large farmers and it was true for medium farmers. The 94 term loan farmers in Rajasthan owned 317.31 hectares of land. In Sirohi of the total land of 184.66 hectares, marginal farmers possessed only 10.38 hectares with average holding size of 0.61 hectare compared to 1.42 hectares average holding of small farmers. There was large difference between small and large farmers- average holding of large farmers was 17.32 hectares. Major portion of land was irrigated in Sirohi. It was observed that marginal and small farmers lease-out land more than they lease-in, while medium farmers tend to lease-in land only. 57 farmers leased-in 91 hectares while they lease-out 80 hectares. In Ganganagar, there were 4 marginal farmers in the sample (did not report land holding information) and the small farmers had an average holding of 1.55 hectares while the large 76 farmers had average holding of 11.81 hectares. Medium and large farmers possessed unirrigated land. In Ganganagar, medium farmers lease-in significant portion of land (54.50 hectares) while they leased- out only 15 hectares. It was also observed that of the 94 farmers, 22 had no irrigation source (largely marginal farmers in Sirohi), while 24 farmers in Sirohi used well with diesel engine for irrigation and another 20 used well with electric motor for irrigation and most were small and medium farmers. Two farmers reportedly depended upon canal irrigation in Sirohi. In Ganganagar, canal irrigation was the major source of irrigation for most farmers while one farmer reportedly had well with electric motor. In Madhya Pradesh, the average size of the holdings of the sample borrowers showed that majority of the farmers were in the upper range of the category (i.e) the average size of holdings for marginal farmers was 2.21 acres, while for small farmers was 4.27 acres and the large farmers it was 11.58 acres (Table 4.1). The agency-wise split-up also showed more or less similar results. Table 4.1: Land Holding of Farmers in Madhya Pradesh Particulars CBs Coop LDBs RRBs Total Number of farmers in the sample Marginal farmers (<2.5 acres) 3(3.1) 3(7.1) 0.00 7(16.7) 13(6.5) Small farmers (2.5 5.0 acres) 32(32.7) 16(38.7) 7(38.9) 16(38.1) 71(35.5) Others (>5.0 acres) 63(64.3) 23(54.8) 11(61.1) 19(45.2) 116(58) Total 98(100) 42 (100) 18 (100) 42 (100) 200.00 Average size of Holdings (in acres) Marginal farmers 2.33 2.33 0.00 2.11 2.21 Small farmers 4.30 4.36 4.29 4.14 4.27 Others 12.31 10.22 12.59 10.21 11.58 Total 9.39 7.42 9.36 6.55 6.02
In Uttar Pradesh, marginal (<2.5 acres), small (>2.5- 5.0 acres), medium (>5.0-10.0 acres) and large (>10 acres) accounted for 20.4, 37.8, 33.9 and 7.9 per cent respectively of the total sample borrowers (230) of the study. The share of marginal and small farmers in total sample from a District was comparatively higher in Moradabad District (63.5%) as compared to that in Jhansi District (53%). In fact, the coverage of marginal and small farmers in the state under doubling of agricultural credit package (2004-05 to 2006-07) was to the tune of 68 per cent. 77 In Tamil Nadu, the average size of the sample farm holdings as a whole was 2.5 hectares. Marginal farmers who had less than one ha of land constituted 34 per cent of the total number of sample farmers selected for the study and they operated 0.68 ha on an average (Table 4.2). Small farmers who operated 1.01 to 2 ha accounted for 30.5 per cent of the total number of farmers and they, on an average, had 1.58 ha and large farms constituted 35.5 per cent of the number and had 5.06 ha each. Commercial banks financed more to large farms in both Districts, which were followed by small and marginal farms. Regional Rural Banks gave more finance to marginal farms followed by small and large farms. In case of PACBs also, marginal farms were given more finance and they were followed by small and large farms. Table 4.2: Average Size of Farm Holdings in Cuddalore and Virudhnagar Districts Bank/Family Cuddalore Virudhnagar Total No. Area (ha.) No. Area (ha.) No. Area (ha.) Marginal 3 0.71 9 0.72 12 0.72 Small 16 1.59 10 1.78 26 1.67 Large 21 5.07 21 5.03 42 5.05 Sub Total 40 3.35 40 3.25 80 3.30 Regional Rural Bank Marginal 4 0.54 22 0.69 26 0.67 Small 12 1.51 7 1.50 19 1.50 Large 14 4.21 1 4.05 15 4.20 Sub Total 30 2.64 30 0.99 60 1.81 PACB Marginal 9 0.75 21 0.64 30 0.67 Small 8 1.82 8 1.26 16 1.54 Large 13 6.16 1 4.05 14 6.01 Sub Total 30 3.38 30 0.92 60 2.15 All Banks Marginal 16 0.69 52 0.67 68 0.68 Small 36 1.61 25 1.54 61 1.58 Large 48 5.11 23 4.94 71 5.06 Total 100 3.15 100 1.87 200 2.51
In Maharashtra, average size of land holding of marginal farmers (MF) and small farmers (SF) was 0.76 hectare and 1.36 hectares respectively, while that of other farmers was 3.84 hectares. Proportion of irrigated land was 62 per cent, 78 per cent and 74 per cent of the 78 total holdings of these farmers respectively. As per the bank records, 77 per cent beneficiaries were SF/MF. However, the land holding pattern of the beneficiaries indicated that 41 per cent beneficiaries were SF/MF. 4.3 Primary/ Secondary Occupations and Income therefrom In Rajasthan, as regards the primary occupation of the farmers, 128 of 136 KCC farmers had agriculture as a primary occupation (51 of 57 in Sirohi and 77 of 79 farmers in Ganganagar). Only medium farmers (two each) in both the Districts had government job as a primary occupation. Very few have private job (only 4 farmers) and they were from Sirohi. As regards the secondary occupation of farmers, 6 reported agriculture, 19 farmers were engaged as agriculture labour and 2 farmers as government servants, 33 in private service and 6 farmers in dairy (in Sirohi only). Average income (gross) from primary source for marginal farmers was Rs.35824 in Sirohi compared to Rs.1.0 lakh in Ganganagar while for small farmers the corresponding incomes were Rs.56706 and Rs.56000 respectively (Table 4.3). There was a sudden jump in primary income of medium farmers to Rs.1.01 lakh in Sirohi and Rs.1.55 lakh in Ganganagar. However, mean primary source income was Rs.2.38 lakh for Sirohi, large farmers and lower at Rs.1.57 lakh for Ganganagar farmers. As regards the secondary source of income, as the size of holding increases secondary source of income increases in both the Districts. A term loan farmer household in Rajasthan has two sources of income which the family members generate- primary activity income and secondary activity income. In Sirohi, 50 farmer households had secondary source income of Rs.40.21 lakh with an average income of Rs.80426 per annum. The average secondary income of marginal farmers was Rs.25443 while the medium farmers have average income of Rs.1.96 lakh. Large farmers do not have secondary income. In Ganganagar, total secondary income generated was Rs.9.20 lakh by 21 farmer households. It was surprising that large farmers have secondary income of Rs.83333 when small farmers have average secondary income of Rs.63333. Even the marginal farmers have average secondary income of Rs.41250 much higher than those in Sirohi. Medium farmers have very low secondary income. All this shows that marginal and small farmers also venture into other activities that provide sizeable household income as a supplementary income. It could also mean more opportunities available to have secondary income in Ganganagar. 79 Table 4.3: Annual Primary and Secondary Source of Income (KCC farmers) In Rajasthan, there were 77 farmers (of 136 KCC farmers) who had no one in the family with other activity as a source of income and majority were from Ganganagar and medium farmers. The other income generating activities were wage labour (38 farmer households of 136) and most were from Sirohi and they were mainly marginal and small farmers as expected. Another 8 farmers households reported family members engaged in government service and most were from Sirohi. Private Service was reported by 9 farmer households. It appeared that Sirohi rural areas required additional income and so family members ventured out to earn additional income. What was the income earned from this activity? Two farmers household from Sirohi did not report the income. Of the remaining, the average annual income earned was Rs.50642; Rs.39433 in Sirohi and Rs.69857 in Ganganagar (Table 4.4). Marginal farmers in Sirohi reported average income of Rs.18278 while small farmers in Sirohi had average income of Rs.35936 and in Ganganagar Rs.36000. It was surprising that small and medium farmers in Sirohi had lower average income while large farmers in Sirohi had higher average income compared to Ganganagar farmers from other activities. Primary Income (Rs.) Secondary Income (Rs.) Land size District Mean N0 Sum N0 Mean Sum Marginal Sirohi 35824 17 609000 13 24346 316500 Ganganagar 100000 1 100000 1 30000 30000 Total 39389 18 709000 14 24750 346500 Small Sirohi 56706 17 964000 12 30817 369800 Ganganagar 56000 7 392000 5 35000 175000 Total 56500 24 1356000 17 32047 544800 Medium Sirohi 101053 19 1920000 12 46917 563000 Ganganagar 154896 65 10068220 21 186905 3925000 Total 142717 84 11988220 33 136000 4488000 Large Sirohi 237500 4 950000 2 98000 196000 Ganganagar 157350 6 944100 3 196333 589000 Total 189410 10 1894100 5 157000 785000 Total Sirohi 77947 57 4443000 39 37059 1445300 Ganganagar 145624 79 11504320 30 157300 4719000 Total 117260 136 15947320 69 89338 6164300 80 What were these secondary sources of income of term loan farmers in Rajasthan? Of the 94 farmer households, 23 did not have any secondary source of income or did not report it. In Sirohi, for 3 farmers agriculture was a secondary activity while another 30 farmers reported wage labour as secondary source of income and half of them were marginal farmers (expectedly) with another 9 small farmers reporting it. Government service was reported by another 3 farmers while 7 farmers each were pensioners/ ex-servicemen and in private service. In Ganganagar, 13 farmers reported wage labour as secondary income source and 8 farmers were in private service too (most were small and medium farmers). There were some farmers who hire out the asset purchased from bank loan and this asset was mainly the tractor, especially in Sirohi. There were 17 farmers hiring out their purchased asset and on an average earned Rs.1.02 lakh annually in Sirohi while this income was Rs.1.10 lakh in Ganganagar for 6 farmers. It was largely the small and medium farmers who earned sizeable income by hiring out the asset. Table 4.4: Annual Income from Other Source Category District Number Income (Rs.) Marginal Sirohi 9 18278 Total 9 18278 Small Sirohi 14 35936 Ganganagar 1 36000 Total 15 35940 Medium Sirohi 10 55600 Ganganagar 19 72947 Total 29 66966 Large Sirohi 3 65333 Ganganagar 1 45000 Total 4 60250 Total Sirohi 36 39433 Ganganagar 21 69857 Total 57 50642
In Rajasthan, as one moved up the land holding category, the average family income went up and the gap between marginal and large farmers was significant in Sirohi compared to Ganganagar (Table 4.5). It was because there were more opportunities in Ganganagar which 81 marginal farmers were availing to reduce the gap between total incomes. Gross income of term loan farmers from agriculture/ activity for which loan was taken was Rs.38752 in Sirohi on an average per year and Rs.94217 in Ganganagar. Marginal farmers had gross income higher than small farmers in both the Districts, though the gross income of small farmers was almost double in Ganganagar compared to that in Sirohi. Large farmers in Sirohi had highest gross income, but in Ganganagar it was the medium farmers. This could be because of the greater number of medium farmers in the sample. Four farmers in Sirohi did not report any income and so the data pertains to 90 farmer households. The total annual family income in Sirohi was Rs.96943 while it was Rs.1.13 lakh in Ganganagar on an average. The family income went up as one moved up the holding size in Sirohi, but the large farmers had slightly higher average income than the marginal farmers. In Ganganagar, there was a continuous increasing trend in family income and the gap between marginal and large farmers was very significant. Table 4.5: Total Annual Family Income (Rs.) KCC Farmers Term Loan Farmers Land size District Mean No Sum No Mean Sum Marginal Sirohi 64118 17 1090000 22 37014 814300 Ganganagar 130000 1 130000 4 47750 191000 Total 67778 18 1220000 26 38665 1005300 Small Sirohi 108053 17 1836900 14 66143 926000 Ganganagar 86143 7 603000 3 75000 225000 Total 101663 24 2439900 17 67706 1151000 Medium Sirohi 159947 19 3039000 21 190867 4008200 Ganganagar 236603 65 15379220 19 76158 1447000 Total 219265 84 18418220 40 136380 5455200 Large Sirohi 335500 4 1342000 4 41250 165000 Ganganagar 263017 6 1578100 3 473333 1420000 Total 292010 10 2920100 7 226429 1585000 Total Sirohi 128209 57 7307900 61 96943 5913500 Ganganagar 223928 79 17690320 29 113207 3283000 Total 183810 136 24998220 90 102183 9196500
