Doubling of Agriculture Credit - NABARD

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					              Report on the
Doubling of Agriculture Credit Programme
         (2004-05 to 2006-07)




            -A Study in Select States




National Bank for Agriculture and Rural Development
    Department of Economic Analysis and Research
                       2009
                               PREFACE
The Government of India, as part of its strategy to boost agriculture
production, announced a package to double the flow of institutional credit
to agriculture within three years starting 2004-05. Consequently, targets
were set and the programme was implemented during the period 2004-
05 to 2006-07. NABARD and RBI were vested with the responsibility of
overseeing the implementation of the programme. On completion of the
programme, NABARD commissioned studies in select states, viz; Madhya
Pradesh, Maharashtra, Rajasthan, Tamil Nadu and Uttar Pradesh so as
to get a feed back on the programme, insights into the mechanisms and
strategies adopted by banks in achieving the targets, review the
implementation of Kisan Credit Cards(KCC) as a product for ensuring
hassle-free credit. Institute of Development Studies, Jaipur, carried out
the study in Rajasthan, Xavier Institute of Development Action and
Studies, Jabalpur in Madhya Pradesh, Bankers' Institute of Rural
Development, Lucknow in Uttar Pradesh, Tamil Nadu Agricultural
University, Coimbatore in Tamil Nadu and Gokhale Institute of Politics
and Economics, Pune in the State of Maharashtra.A consolidated report
based on the findings of the studies in these five States has been prepared
by Institute of Development Studies, Jaipur.

The studies revealed that there were notable inter-agency and inter-district
variations with regard to year of achievement of the doubling of agriculture
credit as well as in terms of 'number of times' the target was achieved. In
all the States, the commercial banks fared better than the RRBs and Co-
operatives. The implementation of the programme resulted in a change
in the share of various agencies in the agriculture credit flow between
2003-04 and 2006-07. In Uttar Pradesh and Rajasthan, the share of RRBs
declined drastically while that of Co-operatives declined in all the States,
excepting Rajasthan. The study also brings out the fact that in the current
Management Information System (MIS), there is no precise definition and
provision for recording of new farmers / new accounts in any of the Rural
Financial Institutions(RFIs). There is a need to evolve a uniform reporting
system for "new farmers". Suggestion from farmers included minimal
documentation, lower interest rates, flexibility in repayments with rebates
in case of crop failure, creation of awareness about KCC, etc. The study
has further suggested that there is a need to orient agriculture credit
policies in a manner that is more conducive for the marginal and small
farmers, tenant farmers, share croppers and oral lessees in accessing
credit from formal institutions.

    January 29, 2009                           Umesh Chandra Sarangi
        Mumbai                                       Chairman
                                                     NABARD

                                    iii
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                                                                      iv
                                        CONTENTS
Chapter        No.     Particulars                                                         Page

Chapter 1       Introduction ............................................................. 1
                A Background to Doubling of Agriculture Credit ............ 3
               1.1
                Lending Targets ............................................................ 5
               1.1.7
                Objectives .................................................................... 10
               1.3
                Methodology ................................................................. 11
               1.4
Chapter 2       Trend in Credit Flow, Loan Accounts
                and Coverage .......................................................... 13
           2.1 Doubling of Credit Flow : Aggregate Level ................... 13
           2.2 District-wise Credit Disbursed ...................................... 22
           2.3 Short-term and Long-term Credit Flows ....................... 34
           2.4 Coverage of New Farmers ............................................. 39
           2.5 Farmers in Distress ..................................................... 42
           2.6 Farmers in Arrears ....................................................... 44
           2.7 One Time Settlement (OTS) .......................................... 45
           2.8 Redemption from Informal Sources of Credit ................ 46
           2.9 Share Croppers, Tenant Farmers and Oral Lessees ....... 47
           2.10 Agri Clinics/Agri Business ........................................... 49
           2.11 Institutional Credit to Small and Marginal
                Farmers (SF/MF) ......................................................... 51
           2.12 Monitoring Information System (MIS) ........................... 53
Chapter 3       Kisan Credit Cards : Some Issues ........................... 58
           3.1 KCC : progress ............................................................. 58
           3.2 District/Branch Level KCC Position .............................. 63
           3.3 Suggestions for Improvement ....................................... 73
Chapter 4       Credit Flow at Grassroot Level :
                Farmers' Perceptions .............................................. 74
           4.1 Social Category of Farmers ........................................... 74
           4.2 Land Holding ............................................................... 76
           4.3 Primary/Secondary Occupations and Income
                Therefrom .................................................................... 79
           4.4 Cost of Cultivation and Cropping Pattern ..................... 86
           4.5 Category of Borrower & Loan Restructured ................... 88
           4.6 Kisan Credit Card : Issues and Concerns
                and Farmers in Arrears ................................................ 90
           4.7 Projects ...................................................................... 103
           4.8 Repayment ................................................................. 108
           4.9 Some Additional Observations .................................... 109
Chapter 5       Summary and Conclusions .................................... 113
Annexure 1      Credit Widening and Deepening through
                Commercial Banks - 2003-07 ..................................... 127

                                                 v
                                         LIST OF TABLES

No.             Title                                                                                  Page No.

Table 1.1      : Decadal Average Growth Rate of Direct Institutional Credit ............. 2
Table 1.2      : Selected Districts ............................................................................ 11
Table 1.3      : Number of Selected Beneficiaries ................................................... 12
Table 2.1      : Credit Flow across States ............................................................... 14
Table 2.2      : Share of Various Types of Banks in Credit Flow ............................ 17
Table 2.3      : Sector-wise Flow of Credit- Term Loan ........................................... 19
Table 2.4      : Credit Flow Share in Term-loan ..................................................... 21
Table 2.5      : Credit Disbursed since 2003-04 ..................................................... 23
Table 2.6      : District- wise Commercial Banks ................................................... 24
Table 2.7      : District-wise Cooperative Banks ..................................................... 25
Table 2.8      : District wise PLDBs Credit Flow ..................................................... 26
Table 2.9      : District- wise Regional Rural Banks Credit Flow ............................ 27
Table 2.10 : District-wise Credit Flow to Agriculture: Tamil Nadu ...................... 28
Table 2.11 : Number of times increase in credit during the
             doubling period .............................................................................. 29
Table 2.12 : District wise Increase of Agricultural Credit in the Doubling
             Period Number of times increase in credit during the
             doubling period .............................................................................. 30
Table 2.13 : District-wise Credit Flow to Agriculture: Madhya Pradesh .............. 31
Table 2.14 : Financial Institution- wise Credit Flow under
             Crop and Term Loans ..................................................................... 35
Table 3.1      : Number and Amount Sanctioned under KCC in Tamil Nadu ......... 59
Table 3.2      : Agency-wise Kisan Credit Cards Issued During the Year ............... 60
Table 3.3      : KCC Issued Since Inception Cumulative Position as On ................ 60
Table 3.4      : Fresh Kisan Credit Cards Issued ................................................... 61
Table 3.5      : Trend in issuing KCCs and the amount sanctioned ....................... 61
Table 3.6      : Achievement of the targets in implementing
                 Kisan Credit Card Scheme ............................................................. 62
Table 3.7      : Share of agencies in Issuing KCCs and the amount
                 sanctioned ...................................................................................... 62
Table 3.8      : Expansion of KCC .......................................................................... 63
Table 3.9      : Number of New and Existing KCCs ................................................ 64



                                                        vi
No.             Title                                                                               Page No.

Table 3.10 : Number of KCCs Renewed and Whose Limit
             has been Increased ........................................................................ 65
Table 3.11 : Number of Dormant KCCs ............................................................. 65
Table 3.12 : Cumulative Number and Amount Sanctioned under
             KCC until March, 2007 in Cuddalore and Virudhnagar
             Districts and Tamil Nadu ............................................................... 67
Table 3.13 : Average Number of KCC accounts per Branch in
             Cuddalore and Virudhunagar Districts ........................................... 67
Table 3.14 : Average Amount Disbursed under New and Total
             KCC Accounts per Branch in Cuddalore and
             Virudhnagar Districts ..................................................................... 68
Table 3.15 : Number of New KCC Issued ........................................................... 69
Table 3.16 : KCCs Performance in Madhya Pradesh .......................................... 70
Table 3.17 : Details on KCC implementation at Branch level ............................. 77
Table 4.1     : Land Holding of Farmers in Madhya Pradesh ................................ 77
Table 4.2     : Average Size of Farm Holdings in Cuddalore and
                Virudhnagar districts ...................................................................... 78
Table 4.3     : Annual Primary and Secondary Source Income (Rs.)
                (KCC farmers) ................................................................................. 80
Table 4.4     : Annual Income from Other Source ................................................. 81
Table 4.5     : Total Annual Family Income .......................................................... 82
Table 4.6     : Income and Occupation of the Madhya Pradesh Farmers .............. 84
Table 4.6A : Average Income of the Madhya Pradesh Farmers ........................... 85
Table 4.7     : Category of Borrower: Rajasthan .................................................... 89
Table 4.8     : Coverage of New Beneficiaries: Maharashtra .................................. 89
Table 4.9     : Classification of Beneficiaries who Availed of
                Crop Loan and Term Loans : Maharashtra .................................... 90
Table 4.10 : Opened KCC A/C Alone or through Some Other Person ................ 91
Table 4.11 : Details on opening of KCC account: Madhya Pradesh .................... 92
Table 4.12 : Actual Utilization of Withdrawal of fund from
             KCC Account: Uttar Pradesh .......................................................... 94
Table 4.13 : Average Cost Spent by Beneficiaries on Procurement
             of Documents: Maharashtra ........................................................... 99
Table 4.14 : Withdrawal from KCC (Rs.) ......................................................... 100
Table 4.15 : Category of Borrower .................................................................... 101
Table A1      : Credit Flow through Scheduled Commercial
                Banks - 2003-07 .......................................................................... 127



                                                      vii
                  LIST OF ABBREVIATIONS
ACABC      Agri Clinics & Agri Business Centres
ACP        Annual Credit Plan
CBs        Commercial Bank/s
CRR        Cash Reserve Ratio
DCCB       District Central Cooperative Bank
DD         Dairy Development
DLCC       District Level Credit Committee
DLTC       District Level Technical Committee
GDP        Gross Domestic Product
GOI        Government of India
GLC        Ground Level Credit
Ha./ ha.   Hectare
JLG        Joint Liability Group
KCC        Kisan Credit Card
LBR        Lead Bank Return
LI         Lift Irrigation
LT         Long Term
MF         Marginal Farmers
MI         Minor Irrigation
MIS        Management Information System
NABARD     National Bank for Agriculture and Rural Development
NCAER      National Council for Applied Economic Research
NFS        Non Farm Sector
NOC        No Objection Certificate
NPA        Non performing Asset
OPS        Other Priority Sector
OTS        One Time Settlement
PACS       Primary Agriculture Credit Society
PLP        Potential Linked Credit Plan
RBI        Reserve Bank of India
RFI        Rural Financial Institution
RRB/s      Regional Rural Bank/s
SACP       Special Agricultural Credit Plans
SAMIS      Service Area Monitoring & Information System
SAO        Short-term Agricultural Operations
SC/ST      Schedule Caste / Schedule Tribe
SF         Small Farmers
SHGs       Self Help Groups
SLBC       State Level Bankers Committee
SLR        Statutory Liquidity Ratio
ST         Short Term
VVV        Vikas Volunteer Vahini


                                viii
                              CHAPTER 1
                             Introduction
In developing countries like India, the development of agriculture
sector is important for a variety of reasons. Agriculture is still the
primary source of livelihood for majority of people in rural areas and
this livelihood needs to be made sustainable for many. It provides
demand for industrial goods and in India, whenever agriculture sector
has grown at 3-4 percent; industrial sector has grown at more than
6 per cent. It has been observed that the required growth of
productivity in agriculture means that more capital must be invested
in it. Farmers need much more capital than they can afford to save
and small and marginal farmers require a higher input of capital as
their savings were meagre. Credit was a condition that enables a
person to extend his or her control over ownership of resources. The
Indian agriculturist was not only capital starved, but faces vagaries
of nature too. Irrigated agriculture forms roughly 40 per cent of total
cropped area.

Credit is an important input in the development of agriculture. Credit
played a critical role in the Green Revolution. However, in the recent
past, since the initiation of financial reforms in India, the flow of credit
to agriculture in relation to the demand for it has slowed down. Indian
agriculture is also facing a crisis. The advent of new technology has
raised input costs. Over the years, prices of fertilizers, seeds, diesel
and inputs have gone up. Farmers have committed suicide in states
like Maharashtra, Punjab, Andhra Pradesh, Karnataka and so on. The
59th round of NSSO on the status of Indian Farmers presents a sorry
picture.

Indian agriculture has undergone structural changes in recent times.
The nature of Indian agriculture has geared towards small farms.
There was marginalization of Indian agriculture; too many small
cultivators were cultivating a small proportion of land and few large
cultivators were cultivating large tracks of land. This meagre base of
Indian agriculture was vulnerable. Indian agriculture has also
undergone changes in its output mix and thereby input mix. These
changes were reflected by the shift in area from foodgrains to non-
food grains, and within foodgrains from coarse cereals to finer cereals.
During the nineties and thereafter, the area under foodgrains has
declined. The shift towards non-food grains has been observed across
states with the exception of Bihar, Haryana, Jammu & Kashmir,
Karnataka, Punjab, Uttaranchal, Uttar Pradesh and West Bengal. The

                                     1
maximum shift away from food grain crops was visible in Kerala
followed by Jharkhand, Gujarat, Orissa and Assam. In Bihar, 87 per
cent increase in foodgrain crop acreage has been observed. In certain
quarters, it has been argued that sleeping giant was awake now. The
decline in the area under coarse cereals was sharper and widespread.
Oilseeds, cotton, tobacco and sugarcane have gained at the expense
of cereals in terms of area. These crops have strong links with the
market. The credit requirement also goes up with these changes and
so does the vulnerability. Changes in cropping pattern towards such
crops influence change in input structure. The relative prices of inputs
too have changed over time. Subsidies have reduced, but were still
significant. Inputs like fertilisers, insecticides, mechanical power and
improved seeds were vital parts of the input structure. They have
replaced organic manure (though getting back into reckoning), animal
power and farm-retained seeds. Farmers expend sizeable part of their
resources on purchased inputs. Hence farmers have to take recourse
to credit to a much larger extent than in the past for purchase of
inputs. The flow of SAO credit in absolute terms has improved. The
crop loan from RFIs covers around a quarter of input cost. The result
was that farmers have to depend on other sources of credit including
own savings to meet more than three-fourths of the cost of material
inputs. On the other hand, as a percentage of gross value of output,
credit has stagnated at around 5-6 per cent when inputs as a
percentage of value of output have been around 25 per cent.

Banks dispense two types of credit viz., short-term credit for seasonal
agricultural operations and long-term credit for asset creation. Table
1.1 shows flow of credit to agriculture. The growth rate of aggregate
short-term credit by all agencies has grown at about 14 percent in
all the decades with marginal variations. There has been decline over
each decade in growth rate of long-term credit. Among the financial
institutions, credit flow to agriculture on both short-term and long-
term hectare basis has shown a declining growth over the decades.
Cooperative sector has managed to maintain the growth pattern with
minor variations across decades.
Table 1.1: Decadal Average Growth Rate of Direct Institutional Credit
                                                                                          (%)
Decades     Cooperative Banks   Regional Rural Banks   Commercial Banks           Total
            Short   Long        Short     Long         Short    Long      Short       Long
            Term    Term        Term      Term         Term     Term      Term        Term
1970s       10.6    13.9        334.8     426.8        28.2     29.9      14.5        20.2
1980s       12.5    11.0        19.8      18.5         16.3     18.6      13.9        14.8
1990s       11.9    13.1        32.7      10.6         17.8     12.1      14.6        11.9
Source : NABARD

                                            2
1.1 A Background to Doubling of Agriculture Credit

1.1.1 Ratio of Agricultural Credit to Agricultural GDP and Total Credit
Despite a well- developed credit delivery structure, the outreach of
banks has remained restricted for various reasons. The ratio of
agricultural credit to agricultural GDP increased from 5.4 percent in
1970s to 8.7 per cent in 2001-02, agricultural credit as a proportion
of total credit had decelerated from 20.5 per cent to 10.5 per cent
during the same period indicating lower deployment of credit in
agriculture.

1.1.2 Agriculture Credit by Commercial Banks
Under directed lending, a target of 18 per cent of net bank credit has
been stipulated for domestic scheduled commercial banks for lending
to agriculture. Although the target for lending to agriculture has not
been achieved by most of the public and private sector banks, the
amount of outstanding advances to agriculture in absolute terms has
increased continuously over the years. The total outstanding
agriculture advances of public sector bank increased from Rs.21204
crore as on 31.3.1994 to Rs.73507 crore as on 31.3.2003, registering
an annual compound growth rate of 14.81 per cent. The total
agriculture advances outstanding of private sector banks has
increased from Rs.591 crore as on 31.3.1994 to Rs.11873 crore as
on 31.3.2003, registering an annual compound growth rate of’ 39.57
per cent. In the year 2002-03, only five public sector banks and two
private sector banks achieved the 18 per cent target of agriculture
lending.

1.1.3 Special Agricultural Credit Plans
Public sector banks have been formulating Special Agricultural Credit
Plans (SACP) since 1994 with a view to achieve marked improvement
in the flow of credit to agriculture. Under SACP, banks were required
to fix self-set targets for disbursement during a year (April-March).
Banks have been advised by the Reserve Bank to fix the targets
showing an increase of about 20 to 25 per cent over the disbursement
made in the previous year. With the introduction of SACP, the flow of
credit to agricultural sector by public sector banks had increased
considerably.




                                   3
1.1.4 Tenth Plan Projections and Achievements
According to the Tenth Plan projections, the flow of credit to
agriculture and allied activities was expected to be of the order of
Rs.736570 crore, as per details given below:
                                                                                    (Rs. Crore)

 Year                        ST          MT/LT                Total         Growth (%)
 2002-03                      44929         37144               82073               22.9
 2003-04                      55442         50516              105958               29.1
 2004-05                      68582         68703              137285               29.6
 2005-06                      85041         93435              178476               30.0
 2006-07                     105707        127071              232778               30.4
 Total                       359701        376869              736570
Note: ST- short-term, MT/LT- medium term and long term.
Source: Working Group on Agricultural Credit and Cooperation, Planning Commission.


1.1.5 Agency-wise Ground Level Credit Flow for Agriculture and Allied
Activities
Despite the extensive outreach of rural and semi-urban branch
network of commercial banks (about 33000), cooperative banks (about
1 lakh) and RRBs (about 14000), the estimated actual flow of credit
to agriculture from formal rural financial institutions (RFI) during the
first year of the Tenth Five Year Plan, i.e. 2002-03 stood at Rs.69560
crore against the projected amount of Rs.82073 crore. Similarly, the
estimated ground level credit flow to agriculture during 2003-04 was
Rs.80000 crore as against projected amount of Rs.105958 crore.

                                                                         (amount in Rs. Crore)

Agency        1997-98        1998-99   1999-2000   2000-01     2001-02   2002-03    2003-04*
Cooperative
Banks             14085        15957       18280      20718     23524       23935       30080
Regional
Rural Banks           2040      2460        3172       4220      4854        6070        6080
Commercial
Banks             15821        18443       24733      27807     33587       39774       43840
Other
agencies                                     103         82         80         80

Total           311958         36860       46268      52827     62045       69560       80000


Note: *- estimated.



                                             4
1.1.6 Lending Targets
The key challenge before the banking sector was to double lending
to agriculture credit in three years time. In order to achieve the above
objective, a target of 30 per cent growth rate was proposed for the
year 2004-05. A detailed programme was worked out in consultation
with NABARD and Indian Bank Association (IBA) to increase the
ground level credit flow to agriculture by 30 per cent during 2004-
05.

1.1.7 Lending Targets of Commercial Banks for 2004-05
IBA prepared an action plan to achieve 30 per cent growth in
disbursement, in respect of public sector and private sector
commercial banks. IBA also worked out the details of achieving this
target with its member banks and monitor the same. With the
expected 30 per cent growth rate, disbursement from commercial
banks was expected to increase from Rs.43840 crore during 2003-
04 to Rs.56992 crore during 2004-05. IBA was also associated with
NABARD in fixing the state-wise/ district-wise targets. As a part of
commercial banks’ effort to enhance the flow of credit, the following
additional steps were to be taken by the IBA and its member banks:

1.1.8 Covering 50 Lakh Additional Farmers
Under the framework of SCAP, banks were to try to bring into their
fold at least 100 new farmers at each branch during the current year.
With 33000 rural branches and over 15000 semi-urban branches, this
effort was expected to enlarge the universe of new farmers by around
50 lakh.

1.1.9 Kisan Credit Card Scheme
Banks were to enlarge the coverage under Kisan Credit Card (KCC)
Scheme to all eligible farmers and it was proposed that the Scheme
should take care of full production, consumption and investment
credit needs of the farmers.

1.1.10 Promoting Investment in Agriculture
Each rural branch was to take up at least one large agricultural project
in the area of land rejuvenation, irrigation or micro-irrigation, sprinkler
irrigation, water-shed management, village ponds development, farm
ponds promotion, dry-land farming, etc.




                                    5
1.1.11 Agri-Clinics
In every district, banks were to finance at least ten agri-clinics in 2004-05.

1.1.12 Special Scheme for Distressed Farmers
A special Scheme was to be worked out for the distressed category of
farmers who had suffered production and income losses on account
of successive recurrence of natural calamities, for the districts
classified as such by the State Governments. Similarly, another special
arrangement was to be worked out to meet credit needs of farmers
who had earlier defaulted in repayment of loans on account of genuine
problems faced by them and their loan accounts were settled through
compromise/ write offs.

1.1.13 Tie-ups with Corporate Sector
Banks were to enter into increasing tie-ups with corporate sector for
establishing linkages for funding farmers in a cost-effective manner.

1.2 Lending Targets of RRBs

Lending by RRBs in agriculture stagnated around Rs.6000 crore
during 2002-03 and 2003-04. With a view to enable RRBs to increase
their credit disbursement, NABARD proposed redeployment of part
of their deposits with the sponsor banks. As on 31.3.2003, the
investment of the RRBs aggregated to Rs.33063 crore including their
deposits with the respective sponsor banks. After accounting for their
SLR requirements and leaving adequate margin, RRBs could withdraw
Rs.2443 crore from deposits with their sponsor banks for on-lending
to small and marginal farmers, rural artisans, etc. under specific
schemes drawn up in consultation with NABARD. This initiative apart
from increasing the flow of credit to the system was also to enable
RRBs to realign themselves with their original mandate. NABARD has
been confident that it would be possible to register a growth rate of
40 per cent in RRBs thereby achieving disbursement of Rs.8512 crore
during 2004-05.

1.2.1 Lending Targets of Cooperative Credit Institutions
A 30 per cent growth in disbursement by cooperatives was to increase
their credit flow from Rs.30080 crore to Rs.39104 crore. Of Rs.9024
crore, additional disbursement of Rs.5350 crore was to be made
available by NABARD in the following manner :


                                      6
                                                                                        (Rs. Crore)
Additional refinance support for crop loans from NABARD                                  2600*
Additional refinance support for Long-term Credit Institutions from NABARD               1200#
Liquidity support for drought effected states from NABARD                                1500$
Financing tenant farmers by NABARD                                                       50@
Total                                                                                    5350
Note : * NABARD’s refinance support during 2003-04 was Rs. 8700 crore, registering a growth
       of around 9%. NABARD has reviewed the position and found that ST/SAO refinance
       support can be increased by Rs.2600 crore in 2004-05. This additional requirement
       will be met by adjustment in NABARD’s sources without any budgetary support.
        #- NABARD’s refinance for investment credit during 2003-04 was Rs.7605 crore. In
        view of the projected demand, refinance support during the coming years has been
        revised to Rs.8800 crore, registering an increase of Rs.1200 crore. This additional
        requirement will also be met by NABARD for adjusting its own resources without any
        budgetary support.
        $- Certain states have faced drought and other natural calamities during 2003-04. In
        terms of extant instructions that DCCBs operating in affected areas have been permitted
        to extant conversion support (without NABARD’s refinance) to the farmers to enable
        them to take fresh crop loans in the ensuing season. However, on account of
        conversion, banks were finding themselves short of liquidity for extending fresh crop
        loans. Therefore, as a one time measure, NABARD will extend an additional SAO
        liquidity limit to the extent of Rs.50 crore on loan provided by these banks for conversion/
        re-schedulement. This was expected to release an additional fund flow of Rs.1500
        crore in the affected areas. To facilitate this fIow of finance and to keep cost of funds
        low, NABARD will need Government of India guarantee for its additional borrowing
        from the market.
        @- This was only a token provision and depending upon the coverage of tenant farmers,
        additional funds would be required for which NABARD may require Government of
        India guarantee.

1.2.2 Additional Resources from Cooperative Institutions
The balance gap in additional requirement of about Rs.3500 crore was
to be met by credit cooperatives themselves from their own resources.
The deposit level of cooperatives was around Rs.80000 crore with
average annual growth rate of 10 per cent. The expected growth in
deposits during the year was about Rs.6000 crore of which about 35
per cent would be required for SLR/CRR and additional 15 per cent
would be required for investing in other Government securities. It was
thus expected that it would be possible to persuade cooperatives to
utilize the remaining Rs.4000 crore for agriculture lending. State-wise
and bank-wise details of lending by cooperatives during 2004-05 were
worked out by NABARD in consultation with State Governments, State
Cooperative Banks, Central Cooperative Banks, etc. To achieve this
additionally, NABARD worked out action plans with State
Governments/Agencies.

                                                 7
1.2.3 Disbursements to Small and Marginal Farmers
Small and marginal farmers constitute a part of the weaker section
in the scheme of priority sector lending. According to the latest data
available, landholdings of small and marginal farmers constituted
nearly 80 per cent of total holdings and 36 per cent of the total area.
Small and marginal farmers would need additional credit support for
intensive cultivation. The share of small and marginal farmers in
agricultural credit should be commensurate with their holdings and
credit needs and, therefore, credit to small and marginal farmers was
required to be progressively raised. As part of the extant guidelines,
domestic commercial banks were required to extend not less than 10
percent of net bank credit to weaker sections, comprising small and
marginal farmers, landless labourers, artisans, borrowers of
government sponsored poverty alleviation programmes, etc. As on 31
March 2003, as against the mandate of 10 per cent, the public sector
banks had extended credit only to the extent of 6.76 per cent of net
bank credit (Rs.32304 crore) to weaker sections. Only 6 out of 27
public sector banks had achieved the 10 per cent goal for financing/
weaker sections while the remaining banks had achieved between 9.4
per cent and 1.97 per cent of the targets. It was, therefore, proposed
to request RBI to suitably advise public sector banks to achieve the
targeted lending to weaker sections. RBI had advised banks to waive
security requirements for agriculture lending up to Rs.50000 and in
the case of agri-business and agri-clinics for loans up to Rs.5.00 lakh.

An area of concern has been the exclusion of tenant farmers and oral
lessees from access to bank credit on account of extant restrictions
on recording of oral lease and other legal impediments. To make a
modest beginning in addressing this situation, NABARD earmarked
Rs.50 crore as a token provision for facilitating formation, linkage and
financing of such groups during 2004-05. This exploratory effort was
to bring over a lakh tenant farmers, oral lessees, share croppers, etc.
within the banking fold.

1.2.4 Kisan Credit Card (KCC)
As on 31.3.2004, 4.14 crore Kisan Credit Cards were issued by
cooperatives (243 lakh), RRBs (39 lakh) and commercial banks (132
lakh). A large number of farmers were considered ineligible to receive
Kisan Credit Card for reasons such as default, lack of clear title deeds,
documentation etc. National Council for Applied Economic Research
(NCAER) conducted an impact study of KCC Scheme at the behest of
RBI. In the light of NCAER’s findings, the scheme was to be reviewed

                                   8
by RBI and NABARD so that it served the cause of farmers more
effectively. RBI/ NABARD were to also review the scale of finance,
number of transactions allowed and purpose covered under the KCC
Scheme.

1.2.5 One Time Settlement (OTS) for Farmers
Many farmers, especially small and marginal farmers had defaulted
in the past and as such they had become ineligible for fresh credit
from financial institutions. RBI was to consider introducing a fresh
OTS scheme to enable such farmers to settle their accounts in a
transparent manner. Based on the RBI scheme, NABARD was to take
follow up action in respect of RRBs and Cooperatives. This step was
expected to help farmers in settling their accounts and draw fresh
credit from the financial institutions.

1.2.6 Raising Scale of Finance
At present the scale of finance suggested by the District Level
Technical Committees, though only indicative, was adopted by banks
as a benchmark. RBI/ NABARD have been requested to review the
scales of finance to meet the realistic credit needs of more capital
-intensive agricultural operations. Regional Offices of NABARD were
being advised to organize State-level and District-level meetings for
revising the scales of finance as also to emphasise that they were only
‘scale’ rather than an absolute amount as of now.

1.2.7 Rate of Interest on Agriculture Credit
As a part of reform in the financial sector, interest rates have been
deregulated. In the year 2003, public sector banks brought down the
interest rate on crop loans up to Rs.50000 to 9 per cent. Subsequently,
public sector banks reviewed the position and further reduced the
interest rate to 8.5 per cent. Considering the cost of funds, NPA levels
and transaction cost, there was little scope for further reduction in
interest rates by commercial banks and it was argued that the interest
rates on medium and long -term loans vary from 9 to 11.5 per cent.

The cost of funds for RRBs was higher as compared to that for
commercial banks. RRBs had accepted long-term deposits by offering
higher rates of interest and these deposits were yet to mature. Credit
from the sponsor banks, one of the components of working funds of
RRBs was available at higher rate of interest than the prevailing
market rates. However, to compete successfully, RRBs need to bring
down their lending rates proportionately.
                                   9
The rates of interest charged to the ultimate borrowers by the
cooperatives have been in the range of 12 to 14 per cent. Even in
Northeastern States where the two-tier cooperative structure exists,
the rates of interest were in the range of 11 to 13 per cent comparable
with rates prevailing in some of the states having three-tier system.
Only in a few states like Andhra Pradesh where the state government
was subsidizing interest to the extent of 5 per cent, the ultimate rate
charged to the final borrower was 7 per cent.

To enable NABARD to provide direct refinance assistance to District
Central Cooperative Banks (DCCBs) by-passing the State Cooperative
Banks, the NABARD Act was amended in 2003. The objective was to
reduce the rate of interest on crop loans by Cooperatives. The progress
was slow as the State Governments have been unwilling to offer
guarantees to NABARD for providing direct refinance to ineligible
DCCBs.

1.2.8 Target for Agriculture Credit during 2004-05
The following programme for Ground Level Credit Flow to Agriculture
during 2004-05 was proposed to be implemented in the manner
indicated as below:                                       (Rs. Crore)
 Banks                      2003-04         2004-05     Growth rate( %)
 Commercial Banks            43840           56992          30.00
 RRBs                        6080             8512          40.00
 Cooperatives                30080           39104          30.00
 Total                       80000          104608          30.76
 Source: NABARD.

It was in this context that Government of India and the Finance
Minister showed concern for enhancing credit flow to agriculture
sector. It was decided to double the flow of credit to agriculture within
three years starting 2004-05. To achieve this target, guidelines were
issued to the banking sector to achieve the targets in a mission mode.
This was achieved at affordable rates and became an important public
policy. Institutional credit to agriculture sector was provided by
commercial banks, regional rural banks and cooperatives.

1.3    Objectives

The objectives of the study were to
    Study the trends in ground level credit flow to agriculture, number
    of loan accounts, coverage of new farmers, etc.


                                   10
      Identify factors responsible for decrease, if any, in the number of
      farmers supported on a year to year basis and suggest strategies
      to arrest and reverse the trend
      Study the existing Management Information System (MIS) used
      by Rural Financial Institutions (RFIs) for reporting number of
      farmers/new farmers covered and to suggest changes for ensuring
      effectiveness of the reporting system
      Assess adherence to guidelines issued by RBI regarding
      agricultural credit, especially in the post doubling of credit period
      Study issues relating to investment credit with respect to the
      factual position in respect of farmers financed for investment
      purposes.
      Review implementation of KCC as a product, its effectiveness in
      ensuring hassle-free credit to farmers as well as to obtain feed-
      back from farmers regarding the reasons for dormancy of KCCs,
      wherever such a situation occurred.
1.4     Methodology

Five similar studies were launched in states of Rajasthan, Uttar
Pradesh, Madhya Pradesh, Tamil Nadu and Maharashtra. It had two
components- secondary data based on State Level Bankers Committee
quarterly reports, District level PLPs of NABARD and other sources
that provided data on credit disbursement and primary data collected
from two Districts each in each of the five states. Within the state,
two Districts were selected on the basis of doubling of credit achieved,
one being agriculturally developed and the other District being
agriculturally underdeveloped, according to various parameters like
area sown, area irrigated and others. Within the District, two blocks
were selected. From each block, effort was made to pick up one
commercial bank, one cooperative bank, one land development bank
and one regional rural bank. It was ensured that the commercial bank
was not repeated in each block. Table 1.2 presents the Districts
selected across states. From each district two blocks were chosen
based on the same indicators (Table 1.3).

                       Table 1.2: Selected Districts
              State                                Districts
            Rajasthan                       Ganganagar and Sirohi
          Uttar Pradesh                     Moradabad and Jhansi
         Madhya Pradesh                     Narsinghpur and Panna
           Tamil Nadu                     Cuddalore and Virudhunagar
          Maharashtra                       Aurangabad and Latur


                                     11
                               Table 1.3: Number of Selected Beneficiaries


     Banks            Branches   Villages Sample   Branches    Villages Sample   Branches   Villages   Sample
     Maharashtra              Aurangabad                      Latur                         Total
     CBs                  4          15     58        4            18     47         8          34      105
     Coop                 2           7     30        2            11     28        4           18       58
     RRBs                 2           8     27        2            15     26         4          23       53
     Total                8          31     115        8           44    101        16          75      216
     Tamil Nadu                Cuddalore                 Virudhunagar                       Total
     CBs                  1           4     40        1             4     40        2            8       80
     Coop                 1           3     30        1             3     30        2            6       60
     RRBs                 1           3     30        1             3     30        3            6       60
     Total                3          10     100        3           10    100        6           20      200




12
     Uttar Pradesh             Moradabad                     Jhansi                         Total
     CBs                  2                 40        2                   40        4                    80
     Coop                 2                 35        2                   35        4                   70
     RRBs                 1                 40        1                   40        2                    80
     Total                5                 115        5                 115        10                  230
     Madhya Pradesh          Narasinghpur                    Panna                          Total
     CBs                  4                 44        5                   54         9                   98
     Coop                 4                 36        4                   24        8                    60
     RRBs                 2                 20        3                   22         5                   42
     Total               10                 100       12                 100        22                  200
     Rajasthan                Ganganagar                     Sirohi                         Total
     CBs                  2          10     31        2             9     30         4        19         61
     Coop                 3          11     42        4            10     59        7         21        101
     RRBs                 2           3     37        2             4     31         4         7         68
     Total                7          24     110        8           23    120        15        47        230
                             CHAPTER 2
      Trend in Credit Flow, Loan Accounts and Coverage
Credit plays a very important role in enhancing agricultural production
and investment. In 2003-04, total institutional credit flow to
agriculture stood at Rs.86,981 crore. During 2004-05 (the first year
of the programme), the figure stood at Rs.1,25,309 crore which
increased to Rs.1,80,486 crore in the next year and further rose to
Rs.2,03,297 crore in 2006-07(the last year of the programme). Thus,
the credit flow to farm sector doubled during two years as against
the stipulated time period of three years. Though Government of India
and Reserve Bank of India have initiated some steps in this direction,
the public and private sector banks were also recognizing business
potential of rural credit (may not be purely for crop production) and
reorienting their policies accordingly. The share of commercial banks
in total agricultural credit increased from 54 per cent in 2001-02 to
around 69 per cent in 2004-05. It may also be noted that the share
of investment credit increased from 35 per cent in 2001-02 to around
41 per cent in 2004-05, despite the negative growth achieved by the
long-term cooperative credit structure. Despite these changes, there
were serious quantitative and qualitative concerns. The poor outreach
of the formal institutional credit structure was a serious issue that
requires to be corrected expeditiously. NSSO 53rd round revealed that
only 27 per cent of total number of cultivator households received
credit from formal sources. The rest comprising mainly small and
marginal farmers had no access to credit. Comprehensive measures
aimed at financial inclusion in terms of innovation of products and
services to increase access to institutional credit were urgently
required. Other issues such as credit flow to tenant farmers, oral
lessees and women cultivators, complex documentation processes,
high transaction costs, lack of availability of quality inputs across all
regions, inadequate and ineffective risk mitigation arrangements, poor
extension services, weak marketing links and sectoral and regional
issues in credit were also required to be addressed expeditiously.

