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CHAPTER I

INTRODUCTION AND DESIGN OF THE STUDY

INTRODUCTION

India is primarily an agricultural country. Agriculture development is

important because it provides economic substance and builds up a strong

industrial base. Capital formation and the level of economic activity depend

upon the agriculture production. Thus, the development of agriculture is an

„accelerator‟ of the overall economic progress of the country. So it is an

imperative need to stabilize and strengthen the agricultural sector.

Agriculture is the chief occupation of the rural masses. As is well

known nearly three fourths of cultivated area depends on monsoon rains. This

means agriculture is seasonal and employment in agriculture is mostly

seasonal too. Further, the agriculture sector is the major sector of the rural

economy in which unemployment and underemployment prevail. Poverty is

essentially a rural Problem linked with the backwardness of agriculture which

implies low capacity to employ more workers gainfully. Dandekar and Rath

say that “Urban Poverty is an overflow of rural poverty. Hence action against

Poverty has to be initiated in rural areas”1. The Creation of optimal

employment opportunities in agriculture reduces rural poverty. More

employment in agriculture is possible when its productivity is raised.

Fortunately, “there is a considerable scope for increasing agricultural

productivity because the present productivity is no more than two-fifth of what

it could be”2. If agricultural Productivity is doubled it will give a boost to the

secondary and tertiary sectors. Improving socio- economic life of agriculturists

depends very much upon the development of agriculture, the progress of it

hinges upon the several inputs, but the one input than can help the farmers to

apply the other inputs is the capital namely credit.

Finance is one of the important requirements of agriculture and other

rural farm economic activities. In other words capital plays a crucial role in the

overall development of rural economy. As majority of the farmers are

economically weak, they are dependent on credit for their agricultural

development. Agriculture cannot develop unless credit facilities are available

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to farmers. The supply of credit will be highly effective in rehabilitating the

farmers. The term „credit‟ is derived from the Latin word „Credere‟ this means

„to trust‟. Credit is the present right to a future payment. Thus it signifies as a

temporary means of raising funds for defraying various obligations. For

defraying various obligations, farmers need agriculture credit. Among various

categories of credit, Agricultural credit is a most common one. This can be

defined as “an amount of investment made available for the purpose of

development of form productivity”3. Agricultural Finance Corporation of India

defined Agriculture Credit as “the amount of money needed by a former to

achieve a proper Combination of productive factors like land, laborers, inputs,

machinery, livestock and managerial ability, so that the planned level of

income is generated by his farm”4.

NEED TO BORROW LONG TERM AGRICULTURAL CREDIT

Indian farmers Capital is locked up in his land and stock. Secondly, the

seasonal cycle of agricultural production is superimposed on a largely

perpetual and steady pattern of consumption. This, in other words means two-

thirds of the average income of farmers goes for food. Thirdly, the cycle of

borrowing and repayment is not maintained in agriculture because of

continuous borrowings followed by irregular repayment mainly due to natural

conditions and hence, farmers remain under debt. The emergence of New

Agricultural Technology (NAT) which is possible even to small farmers to

apply in farming calls for more credit. In other words, farm mechanization

demands more credit. Lastly, many (72 percent) farmers are below two

hectares of land and this group of farmers left with hard-savings. In one way

or other owing to one or more problems mentioned above, The Indian farmers

is forced to borrow funds to improve his economic standards

SOURCES OF AGRICULTURAL CREDIT

Broadly, there are two sources of agricultural credit available to the

farmers-Institutional and Private or Non-Institutional

1) Private or Non Institutional sources:

Farmers often borrow from money-lenders, traders and commission

agents, relatives and land lords. These loans are generally contracted in an

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informal manner and they are returned soon after the harvest. This source

of finance has all the defects associated with money lenders, traders and

commission agents. Interest rates are exorbitant. Often the small farmers

are cheated and their lands are forced to appropriate. The landless

laborers are forced to become bonded slaves.

2) Institutional Sources:

The need for investment credit arises because of the weakness or

inadequacy of private agencies to supply credit to farmers5. Private credit is

defective because:

It is based on profit motive, and therefore, it is always exploitative;

It is very expensive and is not related to the productivity of land;

It does not flow into most desirable channels and to most needy persons;

It is not available for making agricultural improvements and

It is not properly integrated with the agriculturist‟s other needs.