82 In Uttar Pradesh, of the sample borrowers about 41 percent were engaged in farming activity (primary occupation) without any other source of income. About 51 per cent farmers had got some cow or buffalo as an additional engagement but the majority of this used milk for home consumption only. Ten farmers indicated that one or two of their family members were employed in near by town areas and they were extending financial support to the family. Out of nine farmers who reported some business activity by family members, six farmers (3 in Moradabad and 3 in Jhansi) were found to be running grocery shops in their respective villages. One farmer in Jhansi District was engaged in grain trading activity and the other was having two tractors and was having some transport business. In Madhya Pradesh, among the sample farmers in both the Districts, more than 60 per cent of the farmers were having secondary occupation such as government service, or private service, or business or self-employment or labour etc. Among the sample farmers in Narsinghpur, 7 were in government service, 5 in private service, 12 were involved in business/shops or self employment and only 4 were engaged in Agriculture and allied activities. In Panna, around 6 persons were in service jobs, 10 involved in business/shops/self employment and 12 were working as labourers (Table 4.6). The average annual income was high in Narsinghpur as compared to that of Panna as most of the farmers in Narsinghpur were well settled with reasonable standard of living when compared to farmer in Panna. The average annual income of marginal farmers from primary source was Rs.25000 while the secondary source of income was lower at Rs.11000 in Narsinghpur District. In case of small farmers, the average primary source of income was Rs.40081 compared to higher secondary source of income of Rs.43294. This means that such farmers were supplementing family income through other activities like government - private service, petty business, labour etc. Large farmers had annual average income of Rs.1.10 lakh from primary sources and Rs.85632 from secondary sources. As the farm size increased Family income went up. The average annual income of marginal farmers from primary source was Rs.24250 while the secondary source of income was lower at Rs.20200 in Panna District. In case of small farmers, the average primary source of income was Rs.38911 compared to lower secondary 83 Table 4.6: Income and Occupation of the Madhya Pradesh Farmers source of income of Rs.26464. Large farmers had annual average income of Rs.82966 from primary sources and Rs.51023 from secondary sources. As the farm size increased family income went up, but secondary source of incomes were relatively lower compared to Particulars Marginal Small Others Total Narsinghpur Number of farmers 5 37 58 100 Primary occupation Agriculture 5 36 57 98 Kotwari 1 1 2 Secondary occupation Government Service 0 2 5 7 Private service 1 2 2 5 Business/ Shops/Self employed 0 5 7 12 Labour 1 6 0 7 Pensioners 0 0 2 2 Agro. & Allied 0 2 2 4 None 3 20 40 63 Average Annual Income (Rs) Primary Income 25000 40081 109603 79650 Secondary Income 11000 43294 85632 51012 Total Income 29400 59973 137655 103500 Panna Number of Farmers 8 34 58 100 Primary occupation Agriculture 8 34 58 100 Kotwars 0 0 0 0 Secondary occupation Government Service 2 0 3 5 Private service 0 0 1 1 Business/ Shops/Selfemployed 1 5 4 10 Labor 2 9 1 12 Pensioners 0 0 4 4 None 3 20 45 68 Average Annual Income (Rs) Primary Income 24250 38911 82966 63290 Secondary Income 20200 26464 51023 36219 Total Income 36875 49809 94402 74638
84 Narsinghpur District (also see Table 4.6(A). Table 4.6(A) : Average Income of the Madhya Pradesh Farmers Particulars CBs Coop LDBs RRBs Total Average Income (Rs) Marginal farmers 36667 33333 0 33143 34000 Small farmers 57672 64875 42429 45750 55105 Others 129651 104652 104000 91595 116028 Total 103301 84405 80056 64388 68378 Average amount of crop loan sanctioned per farmer (in Rs)
Marginal farmers 19667 36667 0 43643 36500 Small farmers 38969 41875 37971 47813 42722 Others 89132 42452 28955 13158 73064 Total 70626 41819 32461 31440 58792 Average amount of term loan sanctioned per farmer (in Rs)
4.3.1 Savings Account As incomes were reasonable there would be some savings. It was enquired in Rajasthan as to whether the farmers had savings account with the bank which issued them KCC, 96 of the 136 did not affirm it. The remaining had a savings account for 1 to 25 years. However, majority had opened the account only less than 5 years ago. Marginal farmers do not have any savings in both the District, expectedly. However, as seen in table 4.9, 96 farmer households did not have a savings account, the remaining 40 farmer households had total savings of Rs. 6.48 lakh- Rs.1.61 lakh in Sirohi and Rs.4.87 lakh in Ganganagar. The average savings of small farmers in Sirohi were Rs.1500 compared to Rs.21984 in Ganganagar. However, medium farmers in Sirohi had higher average savings compared to those in Ganganagar. It was surprising that large farmers in both the Districts had very low savings. It could be because they had higher consumption pattern and also had higher standards to maintain more assets. 85 4.4 Cost of Cultivation and Cropping Pattern In Rajasthan, majority of farmers responded that cost of cultivation had gone up and majority were from Ganganagar. Surprisingly, most such farmers were medium farmers, though a large proportion of Sirohi farmers were small and marginal farmers. Has there been any cropping pattern change after credit facilities, the answer in Rajasthan was in affirmative in case of 90 farmers, (43 in Sirohi and 47 in Ganganagar), (table 4.26) During the kharif season, major crops changed were sonf (10 farmers), caster (11 farmers), cotton (23 farmers), maize (1 farmer), moong (29 farmers), groundnut (1 farmer), vegetables (3 farmers) and sesasum (one farmer). During the rabi season, the changed crops were wheat (5 farmers), mustard (18 farmers), vegetable (5 farmers), isabgol (1 farmer), taramira (1 farmer), gram (1 farmer), barley (10 farmers). In Madhya Pradesh, the cost of cultivation of the various crops cultivated by the farmers was compared with the scale of finance for each crop in order to find out whether the credit provided by the banks were sufficient to meet the production expenses by the farmers. In Narsinghpur, majority of the sample farmers were growing soyabean followed by sugarcane and redgram in kharif reason. In Rabi season, the major crops grown were wheat, and chickpea, when scale of finance and the cost of cultivation of the crops by the farmers were compared, scale of finance was quite high for all crops except chickpea in Narsinghpur. In case of Panna District, there was opposite situation seen with scale of finance being very low when compared to the cost of cultivation of all the crops except Masur. The scale of finance, when compared between the Districts, in Panna it was almost half of that of Narsinghpur for most of the crops. To find out the impact of credit on the farming characteristics, they were asked whether any change occurred in their input use, cropping patterns, etc over these 3 years. In Narsinghpur, only 6 farmers have changed their cropping pattern after accessing the credit and 5 farmers had increased their productivity. About 24 farmers had increased the use of fertilizers average amount of 3.79 kg/ace. The cost of cultivation increased over 4 years with the increase in wage rate by about 2 times. In Panna, only 2 farmers each said that, there were changes in cropping pattern and increase in yield. Almost all the others said there was no change in cropping pattern and productivity in the last 3 years. The average yield of the borrowers was compared with that of the 86 District. In Narsinghpur, for almost all the crops, other than redgram, the average yield of the borrowers were more or less similar to the productivity in the District. In Panna, surprisingly, the average yields of the borrowers were quite high for all the crops except chickpea. There it can be concluded that the agricultural credit had an intense positive impact on the productivity of the farmers in Panna. In Uttar Pradesh, in Moradabad District, paddy and wheat dominated the respective seasons covering about two third area of KCC holders and about 90 per cent area of term loan borrowers and control sample. In Jhansi District, Urad and Til were the main crops in kharif season covering more than 60 per cent of kharif area whereas wheat was the main crop in the rabi season covering about 52 to 62 per cent of the total area of the sample farmers. The comparison of various cost items of common crops and other-wise also between two Districts indicated that charges of various field operations and input levels were higher in Moradabad District than in Jhansi District. The cost of irrigation was also quite high in Moradabad District for the simple reason that most of farmers in Moradabad District were using tube-wells and pump-sets for irrigation whereas in Jhansi District, canal was found to be the most important source of irrigation. The charges for canal water was Rs.75 per acre for wheat crop and Rs.65 for all other crop for the entire season. However, some of the farmers were also using pump-sets and tube-wells in a limited way subject to the availability of the ground water at the time of need. It was observed that input use levels were different even for the same crops in case of Moradabad and Jhansi Districts. The major factors which was found to be affecting the input use in the Districts of Moradabad and Jhansi was the crop mix of the Districts, availability of assured irrigation and use of high yielding varieties of various crops. In Tamil Nadu, sugarcane was the major crop in Cuddalore District during 2006-07 accounting for 42 per cent of the total cropped area in the District and it was followed by paddy (16.5%), Casurina (15.5%), cashew nut (3.4%) and so on. Farmers were gradually switching over to casurina as the cost of cultivation was higher for sugarcane. In Virudhnagar District, sugarcane was the major crop (41.3% of the total cropped area) and it was followed by coconut (35.3%) and paddy (12.2%). The average areas under the major crops grown in both the Districts during 2006-07 were sugarcane (41.7%), paddy (14.9%), coconut (13.9%), banana (6.9%). Commercial banks in both the Districts preferred to finance for sugarcane cultivation as there was a tie up arrangement between banks and sugar mills in the study 87 area so that loan recovery was easier to the bankers. The scale of finance was fixed by the officials at the District level considering the cost of cultivation for the major crops grown in the District. The cost of cultivation per ha was maximum for banana (Rs.64850) followed by sugarcane (Rs.52894), tapioca (Rs.22375), paddy (Rs.22100), groundnut (Rs.18100) and so on in Cuddalore district. However, the scale of finance as fixed by the lending institutions was lower for all the major crops cultivated by the farmers. Farmers were then forced to borrow from money lenders to meet out the additional expenditure. The percentage of additional cost over and above the scale of finance varied from 9 per cent of the total cost of cultivation in case of sugarcane to 39 per cent in case of banana. The average cost of cultivation of major crops grown in Virudhnagar District indicates that the cost per ha was higher for sugarcane (Rs.56395) followed by coconut (Rs.29190), cotton (Rs.22562), chilli (Rs.20423), paddy (Rs.19607) and so on. The percentage of additional amount over and above the scale of finance varied from 17 per cent in onion to 63 per cent in maize. As the cost of cultivation varies from place to place, the cost of cultivation/ Scale of Finance needs to be updated considering the cost of cultivation of major crops grown. 4.5 Category of Borrower There were two types of borrowers- absolutely new bank borrowers and old bank borrower but new to this bank. Of the 136 KCC farmers in Rajasthan, 96 farmers were absolutely new borrowers and the other 40 were old bank borrowers but new to the present bank (Table 4.7). It was also found that of the 38 absolutely new borrower, 13 were marginal and small farmers in Sirohi and of the 58 such farmers in Ganganagar, 50 were medium and large farmers. In the second category, there were 19 farmers from Sirohi of whom 13 were marginal and small farmers, while of the 21 such farmers in Ganganagar, 17 were medium farmers. This showed that in Sirohi the new entrants were lower end farmers while upper end farmers were in Ganganagar. Further, on probing this matter we found that 40 farmers were old bank borrowers, but new to the present bank. Of the 40 farmers, 18 took loans from commercial banks (15 from Ganaganagar) while 10 farmers borrowed from regional rural bank (8 from Sirohi), 7 borrowed from cooperative bank and 5 farmers borrowed from PLDB. In Maharashtra, out of the 216 beneficiaries, 133 or 62 per cent beneficiaries were reported as new farmers by the banks. However, 31 beneficiaries, though they were new farmers to the respective 88 banks, were old beneficiaries of some other banks. But, they had first time entered in the premises of the bank from which they had availed of fresh loan. They had obviously not come under the fold of bank for the first time. Therefore, 31 beneficiaries who had switched over from one bank to another bank were not considered as new farmers (Table 4.8). Thus, the absolute number of the new beneficiaries who had availed of bank loan for the first time reduced to 102 which formed 47 per cent of the total sample of beneficiaries. The absolute number of new beneficiaries was 59, 19 and 24 in the case of CBs, Co-op. and RRBs respectively. On the other hand, 83 beneficiaries were existing (old) borrowers of the respective banks. Out of them, 68 were repeaters and 15 were in distress and arrears. Table 4.7: Category of Borrower: Rajasthan Category Sirohi Ganganagar Total Marginal 12 1 13 Small 11 7 18 Medium 12 48 60 Large 3 2 5 Absolutely New Borrowers 38 58 96 Marginal 5 5 Small 6 6 Medium 7 17 24 Large 1 4 5 Old Bank Borrower but New to this Bank 19 21 40
Table 4.8: Coverage of New Beneficiaries: Maharashtra New Beneficiaries Existing Beneficiaries Banks New From other banks Total Repeaters In distress total G. total CBs 59 15 74 29 2 31 105 Co-op. 19 7 26 27 5 32 58 RRBs 24 9 33 12 8 20 53 Total 102 31 133 68 15 83 216
Among the total beneficiaries, 64 per cent and 36 per cent availed of crop loan and term loan respectively (Table 4.9). Among the crop loan beneficiaries, 40 per cent were absolutely new borrowers, whereas, among the term loan beneficiaries, 61 per cent were absolutely new farmers. Of the total SF/MF, 47 per cent were 89 absolutely new borrowers, while in the case of other farmers, this percentage was 53. Table 4.9: Classification of Beneficiaries who Availed of Crop Loan and Term Loans: Maharashtra Crop Loan TermLoan New Beneficiaries Existing Beneficiaries New Beneficiaries Existing Beneficiaries Land Holding (Ha) Absolu- tely New Trans- ferred from other banks Repea- ters In distress &arrears
Total Absolu tely New Trans- ferred from other banks Repea- ters In distress &arrears
Total Grand Total Up to 0.99 8 2 7 1 18 3 0 1 0 4 22 1.0 to 1.99 19 9 17 3 48 11 1 6 0 18 66 2.0 & above 28 13 23 9 73 33 6 14 2 55 128 Total 55 24 47 13 139 47 7 21 2 77 216