2.1     Doubling of Credit Flow: Aggregate Level
In June 2004, Government of India announced a credit package
envisaging doubling of agriculture credit over a period of three years
beginning from 2004-05 and 30 per cent growth of credit flow to


                                   13
agriculture every year thereafter. In this chapter the attempt was to
analyze the trend in credit flow to agriculture, number of loan accounts
and coverage of farmers of various categories in five states since June
2004.

Table 2.1 shows that in Uttar Pradesh doubling of credit was
achieved by commercial banks in 2005-06 when RRBs did it in 2006-
07 and cooperatives did not achieve it. At the aggregate level, doubling
in credit flow was achieved in 2006-07. Except for cooperative banks,
in others there has been continuous increase in flow of credit in Uttar
Pradesh.

In Madhya Pradesh, commercial banks achieved doubling target in
2004-05 while the RRBs did it in 2005-06 and cooperatives did not
touch the doubling target. At the aggregate level, in 2005-06 doubling
of credit flow was achieved.

                 Table 2.1: Credit Flow across States
                                                          (Rs.lakh)
 States                   CBs           RRBs      Coops          Total
 Uttar Pradesh
 2003-04                394838         191891     198078        784807
 2004-05                620818         261931     213505       1096254
 2005-06                848782         320576     205805       1375163
 2006-07               1116553         401161     230944       1748658
 Times increase over 2003-04
 2004-05                  1.6            1.4        1.1           1.4
 2005-06                  2.1            1.7        1.0           1.8
 2006-07                  2.8            2.1        1.2           2.2
 Madhya Pradesh
 2003-04                139034          43349     148503        329887
 2004-05                291371         74353.43   197458        563182
 2005-06                361626         112550     221266        695444
 2006-07                485652         130654     271916        888222
 Times increase over 2003-04
 2004-05                  2.1            1.7        1.3           1.7
 2005-06                  2.6            2.6        1.5           2.1
 2006-07                  3.5            3.0        1.8           2.7


                                  14
 States              CBs          RRBs          Coops         Total
 Rajasthan
 2003-04           125936         130789        42440        299165
 2004-05           214041         210140        71182        495363
 2005-06           364738         243270       107624        715631
 2006-07           548910         322192       164796        1035898
 Time increase over 2003-04
 2004-05             1.7            1.5          1.7           1.6
 2005-06             2.9            1.8          2.5           2.3
 2006-07             4.4            2.4          3.9           3.4
 Maharashtra
 2003-04           173488         12342        347831        533661
 2004-05           347830         19138        318865        685833
 2005-06           382314         21093        404158        807565
 2006-07           514047         43143        651214        1208404
 Times increase over 2003-04
 2004-05             2.0            1.6          0.9           1.3
 2005-06             2.2            1.7          1.2           1.5
 2006-07             3.0            3.5          1.9           2.3
 Tamil Nadu
 2003-04           501880         33200        178430        713510
 2004-05           768270         50780        226180        1045230
 2005-06          1065400         71060        228180        1364640
 2006-07          1396050         83180        134520        1613750
 Times increase over 2003-04
 2004-05             1.5            1.5          1.3           1.5
 2005-06             2.1            2.1          1.3           1.9
 2006-07             2.8            2.5          0.8           2.3

In case of Rajasthan, doubling of credit flow was achieved by
commercial banks and cooperative banks in 2005-06 while RRBs did
so in 2006-07. This meant doubling of credit at the state level in 2005-
06 which further increased in 2006-07. During 2006-07, Rs.8129.59
crore agriculture credit was disbursed which showed a growth of 190
per cent over disbursements made during 2003-04. The achievement
during 2005-06 and 2006-07 under farm credit witnessed an annual

                                  15
growth of 40 and 16 per cent respectively over the previous years1.
In Rajasthan, none of the institutions achieved doubling of credit in
the first year, but all except regional rural banks achieved doubling
in the second year. Regional rural banks achieved doubling in the final
year. At the state level doubling was achieved in the second year-
2005-06. If we look at doubling of credit flow on the basis of activities
financed under term lending we find that it was basically horticulture
financing that achieved doubling.

Commercial banks in Maharashtra were able to achieve the target
of doubling of credit in 2004-05 itself while RRBs did so in 2006-07
and cooperative banks could not achieve the doubling of credit in
2006-07. At aggregate level doubling target was met in 2006-07.

In Tamil Nadu, commercial banks and RRBs achieved the target of
doubling of credit flow to agriculture in 2005-06 when cooperative
banks could not even maintain the flow of credit level of 2003-04 in
2006-07. For the state as a whole, in 2006-07 credit flow to agriculture
was doubled from its 2003-04 base.

Thus we find that commercial banks performed better than other types
of banks across states with cooperative sector banks faltering in most
states.

2.1.1 Share of Institutions in Credit Flow/Agency-wise share in GLC
disbursement
In achieving the doubling of credit flow target, commercial banks in
Uttar Pradesh continuously increased their share in total credit flow
from 50.31 per cent to 63.85 per cent in 2006-07 and this appears
to be at the expense of cooperative sector banks (Table 2.2). This would
mean possible shift of clients of cooperative banks to commercial
banks.

A similar pattern was observed in Madhya Pradesh though the
decline in share of cooperative banks was significant. In Rajasthan,
though commercial banks observed increase in share so did the
cooperative banks. This has been at the expenses of RRBs. In
1 (In this context figure of Rs.2802.03 crore in 2003-04, the performance in terms
  of percentage during 2006-07 (and even during 2005-06) needs clarification. The
  mandated target to double the disbursement made during the year 2003-04
  (Rs.2802.03 crore) within three years. By that yardstick, the target for 2006-07
  would have been to the level of Rs.5604.06 crore (giving 30% annual increases).
  However, during 2005-06 and 2006-07, 30 per cent increase was loaded on
  achievement rather than the target, leading to self-regulated target to the level of
  Rs.9300.03 crore).
                                         16
Maharashtra, the share of commercial banks has been fluctuating
during these 4 years and cooperative banks have played a major role
in agriculture credit delivery, though observed a falling share since
2003-04. RRBs have almost no role in agriculture credit in Maharshtra
during these 4 years.

In Tamil Nadu, commercial banks have a high share of 86.51 per
cent in total credit flow to agriculture in 2006-07, up from 70.34 per
cent in 2003-04. This has largely been at the expense of cooperative
banks which observed a decline in share from 25.01 per cent in 2003-
04 to 8.34 per cent in 2006-07. The share of RRBs in credit flow has
almost remained constant. Thus different states witnessed not only
changing roles of institutions, but also relative importance of some
institutions.
2.1.2 Term Loan Doubling
If we look at doubling of credit flow on the basis of activities financed

   Table 2.2: Share of Various Types of Banks in Credit Flow      (%)
 States                CBs         RRBs          Coops.         Total
 Uttar Pradesh
 2003-04               50.31       24.45          25.24          100
 2004-05               56.63       23.89          19.48          100
 2005-06               61.72       23.31          14.97          100
 2006-07               63.85       22.94          13.21          100
 Madhya Pradesh
 2003-04               41.84       13.14          45.02          100
 2004-05               51.74       13.20          35.06          100
 2005-06               52.00       16.18          31.82          100
 2006-07               54.68       14.71          30.61          100
 Rajasthan
 2003-04               41.23       44.88          13.89          100
 2004-05               43.21       42.42          14.37          100
 2005-06               50.97       33.99          15.04          100
 2006-07               52.99       31.10          15.91          100
 Maharashtra
 2003-04               32.51        2.31          65.18          100
 2004-05               50.72        2.79          46.49          100
 2005-06               47.34        2.61          50.05          100
 2006-07               42.54        3.57          53.89          100
 Tamil Nadu
 2003-04               70.34        4.65          25.01          100
 2004-05               73.50        4.86          21.64          100
 2005-06               78.07        5.21          16.72          100
 2006-07               86.51        5.15           8.34          100

                                   17
under term lending we find that it was basically horticulture financing
that achieved doubling (Table 2.3) in Rajasthan. In Maharashtra, in
2005-06, doubling over 2004-05 took place in poultry and SMY
activities, while in 2006-07 over 2004-05 doubling took place in
Plantation & Horticulture, Farm Mechanisation, Poultry, Forestry/
Waste Land Development and Bio-Gas. This means performance in
Maharashtra was better than Rajasthan in case of term loan doubling.

As data was not available for 2003-04 from the same source for
Maharashtra and Rajasthan, growth performance has been erratic for
most activities. In case of Tamil Nadu data for 2003-04 was available
and so we find that in 2004-05, doubling of credit flow took place in
case of fisheries, forestry and storage/ market yards. In 2005-06 over
2003-04, doubling as observed in activities like farm mechanization,
agri- others, animal husbandry, fisheries, forestry, and storage/
market yards. In 2006-07 over 2003-04, doubling as observed in
activities like farm mechanization, agri- others, animal husbandry,
fisheries and storage/ market yards. The devolvement of credit to
forestry fell in the third year. At the aggregate level, doubling took
place in the second year and also in the third year over the base year.

An analysis of market share brings out an interesting feature that
though there was an increase in credit flow in absolute terms,
surprisingly all agencies have retained their market share over the
three years beginning 2004-05 (Table 2.4) in Rajasthan. There was
no vertical movement in market share, which calls for renewed action
on the part of all the agencies. However, purpose-wise analysis of
credit flow under term lending reveals continued dominance of farm
mechanization, but it significantly declined from 47.69 per cent in
2004-05 to 30.95 per cent in 2006-07. Dairy development, storage
godowns/market yards and others were three major purposes
attracting significant credit. However, it was only storage/ market
yards that increased their share from 0.37 per cent in 2004-05 to 9.32
per cent in 2006-07. Dairy development has observed declining share
over the period, but others have presently 41 per cent share in total
term lending which improved from mere 11.4 per cent in 2004-05.
Significant decline was observed for Minor irrigation. The same was
the case with all animal based activities.




                                  18
               Table 2.3: Sector-wise Flow of Credit- Term Loan
                                                              (Rs.crore)

Particulars              2004-05     2005-06       2006-07    Times increase over
                                                                  2004-05 in
                                                             2005-06     2006-07
Rajasthan
Minor Irrigation            140.40      152.83      144.10        1.09        1.03
Land Development             76.87      100.24      131.71        1.30        1.71
Farm Mechanization          499.07      810.23      949.47        1.62        1.90
Horticulture                 10.02       21.54       52.19        2.15        5.21
Dairy Development           124.67      140.54      200.79        1.13        1.61
Poultry                       5.03          3.02      2.44        0.60        0.49
Sheep/Goat/Piggery           46.59       50.08       42.40        1.07        0.91
Fisheries                     2.04          0.64      0.81        0.31        0.40
Forestry/wasteland           18.71          1.74      2.60        0.09        0.14
Storage/MY                    3.89          7.37    285.78        1.89       73.47
Others                      119.28      551.63     1255.56        4.62       10.53
Total                      1046.57     1839.86     3067.85        1.76        2.93


Particulars              2004-05     2005-06       2006-07    Times increase over
                                                                  2004-05 in
                                                             2005-06     2006-07
Maharashtra
MI                         156596       38378       73924         0.25        0.47
LD                          37859        8981       12414         0.24        0.33
FM                          19477       24418       77234         1.25        3.97
P&H                         28468       54910       73508         1.93        2.58
DD                         169835       24139       33668         0.14        0.20
Poultry                      2304        4853         4747        2.11        2.06
S / G /P                     3663        4777         4791        1.30        1.31
Fisheries                    2131        2220         2320        1.04        1.09
F /WLD                       2248        2736       21186         1.22        9.42
SMY                          6971       34427       18887         4.94        2.71
BG                            106              0      1426        0.00       13.45
Others                      31533       55161       87729         1.75        2.78
Total                      461191      255000      411834         0.55        1.62



                                       19
           Table 2.3: Sector-wise Flow of Credit- Term Loan (Contd.)
                                                               (Rs.crore)

Tamil Nadu         2003-04   2004-05   2005-06   2006-07    Times increase over 2003-04 in
                                                           2004-05    2005-06      2006-07
Minor irrigation   148       146       269        166      0.99       1.82        1.12

Land               72        101       112        86       1.40       1.56        1.19
development
Farm               111       213       362        354      1.92       3.26        3.19
Mechanization
Plantation &       180       211       258        220      1.17       1.43        1.22
Horticulture
Agri-Others        384       624       1045       808      1.63       2.72        2.10

Animal             224       315       629        659      1.41       2.81        2.94
Husbandry
Fisheries          13        37        48         45       2.85       3.69        3.46

Forestry           8         28        19         11       3.50       2.38        1.38

Storage/Market     8         23        30         18       2.88       3.75        2.25
Yard
Total              1148      16098     2772      2367      1.48       2.41        2.06

In Maharashtra, minor irrigation and dairy development account for
70.78 per cent of total term loan disbursed in 2004-05 and this share
fell to 24.52 per cent in 2005-06 and further improved to 26.13 per
cent in 2006-07. The other activities gained in share were FM and
P&H.

In Tamil Nadu, major activities funded were agri-others and animal
husbandry cornering more than half the term credit flow across the
years.




                                       20
           Table 2.4: Credit Flow Share of Term-loan        (%)

Particulars                     2004-05     2005-06    2006-07
Rajasthan
Minor Irrigation                    13.42       8.31      4.70
Land Development                     7.34       5.45      4.29
Farm Mechanization                  47.69      44.04     30.95
Horticulture                         0.96       1.17      1.70
Dairy Development                   11.91       7.64      6.54
Poultry                              0.48       0.16      0.08
Sheep/Goat/Piggery                   4.45       2.72      1.38
Fisheries                            0.19       0.03      0.03
Forestry/wasteland                   1.79       0.09      0.08
Storage/MY                           0.37       0.40      9.32
Others                              11.40      29.98     40.93
Total                                 100        100       100
Maharashtra
MI                                  33.95      15.05     17.95
LD                                   8.21       3.52      3.01
FM                                   4.22       9.58     18.75
P&H                                  6.17      21.53     17.85
DD                                  36.83       9.47      8.18
Poultry                              0.50       1.90      1.15
S / G /P                             0.79       1.87      1.16
Fisheries                            0.46       0.87      0.56
F /WLD                               0.49       1.07      5.14
SMY                                  1.51      13.50      4.59
BG                                   0.02       0.00      0.35
Others                               6.84      21.63     21.30
Total                                 100        100       100
Tamil Nadu
Minor irrigation                     8.60       9.70      7.01
Land development                     5.95       4.04      3.63
Farm Mechanization                  12.54      13.06     14.96
Plantation & Horticulture           12.43       9.31      9.29
Agri-Others                         36.75      37.70     34.14
Animal Husbandry                    18.55      22.69     27.84
Fisheries                            2.18       1.73      1.90
Forestry                             1.65       0.69      0.46
Storage/Market Yard                  1.35       1.08      0.76
Total                                 100        100       100

                               21
2.2    District-wise Credit Disbursed

In this section we look at District level performance in doubling of
credit across states.

2.2.1 Rajasthan Situation
It has been observed at the aggregate level that doubling of credit flow
to agriculture was achieved within a year after 2003-04 in Rajasthan.
Tables 2.5 to 2.9 show District-wise performance of credit disbursed
since 2003-04. Table shows that doubling was achieved in credit
disbursement in 2004-05 in Churl, Dungarpur, Jaisalmer, Jalore, and
Sirohi, while in 2005-06 doubling in all Districts was achieved except
Ajmer, Dholpur, Ganganagar, Hanumangarh, Kota, Pali and
Rajsamand. By 2006-07 doubling in credit disbursed was achieved
in all the Districts. There were wide variations across Districts and
this would mean wide variations within the District among different
tehsils/ blocks.

In case of commercial banks, doubling of credit disbursement was
achieved in 2004-05 over 2003-04 in 13 of the 32 Districts while in
2005-06 it was not achieved in Dholpur, Ganganagar, Hanumangarh,
Kota, Pali and Rajsamand. In the final year, 2006-07, all Districts
achieved doubling and still Rajsamand failed to get to the target. There
was a clear picture emerging that it has been little difficult in Districts
to achieve the doubling target where base year disbursement has been
high.

Cooperative banks had achieved doubling of credit disbursement in
2004-05 over 2003-04 in 9 of 32 Districts. In 2005-06, cooperative
banks had achieved doubling in half the Districts only. In the final
year, Ganganagar and Pali could achieve doubling of credit target.

PLDBs largely finance long term activities the target achievement of
doubling was highly variable. In 2004-05, except for Jaisalmer and
Kota doubling in credit over 2003-04 was not achieved, while in 2005-
06, Churu, Dholpur, Jaisalmer and Pali PLDBs could achieve the
target of doubling. In the final year, Jaipur, Jalore, Jodhpur and Kota
were added to list of achiever Districts.

In case of regional rural banks, doubling of credit disbursement was
achieved in 2006-07 over 2003-04 in all Districts but for Karauli and
Rajsamand. In 2004-05- the first year, doubling was achieved in 12
of 32 Districts while in 2005-06 over 2003-04, doubling was achieved
in all but Dausa, Ganganagar, Jodhpur, Karauli, Kota, Pali, Rajsamand
and Sawai Madhopur. It was also observed that credit disbursement
has fluctuated over these three years.
                                    22
               Table 2.5: Credit Disbursed since 2003-04                 (Rs. lakh)

 District          2003-04   2004-05   2005-06    2006-07   Times Increase over 2003-04 in
                                                            2004-05     2005-06     2006-07
 Ajmer               8262    13816       15689      20813       1.67        1.90        2.52
 Alwar              20104    29784       52896      59438       1.48        2.63        2.96
 Banswara            3589      6911       9008      12940       1.93        2.51        3.61
 Baran               9244    15492       21317      25670       1.68        2.31        2.78
 Barmer             10960    19760       25376      37802       1.80        2.32        3.45
 Bharatpur          18898    27552       55205      73476       1.46        2.92        3.89
 Bhilwara            6911    11009       14788      21240       1.59        2.14        3.07
 Bikaner             6911    11009       14788      21240       1.74        3.13        4.06
 Bundi               6146    10722       19215      24942       1.73        2.48        3.38
 Chittorgarh         7244    12544       17934      24513       1.73        2.48        3.38
 Churu               3556      8071      10768      19985       2.27        3.03        5.62
 Dausa               5220      9103      11362      12621       1.74        2.18        2.42
 Dholpur             5609      9149      11145      12820       1.63        1.99        2.29
 Dungarpur           2175      4557       5294       7914       2.10        2.43        3.64
 Ganganagar         37455    57898       65575      87968       1.55        1.75        2.35
 Hanumangarh        24854    35307       43414      61398       1.42        1.75        2.47
 Jaipur             15773    23716       80301     171156       1.50        5.09       10.85
 Jaisalmer           1210      2779       4872       7902       2.30        4.03        6.53
 Jalore              8107    17470       23974      32348       2.15        2.96        3.99
 Jhalawar            6750    13108       16025         NA       1.94        2.37
 Jhunjhunu           8626    14689       18132      23980       1.70        2.10        2.78
 Jodhpur            10318    16523       21891      28578       1.60        2.12        2.77
 Karauli             4811      7844      10282      12981       1.63        2.14        2.70
 Kota                8428    16007       13277      23438       1.90        1.58        2.78
 Nagaur              8748    21681       24158      29615       1.11        2.76        1.37
 Pali               12936    14218       20942      31506       1.10        1.62        2.44
 Rajsamand           2629      2881       4369       5302       1.10        1.66        2.02
 S.Madhopur          7411    11683       16232      18934       1.58        2.19        2.55
 Sikar              13160    22877       34247      45514       1.74        2.60        3.46
 Sirohi              2999      6535       9027      11017       2.18        3.01        3.67
 Tonk                6596    10939       15239      27069       1.66        2.31        4.10
 Udaipur             3275      6302       8192      11177       1.92        2.50        3.41

Source: District PLPs, NABARD.




                                             23
               Table 2.6: District- wise Commercial Banks                       (Rs. lakh)

 District          2003-04   2004-05   2005-06    2006-07    Times Increase over 2003-04 in
                                                            2004-05   2005-06      2006-07
 Ajmer               3411      5389       7395       8892      1.58        2.17         2.61
 Alwar               9826    13655       31827      32388      1.39        3.24         3.30
 Banswara            1048      2418       4124       6828      2.31        3.93         6.51
 Baran               4522      7334      12091      13093      1.62        2.67         2.90
 Barmer              2365      5909       7712      13020      2.50        3.26         5.50
 Bharatpur          11612    19921       41334      49548      1.72        3.56         4.27
 Bhilwara            2255      3759       6303       9976      1.67        2.79         4.42
 Bikaner             4806      8149      11504      13670      1.70        2.39         2.84
 Bundi               2943      5045       8247      11997      1.71        2.80         4.08
 Chittorgarh         3060      4663       7954      11146      1.52        2.60         3.64
 Churu               1004      3441       5642       8123      3.43        5.62         8.09
 Dausa               2178      4792       5455       5646      2.20        2.50         2.59
 Dholpur             3595      6364       7000       8043      1.77        1.95         2.24
 Dungarpur            773      1716       2511       3723      2.22        3.25         4.81
 Ganganagar         19961    33923       38704      50889      1.70        1.94         2.55
 Hanumangarh        12777    18356       23330      33875      1.44        1.83         2.65
 Jaipur             11000      9111      61405     147457      0.83        5.58       13.41
 Jaisalmer            485       855       1464       2848      1.76        3.02         5.88
 Jalore              1928      4198       5696       8599      2.18        2.95         4.46
 Jhalawar            2001      4185       5977                 2.09        2.99         0.00
 Jhunjhunu           2042      4547       5465       7792      2.23        2.68         3.82
 Jodhpur             3878      6150       8329      12265      1.59        2.15         3.16
 Karauli             1636      3196       4898       6686      1.95        2.99         4.09
 Kota                3216      5782       4950       9780      1.80        1.54         3.04
 Nagaur              2832      5857      11336       9966      2.07        4.00         3.52
 Pali                1955      2487       2774       9720      1.27        1.42         4.97
 Rajsamand            930      1241       1527       1758      1.33        1.64         1.89
 S.Madhopur          2253      3752       7200       9071      1.67        3.20         4.03
 Sikar               3688      7412       8931      10944      2.01        2.42         2.97
 Sirohi               708      1620       2691       3437      2.29        3.80         4.85
 Tonk                1127      5804       4102       8760      5.15        3.64         7.77
 Udaipur             1342      3348       4045       5599      2.50        3.02         4.17

Source: District PLPs, NABARD.




                                             24
               Table 2.7: District-wise Cooperative Banks                          (Rs. lakh)

 District          2003-04   2004-05    2005-06   2006-07   Times Increase over 2003-04 in
                                                            2004-05     2005-06     2006-07
 Ajmer               3424        6796      6176      8594       1.98        1.80        2.51
 Alwar               4707        8802     10411     12696       1.87        2.21        2.70
 Banswara            2201        3698      4049      4601       1.68        1.84        2.09
 Baran               2966        5301      5436      7367       1.79        1.83        2.48
 Barmer              7177       11688     14655     21298       1.63        2.04        2.97
 Bharatpur           4258        4022      6492     14645       0.94        1.52        3.44
 Bhilwara            3146        5438      6138      7656       1.73        1.95        2.43
 Bikaner             1828        5650      5253      5126       3.09        2.87        2.80
 Bundi                268        2671      6012      6530       9.95       22.39       24.32
 Chittorgarh         2325        5356      6521      9041       2.30        2.80        3.89
 Churu               2141        3764      3097      6113       1.76        1.45        2.86
 Dausa               2434        3220      4794      5506       1.32        1.97        2.26
 Dholpur             1232        1477      1914      2512       1.20        1.55        2.04
 Dungarpur            965        1952      1829      2783       2.02        1.89        2.88
 Ganganagar         12133       16222     17843     22721       1.34        1.47        1.87
 Hanumangarh         8436       11783     12256     16895       1.40        1.45        2.00
 Jaipur              2906       10186     12720     14891       3.50        4.38        5.12
 Jaisalmer            304         870      1742      3737       2.86        5.73       12.29
 Jalore              3536        7639     10163     12086       2.16        2.87        3.42
 Jhalawar            2955        5700      7167                 1.93        2.42        0.00
 Jhunjhunu           4479        7066      7997     10328       1.58        1.79        2.31
 Jodhpur             5008        8473     10998     11984       1.69        2.20        2.39
 Karauli             2195        3620      4363      5482       1.65        1.99        2.50
 Kota                2872        5589      4698      7246       1.95        1.64        2.52
 Nagaur              2905       10980      7083     11035       3.78        2.44        3.80
 Pali                8454        8076     11126     15057       0.96        1.32        1.78
 Rajsamand            875         995      2358      3037       1.14        2.69        3.47
 S.Madhopur          3679        6298      7229      7782       1.71        1.96        2.12
 Sikar               6535       11134     15788     19218       1.70        2.42        2.94
 Sirohi              1337        3093      4260      4498       2.31        3.19        3.36
 Tonk                3773        2931      7668      9983       0.78        2.03        2.65
 Udaipur             1366        2081      3298      4369       1.52        2.41        3.20

Source: District PLPs, NABARD.




                                             25
               Table 2.8: District wise PLDBs Credit Flow                       (Rs. Lakh)

 District         2003-04   2004-05   2005-06   2006-07     Times Increase over 2003-04 in
                                                           2004-05    2005-06      2006-07
 Ajmer               898       733       843        1134       0.82       0.94         1.26
 Alwar               398       258       239         694       0.65       0.60         1.74
 Banswara             83         91      106          71       1.10       1.28         0.85
 Baran               586       338       592                   0.58       1.01
 Barmer              684       644       677         449       0.94       0.99         0.66
 Bharatpur           473       402       626         226       0.85       1.32         0.48
 Bhilwara            910       651       692         514       0.72       0.76         0.56
 Bikaner             917       625       890         340       0.68       0.97         0.37
 Bundi              1566         34         0         49       0.02       0.00         0.03
 Chittorgarh         749       647       775         885       0.86       1.04         1.18
 Churu               136       235       529         569       1.73       3.89         4.18
 Dausa               234       276       399         264       1.18       1.70         1.13
 Dholpur             315       418       841         465       1.33       2.67         1.47
 Dungarpur           290       201       193         172       0.70       0.67         0.59
 Ganganagar          776      1086       560         545       1.40       0.72         0.70
 Hanumangarh         439       516       479         464       1.17       1.09         1.06
 Jaipur              615         89      658        1763       0.15       1.07         2.87
 Jaisalmer           164       500       813         553       3.05       4.97         3.38
 Jalore              352       413       646         798       1.17       1.83         2.27
 Jhalawar            819       534       522                   0.65       0.64
 Jhunjhunu           510       422       554         542       0.83       1.09         1.06
 Jodhpur             431       417       580        1185       0.97       1.34         2.75
 Karauli             516       519       580         315       1.00       1.12         0.61
 Kota                242       525         70        700       2.17       0.29         2.89
 Nagaur              649       705       928         959       1.09       1.43         1.48
 Pali                387       339      6222         370       0.88      16.10         0.96
 Rajsamand           675       411       302         376       0.61       0.45         0.56
 S.Madhopur          974       881      1038         327       0.90       1.07         0.34
 Sikar               490       658       826         821       1.34       1.69         1.68
 Sirohi              343       440       303         446       1.28       0.88         1.30
 Tonk               1109      1255      1639        1992       1.13       1.48         1.80
 Udaipur             396       472       415         454       1.19       1.05         1.15

Source: District PLPs, NABARD.




                                           26
            Table 2.9: District-wise Regional Rural Banks Credit Flow
                                                                    (Rs.lakh)

 District          2003-04   2004-05    2005-06   2006-07    Times Increase over 2003-04 in
                                                            2004-05    2005-06     2006-07
 Ajmer                529         898      1276      2193       1.70       2.41         4.15
 Alwar               5173        7069     10419     13660       1.37       2.01         2.64
 Banswara             257         704       723      1440       2.74       2.81         5.60
 Baran               1749        2851      3777                 1.63       2.16
 Barmer               743        1519      2332      3034       2.05       3.14         4.09
 Bharatpur           2555        3207      6753      9057       1.26       2.64         3.55
 Bhilwara             538         962      1359      2804       1.79       2.52         5.21
 Bikaner              733        1632      2598      4047       2.23       3.54         5.52
 Bundi               1367         397      4946      6367       0.29       3.62         4.66
 Chittorgarh         1110        1877      2685      3440       1.69       2.42         3.10
 Churu                275         631      1500      5179       2.29       5.45       18.83
 Dausa                375         815       714      1204       2.17       1.91         3.21
 Dholpur              467         889      1389      1800       1.90       2.97         3.85
 Dungarpur            147         688       761      1236       4.69       5.18         8.42
 Ganganagar          4126        6217      8041     13813       1.51       1.95         3.35
 Hanumangarh         3202        4651      7349     10164       1.45       2.30         3.17
 Jaipur              1251        4331      5519      7045       3.46       4.41         5.63
 Jaisalmer            257         554       853       763       2.15       3.31         2.96
 Jalore              2291        5220      7469     10865       2.28       3.26         4.74
 Jhalawar             974        2689      2359                 2.76       2.42
 Jhunjhunu           1595        2655      4116      5318       1.66       2.58         3.33
 Jodhpur             1001        1483      1984      3144       1.48       1.98         3.14
 Karauli              463         509       441       498       1.10       0.95         1.08
 Kota                2099        4111      3559      5713       1.96       1.70         2.72
 Nagaur              2362        4139      4811      7655       1.75       2.04         3.24
 Pali                2140        3317       820      6359       1.55       0.38         2.97
 Rajsamand            149         234       182       131       1.58       1.23         0.88
 S.Madhopur           505         752       765      1754       1.49       1.51         3.47
 Sikar               2447        3672      8702     14532       1.50       3.56         5.94
 Sirohi               611        1383      1773      2636       2.26       2.90         4.32
 Tonk                 587         949      1830      6335       1.62       3.12       10.79
 Udaipur              171         401       434       755       2.35       2.54         4.42
Source: District PLPs, NABARD.



                                             27
2.2.2 Tamil Nadu Situation
The District wise flow of agricultural advances in Tamil Nadu during
2003-04 to 2006-07 was given in Table 2.10. As could be seen from
the table, the flow of agricultural credit increased from Rs.7135 crores
in 2003-04 to Rs.16137 crores in 2006-07 accounting for an increase
of 126 per cent during this period. Among the different Districts,
Tirunelveli District topped the list with an increase of 219 per cent
while the performance was the lowest in Thoothukudi District with

    Table 2.10: District-wise Credit Flow to Agriculture: Tamil Nadu
                                                              (Rs. crore)
 Districts             2003-04    2004-05   2005-06       2006-07      Times increase over 2003-04
                                                                    2004-05     2005-06     2006-07
 Kancheepuram              113        164        201          294         1.5         1.8         2.6
 Thiruvallur               134        184        267          318         1.4         2.0         2.4
 Cuddalore*                302        384        566          672         1.3         1.9         2.2
 Villupuram*               272        442        544          708         1.6         2.0         2.6
 Vellore                   243        272        308          501         1.1         1.3         2.1
 Thiruvannamalai           227        341        427          536         1.5         1.9         2.4
 Salem                     240        381        559          498         1.6         2.3         2.1
 Namakkal                  230        355        562          456         1.5         2.4         2.0
 Dharmapuri*               224        177        263          353         0.8         1.2         1.6
 Krishnagiri*               NA        241        325          408                     1.3         1.7
 Coimbatore                618        805       1051         1334         1.3         1.7         2.2
 Erode                     519        738        949          919         1.4         1.8         1.8
 Tiruchirapalli            298        372        536          712         1.2         1.8         2.4
 Karur                     142        203        242          329         1.4         1.7         2.3
 Perambalur                193        337        389          423         1.7         2.0         2.2
 Pudukottai*               257        378        442          407         1.5         1.7         1.6
 Thanjavur                 340        502        742          837         1.5         2.2         2.5
 Thiruvarur                133        236        290          368         1.8         2.2         2.8
 Nagapattinam              165        307        336          437         1.9         2.0         2.6
 Madurai*                  280        383        499          654         1.4         1.8         2.3
 Theni                     199        260        354          463         1.3         1.8         2.3
 Dindigul*                 311        408        537          535         1.3         1.7         1.7
 Ramanathapuram*           173        293        335          424         1.7         1.9         2.5
 Virudhunagar*             179        262        382          483         1.5         2.1         2.7
 Sivagangai*               216        297        368          500         1.4         1.7         2.3
 Tirunelveli*              296        467        654          942         1.6         2.2         3.2
 Thoothukudi*              327        529        609          513         1.6         1.9         1.6
 The Nilgiris              123        171        213          261         1.4         1.7         2.1
 Kanya Kumari              380        564        696          851         1.5         1.8         2.2
 State                    7135      10452      13646        16137         1.5         1.9         2.3
Note: * Districts in which RRBs were functioning.
Source: State Level Bankers’ Committee Report, Chennai.

                                              28
57 per cent. In Tamil Nadu, doubling of agricultural credit was not
done in seven Districts. The District where maximum agricultural
credit flow (Tirunelveli) and the District where minimum flow
(Thoothukudi) were both located in the Southern Zone of the state.
Table 2.10 shows that in the first year none of the Districts achieved
doubling of credit, but in 2005-06 over 2003-04, Thiruvallur,
Villupuram, Salem, Namakkal, Perambalur, Thanjavur, Thiruvarur,
Nagapattinam, Virudhunagar and Tirunelveli Districts achieved
doubling target (10 of 29 Districts). In 2006-07, only Dharmapuri,
Krishnagiri, Erode, Pudukottai, Dindigul and Thoothukudi did not get
to the target (6 of 29 Districts). Thus, there were inter-District
performance problems in achieving doubling of credit to agriculture
in Tamil nadu.