Institutional credit, refers to the funds made available by Co-operatives,

Commercial banks, and Regional Rural Banks (RRBs)

Institutional credit is not exploitative and the basic motive is always to help

the farmers to raise his productivity and maximize his income. The rate of

interest is not only relatively low but can be different for different groups of

farmers and for different purposes. Institutions also make a clear distinction

between short-term credit and long-term credit requirements and give loans

accordingly. Finally institutional credit is fully integrated with other needs of

agriculturist. The farmers require not only credit but also guidance in the

planning of their agricultural operations like the use of seeds fertilizers,

pesticides etc., and assistance in raising crops and in general, help for

maximizing their income. Agricultural credit and agricultural improvement

should go hand in hand and the farmers should be taught improved farming

methods and also be provided adequate and cheap credit. In all developed

countries, provision of credit facilities and extension services go hand in hand.

This work can be done best by institutions like Co-operatives, Commercial

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Banks and Regional Rural Banks and not by rapacious money lenders and

commission agents.

The Townsend Committee Report, Townsend committee on co-operative

recommended that a provisional land mortgage bank should be set up for

floating of debentures instead of individual Primary banks floating such

debenture6.

The Royal Committee on Agriculture in India, Under chairmanship of the

Marquees of lintithgow, the Royal committee on agriculture in India was

appointed. This committee in its report emphasized the need for the

organization of central land mortgage banks in each province, by

concentrate mainly on the issue of debentures to the public and leaving the

primary banks to deal only in disbursement of loans7.

The Cnetral Banking Enquiry Committee and Gadjil Committee, The central

Banking Enquiry committee and Gadjil committees were reviewed and

made various recommendation to improve the working conditions of central

land Mortgage Banks8.

The All India Rural Credit Survey Committee, the all India Rural credit

survey committee appointed under the chairmanship of Gorwala. The

committee pointed out the failure of co-operatives in purveying the

agriculture credit, and stated “co-operatives have failed but they must

succeed”. This committee recommended that strong central and primary

Land development banks should be established and the banks should re

orient their lending policies9.

The Committee on Co-Operative Credit, Under the chairmanship of V.L.

Mehtha Committee on co-operative credit was appointed to review the

adequacy of co-operative credit. This committee recommended for

strengthening land development banks10.

The All India Rural Credit Review Committee Report, Appointment of the all

India rural credit review committee is the another land mark in the history of

land development banking in India. The committee suggested that

feasibility and financial viability should be regarded as primary

considerations for giving investment credit to agriculture. Particularly loan

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operation period is also required to be fixed on the basis of repayment

capacity. Most of the present policies and procedures of the LDBs owe

their origin to this report11.

The Madhava Das Committee, The committee headed by Madhava Das on

co-operative land development Banks was constituted to review the

performance of the Banks. The committee studied various aspects of land

development banks and made the following observations in the matter of

credit recovery. In Andhra Pradesh in 1971-72 and 1972-73 the failure of

crops due to drought, pests and power shortage accounted for more than

one- half of the defaulters. Other reasons were willful default, misutilisation

of loan amounts and laxity in supervision. In the case of banks in M.P. the

major reason for over dues was willful default which accounted for 39% of

the defaulters. Other important causes were misutilisation of loan amount

and crop failure due to drought etc., In the case of the banks in Punjab,

failure on the part of the state electricity board to provide electric

connection for tube wells, Willful default, payment of loan amount in respect

on agricultural machinery and equipment to bogus or unreliable firms, The

Indo-Pak war of 1971 and failure of crops were among the major reasons

for default in respect of the loans. Other reasons included misutilisation of

loan amounts and over financing of influential parties. In the case of banks

in Rajasthan, willful default and misutilisation of loan amounts were the

major reasons for default, the former accounting for 38% and latter for26%

of the defaulters. Next comes the in fructuous investment as a factor

contributing to the default on the part of borrowers. Committee suggested

measures for a comprehensive structure to land development banks for

strengthening and improving the working system12.

Singh, In his article on Study of rural credit structure in Muzaffarpur district

Bihar, stated that the major share in total agricultural credit advanced by

organized credit institutions during the period 1972-75 was accounted by

LDB 50 percent, followed by co-operatives 22 percent, commercial banks

20 percent and Government 8 percent. Among the different sources of

credit, the money lenders finance predominated, accounting for about 90

percent of the borrowing per household13.

