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Chapter VI
PERCEPTIONS AND PROBLEMS OF BANKERS – AN ANALYSIS
This chapter tries to analyse the perceptions and problems of bank officials
regarding various aspects of the agricultural lending. This chapter is presented in
two sections and the first section describes the perceptions and the problems
associated with the lending are analysed in the second section. The perceptions of
the bank officials regarding the criteria followed for the identification of loan
borrowers and for determination of loan amount are measured and ranked for
identifying the prominent factors considered for the identification of borrowers
and determination of loan amount. The views of the officials regarding pre and
post field visit, value added services, time lag in sanction and disbursement of
loan, DRI loans to agriculture, proportion of crop loan and term loan, achievement
in agricultural lending, defaults and NPA, mis-utilization of loan amount, etc. are
considered for evaluating the perceptions.
Selection of Bank Officials The bank officials identified for the study include officers of both public
and private sector banks. The number of officers from public and private sector
has been decided on the basis of number of bank branches in the sample districts
i.e. Thiruvananthapuram from Southern Region, Kottayam from Central Region
and Malappuram from Northern Region. Using the random sampling technique, 10
per cent of the total number of bank branches (as in March 2005) were identified
as sample population and accordingly 36 bank branches from South (27 Public and
9 Private sector), 27 from Central region (17 Public and 10 Private sector) and 24
from Northern region (18 Public and 6 Private sector) were identified. The
217
following table shows the details of branches selected from each sample district of
the three regions.
Table 6.1.1: Sample Design
Region Public Sector Private Sector Total
Total No. of
Branches
Sample Branches
Total No. of
Branches
Sample Branches
Total Bank
Branches
No. of Sample Branches
South (Thiruvanan-
thapuram)
268 (74)
27 (75)
92 (26)
9 (25)
360 (100)
36 (100)
Central (Kottayam)
175 (63)
17 (63)
104 (37)
10 (37)
279 (100)
27 (100)
North (Malapuram)
178 (77)
18 (75)
54 (23)
6 (25)
232 (100)
24 (100)
Total 621 (71)
62 (71)
250 (29)
25 (29)
871 (100)
87 (100)
Source: Primary data The proportion of public and private sector bank branches in the
Thiruvananthapuram district comes to 268 (74%) and 92 (26%), totalling 360
commercial banks. The total number of bank branches in the Kottayam district
comes to 279 of which 175 (63%) are in public sector and 104 (37%) in private
sector. The proportion of public and private sector branches in the Malapuram
district comes to 178 (77%) and 54 (23%) respectively totalling 232. Therefore,
the number of bank branches in the sample population constitutes 27 public and 9
private sector bank branches from the Thiruvananthapuram district and 17 public
and 10 private sectors from Kottayam district. The sample branches from
Malapuram district come to 18 public and 6 private sector banks. So the total
number of public sector bank branches comes to 62 and 25 from private sector,
totalling 87 commercial bank branches. Region-wise number of bank branches
218
constitutes 36 from the Southern region (Thiruvananthapuram), 27 from Central
(Kottayam) and 24 from the Northern region (Malapuram).
Section- I Selection of Eligible Borrowers The criteria normally followed by the banks for the identification of
beneficiaries are: credibility of the borrower, feasibility and viability of the
project, character and integrity of the borrower, the tangible security offered by the
borrowers as security, recommendation of government or governmental agencies,
etc. The respondents are required to rank the criteria adopted for the selection of
beneficiaries from 1 to 5 and the scores are assigned as 5, 4, 3, 2 and 1
respectively for first, second, third, fourth and fifth ranks. The scores are
measured, totalled and averaged for comparison and overall ranking of preferences
is presented in table 6.1.2.
Table 6.1.2: Criteria for Selection of Eligible Borrowers- Sector
Source: Primary data The criteria adopted for the selection of eligible borrowers reveals that the
credibility of the borrower is ranked first in both the public and private sectors.
Criteria Public Sector Private Sector
Mean Score Rank Mean
Score Rank
Credibility 4.53 1 4.2 1
Feasibility and Viability of the Project 3.31 2 3.96 2
Tangible Security Offered 3.00 3 3.04 3
Character and Integrity of the Borrower 2.66 4 2.8 4
On Recommendations 1.02 5 1.00 5
219
The order of ranks is the same in both sectors and they are: feasibility and viability
of the project, tangible security, character and integrity of the borrower and
recommendation respectively. The expected mean score comes to three and
criteria having a mean score of more than three can be considered as one having
much influence in the selection of borrowers. Accordingly credibility, feasibility
and viability of the project and security offered are the most influencing criteria
for the selection of borrowers in both sectors. It is noted that there is no difference
in the criteria adopted for the selection of beneficiaries in both sectors.
The region-wise order of criteria for the identification of the beneficiaries is
shown in table 6.1.3.
Table 6.1.3: Criteria for Selection of Eligible Borrowers – Region
Source: Primary data The region-wise order of criteria for the selection of eligible borrowers
shows that there is regional difference. The region-wise analysis reveals that
credibility and feasibility & viability of the project are the major criteria for
identification of borrowers in southern region, having a mean score of more than
Criteria South Central North
Mean Score Rank Mean
Score Rank Mean Score Rank
Credibility 4.6 1 4.59 1 4.00 1
Feasibility and Viability of the Project 3.36 2 3.3 2 3.92 2
Tangible Security Offered 2.92 3 3.1 3 3.1 3
Character and Integrity of the Borrower 2.28 4 3.00 4 3.00 4
On Recommendations 1.00 5 1.04 5 1.00 5
220
three. In central and northern regions credibility, feasibility & viability of the
project, tangible security offered and character and integrity of the borrower are
the determining factors, having an average mean score of more than three.
Recommendation of the Government or Government agencies is the least
influencing factor in the selection process of eligible borrowers.
Determination of Loan Amount The criteria normally followed by the banks for determination of loan
amount are: the guidelines followed by the bank, financial outlay of the project,
value of security offered, repaying capacity of the borrowers and feasibility of the
project. The respondents are required to rank the criteria adopted for the selection
of beneficiaries from 1 to 5 and the scores are assigned as 5, 4, 3, 2 and 1
respectively for first, second, third, fourth and fifth ranks. The scores are
measured, totalled and averaged for comparison and overall ranking of preferences
is shown in table 6.1.4.
Table 6.1.4: Criteria for Determination of Loan Amount – Sector
Source: Primary data
Criteria Public Sector Private Sector
Mean Score Rank Mean
Score Rank
Guidelines Followed by the Bank 4.87 1 4.88 1
Financial Outlay of Project 2.65 3 2.84 2
Value of Security Offered 2.39 4 2.4 4
Repaying Capacity 3.18 2 2.8 3
Feasibility of the Project 2.1 5 2.24 5
221
The main considerations for determination of loan amount are ranked in
their order of preference in table 6.1.4. The ranking reveals that guidelines
followed by the bank are the first criterion, which determines the loan amount in
both sectors, having a mean score of 4.87 and 4.88, much above the expected
mean score of three. The other influencing factors in the public sector are:
repaying capacity, financial outlay of the project, value of security offered and
feasibility of the project. In the public sector, it is noted that all the factors except
the repaying capacity of the borrower have a mean score of less than three
showing the insignificant influence on determining the loan amount. The order of
preferences of the private sector is: financial outlay of the project, repaying
capacity of the borrower, value of security offered and feasibility of the project. It
is evident from the analysis that in the private sector, all the factors except
guidelines followed by the bank have a mean score of less than three, showing the
insignificant influence on determining loan amount.
The region-wise mean score and rank of different criteria adopted for the
determination of loan amount are given in table 6.1.5.
Table 6.1.5: Criteria for Determination of Loan Amount - Region
Source: Primary data
Criteria South Central North
Mean Score Rank Mean
Score Rank Mean Score Rank
As per Guidelines of the Bank 4.94 1 4.85 1 4.79 1
Total Financial Outlay of Project 2.14 5 3.15 2 2.25 5
Value of Security Offered 2.3 4 2.26 4 2.67 4
Repaying Capacity of the Borrower 3.36 2 2.78 3 2.96 2
Feasibility of the Project 2.39 3 1.96 5 2.75 3
222
The region-wise mean score for different factors influencing the
determination of the loan amount reveals that the guidelines followed by the banks
are the most important criterion in all regions, having a very high mean score of
4.94, 4.85 and 4.79 respectively. The region-wise analysis reveals some regional
difference in the factors that influence the determination of loan amount. Repaying
capacity is ranked second in southern and northern region; whereas it is total
financial outlay in central region. All other factors, which have influence on the
determination of the loan amount has a mean score of less than three and shows an
insignificant influence on determination of loan amount.
Pre-Sanction Field Visit Pre-sanction field visit by bank officials is essential for evaluating financial
viability of the project and credit worthiness of the borrowers. So normally as a
pre requirement, the bank officials make a pre-sanction field visit and the
frequency of such visits is given in table 6.1.6
Table 6.1.6: Pre-Sanction Field Visit –Sector
Source: Primary data Significant Difference (Sig. value 0.039)
Pre-Sanction Field Visit
Public Sector Private Sector Total
No. % No. % No. %
Always 41 66 22 88 63 72
Frequently 19 31 2 8 21 24
Occasionally 2 3 1 4 3 4
Total 62 100 25 100 87 100
223
Of the total respondents, 72 per cent always make pre-sanction field visit
for sanctioning the loan proposals. 24 per cent of the officials make frequent pre
sanction field visit and four per cent make occasional field visit. Therefore, it is
clear that 96 per cent of the officials conducted pre sanction field visit always or
frequently. The sector-wise analysis reveals that more number of private sector
officials (88%) always make pre-sanction field visits than the public sector (66%).
It is clear that there is significant sector-wise variation in pre-sanction field visits
in both sectors. The Chi square test also reveals the significant statistical sector-
wise difference (at 5 per cent level) in the opinion of the respondent’s with regard
to the pre-sanction field visit.
The region-wise frequency of pre-sanction field visit is given in table 6.1.7.
Table 6.1.7: Pre-Sanction Field Visit – Region
Source: Primary data The region-wise pre-sanction field visit by the bank officials reveals that
bank officials of the southern region makes more pre-sanction field visits (78%)
than the central (70%) and northern region (67%). However such difference
among the banks from different regions appeared to be marginal only.