2.2.3 Madhya Pradesh Situation
As shown in the Table 2.11, among the 48 Districts of Madhya
Pradesh, only 38 Districts have achieved the target of doubling of
       Table 2.11: Number of times increase in credit during the doubling period
 Rank          District        Times      Rank           District           Times
                              increase                                    increase
   1     Bhopal                 10.5       26      Barwani                   2.3
   2     Dhar                    4.0       27      Harda                     2.3
   3     Khargone                3.6       28      Indore                    2.3
   4     Gwalior                 3.6       29      Morena                    2.3
   5     Guna                    3.4       30      Neemuch                   2.3
   6     Damoh                   3.4       31      Shahdol                   2.3
   7     Raisen                  3.3       32      Bhind                     2.3
   8     Dewas                   3.2       33      Katni                     2.1
   9     Burhanpur               3.2       34      Balaghat                  2.1
  10     Narsinghpur             3.2       35      Sidhi                     2.1
  11     Shajapur                3.1       36      Chhindwara                2.1
  12     Panna                   2.8       37      Rewa                      2.0
  13     Jabalpur                2.8       38      Rajgarh                   2.0
  14     Shivpuri                2.6       39      Datia                     1.9
  15     Satna                   2.6       40      Sheopur                   1.9
  16     Jhabua                  2.6       41      Dindori                   1.9
  17     Sehore                  2.6       42      Tikamgarh                 1.9
  18     Ujjain                  2.6       43      Ashoknagar                1.8
  19     Mandla                  2.5       44      Anuppur                   1.8
  20     Vidisha                 2.5       45      Seoni                     1.8
  21     Ratlam                  2.4       46      Umariya                   1.7
  22     Khandwa                 2.4       47      Chhatarpur                1.6
  23     Betul                   2.4       48      Hoshangabad               1.6
  24     Mandsaur                2.4      Total                              2.7

                                         29
agricultural credit disbursement. The bottom 10 Districts in the table
have not achieved the target of doubling. Among these 38 Districts,
the data were available only for 35 Districts and not for East Nimar,
West Nimar and Burhanpur because of the re-organisation of the
Districts.

Table 2.13 shows that in Madhya Pradesh, in 2004-05 Shajapur,
Ujjain, Dhar, Dewas, Vidhisha, Harda, Satna, Dindori and Mandla
Districts observed doubling of credit over 2003-04 while Khargone
Bhopal, Shajapur, Indore, Dhar, Dewas, Sehore, Vidhisha, Gwalior,
Burhanpur, Satna, Guna, Damoh, Morena, Panna and Neemuch
doubled credit disbursement in 2005-06 over 2003-04. However, even
   Table 2.12: District wise Increase of Agricultural Credit in the Doubling Period
           Number of times increase in credit during the doubling period

  Rank    District     Crop      Term       Rank    District        Crop      Term
                       loan      Loan                               loan      Loan
         Top 25 Districts                           Bottom 23 Districts
    1    Bhopal           7.4     14.0        26    Barwani           2.3      2.2
    2    Dhar             4.2      3.5        27    Harda             2.3      2.2
    3    Khargone         3.3      5.4        28    Indore            2.8      1.5
    4    Gwalior          4.3      2.9        29    Morena            3.2      1.6
    5    Guna             5.6      1.8        30    Neemuch           2.4      1.6
    6    Damoh            4.3     1.4         31    Shahdol           3.8      1.3
    7    Raisen           3.5     2.5         32    Bhind             4.4      0.8
    8    Dewas            3.3      2.9        33    Katni             3.1      1.2
    9    Burhanpur        3.1      3.8        34    Balaghat          2.2      1.7
   10    Narsinghpur      3.8      1.8        35    Sidhi             2.2      2.0
   11    Shajapur         3.1      2.9        36    Chhindwara        2.3      1.4
   12    Panna            3.1      2.1        37    Rewa              2.4      1.7
   13    Jabalpur         3.3      2.2        38    Rajgarh           2.0      1.9
   14    Shivpuri         4.7      0.8        39    Datia             2.1      1.7
   15    Satna            3.5      1.8        40    Sheopur           2.8      0.8
   16    Jhabua           2.5     3.2         41    Dindori           3.3      1.1
   17    Sehore           3.0      1.0        42    Tikamgarh         1.9      1.9
   18    Ujjain           2.5     2.9         43    Ashoknagar        4.3      0.7
   19    Mandla           3.4     1.8         44    Anuppur           3.3      1.1
   20    Vidisha          2.6      1.9        45    Seoni             2.3      0.7
   21    Ratlam           2.5      2.1        46    Umariya           2.8      0.8
   22    Khandwa          2.6     1.5         47    Chhatarpur        1.8      1.0
   23    Betul            2.8      1.7        48    Hoshangabad       1.9      0.8
   24    Mandsaur         2.8      1.3              Total             2.9      2.1
   25    Sagar            2.5      2.1



                                         30
Table 2.13: District-wise Credit Flow to Agriculture: Madhya Pradesh
                                                            (Rs. lakh)
Districts     2003-04      2004-05     2005-06     2006-07     Times increase over 2003-04
                                                               2004-05   2005-06   2006-07
Khargone        18791.00    36466.50    42301.37    67358.77       1.9       2.3       3.6
Bhopal           4646.89     7087.31    39830.40    48603.22       1.5       8.6      10.5
Indore          19137.60    33243.00    54180.00    44336.51       1.7       2.8       2.3
Raisen          12717.30    20689.30    23289.68    41770.88       1.6       1.8       3.3
Shajapur        12780.50    27434.40    28088.01    39355.23       2.1       2.2       3.1
Ujjain          15012.80    32651.70    26795.85    38353.48       2.2       1.8       2.6
Dhar             9388.00    26788.70    27791.19    37572.30       2.9       3.0       4.0
Dewas            9711.30    21898.60    20775.99    31270.46       2.3       2.1       3.2
Sehore          11946.20    17411.00    25399.79    30571.90       1.5       2.1       2.6
Vidisha         12266.90    30304.40    40886.83    30170.20       2.5       3.3       2.5
Hoshangabad     16917.10    25142.20    21753.23    26802.04       1.5       1.3       1.6
Gwalior          6810.80     8124.02    24916.67    24349.79       1.2       3.7       3.6
Ratlam           9594.01    13521.00    16804.40    23327.59       1.4       1.8       2.4
Khandwa          9093.32    12079.10    17269.67    21760.28       1.3       1.9       2.4
Mandsaur         8936.00    11590.50    15874.43    21089.73       1.3       1.8       2.4
Sagar            8492.92    14042.00    16424.00    19810.32       1.7       1.9       2.3
Harda            8196.58    17525.40    10476.45    18994.35       2.1       1.3       2.3
Burhanpur        5779.11     7722.39    14282.86    18444.32       1.3       2.5       3.2
Satna            6860.40    18669.90    14175.79    18034.57       2.7       2.1       2.6
Narsinghpur      5617.10     9850.15    13002.57    17715.69       1.8       2.3       3.2
Bhind            7464.51    10525.60    10654.82    17013.12       1.4       1.4       2.3
Barwani          7081.00     9745.74    10868.00    16461.55       1.4       1.5       2.3
Guna             4723.37     8580.41    11209.82    16090.02       1.8       2.4       3.4
Chhindwara       7626.17     9575.94    13307.57    16036.64       1.3       1.7       2.1
Damoh            4387.38     7796.41    11692.76    14755.44       1.8       2.7       3.4
Shivpuri         5192.00     7157.31     9350.93    13740.90       1.4       1.8       2.6
Morena           5767.15     9012.16    12759.84    13331.64       1.6       2.2       2.3
Rajgarh          6594.01    11872.70    12735.75    13243.84       1.8       1.9       2.0
Jabalpur         4704.26     7312.38     8780.63    13055.67       1.6       1.9       2.8
Jhabua           4930.57     7407.44     6621.80    12917.27       1.5       1.3       2.6
Betul            4701.09     7048.02     7023.77    11126.23       1.5       1.5       2.4
Rewa             5340.20     8271.66     8052.82    10898.41       1.5       1.5       2.0
Tikamgarh        5681.48     6273.92     7927.28    10647.84       1.1       1.4       1.9
Chhatarpur       6615.08     7840.05    10593.00    10587.49       1.2       1.6       1.6
Datia            5328.35     7820.84     8040.46    10550.66       1.5       1.5       2.0
Balaghat         4556.70     6075.99     6334.97     9647.54       1.3       1.4       2.1
Panna            3407.80     4484.80     6670.35     9538.77       1.3       2.0       2.8
Ashoknagar       4413.29     5096.49     7332.82     8095.68       1.2       1.7       1.8
Neemuch          3456.67     5041.74     7414.68     7923.34       1.5       2.1       2.3
Seoni            3666.14     5139.12     5071.06     6447.77       1.4       1.4       1.8
Sheopur          2774.45     3601.13     3505.55     5401.07       1.3       1.3       1.9
Katni            2467.48     3398.27     3489.24     5303.39       1.4       1.4       2.1
Sidhi            2179.60     3599.09     3591.00     4592.99       1.7       1.6       2.1
Mandla           1765.18     2265.42     2546.33     4364.06       1.3       1.4       2.5
Shahdol          1408.40     2104.42     1922.85     3221.63       1.5       1.4       2.3
Dindori           703.60     1506.36     1243.73     1329.85       2.1       1.8       1.9
Umariya           734.58     1331.75     1369.26     1264.05       1.8       1.9       1.7
Anuppur           520.26     1055.53     1013.60      943.51       2.0       1.9       1.8

                                        31
by 2006-07, Hoshangabad, Tikamgarh, Chhatarpur, Ashoknagar,
Seoni, Sheopur, Dindori, Umariya and Anuppur did not fulfil the
doubling of credit target. This shows that though at the state level
doubling target has been achieved, at the District level few Districts
were not able to get to the target. Inter district variations does exist
in the GLC disbursement in the state.

2.2.4 Uttar Pradesh
It may be observed that GLC flow (in absolute terms) to agricultural
term loan in 3 Districts, total agriculture in one District declined
during 2006-07 from the 2003-04 level. Out of 69 Districts in the state
of UP, for which data for all the four years was available, 16 Districts
could not achieve the target of doubling of agricultural credit during
the policy package period. These 16 Districts were Jaunpur, Faizabad,
St. Ravidas Nagar, Chandauli, Allahabad, Varanasi, Firozabad, Unnao,

 Growth Pattern         No. of          Name of Districts
 during 2003-04         Districts
 to 2006-07
 Tot Ag NFS             52              Agra,     Allahabad,     Aligarh,   Badaun,
 OPS                                    Bahraich, Balrampur, Barabanki, Bareilly,
                                        Basti, Bijnore, Bulandshahar, Deoria,
                                        Etah, Etawah, Farukkhabad, Fatehpur, GB
                                        Nagar, Ghaziabad, Ghazipur, Gonda,
                                        Gorakhpur, Hamirpur, Hardoi, Jalaun,
                                        Jhansi, JP Nagar, Kannauj, Kanpur (D),
                                        Kanpur (N), Kushinagar, Lakhimpur,
                                        Lucknow, Mahoba, Manpuri, Mau, Meerut,
                                        Mirzapur,     Moradabad,      Muzaffarnagar,
                                        Pilibhit, Pratapgarh, Rae Bareli, Rampur,
                                        Saharanpur, Shahjahanpur, Siddharth-
                                        nagar, Sitapur
 Tot Ag    NFS          12              Sonebhadra, Shravasti, St. Kabir Nagar,
 OPS                                    Sultanpur, Unnao, Mathura, Baghpat,
                                        Banda, Maharajganj, Ballia, Firozabad,
                                        Ambedkarnagar,       Lalitpur,    Chitrakoot,
                                        Varanasi, Kaushambi, Faizabad
 Tot Ag    NFS          1               St. Ravidas Nagar
 OPS
 Tot Ag    NFS          3               Azamgarh, Auraiyya, Chandauli
 OPS
 Tot Ag    NFS          1               Jaunpur
 OPS

Note: NFS- Non farm Sector, OPS- Other Priority Sector



                                          32
Kaushabi, Kushinagar, Kanpur (N), Rampur, Badaun, Ambedkar
Nagar, Azamgarh and Mathura. Further, as many as 24 District in
case of crop loan and 26 Districts in case of agricultural term loan
failed to achieve the target of doubling the ground level credit within
three years period of policy package from 2004-05 to 2006-07.
However, Mahamaynagar (Hathras) District recorded 105.4 per cent
increase in case of crop loan, 91.4 per cent increase in case of
agricultural term loan, 115.3 per cent increase in case of agriculture
(total), during 2005-07 (within two years) over 2003-04 period.

2.2.5 Maharashtra
In Maharashtra, though at State level, doubling of agricultural credit
over the three years was achieved at the growth rate of 46 per cent,
18 per cent and 50 per cent in the respective years, the inter-District
variation in growth rates amongst the Districts/regions was wide
during 2004-05, 2005-06 and 2006-07. Out of the 33 Districts the
target of doubling of agriculture credit was achieved in 24 Districts.
In other words, doubling of credit was not achieved in 9 Districts over
the period. The disturbing issue was of the significant inter-District/
inter-regional disparity in the flow of credit. As it was, the average
share of agricultural credit in Western Maharashtra has been around
60 to 61 per cent of the total credit in Maharashtra during 2004-05
to 2006-07. For the same period, it was around 16 to 17 per cent in
Marathwada, 16 to 18 per cent in Vidarbha and 4 to 6 per cent in
Konkan region. The disbursement of credit to agriculture in western
region was as high as 60 to 61 per cent of the total credit to agriculture
in the State. The disbursement of agricultural credit in Marathwada,
Vidarbha and Konkan regions during the last three years was only
between 16 to 17 per cent in Marathwada, 16 to 18 per cent in
Vidarbha and 4 to 6 per cent in Konkan regions of the total flow of
credit to agriculture in the State. In this respect, the most privileged
Districts were Kolhapur, Nasik, Sangli, Satara and Pune in western
Maharashtra. The problem of inadequacy of credit appears to be more
serious in almost all Districts of Vidarbha and Marathwada region of
the State. The situation of inadequacy of credit equally prevails in
three Districts of Konkan, but not so bad in Thane District of the
state.




                                   33
2.3   Short-term and Long-term Credit Flows

What was the situation by type of credit disbursed viz., short-term
and long-term.

2.3.1 Rajasthan
Table 2.14 shows credit disbursed by institutions and type of credit
flows since 2003-04 in Rajasthan. Data shows that in case of
commercial banks achieved doubling of credit disbursed in both crop
and term loans in 2005-06 over 2003-04, though in case of term loans
the achievement was four times the base year. The situation further
improved during the terminal year. Regional Rural Banks almost
achieved doubling of crop loans disbursement in 2005-06, but in the
terminal year it exceeded the doubling target only in crop loans and
not term loans. Cooperative banks though achieved doubling of crop
loans in 2005-06, it went on to further achieve four times
disbursement of the crop credit in 2006-07. The doubling of term loans
was achieved in the terminal year. At the aggregate level, crop loan
and term loan were doubled in 2005-06 and situation further improved
in 2006-07. It was also noticed in this doubling process that
commercial banks improved their share in crop loan from 38.21 per
cent in 2003-04 to 40.38 per cent in 2006-07 and share in term loan
from 55.35 per cent to 82.03 per cent during the same period. Also,
the share in credit disbursement increased from 42.10 per cent in
2003-04 to 53 per cent in 2006-07. In case of Regional Rural Banks,
deterioration was observed in credit disbursement share of crop loans
from 47.63 per cent in 2003-04 to 40.50 per cent in 2006-07 and
significant reduction in share in term loans from 30.39 per cent to
9.46 per cent during the same period. Overall also, Regional Rural
Banks observed a decline in share in credit disbursement from 43.72
per cent to 31.10 per cent. In case of Cooperative Banks, improvement
was observed in credit disbursement share of crop loans from 14.16
per cent in 2003-04 to 19.12 per cent in 2006-07 and significant
reduction in share in term loans from 14.26 per cent to 8.50 per cent
during the same period. Overall also, cooperative banks observed a
marginal increase in share in credit disbursement from 14.19 per cent
to 15.91 per cent.




                                 34
  Table 2.14: Agency- wise Credit Flow under Crop and Term Loans
                                                          (Rs. lakh)

 Institutions   Commercial Banks             RRBs                   Co-ops                   Total

    Years       Amount    % share       Amount      % share    Amount    % share     Amount      % share
Rajasthan
2003-04
 Crop loan       88359     38.21        110159        47.63     32757    14.16      231275           100
 Term loan       37577     55.35         20630        30.39      9683    14.26       67891           100
 Total          125936     42.10        130789        43.72     42440    14.19      299166           100
2004-05
 Crop loan      145933     37.69        183460        47.39     57764    14.92      387157           100
 Term loan       68108     62.94         26680        24.66     13418    12.40      108206           100
 Total          214041     43.21        210140        42.42     71182    14.37      495363           100
2005-06
Crop loan       210259     40.48        219684        42.30     89414    17.22      519357           100
Term loan       154479     78.71         23586        12.02     18210        9.28   196275           100
Total           364738     50.97        243270        33.99    107624    15.04      715632           100
2006-07
Crop loan       291655     40.38        292511        40.50    138126    19.12      722291           100
Term loan       257255     82.03         29681          9.46    26670        8.50   313606           100
Total           548910     52.99        322192        31.10    164796    15.91      1035897          100




Disbursement Times
Base Year                   CBs                  RRBs             Co-ops                Total
2004-05 over 2003-04

Crop Loan                1.65       -       1.67        -       1.76          -       1.67           -
Term Loan                1.81       -       1.29        -       1.39          -       1.59           -
2005-06 over 2003-04
Crop Loan                2.38       -       1.99        -       2.73          -       2.25           -
Term Loan                4.11       -       1.14        -       1.88          -       2.89           -
2006-07 over 2003-04
Crop Loan                3.30       -       2.66        -       4.22          -       3.12           -
Term Loan                6.85       -       1.44        -       2.75          -       4.62           -



                                                 35
Tamil Nadu            CBs               RRBs                      Co-ops                Total
Years            Amount      %      Amount        %        Amount          %      Amount          %
2003-04
Crop Loan         417275    70.41    29075        4.91      146318        24.69   592668          100
Term Loan          84602    70.01     4126        3.41          32110     26.57   120838          100
2004-05
Crop Loan         631121    72.10    45595        5.21      198648        22.69    875364         100
Term Loan         137151    80.74     5182        3.05          27535     16.21    169868         100
2005-06
Crop Loan         831013    76.42    64341        5.92      192069        17.66   1087423         100
Term Loan         234383    84.55     6724        2.43          36113     13.03    277220         100
2006-07
Crop Loan        1176395    85.43    74010        5.37      126607         9.19   1377012         100
Term Loan         219655    92.78     9170        3.87           7912      3.34    236737         100
Times increase
over 2003-04
Crop Loan
2004-05              1.51             1.57                       1.36                  1.48
2005-06              1.99             2.21                       1.31                  1.83
2006-07              2.82             2.55                       0.87                  2.32
Term Loan
2004-05              1.62             1.26                       0.86                  1.41
2005-06              2.77             1.63                       1.12                  2.29
2006-07              2.60             2.22                       0.25                  1.96
Madhya                CBs                Coops                             RRBs                 Total
Pradesh
2003-04                     %                      %                               %
Crop loan        73449      31.59   126167            54.27             32882      14.14      232498
Term loan        65585      67.34    22336            22.93             10467      10.75        97388
2004-05
Crop loan        140012     38.35   167622            45.91             57502      15.75      365135
Term loan        92026      69.01    30839            23.13             10492       7.87      133357
2005-06
Crop loan        197706     42.25   193112            41.26             77178      16.49      467997
Term loan        120419     74.84    25212            15.67             15276       9.49      160907
2006-07
Crop loan        316998     46.67   251879            37.08         110366         16.25      679243
Term loan        168654      80.7    20037               9.59           20288       9.71      208979


                                             36
Disbursement Times Base Year

Year              Amount         %     Amount        %     Amount       %    Amount         %
Crop Loan
2004-05                1.91              1.33               1.75             1.57
2005-06                2.69              1.53               2.35             2.01
2006-07                4.32              2.00               3.36             2.92
Term Loan
2004-05                1.40              1.38               1.00             1.37
2005-06                1.84              1.13               1.46             1.65
2006-07                2.57              0.90               1.94             2.15


Year          Amount      %      Amount       %          Amount     %        Amount          %
Maharashtra        CBs                 RRBs                   Coop                  Total
2003-04
Crop Loan     105647     29.94       10049        2.85    237143     67.21   352839         100

Term Loan     67841      71.05       2294         2.40     25348     26.55    95482         100

2004-05
Crop Loan     234537     44.32       14872        2.81    279829     52.87   529238         100

Term Loan     113294     72.35       4266         2.72     39036     24.93   156596         100

2005-06
Crop Loan     193508     35.02       17651        3.19    341408     61.79   552567         100

Term Loan     188806     74.04       3442         1.35     62750     24.61   254998         100

2006-07
Crop Loan     230608     28.93       30489        3.83    535973     67.24   797070         100

Term Loan     283439     68.91       12654        3.08    115241     28.02   411334         100

Disbursement Times Base Year
Crop Loan
2004-05         2.22                  1.48                   1.18               1.50
2005-06         1.83                  1.76                   1.44               1.57
2006-07         2.18                  3.03                   2.26              2.26
Term Loan
2004-05         1.67                  1.86                   1.54              1.64
2005-06         2.78                  1.50                   2.48              2.67
2006-07         4.18                  5.52                   4.55              4.31



                                             37
2.3.2 Tamil Nadu
Data shows that commercial banks achieved doubling of credit
disbursed in both crop loans in 2006-07 and term loans in 2005-06
over 2003-04. Regional Rural Banks achieved doubling of crop loans
disbursement in 2005-06, while term loan doubling was achieved in
2006-07. Cooperative banks did not achieve the doubling target in
either crop loans or term loans during the entire period of three years.
At the aggregate level, crop loan doubled in 2006-07 while the term
loan in 2005-06.

It was also noticed in this doubling process that commercial banks
improved their share in crop loan from 70.41 per cent in 2003-04 to
85.43 per cent in 2006-07 and share in term loan from 70.01 per cent
to 92.78 per cent during the same period. In case of Regional Rural
Banks, a marginal improvement was observed in credit disbursement
share of crop loans from 4.91 per cent in 2003-04 to 5.37 per cent in
2006-07 and marginal improvement in share in term loans from 3.41
per cent to 3.87 per cent during the same period. In case of
Cooperative Banks, significant reduction was observed in credit
disbursement share of crop loans from 24.69 per cent in 2003-04 to
9.19 per cent in 2006-07 and significant reduction in share in term
loans from 26.57 per cent to 3.34 per cent during the same period.
Thus in Tamil Nadu the space vacated by cooperatives and RRBs has
been occupied by commercial banks.

2.3.3 Madhya Pradesh
Data shows that commercial banks achieved doubling of crop loan
disbursement in 2005-06 and term loan disbursement in 2006-07 over
2003-04, though in case of crop loans the achievement was more than
four times the base year in 2006-07. Cooperatives achieved doubling
of crop loans disbursement in 2006-07, but did not get to the target
in term loan. Regional Rural Banks though achieved doubling of crop
loans in 2005-06, it did not do so in case of term loans. At the
aggregate level, crop loan was doubled in 2005-06 while the term loan
doubled in 2006-07.

It was also noticed in this doubling process that commercial banks
improved their share in crop loan from 31.59 per cent in 2003-04 to
46.67 per cent in 2006-07 and share in term loan from 67.34 per cent
to 80.70 per cent during the same period. In case of Regional Rural
Banks, share improved to 16.25 per cent in 2006-07 from 14.14 per
cent in 2003-04 of crop loan, while the share of term loan reduced

                                  38
from 10.75 per cent to 9.71 per cent. In case of Cooperative Banks,
deterioration was observed in credit disbursement share of crop loans
from 54.27 per cent in 2003-04 to 37.08 per cent in 2006-07 and
significant reduction in share in term loans from 22.93 per cent to
9.59 per cent during the same period.

2.3.4 Maharashtra
Data shows that commercial banks achieved doubling of credit
disbursed in crop loans in 2004-05 and in case of term loans in 2005-
06 over 2003-04, though in case of term loans the achievement was
more than four times the base year in 2006-07. Cooperatives achieved
doubling of crop loans disbursement in 2006-07, but the target in
term loans by 2005-06, though in case of term loans the achievement
was more than four times the base year in 2006-07. Regional Rural
Banks achieved doubling of crop loans and term loans in 2006-07,
the achievement was more significant in case of term loans rather than
crop loans. At the aggregate level, crop loan was doubled in 2006-07
while the term loan doubled in 2005-06.

It was also noticed in this doubling process that commercial banks
had reduced share in crop loan from 29.94 per cent in 2003-04 to
28.93 per cent in 2006-07 and share in term loan from 71.05 per cent
to 68.91 per cent during the same period. In case of Regional Rural
Banks, share improved to 3.83 per cent in 2006-07 from 2.85 per cent
in 2003-04 of crop loan, while the share of term loan improved from
2.40 per cent to 3.08 per cent. In case of Cooperative Banks, the share
in crop loan remained the same in credit disbursement and there was
some improvement in share in term loans from 26.55 per cent to 28.02
per cent during the same period.

2.4 Coverage of New Farmers
Under the financial inclusion, there was a component under doubling
of farm credit that the Commercial Banks would try to bring in their
fold at least 100 new farmers by each branch during the period. As
such there was no such condition for Cooperatives and RRBs.

In Maharashtra the cooperatives having 3332 rural and semi--urban
branches brought 6.08 lakh new farmers in their fold. This worked
out to 182 new farmers per branch. The performance of RRBs in this
respect was significant. All the 564 branches of RRBs taken together
financed 1.60 lakh new farmers during the period which accounted
for 283 new farmers per branch. The amount of loan disbursed to

                                  39
new farmers accounted between 7 per cent and 9 per cent of the total
loan in the case of the cooperatives and exceptionally high between
31 per cent and 69 per cent in respect of RRBs during the period.
Further, of 6.08 lakh new farmers financed during the period, 3.3 lakh
farmers were SF/MF in the case of cooperatives accounting for 55.0
per cent of the total new farmers. Among the 1.60 lakh new farmers
financed by the RRBs, 0.75 lakh farmers were SF/MF which account
for 47.0 per cent of the total new farmers.

In Rajasthan, overall new farmers coverage declined from 4.69 lakh
in 2004-05 to 4.57 lakh and further to 3.57 lakh in 2006-07.

In Madhya Pradesh, the total number of new farmers covered has
increased by 18.81 percent in 2005-06 as compared to previous year,
while it has shown a decline of about 16.27 percent in 2006-07. As
compared to total number of farmer’s accounts the commercial banks’
performance in terms of coverage of new farmers was better as
compared to that of co-operative and RRBs. As far as financing of new
farmers was concerned as against the target of achieving at least 100
new farmers by each of the bank branches in an year, the commercial
banks have surpassed the target by financing 126 new farmers per
branch in 2004-05 and 134 in 2005-06 and 122 new farmers per
branch in 2006-07. The co-operatives has achieved 2-3 times higher
than the target while, RRB’s were lagging behind in achieving the
target by financing only 91 new farmers/branch in 2005-06 and 80
new farmers per branch in 2006-07. On an average in Madhya
Pradesh, over the three years, about 473330 farmers were covered
per year by all the agencies put together considering that there were
no overlaps. In 2005-06 out of the total farmers financed in the state
around 17 per cent were ‘new farmers’. This figure stood at 10 per
cent in 2006-07.

In Uttar Pradesh, the data on ‘coverage of new farmers’ during the
implementation period indicates of an enthusiastic beginning of the
programme as the figure of number of new farmers covered (14,96,373
farmers) during first year (2004-05) of implementation could not be
touched again during the next two years of the implementation i.e.,
2005-06 (1316399 farmers) and 2006-07 (1487213 farmers). Further,
number of fresh Kisan Credit Cards issued during a particular year
also declined from 2061135 during 2004-05 to 1673307 during 2005-
06 and then increased slightly to 1811073 during 2006-07 but fell
short of the level achieved in 2004-05.

                                 40
However, during 2005-06 & 2006-07, banks adopted a different
strategy to upscale the credit flow to agriculture sector and allowed
frequent withdrawals in KCC accounts without taking into account
the season-wise limits sanctioned to the borrowers which was not the
case during 2004-05 where the withdrawals were restricted to some
extent (unofficially) both in terms of quantity and frequency of
withdrawals. Since every withdrawal in KCC accounts was treated as
a fresh disbursement (irrespective of the quantum of limit sanctioned),
allowing more number of KCC withdrawals during 2005-06 and 2006-
07 led to increase in total disbursement during these two years
without issuing more number of fresh loans to new borrowers. This
resulted in decline in number of accounts and increase in total amount
disbursed during 2005-06 and 2006-07.

During the implementation period (2004-05 to 2006-07), the new
farmers accounted for 62 per cent in number and 53 per cent in total
loan to agriculture in case of commercial banks and 56 per cent in
number and 61 per cent in total loan to agriculture in case of RRBs
in the state of Uttar Pradesh which indicates better efforts on the part
of these two agencies as far as share of new farmers in total credit
extended to agriculture sector was concerned. On the other hand, in
case of cooperative banks, the new farmers accounted for only 6 per
cent of total farmers covered and 4.8 per cent of total amount
disbursed to new farmers which may be on account of poor efforts,
poor financial status of cooperative banks and non-willingness of most
of the farmers to have business with the cooperative bank due to
various reasons viz. delay in disbursement of cash component and
delivery of kind components. The efforts made by commercial banks
and RRBs in covering more number of new farmers in extending credit
to agriculture sector helped them to corner 68.8 per cent and 29.9
per cent share respectively by covering 47.7 per cent and 37.7 per
cent of total number of new farmers who were extended the bank loan
for agriculture sector.

The small and marginal farmers accounted for 67.63 per cent of total
number of farmers covered and 57.88 per cent of total amount of loan
granted to new farmers during the implementation of programme in
the state of Uttar Pradesh. The small and marginal farmers were given
lower amount of loan per account (Rs.39997) as compared to other
categories of farmers. The average loan granted per account to new
farmers was Rs.46731.


                                  41
In Tamil Nadu, opening up of a new bank account for the purpose
of getting agricultural credit in the current year was treated as a ‘new
loan’2. The percentage change in the number of new farmers in 2006-
07 over 2004-05 was more in RRBs accounting for 69 per cent followed
by commercial banks with 11 per cent. In case of co-operative banks,
there was a decline in the coverage of new farmers by 46 per cent.
Overall, there was an increase in the coverage of new farmers by all
the lending institutions in Tamil Nadu to the extent of 10 per cent.
As far as the amount sanctioned under new farmer category was
concerned, there was a decline in the amount sanctioned between
2004-05 and 2006-07 by co-operative banks, while there was an
increase in the amount sanctioned by RRBs for the same period.

The coverage of new farmers by commercial banks was more in 2004-
05 with 86.2 percent of the total number of new farmers covered in
the state and they were followed by co-operative banks (7.1 per cent)
and RRBs (6.7 per cent). However, the share was more in commercial
banks followed by RRBs and co-operative banks during 2005-06 and
2006-07.

2.5 Farmers in Distress

A special scheme was announced for the distressed category of farmers
who have suffered production and income losses on account of
successive recurrence of natural calamities like drought, flood,

2 A new farmer is one who did not borrow any loan from any of the credit institutions,
  so far and he comes forward to get bank loan (KCC/AGL/ATL) afresh (during the
  current year) after being persuaded by the banker/ other borrower farmers to do
  so. However, bankers find it difficult in categorizing new farmers separately from
  the general category of farmers. In view of operational conveniences, bankers
  categorized farmers as “new farmers” under the following conditions: A New farmer
  is one who is new to either KCC (crop loan/ term loan) or AGL (Agricultural Gold
  Loan) during the current year. If he approaches the present bank for the first
  time, he has to submit No Objection Certificate (NOC) from other bank (Co- op/
  Commercial bank / RRB) in which he had dealings previously. Even if he produces
  such NOC from other bank, he will be treated as a new farmer if he gets agricultural
  credit from the present bank for the first time. Even though he has regular bank
  transactions like maintaining Savings Bank Account, Current Account, Fixed
  Deposit, etc., currently in the same bank, if he borrows crop loan (KCC/ AGL)
  during the current year he is treated as a new farmer. Even though a farmer
  borrows for non - farm activities, with or with out pledging Jewels, in the current
  year in the same bank, he is treated as a new farmer, if he borrows Crop Loan
  afresh. If a farmer borrowed crop loan two years back, repays the entire outstanding
  amount and then borrows crop loan again during the current year after a gap of
  one or more than a year, then also he is treated as new farmer.


                                         42
infection of pests and diseases, etc. Their dues were restructured/
rescheduled over a suitable period (3 to 5 years) and they were made
eligible for availing fresh loans. Regarding the restructuring of loans,
data of Cooperatives and RRBs was not available for 2004--05 for
Maharashtra. During 2005-06 and 2006-07, the cooperatives
restructured 7.21 lakh and 8.45 lakh accounts of the farmers in
distress amounting to Rs.1424.31 crore and Rs.1743.73 crore in the
respective years. Similarly, the RRBs restructured 638 and 137
accounts of the farmers involving loan amount of Rs.1.95 crore and
Rs.0.37 crore respectively. As a result, DCCBs and RRBs taken
together financed fresh loans against restructuring to 1.69 lakh and
2.94 lakh accounts of the farmers and financed them fresh loan of
Rs.180.63 crore and Rs.500.19 crore during 2005--06 and 2006-07
respectively.

In Rajasthan, farmers in distress covered increased from 1.27 lakh
in 2004-05 to 1.41 lakh in 2005-06. The data for latter period was
not available.

In Tamil Nadu, farmers were more benefited ‘under relief measure
extended to farmers who were in distress’ from co-operative banks
with 54.7 per cent of the total amount sanctioned under the relief
measures and they were followed by commercial banks (44.6%) and
RRBs (0.7%) during 2004-05. However, in 2006-07, commercial banks
provided more relief than that of the co-operative banks and RRBs.
As far as the percentage change in the amount sanctioned between
2004-05 and 2006-07 was concerned, all the three banks showed a
negative trend.

The rescheduling of loans would allow farm borrowers an extension
in repayment with revised terms. At the same time, bankers were also
simultaneously carrying out a restructuring exercise to alleviate the
debt burden on the farm sector. The restructuring implied that
rescheduled farm loans would not have any penal interest rates.
Instead, on a merit basis, interest charges on some of the loans would
be pegged to the current rates. This would bring down the borrowing
costs considerably. Farmers under the relief ‘restructuring of loans
to borrowers in distress’ in Tamil Nadu, were more benefited from
commercial banks with 84.6 per cent of the total amount sanctioned
for the purpose and they were followed by co-operative banks (14.6%)
and RRBs (0.8%). However, in 2006-07, commercial banks provided
more relief followed by RRBs and co-operative banks. The relief came
down between 2004-05 and 2006-07.

                                  43
In Madhya Pradesh, in total, 25097 farmers in distress were settled
in 2004-05 and 5874 farmers in 2005-06 and 1950 farmers in 2006-
07. In aggregate for these 3 years the total amount was to the tune
of Rs. 11,249 lakh. Among these farmers, the majority were from
commercial banks followed by RRBs in 2005-06. In 2006-07, other
than a few (5) farmers settled by RRBs, most of the farmers belonged
to commercial banks.

In Uttar Pradesh, in 2004-05, 80806 farmers who were in distress
saw restructuring of Rs.212.58 crore while in the next year no farmers
was reportedly helped, though in 2006-07, 22649 farmers with loan
amount of Rs.97.43 crore were assisted through restructuring. In all
during these two years, 103455 farmers in distress were helped
through restructuring of Rs.310.01 crore loans. Of these 1755 farmers
were given fresh loans of Rs.5.04 crore in 2004-05, 1151 farmers given
Rs.3.39 crore loans in 2005-06, 957 farmers given Rs.4.62 crore loan
in 2006-07.