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Garg J.S. Singh G.N. And Azad M.D., came to the conclusion in their article

an Economics efficiency of long-term financing by land Development Bank

in U.P. that, there was steady and continuous progress of the banks in

respect of membership, share capital, working capital, loans advanced,

recovery position and net profit, there has been a marked shift in cropping

pattern of borrower‟s farms particularly in all the size groups as compared

to corresponding non-borrowers farms, the shift was in favors of adoption

of high yielding varieties and cash crops on large areas14.

NEED FOR CARD BANKS

Agricultural Credit is of Short, medium and long term. A loan made for

meeting Current expenses of Cultivation to facilitate production is Called short

term credit is repaid after the harvest. A loan provided for purpose of land

improvement, bullocks, piggery dairy etc., for a period of ranging one and half

year and five years is called medium term credit and is repaid out of the

income arise from the project. A loan for period of ranging five and ten years

provided for the purpose of making permanent improvement on land is called

long term credit. It is repaid out of the extra income generated by the

investment on land.

In India farmers need Short and long term credit to make their

agricultural operations successful. The Success of one type of Credit means

fuller utilization of loan and repayment of it hinges upon the other. In farm

mechanization with assured irrigation facility and making the small size of

holding into economic viable unit by intensifying the agricultural operations,

the long term credit claims distinction over short term credit. In other words

assets creation and permanent improvements in farm could be by use of long

term credit since it is affecting improvement on land it is called Development

credit or “investment credit.” In the early stages of the development of co-

operative credit movement the primary agricultural credit societies provided

short and long term credit. Catering long term credit by them caused to grief

and risks as their funds were of short term nature this led to realize that the

primary. Agricultural credit societies were not proper institutions for providing

long term credit. The provincial Banking Enquiry committees have come to

conclusion that the canon of mixing of short and long term credit is not sound

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for banking systems. The solution for channeling long term credit to the

farmers appeared to be the establishment of co-operative land mortgage

banks whose main aim would be promoting the economic interest of the

farmers by attracting long term loans and investing them in long term

advances against mortgage of land. Thus, the need arose for PCARD Banks

especially designed to cater long term credit needs of farmers. The Reserve

Bank of India in its preliminary note stated that, “The long term credit is more

important and if any effective steps are to be taken to make the farmers credit

worthy and this is the first problem which is to be tackled15.

IMPORTANCE OF THE STUDY

In a developing economy like India scarcity of financial resources is

admitted by one of the constraints for accelerating the pace of economic

growth. Hence an efficient and responsive banking system is of utmost

importance. The contribution of banks for economic development is

remarkable in terms of mobilization of deposits, expansion of branches and

advancement of credit etc., in rural as well as urban areas. In rural areas

about 10% of the population has surplus savings but majority rural people are

poor it is not possible by them to save first a certain amount of deposits and

then undertake investment in land or allied activities. Thus it would be more

appropriate first to help them with a loan and invest in their familiar sector so

as to enable them to raise their productivity and income. Anyway banks are

deploy credit mainly in productive field so that income of borrowers will

increase beyond subsistence level and contribute something more to the

savings in the rural areas. The additional income of rural households due to

bank loan investment may also improve the deposit potentiality in the rural

areas. Hence standard living of the rural masses increases and in turn it

leads to the growth of the economy.

SCOPE OF THE STUDY

Now-a-days agriculture plays a significant role in the Indian economy.

Therefor there is a wide scope to examine the long term agricultural credit to

beneficieries of the PCARD Banks. The study is restricted to Davanagere

District of the Karnataka which is economically backward area. The rural

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people are starving funds for their agricultural operations and development.

Hence the provision of agricultural credit is essential to augment the farmers

to adopt agricultural production, adopt new agricultural techniques and

develop the resourcefulness of farmers. This study tries to analyse how the

PCARD Banks provides credit to the beneficieries for the growth of agriculture

in Davanagere District.

STATEMENT OF PROBLEM

The primary co-operative Agricultural and Rural development banks

have been providing long term credit to farmers for Promoting their economic

interest and tries to minimize the gulf between the haves and have-nots. In

fact, they have become phenomena of agricultural development. Finance is

essential for farm activities in rural areas. It is the life blood for the farmers.

The PCARD Banks is functioning at block level to provide long term credit for

cultivation. The rural farmers highly depend on these banks due to the

problem of 1) resource constraints, 2) Heavy dependence on financial

institutions, 3) Lack of mechanization in agricultural operations. Hence the

PCARD Banks provides credit to farm and non farm activities in rural areas to

improve the agriculture. In this background the study has been taken up to

analyse the PCARD Banks contribution to rural economic activities to

increase the productivity in agriculture and the problems faced by the farmers

in the rural areas and also to recommend suitable strategies for improving the

socio economic conditions of the rural farmers.

