CHAPTER - I Review of Literature and Methodology

aiAPTER - I

REVIEW OF LITERATURE AND YTHODOLOOY

"Far di8coveries are m r e i r r i t a t i n g than thole which expoae the pedigrw of ideaam.

Agriculture i s the f i r s t cul ture t h a t man lea rn t

to pract ice as a means of l iv ing and a way of l i f e .

However, with the advancement of knowledge, cul ture

and civi l izat ion, the place, pattern, pract ices and

po ten t i a l i t i e s of agricul ture, have bean continually

undelqoing a process of t r a n a f o m t i o n . From a lwm

primitive way of l i f e and a source of livelihood, it

haa coma to be real iaed a4 a commercialiaed a c t i v i t y

and profi table businaaa gropoaition and a v i t a l instru-

msnt of progress. In India the v i t a l ro le of agri-

culture a r i s ~ a out of the posi t ion the agrarian sector

occupies i n the overal l economy of Me country. Agri-

cul ture i s the largeat sector of the economic a c t i v l t p

and has a c ruc ia l mle to play i n the country's econo-

mic development by providing h o d and raw matarlalr ,

employmnt to a very large proportion of population,

capi tal for i t s own development and surpluses fo r

national economic development. Thus the irrqortance of

agriculture despifo rapid industr ial isat ion has not in

any way dlminlahed. ~t has become necessary not only

to achieve self-sufficiency in matters of food and agri-

cul tural raw-materials, but to highly mderniae agricul-

ture so aa to throw up surplusee t o bs made avai lable

for investment in the other aactora of economy a s well1.

The adoption of new technology has given r i s e to increas-

ing demand for farm credi t which i s the )cay factor In,

and l i f e blood of agricul tural developmant. The o q a n i -

sation of inst i tut ional c red i t i s one of the major factor6

governing agricul tural production part icular ly tha t of

small and marginal farmers. But it i s no wonder tha t a l l

farmers especially small peasants, m a t of necessity

borrow a t one tims o r other. The rural masea borrow

a l m s t habitually, passing on the burden of debt to the

next generation. It la, perhapa, t h i s phenomenon of

agriculture tha t compelled Nicholson t o obaarve I

"The lesson of universal agrarian hiatory from Rom

t o Scotland l a tha t an essent ial of agrioulture i s credi t .

Neither the condition of the country nor the nature of

I. ch0ub.y p,N., Inmtitutional Finance fo r A r i cu l tu r s l yT$;b;t, Sharad mgate, Subhada S a r a d t , Qune,

the land tenurea, nor the position of agriculture, affects

the one grsat fact that agriculturists rust borrow",

The peasantry of India is no exception. This has

been amply borne out by records of heavy rural indebted-

ness, historically described in the words;

"A farmer is brn in debt. lives in debt,

kequeathes in debt and dies in debtn.

The agricultural arsdit is a diversified and coinplex

subject. The existanca of a strong and efficient credit

institution ia like winning more than half the battle,

aspeelally in developing countries, and the success of

credit oriented development projects is significantly

dependent upon the soundness of the credit structure - that of the credit institution and the oredlt system3.

Farm credit in India like that of davaloping coun-

tries conaiats of institutional and non-institutional

sectors. The non-institutional sector consista minly

of the professional and agricultural mneylendsrs, land-

lords, camission agents, tradars and the farmera. rela-

tives and friends. The institutional sector mainly

compriaea of cooperatives, o o m r c i a l banks, regional

r u r a l banks and ~overnments'.