2.6    Farmers in Arrears

Like in the case of farmers in distress, similar arrangement was made
to meet the credit needs of farmers in arrears. During 2005-06 and
2006-07, the cooperatives restructured 1.73 lakh and 1.17 lakh
accounts of the farmers in arrears amounting to Rs.378.73 crore and
Rs.385.13 crore respectively in Maharashtra. Because of
restructuring of loans of farmers in arrears, cooperatives financed fresh
loans to 4.07 lakh accounts of the farmers in arrears and issued fresh loans
to them to the tune of Rs.712.98 crore during the period of three years.
In Rajasthan, farmers in arrears also increased from 0.25 lakh in
2004-05 to 0.34 lakh in 2005-06. The data for latter period was not
available.
In Madhya Pradesh, in 2004-05, 6292 farmers were reported to be
in arrears and Rs.36.81 crore loans were settled while in 2005-06,
1235 farmers who were in arrears could get Rs.9.35 crore loans
settled. Of these, majority were from commercial banks (1020 with
Rs.8.75 crore loan) and RRBs (215 farmers with Rs.0.60 crore loans).
In the next year, 533 accounts of arrears with Rs.4.02 crore loan were
settled and again 368 came from commercial banks and 135 with
RRBs.
In Uttar Pradesh, in the three years 297741 farmers with arrears
were benefited and Rs.404.86 crore loans were settled. Of these,

                                    44
241867 farmers were in 2004-05 followed by 44472 farmers in 2005-
06 and 11402 farmers in 2006-07. In 2004-05 the loan amount settled
was Rs.256.65 crore followed by Rs.61.64 crore in 2005-06 and
Rs.86.57 crore in 2006-07. Once this was done, fresh loans were
issued to 29196 farmers to the tune of Rs.27.18 crore of which 20507
farmers were in 2004-05, 8235 farmers in 2005-06 and 454 farmers
in 2006-07. The fresh loans issued were Rs.15.34 crore, Rs.10.27 crore
and Rs.1.57 crore respectively for 2004-05, 2005-06 and 2006-07.

2.7   One Time Settlement (OTS)
This scheme was applicable to SF/MF whose accounts have turned
into Non-Performing Assets (NPA) and their cases have been filed and
decreed debts. The end of 31 March 2001 was fixed as a cut of off
date for the NPA accounts. Total number of accounts settled under
OTS in the case of co-operatives during the three years was 26368
and their amount of settlement was Rs.175.93 crore in Maharashtra.
In the case of RRBs, the number of OTS accounts settled during the
period was 573 and their amount of settlement was Rs.0.75 crore. In
other words, the cooperatives and RRBs taken together, nearly 27000
SF/MF became eligible for fresh credit from the banks.

In Rajasthan, farmers in OTS marginally increased from 0.10 lakh
in 2004-05 to 0.12 lakh in 2005-06. The data for latter period was
not available.

In Tamil Nadu, the farmers under ‘One Time Settlement (OTS) Relief’
in Tamil Nadu were benefited more from commercial banks with 96.7
per cent of the total amount disbursed for the purpose during 2004-
05 and they were followed by RRBs (2.5%) and co-operative banks
(0.8%). However, co-operative banks provided more benefits under OTS
in 2006-07 followed by commercial banks and RRBs. The co-operative
banks increased the OTS benefit to the farmers in between 2004-05
and 2006-07 significantly while there was a negative trend in case of
commercial banks and RRBs.

In Madhya Pradesh, in 2004-05, 87555 farmers were benefited under
OTS and Rs.90.92 crore loans were settled while in 2005-06, 10948
farmers were benefited when loans worth Rs.33.62 crore were settled.
Of these majority were from commercial banks (3526 with Rs.14.76
crore loan) followed by cooperatives (4724 farmers and Rs.9.71 crore
loans) and RRBs (2698 farmers with Rs.9.15 crore loans). In the next
year, 9098 accounts were settled under OTS with Rs.15.72 crore loan

                                 45
settled and again 3566 came from commercial banks and 5527 from
RRBs. The amount settled by commercial banks in 2006-07 was
Rs.10.83 crore, cooperatives Rs.0.18 crore and Rs.4.71 crore by RRBs.

In Uttar Pradesh, in the three years, 107990 farmers (SF/MF)
benefited from OTS and Rs.191.09 crore loans were settled. Of these,
63036 farmers were in 2004-05 followed by 18991 farmers in 2005-
06 and 25973 farmers in 2006-07. In 2004-05 the loan amount settled
was Rs.88.04 crore followed by Rs.28.78 crore in 2005-06 and
Rs.74.27 crore in 2006-07. Once this was done, fresh loans were
issued to 17006 farmers to the tune of Rs.28.29 crore of which 8270
farmers were in 2004-05, 3510 farmers in 2005-06 and 5226 farmers
in 2006-07. The fresh loans issued were Rs.8.44 crore, Rs.6.56 crore
and Rs.13.29 crore respectively for 2004-05, 2005-06 and 2006-07.

2.8 Redemption from Informal Sources of Credit

The advances granted against the farmers’ indebtedness to informal
sources like moneylenders, etc. were Rs.11 lakh to 58 farmers in the
case of cooperatives in Maharashtra. While in the case of RRBs, this
amount was Rs.473 lakh for 241 farmers. The banks were advised to
give wide publicity to this scheme among the eligible farmers. However,
it was reported by the banks that they found difficult to identify such
farmers mainly because the farmers themselves could not come
forward and apply in writing to the bank and comply with relevant
details which they found difficult.

In Rajasthan, It was also found that loans against indebtedness
benefited 2164 farmers in 2004-05 and only 539 farmers in 2005-06
and 182 farmers in 2006-07. During these two years, Rs.27.20 crore
and Rs.1.07 crore were advanced to these farmers. It was also noticed
in Rajasthan that fresh loans after relief measures were given to 62000
farmers in 2004-05 and were disbursed Rs.331 crore. This number
went up to 89000 in 2005-06 and amount disbursed declined to
Rs.179 crore. The number further declined to 2251 in 2006-07 and
the amount of credit disbursed was mere Rs.2.08 crore.

In Madhya Pradesh, in 2004-05, 282 farmers were benefited under
redemption of moneylenders loans and Rs.1.04 crore redeemed while
in 2005-06, 172 farmers were benefited when loans worth Rs.1.63
crore were settled. Of these all were from commercial banks. In 2006-
07, 82 farmers were benefited with Rs.0.03 crore loan settled and they
belonged to RRBs.

                                  46
In Uttar Pradesh, in the three years 11610 farmers benefited from
moneylender loan redemption and Rs.40.83 crore loans were settled.
Of these, 5004 farmers were in 2004-05 followed by 2422 farmers in
2005-06 and 4184 farmers in 2006-07. In 2004-05 the loan amount
settled was Rs.21.88 crore followed Rs.4.89 crore in 2005-06 and
Rs.14.66 crore in 2006-07.

2.9   Share Croppers, Tenant Farmers and Oral Lessees

The area of concern has been the exclusion of tenant farmers, lessees
and share croppers from access to bank credit on account of extant
restrictions on recording of oral lease and other legal impediments.
To make modest beginning in addressing this situation, it was
expected that the banks would make some token provision for
facilitating formation, linkage and financing such groups during the
implementation of the scheme. However, the cooperatives and RRBs
expressed their inability to identify such beneficiaries mainly due to
lack of evidence/proof of lease and adequate security.

In Rajasthan, information on small and marginal farmers, tenant
farmers, share croppers and oral lessees was available only for 2004-
05. During this year 174909 small and marginal farmers were
benefited with credit of Rs.687.11 crore.

There were only 288 oral lessees covered in 2004-05 in Rajasthan with
credit disbursement of Rs.1.13 crore. The data for latter period was
not available.

There were only 939 sharecroppers covered in 2004-05 in Rajasthan
with credit disbursement of Rs.1.52 crore. The data for latter period
was not available.

There were only 1774 tenant farmers covered in 2004-05 in Rajasthan
with credit disbursement of Rs.4.21 crore. The data for latter period
was not available.

In Madhya Pradesh, to address the problem of exclusion of tenant
farmers, oral lessees and sharecroppers from access to bank credit,
the banks were directed to finance them. As a response to the norms,
in Madhya Pradesh in 2005-06, only 148 tenant farmers were financed
by commercial banks, which declined drastically in the next financial
year 2006-07 to 43 tenant farmers. The other agencies have not
financed any farmers in this category. No financing has been done to

                                 47
oral lessees and sharecroppers by formal banking institutions in
Madhya Pradesh.

In Maharashtra, 3621 SHGs of tenant farmers were formed and
financed by cooperatives and 474 by RRBs during the period. This
was possible because of the efforts of the NGOs who could identify
the tenant farmers and formed their SHGs. In Maharashtra,
agriculture credit was not extended to share croppers and oral lessees
for lack of records on land use.

In Tamil Nadu, in 2004-05, in terms of extent of financial support
provided to the SHGs of tenant farmers, commercial banks’
contribution was more (92 %) followed by RRBs’(5%) and co-operative
banks (3%). In 2006-07 also, commercial banks played a leading role
followed by RRBs. The percentage change in the financial assistance
extended to tenant farmers between 2004-05 and 2006-07 was more
in RRBs and a declining trend was observed in case of commercial
banks and co-operative banks.

In 2004-05, commercial banks supported tenant farmers through 1002
SHGs, RRBs and cooperatives formed 91 and 34 SHGs respectively.
A total of Rs.17.63 crore was loaned during 2004-05 and commercial
banks led with Rs.16.24 crore followed by RRBs Rs.0.96 crore and
cooperatives another Rs.0.44 crore. In 2005-06, commercial banks
supported 484 tenant farmer SHGs followed by 20 by RRBs and only
4 SHGs by cooperatives. During the year, Rs.6.5 crore was loaned of
which 97 per cent was through commercial banks followed by 1.8 per
cent by RRBs and 1.2 per cent by cooperatives. During 2006-07,
commercial banks supported 286 tenant farmer SHGs while RRBs
supported only 94 tenant farmer SHGs. During the year, Rs.3.3 crore
was loaned of which 59.5 per cent was through commercial banks
followed by 40.5 per cent by RRBs. No SHG was formed by co-
operatives during 2006-07.

In Uttar Pradesh, in the three years, 39380 tenant farmers were
covered of which 15835 were during 2004-05, 7306 during 2005-06
and 16239 during 2006-07. It was also revealed that of the total
number of new farmers the share of tenant farmers was 1.06 per cent
in 2004-05, 0.55 per cent in 2005-06 and 1.09 per cent in 2006-07.
In 2004-05, tenant farmers were issued loans of Rs.44.30 crore which
reduced to Rs.25.61 crore in 2005-06 and then increased to Rs.103.83
crore in 2006-07.

                                 48
In case of oral lessees, in the three years, 7911 such farmers were
covered of which 1684 were during 2004-05, 3338 during 2005-06
and 2889 during 2006-07. It was also revealed that of the total number
of new farmers the share of oral lessees was 0.11 per cent in 2004-05,
0.25 per cent in 2005-06 and 0.19 per cent in 2006-07. In 2004-05,
oral lessees were issued loans of Rs.8.03 crore which reduced to
Rs.2.77 crore in 2005-06 and then increased to Rs.6.52 crore in 2006-07.

In case of share-croppers, in the three years, 19951 share croppers
were covered of which 3309 were during 2004-05, 5018 during 2005-
06 and 11624 during 2006-07. It was also revealed that of the total
number of new farmers the share of share croppers was 0.22 per cent
in 2004-05, 0.38 per cent in 2005-06 and 0.78 per cent in 2006-07.
In 2004-05, share croppers were issued loans of Rs.9.62 crore which
improved to Rs.13.85 crore in 2005-06 and then increased to Rs.52.91
crore in 2006-07.

Surprisingly, the tenant farmers were giver higher dose of loan per
account (Rs.44120) as compared to the average loan. The oral lessees
and the share-croppers were given an average loan of Rs.21897 and
Rs.38284 per account respectively.

2.10    Agric-Clinics/Agri-Business

The programme on agri-clinic and agri-business was launched by
Ministry of Agriculture, Government of India, in association with
NABARD with an objective to facilitate the farmers by extending new
technologies of farming through trained agricultural graduates. In view
of the policy package announced for doubling of agriculture credit,
the banks had to sponsor and finance at least 10 agri-clinic/ business
centres in each District as per the government directives. The
objectives of the agri-clinic scheme were: (i) to supplement the efforts
of government extension system, (ii) to make available supplementary
sources of input supply and services to needy farmers, and (iii) to
provide gainful employment to agriculture graduates in new and
emerging areas in agriculture sector. Thus, NABARD took the initiative
of providing training to those eligible graduates and also provides
capital subsidy for setting up of the unit as well as interest subsidy
on the loans availed under the scheme. The units could be established
for host of activities which could result in sustainable income for the
graduates apart from increasing the productivity in rural areas by
adopting scientific measures and protocols. Greater emphasis was


                                  49
being given on formation of atleast 10 ACABC units in each District.
The banks have been encouraged to finance a group of entrepreneurs
belonging to different disciplines. The project may be taken up by
agriculture graduates individually or on joint/ group basis. The group
may normally be of five, of which one could be a management graduate
with qualification or experience in Business Development and
Management.

In Rajasthan, in 2004-05, 36 agri-clinics/ agri-business units were
devolved credit of Rs.0.69 crore while in 2005-06, 179 agri-clinics/
agri-business units were devolved credit of Rs.0.65 crore. The number
further reduced to 5 in 2006-07 which were disbursed Rs.0.14 crore.

In Madhya Pradesh, to encourage the entrepreneurship in
agriculture and allied sector and to imbibe the educated youth in this
sector, guidelines have been formed in SACP that in every District
atleast 2-3 agri-clinics/agri-business centres should be funded by
commercial banks. Accordingly, it has been reported that Rs.0.83 crore
loan was sanctioned to 30 agri-clinics/agri-business centres in 2005-
06, while it has drastically declined to only one agri-clinic in 2006-
07. RRBs have also funded around 8 units in 2005-06 and 2 units in
2006-07.

In Uttar Pradesh, the data on the financing of agri-clinics/ business
centres indicates that the achievement was only 27 per cent (570
against the target of 2100 agri-clinics in the state (@10/ District/year).
The financing of all the 570 agri clinics/ agri-business Centres in the
State was done by Commercial banks and RRBs only. For example,
during 2005-06, out of 252 centres financed in the state, 162 were
financed by Commercial banks and the rest 90 centres by RRBs and
during 2006-07, 154 centres were financed by commercial banks and
the rest 21 centres by RRBs. The Cooperative banks did not finance
any agri clinics/ agri-business Centres in the state. However, Banks
have financed around 392473 new investment projects during the
policy package period, which can be termed as excellent as far as
mandatory expectations were concerned. Of these new projects,
159116 were financed during 2004-05 (Rs.944.36 crore), 92598 in
2005-06 (Rs.889.45 crore) and 14059 in 2006-07 (Rs.1468.84 crore).

In Tamil Nadu, more agri-clinics were started through co-operative
banks which were followed by commercial banks and RRBs. It could



                                   50
also be observed that more efforts have been taken during 2006-07,
to start agri-clinics as 2626 clinics were supported. Of these 2589
were set up with assistance from cooperative banks with a loan of
Rs.4.22 crore while commercial banks supported only 36 clinics. In
2004-05 only 69 clinics were set up by commercial banks. And this
number declined to 38 in 2005-06. In these two years, commercial
banks supported 107 clinics while cooperative banks set up 114 clinics.

In Maharashtra, the total number of ACABC financed by the banks
in the State was 129 upto 31 March 2007. The total amount of loan
sanctioned to them was Rs. 5.61 crore against which disbursement
of loan was Rs.4.70 crore. Only 14 new ACABC were financed by the
bank during the last three years, though a large number of private
centers as reported have been opened in the State without taking
credit from the formal sources. Regarding deployment of credit to
ACABC, out of 129 units financed in the State, as much as 92 units
were financed in Western Maharashtra alone, leaving 12, 15 and 10
for Marathwada, Vidarbha and Konkan regions respectively.

2.11 Institutional Credit to Small and Marginal Farmers (SF/MF)
The land operated by SF/MF was around 39.0 per cent of the total
operated area in Maharashtra, though they account for about 73.0
per cent of the total holdings. Regarding the credit flow, it was
observed that disbursement of credit to SF/MF in the case of
cooperatives and RRBs during the period of doubling of credit was
more than commensurate with the land operated by them. For
instance, flow of credit to them was between 37.0 per cent and 47.0
per cent in the case of co-operative banks and between 45.0 per cent
and 48.0 per cent in respect of the RRBs. On the other hand, however,
the number of accounts of SF/MF financed, during the same period
was between 38.0 per cent and 51.0 per cent of the total accounts
financed by cooperative banks, while their proportion was between
36.0 per cent and 50 per cent in the case of RRBs.

In Madhya Pradesh, 30 per cent of the total agricultural credit was
extended to small/marginal farmers in 2004-05, which declined to
15.53 per cent in 2005-06 and 19.17 per cent in 2006-07. The share
of number of accounts showed an increasing trend with about 32.35
per cent share in the total number of accounts. The agency-wise
financing of SF/MF farmers shows that commercial banks have
financed 36.75 per cent out of their total agricultural credit


                                  51
disbursement in 2004-05, which reduced in 2005-06 to 9.73 per cent
and then to 11.05 per cent in 2006-07. Among the total number of
farmers financed by commercial banks, small/marginal farmers
accounted for around 20 per cent in 2005-06 and 2006-07. As far as
co-operatives were concerned, the amount of credit to SF/MF farmers
accounted for 14.8 per cent in 2004-05, which increased to 19.92 per
cent in 2005-06 and 29.59 per cent in 2006-07. In case of RRBs the
credit to SF/MF farmers accounted for about 47.7 per cent, which
showed a declining trend over the years. In RRBs, the number of SF/
MF farmers account about 34 per cent to the total number of
accounts.

In Tamil Nadu, the performance of co-operative credit institutions
in terms of share of number and loan amount issued to small /
marginal farmers to their respective totals during 2006-07. There were
22 DCCBs in 2006-07 operating with 661 branches, 4489 PACBs and
44.15 lakh members. The share of small and marginal farmers to total
number of beneficiaries was 56 per cent and they received 51 per cent
of the total loan amount disbursed during 2006-07. This share varied
from 26.4 per cent in Salem DCCB to 100 per cent in Nilgiri’s DCCB.
The share of loan amount issued to SF/ MF to total loan amount
disbursed varied from 10.5 per cent in Salem DCCB to 100 per cent
in Nilgiri’s DCCB. Average loan amount disbursed by DCCBs per
borrower in Tamil Nadu was Rs.19501 ranging from Rs.36024 in
Coimbatore DCCB to Rs.9964 in Sivagangai DCCB. Although the loan
amount outstanding was higher in Salem DCCB, i.e., Rs.811.5 crore,
the coverage of SF/ MF was lesser in this DCCB region.

In Uttar Pradesh, the small and marginal farmers accounted for
67.63 per cent of total number of farmers covered and 57.88 per cent
of total amount of loan granted to new farmers during the
implementation of programme in the state of Uttar Pradesh. The small
and marginal farmers were given lower amount of loan per account
(Rs.39997) as compared to other categories of farmers. The average
loan granted per account to new farmers was Rs.46731. During the
three years a total of 2907951 small/marginal farmers were provided
loans and of these 1023745 (68.42% of new farmers) were given loans
in 2004-05 and the number declined to 858043 (65.18% of new
farmers) in 2005-06, but increased to 1026163 (69% of new farmers)
in 2006-07. The loans disbursed to these farmers stood at Rs.3507.87
crore in 2004-05, Rs.3277.76 crore in 2005-06 and Rs.4845.22 crore
in 2006-07.

                                 52
2.12 Monitoring Information System (MIS)
Under the ‘Service Area Approach (SPA)’, ‘Service Area Monitoring
Information System’ (SAMIS) was introduced to facilitate meaningful
analysis of sectoral credit flow as well as to build up a strong and
uniform data base on agricultural credit. It was envisaged that the
bank branches would codify the data and submit in Lead Bank Return
(LBR) format regularly and the Lead Bank would arrange to generate
the reports utilizing the software supplied to them for the purpose.
Although the system was in vogue for nearly one and a half decades,
it could not be stabilized. Rather, it was withdrawn while dispensing
with the SAA in December 2004. Subsequently, NABARD formed the
Working Group and reviewed the SAMIS reporting system in
consultation with major CBs, IBA and RBI and forwarded the
recommendations to RBI for its approval. Some of the
recommendations of the Working Group were: SAMIS to be renamed
as Priority Sector MIS, LBRs to be made statutory, SAMIS to follow
BSR Coding System to facilitate integration, avoid multiple entries at
branches and to ensure error free and timely reporting, supply of
District-wise consolidated data to SLBC, etc. Subsequently, NABARD
made some revision in the format of new MIS and again forwarded to
RBI for its approval in April 2007. The new MIS would be effective
only after the issue of operational guidelines by RBI.

2.12.1 Maharashtra Concerns
As on today, whatsoever may be the status of the new MIS, the overall
rate of submission of LBRS was not at all satisfactory. Controlling
offices were neither serious about the submission of LBRs by the
branches and forwarding the District-wise consolidated data to SLBC,
nor the SLBC was serious in making follow up of the same at District/
branch level of the banks. While seeking information on the same from
the officials of the bank branches, no ones response was satisfactory.
Rather, they were reluctant to update us on the issue. Nevertheless,
all of them informed that so far they had not forwarded such data/
LBRs to their controlling offices. Further, they were not aware of MIS/
any statement for reporting the number of total accounts financed,
and further, number of accounts of SF/MF and new farmers covered
during the period of doubling of agriculture credit.

The officials of the SLBC, while seeking information on the status of
the MIS, reported that doubling of agricultural credit was one of the
many activities to be performed by the SLBC in a given period.
Moreover, a few more financial schemes were introduced in the

                                  53
subsequent years. As a result, the scheme which was introduced in
the recent past was almost forgotten in the light of the new schemes.
Therefore, the SLBC could hardly get any time to postmortem the data
of completed/closed scheme when already a few new schemes were
on hand to be monitored by the Committee. To cite an example, they
reported that the existing shortage of staff in the banks was the biggest
constraint in monitoring the performance of priority sector lending.
Moreover, once the scheme of doubling of agricultural credit was
closed by the end of March 2007, two more schemes viz., ‘Financial
Inclusion’ and ‘Loan Waiver Scheme of 2008’ announced by the GOI
were to be implemented and monitored in the subsequent year. As a
result, the officials further added: “In the situation when one scheme
was recently closed, but there was already a new scheme on hand to
look into on priority, we can work only in present situation and not
in past”. We were unable to probe further in this matter.

2.12.2 Madhya Pradesh Case
The rural branches face lot of problems in reporting the data because
of frequent power failure, which makes it difficult to maintain the daily
database. In Panna, many co-operative banks were yet to be
computerized and the data was managed manually. The lack of
professionals also add to their problems, as they get struck up for 2-
3 days with even minor problems related to software, in rural
branches. Moreover, different banks follow different software in
managing the database and they take extra efforts while preparing
LBRs. There was often divergence between the data reported at the
SLBC level and that submitted directly by the banks. The co-ordination
between the LDMs and the bank branches was poor regarding the
database management as the LDMs has little hold over the bank
branches. There was no uniformity in the reporting formats. SLBC,
DLCC and their controlling office burden the banks with preparation
of different formats of data for different review meetings. SAMIS was
able to collate data based on the service area. This creates problems
while consolidating the data at District level and block level, as the
concept of service area approach was slowly vanishing as almost all
the banks were covering all the villages. The consolidation of data at
the District level was not done efficiently as it involves lot of
compilation work for the lead banks. Mostly the SLBC directly receives
the LBRs from the bank branches/ computer agencies and this
hampers the review at the District level, and usually the physical
targets set by government were generally ignored. Hence LBR formats
has to be revised in such a way that all the banks follow an uniform

                                   54
format for reporting at all level such as SLBC, DLCC etc. All the bank
branches should submit the periodical data to the controlling offices
of bank branches at each District, instead of lead banks as they
exercise better control over their respective branches than the LDMs.
A uniform reporting system has to be formulated for all the banks so
that there were no differences at different levels and it will reduce
the workload related data base management at each level.

In the current MIS, there was no provision for accounting migrant
farmers who has shifted from one bank to another and there exists
no clear definition for the new farmers or new accounts. According to
them, any new account (whether old costumer) was called as new
farmers. Thus, all the banks do not follow uniform accounting for new
farmers and they were still confused about the concept of new farmers.
During the field study some of the contradictions were even observed.

  Particulars                      Number of farmers
                      Reported       Reported          Migrated
                       rightly     contradictory
  CBs
  New farmers            42              3                4
  Old farmers            38              3                8
  Coops
  New farmers            28              1                0
  Old farmers            23              2                6
  RRBs
  New farmers            19              3                2
  Old farmers            12              2                4
  Total
  New farmers            89              7                6
  Old farmers            73              7                18
  Grand total            162            14                24

Among the farmers surveyed, there were contradictions in information
observed in case of 14 farmers. There was no accounting for 24
farmers who had migrated across banks. Of the 89 new farmers
reported by the banks in the sample, 7 farmers reported that they
were old customers of the same banks and 6 farmers had shifted from
other banks. Moreover, there was a common complaint that at the

                                 55
top level that there was frequent policy changes which generally do
not percolate down quickly. The staff gets confused whether to follow
the new system or stick on to the older one. These things have to be
taken care of.

2.12.3 Rajasthan’s Views
This was very important issue. However, across the board ad-hocism
was practiced. No proper records were kept and were prepared only
when asked for by District or State offices of banks. There was large
number of inconsistencies found in data reported as has been the case
with this survey. There was no verification process of how data was
sent upward. All bank managers reported that they collate information
on agriculture sector largely when NABARD seeks it. The poor data
management was reflected in PLPs and SLBC information also. It has
been found that in two subsequent pages data do not match on the
same item. Forms/structure schedules that were supposed to be sent
to upper level offices were not sufficient to track all that happens at
the branch level. It was attitude of staff that was largely to be blamed
and also information on all items was not sought.

2.12.4 Tamil Nadu
Regarding the Management Information System (MIS), in Tamil Nadu,
it was articulated that although each financial institution was trying
to improve the format and the methodology of preparing the monthly,
quarterly and annual statements taking advantage of the technology
and computer software, still it has a long way to go. Since the format
that was being submitted to the State Level Bankers’ Committee by
the institutions remains the same, at institution level also there can
be a common format so as to avoid errors in reporting. Apart from
this, some of the classifications such as categorizing the farmers
according to the size of the holding, possession of the property, etc.,
could be linked with the software so that the data will be readily
available.

The banking information had been computerized in commercial banks
and RRBs. The PACBs, however, have started to computerize the
information very recently. There was no uniformity in the MIS
maintained by different institutional agencies like commercial banks,
RRBs and PACBs. In RRB Kurinjipadi, there was no categorization of
farmers into marginal, small and large farmers. The Branch Managers
and Secretaries could not suggest any improvement in the existing


                                  56
MIS, as they did not have any clear understanding about the utility
of MIS. They were simply sending the data to their head quarters as
and when the returns were demanded. However, all bankers suggested
that all the banking information should be made available at one apex
level institution.

At the State level, there was no web site of either NABARD or SLBC
to browse the District-wise information on banking development over
years. The available information was highly truncated and it would
be very difficult to make any policy decision based on the available
information. Apart from lack of uniformity in the data provided by
different financial institutions, in some returns only ‘outstanding or
cumulative’ information was available, while in some other returns
only current year information was available. Although, the information
on agricultural advances extended to marginal and small farmers and
other weaker sections of the rural community were required for policy
making, such information were either not available or incomplete. In
some returns, only number of accounts was given, while in others
amount of loan disbursed alone has been given.

Thus, in view of the above inadequacies in the existing MIS (i) a web
site may be created by SLBC for Tamil Nadu for providing the following
banking development indicators like District-wise information, bank-
wise (commercial banks, RRBs, Co-operative Banks), information on
different category of farmers (marginal, small and large farmers,
tenants and oral lessees, new farmers, beneficiaries of crop insurance
and other beneficiaries of the banking system), information on both
number of accounts and loan disbursed for all schemes and categories
of farms, information on both current and outstanding loan and,
information on banking indicators yearly.




                                 57
                            CHAPTER 3
               Kisan Credit Cards : Some Issues
The Kisan Credit Card (KCC) scheme, introduced in August 1998 for
short-term (ST) loans for Seasonal Agricultural Operations (SAO), with
the objective of providing adequate, timely, cost effective and hassle
free credit support to farmers was being implemented across the
country by all public sector commercial banks, RRBs and Co-operative
banks. To cater to the comprehensive credit requirements of farmers
under a single window, the scope of KCC was broad-based by
NABARD, from time to time. In addition to short-term credit and term
loans for agriculture and allied activities, a certain component of loan
through KCC also covers consumption needs.

3.1 KCC : Progress

3.1.1 Tamil Nadu
The number and amount sanctioned under Kisan Credit Card (KCC)
Scheme for Tamil Nadu was presented in Table 3.1. About 64 per cent
of the total number of KCC were issued from commercial banks and
the amount sanctioned through KCC by these banks accounted for
43 per cent of the total amount sanctioned under KCC during 2003-
04. Co-operative banks issued 33 per cent of the total number of cards
but disbursed a relatively larger amount accounting for 56 per cent
of the amount sanctioned for the same period (Table 3.1). As RRBs
had lesser number of branches in the state, the number and amount
sanctioned also were lower. Similar trend was seen in Tamil Nadu
during 2006-07 also. However, the percentage increase between 2003-
04 and 2006-07 in the number as well as the amount sanctioned
under KCC by RRBs were higher than that of commercial and co-
operative banks. In sum, the total number of KCC increased by 7.6
per cent in Tamil Nadu during 2006-07 over 2003-04. However, there
was an increase by 62 per cent in the amount sanctioned under KCC
during the same period.

The amount sanctioned through KCCs per farm household by
commercial banks in Tamil Nadu was Rs.20351 during 2003-04 and
increased to Rs.38037 accounting for an increase of 87 per cent.
Amount sanctioned under KCC by all the lending institutions put
together was Rs.30328 per household in 2003-04 and it increased to
Rs.45615 in 2006-07 accounting for an increase of 50.4 per cent. The


                                  58
amount sanctioned per household under KCC in Tamil Nadu was very
low when compared with that of all India level.

             Table 3.1: Number and Amount Sanctioned under
                            KCC in Tamil Nadu     (amount in Rs.lakhs)

                      Number of Cards                           Amount Sanctioned

Years        CBs      Coops.    RRBs       Total        CBs     Coops.    RRBs      Total

2003-04     309408    159749    12491     481648       62968     82067    1039      146074

             (64.2)   (33.2)     (2.6)    (100.0       (43.1)    (56.2)    (0.7)    (100.0)

2004-05     340149    174730    23998     538877       87093    173946    3508      264547

             (63.1)   (32.4)     (4.5)    (100.0)      (32.9)    (65.8)    (1.3)    (100.0)

2005-06     430953    64795     32144     527892       126966    55972    7441      190379

             (81.6)   (12.3)     (6.1)    (100.0)      (66.7)    (29.4)    (3.9)    (100.0)

2006-07     309731    181082    27390     518203       117813   105706    12859     236378

             (59.8)   (34.9)     (5.3)    (100.0)      (49.8)    (44.7)    (5.5)    (100.0)

Figures in parentheses indicate percentages to total

3.1.2 Rajasthan
During 2004-05, 843943 fresh KCCs were issued of which 67 per cent
were issued by cooperative banks followed by commercial banks and
regional rural banks (Table 3.2). During 2005-06, a lower number of
KCCs were issued- 340000 of which 63.1 per cent were issued by
Commercial Banks followed by 19.4 per cent by Cooperative Banks
and 17.54 per cent by Regional Rural Banks. During 2006-07, 333374
fresh KCCs were issued of which 49.26 per cent were issued by
Commercial Banks followed by 28.78 per cent by Cooperative Banks
and 21.96 per cent by Regional Rural Banks. Keeping in view GoI’s
emphasis on increasing credit flow to agriculture sector, NABARD had
advised banks to bring into the KCC fold all farmers including
defaulters, oral lessees, tenant farmers, etc., and to identify new
farmers. The banks were advised to issue KCCs in a hassle-free
manner, extend and renew crop loans only through KCC to ensure
quality in operation. By March end 2007, a cumulative number of
4301374 KCCs were issued by RFIs and 64.23 per cent belonged to
cooperative banks followed by 27.48 per cent by commercial banks
and 8.29 per cent by regional rural banks (Table 3.3). The total
eligible farmers in the State was 6085837.

                                            59
  Table 3.2: Agency-wise Kisan Credit Cards Issued During the Year
 Agency          2004-05        2005-06            2006-07       Cumulative as on
                                                                  March 2007
 Coop                565389          65959             95946         2762765
 RRBs                76126           59628             73203          356413
 CBs                 202428          214413           164225         1182196
 Total               843943          340000           333374         4301374
                                Distribution (%)
 Coop                 66.99           19.40            28.78           64.23
 RRBs                 9.02            17.54            21.96           8.29
 CBs                  23.99           63.06            49.26           27.48
 Total                 100             100              100            100
Source: SLBC, Rajasthan.

         Table 3.3: KCC Issued Since Inception Cumulative Position
         Agencies                    2004-05           2005-06       2006-07
         CBs                          803558           1017971       1182196
         RRBs                         223582            283210        356413
         DCCBs                       2600860           2666819       2762765
         Total                       3628000           3968000       4301374
     Source: SLBC, Rajasthan.

3.1.3 Uttar Pradesh
Fresh Kisan Credit Cards issued during a particular year declined from
2061135 during 2004-05 to 1673307 during 2005-06 and then
increased slightly to 1811073 during 2006-07 but fell short of the level
achieved in 2004-05 (Table 3.4). However, during 2005-06 & 2006-
07, banks adopted a different strategy to upscale the credit flow to
agriculture sector and allowed frequent withdrawals in KCC accounts
without taking into account the season-wise limits sanctioned to the
borrowers which was not the case during 2004-05 where the
withdrawals were restricted to some extent (unofficially) both in terms
of quantity and frequency of withdrawals. Since every withdrawal in
a KCC account was treated as a fresh disbursement (irrespective of
the quantum of limit sanctioned), allowing more number of KCC
withdrawals during 2005-06 and 2006-07 led to increase in total
disbursement during these two years without an increase in the
number of fresh loans to new borrowers. This resulted in decline in
number of accounts and increase in total amount disbursed during
2005-06 and 2006-07.