Pre-Sanction Field Visit
South Central North Total
No. % No. % No. % No. %
Always 28 78 19 70 16 67 63 72
Frequently 7 19 7 26 7 29 21 24
Occasionally 1 3 1 4 1 4 3 4
Total 36 100 27 100 24 100 87 100
224
Post- Sanction Field Visits Post-sanction field visits are made by the bank officials in order to assess
the effectiveness in the utilization of the loan amount and to ensure timely
repayment of the loan. The frequency of post-sanction field visit by the bank
officials is given in table 6.1.8.
Table 6.1.8: Post- Sanction Field Visits- Sector
Source: Primary data Of the total, 25 per cent of the officials did not make any post sanction field
visits and 40 per cent made annual visits. Nine per cent of the bank officials
claimed that they made quarterly post-loan field visit. The sector- wise analysis
reveals that 36 per cent of private sector and 34 per cent of public sector officials
make quarterly or half yearly post-loan visits. The post-sanction field visits reveal
the poor monitoring and supervision of agricultural loans.
The region-wise post-Sanction field visits conducted by the bank officials is
shown in table 6.1.9
Post- Sanction Field Visits
Public Sector Private Sector Total
No. % No. % No. %
Quarterly 3 5 5 20 8 9
Half Yearly 18 29 4 16 22 25
Yearly 25 40 10 40 35 41
No Visit 16 26 6 24 22 25
Total 62 100 25 100 87 100
225
Table 6.1.9: Post- Sanction Field Visits – Region
Source: Primary data
The region- wise analysis reveals that more (50%) officials of the southern
region made yearly post-sanction field visit than the central (33%) and northern
regions (34%). 20 per cent of the southern and 29 per cent each of the central and
northern regions did not make any post-sanction field visits. 22 per cent and 30
per cent carry out half yearly post-sanction field visits in the southern and central
region whereas it is 25 per cent in the Northern region.
Value Added Services in Agricultural loans The value added services provided by banks to borrowers include:-
a. Technical services
b. Arrange for marketing the agricultural products.
c. Help in acquisition of assets
d. Advice for minimization of cost of loan
e. Advice on technology changes/ market situations, etc.
The table 6.1.10 shows the sector-wise details of value added services
provided by the banks to the borrowers.
Post- Sanction Field Visits
South Central North Total
No. % No. % No. % No. %
Quarterly 3 8 2 8 3 12 8 9
Half Yearly 8 22 8 30 6 25 22 25
Yearly 18 50 9 33 8 34 35 41
No Visit 7 20 8 29 7 29 22 25
Total 36 100 27 100 24 100 87 100
226
Table 6.1.10: Value Added Services Provided by Banks- Sector
Source: Primary data Significant Difference (Sig. value 0.004) Of the total, 48 per cent of the banks did not provide any value added
services to the loan beneficiaries. 38 per cent provide advice for minimization of
the cost of loan. 10 per cent each of the bank officials provide some technical
services and also helped in the acquisition of agricultural assets. It is clear that
only two per cent of the banks provide marketing assistance to the borrowers,
which is one of the main constraints faced by most of the farmers. The sector-wise
analysis reveals that more private sector banks provide value added services to the
borrowers. 20 per cent each of the private sector provide technical services and
help in acquisition of assets, whereas it is six per cent each in the public sector.
The variation in opinion about value added services is corroborated with the help
of Chi square test, which indicates that sector-wise difference is statistically
significant at 1 per cent level.
Value Added Services
Public Sector
Private Sector Total
No. % No. % No. %
Technical Service 4 6 5 20 9 10
Arrange for Marketing 2 3 - - 2 2
Help in Acquisition of Assets 4 6 5 20 9 10
Advice for Minimization of Cost of Loan 20 32 13 52 33 38
Advice on Technology Change /Market etc. 2 3 3 12 5 6
No Additional Services 36 58 6 24 42 48
227
The region-wise analysis of the value added services provided by banks is
shown in table 6.1.11.
Table 6.1.11: Value Added Services Provided by Banks – Region
Source: Primary data
Region-wise analysis of value added services provided by the banks reveals
that more technical services are provided in the northern region. Majority banks of
the central and northern region did not provide any additional services to the
borrowers.
Time Lag in Sanctioning Loan Amount Time lag in sanction of loan amount means the time taken by the banks for
processing the application, i.e. the difference between the date of application and
date of sanctioning of loan amount. The time lag in sanctioning the loan is
analyzed in two ways:
Value Added Services South Central North Total
No. % No. % No. % No. %
Technical Services 3 8 - - 6 25 9 10
Arrange for Marketing - - 1 4 1 4 2 2
Helps in Acquisition of Assets 5 14 1 4 3 13 9 10
Advice for Minimization of Cost of
Loan 14 39 10 37 9 38 33 38
Advice on Technology Charge /Market etc. - - 1 4 4 17 5 6
No Additional Services 14 39 16 59 12 50 42 48
228
a) Time lag in processing the loan application which can be sanctioned at the
branch level and
b) Those which require approval of higher authorities.
Time Lag in Sanction - Within the Power of Branch Manager
Based on the quantum of loan amount, loan applications are sanctioned
either at the branch level or with the approval of the higher authorities. The sector-
wise time lag in sanctioning loan at the branch level is depicted in table 6.1.12.
Table 6.1.12: Time Lag in Sanction - within the Power of Manager- Sector
Source: Primary data
Significant Difference (Sig. value 0.000)
Of the total, the majority (67%) of bank officials state that they sanctioned
the loan application within 4-7 days. 23 per cent of the officials claim that they
sanction the loan application within 3 days. 10 per cent have the opinion that they
need more than 7 days for sanctioning the loan amount. The sector-wise analysis
reveals that the majority (56%) of private sector banks sanctioned the loan within
3 days, whereas it is 10 per cent in the public sector. There is more delay in the
public sector because of ‘public’ character and cumbersome official formalities
Time Lag Public Sector Private Sector Total
No. % No. % No. %
Within 3 Days 6 10 14 56 20 23
4 -7 Days 49 79 9 36 58 67
Above 7 Days 7 11 2 8 9 10
Total 62 100 25 100 87 100
229
fixed by regulatory agencies. The variation in opinion about time lag in
sanctioning the loan is corroborated with the help of Chi square test which
indicates that sector-wise difference is statistically significant at 1 per cent level.
The region-wise analysis shows that the banks in southern region take
comparatively less time than the other regions in sanctioning the loan. It is noted
that the time lag is high in the northern region, even though the difference is not
much.
The region- wise time lag in sanctioning the loan is shown in table 6.1.13.
Table 6.1.13: Time Lag in Sanctioning Loan- Within the Power of Manager- Region
Time Lag South Central North Total
No. % No. % No. % No. %
Within 3 Days 7 19 10 37 3 12.5 20 23
4 -7 Days 27 75 16 59 15 62.5 58 67
Above 7 Days 2 6 1 4 6 25 9 10
Total 36 100 27 100 24 100 87 100
Source: Primary data
Time Lag in Sanctioning Loan Application- Exceeding the Power of Branch
Manager
Based on the quantum of loan amount, various loan applications require the
approval of the higher authorities. In such cases, the time required to sanction the
loan is comparatively more. The sector-wise analysis of time lag for sanctioning
loan which requires the approval of higher authorities is given in table 6.1.14.
230
Table 6.1.14: Time Lag in Sanctioning Loan- Exceeding the Power of Branch Manager- Sector
Source: Primary data
Majority (75%) of the respondents sanction the loan within a period of one
to three weeks and seven per cent within one week. 18 per cent took more than
three weeks for sanctioning the loan. The sector-wise analysis discloses that the
majority (60%) of private sector banks take less than two weeks time to sanction
the loan whereas it is 34 per cent in the public sector. It is noted that public sector
takes more time to sanction the loan which requires the approval of higher
authorities.
The region-wise time lag in the sanctioning of loan that exceeds the power
of manager is shown in table 6.1.15.
Time Lag Public Sector Private Sector Total
No. % No. % No. %
< 1 Week 1 2 5 20 6 7
1-2 Week 20 32 10 40 30 35
2 -3 Week 29 47 6 24 35 40
3 -4 Week 10 16 4 16 14 16
> 4 Week 2 3 - - 2 2
Total 62 100 25 100 87 100
231
Table 6.1.15: Time Lag in Sanctioning Loan- Exceeding the Power of Manager –Region
Time Lag South Central North Total
No. % No. % No. % No. %
< 1 Week 1 3 4 15 1 4 6 7
1- 2 Weeks 14 39 9 33 7 29 30 35
2 -3 Week 16 44 12 45 7 29 35 40
3 -4 Week 5 14 2 7 7 29 14 16
> 4 Weeks - - - - 2 9 2 2
Total 36 100 27 100 24 100 87 100
Source: Primary data
The region- wise analysis reveals that more officials of the central region
(48%) sanctioned the loan within two weeks whereas it is 42 per cent and 33 per
cent in the southern and northern regions. It is observed that the northern region
consumes more time than the other regions.
Time Lag in Disbursement of Loan Amount Sanction and actual disbursement of the loan amount are the two distinct
stages in the lending process. Normally the banks take some added time to the
actual disbursement of the amount after sanctioning the loan. The time lag in the
disbursement loan is analysed sector- wise in table 6.1.16.
232
Table 6.1.16: Time Lag in Disbursement - Within the Power of Manager- Sector
Source: Primary data
Significant Difference (Sig. value 0.016)
The majority (53%) of respondents disburse the loan amount within two
days of sanction. 45 per cent disburse it within a period of 3-5 days. The sector-
wise analysis reveals that the private sector is more prompt in disbursement of
loan amount than the public sector. The variation in opinion about time lag in
disbursement of loan is corroborated with the help of Chi square test which
indicates that sector-wise difference is statistically significant at 5 per cent level.
The region-wise time lag in disbursement of the loan amount, which can be
sanctioned within the power of branch manager, is shown in table 6.1.17.