4.5 Loan was Restructured? On the question of restructuring of loan in case of farmers in distress and arrears in Rajasthan, of the sampled farmer households only two were farmers in arrears and both were marginal farmers belonging to Sirohi. The amount involved in arrears was Rs.37013 (marginal farmer) and Rs.1.36 lakh (medium farmer). Of the sampled farmers household only one farmer was distress farmer household and was a medium farmer belonging to Sirohi. The amount involved was Rs.1.36 lakh. 4.6 Kisan Credit Card: Issues and Concerns In Rajasthan, on the issue of opening KCC account alone or some intermediary was involved, the answer was that 118 out of 136 farmers went alone to open the KCC account and majority were from Ganganagar (Table 4.10). However, more marginal and small went alone to open an account in Sirohi compared to Ganganagar. Again more farmers in Sirohi took help of other persons to open KCC account. It appears that opening a KCC account was not easy. 51 of the 136 farmers reported that they had to visit only once to get the job done, but another 40 stated that they had to visit twice to get the account opened. It was quite surprising that 45 of the 57 farmers in Sirohi and 73 of 79 in Ganganagar went alone. Of these majority were from Ganganagar (59; 74%) and most were medium farmers. It appeared that poor farmers had repeatedly to visit the bank to get a KCC. 90 Table 4.10: Opening of KCC Accounts Opened KCC A/C alone or through some other person Sirohi Gangan agar Total Marginal 10 1 11 Small 13 6 19 Medium 18 60 78 Large 4 6 10 Alone 45 73 118 Marginal 7 7 Small 4 1 5 Medium 1 5 6 Through some Other Person 12 6 18 How many times you visited bank for opening KCC Account Marginal 5 1 6 Small 5 4 9 Medium 4 28 32 Large 4 4 Once 14 37 51 Marginal 2 2 Small 7 1 8 Medium 6 19 25 Large 3 2 5 Twice 18 22 40 Marginal 6 6 Small 2 2 Medium 4 4 8 Three Times 12 4 16 Marginal 2 2 Small 1 1 Medium 2 8 10 Large 1 1 Four Times 6 8 14 Marginal 2 2 Small 1 1 Medium 1 2 3 Five Times 3 3 6 Medium 3 3 Six Times 3 3 Medium 1 1 Seven Times 1 1 Small 1 1 Eight Times 1 1 Small 1 1 2 Medium 1 1 2 Ten Times 2 2 4 91 In Madhya Pradesh, about 65 per cent of the farmers went alone for opening KCC account. Only 10 per cent of the farmers revealed that they approached banks with the help of brokers (Table 4.11). In both the Districts, the brokers played a significant role in opening KCC account, which was observed during the field study and during the casual discussion with the farmers. Around 48 per cent of the farmers had to visit the bank once/twice for opening KCC account; while around 33 per cent farmers had to visit more than 4 times for opening of KCC account which they found it very tedious. Table 4.11: Details on opening of KCC account: Madhya Pradesh Particulars Percentage of Farmers Narsinghpur Panna Total For opening KCC account Farmers who went alone personally 56 71 65 Went along with relatives/neighbour 26 25 25 Through Brokers/Agents 18 4 10 Number of times visited the bank for opening KCC account
Once/twice 51 46 48 3 times 13 23 19 4 times and more 36 31 33 Average Expenses incurred in opening KCC account (in Rs)
Documentation 859 532 695 Other expenses 2408 914 1661 Total expenses 3267 1446 2356
4.6.1 Frequency of Withdrawal What was the frequency of withdrawal allowed? Majority of farmers in Rajasthan reported that withdrawal was freely allowed. Majority reported one visit for money withdrawal while 6 farmers reported two visits and 4 farmers reported three visits. Bankers provide only two answers- busy and bank does not have cash. Credit limits have increased with each new KCC. On the issue of number of withdrawals allowed by a bank on KCC in a season, most stated that banks allow one withdrawal in both the Districts, while a good number (38 farmers) in Ganganagar stated that two withdrawals were allowed. 20 farmers all from Sirohi stated that three withdrawals were also allowed. 130 farmers of the 136 purchase fertilizers (55 of 57 in Sirohi and 75 of 92 79 in Ganganagar), 124 purchase seed (50 of 57 in Sirohi and 74 of 79 in Ganganagar), 95 farmers purchase pesticides (44 of 57 in Sirohi and 51 of 79 in Ganganagar), 69 farmers purchase water for irrigation (15 of 57 in Sirohi and 54 of 79 in Ganganagar), 79 farmers pay wages to hired labour (20 of 57 in Sirohi and 59 of 79 in Ganganagar) and 122 farmers pay for tractor hiring services (47 of 57 in Sirohi and 75 of 79 in Ganganagar). In Madhya Pradesh, among 178 farmers who have taken KCC loan, majority of the farmers had only one KCC card, while 6 farmers had 2 KCCs and 2 farmers were having 3 or more KCCs. None of the sample borrowers faced any problems in withdrawals. In Narsingpur, majority (58.97%) of the farmers were using KCC effectively by withdrawing loan many times whenever necessary and almost a similar trend in Panna (52%). Nearly 37 percent of the farmers still withdraw only once using KCC. In Uttar Pradesh, the analysis of cost of cultivation (cash expenses) as against the average amount of bank loan indicated that, on an average, an individual farmer withdraws an excess cash of Rs.20260 per year in Moradabad District and Rs.30556 per year in Jhansi District which was over and above his cash requirement for making payments towards operational expenses as well as purchase of materials/ inputs, etc. However, the actual use of cash withdrawn by farmers out of KCC loan was used for different purposes. The analysis of transaction of KCC loan account by farmers indicated that 42.3 per cent farmers withdrew the entire amount of the limits sanctioned to them in one transaction. The farmers who withdrew the entire amount in 2, 3 and 4 instalments accounted for 24 percent, 13.5 per cent and 3.8 per cent respectively and the rest of the farmers (16.4 %) made 5 to 10 transactions to withdraw the entire amount of limit sanctioned to them. The actual use of fund just after the withdrawal from the banks told altogether a different story. Although it has been estimated that about 64.5 per cent of total withdrawal in Moradabad and 35.7 per cent of total withdrawal in Jhansi District were genuinely used in agriculture for crop production, the farmers revealed that they withdraw money from KCC accounts specifically for purchase of inputs and payments to labourers/ tractor hiring to the extent of 19.4 per cent in Jhansi District and 31.8 per cent in Moradabad District (Table 4.12). The rest of the amount (limit sanctioned) was withdrawn for some other purposes. Farmers also revealed that majority of them (42%) withdraw the entire amount of the limit sanctioned in one go, a portion of that was utilized for 93 consumption purpose also. On enquiry about the reason for withdrawal of the entire amount at a time, the farmers opined that it was on account of the fear that the branch manager may not allow the amount at the time of genuine need. Some of the farmers were found to have parked the entire/ major portion of their total withdrawal in their saving bank account. It was gathered that some of the branch managers were also advising the farmers to do so as it helped them in achieving the targets both for the deposits as well as of advances. It was also important to note that quite a reasonable portion of total income was utilized for creating assets for agriculture and allied activities, viz., purchase of pump-sets, purchase/repair of tractor/ trolley, etc. which was a good endeavour on the part of the farmers as it helped them to save some money on account of higher interest burden if they avail loan for these activities under term loan financing. Table 4.12: Actual Utilization of Withdrawal of fund from KCC Account: Uttar Pradesh In Tamil Nadu, although the crop loan was treated as loan under KCC, majority of the farmers did not use the KCC facility, i.e., withdrawal of loan amount as and when they required money to meet the cultivation expenses. In commercial banks, all the borrowers had withdrawn the loan amount only once in a year. In RRBs only 70 per cent and in case of PACBs, 88 per cent of the borrowers used KCC. Utilization of KCC withdrawal for Moradabad Jhansi Purchase of Buffalo 14.91 9.36 House construction/ house repairing 20.88 7.13 Purchase of Pump-sets 5.72 16.89 Exp on marriage of children 7.11 17.69 Repayment of old debts to other bank/ money lender/ relatives 5.66 Higher Education of child 1.32 Purchase of tractor/ trolley/ repairing 16.16 5.66 Purchase of generator 4.22 Consumption expenditures 3.45 12.68 Agriculture-purchase of inputs. Payments to labour, tractor hiring, etc. 31.77 19.39 Total (average per borrower) withdrawal Rs. 12078 (100 %) Rs. 7339 (100%)
94 Of them, 3 per cent of the borrowers of RRBs and 2 per cent of the borrowers of PACBs made two withdrawals during 2006-07. 4.6.2 Farmers Awareness Were the farmers aware of the fact that they can borrow for capital investment and for consumption purposes through their KCC? Not a single farmer was aware of it in both the Districts in Rajasthan. How many KCCs a farmer holds? Of the 136 farmers, 27 have additional KCC. In Sirohi, 30 per cent of farmers have additional card and 13 per cent in Ganganagar. Besides the present RFI KCC, 9 of the 27 farmers hold KCC of a commercial bank, 10 of a regional rural bank and 7 of cooperative bank and one of PLDB. Surprisingly, it largely was small farmers doing this. This means that limits set were not adequate. The limit of the additional KCCs ranges between Rs.20000 to Rs.5.00 lakh. As the farmers were not aware of using KCC for consumption purposes, and there were domestic needs and ready cash was always a temptation for using the money for consumption purposes, it was found that 43 per cent farmers in Ganganagar and 35 per cent farmers in Sirohi spend all the money borrowed on agriculture. One large farmer in Ganganagar spends only 10 per cent of borrowed money on agriculture and one medium farmer also does so. There were another 7 farmers mainly small and marginal farmers in Sirohi and medium farmers in Ganganagar which spend 50 per cent money on agriculture only. It appears that usually large share of borrowed money was spent on agriculture though diversion was also sizeable in certain cases. In Rajasthan, majority of the farmers (94.4%) told that the banks did not conduct any awareness programme. Only about 5.6 percent farmers have attended the awareness programmes conducted by the banks. It may be concluded that the bank would have conducted only few awareness programmes giving coverage to only few areas or may not have conducted programmes in the interior rural areas. The major source of information regarding the credit schemes for the farmers were mostly relatives/neighbhours (69.5%) followed by bankers (15%). The other source of information were media (7%), Panchayats (45%) and brokers (4%). In Madhya Pradesh, awareness about the KCC and other schemes related to agriculture credit among the beneficiary farmers was limited. Only around 11.5 percent of the farmers in Narsinghpur were aware that KCC was for term purposes and consumption loans also and among them only 2.6 percent of the farmers had availed term loans 95 using KCC. The awareness level of farmers in Panna was very poor. As far as debt relief schemes were concerned only 6.4 percent of the farmers in Narsinghpur were aware that such a scheme exists, while only 2 percent farmers in Panna were aware about the schemes. In Maharshtra, lack of awareness about the rural credit available from the banks and the various schemes announced from time to time by the Governments/RBI/NABARD was a common phenomenon in the rural area. At the same time, efforts of the bank staff in this direction appear to be dismal. It was reported by the farmers that they were not aware of many bank schemes like redemption from moneylenders, restructuring of loans, OTS, KCC, etc. All the banks were advised to create awareness among the farmers by way of placement of hoardings, banners, etc. at prominent places, such as branch offices, panchayat buildings, etc. Organising farmers club meetings, farmers mela, credit campaign, literature of bank schemes in local languages, etc. were some of the effective measures used in promotion of farm credit in the past. However, it was reported by the farmers that the bank staff hardly appears to be engaged in such awareness creating measures. The farmers reported that while approaching the banks for loans they were often apprehensive about the urban nature of the CBs and RRBs. Besides this, difficulties in compliance of documents, high margin money, demand from banks for fixed deposits, etc. led the SF/MF, in particular, to money lenders. The bank staff needs to be sensitized in this matter. It has been observed that dispensation of rural credit required more time and efforts especially in dealing with SF/MF who were many times not well informed. Therefore, the rural branches need to be adequately staffed. It was further reported that many time the staff posted at rural branches did not stay locally and, therefore, was unable to have interaction and bond with the farmers. Formation of Farmers Club can act as focal points for dissemination of credit information. Incidentally, it was worth mentioning the experience of an active member of Farmers Club. It was reported that the members of farmers club like him were demoralized when they found Government and banks were whole heartedly supporting the defaulters with honor under the loan waiver scheme. The point was raised not only by the member of farmers club but also by the honest farmers who were regular in repayment. The bank officials were indifferent. In Tamil Nadu, of the 200 sample borrowers, 94 (47% of the total) were new to the banks. Among 47 per cent of the new farmers as indicated by the banks, 15 per cent of them had migrated from other 96 banks. Therefore, only, 32 per cent (about one-third) of the sample farmers actually fall under the category of new farmers. Each borrower had only one KCC. Nearly 40 per cent of the farmers were not aware that KCC was also for term loan apart from the amount advanced for cultivation of crops and only 2 percent of the farmers had availed term loan under KCC, and none of the farmers were aware that the KCC had a component for consumption purpose as well. As farmers did not know about all the facilities under KCC, they need to be educated on the utility of KCC. 4.6.3 Credit Limit In Rajasthan, the credit limit of KCC varied between Rs.15600 to Rs.1.00 lakh for marginal farmers, Rs. 25000 to Rs.2.68 lakh for small farmers, Rs.27000 to Rs.4.75 lakh for medium farmers and Rs.25000 to Rs.4.5 lakh for large farmers. There were 55 new KCC card holders, 30 in Sirohi and 25 in Ganaganagar. The first KCC credit limit ranged between Rs. 13800 to Rs. 93000 for marginal farmers, Rs.25000 to Rs.1.2 lakh for small farmers, Rs.10000 to Rs.2.80 lakh for medium farmers and Rs.21775 to Rs.1.10 lakh for large farmers. There were 98 farmers not in this group. The limit of the second KCC ranged between Rs.10000 to Rs.40000 for marginal farmers, Rs.35000 to Rs.70000 for small farmers, Rs.7500 to Rs.209877 for medium farmers and Rs.20275 to Rs.90000 for large farmers. KCC credit limit has reported enhancement of credit limits. Seven farmers reported limit enhancement once, 25 reported it twice and 28 reported it thrice. This has happened largely in Ganganagar. Almost all wanted to use KCC freely and frequently and reason given for using it frequently and freely was it would help in cash flow with them and they would withdraw only the amount that was required. 