The Report of the Committee of Direction of All-India Rural Credit Survey has pointed out the unsatisfactory performance of the land mortgage banks (now called the land development banks) in the following manner:
(a) These banks raise inadequate funds in a manner ill-rated to demand and usually lend them in a manner uncoordinated with development;
(b) They act as if prior debts and not production had claim on its attention; and
(c) They reach only the large cultivator and reach him late.
Evaluation of Cooperative Banking:
Progress of Cooperative Credit:
As a result of effective steps taken by the government and the Reserve Bank of India, the cooperative banking system in India made tremendous progress after independence. The cooperative credit which was only 3.1 per cent of the total rural credit in 1951-52, rose to 15.5% in 1961-62 and to 22.7 per cent in 1970-71.
The total amount of short-term credit granted by the cooperatives increased from Rs. 23 crore in 1951 -52 to Rs. 203 crore in 1961-62 and further to Rs. 1425 crore in 1979-80. Thus, during the period of about two decades (i.e., 1960-61 to 1979- 80), the short-term and medium-term loans increased by more than seven times.
Table 1 shows that cooperative credit increased significantly from Rs. 3874 crore in 1985-86 to Rs. 10479 crore in 1995-96, and further to Rs. 24296 crore in 2002-03. Short-term cooperative credit increased from Rs. 2787 crore in 1985-86 to Rs. 8331 crore in 1995-96 and to Rs. 20247 crore in 2002-03. Medium-term and long-term cooperative loans increased from Rs. 1087 crore in 1985-86 to Rs. 2148 crore in 1995-96 and to Rs. 4049 crore in 2002-03.
Table-2 shows that during 10th Five Year Plan (2002-03 to 2006-07), agricultural credit from cooperative banks increased from Rs. 23716 crore (34%) to Rs. 33174 crore (22%). In 2009-10, it was Rs. 32925 crore (20%).
The following are the factors responsible for the unsatisfactory performance of land development banks:
I. Uneven Growth:
There has been uneven growth of land development banks. These have shown some progress in the states like Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra, Gujrat. Other states have made very little progress. About half of the states have no land development bank.
II. Problem of Overdues:
The major problem faced by the land development banks is the existence of heavy overdues. Moreover, the overdues are continuously rising over the years. In 1991-92, the percentage of the overdues 6f the land development banks has been put between 42 to 44 per cent.
Faulty loaning policies, inadequate supervision, over-utilisation of loans, ineffective measures for recovery, willful defaulters, etc. are the main causes of unsatisfactory level of overdues. In view of the seriousness of the problem, the state governments have been advised to draw up and implement time-bound programmes for special recovery drives.
III. Lack of Trained Staff:
In spite of quantitative growth of the land development banks, they have not shown much qualitative improvements in the field of granting loans largely due to inadequate technical and supervisory staff. Necessary changes in the legislation of cooperative institutions are also required if the lending activities are to be diversified for non-traditional developmental purposes and on the basis of non-landed security.
IV. Other Defects:
Other defects of the land development banks can be summarised below:
(a) These banks charge very high interest rates on the loans provided by them.
(b) There is much delay and red-tapism in the granting of loans,
(c) Second loan is not advanced unless the first is not repaid.
(d) Installments and the period of loans are not fixed on the basis of the repaying capacity of the borrowers.
(e) The procedure of receiving a loan from these banks is so complicated that the agriculturist is forced to seek help from the money lender,
(f) Weaker sections of the rural society such as landless labourers, village artisans and marginal farmers, are generally unable to secure loans from these banks for their productive activities simply because they do not have land or adequate security to offer against loans.
(g) Mostly loans are given for the repayment of old loans and for development purposes.
Report of Rural Credit Survey:
The Report of the Committee of Direction of All-India Rural Credit Survey has pointed out the unsatisfactory performance of the land mortgage banks (now called the land development banks) in the following manner:
(a) These banks raise inadequate funds in a manner ill-rated to demand and usually lend them in a manner uncoordinated with development;
(b) They act as if prior debts and not production had claim on its attention; and
(c) They reach only the large cultivator and reach him late.
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