On tha i n s t i t u t i o n a l s i d e t h e main landers a r e a g r i -

c u l t u r a l o r development banks, uaual ly e s t a b l i s h e d by

the Government, and p a r t i a l l y o r m r e f requent ly f u l l y

Goverrumnt ownadt coopera t ives o r farriers associn t iona ,

o f t e n Government organised, an8 p r i v a t e o r na t ional iaed

c o m e r c i a 1 banka. Many c e n t r a l banka a r e involved i n

various ways and degrees i n the del ivery of a g r i c u l t u r a l

arsdit5. Cooperatives have numeroua advantages compared

with o ther i n s t i t u t i o n a l agencies. They have tended t o

work beat i n areas where land holdings have been homoge-

neous, tennnt farmers have equal s t a t u s , some a o c i a l

cohesion e x i s t s a t t h e g r a s s r o o t s and where l i t e r a c y

has a t t a i n e d reasonable level6.

C h a r a c t e r i s t i c of formal c r e d i t programmes i a a

high incidence of defaul t . Informal lenders tend to be

f l e x i b l e about repaymant timing while formal lenders have

f ixed due dates. Wstponinp. a loan rspaymant i s l i q u i d i t y

management b o l t and s i n c e formal c r e d i t is l e n s va luable

4. Karunanidhi. M I Farm Credi t S i t u a t i o n i n Asia, Aaian Product iv i ty Organisation (APOI, Tokyo, Japan, 1984, ~ . 2 9 3 .

5. The World mnk, Tha Aasaul t on World Pover t , The SohnB Hopkina M i v a r a i t y Presa, London. 1975, p.&.

6. Pischke, J.D.V. e t al., I The Rural F i n a n c i a l H a r b t a i n Developing Countries ( e n . , London. Tha Johna Hopkina M i v e r s i t y Preaa, 1983, p.157.

than Boma other l iqu id i ty reserves, the cost of losing

i t s avai labi l i ty as a r e s u l t of non-repayment Is r e l a t i -

vely low. Current consumgtion, the rapaynwnt of the

informal loans o r the replenshing of l iquid asaets and

inventories wi l l often take precedence over repayment of

formal loans. Relativaly few penalties a re severe enough

t o cause hormwers t o reorder these p r io r i t i e s .

Another feature of formal c red i t programes i s the t

moat loans go to a few, r e l a t ive ly wealthy borrowers.

One raason l a tha t low in te res t rates froce lenders to

ration limited funds, frequently on the basis of r isk.

The incentive to reduce r isk, as well a s transaction

costs, favours users of large amounts of credi t . Trans-

action costs per rupee borrowed are lowered fo r lendera

in the case of large loans, and wealthy borrowers are

more l ikely than poor ones to be making large, "lumpy"

investment expenditures. In addition, formal c red i t

providea a comparatively low-eoat l iquidi ty managemnt

tool for wealthy borrowers7.

A good number of studies have examined tho relevance

of different ins t i tu t iona l agencies in financing agricul-

ture. Some of theas atudias have examined the role of

7. Ibid., p.109.

inst i tut ional agencies in providing long-term credi t

f a c i l i t i e s t o the farmers, while a few others confined

themselves t o the atudy of short-term and medium-term

loans. The studies seeking t o measure the impact of

cooperative c red i t on Indian agriculture have howaver,

missed to examine the peculiar credit related t o pmblems

of semi-arid regions lib ~ayalaaeama* with a preponde-

rance of small and marginal farmers. To provide nece-

ssary background for tha present study some empirical

and evaluative rtudiee on the subject a t International,

National and local level are reviewed and the lacuna

therain are identified.

Arvind virmanis i n h i s paper on he Nature 05

credi t Merkets in Developing Countriea" analyses various

forms of government intervention in tha loan mariut in

terms of the i r effect on efficiency. This providea the

essential basis fo r evaluating and judging these policies.

I t also shows where ea r l i e r policy prescriptions are

correct, incomplete o r wrong. One of the implications

of the paper 1s tha t the c red i t market d i f f e r s fundamen-

t e l l y from the markat for ordinary goods and services.