                                          60
                      Table 3.4: Fresh Kisan Credit Cards Issued
 Particulars                      CBs                  RRBs               Coops.            All banks

 2004-05
 Number of A/c                    737562                 608726                 714847            2061135
 Amount (Rs. lakh)           249487.99                 183129.43            62883.11            495500.53
 2005-06
 Number of A/c                    665147                 626693                 381467            1673307
 Amount (Rs. lakh)           313493.84                 240918.52           159310.10            713722.46
 2006-07
 Number of A/c                    710886                 797103                 303084            1811073
 Amount (Rs. lakh)           433940.26                 311557.81           187357.91            932855.98

3.1.4 Madhya Pradesh
In Madhya Pradesh, the progress in implementation of KCC Scheme
is shown in the Table 3.5.
     Table 3.5: Trend in issuing KCCs and the amount sanctioned
                                                  (amount in Rs.lakh)
                      CBs                     Coops.                     RRBs                   Total
 Years          No.      Amount         No.      Amount            No.      Amount        No.       Amount
 2004-05       184391    105564    529710         540250       74614        36353        788715     682168
 2005-06       203578    168534    221007         705100       79401        44022        503986     917656
 2006-07       192659    162374    157446         777839       89082        42510        439187     982723

The amount sanctioned under KCC has shown an increasing trend
from Rs 682168 lakhs to Rs.982723 lakhs while the number of KCC
issued has gone down from 788715 to 439187 KCCs, which might be
due to increase in credit limit for old KCC holders. This trend was
obvious in the co-operatives, which show drastic decline in the number
of KCCs as compared to commercial banks. The RRBs have improved
both in terms of number of accounts and the amount of credit
sanctioned through KCC.

The achievement of the targets in implementing KCC schemes by
various agencies was shown in Table 3.6 and it was obvious from the
table that the cooperatives have failed as compared to other agencies
in achieving the target both in terms of physical and financial target.
While commercial banks have achieved physical targets by at least
above 85 per cent after 2005-06, the performance of RRB in achieving
the targets related to KCC implementation was quite impressive both
in terms of number of KCCs and the amount sanctioned under KCC
scheme.
                                                   61
           Table 3.6: Achievement of the targets in implementing
                         Kisan Credit Card Scheme
Year            Commercial banks                  Cooperatives                           RRBs                                Total
            % target     % amount           % target       % amount          % target       % amount             % target        % amount
            achieved     disbursed         achieved in     disbursed         achieved       disbursed            achieved        disbursed
           in issuing    out of limit     issuing KCC      out of limit     in issuing      out of limit        in issuing       out of limit
              KCC        sanctioned                        sanctioned          KCC          sanctioned             KCC           sanctioned
2004-05        10              96              50               31             153              134                60                101
2005-06        92              93              72                2             102              181                83                27
2006-07        85             112              74               32             94               175                82                52
           Total number of operational holdings in MP (Census, 2001)                                  7360000
           Total number of KCCs issued since inception (2007-08)                                      4556632
           % KCCs issued since inception (2007-08) to Total operational holdings                         61.91

In Madhya Pradesh, since inception of KCC schemes till now, 4556632
cards have been issued which account for about 61.97 percent of the
total operational holdings. Table 3.7 shows that co-operatives
contribute the major share both in number of KCCs and the amount
sanctioned followed by commercial banks. The share of co-operatives
in terms of number of KCCs indicates a decreasing trend over the
years, while the commercial banks and RRBs show an increasing
trend.
        Table 3.7: Share of agencies in Issuing KCCs and the amount
                                  sanctioned                      (%)
 Year                         CBs                                     Coops.                                         RRBs


                Share in            Share in total        Share in         Share in total            Share in                Share in total
               total no. of            amount           total No. of          amount                total no. of                amount
               KCC A/Cs.            through KCC          KCC A/Cs          through KCC              KCC A/Cs.                through KCC
 2004-05            23                   15                  67                    79                      10                      6
 2005-06            40                   18                  44                    77                      16                      5
 2006-07            44                   17                  36                    79                      20                      4


3.1.5 Maharashtra
Maharashtra was at the forefront in implementation and expansion
of KCC scheme accounting for 10 per cent of the cards in the country
as a whole. The Cooperatives and RRBs have issued 44.17 lakh and
2.17 lakh KCCs respectively, while CBs have issued 17.41 lakh cards
up to 31 March 2007. Thus, the cumulative total of the cards issued
by all banks work out to 63.76 lakh. Considering the number of land
holdings, membership of PACS, level of borrowing membership, extent
of defaulters, etc., the quantitative coverage by the end of 2006-07


                                                               62
appears to be satisfactory in the State. During the last three years,
the number of cards issued by cooperatives alone was 39.35 lakh
forming 61.72 per cent of the total cards in the State as on 31 March
2007 (Table 3.8). This speaks about the extent of expansion of KCC
by cooperatives.
                                 Table 3.8: Expansion of KCC                   (Rs. in lakh)

            2004-05               2005-06              2006-07                 Total
 Bank       KCC No.     Credit    KCC No.    Credit    KCC No.   Credit    KCC No.       Credit
                        Limit                Limit               Limit                 Limit sanc.
                        sanc.                sanc.               sanc.
 CBs              NA       NA           NA       NA     536284    197344   1740541             NA
 Co-op.       1656035   138899     1282412    151859    996184    396024   4417882        2201407
 RRBs           39770     8556       28458      6861     45212     12844    217088          83356
 Total        1695805   147455     1310870    158720   1577680    606212   6375511        2284763


The credit limit sanctioned by co-op. during the period of three years
against 39.35 lakh KCC was Rs.6867.82 crore. In the case of RRBs,
1.13 lakh KCC were issued and the credit limit sanctioned was
Rs.282.61 crore during the period of three years. The banks have been
advised for extensive coverage of KCC through expanding its outreach
by lending to all eligible farmers including non-willful defaulters, oral
lessees, tenant farmers, share croppers and agricultural labourers.

3.2       District/ Branch Level KCC Position
In Rajasthan two Districts Sirohi and Ganganagar were selected. In
Sirohi District, the maximum number of new KCCs were issued by
cooperative banks in 2004-05 and 2006-07 and that too by two
branches in each of the blocks (Table 3.9). The performance of
commercial banks in Sirohi with regard to issue of new KCCs was
poor and PLDBs do not issue KCCs. In Ganganagar, cooperative bank
in Raisinghnagar issued more KCCs than any other branch, but the
performance of cooperative bank branch in Karamu was poor as it
issued only 15 KCCs in four years. Commercial bank in Raisinghnagar
again out performed the commercial bank in Karanpur. The doubling
period 2004-05 to 2006-07, saw regional rural bank branch in
Raisinghnagar perform better than the one in Karanpur. PLDB in
Ganganagar issued few KCCs (99) during doubling period. The
cooperative bank branches in Sirohi had cumulative number of KCCs
at 5485 and this was the highest among all the branches covered in
the two Districts. Pindwara cooperative bank branch was followed by
cooperative bank branch in Sheoganj with 3225 KCCs.

                                               63
As regards the renewal of KCCs, RRB in Pindwara though renewed
KCCs did not increase the limits. Cooperative bank in Pindwara did
not renew any KCC during these four years (Table 3.10). Commercial
Bank in Pindwara renewed KCCs totalling 250 during these four years,
but enhanced the limit of larger number of KCCs. Commercial bank
and Regional Rural Bank in Sheoganj renewed few KCCs, but did not
report enhancement of limit of any KCC. Cooperative bank in Sheoganj
renewed 3304 KCCs. In Ganganagar, across the bank branches in the
two blocks where KCCs have been renewed; maximum number was
by RRB in Raisinghnagar followed by commercial bank in Karamu.
Both these bank branches enhanced the limit of all renewed KCCs.
We found that most renewed KCCs had enhanced credit limit in
Ganganagar.

                 Table 3.9: Number of New and Existing KCCs

 District        Bank             Number of New KCCs                      Number of Existing KCCs


                        2003-04    2004-05   2005-06     2006-07   2003-04   2004-05   2005-06   2006-07
 Sirohi
 Pindaric        RRB      25         41        47          39        80        88       114       120
                 Coop    197        3925      195         359      1006       4931     5126      5485
                 CB       92        109       103         148       445       554       657       805
 Shogun          CB       2          2         2           3         2         2         4          6
                 RRB      8          7         14          7         8         7         31         19
                 Coop    174        380      1344         416      1085       1465     2809      3225
 Ganganagar
 Raisinghnagar   CB       58         62        76          84       287       398       407       486
                 RRB     215        280       173         287       369       601       643       781
                 Coop    681        498       513         633      3273       4197     4818      5624
 Karamu          PLDB     5          44        10          45        5         49        93       104
                 CB       26         30        42          67       494       546       582       600
                 RRB      47        172        74         100       179       296       318       371
                 Coop     3          4         1           7         62        58        48         44


In Sirohi only 4 KCCs were reported to be dormant by commercial bank branch in
Shogun (Table 3.11). However, large number of KCCs were dormant in Ganganagar.




                                                    64
             Table 3.10: Number of KCCs Renewed and Whose Limit
                              has been Increased
 District        Bank    Number of KCC Renewed                           Number of KCC with Limit Enhanced
                         2003-04      2004-05    2005-06     2006-07     2003-04   2004-05   2005-06    2006-07

 Sirohi
 Pindaric        RRB       15           18         20           18
                 Coop
                 CB*       56           47         62           85         79           83     93            107
 Shogun          CB                      2          4            4
                 RRB        6            7         21           10
                 Coop     586          1179       729           810
 Ganganagar
 Raisinghnagar   CB        37           42         48           56         24           38     36            47
                 RRB      103          315        370           415       103       315       370            415
                 Coop      15           18         17           22
 Karamu          PLDB       0            5         49           59
                 CB        80          124        168           182        80       124       168            182
                 RRB       13           49         53           16         19           43     29            57
                 Coop      58           49         42           37          4           6       9             7
Note: *- There appears to be discrepancy in KCC renewal number and enhancement of limit

                        Table 3.11: Number of Dormant KCCs
  District                 Agency                          Number of Dormant KCC Accounts
                                                2003-04        2004-05          2005-06             2006-07
  Sirohi                        CB                                                  2                   2
  Ganganagar                    RRB               91             131               136                 140
  Ganganagar                 Coop                350             315               348                 371
  Ganganagar                    CB               240             270               295                 298

In Rajasthan, bankers at branch level felt that percentage of farmers
covered by KCC varies from 70 to 100 percent across institutions. As
to why all farmers were not covered, the bankers gave number of
reasons: farmers not interested in taking any loan, these farmers were
defaulters of government schemes, there was staffing problem and
these farmers were covered by other banks. What could be the
percentage of farmers holding more than one KCC? The response of
bankers in Ganganagar was that this could be 15 to 60 percent
farmers. In Sirohi, only one RRB manager reported that it could be
10 percent farmers. For fixing the limit under KCC, land holding was

                                                        65
the major component used and farmers face difficulty in submitting
this information. A farmer may have to visit the bank one to three
times to get a KCC. The main document required to be submitted was
land record. Across banks allow only one withdrawal per season on
a KCC and full limit amount was allowed to be withdrawn. The
impression of bankers was that major share of amount withdrawn was
for agriculture purposes and with the exception of two bankers (RRB
and cooperative bank in Ganganagar) 70 plus percent was used for
agriculture. In Sirohi, 30 to 98 percent cards were regular while in
Ganganagar, the proportion was 20 to 97 percent. The repayment
months during Rabi were February and March while during kharif
the months were May and June and it was early in Sirohi compared
to Ganganagar as the crop matures early there. It was informed that
KCC owner himself does not come for repayment largely across bank
branches in the two Districts. Such percentage ranges between 25 to
100 percent. In Sirohi, 30 to 80 percent farmers get KCC renewed
while this percentage was 10 to 90 percent in Ganganagar. Each bank
has varied experience and it was because shifting was taking place
across institutions in farmers. The reported proportions of farmers who
get their limit enhanced vary between 60 to 100 percent in Sirohi and
5 to 100 percent in Ganganagar. Also 5 to 45 percent get their limit
enhanced within 1 or 2 years in Sirohi and 5 to 76 percent in
Ganganagar. In Sirohi 100 percent withdrawal was not reported while
in Ganganagar it was almost 100 percent withdrawal. A large number
of KCCs were also dormant and this percentage varied between 2 to
70 percent in Sirohi across banks while the corresponding proportions
were 1 to 50 percent in Ganganagar. The reasons cited were that
farmers were not interested in taking any loan; lack of publicity;
covered by other banks; insurance and land disputes.

In Tamil Nadu, in Virudhunagar District, the number of KCCs was
1.1 per cent of that of the state. Cuddalore District had 168886 KCCs
when Virudhunagar had only 48613 KCCs issued (Table 3.12).The
loan amount under KCC was also much higher in Cuddalore than that
of Virudhunagar. In Cuddalore, PACBs issued more KCCs followed
by commercial banks and RRBs while, in Virudhunagar, commercial
banks offered more KCC facility followed by RRBs and PACBs.

At the selected branch level, on an average, the parameters like
number of new and existing KCC accounts, KCCs renewed, KCC limit
enhanced and dormant KCC were increasing in commercial banks and
RRBs while there was a declining trend in PACBs (Table 3.13). In

                                  66
  Table 3.12: Cumulative Number and Amount Sanctioned under KCC
           until March, 2007 in Cuddalore and Virudhunagar
                       Districts and Tamil Nadu (amount in Rs.lakh)
                          CBs                      RRBs                         Coop                     Total
 District        KCCs       Amount        KCCs        Amount           KCCs        Amount        KCCs        Amount
 Cuddalore       78974      26615.3        7816       2194.37          82096       32494.9      168886           61304.6
                 (46.8)         (43.4)     (4.6)          (3.6)        (48.6)          (53.0)   (100.0)          (100.0)
 Virudhunagar    20435      5382.58       16558       2982.15          11620            1468     48613           9832.73
                 (42.0)         (54.7)    (34.1)          (30.3)       (23.9)          (14.9)   (100.0)          (100.0)
 Tamil Nadu     2525556         611602    179740          31804       1704803          487589   4410099      1130995
                 (57.3)         (54.1)     (4.1)          (2.8)        (38.7)          (43.1)   (100.0)          (100.0)
Figures in parentheses indicate percentages to their total.

            Table 3.13: Average Number of KCC accounts per Branch
                    in Cuddalore and Virudhunagar Districts

     Particulars                         2003-04              2004-05           2005-06           2006-07
     Commercial bank
     No. of New KCC                          129                     224             321             423.5
     No. of Existing KCC                   140.5                   273.5           449.5             630.5
     No. of KCC Renewed                    124.5                   248.5             354               497
     No. A/c Limit Enhanced                 35.5                      17           122.5               180
     No. of Dormant KCC A/c                 13.5                    22.5              42                50
     RRB
     No. of New KCC                          614                    1263           1834            3771.5
     No. of Existing KCC                    348                    822.5          1167.5           2534.5
     No. of KCC Renewed                    375.5                     560           778.5            1350
     No. A/c Limit Enhanced                   76                     136             197             302
     No. of Dormant KCC A/c                 66.5                      70              81              65
     PACB
     No. of New KCC                           23                      16            15.5                  12
     No. of Existing KCC                   528.5                    584            542.5                 122
     No. of KCC Renewed                      516                   565.5             526                 97.5
     No. A/c Limit Enhanced                    5                       7               7                    0
     No. of Dormant KCC A/c                    0                       0               0                    0
     All Banks
     No. of New KCC                          766                   1503           2170.5            4207
     No. of Existing KCC                   1017                    1680           2159.5            3287
     No. of KCC Renewed                     1016                   1374           1658.5           1944.5
     No. A/c Limit Enhanced                116.5                    160            326.5             482
     No. of Dormant KCC A/c                   80                   92.5              123             115



                                                      67
2006-07, share of number of new KCCs, KCCs renewed, KCC limit
enhanced and Dormant KCCs to Existing KCCs accounted for 12.8,
59, 15 and 3.5 per cent respectively.

 As could be seen from the Table 3.14, the percentage of disbursement
under new KCC to total disbursement, on an average, in Cuddalore
and Virudhunagar Districts increased from 6 per cent in 2003-04 to
19 per cent in 2006-07. The share of new to total KCC disbursement
was increasing in commercial banks and PACB while there was a
downward trend in RRBs.

Issues relating to the use of KCCs
     Some farmers were not aware of the revolving fund nature of the
     KCC. In majority of the cases, the KCC is not operated like a cash
     credit. One time drawal and one time repayment or renewal was
     reported.
     Many KCC holders view that the credit provided to them is not
     adequate.
     KCC holders complained that they were forced to lift the fertilizers
     from the PACBs while the same was not insisted by the
     commercial banks. Similarly sugarcane growers in the command
     area of Ambica Sugar Mills at Pennadam (Cuddalore district) were
     forced to lift fertilizers from the sugar mill owned subsidiary.
   Table 3.14: Average Amount Disbursed under New and Total KCC
    Accounts per Branch in Cuddalore and Virudhunagar Districts
                                                (amount in Rs.lakh)
 Bank                                       2003-04   2004-05   2005-06   2006-07
 Commercial Banks
 Disbursement under New KCC                   6.6      15.1       61.1      97.9
 Total Disbursement under KCC                47.9      77.2      126.8     202.2
 Percentage of New and Total Disbursement    13.8      19.5       48.2      48.4
 Regional Rural Bank
 Disbursement under New KCC                  16.5       25.0      45.5     109.0
 Total Disbursement under KCC                83.0      305.0     424.5     875.5
 Percentage of New and Total Disbursement    19.9        8.2      10.7      12.5
 PACB
 Disbursement under New KCC                   4.2       5.3       8.4      2.6
 Total Disbursement under KCC                334.1     360.3     344.6     44.3
 Percentage of New and Total Disbursement     1.3       1.5       2.4      5.8
 All Banks
 Disbursement under New KCC                   27.3      45.4     115.0    209.5
 Total Disbursement under KCC                465.0     742.4     895.9    1122.1
 Percentage of New and Total Disbursement      5.9       6.1      12.8     18.7


                                            68
In Maharashtra, during the three years, CBs issued 2879 new KCC,
while two other banks issued 3301 and 1005 KCC respectively (Table
3.15). It has been reported that on an average, 10 to 15 per cent of
the KCC accounts were dormant per annum. The main reasons for
the dormant KCC were lack of awareness among the card holders and
operational difficulties.
               Table 3.15: Number of New KCC Issued

 Banks            2004-05        2005-06       2006-07        Total
 CBs                616            811           1452         2879
 Co-op.              75            176           3050         3301
 RRBs               346            291           368          1005
 Total              1037          1278           4870         7185

The bank branches were further probed on the suitability of the KCC
as a single window for comprehensive credit, financial inclusion,
opening of new account and its operation. All the bank branch
managers reported that nearly two-third of the farmers in their
operational area hold KCC. It was found that 20 per cent of the crop
loan was sanctioned towards consumption purposes. It was reported
by the bankers that farmers had to visit 2/3 times for opening of the
KCC account if all documents were submitted by them at a time.
Nevertheless, farmers by and large, do not comply with all papers on
time and hence, they have to visit the banks till all papers were
submitted. The farmers were allowed to withdraw as many times as
they want up to their sanction of the credit limit. Similarly, they were
allowed to withdraw any amount subject to their limit of sanction.
As per the branch officials, out of the total credit limit sanctioned on
KCC account, the farmers generally use 75 to 80 per cent of the
amount to meet the expenditure in agriculture. Also nearly 74 to 82
per cent of the card holders were regular in transactions of banking.
Nearly, 70 per cent card holders come for repayment on their own in
the case of CBs and Cooperatives. But, about 50 per cent of the card
holders of RRBs were invariably persuaded for repayment. Around 25
per cent of the card holders get enhancement in the credit limit at
the time of renewal of their account.

On an enquiry of KCC as a single window for comprehensive credit
product, it was learnt that the scheme was announced on 31 October
2006. Hence, hardly five months were left for its implementation till
the closure of the scheme on doubling of credit. All the banks informed
that the scheme was promptly advertised at prominent places/
                                  69
locations of the villages and bank offices to create awareness among
the farmers about the merits of the KCC as a single window for
comprehensive credit. In such a short period, however, the scheme
could not percolate down below the bank level, and hence could not
create enough awareness among the farmers. It was reported by the
branch managers that hardly a few farmers were aware of the scheme
by March 2007, although its awareness was picked up among them
in the subsequent years. As such there was hardly any such KCC
with the farmers till the end of the scheme of doubling of credit.
Incidentally, it may be mentioned here that the bank mangers were
also not aware /clear about making the provision of term credit in
the KCC of the farmers. Procedure of sanction of credit limit for crops
and consumption purposes was understood by them. However, they
were not aware of the procedure of making provision for term loan in
the KCC. It was so far so good for the bankers since no one had
approached them with such purpose.

In Madhya Pradesh, the performance under KCC has been quite
impressive and there was very good response for the KCC by both
bankers and farmers. To ensure a hassle free credit to farmers, KCC
was introduced and still there were some issues which have to be
found and sorted out, to make the scheme effective and successful.
The number of KCCs issued by commercial bank has increased over
the period in 2005-06 and 2006-07 and same with the case of co-
operatives and RRBs (Table 3.16).
                                              New KCCs
           Table 3.16: KCCs Performance in Madhya Pradesh
                                   Years                               % of KCCs renewed   % limit enhanced
                                       Commercial Banks
                                       2003-04                128                 -                 -
 Years         New KCCs    % of KCCs renewed      % limit enhanced   % dormant
                                       2004-05                142             14.08               8.71
 Commercial Banks                      2005-06                230             14.11               8.08
 2003-04             128             - 2006-07              - 286         -   13.92               8.46
 2004-05             142          14.08Co-operative Banks 8.71          7.11
 2005-06             230          14.112003-04            8.08157       7.12      -                 -
 2006-07             286          13.922004-05            8.46148       7.91 45.03                1.61
 Co-operative Banks                    2005-06                172             41.91               1.73
 2003-04             157             - 2006-07              - 279         -   43.64               1.78
 2004-05             148          45.03RRBs               1.61          28.74
 2005-06             172          41.912003-04            1.73 30       26.24     -                 -
 2006-07             279          43.642004-05            1.78 27       24.76   2.63              7.89
 RRBs                                  2005-06                 56              10.92             12.07
 2003-04              30             - 2006-07              - 52          -    15.80              7.40
 2004-05              27           2.63                  7.89          22.11
 2005-06              56          10.92                 12.07          14.94
 2006-07              52          15.80                  7.40          12.60


                                   70
As KCCs were renewed once in 3 years based on the repayment of
the farmers, 14 per cent of the KCCs have been renewed by
commercial banks every year, while 45 per cent KCCs were renewed
by Co-operatives in 2004-05 and 2 and 44 per cent during 2005-06
and 2006-07 respectively. RRBs renewed only 2.63 per cent KCCs in
2004-05, but renewed 11 per cent the next year and then 16 per cent
in 2006-07. Further, 8 per cent of the KCC holders of commercial
banks got enhanced limit every year, while around 1 per cent co-
operative KCC holders got increase in limit during each year. In case
of RRBs, in 2004-05 credit limit was enhanced to 8 per cent KCCs
while in 2005-06 limit was enhanced to 12 per cent KCCs and 7.4
per cent KCCs got limit enhanced in 2006-07. The limit was usually
enhanced once in a year by commercial banks based on the
repayment pattern of farmers, while RRBs and Co-operatives were
bound by certain limitations; they were dependent on the DLTC
meeting to enhance the credit limit.

As regards the dormant KCCs in Madhya Pradesh, commercial banks
reported that about 7 percent of their KCCs were dormant (i.e.) they
do not operate their account. It was observed that dormancy was
comparatively high in Narsinghpur District. The dominant KCC
holders were usually large/big farmers who usually do not need credit
and they get the KCC card from banks and keep it without operating
it. Some of the farmers were not operating KCC because of the
dissatisfaction with the banker’s response/behaviour. The percentage
of dormant KCCs was high in case of co-operatives (24-28%) followed
by RRBs (12-22%). Wilful defaulters were also one of the main reasons
for dormant KCCs.

As regards opening of the KCC account, the farmers had to visit the
bankers 2-3 times to open a KCC account. The common documents
asked by the banks were khasra, naksha, patwari map demarcation,
loan book, legal search documents, no dues certificate and residence
proof. In addition to these documents, commercial banks demand
affidavit, Residence proof and photo identity, while RRB, demand
hypothecation promissory note, etc. Among these documents
according to bank managers, the farmers find it difficult/take time
to produce documents such as khasra, naksha, patwari map
demarcation, legal search report and no dues certificates.




                                 71
     Details of documents to be produced for opening KCC account
 Agencies                     Name of the documents
Commercial banks             Kasra, Naksha, Loan book, Patwari map
                             demarcation, Legal search report, No dues
                             certificate, Residence proof, Affidavit, Photo identity
Cooperative banks            Kasra, Naksha, Loan book, Patwari map
                             demarcation, Legal search report, No dues
                             certificate
RRBs                         Kasra, Naksha, Loan book, Patwari map
                             demarcation, Legal search report, No dues
                             certificate, Residence proof, Promissory note,
                             Hypothecation

Note: Highlighted were the documents which the farmers find it difficult to produce.

The farmers find it very difficult to produce these documents as this
involves too many departments, which in turn takes a lot of time lag,
and sometimes commission amount in each department. Because of
these difficulties, some of the farmers were even discouraged from
approaching banks for credit. This was against the very prime objective
of KCC in extending handle-free credit to farmers through KCCs.

       Table 3.17: Details on KCC implementation at Branch level
                (As per response from the branch managers)

                      Particulars                      CBs       Co-ops      RRBs
 No. of times farmers has to visit the bank to          3           2          3
 open KCC account
 Percentage of regular accounts                         80         45         87
 Repayment Period (range in months)
 a. Kharif season                                      6-12        6-8        6-8
 b. Rabi                                               6-12       6-12        6-8
 KCC holders who repay regularly by                     63         25         42
 themselves (%)
 KCC holders who gets renewal (%)                       65         73         85
 KCC holders who gets their limit enhanced during       46         35          9
 renewal (%)
 Time limit for credit enhancement (years)             2-3          3         1-3
 Farmers who hold KCCs from more than one               10          5         5-10
 bank (%)
 Approx. percentage of credit used in Agrl.             65         85         80



                                                 72
In case of commercial banks, it seems approximately 80 per cent of
the accounts were regularly operated with the transactions. In the
case of RRBs also, the percentage of regular accounts were high (87%)
while percentage of regular accounts in case of Co-operatives (45%)
was low, the reason being most of the farmers intend to migrate to
commercial banks as they demand entire credit in cash.

In case of commercial banks, nearly 63 percent of the customers
repaid, while, the repayment was 42 percent in case of RRBs and 25
per cent in case of Cooperative banks3. Usually their credit limit was
enhanced once in 2-3 years. In case of commercial banks, only 65
per cent of the KCC holders were renewed and about 46 per cent of
KCC holders got their credit limit enhanced during renewal. About
73 per cent of KCC holders of co-operatives got their card renewed
while only 35 per cent farmers got their credit limit enhanced, while
in case of RRBs only 9 per cent KCCs got their limit enhanced.

As per the bank manager’s perception, nearly 5-10 percent of farmers
hold KCC from more than one bank and they said that approximately
65-85 percent of credit amount was used in agriculture. The rest of
the amount was used for consumption purposes, or invested in the
business or family functions or festivals.

3.3    Suggestions for Improvement

Important suggestions from farmers were that there should be less
paper work, interest rates should be lower, there should be flexibility
in instalment payment or some rebate in times of hardship/ crop
failure and have higher credit limits than the existing ones. Some
farmers also felt efforts should be made to build awareness. In order
to enhance coverage, the simplification of procedures was required
and banks should also stop unnecessary deductions they make.




3 The repayment period given by the commercial bank is generally 6-12 months
  based on the nature of the crop for both Kari and Rabi. Season crops, while RRB
  gives 6-8 months repayment period.


                                      73
                            CHAPTER 4
 Credit Flow at Grass Root Level : Farmers’ Perceptions
In this chapter, we look at field impressions based on survey of
farmers, who possessed Kisan Credit Cards and also those farmers
who had taken term loan, conducted in two Districts in each of five
states. In five states, 10 Districts and 20 blocks were covered. In
Rajasthan, the two Districts were Sirohi and Ganganagar. The sample
comprised of 216 farmers while in Madhya Pradesh, the sample
comprised of 200 farmers in two Districts- Narasinghpur and Panna.
In Uttar Pradesh, 230 borrowers were selected in two Districts viz.,
Moradabad and Jhansi while the sample size in Tamil Nadu was 200.
In Maharashtra, field work covered 216 farmers in Aurangabad and
Latur.

4.1 Social Category of Farmers
In Rajasthan, of the sampled 136 farmers (KCC), 88 were from
general category (24 of 57 in Sirohi and 64 of 79 in Ganganagar) and
most were medium sized farmers, while 10 were OBC (all in Sirohi)
and 9 were schedule caste farmers (all but 2 in Ganganagar) and 29
other farmers (21 Scheduled Tribe farmers in Sirohi and 8 in
Ganganagar). Of the 94 farmers who took term loan, 22 were
Scheduled Caste and 10 were Scheduled Tribe and were largely from
Sirohi. OBC farmers were from Ganganagar of the 34 such farmers,
while general category farmers were mainly from Sirohi. It was also
true that marginal and small farmers were from Scheduled Caste
group.
4.1.1 Family Information
In Rajasthan, 136 farmer households have 908 family members of
which 524 belonged to 79 households in Ganaganagar and 384
members to 57 households in Sirohi. The average family size was 6.7
in Sirohi and 6.6 in Ganganagar. The average family size of marginal
farmers was 5.8 in Sirohi and 5.0 in Ganganagar while small farmers
Sirohi had high family size of 7.2 compared to 4.7 in Ganganagar.
The same was the family size of medium farmers in Sirohi and 6.9
was the family size in Ganganagar. Large farmers also had large family
sizes in both the Districts. On an average, families had adults between
2.0 to 5.0, while average number of children was 2.3 to 3.6. There
were 171 children in 57 families in Sirohi and 195 children in 79
families in Ganganagar. Marginal and small farmers had more children
on an average.
                                  74
94 term loan farmer households had 665 members of which 389 were
adults and 276 were children. In Sirohi, the 63 farmer households
had 448 members of which 254 were adults and 194 were children
while the corresponding figures for Ganganagar were 217 members,
135 adults and 82 children (Table 5.3). The average family size in
Sirohi was 7.1 while it was 7.0 in Ganganagar. The family size
increased as one moved from marginal farmer household to medium
farmer household in Ganganagar and then dropped in case of large
farmers. In case of Sirohi, the family size increased from marginal to
small farmers and then dropped to increase again in case of large
farmers (10 plus). A similar trend was observed in case of children in
Ganganagar though adults' average size remained more or less same.
In Sirohi, average adult member family size increased as one moved
up the land holdings, but fluctuated with average children per family.
These trends were more to do with culture and age profile of the
parents in the two Districts.

In Uttar Pradesh, the average size of family members in Moradabad
and Jhansi Districts was found to be 6.3 and 6.47 respectively. It was
observed that about 90 per cent families in Moradabad District were
having family size less than eight as against 81 per cent families falling
in this category in Jhansi District. The higher family size in Jhansi
District indicated prevalence of comparatively more number of joint
families in the District. Comparatively more number of families
comprising more members per family in Jhansi District also resulted
in the availability of more number of family labourers for work on own
farm as well as agricultural labourers. It may be mentioned here that
as many as 16 families in Jhansi and 7 families in Moradabad District
having comparatively low operational holding were working on farms
of other farmers as daily wage earners. It was interesting to mention
that 19 out of 230 sample families reported that none of their family
members go to field for work and they fully depend on agricultural
laborers for farm activities.

In Tamil Nadu, the average family size of the sample households as
a whole was 5.6. The contribution of male, female and children
constituted 39, 32 and 29 per cent respectively. In Cuddalore District,
the family size was less (5.14) while, it was more in Virudhunagar
(5.95) when compared with that of the overall. In Cuddalore, male
members were more in number followed by female and children as
observed in combined Districts also. However, in Virudhunagar,
children were more in number followed by female and male members.

                                   75
4.1.1.1 Education Levels
Majority of farmers (114 of 230) in Uttar Pradesh were 6-12 class
educated with another 80 farmers either being illiterate or below
primary educated. Better literacy level of borrowers made them realize
the importance of use of modern inputs and made them aware about
the available options and the range of a particular input. On enquiry
about the use of pesticides and variety of crops, many illiterate
borrowers were not able to tell the brand name of pesticides, variety
of crops, etc. The unemployment scenario in the country had forced
many graduates and postgraduates to stay in the farming business
although at least half of them wanted to quit farming. In Maharsahtra,
of the 216 beneficiaries, 10 per cent were illiterate, 19 per cent had
completed primary education between first and fifth standard, 58 per
cent had education between sixth and twelfth standard, eight per cent
were undergraduate and hardly five per cent had done graduation and
above.

4.2 Land Holding

In Rajasthan, of the sampled farmer households, in Sirohi the
average holding size was 3.66 hectares while it was 5.94 hectares in
Ganganagar. There was wide difference between the marginal and
large farmers, especially in Ganganagar. Irrigated area was significant
in Ganganagar while 169.91 hectares out of 208.38 hectares was
irrigated in Sirohi. It was surprising that average irrigated area of
marginal and small farmers was higher than large farmers in both
the Districts. Marginal and small farmers in both the Districts did not
lease-out land while they do lease-in land, while medium and large
farmers do both with average leased-out land higher than the leased-
in land for large farmers and it was true for medium farmers.

The 94 term loan farmers in Rajasthan owned 317.31 hectares of
land. In Sirohi of the total land of 184.66 hectares, marginal farmers
possessed only 10.38 hectares with average holding size of 0.61
hectare compared to 1.42 hectares average holding of small farmers.
There was large difference between small and large farmers- average
holding of large farmers was 17.32 hectares. Major portion of land
was irrigated in Sirohi. It was observed that marginal and small
farmers lease-out land more than they lease-in, while medium farmers
tend to lease-in land only. 57 farmers leased-in 91 hectares while they
lease-out 80 hectares. In Ganganagar, there were 4 marginal farmers
in the sample (did not report land holding information) and the small
farmers had an average holding of 1.55 hectares while the large

                                  76
farmers had average holding of 11.81 hectares. Medium and large
farmers possessed unirrigated land. In Ganganagar, medium farmers
lease-in significant portion of land (54.50 hectares) while they leased-
out only 15 hectares. It was also observed that of the 94 farmers, 22
had no irrigation source (largely marginal farmers in Sirohi), while 24
farmers in Sirohi used well with diesel engine for irrigation and
another 20 used well with electric motor for irrigation and most were
small and medium farmers. Two farmers reportedly depended upon
canal irrigation in Sirohi. In Ganganagar, canal irrigation was the
major source of irrigation for most farmers while one farmer reportedly
had well with electric motor.

In Madhya Pradesh, the average size of the holdings of the sample
borrowers showed that majority of the farmers were in the upper range
of the category (i.e) the average size of holdings for marginal farmers
was 2.21 acres, while for small farmers was 4.27 acres and the large
farmers it was 11.58 acres (Table 4.1). The agency-wise split-up also
showed more or less similar results.

          Table 4.1: Land Holding of Farmers in Madhya Pradesh

 Particulars                        CBs            Coop      LDBs       RRBs       Total
 Number of farmers in the sample
 Marginal farmers (< 2.5 acres)     3(3.1)         3(7.1)    0.00      7(16.7)    13(6.5)
 Small farmers (2.5 – 5.0 acres)   32(32.7)    16(38.7)     7(38.9)    16(38.1)   71(35.5)
 Others (> 5.0 acres)              63(64.3)    23(54.8)     11(61.1)   19(45.2)   116(58)
 Total                             98(100)     42 (100)     18 (100)   42 (100)   200.00
 Average size of Holdings (in acres)
 Marginal farmers                   2.33           2.33      0.00       2.11       2.21
 Small farmers                         4.30        4.36      4.29       4.14       4.27
 Others                             12.31          10.22     12.59      10.21      11.58
 Total                                 9.39        7.42      9.36       6.55       6.02

In Uttar Pradesh, marginal (<2.5 acres), small (>2.5- 5.0 acres),
medium (>5.0-10.0 acres) and large (>10 acres) accounted for 20.4,
37.8, 33.9 and 7.9 per cent respectively of the total sample borrowers
(230) of the study. The share of marginal and small farmers in total
sample from a District was comparatively higher in Moradabad District
(63.5%) as compared to that in Jhansi District (53%). In fact, the
coverage of marginal and small farmers in the state under doubling
of agricultural credit package (2004-05 to 2006-07) was to the tune
of 68 per cent.