Time Lag
Public Sector Private Sector Total
No. % No. % No. %
Within 2 Days 27 44 19 76 46 53
3 -5 Days 33 53 6 24 39 45
> 5 Days 2 3 - - 2 2
Total 62 100 25 100 87 100
233
Table 6.1.17: Time Lag in Disbursement– Within the Power of Manager- Region
Time Lag South Central North Total
No. % No. % No. % No. %
Within 2 Days 20 55 15 55 11 46 46 53
3 -5 Days 15 42 11 41 13 54 39 45
> 5 Days 1 3 1 4 - - 2 2
Total 36 100 27 100 24 100 87 100
Source: Primary data
The region-wise analysis shows that the majority respondents of the south
and central region (55%) disbursed the loan amount within two days, whereas it is
46 per cent in the northern region. More respondents of the northern region took 3
- 5 days for disbursing the loan amount.
Disbursement of Loan Amount- Exceeding the Power of Manager The sector-wise time lag in disbursement of loan amount exceeding the
power of branch manager shows (Table 6.1.18) that the majority of (51%) banks
disbursed the loan amount within three days and 37 per cent in 4- 6 days. The
sector-wise analysis shows that the private sector is more punctual in disbursement
of loan amounts than the public sector.
234
Table 6.1.18: Time Lag in Disbursement - Exceeding the Power of Manager-Sector
Source: Primary data
The region-wise time lag in disbursement of loan amount which exceeds
the power of branch manager is given in table 6.1.19.
Table 6.1.19: Time Lag in Disbursement – Exceeding the Power of Manager- Region
Source: Primary data
The majority of branch managers of the south and central region disbursed
the loan amount within three days of sanction, whereas it is 46 per cent in north. It
Time Lag Public Sector Private Sector Total
No. % No. % No. %
Within 3 Days 28 45 16 64 44 51
4 -6 Days 31 50 6 24 37 42
Above 6 Days 3 5 3 12 6 7
Total 62 100 25 100 87 100
Time Lag South Central North Total
No. % No. % No. % No. %
With in 3 Days 19 53 14 52 11 46 44 51
4 -6 Days 15 42 11 41 11 46 37 42
Above 6 Days 2 5 2 7 2 8 6 7
Total 36 100 27 100 24 100 87 100
235
is observed that more time is taken in the northern region compared to the other
regions.
DRI Loan for Agricultural Purposes
As per the RBI Guidelines, ‘Differential Rate of Interest’ (DRI) loans are to
be granted by the commercials banks to the weaker sections of the society at a
lower rate of interest at four per cent. The RBI directs the commercial banks to
advance loans and advances under the DRI scheme up to a minimum of one per
cent of the Net Bank Credit (NBC). The recent statistics shows that the
achievement under the scheme is very low, i.e. 0.01 per cent to 0.02 per cent of the
NBC. Therefore, an attempt is made to identify the level of DRI loan to
agricultural sector and the sector-wise responses are shown in table 6.1.20.
Table 6.1.20: DRI Loans for Agricultural Purposes – Sector
Source: Primary data
The majority (55%) of respondents never allowed DRI loans to the
agricultural sector. 39 per cent allowed DRI loans occasionally and only five per
cent frequently.
DRI Loans Public Sector Private Sector Total
No. % No. % No. %
Always 1 2 - - 1 1
Frequently 2 3 2 8 4 5
Occasionally 25 40 9 36 34 39
Never 34 55 14 56 48 55
Total 62 100 25 100 87 100
236
The region- wise analysis of DRI loan to agriculture is shown in table
6.1.21.
Table 6.1.21: DRI Loans for Agricultural Purposes – Region
DRI Loans South Central North Total
No. % No. % No. % No. %
Always - - - - 1 4 1 1
Frequently 2 6 1 4 1 4 4 5
Occasionally 13 36 7 26 14 58 34 39
Never 21 58 19 70 8 34 48 55
Total 36 100 27 100 24 100 87 100
Source: Primary data
Significant Difference (Sig. value 0.026)
Table 6.1.21 shows the region-wise disbursement of the DRI loan to the
agriculture sector. It is clear that more DRI loans are granted in the northern
region (66%) than the southern (42%) and central (30%) region. The variation in
the opinion about granting of DRI loans to agriculture is corroborated with the
help of Chi square test which reveals that the difference is statistically significant
at 5 per cent level.
Share DRI Loans to Agriculture
As per RBI guidelines, every banking company in India is required to grant
DRI loans to weaker sections of the society, at least one per cent of the Net Bank
Credit. The majority of the agriculturists of the State are marginal and small
237
farmers having too little income from agriculture. The major portion of the
workforce of the State is also involved in agriculture and their earning is skimpy,
as compared to the secondary and tertiary sector. Therefore, the majority of the
farmers and agricultural labours are eligible for the concessional DRI loans.
Hence, an attempt is made to analyse the extent of concessional lending to
agricultural sector and the responses are analyzed on the basis of sector and
region. The sector-wise share of DRI loans to agricultural activities is depicted in
table 6.1.22.
Table 6.1.22: Share of DRI Loans to Agriculture –Sector
Source: Primary data
Of the total respondents, the majority (55%) never granted DRI loans to the
agriculturists. The percentage share of DRI loans for agricultural activities reveals
that 67 per cent of the bank officials who allowed DRI loan to agriculture,
sanctioned up to 25 per cent of the total DRI loans. 28 per cent allowed DRI loans
to agriculture to the extent of 25 -50 per cent and 5 per cent above 50 per cent. The
sector-wise analysis shows that public sector is in a superior position than the
private sector in disbursing DRI loan to agriculture sector. 36 per cent of the
Share of DRI Loans Public Sector Private Sector Total
No. % No. % No. %
< 25% 18 64 8 73 26 67
25 – 50% 8 29 3 27 11 28
50 – 75% 1 3.5 - - 1 2.5
> 75% 1 3.5 - - 1 2.5
Total 28 100 11 100 39 100
238
public sector granted DRI loans to the extent of above 25 per cent of the total DRI
loans to agriculture sector, while it is 27 per cent in the private sector.
The region -wise percentage share of DRI loan to agricultural sector is
given in table 6.1.23.
Table 6.1.23: Share of DRI Loans to Agriculture –Region
Share of DRI Loans
South Central North Total
No. % No. % No. % No. %
< 25% 9 60 6 75 11 69 26 67
25 – 50% 4 26 2 25 5 31 11 28
50 – 75% 1 7 - - - - 1 2.5
> 75% 1 7 - - - - 1 2.5
Total 15 100 8 100 16 100 39 100
Source: Primary data
The region-wise analysis reveals that more DRI loans are disbursed to the
agricultural sector in the southern region than in the other regions. It is noted that
in central and northern region, the percentage distribution of DRI loan to the
agriculture sector is less than 50 per cent of the total DRI loans.
Proportion of Crop Loan and Term Loan Accounts
The loans and advances granted to agriculture sector are basically classified
into crop loans and term loans. The classification is based on the nature and period
of the loan. The crop loans are considered as production credit, normally for a
period of one year and term loans are mainly for investment purposes, having
more than one-year time frame for the settlement. The proportion of crop loan
239
accounts in total agriculture lending is evaluated, sector-wise and region-wise in
table 6.1.24 and 6.1.25.
Proportion of Crop Loan
The banks allow crop loans to the agriculturists mainly for meeting the
cultivation and operational expenses. The crop loans are normally sanctioned for
a period of one year and the borrowers are required to repay the amount with
interest, within the same period. Term loan includes medium and long-term loans
sanctioned by banks for agriculture and allied activities for a period of more than
one year. These loans are mainly sanctioned for the purpose of making
investments and developmental activities in agricultural land, agricultural
machinery, irrigation facility, etc. The sector-wise proportion of crop loans to the
total agriculture loan accounts is depicted in table 6.1.24.
Table 6.1.24: Proportion of Crop Loan Accounts to Total Agriculture Loan- Sector
Source: Primary data
The proportion of crop loan to total agriculture loan is above 80 per cent
among 54 per cent sample branches and between 60- 80 per cent in 43 per cent. It
Proportion of Crop
Loan
Public Sector Private Sector Total
No. % No. % No. %
< 60% 2 3 1 4 3 3
60 -80% 23 37 14 56 37 43
> 80% 37 60 10 40 47 54
Total 62 100 25 100 87 100
240
is observed that the share of crop loan to total agricultural loan is very high and the
public sector banks made more crop loan than the private sector.
Table 6.1.25 shows the region-wise proportion of crop loan to total
agricultural lending.
Table 6.1.25: Proportion of Crop Loan Accounts to Total Agricultural Loan –
Region
Proportion of
Crop Loan
South Central North Total
No. % No. % No. % No. %
< 60% 1 3 2 8 - - 3 3
60 -80% 14 39 12 44 11 46 37 43
> 80% 21 58 13 48 13 54 47 54
Total 36 100 27 100 24 100 87 100
Source: Primary data
The region-wise analysis shows that the majority of respondents of the
southern (58%) and northern regions (54%) have more than 80 per cent crop loan
accounts for the total agricultural lending. It is noted that more crop loan accounts
for total agriculture lending are in the northern and southern region than in the
central region.
Achievement in Agricultural Lending The RBI guidelines direct the commercial banks to lend at least 18 per cent
of Net Bank Credit (NBC) to the agriculture sector- the largest share in priority
sector lending. So an attempt is made to identify the extent of agricultural loans
granted by the banks to the agriculture sector and the analysis is presented in the
241
following tables. The sector-wise percentage achievement in agriculture lending
is shown in table 6.1.26.
Table 6.1.26: Achievement in Agriculture Lending – Sector
Source: Primary data
The achievement in agricultural lending by the respondent banks reveals
that 41 per cent attains 10-20 per cent target achievement and 31 per cent at level
of 20-40 per cent. 21 per cent achieves a higher level of above 40 per cent. The
sector-wise analysis shows that more achievement is among the public sector than
the private sector.
The region-wise achievement in agricultural lending is shown in table
6.1.27.