Conseqwntly conventional analysis of the loan markers,

baaed on tha theory applicable ta product markets, can

be misleading even where s imilar prescript ions a re reaohd,

Rayalaseem region of Andhra Pradesh Couprises of Kllrnaol, Cuddapah, Anantapur and Chittoor Districts. 8. ~ N i n d ~ i r m a n i r The Nature of Credit mrke t s in

Dnnlosina Countriea, Washington D.C.. 1982.

Another important highlight of the paper i s the v i t a l

role of co l l a t e ra l in the loan market. These two issues

a re addreaaed in the introductory discussion on the s p -

cia1 nature of credi t msrketa, which forma an important

pre-requisite fo r understanding the subsequent sections

of the papar. The paper focusses i t s a t tent ion exolu-

sively on one of the underlying reasona for Govemnant

intervention namely market fai lure in the c red i t msrktt.

It examines the causes and oonaequencea of market inger-

fectiona or failurea in the m a 1 credi t s t ructure and

the effects of different types of intervention and tha i r

implications for different policies for correcting market

imperfections on the loan side of the marbt . I t assume8

the dcgoait side of the market as given.

The gaper provides unified framework for analysing

credl t marksts and allows apparently desparate obser-

vstiona and facts in the banking and ins t i tu t iona l l i t e -

rature to be understood and interpreted. Mare importantly

i t provides a unique fearrework fo r determining the e f fec t

of government policy on c red i t marb t efficiency.

Rural Financial Markets in Developing Countriaat

Their use and ~ b u S e ~ i s based on the neoclassical madel.

Thia volum does i l lua t ra t e , howaver, new viewa tha t

9. Vonpischke, J.D. Dale W.Adama, Gordan Donald $da) I Rural Pinanoial Yarkets i n Davelo~ing Countriear The* use and Abuse, The Johns Hopkine University Prsal, London, 1983.

stress examination of rural financial transactions within

financial markets. Agricultural credi t has t radi t ional ly

b@en viewed as having more t o do with agriaulture than

with finance, but thin perception i s changing. Exami-

nation of farm credi t p rograms and inst i tut ions has

led 8om devslopmnt economists to a broader view of

rural finance. More attention i s being given to financial

markets in rural arena, t o their performance, structure,

institutions, oparations, costs and nature of the i r ser-

vices to rural people. The concept of Rural Financial

Market (RFM) has been develope3 from the bottom up and

constitutes a theoretical construct for dealing with issues

arising from the performance of farm credi t projects.

mny authors in th i s book, however, a s se r t that

farmers in develoging countries are rat ional in the i r

use of financial markets, Thia conclusion has important

implications for ths way RFM interventions are designed.

rt strongly suggests tha t supply-led s trategies fo r rural

development ought to be deemphaaiaed. Rather than merely

increasing the aupply of loanable funda, a t tent ion should

be directed towards improving the range and qual i ty of

rural financial services. In particular, deposit f ac i l i -

t i e s should be provided fo r small savers. Thia s e n i c e

i s not handled well in informal f inancial markets and

is outsids the scope of the typical c red i t p r o g r a m .

A Mlnprehensive reading of these contributions however

suggests tha t d i f f e ren t ins t i tu t ions have d i f f e ren t

strengths and short cominqs. Some are very awkward in

dealing with small loans and small deposits while others

may display weaknesses a s specialiaed lenders o r in daa-

l ing with the r iska of f inancial intermediation i n ru ra l

areas. I t i s , tharefore, not the form of f inancial

inst i tut ion but the progress of f inancial intermediation

tha t deserves more at tent ion. Too l i t t l e e f f o r t has been

devoted to understanding why exist ing f inancial inter-

mediaries of almost any form often f a i l t o provide, the

services which planners and the project designers believe

they should provide.

The contribritions in t h i s velum indicate tha t

developlnental role of RFMa i 5 not real ised by augmentinq

the supply of conceasionally priced agricul tural loans.