15 farmers have been insisting for increasing the limit for last one year and 22 farmers doing it for two years and 13 farmers have been insisting it for last three years. It appeared that this demand was largely not being met in Sirohi. Farmers reported that if other farmers who do not have a KCC do not need it as they have enough money. On usage of KCC, some farmers were very smart or have picked up the advantage of having a KCC. It was found that 52 farmers (21 in Sirohi and 31 in Ganganagar) do not deposit the loan amount and used the KCC next day. There were only 46 farmers who availed the KCC loan the next day after depositing the loan amount (17 of 57 farmers in Sirohi and 29 of 79 farmers in Ganganagar). These farmers were linked to commercial banks only. 97 4.6.4 Cost of Getting KCC Kisan Credit does not come free like any other credit card, there was a cost attached to it which other studies have also found. In Rajasthan, 136 farmers fished out Rs.79148 for KCCs. There were two components on which responses were sought- documentation and other expenses. It was found that marginal farmers in Sirohi had spent Rs.163 on documentation and Rs.104 on other expenses like travel etc. Thus, marginal farmers in Sirohi spent, on an average, Rs.267 to get a KCC when marginal farmers spent Rs.300 in Ganganagar. Small farmers on the other hand spent higher amount in both the Districts with significantly higher amount in Ganganagar. This could be because of limit set which were higher. Similar was the experience of medium farmers, though large farmers in Sirohi on an average spent higher amount to get a KCC, especially on documentation. As these expenses were based on recall, a trend could only be deduced from the figures. Farmers must have paid some bribe to get a Kisan Credit Card. In Madhya Pradesh, farmers had to bear some costs for producing documents for opening KCC account. On an average, the farmers spent Rs.695 for producing documents while quite a high amount was paid for other expenses such as commissions, etc. The expenses were high in the Narsinghpur District, as most of the farmers were willing to pay any amount of money to get their work done. In Narsinghpur, the large farmers pay somebody for arranging documents by visiting various departments offices. This was discouraging trend, as the poor farmers who were unable to spend, will be deprived of the KCC loans. In Maharashtra, cost of loan to a farmer was the payment of interest on it. However, in addition to this, the farmer had to incur some more cost prior to sanction/disbursement of loan on various items like search report, no dues, stamp paper, inspection charges, revenue record, etc. The search report from the banks advocate was asked in the case of term loan applications above Rs.50000. But in some instances banks had asked for the same for small amounts also. The advocates were permitted by the banks to charge Rs.350 towards the legal fee of the search report. However, it had been reported by the borrowers that invariably they had to pay much more than the legal fee which ranged from Rs.700 to Rs.1500 for getting the single search report from the advocate. The other important cost incurred by the farmer was on procuring No Objection Certificate (NOC) from different banks operating in the area. The borrowers opined that the NOC was one of the biggest irritants faced by the farmers approaching for bank 98 loans because they had to produce NOC from various banks operating in the area. It was introduced to avoid multiple financing under Service Area Approach which was now discontinued. The RBI has issued circulars clarifying a non-compulsory nature of NOC. Yet the practice of obtaining the NOC was continued. For farmers, the NOC entails a considerable amount of time and money to be spent even to get a small loan and leads to delay in obtaining the loan. Though it was seen that often the RRBs and Co-op. did not levy any charges to issue NOC, many banks charge fees ranging from Rs.25 to Rs.100 to issue this certificate. Revenue record (7/12 and 8a) showing rights of ownership/cultivation was available from Talathi at a nominal fee. However, it was observed from our data that the borrowers had paid between Rs.50 to Rs.250 for getting the revenue record. The same was the case in procurement of the mutation certificate. The cost of stamp paper depended on the amount of loan. On an average, the borrowers had paid between Rs.125 to Rs.550 towards the cost of stamp duty. It adds not only to the cost of loans but also led to delay on account of non-availability of stamp paper in remote places. The cost of photographs to be pasted on application form was not much, say, Rs.25-30. But one or two days were spent on getting the snap from taluka places. As per the RBI Guidelines, no service/inspection charges were to be levied for loan amount up to Rs. 25,000 in priority sector. For loans exceeding Rs. 25,000, banks levy inspection charges ranging from Rs. 50 to Rs. 225 per visit. Nevertheless, all the borrowers, small or big, reported that they had to incur cost on the same either in cash or in kind or in service form (Table 4.13). 4.6.5 Response of Term Loan Farmers in Rajasthan The surveyed term loan farmers also possessed KCCs in Rajasthan. All got the KCC independently in both the Districts. A large number did not report the KCC limit. Those reporting (23 farmers), 8 were Table 4.13: Average Cost Spent by Beneficiaries on Procurement of Documents: Maharashtra Crop loan Term loan Holdings ha. CBs Coop RRBs CBs Coop RRBs Up to 0.99 608 510 137 2000 0 2500 1.0 to 1.99 803 700 302 1500 1300 1750 2.0 and above 1068 675 207 1780 1667 1625 Total 922 650 239 1700 1556 1778
99 T a b l e
4 . 1 4 :
W i t h d r a w a l
f r o m
K C C
( R s . ) D i s t r i c t
2 0 0 3 - 0 4
2 0 0 4 - 0 5
2 0 0 5 - 0 6
2 0 0 6 - 0 7
N o
M e a n
S u m
N o
M e a n
S u m
N o
M e a n
S u m
N o
M e a n
S u m
M a r g i n a l
S i r o h i
1
1 2 5 0 0
1 2 5 0 0
8
3 8 3 3 8
3 0 6 7 0 0
9
3 9 3 0 2
3 5 3 7 1 5
8
1 0 7 2 3 8
8 5 7 9 0 5
G a n g a n a g a r
1
1 3 8 2 5
1 3 8 2 5
1
1 0 4 2 5
1 0 4 2 5
1
1 9 6 7 1
1 9 6 7 1
1
2 3 5 0 0
2 3 5 0 0
T o t a l
2
1 3 1 6 3
2 6 3 2 5
9
3 5 2 3 6
3 1 7 1 2 5
1 0
3 7 3 3 9
3 7 3 3 8 6
9
9 7 9 3 4
8 8 1 4 0 5
S m a l l
S i r o h i
2
2 3 5 0 0
4 7 0 0 0
8
1 9 7 0 9
1 5 7 6 7 2
6
3 1 0 8 7
1 8 6 5 2 0
6
3 2 3 4 3
1 9 4 0 6 0
G a n g a n a g a r
1
3 0 0 0
3 0 0 0
T o t a l
2
2 3 5 0 0
4 7 0 0 0
8
1 9 7 0 9
1 5 7 6 7 2
6
3 1 0 8 7
1 8 6 5 2 0
7
2 8 1 5 1
1 9 7 0 6 0
M e d i u m
S i r o h i
2
7 4 6 9 0
1 4 9 3 8 0
6
8 7 5 3 3
5 2 5 2 0 0
5
3 3 3 8 2
1 6 6 9 1 0
8
8 1 2 1 9
6 4 9 7 4 8
G a n g a n a g a r
2 7
5 6 2 5 0
1 5 1 8 7 4 4
3 4
6 0 7 9 7
2 0 6 7 0 8 1
3 5
9 3 7 4 5
3 2 8 1 0 7 5
3 9
1 1 5 6 1 4
4 5 0 8 9 4 6
T o t a l
2 9
5 7 5 2 2
1 6 6 8 1 2 4
4 0
6 4 8 0 7
2 5 9 2 2 8 1
4 0
8 6 2 0 0
3 4 4 7 9 8 5
4 7
1 0 9 7 5 9
5 1 5 8 6 9 4
L a r g e
S i r o h i
2
1 3 5 0 0
2 7 0 0 0
2
2 8 5 0 0
5 7 0 0 0
2
7 8 5 0 0
1 5 7 0 0 0
4
7 0 7 5 0
2 8 3 0 0 0
G a n g a n a g a r
3
5 5 3 5
1 6 6 0 5
2
1 1 3 8 5
2 2 7 7 0
4
1 8 8 2 4
7 5 2 9 5
5
6 0 0 9 9
3 0 0 4 9 5
T o t a l
5
8 7 2 1
4 3 6 0 5
4
1 9 9 4 3
7 9 7 7 0
6
3 8 7 1 6
2 3 2 2 9 5
9
6 4 8 3 3
5 8 3 4 9 5
T o t a l
S i r o h i
7
3 3 6 9 7
2 3 5 8 8 0
2 4
4 3 6 0 7
1 0 4 6 5 7 2
2 2
3 9 2 7 9
8 6 4 1 4 5
2 6
7 6 3 3 5
1 9 8 4 7 1 3
G a n g a n a g a r
3 1
4 9 9 7 3
1 5 4 9 1 7 4
3 7
5 6 7 6 4
2 1 0 0 2 7 6
4 0
8 4 4 0 1
3 3 7 6 0 4 1
4 6
1 0 5 1 2 9
4 8 3 5 9 4 1
T o t a l
3 8
4 6 9 7 5
1 7 8 5 0 5 4
6 1
5 1 5 8 8
3 1 4 6 8 4 8
6 2
6 8 3 9 0
4 2 4 0 1 8 6
7 2
9 4 7 3 1
6 8 2 0 6 5 4
100 from Sirohi with credit limit of Rs.25000 to 300000, while in Ganganagar there were 15 reporting farmers with credit limit of Rs.51000 to Rs.4.5 lakh. Only farmers reported credit enhancement- 5 in Ganganagar and 4 in Sirohi. In Sirohi KCCs were from commercial bank (2 farmers), regional rural bank (2) and cooperative bank (4), while in Ganganagar the banks were- commercial bank (3), regional rural bank (11) and cooperative bank (1). The first KCC limit was Rs.15000 to Rs.50000 in Sirohi and Rs.45000 to Rs.3.00 lakh in Ganganagar. It was found that average withdrawals through KCCs had increased since 2003-04, though in some cases in 2004-05 some decline was reported (Table 4.14). As in most cases only one withdrawal was allowed and the limit was not changed over a season, doubling was not possible in credit disbursement for these farmers. There were 5 farmers in Sirohi with one additional KCC, one farmer with two additional KCC while in Ganganagar there were 13 farmers with one additional KCC. In case of KCC, we found in Sirohi, 48 farmers were absolutely new KCC farmers while 15 were old bank borrower but new to the present bank (Table 4.15). Most of these were marginal and small farmers. In Ganganagar, absolutely new borrowers were 20 while 11 were old bank borrower but new to the present bank. Most of these farmers were medium farmers. 15 farmers in Sirohi had earlier borrowed from commercial bank (5 farmers), regional rural bank (1 farmer) and cooperative bank (9 farmers) while 11 farmers in Ganganagar had earlier borrowed from commercial bank (8 farmers), regional rural bank (1 farmer) and cooperative bank (2 farmers). To probe further, we found that of the 94 farmers, 26 were old bank borrowers but new to the present bank while 68 were absolutely new bank borrower. The earlier bank was commercial bank for 5 farmers in Sirohi and 8 farmers in Ganganagar, while regional rural bank took care of one farmer each. Cooperative bank had 9 farmers in Sirohi earlier as borrowers and in Ganganagar only 2 farmers. Table 4.15: Category of Borrower Category of Borrower Marginal Small Medium Large Total Sirohi Absolutely new bank borrower 19 11 14 4 48 Old bank borrower but new to this bank 4 4 7 15 Ganganagar Absolutely new bank borrower 3 2 13 2 20 Old bank borrower but new to this bank 1 1 7 2 11
101 4.6.6 Problems with KCC In Rajasthan, on the problem front of the KCC module, the response was that 88 of 136 KCC farmers did have any problem with KCC module. Another 34 farmers felt that KCC should allow its use as and when needed and these farmers were mainly from Ganganagar. For 6 farmers high interest was a problem. It takes too much time to get the money for 4 farmers and mix of all the above for another 4 farmers. It appears that marginal and small farmers were more affected by periodicity and high interest rates compared to medium and large farmers. Of the 136 farmers, 123 farmers had crop insurance cover too. It was also noticed that 127 of the 136 farmers were regular in payment of dues to banks. There were thus only 9 farmers who reported some irregularity in payments and 6 were from Sirohi and they were marginal and small farmers mainly. The frequency payment was six monthly for majority of the farmers but there were reportedly 24 farmers who had annual repayment schedule and all but 2 were from Ganganagar. In Maharsahtra, the farmers reported that considerable time, efforts and money had to be spent to procure all these documents required for getting a KCC. It was also reported that the requirement of various papers 4 were intimated in a piecemeal manner resulting in undue delay. In view of this, many times farmers feel that: better not to step in the bank. The farmers also reported that this was one of the major reasons to seek loan from the informal sources instead of taking it from the bank though interest rates of the latter were less than the formal sources. The part of documentation was more or less the same for both; crop and term loan. Thus, one can realize that how 4 In Maharashtra, a farmer has to produce the following documents to a bank branch for sanction of loan: revenue record pertaining to his land showing rights of ownership/cultivation; no dues certificate from different banks to the effect that he is not indebted to any other bank in the area; ration card or any other proof of identity; two photographs; stamp papers as per the requirement of the bank; search report from banks advocate in the case of loans above Rs.50000, and mutation certificate from the land record keeper (Talathi), if there is any alteration in revenue records. Besides these documents, the banks commonly seek the following papers/forms for their use and records from the borrowers at the time of sanction/disbursement: application form; annexure to the application as per the NABARD norms; D.P. note; D.P. note take delivery letter; terms and conditions letter; hypothecation agreement to be executed for all loans; deed of guarantee wherever applicable, and deed of mortgage wherever applicable. Again at the time of renewal, the following documents were taken from the borrower: fresh set of land records to check if there is any change in right of ownership / cultivation and the search report from the advocate; revival letter for hypothecation; revival letter for guarantee, and revival letter for mortgage. 102 difficult it could be for share croppers, tenant farmers and oral lessees to get loan from the bank. In Madhya Pradesh, the main problem regarding the KCC was the documentation procedure, violating the very important objective of KCC extending hassle free credit to farmers. Around 32.5 per cent farmers did not have any problems with KCC, while about 5 percent farmers found it difficult to approach the banks directly without the agents and they were mostly small/ marginal farmers. Around 3 percent farmers who were poor felt the poor response from the banks. The reasons for the other non-KCC holders in the village not getting KCC were, lack of awareness (15%) difficulties in documentation (14%), unsatisfied with bankers response (2.5%) and defaulters (18.5%). About 42 percent farmers were not having any idea about, why others have not got KCC. The farmers suggested that to make the KCC scheme more farmer friendly the procedures/documents has to be reduced and brokers has to banned (62.5%). About 10 per cent farmers suggested that their credit limit should be enhanced automatically as they face problems in enhancing credit limits. Others suggested that each bank should have one counsellor/or a cell to clarify the problems regarding KCC and around 3 per cent farmers were discouraged by the debt waiver schemes and the regular repayers should also be rewarded along with loan waiver schemes. In Tamil Nadu, none of the selected borrowers were tenant farmers or oral lessee. In general, the farmers opined that they were allowed to withdraw the loan amount as and when required by them. In 45 per cent of the sample respondent households, wife of the farmer was a member of SHG and out of this 85 per cent of them have availed Cash Credit Loan (CCL) through SHG. 4.6 Farmers in Arrears In Rajasthan, there were only two farmers with arrears who were from Sirohi and were small and medium farmers. The amount involved was Rs. 24553 (small) and 149581 (medium). 