OBJECTIVES

The objectives of the Study are:

1. To review the loans and advances provided by the KSCARD Bank for the

development of agriculture.

2. To study the significant role played by PCARD Banks in Karnataka.

3. To assess the long term credit provided by PCARD Banks to improve

agriculture in Davanagere District.

4. To identify the factors influencing beneficiaries to avail credit facilities of the

PCARD Banks.

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5. To analyse the factors affecting utilization of credit facilities by the

beneficieries.

6. To assess the impact of credit provided by the PCARD Banks to the

beneficieries.

7. To offer suggestions for improvement in usage of credit and repayment of

loans and advances to the PCARD Banks.

SAMPLING SCHEME

The sample respondents have been selected from the Davanagere district.

The following steps are adopted for sampling.

1. Total number of villages and number of villages covered by PCARD Banks

were identified.

2. Based on the above step, total number of members and number of regular

borrowers were classified.

3. For this study, a total of 370 respondents were drawn from Davanagere

district by taluk-wise and Hobalie-wise by adopting proportionate stratified

random sampling.

Table 1.1

TOTAL NO.OF VILLAGES AND NO.OF VILLAGES COVERED BY PCARD

BANKS

S. No. TALUK TOTAL NO.OF

VILLAGES

TOTAL NO. OF VILLAGES COVERED

BY PCARD BANKS

1 CHANNGIRI 249 205

2 DAVANAGERE 166 155

3 HARAPANAHALLI 180 150

4 HARIHAR 84 78

5 HONNALI 173 153

6 JAGALUR 171 141

TOTAL 1023 882

Source: PCARD Banks

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The total number of villages covered by the PCARD Banks is 86.22%.

In order to study the credit facilities provided by PCARD Banks, the

total number of members and regular borrowers were taken from the records

of PCARD Banks as follows:

Table 1.2

TOTAL NO. OF MEMBERS AND REGULAR BORROWERS OF

PCARD BANKS

S. No. TALUK TOTAL NO.OF

MEMBERS

TOTAL NO. OF REGULAR

BORROWERS

1 CHANNGIRI 7225 2532

2 DAVANAGERE 10832 1424

3 HARAPANAHALLI 6772 769

4 HARIHAR 6780 1173

5 HONNALI 8960 1628

6 JAGALUR 3958 884

TOAL 44527 8410

Source: PCARD Banks

Out of total number of members 18.89% are regular borrowers from the

bank on an average in the select district for this study.

Instead of obtaining information from each and every unit of the

universe, only a small representative part is studied and the conclusions are

drawn on that basis for the entire universe or whole population. Hence, this

research uses sampling method for collecting data. For this research

proportionate stratified random sampling is used for collecting the data.

In order to study the agricultural credit to the beneficiaries by the

primary co-operative agricultural and rural development bank in Davanagere

District, 370 sample respondents have been selected from the various taluks

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of respondents‟ population. The sample respondents are selected from six

taluks of Davangere district namely, Channagiri, Davanagere, Harapanahalli,

Harihara, Honnalli and Jagalur.

The sampling units are the respondents from the six taluks and each

taluks is treated as strata (Homogeneous sub groups or sub population). The

sample size for the study is calculated with the margin of error of 5% and 95%

confidence level and the sample size is calculated as 370 for the population

size of 8410. Further from each stratum the sub sample size is calculated

proportionately. After the editing of data, by eliminating the incomplete and

improperly answered questionnaire the sample size come down to 370.

Sub sample size selected proportionately = hn = hNN

n* , h = 1,2,3,4,5,6

N = Population size = 8410

Required Sample size for Group =

N

SS

SS

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,

Where SS = 2

2 )1(*

C

ppZ

,

Z = 1.96 for 95% confidence level

SS = 2

2

05.

)5.01(5.0*96.1=

0025.

)25.0*8416.3=

0025.