                                              77
In Tamil Nadu, the average size of the sample farm holdings as a
whole was 2.5 hectares. Marginal farmers who had less than one ha
of land constituted 34 per cent of the total number of sample farmers
selected for the study and they operated 0.68 ha on an average (Table
4.2). Small farmers who operated 1.01 to 2 ha accounted for 30.5 per
cent of the total number of farmers and they, on an average, had 1.58
ha and large farms constituted 35.5 per cent of the number and had
5.06 ha each. Commercial banks financed more to large farms in both
Districts, which were followed by small and marginal farms. Regional
Rural Banks gave more finance to marginal farms followed by small
and large farms. In case of PACBs also, marginal farms were given
more finance and they were followed by small and large farms.
         Table 4.2: Average Size of Farm Holdings in Cuddalore and
                            Virudhnagar Districts
 Bank/Family            Cuddalore          Virudhnagar         Total
                  No.   Area (ha.)   No.    Area (ha.)   No.   Area (ha.)
 Marginal         3        0.71       9       0.72       12      0.72
 Small            16       1.59      10       1.78       26      1.67
 Large            21       5.07      21       5.03       42      5.05
 Sub Total        40       3.35      40       3.25       80      3.30
 Regional Rural Bank
 Marginal         4        0.54      22       0.69       26      0.67
 Small            12       1.51       7       1.50       19      1.50
 Large            14       4.21       1       4.05       15      4.20
 Sub Total        30       2.64      30       0.99       60      1.81
 PACB
 Marginal         9        0.75      21       0.64       30      0.67
 Small            8        1.82       8       1.26       16      1.54
 Large            13       6.16       1       4.05       14      6.01
 Sub Total        30       3.38      30       0.92       60      2.15
 All Banks
 Marginal         16       0.69      52       0.67       68      0.68
 Small            36       1.61      25       1.54       61      1.58
 Large            48       5.11      23       4.94       71      5.06
 Total            100      3.15      100      1.87       200     2.51


In Maharashtra, average size of land holding of marginal farmers (MF)
and small farmers (SF) was 0.76 hectare and 1.36 hectares
respectively, while that of other farmers was 3.84 hectares. Proportion
of irrigated land was 62 per cent, 78 per cent and 74 per cent of the

                                     78
total holdings of these farmers respectively. As per the bank records,
77 per cent beneficiaries were SF/MF. However, the land holding
pattern of the beneficiaries indicated that 41 per cent beneficiaries
were SF/MF.

4.3 Primary/ Secondary Occupations and Income therefrom

In Rajasthan, as regards the primary occupation of the farmers, 128
of 136 KCC farmers had agriculture as a primary occupation (51 of
57 in Sirohi and 77 of 79 farmers in Ganganagar). Only medium
farmers (two each) in both the Districts had government job as a
primary occupation. Very few have private job (only 4 farmers) and
they were from Sirohi. As regards the secondary occupation of farmers,
6 reported agriculture, 19 farmers were engaged as agriculture labour
and 2 farmers as government servants, 33 in private service and 6
farmers in dairy (in Sirohi only). Average income (gross) from primary
source for marginal farmers was Rs.35824 in Sirohi compared to
Rs.1.0 lakh in Ganganagar while for small farmers the corresponding
incomes were Rs.56706 and Rs.56000 respectively (Table 4.3). There
was a sudden jump in primary income of medium farmers to Rs.1.01
lakh in Sirohi and Rs.1.55 lakh in Ganganagar. However, mean
primary source income was Rs.2.38 lakh for Sirohi, large farmers and
lower at Rs.1.57 lakh for Ganganagar farmers. As regards the
secondary source of income, as the size of holding increases secondary
source of income increases in both the Districts.

A term loan farmer household in Rajasthan has two sources of income
which the family members generate- primary activity income and
secondary activity income. In Sirohi, 50 farmer households had
secondary source income of Rs.40.21 lakh with an average income of
Rs.80426 per annum. The average secondary income of marginal
farmers was Rs.25443 while the medium farmers have average income
of Rs.1.96 lakh. Large farmers do not have secondary income. In
Ganganagar, total secondary income generated was Rs.9.20 lakh by
21 farmer households. It was surprising that large farmers have
secondary income of Rs.83333 when small farmers have average
secondary income of Rs.63333. Even the marginal farmers have
average secondary income of Rs.41250 much higher than those in
Sirohi. Medium farmers have very low secondary income. All this
shows that marginal and small farmers also venture into other
activities that provide sizeable household income as a supplementary
income. It could also mean more opportunities available to have
secondary income in Ganganagar.

                                 79
        Table 4.3: Annual Primary and Secondary Source of Income
                              (KCC farmers)
                            Primary Income (Rs.)       Secondary Income (Rs.)
Land size    District      Mean     N0         Sum    N0      Mean         Sum
Marginal     Sirohi       35824     17       609000   13      24346      316500
             Ganganagar   100000     1       100000    1      30000       30000
             Total         39389    18       709000   14      24750      346500
Small        Sirohi       56706     17       964000   12      30817      369800
             Ganganagar   56000      7       392000    5      35000      175000
             Total         56500    24      1356000   17      32047      544800
Medium       Sirohi       101053    19      1920000   12      46917      563000
             Ganganagar   154896    65     10068220   21     186905     3925000
             Total        142717    84     11988220   33     136000     4488000
Large        Sirohi       237500     4       950000    2      98000      196000
             Ganganagar   157350     6       944100    3     196333      589000
             Total        189410    10      1894100    5     157000      785000
Total        Sirohi        77947    57      4443000   39      37059     1445300
             Ganganagar   145624    79     11504320   30     157300     4719000
             Total        117260   136     15947320   69      89338     6164300


In Rajasthan, there were 77 farmers (of 136 KCC farmers) who had
no one in the family with other activity as a source of income and
majority were from Ganganagar and medium farmers. The other
income generating activities were wage labour (38 farmer households
of 136) and most were from Sirohi and they were mainly marginal and
small farmers as expected. Another 8 farmers households reported
family members engaged in government service and most were from
Sirohi. Private Service was reported by 9 farmer households. It
appeared that Sirohi rural areas required additional income and so
family members ventured out to earn additional income. What was
the income earned from this activity? Two farmers household from
Sirohi did not report the income. Of the remaining, the average annual
income earned was Rs.50642; Rs.39433 in Sirohi and Rs.69857 in
Ganganagar (Table 4.4). Marginal farmers in Sirohi reported average
income of Rs.18278 while small farmers in Sirohi had average income
of Rs.35936 and in Ganganagar Rs.36000. It was surprising that small
and medium farmers in Sirohi had lower average income while large
farmers in Sirohi had higher average income compared to Ganganagar
farmers from other activities.


                                      80
What were these secondary sources of income of term loan farmers
in Rajasthan? Of the 94 farmer households, 23 did not have any
secondary source of income or did not report it. In Sirohi, for 3 farmers
agriculture was a secondary activity while another 30 farmers reported
wage labour as secondary source of income and half of them were
marginal farmers (expectedly) with another 9 small farmers reporting
it. Government service was reported by another 3 farmers while 7
farmers each were pensioners/ ex-servicemen and in private service.
In Ganganagar, 13 farmers reported wage labour as secondary income
source and 8 farmers were in private service too (most were small and
medium farmers). There were some farmers who hire out the asset
purchased from bank loan and this asset was mainly the tractor,
especially in Sirohi. There were 17 farmers hiring out their purchased
asset and on an average earned Rs.1.02 lakh annually in Sirohi while
this income was Rs.1.10 lakh in Ganganagar for 6 farmers. It was
largely the small and medium farmers who earned sizeable income
by hiring out the asset.

                 Table 4.4: Annual Income from Other Source

      Category        District         Number       Income (Rs.)
      Marginal        Sirohi             9             18278
                      Total              9             18278
      Small           Sirohi             14            35936
                      Ganganagar         1             36000
                      Total              15            35940
      Medium          Sirohi             10            55600
                      Ganganagar         19            72947
                      Total              29            66966
      Large           Sirohi             3             65333
                      Ganganagar         1             45000
                      Total              4             60250
      Total           Sirohi             36            39433
                      Ganganagar         21            69857
                      Total              57            50642

In Rajasthan, as one moved up the land holding category, the average
family income went up and the gap between marginal and large
farmers was significant in Sirohi compared to Ganganagar (Table 4.5).
It was because there were more opportunities in Ganganagar which

                                    81
marginal farmers were availing to reduce the gap between total
incomes. Gross income of term loan farmers from agriculture/ activity
for which loan was taken was Rs.38752 in Sirohi on an average per
year and Rs.94217 in Ganganagar. Marginal farmers had gross income
higher than small farmers in both the Districts, though the gross
income of small farmers was almost double in Ganganagar compared
to that in Sirohi. Large farmers in Sirohi had highest gross income,
but in Ganganagar it was the medium farmers. This could be because
of the greater number of medium farmers in the sample. Four farmers
in Sirohi did not report any income and so the data pertains to 90
farmer households. The total annual family income in Sirohi was
Rs.96943 while it was Rs.1.13 lakh in Ganganagar on an average. The
family income went up as one moved up the holding size in Sirohi,
but the large farmers had slightly higher average income than the
marginal farmers. In Ganganagar, there was a continuous increasing
trend in family income and the gap between marginal and large
farmers was very significant.

                 Table 4.5: Total Annual Family Income                   (Rs.)

                                  KCC Farmers             Term Loan Farmers
 Land size     District    Mean       No        Sum      No   Mean      Sum
 Marginal    Sirohi         64118      17    1090000     22   37014     814300
             Ganganagar    130000       1       130000    4   47750     191000
             Total          67778      18    1220000     26   38665    1005300
 Small       Sirohi        108053      17    1836900     14   66143     926000
             Ganganagar     86143       7       603000    3   75000     225000
             Total         101663      24    2439900     17   67706    1151000
 Medium      Sirohi        159947      19    3039000     21   190867   4008200
             Ganganagar    236603      65   15379220     19   76158    1447000
             Total         219265      84   18418220     40   136380   5455200
 Large       Sirohi        335500       4    1342000      4   41250     165000
             Ganganagar    263017       6    1578100      3   473333   1420000
             Total         292010      10    2920100      7   226429   1585000
 Total       Sirohi        128209      57    7307900     61    96943   5913500
             Ganganagar    223928      79   17690320     29   113207   3283000
             Total         183810     136   24998220     90   102183   9196500



                                     82
In Uttar Pradesh, of the sample borrowers about 41 percent were
engaged in farming activity (primary occupation) without any other
source of income. About 51 per cent farmers had got some cow or
buffalo as an additional engagement but the majority of this used milk
for home consumption only. Ten farmers indicated that one or two of
their family members were employed in near by town areas and they
were extending financial support to the family. Out of nine farmers
who reported some business activity by family members, six farmers
(3 in Moradabad and 3 in Jhansi) were found to be running grocery
shops in their respective villages. One farmer in Jhansi District was
engaged in grain trading activity and the other was having two tractors
and was having some transport business.

In Madhya Pradesh, among the sample farmers in both the Districts,
more than 60 per cent of the farmers were having secondary
occupation such as government service, or private service, or business
or self-employment or labour etc. Among the sample farmers in
Narsinghpur, 7 were in government service, 5 in private service, 12
were involved in business/shops or self employment and only 4 were
engaged in Agriculture and allied activities. In Panna, around 6
persons were in service jobs, 10 involved in business/shops/self
employment and 12 were working as labourers (Table 4.6). The average
annual income was high in Narsinghpur as compared to that of Panna
as most of the farmers in Narsinghpur were well settled with
reasonable standard of living when compared to farmer in Panna.

The average annual income of marginal farmers from primary source
was Rs.25000 while the secondary source of income was lower at
Rs.11000 in Narsinghpur District. In case of small farmers, the average
primary source of income was Rs.40081 compared to higher secondary
source of income of Rs.43294. This means that such farmers were
supplementing family income through other activities like government
- private service, petty business, labour etc. Large farmers had annual
average income of Rs.1.10 lakh from primary sources and Rs.85632
from secondary sources. As the farm size increased Family income
went up.

The average annual income of marginal farmers from primary source
was Rs.24250 while the secondary source of income was lower at
Rs.20200 in Panna District. In case of small farmers, the average
primary source of income was Rs.38911 compared to lower secondary


                                  83
 Table 4.6: Income and Occupation of the Madhya Pradesh Farmers
 Particulars                     Marginal    Small   Others   Total
 Narsinghpur
 Number of farmers                  5         37       58      100
 Primary occupation
 Agriculture                        5         36       57      98
 Kotwari                                      1        1        2
 Secondary occupation
 Government Service                 0         2        5        7
 Private service                    1         2        2        5
 Business/ Shops/Self employed      0         5        7       12
 Labour                             1         6        0        7
 Pensioners                         0         0        2        2
 Agro. & Allied                     0         2        2        4
 None                               3         20       40      63
 Average Annual Income (Rs)
 Primary Income                   25000      40081   109603   79650
 Secondary Income                 11000      43294   85632    51012
 Total Income                     29400      59973   137655   103500
 Panna
 Number of Farmers                  8         34       58      100
 Primary occupation
 Agriculture                        8         34       58      100
 Kotwars                            0         0        0        0
 Secondary occupation
 Government Service                 2         0        3        5
 Private service                    0         0        1        1
 Business/ Shops/Selfemployed       1         5        4       10
 Labor                              2         9        1       12
 Pensioners                         0         0        4        4
 None                               3         20       45      68
 Average Annual Income (Rs)
 Primary Income                   24250      38911   82966    63290
 Secondary Income                 20200      26464   51023    36219
 Total Income                     36875      49809   94402    74638

source of income of Rs.26464. Large farmers had annual average
income of Rs.82966 from primary sources and Rs.51023 from
secondary sources. As the farm size increased family income went up,
but secondary source of incomes were relatively lower compared to

                                        84
Narsinghpur District (also see Table 4.6(A).
    Table 4.6(A) : Average Income of the Madhya Pradesh Farmers
Particulars                      CBs      Coop    LDBs     RRBs     Total
Average Income (Rs)
Marginal farmers                36667     33333     0      33143    34000
Small farmers                   57672     64875   42429    45750    55105
Others                          129651   104652   104000   91595    116028
Total                           103301    84405   80056    64388    68378
Average amount of crop loan
sanctioned per farmer (in Rs)
Marginal farmers                19667     36667     0      43643    36500
Small farmers                   38969     41875   37971    47813    42722
Others                          89132     42452   28955    13158    73064
Total                           70626     41819   32461    31440    58792
Average amount of term loan
sanctioned per farmer (in Rs)
Marginal farmers                  0           0     0      20000    20000
Small farmers                   35000         0   42429      0      41500
Others                          142250    40000   169667   122000   174533
Total                           120800    40000   114000   71000    123750

4.3.1 Savings Account
As incomes were reasonable there would be some savings. It was
enquired in Rajasthan as to whether the farmers had savings account
with the bank which issued them KCC, 96 of the 136 did not affirm
it. The remaining had a savings account for 1 to 25 years. However,
majority had opened the account only less than 5 years ago. Marginal
farmers do not have any savings in both the District, expectedly.
However, as seen in table 4.9, 96 farmer households did not have a
savings account, the remaining 40 farmer households had total
savings of Rs. 6.48 lakh- Rs.1.61 lakh in Sirohi and Rs.4.87 lakh in
Ganganagar. The average savings of small farmers in Sirohi were
Rs.1500 compared to Rs.21984 in Ganganagar. However, medium
farmers in Sirohi had higher average savings compared to those in
Ganganagar. It was surprising that large farmers in both the Districts
had very low savings. It could be because they had higher
consumption pattern and also had higher standards to maintain more
assets.

                                         85
4.4 Cost of Cultivation and Cropping Pattern

In Rajasthan, majority of farmers responded that cost of cultivation
had gone up and majority were from Ganganagar. Surprisingly, most
such farmers were medium farmers, though a large proportion of
Sirohi farmers were small and marginal farmers. Has there been any
cropping pattern change after credit facilities, the answer in Rajasthan
was in affirmative in case of 90 farmers, (43 in Sirohi and 47 in
Ganganagar), (table 4.26) During the kharif season, major crops
changed were sonf (10 farmers), caster (11 farmers), cotton (23
farmers), maize (1 farmer), moong (29 farmers), groundnut (1 farmer),
vegetables (3 farmers) and sesasum (one farmer). During the rabi
season, the changed crops were wheat (5 farmers), mustard (18
farmers), vegetable (5 farmers), isabgol (1 farmer), taramira (1 farmer),
gram (1 farmer), barley (10 farmers).

In Madhya Pradesh, the cost of cultivation of the various crops
cultivated by the farmers was compared with the scale of finance for
each crop in order to find out whether the credit provided by the banks
were sufficient to meet the production expenses by the farmers. In
Narsinghpur, majority of the sample farmers were growing soyabean
followed by sugarcane and redgram in kharif reason. In Rabi season,
the major crops grown were wheat, and chickpea, when scale of
finance and the cost of cultivation of the crops by the farmers were
compared, scale of finance was quite high for all crops except chickpea
in Narsinghpur. In case of Panna District, there was opposite situation
seen with scale of finance being very low when compared to the cost
of cultivation of all the crops except Masur. The scale of finance, when
compared between the Districts, in Panna it was almost half of that
of Narsinghpur for most of the crops. To find out the impact of credit
on the farming characteristics, they were asked whether any change
occurred in their input use, cropping patterns, etc over these 3 years.

 In Narsinghpur, only 6 farmers have changed their cropping pattern
after accessing the credit and 5 farmers had increased their
productivity. About 24 farmers had increased the use of fertilizers
average amount of 3.79 kg/ace. The cost of cultivation increased over
4 years with the increase in wage rate by about 2 times. In Panna,
only 2 farmers each said that, there were changes in cropping pattern
and increase in yield. Almost all the others said there was no change
in cropping pattern and productivity in the last 3 years.
The average yield of the borrowers was compared with that of the

                                   86
District. In Narsinghpur, for almost all the crops, other than redgram,
the average yield of the borrowers were more or less similar to the
productivity in the District. In Panna, surprisingly, the average yields
of the borrowers were quite high for all the crops except chickpea.
There it can be concluded that the agricultural credit had an intense
positive impact on the productivity of the farmers in Panna.

In Uttar Pradesh, in Moradabad District, paddy and wheat dominated
the respective seasons covering about two third area of KCC holders
and about 90 per cent area of term loan borrowers and control sample.
In Jhansi District, Urad and Til were the main crops in kharif season
covering more than 60 per cent of kharif area whereas wheat was the
main crop in the rabi season covering about 52 to 62 per cent of the
total area of the sample farmers. The comparison of various cost items
of common crops and other-wise also between two Districts indicated
that charges of various field operations and input levels were higher
in Moradabad District than in Jhansi District. The cost of irrigation
was also quite high in Moradabad District for the simple reason that
most of farmers in Moradabad District were using tube-wells and
pump-sets for irrigation whereas in Jhansi District, canal was found
to be the most important source of irrigation. The charges for canal
water was Rs.75 per acre for wheat crop and Rs.65 for all other crop
for the entire season. However, some of the farmers were also using
pump-sets and tube-wells in a limited way subject to the availability
of the ground water at the time of need. It was observed that input
use levels were different even for the same crops in case of Moradabad
and Jhansi Districts. The major factors which was found to be affecting
the input use in the Districts of Moradabad and Jhansi was the crop
mix of the Districts, availability of assured irrigation and use of high
yielding varieties of various crops.

In Tamil Nadu, sugarcane was the major crop in Cuddalore District
during 2006-07 accounting for 42 per cent of the total cropped area
in the District and it was followed by paddy (16.5%), Casurina (15.5%),
cashew nut (3.4%) and so on. Farmers were gradually switching over
to casurina as the cost of cultivation was higher for sugarcane. In
Virudhnagar District, sugarcane was the major crop (41.3% of the total
cropped area) and it was followed by coconut (35.3%) and paddy
(12.2%). The average areas under the major crops grown in both the
Districts during 2006-07 were sugarcane (41.7%), paddy (14.9%),
coconut (13.9%), banana (6.9%). Commercial banks in both the
Districts preferred to finance for sugarcane cultivation as there was
a tie up arrangement between banks and sugar mills in the study

                                  87
area so that loan recovery was easier to the bankers. The scale of
finance was fixed by the officials at the District level considering the
cost of cultivation for the major crops grown in the District. The cost
of cultivation per ha was maximum for banana (Rs.64850) followed
by sugarcane (Rs.52894), tapioca (Rs.22375), paddy (Rs.22100),
groundnut (Rs.18100) and so on in Cuddalore district. However, the
scale of finance as fixed by the lending institutions was lower for all
the major crops cultivated by the farmers. Farmers were then forced
to borrow from money lenders to meet out the additional expenditure.
The percentage of additional cost over and above the scale of finance
varied from 9 per cent of the total cost of cultivation in case of
sugarcane to 39 per cent in case of banana. The average cost of
cultivation of major crops grown in Virudhnagar District indicates that
the cost per ha was higher for sugarcane (Rs.56395) followed by
coconut (Rs.29190), cotton (Rs.22562), chilli (Rs.20423), paddy
(Rs.19607) and so on. The percentage of additional amount over and
above the scale of finance varied from 17 per cent in onion to 63 per
cent in maize. As the cost of cultivation varies from place to place,
the cost of cultivation/ Scale of Finance needs to be updated
considering the cost of cultivation of major crops grown.

4.5 Category of Borrower

There were two types of borrowers- absolutely new bank borrowers
and old bank borrower but new to this bank. Of the 136 KCC farmers
in Rajasthan, 96 farmers were absolutely new borrowers and the
other 40 were old bank borrowers but new to the present bank (Table
4.7). It was also found that of the 38 absolutely new borrower, 13
were marginal and small farmers in Sirohi and of the 58 such farmers
in Ganganagar, 50 were medium and large farmers. In the second
category, there were 19 farmers from Sirohi of whom 13 were marginal
and small farmers, while of the 21 such farmers in Ganganagar, 17
were medium farmers. This showed that in Sirohi the new entrants
were lower end farmers while upper end farmers were in Ganganagar.
Further, on probing this matter we found that 40 farmers were old
bank borrowers, but new to the present bank. Of the 40 farmers, 18
took loans from commercial banks (15 from Ganaganagar) while 10
farmers borrowed from regional rural bank (8 from Sirohi), 7 borrowed
from cooperative bank and 5 farmers borrowed from PLDB.

In Maharashtra, out of the 216 beneficiaries, 133 or 62 per cent
beneficiaries were reported as new farmers by the banks. However,
31 beneficiaries, though they were new farmers to the respective

                                  88
banks, were old beneficiaries of some other banks. But, they had first
time entered in the premises of the bank from which they had availed
of fresh loan. They had obviously not come under the fold of bank for
the first time. Therefore, 31 beneficiaries who had switched over from
one bank to another bank were not considered as new farmers (Table
4.8). Thus, the absolute number of the new beneficiaries who had
availed of bank loan for the first time reduced to 102 which formed
47 per cent of the total sample of beneficiaries. The absolute number
of new beneficiaries was 59, 19 and 24 in the case of CBs, Co-op.
and RRBs respectively. On the other hand, 83 beneficiaries were
existing (old) borrowers of the respective banks. Out of them, 68 were
repeaters and 15 were in distress and arrears.
                 Table 4.7: Category of Borrower: Rajasthan

    Category                                    Sirohi          Ganganagar         Total
    Absolutely New          Marginal                12               1                  13
    Borrowers
                            Small                   11               7                  18
                            Medium                  12              48                  60
                            Large                   3                2                  5
                                                    38              58                  96
    Old Bank Borrower       Marginal                5                                   5
    but New to this
    Bank                    Small                   6                                   6
                            Medium                  7               17                  24
                            Large                   1                4                  5
                                                    19              21                  40

          Table 4.8: Coverage of New Beneficiaries: Maharashtra
               New Beneficiaries                     Existing Beneficiaries
 Banks         New     From other      Total        Repeaters     In distress   total        G. total
                         banks
 CBs           59          15           74               29           2          31            105
 Co-op.        19           7           26               27           5          32            58
 RRBs          24           9           33               12           8          20            53
 Total         102         31          133               68           15         83            216

Among the total beneficiaries, 64 per cent and 36 per cent availed
of crop loan and term loan respectively (Table 4.9). Among the crop
loan beneficiaries, 40 per cent were absolutely new borrowers,
whereas, among the term loan beneficiaries, 61 per cent were
absolutely new farmers. Of the total SF/MF, 47 per cent were

                                               89
absolutely new borrowers, while in the case of other farmers, this
percentage was 53.
  Table 4.9: Classification of Beneficiaries who Availed of Crop Loan
                      and Term Loans: Maharashtra
Land                         Crop Loan                                          Term Loan                       Grand
Holding                                                                                                         Total
               New                 Existing                       New                Existing
(Ha)
            Beneficiaries        Beneficiaries                 Beneficiaries       Beneficiaries
          Absolu-   Trans-    Repea-     In                  Absolu    Trans-   Repea-      In
          tely      ferred    ters       distress    Total   tely      ferred   ters        distress    Total
          New       from                 & arrears           New       from                 & arrears
                    other                                              other
                    banks                                              banks
Up to       8         2         7            1        18       3         0        1             0         4      22
0.99
1.0 to      19        9         17           3        48      11         1        6             0         18     66
1.99
2.0 &       28        13        23           9        73      33         6        14            2         55     128
above
Total       55        24        47          13       139      47         7        21            2         77     216

4.5 Loan was Restructured?
On the question of restructuring of loan in case of farmers in distress
and arrears in Rajasthan, of the sampled farmer households only two
were farmers in arrears and both were marginal farmers belonging to
Sirohi. The amount involved in arrears was Rs.37013 (marginal farmer)
and Rs.1.36 lakh (medium farmer). Of the sampled farmers household
only one farmer was distress farmer household and was a medium farmer
belonging to Sirohi. The amount involved was Rs.1.36 lakh.

4.6 Kisan Credit Card: Issues and Concerns
In Rajasthan, on the issue of opening KCC account alone or some
intermediary was involved, the answer was that 118 out of 136 farmers
went alone to open the KCC account and majority were from Ganganagar
(Table 4.10). However, more marginal and small went alone to open
an account in Sirohi compared to Ganganagar. Again more farmers
in Sirohi took help of other persons to open KCC account. It appears
that opening a KCC account was not easy. 51 of the 136 farmers
reported that they had to visit only once to get the job done, but
another 40 stated that they had to visit twice to get the account
opened. It was quite surprising that 45 of the 57 farmers in Sirohi
and 73 of 79 in Ganganagar went alone. Of these majority were from
Ganganagar (59; 74%) and most were medium farmers. It appeared
that poor farmers had repeatedly to visit the bank to get a KCC.

                                                         90
                 Table 4.10: Opening of KCC Accounts
Opened KCC A/C alone or                  Sirohi    Gangan      Total
through some other person                           agar
             Alone          Marginal       10        1          11
                            Small          13        6          19
                            Medium         18        60         78
                            Large           4        6          10
                                           45        73        118
   Through some Other       Marginal       7                    7
         Person             Small          4         1          5
                            Medium            1       5         6
                                             12       6         18
How many times you visited bank for opening KCC Account
Once                        Marginal           5          1          6
                            Small              5          4          9
                            Medium             4          28        32
                            Large                         4          4
                                            14            37        51
Twice                       Marginal        2                        2
                            Small           7             1          8
                            Medium          6             19        25
                            Large           3             2          5
                                            18            22        40
Three Times                 Marginal        6                        6
                            Small           2                        2
                            Medium          4             4          8
                                            12            4         16
Four Times                  Marginal           2                     2
                            Small              1                     1
                            Medium             2          8         10
                            Large              1                     1
                                               6          8         14
Five Times                  Marginal           2                     2
                            Small                         1          1
                            Medium             1          2          3
                                               3          3          6
Six Times                   Medium                        3          3
                                                          3          3
Seven Times                 Medium             1                     1
                                               1                     1
Eight Times                 Small              1                     1
                                               1                     1
Ten Times                   Small              1          1          2
                            Medium             1          1          2
                                               2          2          4

                                    91
In Madhya Pradesh, about 65 per cent of the farmers went alone
for opening KCC account. Only 10 per cent of the farmers revealed
that they approached banks with the help of brokers (Table 4.11). In
both the Districts, the brokers played a significant role in opening
KCC account, which was observed during the field study and during
the casual discussion with the farmers. Around 48 per cent of the
farmers had to visit the bank once/twice for opening KCC account;
while around 33 per cent farmers had to visit more than 4 times for
opening of KCC account which they found it very tedious.

   Table 4.11: Details on opening of KCC account: Madhya Pradesh
 Particulars                                        Percentage of Farmers
                                         Narsinghpur       Panna            Total
 For opening KCC account
 Farmers who went alone personally            56             71              65
 Went along with relatives/neighbour         26              25              25
 Through Brokers/Agents                       18             4               10
 Number of times visited the bank for
 opening KCC account
 Once/twice                                   51             46              48
 3 times                                      13             23              19
 4 times and more                             36             31              33
 Average Expenses incurred in opening
 KCC account (in Rs)
 Documentation                               859            532             695
 Other expenses                              2408           914             1661
 Total expenses                              3267           1446            2356

4.6.1 Frequency of Withdrawal
What was the frequency of withdrawal allowed? Majority of farmers
in Rajasthan reported that withdrawal was freely allowed. Majority
reported one visit for money withdrawal while 6 farmers reported two
visits and 4 farmers reported three visits. Bankers provide only two
answers- busy and bank does not have cash. Credit limits have
increased with each new KCC. On the issue of number of withdrawals
allowed by a bank on KCC in a season, most stated that banks allow
one withdrawal in both the Districts, while a good number (38 farmers)
in Ganganagar stated that two withdrawals were allowed. 20 farmers
all from Sirohi stated that three withdrawals were also allowed. 130
farmers of the 136 purchase fertilizers (55 of 57 in Sirohi and 75 of

                                        92
79 in Ganganagar), 124 purchase seed (50 of 57 in Sirohi and 74 of
79 in Ganganagar), 95 farmers purchase pesticides (44 of 57 in Sirohi
and 51 of 79 in Ganganagar), 69 farmers purchase water for irrigation
(15 of 57 in Sirohi and 54 of 79 in Ganganagar), 79 farmers pay wages
to hired labour (20 of 57 in Sirohi and 59 of 79 in Ganganagar) and
122 farmers pay for tractor hiring services (47 of 57 in Sirohi and 75
of 79 in Ganganagar).

In Madhya Pradesh, among 178 farmers who have taken KCC loan,
majority of the farmers had only one KCC card, while 6 farmers had
2 KCCs and 2 farmers were having 3 or more KCCs. None of the
sample borrowers faced any problems in withdrawals. In Narsingpur,
majority (58.97%) of the farmers were using KCC effectively by
withdrawing loan many times whenever necessary and almost a
similar trend in Panna (52%). Nearly 37 percent of the farmers still
withdraw only once using KCC.

In Uttar Pradesh, the analysis of cost of cultivation (cash expenses)
as against the average amount of bank loan indicated that, on an
average, an individual farmer withdraws an excess cash of Rs.20260
per year in Moradabad District and Rs.30556 per year in Jhansi
District which was over and above his cash requirement for making
payments towards operational expenses as well as purchase of
materials/ inputs, etc. However, the actual use of cash withdrawn
by farmers out of KCC loan was used for different purposes. The
analysis of transaction of KCC loan account by farmers indicated that
42.3 per cent farmers withdrew the entire amount of the limits
sanctioned to them in one transaction. The farmers who withdrew the
entire amount in 2, 3 and 4 instalments accounted for 24 percent,
13.5 per cent and 3.8 per cent respectively and the rest of the farmers
(16.4 %) made 5 to 10 transactions to withdraw the entire amount of
limit sanctioned to them. The actual use of fund just after the
withdrawal from the banks told altogether a different story. Although
it has been estimated that about 64.5 per cent of total withdrawal in
Moradabad and 35.7 per cent of total withdrawal in Jhansi District
were genuinely used in agriculture for crop production, the farmers
revealed that they withdraw money from KCC accounts specifically
for purchase of inputs and payments to labourers/ tractor hiring to
the extent of 19.4 per cent in Jhansi District and 31.8 per cent in
Moradabad District (Table 4.12). The rest of the amount (limit
sanctioned) was withdrawn for some other purposes. Farmers also
revealed that majority of them (42%) withdraw the entire amount of
the limit sanctioned in one go, a portion of that was utilized for

                                  93
consumption purpose also. On enquiry about the reason for
withdrawal of the entire amount at a time, the farmers opined that it
was on account of the fear that the branch manager may not allow
the amount at the time of genuine need. Some of the farmers were
found to have parked the entire/ major portion of their total
withdrawal in their saving bank account. It was gathered that some
of the branch managers were also advising the farmers to do so as it
helped them in achieving the targets both for the deposits as well as
of advances.

It was also important to note that quite a reasonable portion of total
income was utilized for creating assets for agriculture and allied
activities, viz., purchase of pump-sets, purchase/repair of tractor/
trolley, etc. which was a good endeavour on the part of the farmers
as it helped them to save some money on account of higher interest
burden if they avail loan for these activities under term loan financing.

    Table 4.12: Actual Utilization of Withdrawal of fund from KCC
                       Account: Uttar Pradesh
Utilization of KCC withdrawal for                 Moradabad       Jhansi
Purchase of Buffalo                                    14.91        9.36
House construction/ house repairing                    20.88        7.13
Purchase of Pump-sets                                   5.72       16.89
Exp on marriage of children                             7.11       17.69
Repayment of old debts to other bank/                               5.66
money lender/ relatives
Higher Education of child                                           1.32
Purchase of tractor/ trolley/ repairing                16.16        5.66
Purchase of generator                                               4.22
Consumption expenditures                                3.45       12.68
Agriculture-purchase of inputs. Payments to            31.77       19.39
labour, tractor hiring, etc.
Total (average per borrower) withdrawal            Rs. 12078    Rs. 7339
                                                     (100 %)     (100%)

In Tamil Nadu, although the crop loan was treated as loan under
KCC, majority of the farmers did not use the KCC facility, i.e.,
withdrawal of loan amount as and when they required money to meet
the cultivation expenses. In commercial banks, all the borrowers had
withdrawn the loan amount only once in a year. In RRBs only 70 per
cent and in case of PACBs, 88 per cent of the borrowers used KCC.

                                          94
Of them, 3 per cent of the borrowers of RRBs and 2 per cent of the
borrowers of PACBs made two withdrawals during 2006-07.