4.7 Projects What did the farmers take term loan for? Of the 94 farmers survey who had taken term loan in Rajasthan, 28 took loan for farm machinery (tractors) and it was the small and medium farmers mainly in Sirohi and medium farmers in Ganganagar. 17 farmers took loan for minor irrigation works and most were from Sirohi and again small 103 and medium farmers. Land development had been important purpose for borrowing in Ganganagar. Dairy development was another activity for which 20 farmers took term loan and most were from Sirohi and were marginal farmers. Sheep/goat/pig purchase was activity for 10 farmers and again in Sirohi. What was average cost of the project for which loan was sought? In Sirohi the average project cost was Rs.1.60 lakh of which loan sanctioned was Rs.1.47 lakh and loan amount was Rs.1.42 lakh. Thus there was a shortfall in the requirement and loan provided. The average project cost for marginal farmers was Rs.67079 while it was Rs.2.63 lakh for large farmers. The loan sanctioned on average for marginal farmers was Rs.48140 while it was Rs.2.38 lakh for large farmers. In Ganganagar, the difference between project cost of marginal and large farmers was immense, but here too there was large gap between project cost and loan sanctioned /loan amount. There was a difference between project cost, loan sought and loan sanctioned, there was bound to be difference between loan disbursed and project cost. Loan disbursed on an average in Sirohi was Rs.135670 while it was Rs. 217732 in Ganganagar. Across category of farmers in both the Districts, disbursement was lower than the loan sanctioned. This means that term loan was sufficient for all categories of farmers. As per the RBI Guidelines, no margin was stipulated by banks for loans up to Rs.50000. No margin was stipulated in the case of term loans and cash credit up to Rs.5 lakh for ACABC. The average money margin varies between Rs.7100 in case of marginal farmers and Rs.43667 in case of medium farmers in Sirohi while the range was between Rs.1500 for marginal farmers and Rs.25643 in case of medium farmers. In Maharashtra, as such, no ACABC was financed in Aurangabad and Latur Districts during the three years. For other loans exceeding Rs.50000, the banks sought margin money prescribed as per stipulations ranging from 15 per cent to 25 per cent of the total cost. When there were gaps between required finance for an activity and loan provisioning, what do the farmers do? They have to resort to own savings or borrow from other lenders. Of the 94 farmers, 24 farmers depended on own savings while 10 also borrowed from traditional sources like relatives/ friends/ moneylenders. Average own funds used for the project varied between Rs.47667 in case of marginal farmers and Rs.73571 in case of medium farmers in Sirohi while the range 104 was Rs. 25000 in case of small farmers to Rs.150000 in case of large farmers in Ganganagar. Marginal farmers in Ganganagar did not use own funds but borrowed on an average Rs.15000 from other sources. Dependence on own sources or borrowed funds was largely determined by secondary sources of income of the household and surplus generated from agriculture. Sirohi District had on an average smaller holding sizes and less irrigated area renders farmers depended upon moneylenders more as was observed from average borrowings by marginal and small farmers in Sirohi. Besides the above figures that show gap in loan and requirement, it was also ascertained whether the loan was sufficient or not? 65 of the 94 farmers stated that loan was sufficient and only 29 reported insufficient loan and most were from Sirohi and marginal and small farmers as expected. If the loan was not sufficient, then either one was using own savings to fill the gap or borrowing from others? Who were these others? Relatives were the source for one farmer, friends for 3 farmers and 6 depended up on others. The interest paid on borrowed funds varied between 12 to 24 percent per annum with most paying 24 percent interest rate. Invariably it was stated that banks take lot of time in disbursing the loan after sanction. Of the 94 farmers, 53 farmers reported no delay in sanction and disbursement. In Sirohi, the delay ranges between one day to 90 days while this delay in Ganganagar was between one and 60 days. 4.7.1 Asset from Term Loan In Rajasthan, in Sirohi of the 63 surveyed farmers, 44 farmers had the asset purchased intact and in use while 19 do not have the asset with them or was not in use. In Ganganagar, of the 31 farmers, 25 farmers had the asset purchased in intact while only 6 farmers did not have the asset in intact. There were four reasons for asset not being intact. It had been sold off (10 farmers), it was no more (basically animals) (3 farmers), drought affected it and at present the asset was not useable. Invariably capital assets in agriculture were not put use everyday and there was lot of underutilization of assets. In Sirohi, we found that there were 14 farmers reporting the asset in use for 365 days and another 1 farmer using it for 300 days. The range of days the asset was put to use was 2 to 365 days in Sirohi. In Ganganagar the asset use higher as the days it was put to use in a year ranges between 20 to 365 days. 105 The asset was used at farm/ home and hired out. Marginal farmers in Sirohi operate the purchased asset for 215 days in a year on an average, while it was 365 days in Ganganagar. Small farmers used it for 232 days in Sirohi and 258 days in Ganganagar. The large farmers used it for 296 and 341 days in Sirohi and Ganganagar respectively. The asset was used for more number of days on farm than days it was hired out across holding classes and in both the Districts. Who were used for operating the asset? On an average, marginal, small and medium farmers used higher number of family members compared to Ganganagar while only large farmers in Ganganagar use more family members. In Sirohi, fewer numbers of persons was hired to operate the asset. On an average, across categories of farmers Ganganagar hired more persons to operate the asset. Where the asset purchased was used? Use of asset on own farm ranged between 1 to 365 days in Sirohi and more than half the farmers used the asset for more than 120 days. In Ganganagar, the asset used on own farm ranges between 5 to 365 days with majority using it for more than 120 days. The asset was also hired out. It was found that in Sirohi, 4 to 270 days in a year (15 farmers do it) while in Ganganagar, it was hired out for 55 to 365 days (only 4 farmers do so). The average operating expenses on the asset were Rs.24846 for marginal farmer which goes up to 43125 in case of large farmers in Sirohi. Except for small farmers, in all categories of farmers, the average operating expenses in Sirohi were lower compared to Ganganagar. There were some farmers who did not purchase the asset for which the loan was taken. It was used for childrens marriage, domestic consumption, education and clearing the old debt of money lender. In Madhya Pradesh, the term loan disbursement had shown a decreasing trend over years by all the banks, which was of major concern as it affected the productive investments in agriculture, which was vital for long-term agricultural growth. The major problem faced by the banks was the poor recovery in case of term loans. In an attempt to find out the actual situation among the farmers who has 106 taken term loan, some of the issues were studied among farmers. Among the 21 farmers, funded by commercial banks, majority were the tractor loans (11), followed by minor irrigation loan. Commercial banks have given housing loan (3) under this head of term loan for agriculture. Among 46 term loan borrowers surveyed, 40 were regular re-payers. Among the 6 defaulters, 4 were the tractor loans. The farmers who take tractor loans find in difficult to take back the returns, by giving for rent, as majority of the farmers possess the tractor by themselves. Among the term loans units, one unit each from, minor irrigation; farm mechanization were not operational. One dairy unit and one warehouse were closed. The reason for the closure being the high maintenance and operating cost as compared to the income from the unit. One of the tractor and one pump set purchased through term loans were non-existent showing the amount was utilized for some other purposes. In case of minor irrigation and farms mechanization loans, approximately 90 per cent of the cost was covered by the loan while, in case of dairy units and warehousing, 65 per cent of the project cost was covered by the loan. The net income was high for the dairy unit, while very low from the warehousing. The net income from the farm mechanization was less than the annual instalment (i.e. he was not was able to repay the instalments). In Uttar Pradesh, a total of 30 borrowers (15 units from Thakurdwara Branch of UPSGV Bank Ltd, Moradabad District and 15 units from Moth Branch of UPSGV Bank Ltd, Jhansi District) were covered in the present study to see the utilization pattern of bank loan availed for agriculture and allied activities. A general norm of extending bank loan (maximum) of Rs.30000 to Rs.40000 per acre of owned land was adopted by the UPSGV Bank in Jhansi and Moradabad Districts. However, a cap for maximum amount of finance for most of the activities was also adopted by the Bank which was found to be generally less than the actual requirement for creating the desired asset. For example, in Jhansi District, Bank was extending loan of Rs.19000 for 6HP engine and Rs.21000 for 8HP diesel engine (P/s) whereas a market price of a good brand engine was around Rs.25000. Similarly, bank was extending dairy loan @ Rs.12000- Rs.13000 per animal whereas a good quality buffalo/cow was not available in less than Rs.20000. Less financing in case of dairy loan had resulted in procurement of desi/ non-descriptive breed of animals by the borrowers. In general, the level of asset creation by the borrowers in case of agriculture and allied activities was not found to be satisfactory. It 107 was observed that only 40 per cent of the borrowers in both the Districts of Moradabad and Jhansi had created the assets which were also found to be intact at the time of field visits. In as many as 27 per cent cases (8 out of 30 borrowers), the borrowers had created the assets/ established the units but had closed after a period of time. This observation was more common in case of animal husbandry projects (dairy, poultry and goatery) where asset was created and closed/ sold out after a period of time. Horticulture was one activity where it was very difficult to ensure the asset creation although it was assumed that the borrower will go for some plantation crop. But none of the sample borrower had even thought of investing in orchard/ plantation crop. Two borrowers in Moradabad District (1 for trolley another for horticulture loan) had availed the loan from the bank just to close their earlier loan accounts. Mr Gulam Saber had availed loan for horticulture activity and repaid the crop loan availed from the PACS and Mr Byan Singh had availed Rs.50000 for the purchase of trolley just to close his earlier dairy loan from the same bank. In Tamil Nadu, in Cuddalore and Viruthunagar districts, 28 farmers (6 small farmers and 22 large farmers) with an average farm size of 4.7 ha have borrowed term loans. Of these 28 farmers, 10 borrowed from RRBs (36 per cent of the total) and the remaining from commercial banks. Of the term loan borrowers, eight have borrowed as sugarcane premium (for laying drip irrigation system in sugarcane field) accounting for 28.6 per cent of the total number of term loan borrowers, 6 borrowed for purchasing tractors (21.4 per cent), 4 each for tractor maintenance and bore well (14.3 per cent), 3 for laying pipe line (10.7 per cent), 2 for purchasing oil engine (7.1 per cent) and one for digging well (3.6 per cent). In terms of the loan amount, purchase of tractors accounted for a maximum of 48 per cent of the total term loan amount disbursed. Bore wells, oil engines, drip irrigation system and tractors purchased under term loans were being properly maintained by them as these assets are highly useful to them in terms of yielding more returns. Farmers purchased tractors with term loan assistance from banks as the sugar mills authorized these farmers to use their tractors for transporting sugarcane to the mills. Banks were also ready to give such tractor loans owing to assured repayment. 4.8 Repayment In Rajasthan, the average instalment for marginal farmers was Rs.7009 in Sirohi while it was as low as Rs.420 in Ganganagar. Instalments 108 in Sirohi were more or less the same across category of farmers while they were very high for large farmers in Ganganagar. Small farmers in Sirohi have high instalments to pay compared to Ganganagar. In Sirohi the reported repayment period range between one year to 15 years, but majority of farmers had repayment period of up to 7 years. In Ganganagar, the repayment period reported was 5 to 10 years. This varied as per the asset purchased. 25 of the 63 surveyed farmers in Sirohi were paying instalments regularly compared to 18 out of 31 farmers who do it regularly in Ganganagar. It was mainly marginal and small farmers not paying regularly their instalments. The main reasons for this were drought led crop failure, rising input cost, water table declining leading to poor crop production and the asset not being fully used, especially tractor. In Sirohi, most hire it out and as the number had increased a lot there was less demand. What was the interest rate? In Sirohi the interest varied between 5 to 18 percent per year and most had 11 percent plus interest rate while in Ganganagar, the interest varied between 11 to 20 percent, most paying 12.00 percent. In Madhya Pradesh, majority of the farmers repay annually, around 85 per cent farmers regularly repay the loans. Some of the banks asked the customers/farmers to repay the loan in the previous day and sanction the loan in the next day in order to make some adjustments in their accounts. To address this issue, the farmers were questioned, only 4 farmers told that they did so twice/thrice as per the banks request. Some farmers while having casual discussion said that, they sometimes take loans from brokers to repay the bank and avail the loan from the bank next day and settle them by paying some interest. 