I f policy makers and project designers permit and en-

courage f inancial intermediaries t o perform a broader

role, they can improve income distr ibut ion, the e f f i -

ciency of resource al locat ion, and the overal l v i t a l i t y

of f inancial markets aerving ru ra l people. The specif ic

measures required t o improve the qual i ty of RFMs i n

different economies wi l l vary. But it appears tha t

maat e f fo r t s should contribute toward the integrat ion

of these markets, emphasize voluntary savings mobiliza-

t ion by formal ins t i tu t ions , and allow i n t e r e s t r a t e s

t o be determined f lexibly by market forces.

Dale w.~dams'O in h i s vork Vndermining Rural Deva-

lopment with Cheap Credit" out l ines tha t in the pas t

several decades large amounts of mney have gone in to

agricul tural c r e d i t programas in low income countries.

The re su l t s of theae e f f o r t s have often been d i s a p p i n t -

ingl Persistence of ser ious loan recovery problems? the

r i ch get t ing m e t of the cheap loans; low in te rea t r a t ea

discouraging local savings and deposits? and c o m n polis

t i c a l intrusions. Hence many f inancial in s t i tu t ions in

low income countries are floundering. The contr ibutors

t o th i s book c i t e ubiquitous low-increase r a t e po l i c i e s

and imgroper use of f inancial marlcets a s pr incipal rea-

sons fo r theae problems, recommending higher and more

f lexible in t e rea t rate .

10. Dale W.Adams e t al., I Undermining Rural Developmnt with Cheap Credit (EBB) r Went View press, Boulder, 1984.

David ~.~athrick" in his critical work nAgricultu-

ral Credit for Small s a w Development I Policies and

Practices" explains that agricultural credit ahould be

viewed not in isolation but in relation to dupporting

services and the needs of improved technology. V.S

agricultural credit mdels based on individualised

supervision approach cannot be replicated in developing

countries. The overview amarisea also the evaluation

of ideals on policy issues pertaining to eligibility

criteria and security requirements, interest rates end

the merits of interest subsidies, repaymant performance

and credit channels. A glaring omlssion in the over-

visw is the inadequacy of attention to the inter-

ralationahip between agrarian structure, and inadequacy

of credit to the small farmers on one hand, and the

preferred model of the institutional system of credit,

on the other. The critical operational problems identi-

fiad by the author pertain to management information

systems, project evaluation systema, quality of supporting

services, loan approval considerations, centralisation

vis-a-vis decentralisaticn of organiration, peraonnel

matters, and management and personnel administration

systems. The purpose of the Nicaraguan caae is to illu-

strate how thaae operational problems in developing

effective credit managemant aystema for the small farmers

are sought to lm eolved. The sco7e of t h i s book i s l i m i -

ted to opsrational aspects, and there i s l i t t l e documan-

tation on how the improved systems contributed to the

fulfilment of management objectives. The obvious weak-

ness of t h i s book i s tha t it f a i l s to capture the con-

f l i c t between the management objectives of INVTERNO and

the agrarian s tructure in Nicaraguan immediately before

the downfall of Somaza Oovarnment.

J.A,Banks of London University and G,N.Ostergaard

of the University of Birmingham made of small sc i en t i f i a

investigation in 1954 of the working of cooperative

democracy in practicei2.

This investigation involved a comarat ivr survey of

methods of democratic control in 4 0 sociehiea mainly in

the midland area of England, and a caee study of the

electoral process in a large r e t a i l midland society

during a period of ten years (1945-54). As pointed out

by the authors, t h i s study was 'fragmentary i n character'

and served as a p i l o t study for a national lave1 stuay

made subsequently.

12. Banka, J.A. and Ostergaard, G.N.1 Coo e ra t ive DemoCra.2 - A gtudv of As a c t s of +tic Process :n Certain RetallPCocperative ~ o c i e t m Stanford Hall (England) Cooperative Union, 195

Findings of t h i s Study.:

Between 1933 and 1994, the average proportion of

mombars attending busineae meetings and voting i n

elections to board haa declined. There i s an inverse

relationship between the s i ae of a sociaty and the pm-

portion of menbra attending and voting, the larger the

society the smaller the proportion of members attending

and voting.