Achievement Public Sector Private Sector Total
No. % No. % No. %
< 10% 5 8 1 4 6 7
10 -20% 25 40 11 44 36 41
20 -40% 18 29 9 36 27 31
40 -60% 9 15 4 16 13 15
> 60% 5 8 - - 5 6
Total 62 100 25 100 87 100
242
Table 6.1.27: Achievement in Agriculture Lending - Region
Achievement South Central North Total
No. % No. % No. % No. %
< 10% 2 5.5 3 11 1 4 6 7
10 -20% 15 42 12 44 9 37.5 36 41
20 -40% 9 25 9 33 9 37.5 27 31
40 -60% 8 22 2 8 3 13 13 15
> 60% 2 5.5 1 4 2 8 5 6
Total 36 100 27 100 24 100 87 100
Source: Primary data
The region-wise analysis shows that achievement in agriculture lending is
more by the banks in northern and southern region than those in the central region,
even though the difference is not much wide.
Defaults in Agricultural Loan Default in loan means the failure of the borrowers to repay the amount
when it is due or delayed beyond a specified time. Agriculture is an economic
activity and income generated from it is a critical factor, which influences the
timely repayment of the loan. The extent of default is analyzed by sector and
region, in the following tables.
The sector-wise extent of defaults in agricultural loan is incorporated in
table 6.1.28.
243
Table 6.1.28: Defaults in Agricultural Loan –Sector
Source: Primary data
Of the total, 18 per cent of the banks have less than 5 per cent defaults in
agricultural lending. 45 per cent banks have defaults of 5-10 per cent and 30 per
cent of the banks have defaults to the extent of 10-20 per cent. 7 per cent banks
have a default of above 20 per cent. The sector-wise analysis exposes that more
defaults are in the public sector than the private sector. 76 per cent of private
sector banks have less than 10 per cent loan default, whereas it is 58 per cent in the
public sector. It is noted that the private sector banks are more profit- oriented and
they follow an effective follow-up and timely action for the recovery of loan than
the public sector, which reduces the defaults.
Region-wise defaults (6.1.29) reveal that more defaults are in the southern
region than the other regions. In the south, percentage of loan defaults is above 10
per cent in 41 per cent cases, as against 37 and 29 per cent of the central and
northern regions.
Defaults
Public Sector Private Sector Total
No. % No. % No. %
< 5% 11 18 5 20 16 18
5 -10% 25 40 14 56 39 45
10 -20% 22 35.5 4 16 26 30
> 20% 4 6.5 2 8 6 7
Total 62 100 25 100 87 100
244
Table 6.1.29: Defaults in Agricultural Loan – Region
Defaults South Central North Total
No. % No. % No. % No. %
< 5% 6 17 5 19 5 21 16 18
5 -10% 15 42 12 44 12 50 39 45
10 -20% 13 36 7 26 6 25 26 30
> 20% 2 5 3 11 1 4 6 7
Total 36 100 27 100 24 100 87 100
Source: Primary data
Non Performing Assets (NPA) in Agricultural Lending
Non-Performing Assets (NPA) means an asset or account of a borrower,
which has been classified as substandard, doubtful or loss asset, as per the
guidelines applicable for the asset classification, issued by the RBI. With a view to
moving towards international best practices and to ensure greater transparency, it
has been decided to adopt the '90 days overdue' norm for identification of NPAs,
from the year ending March 31, 2004. Accordingly, with effect form March 31,
2004, a non-performing asset shall be a loan or an advance where:
i. Interest and /or instalment of principal remains overdue for a period of
more than 90 days in respect of a term Loan
ii. The account remains 'out of order' for a period of more than 90 days, in
respect of an overdraft/ cash Credit (OD/CC),
245
iii. The bill remains overdue for a period of more than 90 days in the case of
bills purchased and discounted,
iv. Interest and/ or instalment of principal remains overdue for two harvest
seasons, but for a period not exceeding two half years in the case of an
advance granted for agricultural purpose, and
v. Any amount to be received remains overdue for a period of more than 90
days in respect of other accounts.
It is worthwhile to spotting the NPA altitude of the respondent banks, in
agricultural lending. The NPA echelon of the banks in agricultural lending is
analyzed by sector in table 6.1.30.
Table 6.1.30: NPA in Agricultural Lending – Sector
Source: Primary data
The majority of the respondent banks (55%) have less than two per cent
NPA and 36 per cent have 2 - 5 per cent. Nine per cent banks have NPA level of
above five per cent in agricultural lending. The sector-wise analysis shows that 55
per cent and 56 per cent of the public and private sector banks have very low NPA
level of less than 2 per cent and 35 per cent and 36 per cent have 2 - 5 per cent
NPA Public Sector Private Sector Total
No. % No. % No. %
< 2% 34 55 14 56 48 55
2-5% 22 35 9 36 31 36
> 5% 6 10 2 8 8 9
Total 62 100 25 100 87 100
246
NPA. The sector-wise descriptive analysis discloses that there is no wide variation
between the public and the private sector in their NPA levels.
The region- wise level of NPA in agricultural lending is shown in table
6.1.31.
Table 6.1.31: NPA in Agricultural Lending – Region
NPA South Central North Total
No. % No. % No. % No. %
< 2% 21 58 13 48 14 58 48 55
2 -5% 11 31 12 45 8 34 31 36
> 5% 4 11 2 7 2 8 8 9
Total 36 100 27 100 24 100 87 100
Source: Primary data
The region-wise analysis discloses that majority (58%) of the southern and
northern regions have less than two per cent NPA, whereas it is 48 per cent in the
central region. 31 per cent of the southern region has NPA of 2-5 per cent
whereas it is 45 per cent and 34 per cent respectively in central and northern
region..
Level of NPA in Crop and Term Loans The extent of NPA in crop loans and term loans is analysed in the following
tables.
247
Level of NPA in Crop Loans Crop loans are granted for meeting the cultivation expenses normally for a
period of one year. The sector-wise level of NPA in crop loans is shown in table
6.1.32.
Table 6.1.32: Level of NPA in Crop Loans- Sector
Source: Primary data
Majority (75%) of the banks have less than 2 per cent NPA in crop loans.
22 per cent banks have an NPA level of 2-5 per cent. The sector-wise analysis
shows that 74 per cent of the public and 76 per cent of private sector banks have
less than 2 per cent NPA in crop loans. It is observed that the public sector banks
have a fairly little more NPA level than the private sector banks in crop loans.
The region-wise level of NPA in crop loan is given in table 6.1.33.
Level of NPA – Crop Loans
Public Sector Private Sector Total
No. % No. % No. %
< 2% 46 74 19 76 65 75
2-5% 14 23 5 20 19 22
> 5% 2 3 1 4 3 3
Total 62 100 25 100 87 100
248
Table 6.1.33: Level of NPA in Crop Loans- Region
Level of NPA - Crop Loans
South Central North Total
No. % No. % No. % No. %
< 2% 27 75 21 78 17 71 65 75
2 -5% 7 19 6 22 6 25 19 22
> 5% 2 6 - - 1 4 3 3
Total 36 100 27 100 24 100 87 100
Source: Primary data
The region-wise analysis shows that the extent of NPA is more in southern
and northern region than in the central region, even though there is no much
difference.
Level of NPA in Term Loans
Term loans are allowed to investments in agricultural operation for a period
of more than one year. Term loan includes both medium term and long term loans
for agricultural purposes. The NPA levels in agricultural term loans are analyzed
by sector and region in the table 6.1.34 and 6.1.35. The sector- wise extent of
NPA in term loans (Table 6.1.34) shows that 62 per cent banks have less than 2
percent and 31 per cent have 2-5 per cent NPA in term loans. The sector- wise
analysis shows that 61 per cent of the public sector has less than 2 per cent NPA
and it is 64 per cent in the private sector. The sector- wise analysis reveals that the
public sector has a little more term loan NPA than the private sector.
249
Table 6.1.34: Level of NPA in Term Loans – Sector
Source: Primary data
The region- wise level of NPA in term loan is given in table 6.1.35.
Table 6.1.35: Level of NPA in Term Loans- Region
Level of NPA -
Term Loans
South Central North Total
No. % No. % No. % No. %
< 2% 24 67 16 59 14 58 54 62
2 -5% 11 30 9 33 8 33 27 31
> 5% 1 3 2 8 2 9 6 7
Total 36 100 27 100 24 100 87 100
Source: Primary data
Level of NPA – Term Loans
Public Sector Private Sector Total
No. % No. % No. %
< 2% 38 61 16 64 54 62
2-5% 20 32 7 28 27 31
> 5% 4 7 2 8 6 7
Total 62 100 25 100 87 100
250
The region-wise analysis shows that 67 per cent of the southern region has
less than 2 per cent NPA in agricultural term loans. The level of NPA in term loan
is moderately high in north and central regions in comparison with the south.
Inducement for Agricultural Loan The RBI prioritizes the agricultural lending in India and set a target of 18
per cent of the Net Bank Credit to the sector. Thus the commercial banks are
committed to attaining the target specification. The target stipulation sometimes
forces the bank officials to include other loans under the head ‘agriculture’. Table
6.1.36 shows the sector- wise responses of the respondents in this regard.
Table 6.1.36: Inducement for Agricultural Loan –Sector
Source: Primary data
Of the total, 70 per cent respondents sometimes or frequently, induce the
borrowers to avail themselves of loan under the head agriculture. The sector-wise
analysis shows that more inducement is given by the public sector than the private
sector, even though the difference is marginal.
Inducement for
Agricultural Loan
Public Sector Private Sector Total
No. % No. % No. %
Frequently 20 32 6 24 26 30
Sometimes 25 40 10 40 35 40
Never 17 28 9 36 26 30
Total 62 100 25 100 87 100
251
The region-wise inducement for availing the agricultural loan is given in
table 6.1.37.
Table 6.1.37: Inducement for Agricultural Loan – Region
Inducement for
Agricultural Loan
South Central North Total
No. % No. % No. % No. %
Frequently 12 33 9 33.3 5 21 26 30
Sometimes 15 42 9 33.3 11 46 35 40
Never 9 25 9 33.3 8 33 26 30
Total 36 100 27 100 24 100 87 100
Source: Primary data
The region-wise analysis discloses that more inducement for agriculture
loan is made at the southern region than the other regions. However the difference
seems to be normal.