4.6.2 Farmers Awareness
Were the farmers aware of the fact that they can borrow for capital
investment and for consumption purposes through their KCC? Not a
single farmer was aware of it in both the Districts in Rajasthan. How
many KCCs a farmer holds? Of the 136 farmers, 27 have additional
KCC. In Sirohi, 30 per cent of farmers have additional card and 13
per cent in Ganganagar. Besides the present RFI KCC, 9 of the 27
farmers hold KCC of a commercial bank, 10 of a regional rural bank
and 7 of cooperative bank and one of PLDB. Surprisingly, it largely
was small farmers doing this. This means that limits set were not
adequate. The limit of the additional KCCs ranges between Rs.20000
to Rs.5.00 lakh. As the farmers were not aware of using KCC for
consumption purposes, and there were domestic needs and ready cash
was always a temptation for using the money for consumption
purposes, it was found that 43 per cent farmers in Ganganagar and
35 per cent farmers in Sirohi spend all the money borrowed on
agriculture. One large farmer in Ganganagar spends only 10 per cent
of borrowed money on agriculture and one medium farmer also does
so. There were another 7 farmers mainly small and marginal farmers
in Sirohi and medium farmers in Ganganagar which spend 50 per
cent money on agriculture only. It appears that usually large share
of borrowed money was spent on agriculture though diversion was
also sizeable in certain cases. In Rajasthan, majority of the farmers
(94.4%) told that the banks did not conduct any awareness
programme. Only about 5.6 percent farmers have attended the
awareness programmes conducted by the banks. It may be concluded
that the bank would have conducted only few awareness programmes
giving coverage to only few areas or may not have conducted
programmes in the interior rural areas. The major source of
information regarding the credit schemes for the farmers were mostly
relatives/neighbhours (69.5%) followed by bankers (15%). The other
source of information were media (7%), Panchayats (45%) and brokers
(4%).

In Madhya Pradesh, awareness about the KCC and other schemes
related to agriculture credit among the beneficiary farmers was limited.
Only around 11.5 percent of the farmers in Narsinghpur were aware
that KCC was for term purposes and consumption loans also and
among them only 2.6 percent of the farmers had availed term loans


                                  95
using KCC. The awareness level of farmers in Panna was very poor.
As far as debt relief schemes were concerned only 6.4 percent of the
farmers in Narsinghpur were aware that such a scheme exists, while
only 2 percent farmers in Panna were aware about the schemes.

In Maharshtra, lack of awareness about the rural credit available
from the banks and the various schemes announced from time to time
by the Governments/RBI/NABARD was a common phenomenon in
the rural area. At the same time, efforts of the bank staff in this
direction appear to be dismal. It was reported by the farmers that they
were not aware of many bank schemes like redemption from
moneylenders, restructuring of loans, OTS, KCC, etc. All the banks
were advised to create awareness among the farmers by way of
placement of hoardings, banners, etc. at prominent places, such as
branch offices, panchayat buildings, etc. Organising farmers’ club
meetings, farmers’ mela, credit campaign, literature of bank schemes
in local languages, etc. were some of the effective measures used in
promotion of farm credit in the past. However, it was reported by the
farmers that the bank staff hardly appears to be engaged in such
awareness creating measures. The farmers reported that while
approaching the banks for loans they were often apprehensive about
the urban nature of the CBs and RRBs. Besides this, difficulties in
compliance of documents, high margin money, demand from banks
for fixed deposits, etc. led the SF/MF, in particular, to money lenders.
The bank staff needs to be sensitized in this matter. It has been
observed that dispensation of rural credit required more time and
efforts especially in dealing with SF/MF who were many times not
well informed. Therefore, the rural branches need to be adequately
staffed. It was further reported that many time the staff posted at rural
branches did not stay locally and, therefore, was unable to have
interaction and bond with the farmers. Formation of ‘Farmers’ Club’
can act as focal points for dissemination of credit information.
Incidentally, it was worth mentioning the experience of an active
member of Farmers’ Club. It was reported that the members of farmers’
club like him were demoralized when they found Government and
banks were whole heartedly supporting the defaulters with honor
under the loan waiver scheme. The point was raised not only by the
member of farmers’ club but also by the honest farmers who were
regular in repayment. The bank officials were indifferent.

In Tamil Nadu, of the 200 sample borrowers, 94 (47% of the total)
were new to the banks. Among 47 per cent of the ‘new farmers’ as
indicated by the banks, 15 per cent of them had migrated from other

                                   96
banks. Therefore, only, 32 per cent (about one-third) of the sample
farmers actually fall under the category of new farmers. Each borrower
had only one KCC. Nearly 40 per cent of the farmers were not aware
that KCC was also for term loan apart from the amount advanced for
cultivation of crops and only 2 percent of the farmers had availed term
loan under KCC, and none of the farmers were aware that the KCC
had a component for consumption purpose as well. As farmers did
not know about all the facilities under KCC, they need to be educated
on the utility of KCC.

4.6.3 Credit Limit
In Rajasthan, the credit limit of KCC varied between Rs.15600 to
Rs.1.00 lakh for marginal farmers, Rs. 25000 to Rs.2.68 lakh for small
farmers, Rs.27000 to Rs.4.75 lakh for medium farmers and Rs.25000
to Rs.4.5 lakh for large farmers. There were 55 new KCC card holders,
30 in Sirohi and 25 in Ganaganagar. The first KCC credit limit ranged
between Rs. 13800 to Rs. 93000 for marginal farmers, Rs.25000 to
Rs.1.2 lakh for small farmers, Rs.10000 to Rs.2.80 lakh for medium
farmers and Rs.21775 to Rs.1.10 lakh for large farmers. There were
98 farmers not in this group. The limit of the second KCC ranged
between Rs.10000 to Rs.40000 for marginal farmers, Rs.35000 to
Rs.70000 for small farmers, Rs.7500 to Rs.209877 for medium farmers
and Rs.20275 to Rs.90000 for large farmers. KCC credit limit has
reported enhancement of credit limits. Seven farmers reported limit
enhancement once, 25 reported it twice and 28 reported it thrice. This
has happened largely in Ganganagar. Almost all wanted to use KCC
freely and frequently and reason given for using it frequently and freely
was it would help in cash flow with them and they would withdraw
only the amount that was required. 15 farmers have been insisting
for increasing the limit for last one year and 22 farmers doing it for
two years and 13 farmers have been insisting it for last three years.
It appeared that this demand was largely not being met in Sirohi.
Farmers reported that if other farmers who do not have a KCC do
not need it as they have enough money. On usage of KCC, some
farmers were very smart or have picked up the advantage of having
a KCC. It was found that 52 farmers (21 in Sirohi and 31 in
Ganganagar) do not deposit the loan amount and used the KCC next
day. There were only 46 farmers who availed the KCC loan the next
day after depositing the loan amount (17 of 57 farmers in Sirohi and
29 of 79 farmers in Ganganagar). These farmers were linked to
commercial banks only.

                                   97
4.6.4 Cost of Getting KCC
Kisan Credit does not come free like any other credit card, there was
a cost attached to it which other studies have also found. In
Rajasthan, 136 farmers fished out Rs.79148 for KCCs. There were
two components on which responses were sought- documentation and
other expenses. It was found that marginal farmers in Sirohi had spent
Rs.163 on documentation and Rs.104 on other expenses like travel
etc. Thus, marginal farmers in Sirohi spent, on an average, Rs.267
to get a KCC when marginal farmers spent Rs.300 in Ganganagar.
Small farmers on the other hand spent higher amount in both the
Districts with significantly higher amount in Ganganagar. This could
be because of limit set which were higher. Similar was the experience
of medium farmers, though large farmers in Sirohi on an average spent
higher amount to get a KCC, especially on documentation. As these
expenses were based on recall, a trend could only be deduced from
the figures. Farmers must have paid some bribe to get a Kisan Credit
Card.

In Madhya Pradesh, farmers had to bear some costs for producing
documents for opening KCC account. On an average, the farmers
spent Rs.695 for producing documents while quite a high amount was
paid for other expenses such as commissions, etc. The expenses were
high in the Narsinghpur District, as most of the farmers were willing
to pay any amount of money to get their work done. In Narsinghpur,
the large farmers pay somebody for arranging documents by visiting
various departments’ offices. This was discouraging trend, as the poor
farmers who were unable to spend, will be deprived of the KCC loans.
In Maharashtra, cost of loan to a farmer was the payment of interest
on it. However, in addition to this, the farmer had to incur some more
cost prior to sanction/disbursement of loan on various items like
search report, ‘no dues’, stamp paper, inspection charges, revenue
record, etc. The search report from the bank’s advocate was asked in
the case of term loan applications above Rs.50000. But in some
instances banks had asked for the same for small amounts also. The
advocates were permitted by the banks to charge Rs.350 towards the
legal fee of the search report. However, it had been reported by the
borrowers that invariably they had to pay much more than the legal
fee which ranged from Rs.700 to Rs.1500 for getting the single search
report from the advocate. The other important cost incurred by the
farmer was on procuring ‘No Objection Certificate’ (NOC) from different
banks operating in the area. The borrowers opined that the NOC was
one of the biggest irritants faced by the farmers approaching for bank

                                  98
loans because they had to produce NOC from various banks operating
in the area. It was introduced to avoid multiple financing under
‘Service Area Approach’ which was now discontinued. The RBI has
issued circulars clarifying a non-compulsory nature of NOC. Yet the
practice of obtaining the NOC was continued. For farmers, the NOC
entails a considerable amount of time and money to be spent even to
get a small loan and leads to delay in obtaining the loan. Though it
was seen that often the RRBs and Co-op. did not levy any charges to
issue NOC, many banks charge fees ranging from Rs.25 to Rs.100 to
issue this certificate.

Revenue record (7/12 and 8a) showing rights of ownership/cultivation
was available from ‘Talathi’ at a nominal fee. However, it was observed
from our data that the borrowers had paid between Rs.50 to Rs.250
for getting the revenue record. The same was the case in procurement
of the mutation certificate. The cost of stamp paper depended on the
amount of loan. On an average, the borrowers had paid between
Rs.125 to Rs.550 towards the cost of stamp duty. It adds not only to
the cost of loans but also led to delay on account of non-availability
of stamp paper in remote places. The cost of photographs to be pasted
on application form was not much, say, Rs.25-30. But one or two days
were spent on getting the snap from taluka places. As per the RBI
Guidelines, no service/inspection charges were to be levied for loan
amount up to Rs. 25,000 in priority sector. For loans exceeding Rs.
25,000, banks levy inspection charges ranging from Rs. 50 to Rs. 225
per visit. Nevertheless, all the borrowers, small or big, reported that
they had to incur cost on the same either in cash or in kind or in
service form (Table 4.13).
 Table 4.13: Average Cost Spent by Beneficiaries on Procurement of
                      Documents: Maharashtra
                         Crop loan                  Term loan
 Holdings ha.    CBs      Coop       RRBs   CBs      Coop       RRBs
 Up to 0.99      608      510        137    2000     0          2500
 1.0 to 1.99     803      700        302    1500     1300       1750
 2.0 and above   1068     675        207    1780     1667       1625
 Total           922      650        239    1700     1556       1778

4.6.5 Response of Term Loan Farmers in Rajasthan
The surveyed term loan farmers also possessed KCCs in Rajasthan.
All got the KCC independently in both the Districts. A large number
did not report the KCC limit. Those reporting (23 farmers), 8 were

                                     99
                                        Table 4.14:     Withdrawal from KCC                                   (Rs.)

      District           2003-04                   2004-05                    2005-06                        2006-07
                   No   Mean    Sum         No   Mean     Sum          No    Mean    Sum          No        Mean       Sum
      Marginal
      Sirohi        1   12500      12500     8    38338      306700      9   39302      353715          8   107238       857905
      Ganganagar    1   13825      13825     1    10425        10425     1   19671       19671          1    23500       23500
      Total         2   13163      26325     9    35236       317125    10   37339       373386         9    97934       881405
      Small
      Sirohi        2   23500      47000     8    19709      157672      6   31087      186520          6    32343       194060
      Ganganagar                                                                              1   3000        3000
      Total         2   23500      47000     8    19709       157672     6   31087       186520         7    28151       197060
      Medium




100
      Sirohi        2   74690      149380    6    87533      525200      5   33382      166910          8    81219       649748
      Ganganagar   27   56250   1518744     34    60797      2067081    35   93745      3281075        39   115614      4508946
      Total        29   57522   1668124     40    64807      2592281    40   86200      3447985        47   109759      5158694
      Large
      Sirohi        2   13500      27000     2    28500       57000      2   78500      157000          4    70750       283000
      Ganganagar    3    5535      16605     2    11385        22770     4   18824       75295          5    60099       300495
      Total         5   8721       43605     4    19943       79770      6   38716       232295         9    64833       583495
      Total
      Sirohi        7   33697      235880   24    43607      1046572    22   39279      864145         26    76335      1984713
      Ganganagar   31   49973   1549174     37    56764      2100276    40   84401      3376041        46   105129      4835941
      Total        38   46975   1785054     61    51588      3146848    62   68390      4240186        72    94731      6820654
from Sirohi with credit limit of Rs.25000 to 300000, while in
Ganganagar there were 15 reporting farmers with credit limit of
Rs.51000 to Rs.4.5 lakh. Only farmers reported credit enhancement-
5 in Ganganagar and 4 in Sirohi. In Sirohi KCCs were from commercial
bank (2 farmers), regional rural bank (2) and cooperative bank (4),
while in Ganganagar the banks were- commercial bank (3), regional
rural bank (11) and cooperative bank (1). The first KCC limit was
Rs.15000 to Rs.50000 in Sirohi and Rs.45000 to Rs.3.00 lakh in
Ganganagar. It was found that average withdrawals through KCCs had
increased since 2003-04, though in some cases in 2004-05 some
decline was reported (Table 4.14). As in most cases only one
withdrawal was allowed and the limit was not changed over a season,
doubling was not possible in credit disbursement for these farmers.
There were 5 farmers in Sirohi with one additional KCC, one farmer
with two additional KCC while in Ganganagar there were 13 farmers
with one additional KCC.

In case of KCC, we found in Sirohi, 48 farmers were absolutely new
KCC farmers while 15 were old bank borrower but new to the present
bank (Table 4.15). Most of these were marginal and small farmers. In
Ganganagar, absolutely new borrowers were 20 while 11 were old
bank borrower but new to the present bank. Most of these farmers
were medium farmers. 15 farmers in Sirohi had earlier borrowed from
commercial bank (5 farmers), regional rural bank (1 farmer) and
cooperative bank (9 farmers) while 11 farmers in Ganganagar had
earlier borrowed from commercial bank (8 farmers), regional rural
bank (1 farmer) and cooperative bank (2 farmers). To probe further,
we found that of the 94 farmers, 26 were old bank borrowers but new
to the present bank while 68 were absolutely new bank borrower.
                         Table 4.15: Category of Borrower
 Category of Borrower                     Marginal   Small   Medium   Large   Total
 Sirohi
 Absolutely new bank borrower               19        11       14       4      48
 Old bank borrower but new to this bank      4        4        7               15
 Ganganagar
 Absolutely new bank borrower                3        2        13       2      20
 Old bank borrower but new to this bank      1        1        7        2      11

The earlier bank was commercial bank for 5 farmers in Sirohi and 8
farmers in Ganganagar, while regional rural bank took care of one
farmer each. Cooperative bank had 9 farmers in Sirohi earlier as
borrowers and in Ganganagar only 2 farmers.

                                          101
4.6.6 Problems with KCC
In Rajasthan, on the problem front of the KCC module, the response
was that 88 of 136 KCC farmers did have any problem with KCC
module. Another 34 farmers felt that KCC should allow its use as and
when needed and these farmers were mainly from Ganganagar. For
6 farmers high interest was a problem. It takes too much time to get
the money for 4 farmers and mix of all the above for another 4
farmers. It appears that marginal and small farmers were more affected
by periodicity and high interest rates compared to medium and large
farmers. Of the 136 farmers, 123 farmers had crop insurance cover
too. It was also noticed that 127 of the 136 farmers were regular in
payment of dues to banks. There were thus only 9 farmers who
reported some irregularity in payments and 6 were from Sirohi and
they were marginal and small farmers mainly. The frequency payment
was six monthly for majority of the farmers but there were reportedly
24 farmers who had annual repayment schedule and all but 2 were
from Ganganagar.
In Maharsahtra, the farmers reported that considerable time, efforts
and money had to be spent to procure all these documents required
for getting a KCC. It was also reported that the requirement of various
papers4 were intimated in a piecemeal manner resulting in undue
delay. In view of this, many times farmers feel that: ‘better not to step
in the bank’. The farmers also reported that this was one of the major
reasons to seek loan from the informal sources instead of taking it
from the bank though interest rates of the latter were less than the
formal sources. The part of documentation was more or less the
same for both; crop and term loan. Thus, one can realize that how

4 In Maharashtra, a farmer has to produce the following documents to a bank
  branch for sanction of loan: revenue record pertaining to his land showing rights
  of ownership/cultivation; no dues certificate from different banks to the effect
  that he is not indebted to any other bank in the area; ration card or any other
  proof of identity; two photographs; stamp papers as per the requirement of the
  bank; search report from bank’s advocate in the case of loans above Rs.50000,
  and mutation certificate from the land record keeper (Talathi), if there is any
  alteration in revenue records. Besides these documents, the banks commonly
  seek the following papers/forms for their use and records from the borrowers at
  the time of sanction/disbursement: application form; annexure to the application
  as per the NABARD norms; D.P. note; D.P. note take delivery letter; terms and
  conditions letter; hypothecation agreement to be executed for all loans; deed of
  guarantee wherever applicable, and deed of mortgage wherever applicable. Again
  at the time of renewal, the following documents were taken from the borrower:
  fresh set of land records to check if there is any change in right of ownership /
  cultivation and the search report from the advocate; revival letter for hypothecation;
  revival letter for guarantee, and revival letter for mortgage.

                                         102
difficult it could be for share croppers, tenant farmers and oral lessees
to get loan from the bank.

In Madhya Pradesh, the main problem regarding the KCC was the
documentation procedure, violating the very important objective of
KCC extending hassle free credit to farmers. Around 32.5 per cent
farmers did not have any problems with KCC, while about 5 percent
farmers found it difficult to approach the banks directly without the
agents and they were mostly small/ marginal farmers. Around 3
percent farmers who were poor felt the poor response from the banks.
The reasons for the other non-KCC holders in the village not getting
KCC were, lack of awareness (15%) difficulties in documentation (14%),
unsatisfied with banker’s response (2.5%) and defaulters (18.5%).
About 42 percent farmers were not having any idea about, why others
have not got KCC. The farmers suggested that to make the KCC
scheme more farmer friendly the procedures/documents has to be
reduced and brokers has to banned (62.5%). About 10 per cent
farmers suggested that their credit limit should be enhanced
automatically as they face problems in enhancing credit limits. Others
suggested that each bank should have one counsellor/or a cell to
clarify the problems regarding KCC and around 3 per cent farmers
were discouraged by the debt waiver schemes and the regular repayers
should also be rewarded along with loan waiver schemes.
In Tamil Nadu, none of the selected borrowers were tenant farmers
or oral lessee. In general, the farmers opined that they were allowed
to withdraw the loan amount as and when required by them. In 45
per cent of the sample respondent households, wife of the farmer was
a member of SHG and out of this 85 per cent of them have availed
Cash Credit Loan (CCL) through SHG.
4.6 Farmers in Arrears

In Rajasthan, there were only two farmers with arrears who were
from Sirohi and were small and medium farmers. The amount involved
was Rs. 24553 (small) and 149581 (medium).

4.7 Projects

What did the farmers take term loan for? Of the 94 farmers’ survey
who had taken term loan in Rajasthan, 28 took loan for farm
machinery (tractors) and it was the small and medium farmers mainly
in Sirohi and medium farmers in Ganganagar. 17 farmers took loan
for minor irrigation works and most were from Sirohi and again small

                                  103
and medium farmers. Land development had been important purpose
for borrowing in Ganganagar. Dairy development was another activity
for which 20 farmers took term loan and most were from Sirohi and
were marginal farmers. Sheep/goat/pig purchase was activity for 10
farmers and again in Sirohi.

What was average cost of the project for which loan was sought? In
Sirohi the average project cost was Rs.1.60 lakh of which loan
sanctioned was Rs.1.47 lakh and loan amount was Rs.1.42 lakh. Thus
there was a shortfall in the requirement and loan provided. The
average project cost for marginal farmers was Rs.67079 while it was
Rs.2.63 lakh for large farmers. The loan sanctioned on average for
marginal farmers was Rs.48140 while it was Rs.2.38 lakh for large
farmers. In Ganganagar, the difference between project cost of
marginal and large farmers was immense, but here too there was large
gap between project cost and loan sanctioned /loan amount.

 There was a difference between project cost, loan sought and loan
sanctioned, there was bound to be difference between loan disbursed
and project cost. Loan disbursed on an average in Sirohi was
Rs.135670 while it was Rs. 217732 in Ganganagar. Across category
of farmers in both the Districts, disbursement was lower than the loan
sanctioned. This means that term loan was sufficient for all categories
of farmers. As per the RBI Guidelines, no margin was stipulated by
banks for loans up to Rs.50000. No margin was stipulated in the case
of term loans and cash credit up to Rs.5 lakh for ACABC. The average
money margin varies between Rs.7100 in case of marginal farmers
and Rs.43667 in case of medium farmers in Sirohi while the range
was between Rs.1500 for marginal farmers and Rs.25643 in case of
medium farmers. In Maharashtra, as such, no ACABC was financed
in Aurangabad and Latur Districts during the three years. For other
loans exceeding Rs.50000, the banks sought margin money prescribed
as per stipulations ranging from 15 per cent to 25 per cent of the
total cost.

When there were gaps between required finance for an activity and
loan provisioning, what do the farmers do? They have to resort to own
savings or borrow from other lenders. Of the 94 farmers, 24 farmers
depended on own savings while 10 also borrowed from traditional
sources like relatives/ friends/ moneylenders. Average own funds used
for the project varied between Rs.47667 in case of marginal farmers
and Rs.73571 in case of medium farmers in Sirohi while the range



                                 104
was Rs. 25000 in case of small farmers to Rs.150000 in case of large
farmers in Ganganagar. Marginal farmers in Ganganagar did not use
own funds but borrowed on an average Rs.15000 from other sources.
Dependence on own sources or borrowed funds was largely determined
by secondary sources of income of the household and surplus
generated from agriculture. Sirohi District had on an average smaller
holding sizes and less irrigated area renders farmers depended upon
moneylenders more as was observed from average borrowings by
marginal and small farmers in Sirohi.
Besides the above figures that show gap in loan and requirement, it
was also ascertained whether the loan was sufficient or not? 65 of
the 94 farmers stated that loan was sufficient and only 29 reported
insufficient loan and most were from Sirohi and marginal and small
farmers as expected.
If the loan was not sufficient, then either one was using own savings
to fill the gap or borrowing from others? Who were these others?
Relatives were the source for one farmer, friends for 3 farmers and 6
depended up on others. The interest paid on borrowed funds varied
between 12 to 24 percent per annum with most paying 24 percent
interest rate.
Invariably it was stated that banks take lot of time in disbursing the
loan after sanction. Of the 94 farmers, 53 farmers reported no delay
in sanction and disbursement. In Sirohi, the delay ranges between
one day to 90 days while this delay in Ganganagar was between one
and 60 days.

4.7.1 Asset from Term Loan
In Rajasthan, in Sirohi of the 63 surveyed farmers, 44 farmers had
the asset purchased intact and in use while 19 do not have the asset
with them or was not in use. In Ganganagar, of the 31 farmers, 25
farmers had the asset purchased in intact while only 6 farmers did
not have the asset in intact. There were four reasons for asset not
being intact. It had been sold off (10 farmers), it was no more (basically
animals) (3 farmers), drought affected it and at present the asset was
not useable. Invariably capital assets in agriculture were not put use
everyday and there was lot of underutilization of assets. In Sirohi, we
found that there were 14 farmers reporting the asset in use for 365
days and another 1 farmer using it for 300 days. The range of days
the asset was put to use was 2 to 365 days in Sirohi. In Ganganagar
the asset use higher as the days it was put to use in a year ranges
between 20 to 365 days.
                                  105
The asset was used at farm/ home and hired out. Marginal farmers
in Sirohi operate the purchased asset for 215 days in a year on an
average, while it was 365 days in Ganganagar. Small farmers used it
for 232 days in Sirohi and 258 days in Ganganagar. The large farmers
used it for 296 and 341 days in Sirohi and Ganganagar respectively.
The asset was used for more number of days on farm than days it
was hired out across holding classes and in both the Districts.

Who were used for operating the asset? On an average, marginal, small
and medium farmers used higher number of family members
compared to Ganganagar while only large farmers in Ganganagar use
more family members.

In Sirohi, fewer numbers of persons was hired to operate the asset.
On an average, across categories of farmers Ganganagar hired more
persons to operate the asset.

Where the asset purchased was used? Use of asset on own farm
ranged between 1 to 365 days in Sirohi and more than half the farmers
used the asset for more than 120 days. In Ganganagar, the asset used
on own farm ranges between 5 to 365 days with majority using it for
more than 120 days.

The asset was also hired out. It was found that in Sirohi, 4 to 270
days in a year (15 farmers do it) while in Ganganagar, it was hired
out for 55 to 365 days (only 4 farmers do so).

The average operating expenses on the asset were Rs.24846 for
marginal farmer which goes up to 43125 in case of large farmers in
Sirohi. Except for small farmers, in all categories of farmers, the
average operating expenses in Sirohi were lower compared to
Ganganagar.

There were some farmers who did not purchase the asset for which
the loan was taken. It was used for children’s marriage, domestic
consumption, education and clearing the old debt of money lender.

In Madhya Pradesh, the term loan disbursement had shown a
decreasing trend over years by all the banks, which was of major
concern as it affected the productive investments in agriculture, which
was vital for long-term agricultural growth. The major problem faced
by the banks was the poor recovery in case of term loans. In an
attempt to find out the actual situation among the farmers who has

                                 106
taken term loan, some of the issues were studied among farmers.
Among the 21 farmers, funded by commercial banks, majority were
the tractor loans (11), followed by minor irrigation loan. Commercial
banks have given housing loan (3) under this head of term loan for
agriculture. Among 46 term loan borrowers surveyed, 40 were regular
re-payers. Among the 6 defaulters, 4 were the tractor loans. The
farmers who take tractor loans find in difficult to take back the
returns, by giving for rent, as majority of the farmers possess the
tractor by themselves. Among the term loans units, one unit each
from, minor irrigation; farm mechanization were not operational. One
dairy unit and one warehouse were closed. The reason for the closure
being the high maintenance and operating cost as compared to the
income from the unit. One of the tractor and one pump set purchased
through term loans were non-existent showing the amount was
utilized for some other purposes. In case of minor irrigation and farms
mechanization loans, approximately 90 per cent of the cost was
covered by the loan while, in case of dairy units and warehousing,
65 per cent of the project cost was covered by the loan. The net income
was high for the dairy unit, while very low from the warehousing. The
net income from the farm mechanization was less than the annual
instalment (i.e. he was not was able to repay the instalments).

In Uttar Pradesh, a total of 30 borrowers (15 units from Thakurdwara
Branch of UPSGV Bank Ltd, Moradabad District and 15 units from
Moth Branch of UPSGV Bank Ltd, Jhansi District) were covered in
the present study to see the utilization pattern of bank loan availed
for agriculture and allied activities. A general norm of extending bank
loan (maximum) of Rs.30000 to Rs.40000 per acre of owned land was
adopted by the UPSGV Bank in Jhansi and Moradabad Districts.
However, a cap for maximum amount of finance for most of the
activities was also adopted by the Bank which was found to be
generally less than the actual requirement for creating the desired
asset. For example, in Jhansi District, Bank was extending loan of
Rs.19000 for 6HP engine and Rs.21000 for 8HP diesel engine (P/s)
whereas a market price of a good brand engine was around Rs.25000.
Similarly, bank was extending dairy loan @ Rs.12000- Rs.13000 per
animal whereas a good quality buffalo/cow was not available in less
than Rs.20000. Less financing in case of dairy loan had resulted in
procurement of desi/ non-descriptive breed of animals by the
borrowers.

In general, the level of asset creation by the borrowers in case of
agriculture and allied activities was not found to be satisfactory. It

                                 107
was observed that only 40 per cent of the borrowers in both the
Districts of Moradabad and Jhansi had created the assets which were
also found to be intact at the time of field visits. In as many as 27
per cent cases (8 out of 30 borrowers), the borrowers had created the
assets/ established the units but had closed after a period of time.
This observation was more common in case of animal husbandry
projects (dairy, poultry and goatery) where asset was created and
closed/ sold out after a period of time. Horticulture was one activity
where it was very difficult to ensure the asset creation although it
was assumed that the borrower will go for some plantation crop. But
none of the sample borrower had even thought of investing in orchard/
plantation crop. Two borrowers in Moradabad District (1 for trolley
another for horticulture loan) had availed the loan from the bank just
to close their earlier loan accounts. Mr Gulam Saber had availed loan
for horticulture activity and repaid the crop loan availed from the PACS
and Mr Byan Singh had availed Rs.50000 for the purchase of trolley
just to close his earlier dairy loan from the same bank.

In Tamil Nadu, in Cuddalore and Viruthunagar districts, 28 farmers
(6 small farmers and 22 large farmers) with an average farm size of
4.7 ha have borrowed term loans. Of these 28 farmers, 10 borrowed
from RRBs (36 per cent of the total) and the remaining from
commercial banks. Of the term loan borrowers, eight have borrowed
as sugarcane premium (for laying drip irrigation system in sugarcane
field) accounting for 28.6 per cent of the total number of term loan
borrowers, 6 borrowed for purchasing tractors (21.4 per cent), 4 each
for tractor maintenance and bore well (14.3 per cent), 3 for laying pipe
line (10.7 per cent), 2 for purchasing oil engine (7.1 per cent) and one
for digging well (3.6 per cent).

In terms of the loan amount, purchase of tractors accounted for a
maximum of 48 per cent of the total term loan amount disbursed.
Bore wells, oil engines, drip irrigation system and tractors purchased
under term loans were being properly maintained by them as these
assets are highly useful to them in terms of yielding more returns.
Farmers purchased tractors with term loan assistance from banks as
the sugar mills authorized these farmers to use their tractors for
transporting sugarcane to the mills. Banks were also ready to give
such tractor loans owing to assured repayment.

4.8 Repayment
In Rajasthan, the average instalment for marginal farmers was Rs.7009
in Sirohi while it was as low as Rs.420 in Ganganagar. Instalments

                                  108
in Sirohi were more or less the same across category of farmers while
they were very high for large farmers in Ganganagar. Small farmers
in Sirohi have high instalments to pay compared to Ganganagar. In
Sirohi the reported repayment period range between one year to 15
years, but majority of farmers had repayment period of up to 7 years.
In Ganganagar, the repayment period reported was 5 to 10 years. This
varied as per the asset purchased. 25 of the 63 surveyed farmers in
Sirohi were paying instalments regularly compared to 18 out of 31
farmers who do it regularly in Ganganagar. It was mainly marginal
and small farmers not paying regularly their instalments. The main
reasons for this were drought led crop failure, rising input cost, water
table declining leading to poor crop production and the asset not being
fully used, especially tractor. In Sirohi, most hire it out and as the
number had increased a lot there was less demand. What was the
interest rate? In Sirohi the interest varied between 5 to 18 percent
per year and most had 11 percent plus interest rate while in
Ganganagar, the interest varied between 11 to 20 percent, most paying
12.00 percent.

In Madhya Pradesh, majority of the farmers repay annually, around
85 per cent farmers regularly repay the loans. Some of the banks
asked the customers/farmers to repay the loan in the previous day
and sanction the loan in the next day in order to make some
adjustments in their accounts. To address this issue, the farmers were
questioned, only 4 farmers told that they did so twice/thrice as per
the bank’s request. Some farmers while having casual discussion said
that, they sometimes take loans from brokers to repay the bank and
avail the loan from the bank next day and settle them by paying some
interest.

4.9 Some Additional Observations

In Madhya Pradesh, as far as KCCs were concerned, it was observed
that many large farmers, who has distributed their holdings in the
name of their family members have accessed the credit under the
category of small/marginal farmers. About 22 farmers who claimed
to be small farmers were in reality having large operational holdings
and such farmers were having more than 2 KCC cards in the same
family. Nearly 54 farmers were having two or more KCC cards and
nearly 11 farmers were found to use the agricultural credit in their
business or shops. It was also observed that in Madhya Pradesh,
there exists a lot of competition among various agencies in getting
their customers in rural areas because of the high target set for them.


                                  109
Among the different sources of credit, commercial banks were
preferred by most of the banks (53.5%). 6.5 percent farmers prefer
other sources such as relatives and money leaders as they can get
quick cash in hand without having to face the documentation
problems. The reasons for preferences were shown and major reason
for the commercial banks being preferred was the good/faster service
and they maintain good relationship with the clients. Now there was
generally tendency of shifting from one bank to another and was
observed mainly from co-operatives and RRB’s to commercial banks
mainly because of the better services by CB’s.

In Madhya Pradesh, there was mixed response among the bankers
regarding the recent loan wavier schemes. Some of the commercial
bank managers were against this scheme saying that, it affected the
basic morale among the farmers. The recovery percentage of the future
loan was very low as most farmers turned into willful defaulters
expecting further loan waivers in future. As far as co-operative banks
were concerned being major stakeholders in financing small/marginal
farmers, tends to gain maximum from the scheme and hence they
were welcoming the scheme. In Panna, the response was different
among commercial banks, as they also welcomed the scheme, as most
of the farmers were affected by drought and flood since last 3 years.
So they were in desperate need for the relief schemes. From the
farmers point of view it has sent a wrong message that, the one who
repays the loans was a looser, while the defaulters will benefit in the
long run. Hence a scheme encouraging the regular repayers should
also have been announced simultaneously, which would have had
balanced feelings among the farmers.
In Uttar Pradesh, branch managers opined that financing of term
loan based on land security now-a-days has also become very risky.
As per a rough estimate, about 100 accounts were such, where the
owner has sold out the land mortgaged to the bank and there were
number of court cases on this type of dispute.
In Maharshtra, the major problem of the farmers was lack of
awareness about the banks and the credit facilities available from
them. First of all, the majority of the farmers who have so far not
approached any bank for availing of credit were still apprehensive
about procedures and processes of banks needed for sanction of loan.
This often made the farmers shy of approaching the bank directly.
To remove the fear from the minds of the farmers, first of all, the
documentation part of the loan proposal needs to be further simplified.
Secondly, a certain amount of handholding may actually make the
                                 110
task easier for the bank. ‘Identification of beneficiaries’ as was
proposed in ‘Service Area Approach’ could be initiated by banks. Even
majority of the sample beneficiaries were not aware of various schemes
of credit available with the banks. Hardly 10 per cent farmer-
beneficiaries were aware of multipurpose use of KCC for availing of
crop loan, term loan and consumption loan as a single window for
the credit needs. Another important issue raised by the farmers in
general was related to payment of margin money and keeping of fixed
deposits with banks before the sanction/disbursement of loan.
Farmers found these conditions difficult to fulfill. In comparison, many
farmers argued that availability of informal credit from moneylenders
in many respects was much easier than availing of loan from the
banks; no matter what interest rate was charged by the former. On
probing further on the issue of formal and informal credit facilities,
the farmers opined that the interest rate charged by moneylenders
at Rs.2 per cent per month (around 24% per annum) was not higher
when they could get timely, adequate and hassle free credit from them.
The same thing was not assured by the banks. This was so,
particularly in respect of consumption loan. It should be available as
and when required because, its need was time bound. The study team
had an opportunity to discuss some issues with a businessman-cum
farmer-cum moneylender. On the issue of higher interest rates charged
by the money lenders, while justifying his point, he cited an example
of a SHG in his village charging interest rates between Rs. 2 per cent
and Rs. 3 per cent per month to its members. Further, he continued
and said that gone were those days when some atrocities were done
by a few money lenders in the past. The importance of money lenders
in rural area could not be questioned. Rather it should be
strengthened by a Government act with suitable modifications to suit
the rural situation. This point was debatable.