4.9 Some Additional Observations In Madhya Pradesh, as far as KCCs were concerned, it was observed that many large farmers, who has distributed their holdings in the name of their family members have accessed the credit under the category of small/marginal farmers. About 22 farmers who claimed to be small farmers were in reality having large operational holdings and such farmers were having more than 2 KCC cards in the same family. Nearly 54 farmers were having two or more KCC cards and nearly 11 farmers were found to use the agricultural credit in their business or shops. It was also observed that in Madhya Pradesh, there exists a lot of competition among various agencies in getting their customers in rural areas because of the high target set for them. 109 Among the different sources of credit, commercial banks were preferred by most of the banks (53.5%). 6.5 percent farmers prefer other sources such as relatives and money leaders as they can get quick cash in hand without having to face the documentation problems. The reasons for preferences were shown and major reason for the commercial banks being preferred was the good/faster service and they maintain good relationship with the clients. Now there was generally tendency of shifting from one bank to another and was observed mainly from co-operatives and RRBs to commercial banks mainly because of the better services by CBs. In Madhya Pradesh, there was mixed response among the bankers regarding the recent loan wavier schemes. Some of the commercial bank managers were against this scheme saying that, it affected the basic morale among the farmers. The recovery percentage of the future loan was very low as most farmers turned into willful defaulters expecting further loan waivers in future. As far as co-operative banks were concerned being major stakeholders in financing small/marginal farmers, tends to gain maximum from the scheme and hence they were welcoming the scheme. In Panna, the response was different among commercial banks, as they also welcomed the scheme, as most of the farmers were affected by drought and flood since last 3 years. So they were in desperate need for the relief schemes. From the farmers point of view it has sent a wrong message that, the one who repays the loans was a looser, while the defaulters will benefit in the long run. Hence a scheme encouraging the regular repayers should also have been announced simultaneously, which would have had balanced feelings among the farmers. In Uttar Pradesh, branch managers opined that financing of term loan based on land security now-a-days has also become very risky. As per a rough estimate, about 100 accounts were such, where the owner has sold out the land mortgaged to the bank and there were number of court cases on this type of dispute. In Maharshtra, the major problem of the farmers was lack of awareness about the banks and the credit facilities available from them. First of all, the majority of the farmers who have so far not approached any bank for availing of credit were still apprehensive about procedures and processes of banks needed for sanction of loan. This often made the farmers shy of approaching the bank directly. To remove the fear from the minds of the farmers, first of all, the documentation part of the loan proposal needs to be further simplified. Secondly, a certain amount of handholding may actually make the 110 task easier for the bank. Identification of beneficiaries as was proposed in Service Area Approach could be initiated by banks. Even majority of the sample beneficiaries were not aware of various schemes of credit available with the banks. Hardly 10 per cent farmer- beneficiaries were aware of multipurpose use of KCC for availing of crop loan, term loan and consumption loan as a single window for the credit needs. Another important issue raised by the farmers in general was related to payment of margin money and keeping of fixed deposits with banks before the sanction/disbursement of loan. Farmers found these conditions difficult to fulfill. In comparison, many farmers argued that availability of informal credit from moneylenders in many respects was much easier than availing of loan from the banks; no matter what interest rate was charged by the former. On probing further on the issue of formal and informal credit facilities, the farmers opined that the interest rate charged by moneylenders at Rs.2 per cent per month (around 24% per annum) was not higher when they could get timely, adequate and hassle free credit from them. The same thing was not assured by the banks. This was so, particularly in respect of consumption loan. It should be available as and when required because, its need was time bound. The study team had an opportunity to discuss some issues with a businessman-cum farmer-cum moneylender. On the issue of higher interest rates charged by the money lenders, while justifying his point, he cited an example of a SHG in his village charging interest rates between Rs. 2 per cent and Rs. 3 per cent per month to its members. Further, he continued and said that gone were those days when some atrocities were done by a few money lenders in the past. The importance of money lenders in rural area could not be questioned. Rather it should be strengthened by a Government act with suitable modifications to suit the rural situation. This point was debatable. A detailed discussion was held with them regarding the quality in operations of KCC and its importance as a single window system for all types of loans, viz., crop loan, term loan and consumption loan. As mentioned above, among all the sample-beneficiaries, hardly 10 per cent were aware of the multipurpose use of KCC for availing of all types of credit. Nearly 70 per cent beneficiaries informed that they got information about the usage of KCC from the bank officials and helped them to open an account. On an average, the beneficiaries made 3 to 4 visits to the banks for opening the KCC account. By and large, they were allowed to withdraw money freely; may not be on the same day but on the next day. Nearly 38 per cent beneficiaries reported that they were refused to withdraw money on the next day 111 for non-availability of cash at bank level and sometimes for absence of branch manager. Nearly, 20 per cent KCC holders had no problem in sanction of enhancement in credit limit. However, the rest could not get enhancement in credit because of inadequate land holdings and lack of switch over from foodgrain crops to cash crops like sugarcane, cotton, etc. The beneficiaries were asked by the study team to show their KCC. Nearly, one-third beneficiaries told that the cards were not issued to them. On enquiry of this point with the bank officials, it was informed that the cards were kept in the branch to avoid loss or damage of it by the farmers. Further, it was found that the beneficiaries generally withdrew the entire amount of credit limit during the on-set of the monsoon, say, in June-July, and kept the money with the dealers of fertilizers, seeds, insecticides, etc. to book the supply of these inputs required during the year. Thus, the short supply of inputs like fertilizers was the main reason for such withdrawal of the credit. Nevertheless, it was found that the banks were continuing their old practice of lending in the name of KCC and the farmers were deprived of the flexibility in operations as envisaged under the scheme. The beneficiaries were not aware of the insurance scheme (death and permanent disability) covered under the KCC. Nor they were aware of flexibility in operation of card. Though the banks had tried to popularize the KCC by way of display of posters, banners and leaflets in rural area, the scheme was not picked up as desired. On enquiry with the card holders regarding the financial inclusion of every farmer with KCC account, they responded that the banks did not issue new KCC to the new farmers but insisted on him to open a savings account and operate it at least for three years. This was the main hurdle in expansion of KCC. 112 CHAPTER 5 Conclusions and Suggestions This study was launched to Study the trends in ground level credit flow in agriculture, number of loan accounts, coverage of new farmers, etc. during the period of the currency of the scheme, viz. from 2004-05 to 2006-07. Identify factors responsible for decrease, if any, in the number of farmers supported on a year to year basis and suggest strategies to arrest and reverse the trend Study the existing Management Information System (MIS) used by Rural Financial Institutions (RFIs) for reporting number of farmers/new farmers covered and to suggest changes for ensuring effectiveness of the reporting system Assess adherence to guidelines issued by RBI regarding agricultural credit, especially in the post doubling of credit period Study issues relating to investment credit with respect to the factual position in respect of farmers financed for investment purposes Review implementation of KCC as a product, its effectiveness in ensuring hassle-free credit to farmers as well as to obtain feed- back from farmers regarding the reasons for dormancy of KCCs, wherever such a situation occurred. The study pertains to five states viz., Rajasthan, Tamil Nadu, Uttar Pradesh, Madhya Pradesh, Maharashtra wherein two Districts each were surveyed to elicit ground level information and performance. Of the two Districts, one was agriculturally developed and the other agriculturally underdeveloped. Both had achieved doubling of credit during 2004-05 to 2006-07. The Districts covered were Sirohi and Ganganagar in Rajasthan, Aurangabad and Latur in Maharashtra, Narsingpur and Panna in Madhya Pradesh, Cuddalore and Virudhunagar in Tamil Nadu and Jhansi and Muradabad in Uttar Pradesh. In each state, two blocks in a similar fashion were also selected. Within each block one cooperative institution, one commercial bank and one regional rural bank were chosen. It was 113 ensured that the commercial bank was repeated in each block. A minimum of 200 farmers were covered in each State giving a sample of 1000 farmers. However, in certain states, the sample exceeded 200 farmers. Besides primary level information on doubling of credit and performance of Kisan Credit Cards, secondary information was also collected through State Level Bankers Committee which across states made special effort to gather information and monitored credit flow. This information related to state level agriculture credit flow by institutions and by activity. To obtain District level information, PLP reports prepared by District officers of NABARD were used. At the branch level, data was obtained from branches on various parameters through a structured questionnaire. Information from other sources at the state level was also relied upon to provide detailed performance with respect to doubling of credit to agriculture sector. The study was commissioned through five reputed research institutions in the country that were located in the selected states. Conclusions Doubling of credit to agriculture during the stipulated period was achieved at the aggregate level in all the states. However, there were inter-institutional variations in achievement of these targets. In certain states like Uttar Pradesh, doubling of credit was achieved by commercial banks in the very next year. RRBs achieved doubling target in 2006-07 in Uttar Pradesh whereas cooperatives did not achieve the target even in 2006-07. In Madhya Pradesh, doubling of credit flow was achieved in 2004-05 by commercial banks while RRBs were able to do so in 2005-06 and cooperatives did not achieve the target even in 2006-07. In Rajasthan, doubling of credit flow was achieved by commercial banks and cooperative banks in 2005-06 while RRBs did so in 2006-07. This meant doubling of credit at the state level in 2005-06 which further increased in 2006-07. In Maharashtra, commercial banks were able to achieve the target of doubling of credit in 2004-05 itself while RRBs did 114 so in 2006-07 and cooperative banks could not achieve the doubling of credit in 2006-07. At aggregate level, doubling target was met in 2006-07. In Tamil Nadu, commercial banks and RRBs achieved the target of doubling of credit flow to agriculture in 2005-06 when cooperative banks could not even maintain the flow of credit level of 2003-04 in 2006-07. For the state as a whole, in 2006-07 credit flow to agriculture was doubled from its 2003-04 base. Thus, we find that commercial banks performed better than other types of banks across states with cooperative sector banks faltering in most states. Across states there has been a shift of clients from cooperative sector to commercial banks with almost complete dominance of commercial banks in Tamil Nadu. Different states witnessed not only changing role of institutions, but also changes in the relative importance of some institutions. Term Loan Lending There were variations in doubling of term loan lending across states. For instance, only in case of horticulture activity, doubling of credit flow was achieved in Rajasthan while Maharashtra achieved doubling in poultry, Storage & Market Yards (SMY), Plantation & Horticulture (P&H), Farm Mechanisation (FM), Forest/Waste Land Development (F/ WLD) and Bio-Gas (BG) in either 2004-05 or 2006-07. In Tamil Nadu doubling of credit took place in fisheries, forestry and storage/market yards, farm mechanization, agri-others, animal husbandry. At aggregate level, doubling took place in Tamil Nadu in the second year and also in the third year over the base year. District level Situation Across states, there was varied performance in doubling of credit flow. In Rajasthan, doubling of credit flow to agriculture was achieved within a year after 2003-04 in most Districts. However, in 2006-07 all Districts met the doubling targets. There were of course wide variations across Districts in credit flow and this was probably the situation below the District level too for which data was not available. It was observed that doubling of credit flow has been difficult in Districts where base year flow has been high compared to Districts where base 115 year flows were low. All the institutions in Rajasthan achieved doubling of credit across Districts. In Tamil Nadu seven Districts did not achieve the doubling target. In the first year, none of the Districts achieved the doubling target. There were high inter-District variations in credit flow in Tamil Nadu. In Madhya Pradesh only 38 of the 48 Districts achieved the target of doubling agriculture credit and the districts which did not achieve doubling were: Datia, Sheopur, Dindori, Tikamgarh, Ashoknagar, Anuppur, Seoni, Umariya, Chhatarpur and