Reasons for Inducement The bankers encourage the borrowers to utilize the agricultural credit
facility due to various reasons. They are: procedural simplicity, longer period for
NPA, attainment of target, security advantages, corporate practice and low interest
rate. The table 6.1.38 shows the sector-wise reasons for inducement. Procedural
simplicity is the reasons for the inducement among 24 per cent respondents and
longer period for NPA in 21 per cent cases. 18 per cent are induced for target
attainment and 17 per cent as a corporate practice. In 14 per cent cases, security
advantage is the reason for inducement and 6 per cent are induced by low interest
252
rate. The sector-wise analysis shows that procedural simplicity is the reason for
inducement in 24 per cent cases. The other major reasons are longer period for
NPA (23%), corporate practice (18%) and target attainment (16%) and in private
sector these are attainment of target (24%) longer period for NPA and corporate
practice (16% each). It is noted that the target achievement is one prominent
reason in the private sector.
Table 6.1.38: Reasons for Inducement – Sector
Source: Primary data
The region-wise analysis (Table 6.1.39) shows that the major influencing
factors in the southern region for inducement are: procedural simplicity (25%),
attainment of target (22%) and longer period for NPA (22%). In the central
region, it is procedural simplicity (22%), corporate practice (22%) and attainment
Reasons for Inducement Public Sector Private Sector Total
No. % No. % No. %
Procedural Simplicity 15 24 6 24 21 24
Longer Period for NPA 14 23 4 16 18 21
Attainment of Target 10 16 6 24 16 18
Security Advantages 9 14 3 12 12 14
Corporate Practice 11 18 4 16 15 17
Low Interest Rate 3 5 2 8 5 6
Total 62 100 25 100 87 100
253
of target (19%). In northern region, procedural simplicity (25%) and longer period
for NPA (25%) are the major influencing factors.
Table 6.1.39: Reasons for Inducement –Region
Reasons for Inducement
South Central North Total
No. % No. % No. % No. %
Procedural Simplicity 9 25 6 22 6 25 21 24
Longer Period for NPA 8 22 4 15 6 25 18 21
Attainment of Target 8 22 5 19 3 13 16 18
Security Advantages 5 14 3 11 4 17 12 14
Corporate Practice 5 14 6 22 4 17 15 17
Low Interest Rate 1 3 3 11 1 3 5 6
Total 36 100 27 100 24 100 87 100
Source: Primary data
Mis-utilisation of Agricultural Loan
Mis- utilisation means improper or diverted usage of the loan amount. If the
borrowers employ the loan amount for purposes other than the stipulated one, it is
termed as mis-utilisation. The opinion of bank officials regarding the mis-
utilisation of agricultural loan shown in Table 6.1.40 discloses that the majority
(70%) of bank officials have the opinion that there is occasional mis- utilisation of
loan amount by the borrowers. 24 per cent of the officials remarked that the mis-
utilisation of agricultural loan is frequent. The sector-wise analysis shows that
more officials of the public sector (71%) have the opinion that there is occasional
mis-utilisation compared with the private sector (68%). 26 per cent and 20 per
254
cent respondents of both public and private sectors subscribe the feeling that
frequent mis-utilisation of agricultural loan is a fact. It is noted that 97 per cent of
the public sector have the opinion that there is mis- utilisation of loan either
occasionally or frequently, whereas it is 88 per cent in private sector.
Table 6.1.40: Mis-utilisation of Agricultural Loan - Sector
Mis-utilisation of Loan Public Sector Private Sector Total
No. % No. % No. %
Always 1 1.5 2 8 3 4
Frequently 16 26 5 20 21 24
Occasionally 44 71 17 68 61 70
Never 1 1.5 1 4 2 2
Total 62 100 25 100 87 100
Source: Primary data
The region-wise analysis exposes that 41 per cent respondents of the central
region have the opinion that the mis- utilisation is frequent, whereas it is 22 per
cent in the south and 8 per cent in the north. Majority of the respondents of the
southern and northern region have the opinion that there is occasional mis-
utilisation of loan amount.
255
Table 6.1.41: Mis-utilisation of Agricultural Loan –Region
Mis-utilisation of Loan
South Central North Total
No. % No. % No. % No. %
Always 1 3 2 7 - - 3 4
Frequently 8 22 11 41 2 8 21 24
Occasionally 27 75 13 48 21 88 61 70
Never - - 1 4 1 4 2 2
Total 36 100 27 100 24 100 87 100
Source: Primary data
Extent of Mis-utilisation of Agricultural Loan The opinion of bank officials to the extent of mis-utilisation of loans given
in table 6.1.42 discloses that 38 per cent of the respondents have the opinion that
there is mis-utilisation of loan to the extent of 20- 40 per cent and 23 per cent as
less than 10 per cent. 23 per cent opines the mis-utilisation is above 40 per cent.
The sector-wise analysis shows that more public sector respondents have the
opinion that there is higher level of mis- utilisation than the private sector. 28 per
cent of private sector bank officials have the opinion that there is less than 10 per
cent mis-utilisation, whereas it is 21 per cent in the public sector.
256
Table 6.1.42: Extent of Mis-utilisation –Sector
Extent of Mis-
utilisation
Public Sector Private Sector Total
No. % No. % No. %
< 10% 13 21 7 28 20 23
10-20% 10 16 4 16 14 16
20-40% 24 39 9 36 33 38
40-60% 12 19 4 16 16 18
> 60% 3 5 1 4 4 5
Total 62 100 25 100 87 100
Source: Primary data
The region-wise opinion about the extent of mis-utilisation of agricultural
loan (Table 6.1.43) reveals that the majority (63%) of the northern region have the
opinion that the mis-utilization is less than 20 per cent, whereas it is 30 per cent
and 29 per cent in the south and central regions. More respondents of the southern
and central region have the opinion that the mis-utilisation is more than 20 per
cent. It noted that the officials of the different region have the common opinion
that there exists false deployment of agricultural loan, but the extent of mis-
employment varies in different regions and is more rampant in central and
southern regions.
257
Table 6.1.43: Extent of Mis-utilisation- Region
Extent of Mis- utilisation
South Central North Total
No. % No. % No. % No. %
< 10% 4 11 6 22 10 42 20 23
10-20% 7 19 2 7 5 21 14 16
20-40% 18 50 9 34 6 25 33 38
40-60% 5 14 8 30 3 12 16 18
> 60% 2 6 2 7 - - 4 5
Total 36 100 27 100 24 100 87 100
Source: Primary data
Significant Difference (Sig. value 0.022)
The variation in opinion about the mis-utilisation of loan is corroborated
with the help of Chi square test, the result of which proves that region- wise
difference is statistically significant at 5 percent level.
258
Section- II
Problems Faced by Commercial Banks in Agricultural
Lending
For studying the problems faced by the commercial banks in agricultural
lending, a Structured Interview Schedule was circulated among 87 selected bank
officials. It was to measure the level of agreement or disagreement on the
identified problems in agriculture lending. The problems in the agricultural
lending are divided into four heads: -
1) Lending and monitoring problems,
2) Repayment and related problems
3) Overdue and related problems and
4) General problems in agricultural lending.
Under the head lending and monitoring, 8 problems are identified and 5
problems each under the head repayment and overdue problems. 7 problems are
identified under the head general problems in agricultural lending. The identified
problems are ranked by using weighted mean score and appropriate statistical tests
like one way ANOVA, student’s t test, etc. are used to test the level of significance
of the identified problems in agricultural lending.
Lending and Monitoring Problems The extent of problems faced by the bank officials in connection with the
lending and monitoring of agricultural loan was analyzed by using weighted mean
259
score. For this a Structured Interview Schedule is circulated among the bank
officials and by using 5-point scale, the responses are scored and analyzed. On the
basis of the mean score, the problems are ranked and the results are incorporated
in table 6.2.1. The lending and monitoring problems identified for the analysis are:
1. Rigidity in lending rates
2. Cumbersome lending procedure
3. Excessive Regulations of the controlling authorities
4. Oral lease agreements
5. Insufficient tangible collateral security
6. Ineffective follow up
7. Mis-utilisation of the loan amount by borrowers
8. Lack of corrective action on mis-utilisation
Rigidity refers to inflexibility or resistance to change. In agricultural
lending the banks normally follow a rigid lending rate policy, which in most cases
unrealistic to the farmers. Agriculture now becoming as an unprofitable economic
activity and therefore, the lending rates should be sufficiently flexible to suit to the
changed situations.
The word cumbersome means difficult to handle because of complexity. In
agricultural lending, the commercial banks followed some cumbersome lending
procedures which make many difficulties to the officials as well as borrowers. The
procedural complexities insisted on by the bank for effectively protecting their
interest that creates problems in lending.
The operations of the commercial banks in India are controlled and
monitored by the RBI and the Government. The regulations and guidelines issued
by the controlling authorities from time to time create many difficulties for the
banks as well the borrowers. The opinion of the officials regarding such controls is
sought and incorporated in the study.
Lease agreement may be in written or oral. For granting agriculture credit
to the lease farmers, they are required to provide written lease agreement to the
260
bank. But in some areas, the landowners are reluctant to enter a written lease
agreement and they will enter only an oral lease agreement. Such oral lease
agreements create some difficulties for the bank officials and borrowers in
agricultural financing.
The capacity of the borrower to provide adequate collateral security to the
loan amount is another problem faced by the bank officials. The lending norms of
the bank insist on sufficient security for the loan amount, for properly protecting
the interests of the bank, but the incapability of the farmers to provide such
security creates some problems in agricultural lending.
Effective follow-up is very essential for the proper utilization and
repayment of the loan amount. For various reasons the bank officials are not in a
position to make effective follow up on agricultural loans. The ineffective follow
up of the agricultural loans creates some difficulties.
The utilization of the agricultural loan amount for other purposes especially
for unproductive purposes is another problem in agricultural lending. Fund
diversion leads to loan default and ultimately the lending capacity of the banks.
The target based lending to agriculture resists the correction of mis -
utilisation of the loan. Even though the loan agreement gives power to the banker
to take corrective action on mis-utilisation, the banks are reluctant to take such
corrective actions due to varying reasons. The lack of corrective action on mis-
utilisation is another major problem in agricultural lending.
The extent of problems associated with lending and monitoring are
measured by using five point scale. The respondents are required to mark the
degree of agreement or disagreement to the identified problems and the scores are
assigned as 5, 4, 3, 2 and 1 respectively for strongly agree, agree, neutral, disagree
and strongly disagree. The scores are measured totalled and averaged for
comparison and overall ranks are assigned on the basis of the weighted score. The
mean score and ranks of the associated problems of lending and monitoring are
incorporated in table 6.2.1.