9604.0= 387

Hence the Required Sample size =n=

8410

13871

387=

0458.1

387= 370

Sub sample size = hh Nn

nn

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Table 1.3

SAMPLE SIZE

Taluk Sub Population (Nh) Sub sample size (nh)

Channagiri 2532 110

Davanagere 1424 65

Harapanahalli 769 34

Harihara 1173 51

Honnalli 1628 71

Jagalur 884 39

Total 8410 370

Source: Computed

FIELDWORK AND DATA COLLECTION

The researcher carried on the fieldwork during June2011 to July 2012

at different stages. First the lists of PCARD Banks were collected from

KSCARD Bank Davanagere district branch. In the second stage the list of

regular borrowers were collected from the PCARD Banks. In the last stage

using these lists the borrowers were selected. All the sample borrowers were

interviewed and details were collected from the records of the PCARD Banks,

through personal discussion, annual reports etc. In short, for this study,

primary and secondary data were collected, processed and the results were

arrived.

PERIOD OF STUDY

Data related to ten years from 2001-02 to 2010-11 have been collected

from PCARD Banks. These ten years happened to be the last full ten years

for which data were available at the time of data collection and reference

period is one and half years.

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AREA OF THE STUDY

The Study Confined to the Davanagere district PCARD Banks. The

Study Covers the long term agricultural Credit provided by the Banks to the

beneficiaries, for different agricultural activities. Similarly to assess the

repayers of loan and defaulters of agricultural credit.

LIMITATIONS OF THE STUDY

1. The study covers only the Davanagere district ,

2. The study has been made only the credit facilities to the beneficiaries of

PCARD Banks, not the performance of the bank and

3. The findings of the study applicable to the particular district only

TOOLS OF ANALYSIS

The study results were analyzed by using various statistical tools. The

data collected from the respondents were analyzed and presented in the form

of tables. Bar charts are used at various places as a statistical tool. The

results are compared and analyzed by using descriptive analysis and

inferential analysis for arriving results. The various tools used are Percentage

analysis, Non Parametric Friedman Test, Chi-square analysis, Average score

analysis and Discriminant function analysis.

REVIEW OF LITRATURE

A few studies in India have been done on PCARD Banks. Here it may

not be possible to review all the available studies and hence the review is

confined to the major works in the area that have a bearing on the present

study.

Most of the studies have revolved around the lending pattern and credit

recovery, reasons for non- repayment of loan amount and impact of loan.

PCARD BANKS IN FINANCIAL TROUBLE (THE HINDU, H.S. NARASIMHA

KUMAR, 15TH JULY 2012)16, says that 177 PCARD Banks in Karnataka

which have been providing LT loans to farmers are in poor financial shape.

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Except for four (or) five banks the NPAs of all other banks have crossed 40

percent which means that they are not eligible for refinance from NABARD.

PCARD BANKS RECORDS PROFIT, (THE HINDU, AUGUST 29, 2012)17

CHOKKA BASAVANAGOUNDA, CHAIRMAN of the KSCARD bank

addressing the media persons on the eve of the Siruguppa, PCARD bank‟s

annual general meeting, the bank had made profit for 47 years in succession.

This is number one in loan recovery and earned a profit of `1.12 crores during

2011-12.

H.S. MANJUNATHA (2010)18, studied the “Performance of PCARD Banks -A

case study of Davanagere District” and came to the conclusion that in study

area PCARD Banks are the only specialized long term agricultural financing

agency, so in the present context of agriculture and rural development,

suitable policy and orientation is needed by the PCARD Banks. The PCARD

Banks have to realize the constructive role in the development of agriculture

and rural, Farmers should learn to make the best use of the banking facilities

and the periodical monitoring of operating performance and financial position

of the banks would go a long way in improving their working results.

PAZHANI AND ISOBELLA (2008)19, have observed in their study that since

1992 NPAs have emerged as one of the major challenges facing the PCARD

Banks. Increasing NPAs affect the profitability of the banks and lead to the

accumulation of losses in the succeeding years. To overcome the problem of

NPAs, the authors have suggested that the state Government introduce some

incentive schemes for prompt recovery, extend the period of repayment and

resort to legal action.

PRATIBHA DEVISHINGH PATIL (2008)20, Hon‟ble President of India in her

inaugural address in 15th Congress of Indian Co-operative Union of India

(NCUI) from 21-22 January 2008 “Theme was reforms Initiative- vision for

autonomous and competitive co- operatives” called upon the members to

rejuvenate the co- operative movement in the country laying emphasis on the

need to have a dynamic leadership, committed professionals and well trained

staff, the president highlighted that credibility of this fledging institution needed

to be restored. In fast globalizing world, the challenge for the co- operatives is

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to have a strategy to adapt to new requirements. Co-operative banks would

need to sharpen their core competency and devise market driven business

strategies appropriate to their circumstances”

C.MAHADEVA MURTHY AND K.P.VEENA (2008)21, in their study on impact

of agricultural credit through PCARD Banks. Pointed out that, the economic

position of the borrowers who took loan for minor irrigation from PCARD

Banks, of Mysore and Chamarajnagar District is increased and loans

borrowed against land development and improvements were misutilized and

suggested bank authority to take steps to avoid misutilization of loans by the

borrowers.