A detailed discussion was held with them regarding the quality in
operations of KCC and its importance as a single window system for
all types of loans, viz., crop loan, term loan and consumption loan.
As mentioned above, among all the sample-beneficiaries, hardly 10
per cent were aware of the multipurpose use of KCC for availing of
all types of credit. Nearly 70 per cent beneficiaries informed that they
got information about the usage of KCC from the bank officials and
helped them to open an account. On an average, the beneficiaries
made 3 to 4 visits to the banks for opening the KCC account. By and
large, they were allowed to withdraw money freely; may not be on the
same day but on the next day. Nearly 38 per cent beneficiaries
reported that they were refused to withdraw money on the next day

                                  111
for non-availability of cash at bank level and sometimes for absence
of branch manager. Nearly, 20 per cent KCC holders had no problem
in sanction of enhancement in credit limit. However, the rest could
not get enhancement in credit because of inadequate land holdings
and lack of switch over from foodgrain crops to cash crops like
sugarcane, cotton, etc. The beneficiaries were asked by the study team
to show their KCC. Nearly, one-third beneficiaries told that the cards
were not issued to them. On enquiry of this point with the bank
officials, it was informed that the cards were kept in the branch to
avoid loss or damage of it by the farmers. Further, it was found that
the beneficiaries generally withdrew the entire amount of credit limit
during the on-set of the monsoon, say, in June-July, and kept the
money with the dealers of fertilizers, seeds, insecticides, etc. to book
the supply of these inputs required during the year. Thus, the short
supply of inputs like fertilizers was the main reason for such
withdrawal of the credit. Nevertheless, it was found that the banks
were continuing their old practice of lending in the name of KCC and
the farmers were deprived of the flexibility in operations as envisaged
under the scheme. The beneficiaries were not aware of the insurance
scheme (death and permanent disability) covered under the KCC. Nor
they were aware of flexibility in operation of card. Though the banks
had tried to popularize the KCC by way of display of posters, banners
and leaflets in rural area, the scheme was not picked up as desired.
On enquiry with the card holders regarding the financial inclusion of
every farmer with KCC account, they responded that the banks did
not issue new KCC to the new farmers but insisted on him to open
a savings account and operate it at least for three years. This was
the main hurdle in expansion of KCC.




                                  112
                            CHAPTER 5
                 Conclusions and Suggestions
This study was launched to

        Study the trends in ground level credit flow in agriculture,
        number of loan accounts, coverage of new farmers, etc. during
        the period of the currency of the scheme, viz. from 2004-05
        to 2006-07.

        Identify factors responsible for decrease, if any, in the number
        of farmers supported on a year to year basis and suggest
        strategies to arrest and reverse the trend

        Study the existing Management Information System (MIS)
        used by Rural Financial Institutions (RFIs) for reporting
        number of farmers/new farmers covered and to suggest
        changes for ensuring effectiveness of the reporting system

        Assess adherence to guidelines issued by RBI regarding
        agricultural credit, especially in the post doubling of credit
        period

        Study issues relating to investment credit with respect to the
        factual position in respect of farmers financed for investment
        purposes

    Review implementation of KCC as a product, its effectiveness in
    ensuring hassle-free credit to farmers as well as to obtain feed-
    back from farmers regarding the reasons for dormancy of KCCs,
    wherever such a situation occurred.

The study pertains to five states viz., Rajasthan, Tamil Nadu, Uttar
Pradesh, Madhya Pradesh, Maharashtra wherein two Districts each
were surveyed to elicit ground level information and performance. Of
the two Districts, one was agriculturally developed and the other
agriculturally underdeveloped. Both had achieved doubling of credit
during 2004-05 to 2006-07. The Districts covered were Sirohi and
Ganganagar in Rajasthan, Aurangabad and Latur in Maharashtra,
Narsingpur and Panna in Madhya Pradesh, Cuddalore and
Virudhunagar in Tamil Nadu and Jhansi and Muradabad in Uttar
Pradesh. In each state, two blocks in a similar fashion were also
selected. Within each block one cooperative institution, one
commercial bank and one regional rural bank were chosen. It was

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ensured that the commercial bank was repeated in each block. A
minimum of 200 farmers were covered in each State giving a sample
of 1000 farmers. However, in certain states, the sample exceeded 200
farmers.

Besides primary level information on doubling of credit and
performance of Kisan Credit Cards, secondary information was also
collected through State Level Bankers Committee which across states
made special effort to gather information and monitored credit flow.
This information related to state level agriculture credit flow by
institutions and by activity. To obtain District level information, PLP
reports prepared by District officers of NABARD were used. At the
branch level, data was obtained from branches on various parameters
through a structured questionnaire. Information from other sources
at the state level was also relied upon to provide detailed performance
with respect to doubling of credit to agriculture sector.

The study was commissioned through five reputed research
institutions in the country that were located in the selected states.

Conclusions

Doubling of credit to agriculture during the stipulated period was
achieved at the aggregate level in all the states.

However, there were inter-institutional variations in achievement of
these targets.
        In certain states like Uttar Pradesh, doubling of credit was
        achieved by commercial banks in the very next year. RRBs
        achieved doubling target in 2006-07 in Uttar Pradesh whereas
        cooperatives did not achieve the target even in 2006-07.

        In Madhya Pradesh, doubling of credit flow was achieved in
        2004-05 by commercial banks while RRBs were able to do
        so in 2005-06 and cooperatives did not achieve the target even
        in 2006-07.

        In Rajasthan, doubling of credit flow was achieved by
        commercial banks and cooperative banks in 2005-06 while
        RRBs did so in 2006-07. This meant doubling of credit at the
        state level in 2005-06 which further increased in 2006-07.

        In Maharashtra, commercial banks were able to achieve the
        target of doubling of credit in 2004-05 itself while RRBs did

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        so in 2006-07 and cooperative banks could not achieve the
        doubling of credit in 2006-07. At aggregate level, doubling
        target was met in 2006-07.

        In Tamil Nadu, commercial banks and RRBs achieved the
        target of doubling of credit flow to agriculture in 2005-06
        when cooperative banks could not even maintain the flow of
        credit level of 2003-04 in 2006-07. For the state as a whole,
        in 2006-07 credit flow to agriculture was doubled from its
        2003-04 base.

Thus, we find that commercial banks performed better than other
types of banks across states with cooperative sector banks faltering
in most states.

Across states there has been a shift of clients from cooperative sector
to commercial banks with almost complete dominance of commercial
banks in Tamil Nadu. Different states witnessed not only changing
role of institutions, but also changes in the relative importance of some
institutions.

Term Loan Lending
There were variations in doubling of term loan lending across states.
For instance, only in case of horticulture activity, doubling of credit
flow was achieved in Rajasthan while Maharashtra achieved doubling
in poultry, Storage & Market Yards (SMY), Plantation & Horticulture
(P&H), Farm Mechanisation (FM), Forest/Waste Land Development (F/
WLD) and Bio-Gas (BG) in either 2004-05 or 2006-07. In Tamil Nadu
doubling of credit took place in fisheries, forestry and storage/market
yards, farm mechanization, agri-others, animal husbandry. At
aggregate level, doubling took place in Tamil Nadu in the second year
and also in the third year over the base year.

District level Situation
Across states, there was varied performance in doubling of credit flow.

In Rajasthan, doubling of credit flow to agriculture was achieved within
a year after 2003-04 in most Districts. However, in 2006-07 all
Districts met the doubling targets. There were of course wide variations
across Districts in credit flow and this was probably the situation
below the District level too for which data was not available. It was
observed that doubling of credit flow has been difficult in Districts
where base year flow has been high compared to Districts where base

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year flows were low. All the institutions in Rajasthan achieved
doubling of credit across Districts.

In Tamil Nadu seven Districts did not achieve the doubling target. In
the first year, none of the Districts achieved the doubling target. There
were high inter-District variations in credit flow in Tamil Nadu.

In Madhya Pradesh only 38 of the 48 Districts achieved the target of
doubling agriculture credit and the districts which did not achieve
doubling were: Datia, Sheopur, Dindori, Tikamgarh, Ashoknagar,
Anuppur, Seoni, Umariya, Chhatarpur and Hoshangabad.

In 16 of the 69 Districts of Uttar Pradesh doubling of agriculture credit
flow target was not achieved and these were: Jaunpur, Faizabad, St.
Ravidas Nagar, Chandauli, Allahabad, Varanasi, Firozabad, Unnao,
Kaushabi, Kushinagar, Kanpur (N), Rampur, Badaun, Ambedkar
Nagar, Azamgarh and Mathura. As many as 24 Districts in case of
crop loan and 26 Districts in case of agricultural term loan failed to
achieve the target of doubling the ground level credit within three
years period of policy package from 2004-05 to 2006-07. There were
wide inter-District variations in Uttar Pradesh too.

New Farmers
In Maharashtra, coverage of new farmers across institutions has gone
up every year while in Rajasthan and Uttar Pradesh, a decline in
number of new farmers was observed. In Madhya Pradesh in the first
year while the number of new farmers increased, in the subsequent
years the number went down. In Tamil Nadu overall increase in new
farmers across institutions has been around 10 percent.

Farmers in Distress
In Maharashtra, during 2005-06 and 2006-07, the cooperatives
restructured 7.21 lakh and 8.45 lakh accounts of the farmers in
distress amounting to Rs.1424.31 crore and Rs.1743.73 crore in the
respective years while the RRBs restructured 638 and 137 accounts
of the farmers involving loan amount of Rs.1.95 crore and Rs.0.37
crore respectively. As a result, DCCBs and RRBs taken together
financed fresh loans against restructuring to 1.69 lakh and 2.94 lakh
accounts of the farmers and then financed fresh loan of Rs.180.63
crore and Rs.500.19 crore during 2005-06 and 2006-07 respectively.
In Rajasthan, coverage of farmers in distress increased from 1.27
lakh in 2004-05 to 1.41 lakh in 2005-06. In Tamil Nadu, farmers

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were benefited more by ‘under relief measure’ extended to farmers
who were in distress from co-operative banks with 54.7 per cent of
the total amount sanctioned under the relief measures and they were
followed by commercial banks (44.6%) and RRBs (0.7%) during 2004-
05. However, in 2006-07, commercial banks provided more relief than
the co-operative banks and RRBs. As far as the percentage change in
the amount sanctioned between 2004-05 and 2006-07 was concerned,
all the three banks showed a negative trend. In Madhya Pradesh,
loans of 25097 farmers in distress were settled in 2004-05 and 5874
farmers in 2005-06 and 1950 farmers in 2006-07. Among these
farmers, the majority of them were from commercial banks followed
by RRBs in 2005-06. In 2006-07, other than a few (5) accounts of
farmers settled by RRBs, most of the farmers belonged to commercial
banks. In Uttar Pradesh, in 2004-05, 80806 farmers who were in
distress got benefit of restructuring of Rs.212.58 crore loans while in
the next year no farmer was reportedly helped, though in 2006-07,
22649 farmers with loan amount of Rs.97.43 crore were helped
through restructuring. In all, during these two years 103455 farmers
in distress were helped through restructuring of Rs.310.01 crore loans.
Of these, 1755 farmers were given fresh loans of Rs.5.04 crore in 2004-
05, 1151 farmers given Rs.3.39 crore loans in 2005-06 and 957
farmers were given Rs.4.62 crore loan in 2006-07.

Farmers in Arrears
During 2005-06 and 2006-07, the cooperatives restructured 1.73 lakh
and 1.17 lakh accounts of the farmers in arrears amounting to
Rs.378.73 crore and Rs.385.13 crore, respectively in Maharashtra
and as a result cooperatives financed fresh loans to 4.07 lakh accounts
of the farmers in arrears and issued fresh loans to them to the tune
of Rs.712.98 crore during the period of three years. In Rajasthan,
farmers in arrears increased from 0.25 lakh in 2004-05 to 0.34 lakh
in 2005-06. In Madhya Pradesh, in 2004-05, 6292 farmers were
reported to be in arrears and Rs.36.81 crore loans were settled while
in 2005-06, 1235 farmers who were in arrears could get Rs.9.35 crore
loans settled. Of these, majority were from commercial banks (1020
with Rs.8.75 crore loan) and RRBs (215 farmers with Rs.0.60 crore
loans). In the next year, 533 accounts of arrears with Rs.4.02 crore
loan were settled and again 368 were from commercial banks and 135
were with RRBs. In Uttar Pradesh, in the three years, 297741 farmers
with arrears were benefited and Rs.404.86 crore loans were settled.
Of these, 241867 farmers were in 2004-05 followed by 44472 farmers
in 2005-06 and 11402 farmers in 2006-07.

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One Time Settlement (OTS)
Total number of accounts settled under OTS in the case of
co-operatives during the three years was 26368 and the amount of
settlement was Rs.175.93 crore in Maharashtra while in the case of
RRBs, the number of OTS accounts settled during the period was 573
and their amount of settlement was Rs.0.75 crore. In other words, in
the case of the cooperatives and RRBs taken together, nearly 27000
SF/MF became eligible for fresh credit from the banks. In Rajasthan,
farmers in OTS marginally increased from 0.10 lakh in 2004-05 to
0.12 lakh in 2005-06. In Tamil Nadu, the farmers under ‘One Time
Settlement (OTS) Relief’ in Tamil Nadu were benefited more from
commercial banks with 96.7 per cent of the total amount disbursed
for the purpose during 2004-05 and they were followed by RRBs (2.5%)
and co-operative banks (0.8%). However, co-operative banks provided
more benefits under OTS in 2006-07 followed by commercial banks
and RRBs. The co-operative banks increased the OTS benefit to the
farmers in between 2004-05 and 2006-07 significantly while there was
a negative trend in case of commercial banks and RRBs. In Madhya
Pradesh, in 2004-05, 87555 farmers were benefited under OTS and
Rs.90.92 crore loans were settled while in 2005-06, 10948 farmers
were benefited as loans worth Rs.33.62 crore were settled. Of these,
majority were from commercial banks (3526 with Rs.14.76 crore loan)
followed by cooperatives (4724 farmers and Rs.9.71 crore loans) and
RRBs (2698 farmers with Rs.9.15 crore loans). In the next year, 9098
accounts were settled under OTS with Rs.15.72 crore loan settled and
again 3566 came from commercial banks and 5527 from RRBs. The
amount settled by commercial banks in 2006-07 was Rs.10.83 crore,
cooperatives Rs.0.18 crore and Rs.4.71 crore by RRBs. In Uttar
Pradesh, in the three years, 107990 farmers (SF/MF) benefited from
OTS and Rs.191.09 crore loans were settled. Of these 63036 farmers
were in 2004-05 followed by 18991 farmers in 2005-06 and 25973
farmers in 2006-07. In 2004-05, the loan amount settled was Rs.88.04
crore followed by Rs.28.78 crore in 2005-06 and Rs.74.27 crore in
2006-07. Once this was done, fresh loans were issued to 17006
farmers to the tune of Rs.28.29 crore, the break up of which was 8270
farmers in 2004-05, 3510 farmers in 2005-06 and 5226 farmers in
2006-07. The fresh loans issued were Rs.8.44 crore, Rs.6.56 crore and
Rs.13.29 crore, respectively for 2004-05, 2005-06 and 2006-07.

Redemption from Informal Sources of Credit
The advances granted against the farmers’ indebtedness to informal
sources like moneylenders, etc. were Rs.11 lakh to 58 farmers in the

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case of cooperatives in Maharashtra. While in the case of RRBs, this
amount was Rs.473 lakh for 241 farmers. In Rajasthan, it was also
found that loans against indebtedness benefited 2164 farmers in 2004-
05 and only 539 farmers in 2005-06 and 182 farmers in 2006-07.
During these two years, Rs.27.20 crore and Rs.1.07 crore were
advanced to these farmers. It was also noticed in Rajasthan that fresh
loans after relief measures were given to 62000 farmers in 2004-05
to the tune of Rs.331 crore. This number went up to 89000 in 2005-
06 but the amount disbursed declined to Rs.179 crore. The number
further declined to 2251 in 2006-07 and the amount of credit
disbursed was just Rs.2.08 crore. In Madhya Pradesh, in 2004-05,
282 farmers were benefited under redemption of moneylender’s loans
and Rs.1.04 crore redeemed while in 2005-06, 172 farmers were
benefited when loans worth Rs.1.63 crore were settled. Of these, all
were from commercial banks. In 2006-07, 82 farmers were benefited
with Rs.0.03 crore loan settled and they belonged to RRBs. In Uttar
Pradesh, in the three years, 11610 farmers benefited from
moneylender loan redemption scheme and Rs.40.83 crore loans were
settled. Of these, 5004 farmers benefitted in 2004-05 followed by 2422
farmers in 2005-06 and 4184 farmers in 2006-07. In 2004-05, the
loan amount settled was Rs.21.88 crore followed by Rs.4.89 crore in
2005-06 and Rs.14.66 crore in 2006-07.

Share Croppers, Tenant Farmers and Oral Lessees
In Rajasthan, information on small and marginal farmers, tenant
farmers, share croppers and oral lessees was available only for 2004-
05. During this year, 174909 small and marginal farmers were
benefited with credit of Rs.687.11 crore. There were only 288 oral
lessees covered in 2004-05 in Rajasthan with credit disbursement of
Rs.1.13 crore. There were only 939 sharecroppers covered in 2004-
05 in Rajasthan with credit disbursement of Rs.1.52 crore. There were
only 1774 tenant farmers covered in 2004-05 in Rajasthan with credit
disbursement of Rs.4.21 crore. In Madhya Pradesh, in 2005-06, only
148 tenant farmers were financed by commercial banks, which
declined drastically in the next financial year 2006-07 to 43 tenant
farmers. The other agencies have not financed any farmers in this
category. No financing has been done to oral lessees and
sharecroppers by formal banking institutions in Madhya Pradesh. In
Maharashtra, 3621 SHGs of tenant farmers were formed and
financed by cooperatives and 474 by RRBs during the period. This
was possible because of the efforts of NGOs who could identify the
tenant farmers and formed their SHGs. In Maharashtra, agriculture


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credit was not extended to share croppers and oral lessees for lack of
records on land use. In Tamil Nadu, in 2004-05, in terms of extent
of financial support provided to the SHGs of tenant farmers,
commercial banks’ contribution was more (92 %) followed by
RRBs’(5%) and co-operative banks (3%). In 2006-07 also, commercial
banks played a leading role followed by RRBs. The percentage change
in the financial assistance extended to tenant farmers between 2004-
05 and 2006-07 was more in RRBs and a declining trend was observed
in case of commercial banks and co-operative banks.

In 2004-05, commercial banks supported tenant farmers through 1002
SHGs and RRBs and cooperatives formed 91 and 34 SHGs. A total of
Rs.17.63 crore was loaned during 2004-05 and commercial banks led
with Rs.16.24 crore followed by RRBs, Rs.0.96 crore and cooperatives
another Rs.0.44 crore. In 2005-06, commercial banks supported 484
tenant farmer SHGs followed by 20 by RRBs and only 4 SHGs by
cooperatives. During the year, Rs.6.5 crore was loaned of which 97
per cent was through commercial banks followed by 1.8 per cent by
RRBs and 1.2 per cent by cooperatives. During 2006-07, commercial
banks supported 286 tenant farmer SHGs when RRBs supported only
94 tenant farmer SHGs. During the year, Rs.3.3 crore was loaned of
which 59.5 per cent was through commercial banks followed by 40.5 per
cent by RRBs. No SHG was formed by co-operatives during 2006-07.

In Uttar Pradesh, in the three years, 39380 tenant farmers were
covered of which 15835 were during 2004-05, 7306 during 2005-06
and 16239 during 2006-07. It was also revealed that of the total
number of new farmers, the share of tenant farmers was 1.06 per cent
in 2004-05, 0.55 per cent in 2005-06 and 1.09 per cent in 2006-07.
In 2004-05, tenant farmers were issued loans of Rs.44.30 crore which
reduced to Rs.25.61 crore in 2005-06 and then increased to Rs.103.83
crore in 2006-07. In case of oral lessees, in the three years, 7911 such
farmers were covered of which 1684 were during 2004-05, 3338 during
2005-06 and 2889 during 2006-07. It was also revealed that of the
total number of new farmers, the share of oral lessees was 0.11 per
cent in 2004-05, 0.25 per cent in 2005-06 and 0.19 per cent in 2006-
07. In 2004-05, oral lessees were issued loans of Rs.8.03 crore which
reduced to Rs.2.77 crore in 2005-06 and then increased to Rs.6.52
crore in 2006-07. In case of share-croppers, in the three years, 19951
share croppers were covered of which 3309 were during 2004-05, 5018
during 2005-06 and 11624 during 2006-07. It was also revealed that
of the total number of new farmers, the share of share croppers was

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0.22 per cent in 2004-05, 0.38 per cent in 2005-06 and 0.78 per cent
in 2006-07. In 2004-05, share croppers were issued loans of Rs.9.62
crore which improved to Rs.13.85 crore in 2005-06 and then increased
to Rs.52.91 crore in 2006-07. Surprisingly, the tenant farmers were
giver higher amount of loan per account (Rs.44120) as compared to
the average. The oral lessees and the share-croppers were given an
average loan of Rs.21897 and Rs.38284 per account respectively.

Agri-Clinics/Agri-Business
In Rajasthan, in 2004-05, 36 agri-clinics/ agri-business units were
supported with credit of Rs.0.69 crore while in 2005-06, 179 agri-
clinics/ agri-business units were supported with credit of Rs.0.65
crore. The number further reduced to 5 in 2006-07 who were
disbursed Rs.0.14 crore. In Madhya Pradesh, to encourage
entrepreneurship in agriculture and allied sectors and to involve
educated youth in this sector, guidelines have been formed in SACP
that in every District at least 2-3 agri-clinics/agri-business centres
should be funded by commercial banks. Accordingly, it has been
reported that Rs.0.83 crore loan was sanctioned to 30 agri-clinics/
agri-business centres in 2005-06, while it declined to only one agri-
clinic in 2006-07. RRBs also funded around 8 units in 2005-06 and
2 units in 2006-07. In Uttar Pradesh, the data on the financing of
agri-clinics/ agri-business centres indicated that the achievement was
only 27 per cent (570 against the target of 2100 agri-clinics in the
state (@10/ District/year). The financing of all the 570 Agri Clinics/
Agri-business Centres in the state was done by Commercial banks
and RRBs only. For example, during 2005-06, out of 252 centres
financed in the state, 162 were financed by Commercial banks and
the rest 90 centres by RRBs and during 2006-07, 154 centres were
financed by commercial banks and the rest 21 centres by RRBs. The
cooperative banks did not finance any Agri Clinics/ Agri-business
Centres in the state. However, Banks have financed 392473 new
investment projects during the policy package period, which can be
termed as excellent as far as mandatory expectations were concerned.
Of these new projects, 159116 were financed during 2004-05
(Rs.944.36 crore), 92598 in 2005-06 (Rs.889.45 crore) and 14059 in
2006-07 (Rs.1468.84 crore). In Tamil Nadu, more agri-clinics were
started through co-operative banks which were followed by commercial
banks and RRBs. It could also be observed that more efforts have been
taken during 2006-07 to start agri-clinics as 2626 clinics were
supported. Of these, 2589 were set up with assistance from
cooperative banks with a loan of Rs.4.22 crore while commercial banks


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supported only 36 clinics. In 2004-05, only 69 clinics were set up by
commercial banks and this number declined to 38 in 2005-06. In
these two years, commercial banks supported 107 clinics while
cooperative banks set up 114 clinics. In Maharashtra, the total
number of ACABC financed by the banks in the State was 129 upto
31 March 2007. The total amount of loan sanctioned to them was Rs.
5.61 crore against which disbursement of loan was Rs.4.70 crore. Only
14 new ACABC were financed by the bank during the last three years,
though a large number of private centers were reported to have been
opened in the State without taking credit from the formal sources.
Regarding deployment of credit to ACABC, out of 129 units financed
in the State, as many as 92 units were financed in Western
Maharashtra alone, leaving 12, 15 and 10 for Marathwada, Vidarbha
and Konkan regions, respectively.

MIS
As of today, whatsoever may be the status of the new MIS, the overall
rate of submission of LBRs was not at all satisfactory. Controlling
offices were neither serious about the submission of LBRs by the
branches and forwarding the District-wise consolidated data to SLBC,
nor the SLBC was serious in doing follow up of the same at District/
branch level of the banks. While seeking information on the same from
the officials of the bank branches, no one’s response was satisfactory.
Rather, they were reluctant to update us on the issue. Nevertheless,
all of them informed that so far they had not forwarded such data/
LBRs to their controlling offices. Further, they were not aware of MIS/
any statement for reporting the number of total accounts financed,
and the number of accounts of SF/MF and new farmers covered
during the period of doubling of credit.

The officials of the SLBC, while seeking information on the status of
the MIS, reported that doubling of agricultural credit was one of the
many activities to be performed by the SLBC in a given period.
Moreover, a few more financial schemes were introduced in the
subsequent years. As a result, the scheme which was introduced in
the recent past was almost forgotten in the light of the new schemes.
Therefore, the SLBC hardly got any time to study and analyse the data
of completed/closed schemes when already new schemes were on
hand to be monitored by the Committee. To cite an example, they
reported that the existing shortage of staff in the banks was the biggest
constraint in monitoring the performance of priority sector lending.
Moreover, once the scheme of doubling of agricultural credit was

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closed by the end of March 2007, two more schemes viz., ‘Financial
Inclusion’ and ‘Loan Waiver Scheme of 2008’ announced by the GOI
were to be implemented and monitored in the subsequent year. As a
result, the officials added: “In a situation when one scheme was
recently closed, but there was already a new scheme on hand to look
into on priority, we can work only in present situation and not in past”.
We were unable to probe further into this matter. Database has to
be improved. There should be regular reporting of credit flow. SLBC
should have proper reporting formats for institutions and branches.

KCC
There was no doubt that issue of KCCs has gone up across states,
but still 100 per cent coverage has not been achieved. There were
farmers who had more than one card and most of these farmers were
resourceful farmers. Major suggestion from farmers were that there
should be less paper work, interest rates should be lower, there should
be flexibility in instalment payment or some rebate in times of
hardship/ crop failure and to have higher credit limits than the
existing ones. Some farmers also felt efforts are needed to be made
to build awareness. In order to enhance coverage, the simplification
of procedures was required and also banks should stop unnecessary
deductions they make. There was cost involved in getting a KCC.
Intermediaries were involved in getting a card, especially for the small
and marginal farmer’s though, it was not all pervasive. Most farmers
make a single transaction and they lack awareness on whether a KCC
can be used for consumption loan or not. In the process of doubling
of credit, there were wide variations across states in renewal of KCC
and thereby enhancing the credit limit.

In Madhya Pradesh, as far as KCCs were concerned, it was observed
that many large farmers, who had distributed their holdings in the
name of their family members had accessed the credit under the
category of small/marginal farmers. About 22 farmers who claimed
to be small farmers were in reality having large operational holdings
and such farmers were having more than 2 KCC cards in the same
family. Nearly 54 farmers were having two or more KCC cards and
nearly 11 farmers were found to use the agricultural credit in their
business or shops. It was also observed that in Madhya Pradesh, there
exists a lot of competition among various agencies in getting their
customers in rural areas because of the high target set for them.
Among the different sources of credit, commercial banks were
preferred by most of the banks (53.5%). 6.5 percent farmers preferred

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other sources such as relatives and money lenders as they could get
quick cash in hand without having to face documentation problems.
The reason for preference of the commercial banks was the good/faster
service and the good relationship they maintained with the clients.
There was a general tendency of shifting from one bank to another
and was observed mainly from co-operatives and RRB’s to commercial
banks, because of the better services by CBs. In Madhya Pradesh,
there was mixed response among the bankers regarding the recent
loan wavier schemes. Some of the commercial bank managers were
against this scheme saying that, it affected the basic morale among
the farmers. It was felt that the recovery of the future loan may be
low as most farmers may turn into defaulters, expecting further loan
waivers in future. As far as co-operative banks were concerned, being
a major stakeholders in financing small/marginal farmers, it was
viewed to gain maximum from the scheme and hence they welcomed
the scheme. In Panna, commercial banks also welcomed the scheme,
as most of the farmers were affected by drought and flood since last
3 years. So they were in desperate need for relief schemes. From the
farmers’ point of view it has sent a wrong message that the one who
repays the loans was a loser, while the defaulters will benefit in the
long run. Hence, a scheme encouraging the regular repayments should
have also been announced simultaneously, which would have had
balanced feelings among the farmers.

In Uttar Pradesh, branch managers opined that financing of term
loan based on land security has also become risky. As per a rough
estimate, about 100 accounts were such where the owner had sold
out the land mortgaged to the bank and there were number of court
cases in this regard.

In Maharashtra, a major problem among the farmers was the lack
of awareness about banks and the credit facilities available from them.
First of all, the majority of the farmers who had so far not approached
any bank for availing of credit were still apprehensive about
procedures and processes of banks needed for sanction of loan. This
often made the farmers wary of approaching the bank directly. To
remove the fear from the minds of the farmers, first of all, the
documentation part of the loan proposal needs to be further simplified.
Secondly, a certain amount of handholding may actually make the
task easier for the bank. ‘Identification of beneficiaries’ as was
proposed in ‘Service Area Approach’ could be initiated by banks. Even
majority of the sample beneficiaries were not aware of various schemes
of credit available with the banks. Hardly 10 per cent farmer-

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beneficiaries were aware of multipurpose use of KCC for availing of
crop loan, term loan and consumption loan as a single window for
the credit needs. Another important issue raised by the farmers in
general was related to payment of margin money and keeping of fixed
deposits with banks before the sanction/disbursement of loan.
Farmers find these conditions difficult to fulfill. In comparison, many
farmers argued that availability of informal credit from moneylenders
in many respects was much easier than availing of loan from the
banks; no matter what the interest rate charged by the former. On
probing further on the issue of formal and informal credit facilities,
the farmers opined that the interest rate charged by moneylenders
at 2 per cent per month (around 24% per annum) was not higher
when they could get timely, adequate and hassle free credit from them.
The same thing was not assured by the banks. This was so,
particularly in respect of consumption loan. It should be available
as and when required because, its need was time bound. The study
team had an opportunity to discuss some issues with a businessman-
cum farmer-cum moneylender. On the issue of higher interest rates
charged by the money lenders, while justifying his point, he cited an
example of a SHG in his village charging interest rates between 2 per
cent and 3 per cent per month to its members. Further, he continued
and said that the days when atrocities were committed by a few
money lenders, were in the past. The importance of money lenders
in rural areas could not be questioned. Rather it should be
strengthened by a Government act with suitable modifications to suit
the rural situation. This point was debatable.

A detailed discussion was held with them regarding the quality in
operation of KCC and its importance as a single window system for
all types of loans, viz., crop loan, term loan and consumption loan.
As mentioned above, among all the sample-beneficiaries, hardly 10
per cent were aware of the multipurpose use of KCC for availing of
all types of credit. Nearly 70 per cent beneficiaries informed that they
got information about the usage of KCC from the bank officials who
helped them open an account. On an average, the beneficiaries made
3 to 4 visits to the banks for opening the KCC account. By and large,
they were allowed to withdraw money freely; may be not on the same
day but on the next day. Nearly 38 per cent beneficiaries reported
that they were not allowed to withdraw money on the next day due
to non-availability of cash at bank level and sometimes due to absence
of branch manager. Nearly, 20 per cent KCC holders had no problem
in sanction of enhancement in credit limit. However, the rest could
not get enhancement in credit because of inadequate land holdings

                                  125
and lack of switch over from foodgrain crops to cash crops like
sugarcane, cotton, etc. The beneficiaries were asked by the study team
to show their KCC. Nearly, one-third beneficiaries said that the cards
were not issued to them. On enquiry of this point with the bank
officials, it was informed that the cards were kept in the branch to
avoid the loss or damage of it by the farmers. Further, it was found
that the beneficiaries generally withdrew the entire amount of credit
limit during the on-set of the monsoon, say, in June-July, and keep
the money with the dealers of fertilizers, seeds, insecticides, etc. to
book the supply of these inputs required during the year. Thus, the
short supply of inputs like fertilizers was the main reason for such
withdrawal of the credit. Nevertheless, it was found that the banks
were continuing their old practice of lending and the farmers were
deprived of the flexibility in operations as envisaged under the scheme.
The beneficiaries were not aware of the insurance scheme (death and
permanent disability) covered under the KCC. Nor were they aware
of flexibility in operation of card. Though the banks have tried to
popularize the KCC by way of display of posters, banners and leaflets
in rural area, the scheme did not pick up as desired. On enquiry with
the card holders regarding the financial inclusion of every farmer with
KCC account, they responded that the banks did not issue new KCC
to the new farmers but insisted that they open a savings account
and operate it at least for three years. This was the main hurdle in
expansion of KCC and across the board keeping momentum of credit
flow to agriculture.




                                  126
                                         Annexure I
Credit Widening and Deepening through
Scheduled Commercial Banks- 2003-07

At all India level , institutional credit flow through the Scheduled
Commercial Banks increased from Rs.25,255.93 crore as at end June
2003 to Rs.1,15,265.86 crore as at the end June 2007, registering a
compound annual growth rate CARG at 47 per cent (TableA1 ). During
the same period, number of accounts increased from 70.07 lakh to
155.37 lakh and registered an annual CARG of 22.15 per cent.
Similarly, average loan per account increased from Rs.36040 to
Rs.74189 during the period 2003-07. Thus the growth in credit flow
between 2003 and 2007 resulted in both credit widening
(increased accounts) as well as credit deepening (increased loan
per account.)
 Table A1: Credit Flow through Scheduled Commercial Banks-2003-07

   Particulars     Rajasthan      Madhya          Uttar     Mahara-shtra   Tamil Nadu    All India
                                  Pradesh        Pradesh
                                 Average Loan per account (Rs)
(a) 2003            47775         64731          33223        62257         17643        36040
(b) 2007           119814         110950         79705        130215        47231        74189
                                     Number of Accounts
(a) 2003           149423         133585         550453       314527       1589728      7007601
(b) 2007           364370         390485        1033308       801378       4075103      15536741
                               Compound Annual Growth Rate (%)
(a) Average         21.61          14.84         24.62         9.84          29.00       20.15
loan per
account
(b) Number of       24.58          29.97         18.91         40.42         25.99       22.15
accounts
 (c) Credit flow    51.50          49.26         48.19         54.23         62.53       46.77


                                            Other details
(i) Average          3.96          2.28           0.86         1.87          0.91         1.41
size of holding
(ha)
(ii) Area under       35            36             22           45            44           35
non foodgrain
crops %
Source: Data procured from RPCD, RBI, Mumbai

                                               127
At State level, credit widening and deepening varied substantially. The
credit widening was more conspicuous in Maharastra as the annual
growth in number of accounts was 40 per cent and the average loan
size increased at 10 per cent only. The latter interalia could be
attributed to higher loan size during 2003 which could be due to
relatively larger size of holding and area under non-foodgrain crops.
Madhya Pradesh followed similar trend. In remaining three States
(Tamil Nadu, Rajasthan and Uttar Pradesh), the growth in credit flow
followed the All India trend and contribution of widening and
deepening to the credit flow was almost equal.




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