261
It is evident that the overall weighted mean score of the lending and
monitoring problems of the bank is 2.48, which is below the median score of
three. This reveals that the gravity of such problems is relatively low among the
commercial banks in Kerala. The problems with a mean score of three or more
are: lack of corrective action on mis- utilisation of loan amount and mis-utilisation
of loan by the beneficiaries. In all other identified problems the mean score is less
than three which means that the bank officials face low- to- moderate problems in
this regard. Cumbersome lending procedures and excessive regulations of the
controlling authorities are the problems occupying third and fourth position in
terms of intensity among the eight identified problems related to agricultural
lending and monitoring.
Table 6.2.1: Lending and Monitoring Problems- Mean Score and Rank
Problems Mean Score Rank
1. Rigidity in Lending Rates 2.7 VI
2. Cumbersome Lending Procedures 2.88 III 3. Excessive Regulation of the Controlling
Authorities 2.84 IV
4. Oral Lease Agreements 2.34 VIII
5. Insufficient Tangible Collateral Security 2.65 VII
6. Ineffective Follow up 2.78 V
7. Mis-utilisation of Loan by Borrowers 3.08 II
8. Lack of Corrective Action on Mis-utilisation 3.18 I
Over All average score 2.48
Sign Test p value 0.1445
Source: Primary data
262
By using One Sample Sign Test, the study has tested the null hypothesis
of µ = 3 (lending and monitoring problems are moderate among the commercial
banks), against the alternate hypothesis of µ<3 (i.e., lending and monitoring
problems are relatively low) at five per cent level of significance. The test found
rejection of alternative hypothesis at this level which leads to the conclusion that
the commercial banks in Kerala are facing problems at moderate scale with
regard to lending and monitoring of agricultural credit to their customers.
Lending and Monitoring Problems – Sector-wise Comparison
The sector- wise mean score and rank of lending and monitoring problems
is shows in Table 6.2.2.
Table 6.2.2: Lending and Monitoring Problems- Mean Score and Rank- Sector
Problems Public Sector Private Sector
Mean Score Rank Mean
Score Rank
1. Rigidity in Lending Rates 2.82 VI 2.4 V
2. Cumbersome Lending Procedures 3.04 III 2.48 IV
3. Excessive Regulations of the Controlling Authorities 2.95 V 2.56 III
4. Oral Lease Agreements 2.44 VIII 2.12 VII
5. Insufficient Tangible Collateral Security 2.73 VII 2.48 IV
6. Ineffective Follow Up 2.97 IV 2.32 VI
7. Mis-utilisation of Loan by Borrowers 3.26 II 2.64 II
8. Lack of Corrective Action on Mis- utilisation 3.34 I 2.8 I
Over All Mean 2.94 -- 2.48 --
Source: Primary data
263
The sector- wise mean score and rank of lending and monitoring problems
reveal that lack of corrective action on mis-utilisation of the loan amount is the
major problem faced by the bank officials in the agricultural lending and both the
public and the private sector. Mis-utilisation of the loan by the loan beneficiaries is
ranked second in both the sectors. Cumbersome lending procedures and
ineffective follow-up and excessive regulations of the controlling authorities
ranked as third, fourth and fifth problems in agricultural lending by the public
sector, whereas these are excessive regulations of the controlling authority,
cumbersome lending procedure and rigidity in lending rates in the private sector.
The mean score of the problems is higher in the public sector, revealing that the
public sector faces more lending related problems than the private sector. It is also
noted that none of the problems have a mean score of above 3 in the private sector
which means all the private sector officials face low- to- moderate problems in the
lending and monitoring of agricultural loans.
In order to verify whether there is any sector-wise variation in lending and
monitoring the problems, student’s t- test is applied and the result is shown in the
table 6.2.3.
Table 6.2.3: Mean Score Difference in Lending and Monitoring Problems -
Student’s‘t’ Test
Sector N Mean SD. Df. t P. Value
Public 62 26.27 3.44 85 4.803 0.000*
Private 25 22.28 3.68
*Significant at 1 per cent level
The student’s t test shows that there is significant sector-wise variation in
lending and monitoring problems in agricultural lending operations in Kerala. The
264
lending and monitoring problems are denser in the public sector than in the private
sector, as revealed by the test result.
Lending and Monitoring Problems – Region-wise Comparison
The region-wise mean score and rank of lending and monitoring problems
are incorporated in table 6.2.4.
Table 6.2.4: Lending and Monitoring Problems – Mean Score and Rank- Region
Problems South Central North Mean Score Rank Mean
Score Rank Mean Score Rank
1. Rigidity in Lending Rates 2.58 VI 2.59 V 3.00 IV
2. Cumbersome Lending Procedures 2.86 III 2.89 II 2.92 V
3. Excessive Regulations of the Controlling Authorities 2.75 V 2.89 II 2.92 V
4. Oral Lease Agreements 2.17 VIII 1.93 VI 3.08 III
5. Insufficient Tangible Collateral Security 2.42 VII 2.67 IV 3.00 IV
6. Ineffective Follow Up 2.83 IV 2.81 III 2.67 VI
7. Mis-utilisation of Loan by Borrowers 3.08 II 2.89 II 3.29 I
8. Lack of Corrective Action on Mis-utilisation 3.14 I 3.26 I 3.17 II
Mean 2.73 -- 2.74 -- 3.00 -- Source: Primary data
The mean score of the lending and monitoring problems in the three regions
are 2.73, 2.74 and 3. The major problems in the lending and monitoring are the
same in different regions and the problems having a mean score of more than three
are mis-utilisation of the loan by the borrowers and lack of corrective action on
mis-utilisation. The prominent problem in the southern region is cumbersome
265
lending procedures, ineffective follow-up in the central region and oral lease
agreements in the northern region. Ineffective follow-up and excess regulation of
controlling authorities are ranked fourth and fifth in the south, whereas it is
ineffective follow up and rigidity in lending rate are in the central region.
Insufficient collateral security and regulations of the controlling authorities are
ranked fourth and fifth in the northern region. The region-wise magnitude of the
lending and monitoring problems, as measured by the weighted mean score are
high in the northern region, as compared to the south and central regions.
In order to verify whether there is any region-wise variation in the problems
faced by the bank in lending and monitoring, one-way ANOVA is applied and the
test result found significance of difference in the magnitude of lending and
monitoring problems across the regions (Table 6.2.5).
Table 6.2.5: Mean Score Difference in Lending and Monitoring Problems One-way ANOVA
Region N Mean S.D F P. Value
South 36 24.25 3.62
4.289 0.017* Central 27 24.59 4.04
North 24 27.04 3.76 *Significant at 5 per cent level Repayment and Related Problems
The repayment and related problems normally faced by the bank officials in
agricultural lending are identified and the level of agreement or disagreement is
measured by using five point scale. The respondents are required to mark the
degree of agreement or disagreement to the identified problems and the scores are
assigned as 5, 4, 3, 2 and 1 respectively for strongly agree, agree, neutral, disagree
and strongly disagree. The scores are calculated, totalled and averaged for
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comparison and overall ranks are assigned on the basis of the weighted score. The
repayment and related problems identified are:
1. Waiver syndrome/ OTS policy of the government
2. Intentional failure of the borrowers to repay the loan amount
3. Natural calamity and crop failure
4. Inadequate return of agricultural activity
5. Absence of incentive/ subsidy for prompt repayment
The term ‘waiver’ means a formal written statement of relinquishment or
discharge of an obligation. In waiver, the lender does not insist on the borrowers
repaying the debt when it is due. The term syndrome refers to a set of signs that
tend to occur together and which reflect the presence of a particular abnormal
condition. The waiver syndrome here means the practice of the Government to
write off the agricultural loans obligations. The one time settlement policy- the
policy set by the Government for the recovery of overdue by offering some
concessions to the defaulters. Even though the government formulates such
schemes, for providing relief to the farmers, they stimulate the intentional loan
defaults. So such practices give some bad signal to the society and they will create
some problems to the lending institutions.
Willful default means the intentional failure of the borrower to repay the
loan even though he is in a position to do so. Waiver syndrome/ OTS policy of the
Government, to some extent, promotes the willful defaults in agricultural credit. In
such cases, some of the beneficiaries intentionally make default for the repayment
of the debt obligations in order to avail the concessions.
Natural calamity– the act of God- may adversely affect the repayment
performance of the borrowers. Natural calamity and crop failure are one of the
main problems, faced by the farmers. Natural calamity may occur in the form of
drought, flood, earthquake, land slide, storm, etc. Crop failure may be due to the
natural calamity or pest attack. Effective insurance protection is a must for
relieving the farmer of such setbacks.
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In the present scenario, the return from the agricultural activities is
insufficient to meet the day-to-day affairs of the farmers and for the repayment of
the loan. The inadequate return from the agricultural activities is another factor
affecting the repayment performance of the borrowers.
In agricultural lending there is no practice of providing any incentives or
concession to the prompt re-payers. By the introduction of the waiver/ OTS policy,
actually the defaulters get benefited and prompt re-payers are penalized.
Table 6.2.6: Repayment and Related Problems- Mean Score and Rank
Problems Mean Score Rank
1. Waiver Syndrome/ OTS Policy of the Government 3.14 II
2. Intentional Failure of the Borrowers 2.57 IV
3. Natural Calamity and Crop Failure 2.44 V
4. Inadequate Return of Agricultural Activity 2.63 III
5. Absence of Incentive/ Subsidy for Prompt Repayment 3.51 I
Mean 2.96 --
Sign Test P value 0.499
Source: Primary data
The mean score and rank of the repayment and related problems are shown
in table 5.2.6. Analysis of the table reveals that among the five identified problems
relating to repayment and related aspects, absence of incentives on prompt
repayment and waiver syndrome/ One Time Settlement policy of the Government
are the most proximate issues faced by the commercial banks in Kerala, while
extending agricultural credit. Inadequate return from agriculture and intentional
failure are ranked third and fourth in terms of its intensity. The mean score of 2.96,
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very close to the median score of 3, given an indication of moderate degree of
problems faced by banks related to repayment of agricultural loans.