THE VAIDYANATHAN TASK FORCE- II REPORT (2006)22, Vidyanathan

Task force-II was appointed mainly to recommend on implementable action

plan for reviving co-operative Agriculture and Rural Development Banks. The

task force in its report, recommended, the revival package for long term credit

structure to cover accumulated losses, technical assistance etc., and

institutional restructuring, legal and policy reforms to convert them into

resource based institutions capable of meeting the diverse needs for financial

services in rural sector.

In addition to review of committees report, the researcher has made an

attempt to review research related articles found in journals, magazines and

thesis of few individual studies in appraising the overall performance of the

agricultural credit co-operative Banks.

JAYAPRAKASH (2005)23, has done a study on “An Economic analysis of

primary co- operative agricultural and rural development banks in

Karnataka.In his study, analyzed relating to operational management, lending

and recovery procedure and human resource management in the PCARD

Banks in Karnataka. The researcher pointed out that, no attempts were made

to reduce the operational cost, lack of computerization, there was no

professionalism and most of all PCARD Banks were not following appropriate

norms for lending and recovery of loans. The author suggested that, policy

makers should develop a clear vision about the future role of co-operative

sector in the globalization regime; Government should spend more money for

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improving the human resources by organizing appropriate training

programme.

SAMVEL LOPOYETUM (2004)24, in his study observed that, the co-operative

banking sector could not take the full advantage of new economic policy

reforms because they were not planned properly. There were several

problems which already existed in the sector and thus the reforms

unquestionably opened up new challenges like threats, prospects,

opportunities and potentialities. The author has suggested the diversified

lending and recovery operations, pre-sanction / post sanction and integrated

recovery strategies, recycling of fund mix and many more efficient and

effective central banking strategies. The author strongly believes in many

other solutions which would bring prospects to co- operative banking in an

efficient manner.

SUBRAHMANYAM (2001)25, have observed that co-operative system is

crucial channel of credit for rural and urban areas while making analysis of the

union budget he emphasized the importance of co – operative sector. The

author felt the urgency to maximize the union budget proposal and ensure

special specific and appropriate measure for co- operatives become dynamic,

vibrant, viable, strong and more democratic.

VERENDRA KUMAR GUPTA (2000)26, in his article on problem of long-term

credit to the agricultural sector and the lending policies followed by the land

development banks in economically backward region like Badaum District. He

pointed out that state development bank in India does not follow any special

norms for the economically backward regions of the states. He made two

important suggestions issue of Pass Book to the farmers by the state and

integration of short-term and long-term co- operative banks.

SHARDA AND POLICE PATIL (2000)27, emphasized in their article on “The

co-operatives development in Karnataka” that the need for co-operatives to be

aloof from the influence of vested interest groups, free from politics, abundant

state financial help and must encourage professionals into the co-operative

sector tracing the co- operative development in Karnataka. The author viewed

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optimistically the above enumerated things in the co- operatives in Dharwad

district in order to achieve success.

KUMAD SHARMA (1997)28, Researcher in her thesis submitted to Karnataka

University Dharwad, on “Co-operative v/s commercial bank Finance of

agriculture -A case study of North Canara District”. Pointed out that, borrowing

of long-term loan from commercial banks is profitable as compared to

borrowing from PCARD Banks and features of a good credit system are

sanctioning the loan adequately, quickly at a cheap rate and involving good

human factor. She suggested that, loan waiving schemes should not be

announced which adversely affects the lending operation of financial

agencies.

DALVIR SINGH AND S.K. GOYAL (1996)29, in his study on the role of land

development banks in the infrastructure creation in Hariyana agriculture, has

highlighted that the loan granted for debt redemption and purchase of land is

declined to bottom level over the years. On the other hand the advances to

purchase of tractors, installation of tube wells and other land improvement

programmers registered a substantial growth with the passage of time.