The electoral chances of employees in board elec-

tions were well above those of non-employees. The

olderstyle pure moperator i s becoming rarer and h i s

place i s being taken by the cooperator who i s a lso act ive

in ~ o l i t i c s .

The agricul tural c red i t department was organlsed

simultaneously with the establishment of the Reserve Bank

in April 1935. The i n i t i a l task of the department was

t o make a atudy of the problems of agricul tural credit

enjoined on the bank under the t ransi tory sect ion 55 of

the RBI Act. A few aspects of the working of the

Reserve Bank of India have been so atriking, in comparison

with other central banks generally, as i t s role in the

sphere of rural finance. The bank's responsibi l i ty i n

this f i e ld has h e n occasioned by the predominantly

agricul tural basis of the Indian econonry and the urgent

need t o expand and coordinate the c red i t f a c i l i t i e s

available to the agricul tural sector.

All India Rural Credit Survey ( A I R c s ) ~ ~ , one of the

biggest and most s ignif icant empirical surveys mver

undertaken in Asia, covered 1,27,343 families in 600

vi l lages selected in 75 d i s t r i c t s e l l over the country.

Investigations were also held in several other ru ra l and

urban places which were the marketing or the sea t s of

administration. To thrs study of rural c red i t and a l l i e d

economic ac t iv i t i e s on the hi therto unprecedented scale

was added a careful analysis of the views which the conanis

t t ee had e l i c i t ed from o f f i c i a l s and non-officials. The

cornittee examined the record of various c red i t agencies,

private as well as s t a t e o r staae-associated, in order

to assess past performance and future significance.

The findings of the survey comnittee confirmed the

dominant position occupied by the moneylender i n the

rural c red i t market. I t observed that agricul tural

c rea i t f e l l short of the r igh t quantity, was not of

the r ight tygc, did not serve the r igh t purpose and

often fai led t o go to the r igh t people. Rural ar t isans,

13. RBI8 All India Rural Credit S w e y (Summary), Vol.I!. Bombay, 1955, P.8.

agricultural labourers and other alaaaes of the group

of non-cultivatoru a re not usually able to obtain acm-

mdation from cooprat ivss . The comit tae a l w observed

that althougli the prformance of the cooperatives i n the

sphere of agricultural credi t was deficient in several

ways, the cooperative agency still remained by f a r the

leaat unsatiefactory channel of credi t and s m d up i t a

approach in the statement - 'cooperation has failed, but

cooperation muat suoceed'.

In 1966, the Reserve Bank ant up . A l l India Rural

Credit Review comit teeJ4 in order to reasseas the dsve-

lopments that had taken place in the f i e ld of rural nredit

since 1954, that is, subsequent to the subdsaion of the

report of the All India Rural Credit Burvey Conunittee and

to make recommendations. The review committee submitted

i t s report in m l y 1969. It emphasized that while orga-

nisation of cooperative c red i t ehould he pursued and the

integrated scheme implemented vigamualy, e f fo r t s should

not b concentrated Bolely in the cooperative sector, and

considering the magnitude of the problem of agricul tural

credit, the comercia1 banka, especially the nationalised

banks, ahould embark on wide and intensive e f fo r t s for

proviaion of agricul tural credit. The adoption of a nunbar

of progressive measurea by both the cooperative and Ohr

14. Reserve Bank of Tndia (RBI), A11 India Rural Credit Review cornittee, c om hay, 1963.

comercial hanka was suggested fo r ensuring the timely

and adequate flow of credi t . The Raviaw committee also

recornended the establishment of two new organiaations,

via., the rural e lectr i f icat ion echemea through the S t a t e

Electr ici ty Boards and the Rural Eleotric Cooperatives

and the Small Farmers Development Agency (SPDA) designed

to iaent ify the pmblems of small but potent ial ly viable

farmers and to ensure that agricul tural inputs, aervicas

and ceredit are made available to them. The committee

rscomnendad the enlargement of the Reserve Bank role i n

regard to the cooperative movement. While endorsing the

policy pursued till then by the RBI in the proviaion of

ml credi t through the cooperative agency, it suggested

liberalidation in some respects and also the introduction

of certain meaaures to correct the tendency on the part

of the cooperative banks to borrow mrre from the Reserve

Bank, by linking the rate of refinance to the cooperative

banks with the i r efforts to mobilise d e ~ o s i t s .