For drawing statistical inference on the extent of repayment and related
problems existing among the commercial banks, the null hypothesis of µ = 3
(repayment and related problems are moderate among the commercial banks) is
tested, against the alternate hypothesis of µ<3 (i.e., repayment and related
problems are relatively low) at 5 percent level of significance by using non
parametric test of one sample Sign Test. Test result indicates commercial banks in
Kerala are facing moderate degree of such problems.
The sector-wise analysis of the repayment related problems of the banks is
shown in table 6.2.7.
Table 6.2.7: Repayment and Related Problems- Mean Score and Rank –Sector
Problems
Public Sector Private Sector
Mean Score Rank Mean
Score Rank
1. Waiver Syndrome/ OTS Policy of the Government 3.31 II 2.72 II
2. Intentional Failure of the Borrowers 2.69 IV 2.28 III
3. Natural Calamity and Crop Failure 2.55 V 2.16 V
4. Inadequate Return of Agricultural Activity 2.79 III 2.24 IV
5. Absence of Incentive/ Subsidy for Prompt Repayment 3.69 I 3.04 I
Mean 3.01 -- 2.49 --
Source: Primary data
The sector-wise analysis reveals that the absence of incentive/ subsidy on
prompt repayment is the main problem acknowledged by the respondents of both
the sectors. In the present scenario, there is a feeling among the farmers that
defaulters are supported and prompt re-payers are penalized by the financial
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agencies. The mean score of the repayment problems in public sector is 3.01, just
above the expected average mean score, enlightening the repayment-related
problems whereas it is 2.49 in the private sector. It means that the impact is
moderate. Waiver syndrome/ OTS policy is ranked II in both the sectors.
Inadequate return from the agricultural activity ranked third in the public sector,
whereas it is intentional failure in the private sector. The impact of natural
calamity and crop failure is the slightest problem in both sectors.
In order to verify whether there is any significant difference in the opinion
of the bank officials of the public and private sectors about the difficulties faced
by them in repayment and related aspects, student’s t- test is applied.
Table 6.2.8: Mean Score Difference in Repayment and Related Problems
Student’s ‘t’ Test
Sector N Mean SD. Df t P Value
Public 62 15.03 2.6049
85 4.594 0.000*
Private 25 12.44 1.6852
*Significant at 1 per cent level
Test result reported in table 6.2.8 shows that there is significant difference
in the opinion of the bank officials of the public and private sectors regarding the
repayment and related problems in their agricultural lending. The repayment and
related problems are more severe in the public sector than in the private sector.
Region-wise analysis of the repayment and related problems are shown in
table 6.2.9 reveals that the absence of incentives / subsidy for prompt repayment
and waiver syndrome are the main problems faced by the bank officials,
irrespective of any regional variation. Natural calamity and crop failure is the third
problem in the southern region, whereas it is inadequate return from agricultural
operations in the central region. Intentional failure of the borrowers is the third
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problem faced by the bank officials of the northern region. Inadequate return from
agriculture and intentional failure are ranked IV and V in the southern region,
whereas it is intentional failure and natural calamity in the central region.
Inadequate return from agriculture and natural calamity are ranked IV and V in the
northern region.
Table 6.2.9: Repayment and Related Problems – Mean Score and Rank –Region
Problems South Central North
Mean Score Rank Mean
Score Rank Mean Score Rank
1. Waiver Syndrome/ OTS Policy of the Government 3.36 II 2.74 II 3.25 II
2. Intentional Failure of the Borrowers 2.55 V 2.3 IV 2.92 III
3. Natural Calamity and Crop Failure 2.89 III 2.07 V 2.17 V
4. Inadequate Return of Agricultural Activity 2.72 IV 2.52 III 2.62 IV
5. Absence of Incentive/ Subsidy for Prompt Repayment 3.61 I 3.33 I 3.54 I
Mean 3.03 -- 2.59 -- 2.9 --
Source: Primary data
In order to verify whether there is any significant difference among the
selected banks from the three regions in the problems faced by them with regard to
repayment of agricultural loans, one-way ANOVA is carried out at one per cent
level of significance and the result is shown in Table 6.2.10.
Table 6.2.10: Mean Score Difference in Repayment and Related Problems One-way ANOVA
Region N Mean SD. F P- Value
South 36 15.14 2.54
5.938 0.004* Central 27 12.96 2.36
North 24 14.50 2.61
*Significant at 1 per cent level
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ANOVA result shows that there is significant difference in repayment and
related problems faced by the commercial banks across the different regions of the
State.
Overdue and Related Problems Overdue means debt not repaid within the scheduled time. The amount of
loan not repaid as per the schedule of repayment is considered as overdue. In
agricultural financing, the bankers have to face some overdue-related problems.
The opinion of the respondents relating to the overdue and related problems was
analyzed on the basis of the identified problems. The identified overdue and
related-problems of the bank officials in agricultural lending are:
1. Complicated recovery procedures
2. High share of agricultural NPA
3. Lack of sufficient support from Government agencies
4. Ineffective insurance/ compensation on calamities
5. Social/ political influence on recovery of agricultural loans
For the recovery of the agricultural loans, the banker has to follow some
intricate procedures. The procedures involve sending of notice to the defaulter as a
step for revenue recovery. There are many procedural formalities in this process
that should be followed by the banker.
Lending to Agriculture is prioritized; therefore, the banker has to face some
NPA problems. In order to meet the target obligations, the banks have to lend
agricultural advances without effective security and therefore, they have to face
some NPA problems.
For the effective realization of the loan amount, the banker has to obtain the
support of the Government agencies especially for the revenue recovery. In most
cases, the banks have to face some difficulties due to the ineffective support of the
Government machinery.
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Effective insurance coverage against natural calamities and crop failure are
essential requirements, especially for perennial and annual crops. In Kerala, there
is no such false- proof insurance coverage/ compensation package. This leads to
many problems in repayment performance of the loans.
Social and political influence on recovery of loans is another factor, which
affects the repayment performance of the borrowers. In a highly politicized
society, like Kerala, the banker has to face much hindrance in the recovery of the
overdue.
By using the weighted mean score the identified problems are ranked and
the results are incorporated in table 6.2.11.
Table 6.2.11: Overdue and Related Problems- Mean Score and Rank
Problems Mean Score Rank
1. Complicated Recovery Procedures 3.18 III
2. High Share of Agricultural NPA 2.41 IV
3. Lack of Sufficient Support From Govt. Agencies 3.4 II
4. Ineffective Insurance/ Compensation on Calamities 3.44 I
5. Social/ Political Influence on Recovery of Agricultural Loans 2.38 V
Mean 2.96 --
Sign Test P value 0.8124 Source: Primary data
Magnitude of various factors contributing overdue and related problems to
the banks were measured by computing weighted mean values of the scores
obtained by five point summated scales and they were ranked in the order of the
mean scores so they obtained. Out of the five factors contributing such problems
to the banks, three factors - inadequate insurance/ compensation on calamities,
lack of sufficient support from the Government agencies and complicated recovery
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procedures were secured scores of more than 3 and were ranked first, second and
third respectively in overdue related problems. The agricultural insurance schemes
offered by the insurance companies are not farmer friendly and suitable for the
Kerala’s peculiar agricultural situations. Therefore, farmers are not attracted to the
insurance schemes offered by the insurance companies, which adds to gravity in
recovery of agricultural loan. Share of agricultural NPA and social/political
influence on recovery were ranked in fourth and fifth position. The overall
weighted mean score of overdue and related problems of the Banks found 2.96,
which is very close to the median score of 3. This reveals that the extent of
overdue and related problems among the respondent banks is moderate.
By using one sample Sign Test the null hypothesis of µ = 3 (overdue and
related problems are moderate among the commercial banks), is tested against the
alternate hypothesis of µ<3 (overdue and related problems are relatively low) at 5
per cent level of significance. Test found at 5 per cent level of significance the
overdue and related problems among commercial banks in Kerala are not low, but
moderate.
The mean score of the overdue related problems of the public and private
sectors revealed that the public sector faces more problems than the private sector.
The sector- wise analysis shows that ineffective insurance, lack of support from
the Government agencies and complicated recovery procedures are the main
problems in both the sectors. Social/ political influence is ranked fourth in public
sector, whereas it is share of agricultural NPA in the private sector.
The sector-wise opinion of the bank officials about the overdue and related
problems in agricultural financing is shown in table 6.2.12.
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Table 6.2.12: Overdue and Related Problems – Mean Score and Rank -Sector
Problems Public Sector Private Sector
Mean Score Rank Mean
Score Rank
1. Complicated Recovery Procedures 3.24 III 3.04 III
2. High Share of Agricultural NPA 2.53 V 2.12 IV
3. Lack of Sufficient Support from Govt. Agencies 3.37 II 3.48 II
4. Ineffective Insurance/ Compensation on Calamities 3.4 I 3.52 I
5. Social/ Political Influence on Recovery of Agricultural Loans 2.55 IV 1.96 V
Mean 3.02 -- 2.82 --
Source: Primary data
In order to verify whether there is any significant variation in the opinion of
the bank officials of the public and private sectors about overdue and related
problems, student’s t- test is applied and the result is shown in table 6.2.13.
Table 6.2.13: Mean Score Difference in Overdue and Related Problems
Student’s ‘t’ Test
Sector N Mean SD Df t P. Value
Public 62 15.097 2.726 85 1.618 0.109
Private 25 14.120 2.027
Not Significant
The P- value of the student’s ‘t’ test is 0.109 and so the test result reveals
that there is no significant difference in the opinion of the bank officials in the
different sectors. The extent of problems confronted by the public sector is slightly
higher than that of the private sector.
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The region-wise analysis of the overdue and related problems is included in
table 6.2.14. The analysis shows that the region-wise mean score of the overdue
and related problems are 2.95, 2.82 and 3.15 respectively in south, central and
northern regions. The region-wise analysis of the overdue related problems
revealed that lack of sufficient support from Governmental agencies is the main
problem in the southern region, whereas it is ineffective insurance/ compensation
on calamities in the central and northern region. Complicated recovery procedure
is ranked third in all the regions. Social/ political influence is ranked fourth in
southern region, whereas it is fifth in the central and northern regions. The region-
wise mean score divulges that the northern region has more overdue related
problems than the rest.