M.B. PATEL (1995)30, in his article on problems and performance of PCARD

Banks in Karnataka during 1976-77 to 1990-91 has pointed out the following

aspects ; a) The membership, share capital and working capital have

increased but the percentage of borrowing members has declined, b) The

overdues are high and have increased steadily, c) The banks suffer from high

cost of management and heavy accumulated losses, d) The banks have

become sick due to resources constraints, poor business,poor recovery and

heavy overdues. This is attributed to indifferent attitude of the management

towards banks conditions.

G. VEERAKUMARAN (1995)31, has studied credit utilization in LDBs in Tamil

Nadu and came to the conclusion that there was a certain amount of

misutilization of loan in minor irrigation, diversified activities and farm

mechanization. The study, has noticed heavy overdues at primary level and

state level. LDBs are efficient in the matter of lending procedure. The minor

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irrigation has helped in raising two crops and increasing agricultural

production and also farm income.

REDDY BABU D.R. CHENGAPPA D.G. AND LALITH ACHOTH (1994)32,

have analyzed the performance of PCARD Banks in the districts of Karnataka

and ranked them by applying principal component analysis on selected

performance indicators. Further, using discriminate analysis the factors

contributing to the disparity between the districts where the PCARD Banks

were performing well from those where they were not, was quantified. The

discriminate functions revealed the growth in working capital (49.7 percent)

deposits (32.85 percent) and overdues (26.50 percent) distinguished high

performing banks from low performing Banks.

BHAGA CHANDRA JAIN (1994)33, has done a study on “Role of District co-

operative land development bank in Rural Area of Raipur District of M.P.

during 1985-86 and 1994-95”. The study reveals that the membership of small

and big farmers have increased and the bank has played an important role in

providing loan to productive activities. Particularly irrigation the credit recovery

in the district was quite satisfactory in 10 years and the bank is working on

sound lines. The analysis reveals that out of 40 respondents, 39 reported non-

availability of long term loan at proper time and it ranked first as a major

problem, followed by visit to the bank several times, non co-operation of

block, other bank and revenue officials and court permission for mortgaging of

land in favour of district co-operatives land development Bank.

DR. P. BHUVANENDRAN AND SHRI SURYA PRAKASH TRIPATI (1994)34,

have conducted empirical study on recovery trend of land development banks

in the tribal zone of M.P. The data shows that 44.67% of the sample

cultivators were found as defaulters. 54.48% of the defaulters gave crop

failure due to natural calamities, as the main reason for delay in repayment,

followed by low income (25.37%) and wilful default (20.15%). Another finding

of the study was that, there is a positive relation between size of holdings and

delay in repayment. In all the five districts of west zone a high degree of

political pressure influenced operation of land development banks and it

variably influenced the cultivations too to become defaulters. The on-going

19

trend of write-off the old loan by the co- operative societies also given a

positive inspiration to the borrowers to become defaulters.

MRUTHYNJAYA AND SINGH (1992)35, In their article on “ Credit utilization

and overdues on marginal and small farmers in Aligarh district of U.P. stated

that nearly 70 percent of crop loan was diverted for crop production and rest

was diverted for other purposes. And as regards to the difference in utilization

between small and marginal farmers, it was seen that the extent of diversion

was observed to be slightly higher in marginal farmers as compared to that of

small farmers.

S.B. PATIL (1992)36, Studied “ The impact of agricultural long term loans on

the socio- economic life of the farmers in Aurangabad taluk of Aurangabad

District” and come to the conclusion that the irrigation development through

the investment of long term credit had an impact on socio- economic

conditions of the farmers in Aurangabad taluk.

K.M. GEORAGE AND SATHEES BABU (1992)37, have studied lending

pattern of the quilon Co-operative Agricultural Development Bank in kerala

state and came the conclusion that despite a high share of normal lending

and law share of schematic lending, large coverage to small farmers and not

to impressive record in recovery, the bank could become a viable unit and

earn profit. The study therefore says that the profitability of the bank could be

further improved if credit supervision is made strict and lending pattern is

streamlined as per the directives of NABARD.

KULWANT AND VARMA (1991)38, identified that no significant relationship

existed between different family size of farmers and credit utilization for

unproductive purposes. Further misutilization of credit was found to be

significantly more among the formers who borrowed low amount of credit.

Social and religious ceremonies were found to be the most unproductive

purposes among all categories of farmers borrowing different amount of

credit.

KITTUR A (1990)39, was of the opinion in his article on “ Diversion of

Agricultural loans of Formal Financial Institutions” that marginal and small

farmers tended to use diverted funds to meet the basic necessities of life,

20

where as large and well-to-do farmers used the funds towards useful and

conspicuous consumption. Whenever the loans were made in cash, the

chances of misuse were higher as compared to loan made in kind.