The scheme of financing of the Primary Agricultural

credi t Societies (PACS) by commercial banksi5 was a part

of A l l India Debt and Investment S w e y sponsored by

the RBI i n 1970 in Pive states* where the cooperative

15. ?BII Financing of Primary Xgriculsurai CreEit Socie- t i e s ~y c o m r c i a l aanks, Bombay, 1976.

- ~ n d h r a Pradesh, HaLyana, Karnataka, Madhya Pradesh and Uttar Pradash.

credi t atnrcture was f inancial ly and adminlstrativaly

weak. 57 out of 114 PACS financed by 19 commsrcial banka

0 for each branch) and the remaining 57 financed by the

16 d i s t r i c t cooperativa central banka were coverad by the

survey which made extensive use of questionnaires a t

different levels with a view to meeting tho c red i t gaps

and revi tal is ing the PACS. Po ge t a fu l l e r picture of

the working of the scheme, the survey data had b a n supple.

mented to include a l l commercial banks part ic ipat ing i n

the scheme. Thus the report presents a detai led appraisal

of the progress and performance of the commercial banks

in the financing of agriculture through the medium of

societies during the span 1970-75. ?he report while high-

lighting the progress achieved by the commercial banka in

terms of quantum of loans to the societies, a l so pointed

out certain short wmings observed i n the working of the

scheme in some areas of the selected f ive s tates , such

as high incidence of overduea against societ iea financed,

persistence of operational weakneasea in the socliarties

ceded ta the banks, low volume of medium term loans

issued to the rnembera of societies, inadequate financing

of amall farmers.

R.K.Hasar1 ~ommi t t ee '~ a f t e r discussions with Chief

Ministers and Ministers for cooperation, o f f i c i a l s and

non-efficials in 13 atates and by conducting studies

on integration of the two wings, short and long-term

cooperative c red i t r e m m n d e d the intagration of the

two wings of the m p e r a t i v e c red i t s t ructure a t a l l

levels, I.e., the prinnry, the intermediate ( d i s t r i c t )

and the apex ( s t a t e ) . However, one of the members of

the camnittee Mr.B.Viswanathan, in h i s capacity a s

chairman of the National Cooperative Land Developmsnt

Bank Federation i n h i s minutes of dissent found tha t

the diaadvanteges outweigh the advantage af integration,

and pleaded tha t the long-term credi t s t ructure should

not be disturbed. It my be noted here with in te res t

that the 'Madhavadaa Committee' also recommended inte-

gration of cooperative c red i t inst i tut ions in the north

eastern atates.

RBI in i t s report of the Committne to Review Arranga-

m n t s for Inst i tut ional Credit for Agriculture and Rural

Development (CRAFICARD)~~ examined the followingr

16. ARDC, Report of the Committee on Integration of Cooperikive Credit Inst i tut ions, Bombay, 1976.

11. RBI, Report of the Conunittee to Review Arrangemnts ?or Inst i tut ional Credit for Aariculture and Rural Developrent (CRRFICARDI, Bcmbay, 19

a Objectives I

1, to review the structure and operation of the

Agricultural Refinance and Developmant Corporation (ARDC)

in the l igh t of growing need for term loans fo r agricul-

tural and a l l i d ?uposes end other aemices relevant to

Integrated Rural Development (IUD)!