Hoshangabad. In 16 of the 69 Districts of Uttar Pradesh doubling of agriculture credit flow target was not achieved and these were: Jaunpur, Faizabad, St. Ravidas Nagar, Chandauli, Allahabad, Varanasi, Firozabad, Unnao, Kaushabi, Kushinagar, Kanpur (N), Rampur, Badaun, Ambedkar Nagar, Azamgarh and Mathura. As many as 24 Districts in case of crop loan and 26 Districts in case of agricultural term loan failed to achieve the target of doubling the ground level credit within three years period of policy package from 2004-05 to 2006-07. There were wide inter-District variations in Uttar Pradesh too. New Farmers In Maharashtra, coverage of new farmers across institutions has gone up every year while in Rajasthan and Uttar Pradesh, a decline in number of new farmers was observed. In Madhya Pradesh in the first year while the number of new farmers increased, in the subsequent years the number went down. In Tamil Nadu overall increase in new farmers across institutions has been around 10 percent. Farmers in Distress In Maharashtra, during 2005-06 and 2006-07, the cooperatives restructured 7.21 lakh and 8.45 lakh accounts of the farmers in distress amounting to Rs.1424.31 crore and Rs.1743.73 crore in the respective years while the RRBs restructured 638 and 137 accounts of the farmers involving loan amount of Rs.1.95 crore and Rs.0.37 crore respectively. As a result, DCCBs and RRBs taken together financed fresh loans against restructuring to 1.69 lakh and 2.94 lakh accounts of the farmers and then financed fresh loan of Rs.180.63 crore and Rs.500.19 crore during 2005-06 and 2006-07 respectively. In Rajasthan, coverage of farmers in distress increased from 1.27 lakh in 2004-05 to 1.41 lakh in 2005-06. In Tamil Nadu, farmers 116 were benefited more by under relief measure extended to farmers who were in distress from co-operative banks with 54.7 per cent of the total amount sanctioned under the relief measures and they were followed by commercial banks (44.6%) and RRBs (0.7%) during 2004- 05. However, in 2006-07, commercial banks provided more relief than the co-operative banks and RRBs. As far as the percentage change in the amount sanctioned between 2004-05 and 2006-07 was concerned, all the three banks showed a negative trend. In Madhya Pradesh, loans of 25097 farmers in distress were settled in 2004-05 and 5874 farmers in 2005-06 and 1950 farmers in 2006-07. Among these farmers, the majority of them were from commercial banks followed by RRBs in 2005-06. In 2006-07, other than a few (5) accounts of farmers settled by RRBs, most of the farmers belonged to commercial banks. In Uttar Pradesh, in 2004-05, 80806 farmers who were in distress got benefit of restructuring of Rs.212.58 crore loans while in the next year no farmer was reportedly helped, though in 2006-07, 22649 farmers with loan amount of Rs.97.43 crore were helped through restructuring. In all, during these two years 103455 farmers in distress were helped through restructuring of Rs.310.01 crore loans. Of these, 1755 farmers were given fresh loans of Rs.5.04 crore in 2004- 05, 1151 farmers given Rs.3.39 crore loans in 2005-06 and 957 farmers were given Rs.4.62 crore loan in 2006-07. Farmers in Arrears During 2005-06 and 2006-07, the cooperatives restructured 1.73 lakh and 1.17 lakh accounts of the farmers in arrears amounting to Rs.378.73 crore and Rs.385.13 crore, respectively in Maharashtra and as a result cooperatives financed fresh loans to 4.07 lakh accounts of the farmers in arrears and issued fresh loans to them to the tune of Rs.712.98 crore during the period of three years. In Rajasthan, farmers in arrears increased from 0.25 lakh in 2004-05 to 0.34 lakh in 2005-06. In Madhya Pradesh, in 2004-05, 6292 farmers were reported to be in arrears and Rs.36.81 crore loans were settled while in 2005-06, 1235 farmers who were in arrears could get Rs.9.35 crore loans settled. Of these, majority were from commercial banks (1020 with Rs.8.75 crore loan) and RRBs (215 farmers with Rs.0.60 crore loans). In the next year, 533 accounts of arrears with Rs.4.02 crore loan were settled and again 368 were from commercial banks and 135 were with RRBs. In Uttar Pradesh, in the three years, 297741 farmers with arrears were benefited and Rs.404.86 crore loans were settled. Of these, 241867 farmers were in 2004-05 followed by 44472 farmers in 2005-06 and 11402 farmers in 2006-07. 117 One Time Settlement (OTS) Total number of accounts settled under OTS in the case of co-operatives during the three years was 26368 and the amount of settlement was Rs.175.93 crore in Maharashtra while in the case of RRBs, the number of OTS accounts settled during the period was 573 and their amount of settlement was Rs.0.75 crore. In other words, in the case of the cooperatives and RRBs taken together, nearly 27000 SF/MF became eligible for fresh credit from the banks. In Rajasthan, farmers in OTS marginally increased from 0.10 lakh in 2004-05 to 0.12 lakh in 2005-06. In Tamil Nadu, the farmers under One Time Settlement (OTS) Relief in Tamil Nadu were benefited more from commercial banks with 96.7 per cent of the total amount disbursed for the purpose during 2004-05 and they were followed by RRBs (2.5%) and co-operative banks (0.8%). However, co-operative banks provided more benefits under OTS in 2006-07 followed by commercial banks and RRBs. The co-operative banks increased the OTS benefit to the farmers in between 2004-05 and 2006-07 significantly while there was a negative trend in case of commercial banks and RRBs. In Madhya Pradesh, in 2004-05, 87555 farmers were benefited under OTS and Rs.90.92 crore loans were settled while in 2005-06, 10948 farmers were benefited as loans worth Rs.33.62 crore were settled. Of these, majority were from commercial banks (3526 with Rs.14.76 crore loan) followed by cooperatives (4724 farmers and Rs.9.71 crore loans) and RRBs (2698 farmers with Rs.9.15 crore loans). In the next year, 9098 accounts were settled under OTS with Rs.15.72 crore loan settled and again 3566 came from commercial banks and 5527 from RRBs. The amount settled by commercial banks in 2006-07 was Rs.10.83 crore, cooperatives Rs.0.18 crore and Rs.4.71 crore by RRBs. In Uttar Pradesh, in the three years, 107990 farmers (SF/MF) benefited from OTS and Rs.191.09 crore loans were settled. Of these 63036 farmers were in 2004-05 followed by 18991 farmers in 2005-06 and 25973 farmers in 2006-07. In 2004-05, the loan amount settled was Rs.88.04 crore followed by Rs.28.78 crore in 2005-06 and Rs.74.27 crore in 2006-07. Once this was done, fresh loans were issued to 17006 farmers to the tune of Rs.28.29 crore, the break up of which was 8270 farmers in 2004-05, 3510 farmers in 2005-06 and 5226 farmers in 2006-07. The fresh loans issued were Rs.8.44 crore, Rs.6.56 crore and Rs.13.29 crore, respectively for 2004-05, 2005-06 and 2006-07. Redemption from Informal Sources of Credit The advances granted against the farmers indebtedness to informal sources like moneylenders, etc. were Rs.11 lakh to 58 farmers in the 118 case of cooperatives in Maharashtra. While in the case of RRBs, this amount was Rs.473 lakh for 241 farmers. In Rajasthan, it was also found that loans against indebtedness benefited 2164 farmers in 2004- 05 and only 539 farmers in 2005-06 and 182 farmers in 2006-07. During these two years, Rs.27.20 crore and Rs.1.07 crore were advanced to these farmers. It was also noticed in Rajasthan that fresh loans after relief measures were given to 62000 farmers in 2004-05 to the tune of Rs.331 crore. This number went up to 89000 in 2005- 06 but the amount disbursed declined to Rs.179 crore. The number further declined to 2251 in 2006-07 and the amount of credit disbursed was just Rs.2.08 crore. In Madhya Pradesh, in 2004-05, 282 farmers were benefited under redemption of moneylenders loans and Rs.1.04 crore redeemed while in 2005-06, 172 farmers were benefited when loans worth Rs.1.63 crore were settled. Of these, all were from commercial banks. In 2006-07, 82 farmers were benefited with Rs.0.03 crore loan settled and they belonged to RRBs. In Uttar Pradesh, in the three years, 11610 farmers benefited from moneylender loan redemption scheme and Rs.40.83 crore loans were settled. Of these, 5004 farmers benefitted in 2004-05 followed by 2422 farmers in 2005-06 and 4184 farmers in 2006-07. In 2004-05, the loan amount settled was Rs.21.88 crore followed by Rs.4.89 crore in 2005-06 and Rs.14.66 crore in 2006-07. Share Croppers, Tenant Farmers and Oral Lessees In Rajasthan, information on small and marginal farmers, tenant farmers, share croppers and oral lessees was available only for 2004- 05. During this year, 174909 small and marginal farmers were benefited with credit of Rs.687.11 crore. There were only 288 oral lessees covered in 2004-05 in Rajasthan with credit disbursement of Rs.1.13 crore. There were only 939 sharecroppers covered in 2004- 05 in Rajasthan with credit disbursement of Rs.1.52 crore. There were only 1774 tenant farmers covered in 2004-05 in Rajasthan with credit disbursement of Rs.4.21 crore. In Madhya Pradesh, in 2005-06, only 148 tenant farmers were financed by commercial banks, which declined drastically in the next financial year 2006-07 to 43 tenant farmers. The other agencies have not financed any farmers in this category. No financing has been done to oral lessees and sharecroppers by formal banking institutions in Madhya Pradesh. In Maharashtra, 3621 SHGs of tenant farmers were formed and financed by cooperatives and 474 by RRBs during the period. This was possible because of the efforts of NGOs who could identify the tenant farmers and formed their SHGs. In Maharashtra, agriculture 119 credit was not extended to share croppers and oral lessees for lack of records on land use. In Tamil Nadu, in 2004-05, in terms of extent of financial support provided to the SHGs of tenant farmers, commercial banks contribution was more (92 %) followed by RRBs(5%) and co-operative banks (3%). In 2006-07 also, commercial banks played a leading role followed by RRBs. The percentage change in the financial assistance extended to tenant farmers between 2004- 05 and 2006-07 was more in RRBs and a declining trend was observed in case of commercial banks and co-operative banks. In 2004-05, commercial banks supported tenant farmers through 1002 SHGs and RRBs and cooperatives formed 91 and 34 SHGs. A total of Rs.17.63 crore was loaned during 2004-05 and commercial banks led with Rs.16.24 crore followed by RRBs, Rs.0.96 crore and cooperatives another Rs.0.44 crore. In 2005-06, commercial banks supported 484 tenant farmer SHGs followed by 20 by RRBs and only 4 SHGs by cooperatives. During the year, Rs.6.5 crore was loaned of which 97 per cent was through commercial banks followed by 1.8 per cent by RRBs and 1.2 per cent by cooperatives. During 2006-07, commercial banks supported 286 tenant farmer SHGs when RRBs supported only 94 tenant farmer SHGs. During the year, Rs.3.3 crore was loaned of which 59.5 per cent was through commercial banks followed by 40.5 per cent by RRBs. No SHG was formed by co-operatives during 2006-07. In Uttar Pradesh, in the three years, 39380 tenant farmers were covered of which 15835 were during 2004-05, 7306 during 2005-06 and 16239 during 2006-07. It was also revealed that of the total number of new farmers, the share of tenant farmers was 1.06 per cent in 2004-05, 0.55 per cent in 2005-06 and 1.09 per cent in 2006-07. In 2004-05, tenant farmers were issued loans of Rs.44.30 crore which reduced to Rs.25.61 crore in 2005-06 and then increased to Rs.103.83 crore in 2006-07. In case of oral lessees, in the three years, 7911 such farmers were covered of which 1684 were during 2004-05, 3338 during 2005-06 and 2889 during 2006-07. It was also revealed that of the total number of new farmers, the share of oral lessees was 0.11 per cent in 2004-05, 0.25 per cent in 2005-06 and 0.19 per cent in 2006- 07. In 2004-05, oral lessees were issued loans of Rs.8.03 crore which reduced to Rs.2.77 crore in 2005-06 and then increased to Rs.6.52 crore in 2006-07. In case of share-croppers, in the three years, 19951 share croppers were covered of which 3309 were during 2004-05, 5018 during 2005-06 and 11624 during 2006-07. It was also revealed that of the total number of new farmers, the share of share croppers was 120 0.22 per cent in 2004-05, 0.38 per cent in 2005-06 and 0.78 per cent in 2006-07. In 2004-05, share croppers were issued loans of Rs.9.62 crore which improved to Rs.13.85 crore in 2005-06 and then increased to Rs.52.91 crore in 2006-07. Surprisingly, the tenant farmers were giver higher amount of loan per account (Rs.44120) as compared to the average. The oral lessees and the share-croppers were given an average loan of Rs.21897 and Rs.38284 per account respectively. Agri-Clinics/Agri-Business In Rajasthan, in 2004-05, 36 agri-clinics/ agri-business units were supported with credit of Rs.0.69 crore while in 2005-06, 179 agri- clinics/ agri-business units were supported with credit of Rs.0.65 crore. The number further reduced to 5 in 2006-07 who were disbursed Rs.0.14 crore. In Madhya Pradesh, to encourage entrepreneurship in agriculture and allied sectors and to involve educated youth in this sector, guidelines have been formed in SACP that in every District at least 2-3 agri-clinics/agri-business centres should be funded by commercial banks. Accordingly, it has been reported that Rs.0.83 crore loan was sanctioned to 30 agri-clinics/ agri-business centres in 2005-06, while it declined to only one agri- clinic in 2006-07. RRBs also funded around 8 units in 2005-06 and 2 units in 2006-07. In Uttar Pradesh, the data on the financing of agri-clinics/ agri-business centres indicated that the achievement was only 27 per cent (570 against the target of 2100 agri-clinics in the state (@10/ District/year). The financing of all the 570 Agri Clinics/ Agri-business Centres in the state was done by Commercial banks and RRBs only. For example, during 2005-06, out of 252 centres financed in the state, 162 were financed by Commercial banks and the rest 90 centres by RRBs and during 2006-07, 154 centres were financed by commercial banks and the rest 21 centres by RRBs. The cooperative banks did not finance any Agri Clinics/ Agri-business Centres in the state. However, Banks have financed 392473 new investment projects during the policy package period, which can be termed as excellent as far as mandatory expectations were concerned. Of these new projects, 159116 were financed during 2004-05 (Rs.944.36 crore), 92598 in 2005-06 (Rs.889.45 crore) and 14059 in 2006-07 (Rs.1468.84 crore). In Tamil Nadu, more agri-clinics were started through co-operative banks which