THE AGRICULTURAL CREDIT REVIEW COMMITTEE REPORT (1989)40,

the RBI constituted this committee under chairmanship of A.M.Khusro to

examin the long- term co- operative credit structure. The committee observed

that land development banks experienced a declining trend in the total

lending, increasing overdues, external and government interference in its

working absence of professional management etc., are some of the major

problems affecting the long- term co-operatives credit structure and made

strong recommendations to take many innovative steps in rebuilding rural

credit institutions for rural development.

PRIHAR AND SINGH’S (1988)41, In their article on “A Study into Institutional

Finance for the Agricultural sector in Punjab” come to the conclusion that

borrowers continue to depend on the non-institutional credit agencies such as

commission agents. A large proportion of the medium and large size farmers

borrowers obtain long term loans from two or more than two agencies. There

is a positive correlation between the size and the number of famer borrowers.

LAL AND LAVANIA (1986)42, have found that 78.18 percent of the total co-

operative credit was utilized for productive and rest 21.82 percent for

unproductive purposes. The credit utilization on unproductive purposes

decreased with the increase in farm size which indicated that large cultivators

utilized the highest percentage of credit for productive purposes.

CHIRANJEEVULU P. AND SURYANARAYANA P (1985)43, In the article on

“A Study of Utilization of Farm Credit” revealed that out of the total credit

supplied by different agencies only 40.91 percent was utilized for productive

purposes and half of this amount was utilized for purchasing farm implements

including draught cattle. Diversion of credit was about 59.09 percent mainly

used to clear old debts (24.74 percent) and buying lands (22.37 percent). It

also indicated that more than 50 percent of the credit was utilized for

productive purposes by the small and medium farmers, whereas 29.46

percent by big farmers.

21

THE HIGH LEVEL WORKING GROUP REPORT (1985)44, The High level

working group was appointed by NABARD. This committee made certain

recommendations such as co-ordinations and integration of short-term and

long- term credit structures, simplification of procedure for loaning and for

mobilization of resources, restoration of democratic management, lending to

the need based schemes and LDBs to assume full banking responsibilities.

FREDERICK NICHOLSON’S REPORT (1982)45, In 1892 the Madras

Government deputed Mr. Fredirck A. Nicholson on special duty to study the

role of land banks and agricultural co – operatives in Europe and to suggest

ways and means by which a similar movement could be popularized in India.

He in his report highlighted defects associated with Non - Institutional

sources, interest rates are exorbitant, often the small farmers are cheated and

their lands are appropriated. The landless laborers are forced to become

bonded slaves. He advocated the setting up of co-operative societies on

Raiffeisian lines in different parts of the country to develop thrift, prudence and

self-reliance in the peasantry.

JAIN AND MISHRA (1981)46, in his study on the disbursement, impact and

cost benefit analysis of loan provided by the co-operative land development

banks in Madyapradesh came to the conclusion that Bank had financed

mainly for irrigation purpose followed by farm machinery. The farmers were

not able to repay the loan in the prescribed time limit due to many natural and

socio- economic factors.

THE COMMITTEE TO REVIEW ARRANGEMENTS FOR INSTITUTIONAL

CREDIT FOR AGRICULTURE AND RURAL DEVELOPMENT

(CRAFICARD) (1981)47, Reserve bank of India constituted a high level

committee under the chairmanship of B. Shivaraman to review the

arrangements of institutional credit for agricultural and rural development. The

Committee made numbering recommendations for channeling long-term

credit to land development schemes.

22

SCHEME OF CHAPTERISATION

This research study has been classified into six chapters-

The first chapter covers introduction, need to borrow long term agricultural

credit, sources of agricultural credit, need for CARD Banks, importance of the

study, scope of the study, statement of problem, objectives of the study, study

period, limitations of the study, sampling scheme, fieldwork and data

collection, methodology and tools of analysis and scheme of chapterisation.

The second chapter covers the role of KSCARD Bank in Karnataka.

The third chapter covers the growth of PCARD Banks in Karnataka and

profile of the PCARD Banks in Davanagere District.

The forth chapter analyses the demographic profile of beneficiaries of

PCARD Banks in Davanagere District.

The fifth chapter analyses the factor affecting the utilization of credit by the

beneficiaries.

The sixth chapter presents with summary of findings, suggestions and

conclusion of this research study.