Table 6.2.14: Overdue and Related Problems – Mean Score and Rank- Region
Problems South Central North
Mean Score Rank Mean
Score Rank Mean Score Rank
1. Complicated Recovery Procedures 3.14 III 3.04 III 3.42 III
2. High Share of Agricultural NPA 2.36 V 2.3 IV 2.62 IV
3. Lack of Sufficient Support From Govt. Agencies 3.42 I 3.26 II 3.54 II
4. Ineffective Insurance/ Compensation on Calamities 3.39 II 3.37 I 3.58 I
5. Social/ Political Influence on Recovery of Agricultural Loans 2.42 IV 2.15 V 2.58 V
Mean 2.95 -- 2.82 -- 3.15 -- Source: Primary data
In order to verify whether there is any region-wise variation in the problems
faced by the bank officials in overdue and a related problem, one-way ANOVA is
applied and the result is shown in table 6.2.15.
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Table 6.2.15: Mean Score Difference in Overdue and Related Problems
One Way ANOVA
Region N Mean SD. F. P- Value
South 36 14.72 2.479
2.725 0.071 Central 27 14.11 2.722
North 24 15.75 2.345 Not Significant
The P- value of the one-way ANOVA is 0.071 which reveals that there is
no significant statistical difference in the opinion of the bank officials in the
different regions relating to the overdue and related problems. The bank officials
of the different regions have to face somewhat similar, overdue and related
problems. The mean score reveals that extent of problems confronted in the
northern region is faintly higher than that of the southern and central regions.
General Problems In addition to the lending and monitoring, repayment, and overdue and
related problems, the banks have to face some general problems in agricultural
lending. The identified general problems in the agricultural lending are:
1. Large Number of Small Borrowings
Agricultural lending is normally for small amounts, so the number of
borrowers is very large. Therefore, the banks have to open and operate a large
number of accounts. The maintenance of a large number of loan accounts adds to
the transaction cost of the banks.
2. Continuous Renewal and Enhancement of Agricultural Loan Amount
It is observed that in agriculture financing, there is a practice of ‘ever-
greening’ of the loan accounts. It is a general practice in farm credit that the
borrower, on maturity, renews the loan amount either paying or not, the interest
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component. If the borrower does not pay the interest components, the loan amount
is enhanced to cover both the principal and interest. This practice is observed as
‘ever greening’ and it has a cumulative effect.
3. Absence of Viable Agricultural Projects
The RBI guidelines stipulate a distinct target of 18 per cent of the NBC to
agriculture. To attain the target, the banks have to identify viable agricultural
projects. The viability is measured in the efficiency of revenue to recover cost and
offer a normal rate of return. It is observed that the small and marginal farmers
have no support or guidance for the preparation of project reports and for putting
them into practice. This situation creates some difficulties to the banks to make
agriculture lending.
4. Target Stipulations
The target stipulation of the RBI creates some difficulties to the banks in
agricultural lending. For the attainment of target, the banks are supposed to make
some adjustments in their lending, which results to the flow of agricultural credit
to other non- agricultural activities, especially through agricultural gold loans.
5. Limited Scope for Agricultural Expansion
The scope of agriculture becomes limited in the State, owing to greater
urbanization, industrialization, mushrooming service industry and fragmented
agricultural area. Industrialization and urbanization limit the scope of agriculture
and this problem has to be tackled by the banks in agricultural lending.
6. Apathy to Agricultural Activity
The greater affinity to employment and lack of interest in taking up
agriculture as an occupation changed the attitude of the society to agriculture. The
inadequate returns of the agricultural activity, social status enjoyed by other
economic activities, labour problems, etc. are the major contributing factors which
change the attitude towards agriculture.
278
7. Small and Scattered Land Holdings
The land holding of the State is very small and fragmented. This holding
pattern has much adverse impact on the agricultural operations. The smallholdings
of agricultural land limit the scope of agricultural activities in the State.
The general problems faced by the bank officials in agricultural financing
are analyzed in the following tables and table 6.2.16 gives the mean score and rank
of the general problems.
Table 6.2.16: General Problems - Mean Score and Rank
Problems Mean Score Rank
1. Large Number of Small Borrowings 3.21 IV
2. Continuous Renewal and Enhancement of Agricultural Loan Amount
3.24 III
3. Absence of Viable Agricultural Projects 2.83 VII
4. Target Stipulations 3.18 V
5. Limited Scope for Agricultural Expansion 3.09 VI
6. Apathy to Agricultural Activity 3.34 I
7. Small and Scattered Land Holdings 3.25 II
Mean 3.16 --
Sign Test P value 0.0625
Source: Primary data
Distribution of problems in general nature which the commercial banks in
Kerala encountered when they involved in agricultural lending operations was
shown high degree of negative skewness. Of the seven problems of this nature
which identified for the purpose of this study, six problems have obtained the
mean score of above the average score of three and the mean score of only one
among them - absence of viable agricultural projects, fall below the average.
Apathy to agricultural activity and small and scattered land holding are the major
279
problems of agricultural lending in Kerala, which are faced by the commercial
banks there.
For drawing statistical inference on the extent of general problems in
agricultural lending existing among the commercial banks of Kerala, the null
hypothesis of µ = 3 (general problems in agriculture lending are moderate among
the commercial banks) is tested against the alternate hypothesis of µ>3 (general
problems in agriculture lending are relatively high) at five per cent level of
significance by using non parametric test of One Sample Sign test. As the
probability value determined by the test procedure is greater than the significance
level of 0.05, it should reject the alternate hypothesis of general problems in
agriculture lending are relatively high. Thus, it can be statistically inferred that the
general problems in agriculture lending are moderate.
Sector- wise analysis of the general problems in agricultural financing is
disclosed in table 6.2.17.
Table 6.2.17: General Problems in Agricultural Lending – Mean Score and Rank –Sector
Problems Public Sector Private Sector
Mean Score Rank Mean
Score Rank
1. Large Number of Small Borrowings 3.34 IV 2.88 V
2. Continuous Renewal and Enhancement of Agricultural Loan Amount
3.39 I 2.88 V
3. Absence of Viable Agricultural Projects 2.77 VII 2.96 IV
4. Target Stipulations 3.27 V 2.96 IV
5. Limited Scope for Agricultural Expansion
3.11 VI 3.04 II
6. Apathy to Agricultural Activity 3.37 II 3.28 I
7. Small and Scattered Land Holdings 3.35 III 3.00 III
Mean 3.23 -- 3.00 --
Source: Primary data
280
The mean score of the general problems of the public and private sectors is
3.23 and 3 which shows that they face some general problems in agricultural
financing. The mean score of the public sector is more than the private sector
which indicates that the public sector faces more general problems in agricultural
lending. The sector-wise opinion of the bankers reveals that the continuous
renewal and enhancement are the severe problems in the public sector, whereas it
is apathy to agriculture in the private sector. Limited scope for the agricultural
expansion is ranked second in the private sector, whereas it is apathy to agriculture
in public sector. Small and scattered landholding, small borrowing and target
based agricultural lending are ranked third, fourth and fifth in the public sector,
whereas it is small and scattered land holding, target based lending and continuous
renewal and enhancement of loan, in private sector. Absence of viable agricultural
projects is the only problem in the public sector having the calculated value of less
than the expected mean score of three.
In order to verify whether there is any significant statistical variation in the
opinion of the bank officials about the general problems in agricultural financing,
student’s t- test is applied and the result is shown in table 6.2.18.
Table 6.2.18: Mean Score Difference in General Problems
Student’s ‘t’ Test
Sector N Mean SD. Df. t. P- Value
Public 62 22.613 2.706
85 2.704 0.008* Private 25 21.000 1.957
* Significant at 1 per cent level
The student’s t test shows a P- value of 0.008, which means that there is
significant sector-wise variation in the opinion of the bank officials regarding the
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general problems in agricultural lending. The extent of problems confronted by the
respondents of the public sector is higher than that of the private sector.
The region-wise analysis of the general problems is incorporated in table
6.2.19.
Table 6.2.19: General Problems in Agricultural Lending- Mean Score and Rank -
Region
Problems
South Central North Mean Score Rank Mean
Score Rank Mean Score Rank
1. Large Number of Small Borrowings
3.14 V 3.18 II 3.33 III
2. Continuous Renewal and Enhancement of Loan Amount
3.17 IV 3.18 II 3.42 II
3. Absence of Viable Agricultural Projects
2.67 VI 2.81 V 3.08 IV
4. Target Stipulations 3.31 II 3.18 II 3.00 V
5. Limited Scope for Agricultural Expansion
3.14 V 3.11 III 3.00 V
6. Apathy to Agricultural Activity 3.28 III 3.44 I 3.33 III
7. Small and Scattered Land Holdings
3.33 I 2.96 IV 3.46 I
Mean 3.1 -- 3.12 -- 3.23 --
Source: Primary data
The region- wise analysis reveals that the small and scattered land holding
is the major problem faced by the bank officials in the southern and northern
regions, whereas it is apathy to agriculture in the central region. Target-based
lending is ranked second in southern and central regions whereas it is continuous
renewal and encashment of the loan in the northern region. Apathy to agricultural
282
activity is ranked third in the south and northern regions, whereas it is limited
scope for agricultural expansion in the central region. In the southern region, all
the identified problems except the absence of viable projects in agriculture have a
higher calculated mean score than the expected mean score of 3. In the central
region, small and scattered land holding and absence of viable agricultural projects
have a calculated mean score of less than expected mean score of three. In the
northern region, all the problems have mean score above the expected mean score
of three.
In order to verify whether there is any statistical variation in the general
problems faced by the banks in agricultural financing, One way ANOVA is
applied and the result is incorporated in table 6. 2. 20.
Table 6.2.20: Mean Score Difference in General Problems
One way ANOVA
Region N Mean SD. F. P- Value
South 36 22.028 2.467
0.567 0.569 Central 27 21.889 3.142
North 24 22.625 2.163 Not Significant
Variance analysis is used to test the statistical significance of the extent of
the general problems across different regions. The P- value of the one-way
ANOVA reveals that the weighted mean score of general problems across
different regions is not statistically significant which means there is no region-
wise difference in the extent of general problems. The mean score of the south and
north is higher than the central region which indicates that the degree of general
problems in central region is lower than the rest.