were followed by commercial banks and RRBs. It could also be observed that more efforts have been taken during 2006-07 to start agri-clinics as 2626 clinics were supported. Of these, 2589 were set up with assistance from cooperative banks with a loan of Rs.4.22 crore while commercial banks 121 supported only 36 clinics. In 2004-05, only 69 clinics were set up by commercial banks and this number declined to 38 in 2005-06. In these two years, commercial banks supported 107 clinics while cooperative banks set up 114 clinics. In Maharashtra, the total number of ACABC financed by the banks in the State was 129 upto 31 March 2007. The total amount of loan sanctioned to them was Rs. 5.61 crore against which disbursement of loan was Rs.4.70 crore. Only 14 new ACABC were financed by the bank during the last three years, though a large number of private centers were reported to have been opened in the State without taking credit from the formal sources. Regarding deployment of credit to ACABC, out of 129 units financed in the State, as many as 92 units were financed in Western Maharashtra alone, leaving 12, 15 and 10 for Marathwada, Vidarbha and Konkan regions, respectively. MIS As of today, whatsoever may be the status of the new MIS, the overall rate of submission of LBRs was not at all satisfactory. Controlling offices were neither serious about the submission of LBRs by the branches and forwarding the District-wise consolidated data to SLBC, nor the SLBC was serious in doing follow up of the same at District/ branch level of the banks. While seeking information on the same from the officials of the bank branches, no ones response was satisfactory. Rather, they were reluctant to update us on the issue. Nevertheless, all of them informed that so far they had not forwarded such data/ LBRs to their controlling offices. Further, they were not aware of MIS/ any statement for reporting the number of total accounts financed, and the number of accounts of SF/MF and new farmers covered during the period of doubling of credit. The officials of the SLBC, while seeking information on the status of the MIS, reported that doubling of agricultural credit was one of the many activities to be performed by the SLBC in a given period. Moreover, a few more financial schemes were introduced in the subsequent years. As a result, the scheme which was introduced in the recent past was almost forgotten in the light of the new schemes. Therefore, the SLBC hardly got any time to study and analyse the data of completed/closed schemes when already new schemes were on hand to be monitored by the Committee. To cite an example, they reported that the existing shortage of staff in the banks was the biggest constraint in monitoring the performance of priority sector lending. Moreover, once the scheme of doubling of agricultural credit was 122 closed by the end of March 2007, two more schemes viz., Financial Inclusion and Loan Waiver Scheme of 2008 announced by the GOI were to be implemented and monitored in the subsequent year. As a result, the officials added: In a situation when one scheme was recently closed, but there was already a new scheme on hand to look into on priority, we can work only in present situation and not in past. We were unable to probe further into this matter. Database has to be improved. There should be regular reporting of credit flow. SLBC should have proper reporting formats for institutions and branches. KCC There was no doubt that issue of KCCs has gone up across states, but still 100 per cent coverage has not been achieved. There were farmers who had more than one card and most of these farmers were resourceful farmers. Major suggestion from farmers were that there should be less paper work, interest rates should be lower, there should be flexibility in instalment payment or some rebate in times of hardship/ crop failure and to have higher credit limits than the existing ones. Some farmers also felt efforts are needed to be made to build awareness. In order to enhance coverage, the simplification of procedures was required and also banks should stop unnecessary deductions they make. There was cost involved in getting a KCC. Intermediaries were involved in getting a card, especially for the small and marginal farmers though, it was not all pervasive. Most farmers make a single transaction and they lack awareness on whether a KCC can be used for consumption loan or not. In the process of doubling of credit, there were wide variations across states in renewal of KCC and thereby enhancing the credit limit. In Madhya Pradesh, as far as KCCs were concerned, it was observed that many large farmers, who had distributed their holdings in the name of their family members had accessed the credit under the category of small/marginal farmers. About 22 farmers who claimed to be small farmers were in reality having large operational holdings and such farmers were having more than 2 KCC cards in the same family. Nearly 54 farmers were having two or more KCC cards and nearly 11 farmers were found to use the agricultural credit in their business or shops. It was also observed that in Madhya Pradesh, there exists a lot of competition among various agencies in getting their customers in rural areas because of the high target set for them. Among the different sources of credit, commercial banks were preferred by most of the banks (53.5%). 6.5 percent farmers preferred 123 other sources such as relatives and money lenders as they could get quick cash in hand without having to face documentation problems. The reason for preference of the commercial banks was the good/faster service and the good relationship they maintained with the clients. There was a general tendency of shifting from one bank to another and was observed mainly from co-operatives and RRBs to commercial banks, because of the better services by CBs. In Madhya Pradesh, there was mixed response among the bankers regarding the recent loan wavier schemes. Some of the commercial bank managers were against this scheme saying that, it affected the basic morale among the farmers. It was felt that the recovery of the future loan may be low as most farmers may turn into defaulters, expecting further loan waivers in future. As far as co-operative banks were concerned, being a major stakeholders in financing small/marginal farmers, it was viewed to gain maximum from the scheme and hence they welcomed the scheme. In Panna, commercial banks also welcomed the scheme, as most of the farmers were affected by drought and flood since last 3 years. So they were in desperate need for relief schemes. From the farmers point of view it has sent a wrong message that the one who repays the loans was a loser, while the defaulters will benefit in the long run. Hence, a scheme encouraging the regular repayments should have also been announced simultaneously, which would have had balanced feelings among the farmers. In Uttar Pradesh, branch managers opined that financing of term loan based on land security has also become risky. As per a rough estimate, about 100 accounts were such where the owner had sold out the land mortgaged to the bank and there were number of court cases in this regard. In Maharashtra, a major problem among the farmers was the lack of awareness about banks and the credit facilities available from them. First of all, the majority of the farmers who had so far not approached any bank for availing of credit were still apprehensive about procedures and processes of banks needed for sanction of loan. This often made the farmers wary of approaching the bank directly. To remove the fear from the minds of the farmers, first of all, the documentation part of the loan proposal needs to be further simplified. Secondly, a certain amount of handholding may actually make the task easier for the bank. Identification of beneficiaries as was proposed in Service Area Approach could be initiated by banks. Even majority of the sample beneficiaries were not aware of various schemes of credit available with the banks. Hardly 10 per cent farmer- 124 beneficiaries were aware of multipurpose use of KCC for availing of crop loan, term loan and consumption loan as a single window for the credit needs. Another important issue raised by the farmers in general was related to payment of margin money and keeping of fixed deposits with banks before the sanction/disbursement of loan. Farmers find these conditions difficult to fulfill. In comparison, many farmers argued that availability of informal credit from moneylenders in many respects was much easier than availing of loan from the banks; no matter what the interest rate charged by the former. On probing further on the issue of formal and informal credit facilities, the farmers opined that the interest rate charged by moneylenders at 2 per cent per month (around 24% per annum) was not higher when they could get timely, adequate and hassle free credit from them. The same thing was not assured by the banks. This was so, particularly in respect of consumption loan. It should be available as and when required because, its need was time bound. The study team had an opportunity to discuss some issues with a businessman- cum farmer-cum moneylender. On the issue of higher interest rates charged by the money lenders, while justifying his point, he cited an example of a SHG in his village charging interest rates between 2 per cent and 3 per cent per month to its members. Further, he continued and said that the days when atrocities were committed by a few money lenders, were in the past. The importance of money lenders in rural areas could not be questioned. Rather it should be strengthened by a Government act with suitable modifications to suit the rural situation. This point was debatable. A detailed discussion was held with them regarding the quality in operation of KCC and its importance as a single window system for all types of loans, viz., crop loan, term loan and consumption loan. As mentioned above, among all the sample-beneficiaries, hardly 10 per cent were aware of the multipurpose use of KCC for availing of all types of credit. Nearly 70 per cent beneficiaries informed that they got information about the usage of KCC from the bank officials who helped them open an account. On an average, the beneficiaries made 3 to 4 visits to the banks for opening the KCC account. By and large, they were allowed to withdraw money freely; may be not on the same day but on the next day. Nearly 38 per cent beneficiaries reported that they were not allowed to withdraw money on the next day due to non-availability of cash at bank level and sometimes due to absence of branch manager. Nearly, 20 per cent KCC holders had no problem in sanction of enhancement in credit limit. However, the rest could not get enhancement in credit because of inadequate land holdings 125 and lack of switch over from foodgrain crops to cash crops like sugarcane, cotton, etc. The beneficiaries were asked by the study team to show their KCC. Nearly, one-third beneficiaries said that the cards were not issued to them. On enquiry of this point with the bank officials, it was informed that the cards were kept in the branch to avoid the loss or damage of it by the farmers. Further, it was found that the beneficiaries generally withdrew the entire amount of credit limit during the on-set of the monsoon, say, in June-July, and keep the money with the dealers of fertilizers, seeds, insecticides, etc. to book the supply of these inputs required during the year. Thus, the short supply of inputs like fertilizers was the main reason for such withdrawal of the credit. Nevertheless, it was found that the banks were continuing their old practice of lending and the farmers were deprived of the flexibility in operations as envisaged under the scheme. The beneficiaries were not aware of the insurance scheme (death and permanent disability) covered under the KCC. Nor were they aware of flexibility in operation of card. Though the banks have tried to popularize the KCC by way of display of posters, banners and leaflets in rural area, the scheme did not pick up as desired. On enquiry with the card holders regarding the financial inclusion of every farmer with KCC account, they responded that the banks did not issue new KCC to the new farmers but insisted that they open a savings account and operate it at least for three years. This was the main hurdle in expansion of KCC and across the board keeping momentum of credit flow to agriculture. 126 Annexure I Credit Widening and Deepening through Scheduled Commercial Banks- 2003-07 At all India level , institutional credit flow through the Scheduled Commercial Banks increased from Rs.25,255.93 crore as at end June 2003 to Rs.1,15,265.86 crore as at the end June 2007, registering a compound annual growth rate CARG at 47 per cent (TableA1 ). During the same period, number of accounts increased from 70.07 lakh to 155.37 lakh and registered an annual CARG of 22.15 per cent. Similarly, average loan per account increased from Rs.36040 to Rs.74189 during the period 2003-07. Thus the growth in credit flow between 2003 and 2007 resulted in both credit widening (increased accounts) as well as credit deepening (increased loan per account.) Table A1: Credit Flow through Scheduled Commercial Banks-2003-07 Source: Data procured from RPCD, RBI, Mumbai Particulars Rajasthan Madhya Pradesh Uttar Pradesh Mahara-shtra Tamil Nadu All India Average Loan per account (Rs) (a) 2003 47775 64731 33223 62257 17643 36040 (b) 2007 119814 110950 79705 130215 47231 74189 Number of Accounts (a) 2003 149423 133585 550453 314527 1589728 7007601 (b) 2007 364370 390485 1033308 801378 4075103 15536741 Compound Annual Growth Rate (%) (a) Average loan per account 21.61 14.84 24.62 9.84 29.00 20.15 (b) Number of accounts 24.58 29.97 18.91 40.42 25.99 22.15 (c) Credit flow
51.50 49.26 48.19 54.23 62.53 46.77 Other details (i) Average size of holding (ha) 3.96 2.28 0.86 1.87 0.91 1.41 (ii) Area under non foodgrain crops % 35 36 22 45 44 35
127 At State level, credit widening and deepening varied substantially. The credit widening was more conspicuous in Maharastra as the annual growth in number of accounts was 40 per cent and the average loan size increased at 10 per cent only. The latter interalia could be attributed to higher loan size during 2003 which could be due to relatively larger size of holding and area under non-foodgrain crops. Madhya Pradesh followed similar trend. In remaining three States (Tamil Nadu, Rajasthan and Uttar Pradesh), the growth in credit flow followed the All India trend and contribution of widening and deepening to the credit flow was almost equal. 128