2. to examine the need for and the f eas ib i l i ty of,

integrating short-term and medium-term credi t structure

with long-term1 . 3. to consider t i e relat ive merits of three-tier

and two-tier structures for cooperative financing ins t i -

tutions, etc.,

b) Field oE Enquiry1

The committee vis i ted 14 s tates for the f i e ld level

discussions and issued a check l i s t of points for dis-

cussions a t the Block, Distr ic t and State levels. This

was followed by separate questionnaires, one on the

national level inst i tut ions and the second on tho f i e ld

level credi t delivery system to scheduled commercial banks,

s t a t e cooperative banks and s t a t e cooperative land develop-

ment banks.

1. Over the period 1969-80, the outstanding i n s t i -

tut ional credi t increased from Rs.1075 crorea to Re.6329

crores. Cooperatives accounted for 59.4 per cent, comer.

c ia1 banks 38.8 per cent and regional rural banks 1.8

per cent.

2. some of the major recommandationa of the RBI'a

study team on overdues have not been given e f fec t to by

m s t of the State Oovernments. On the other hand som

of the State Oovernrnenta have issued from time to time

blanket s tay ordera on or banned coercive action fo r

recovery of cooperative dues.

3. The recovery perforfnance of the banks i n reapact

of the i r d i r ec t loan8 to agricul ture haa not shown any

perceptible change over thm past few years i n tha t the

recovery b v e r e d a t around ha l f the dmmand.

4. The committee was of the firm view t h a t wilful

default i n rapayrnent of cooperative loana i s not merely

a Oivil misderneanour but a criminal offence. It should

no longer go unpenalised and must a t t r a c t deterrent

punishment under the criminal law of the country.

5. The pass books being issued by aome commsroial

banks to their c l ientele belonging t o target groups mrst

be improved to include a l l relevant date so as to aervm

as aafe-guards against malpractices.

National Bank for Agriculture and Rural Developmnti8

launched f i e ld studies in 9 s t a t e s to gain perception

into the problems of delinquency in loan repayment from

tha demand side. The demand aide studies covering 2

states* with good recoveries and 7 s tatest* with goor

recoverias, were undertaken with varying number of de-

faulters/non-defaulters and the following findinge were

arrived at.

The level of overdues was higher fo r investment

credi t (term loana) than for crop loans (short-term

cradi t) . A considerable p r o ~ r t i o n (190 per cent to 45

per cent) of the default i n reapect of investment c rad i t

(extended by PLDea) wan over f ive years old, where aa

in the case of short-term croploana (borrowed from PACS)

it was typically less than 2 years old. One wondera

therefore whether the greater and prolonged defaul t i n

18. NABRRDr Seminar on Rewament of Inst i tut ional Credit, New DeUii, Vigyanbhavan, lg84.

'Punjab and Kerala. Bihar, Oujarat, Karnataka, Mamya Pradesh, Maharastra, Tamil Nadu and West Bengal.

respect of investmnt credi t i s amaociated with the less

frequent need for i t s borrowing. Large farmers defaulted

mre than the s m l l farmers. 25 per cent and 35 per cent

of the defaulters were respectively those who had made

partial repayment and defaulted on Me ent ire amount.

The supply side studies conducted in 5 s tater via., Bihar,

Oujarat, Karnataka, Madhya Pradesh and West Bengal examined

the i w c t of faulty lending and mcovery procedures follow-

ed by Land Developmnt Banks.

The pattern of credi t requiremanta was analysad in

detai l in the report Vred i t Requirements tor ~ g r i c u l t u r a " ~ ~ .

A atudy indepth of what actually happens in the village8

i n the matter of aqricultural credi t should therefore be

of considerable practical interest. The factual basis

of this study was a comgmhenaive field auwey of 3109

cultivating households of which 1906 wars hormwing houae-

holds. The sampling was done with as much scient i f ic

rigour as circumstances permitted, with suitable over-

sampling in rare developed areas. The analysis clsarly

brought out that a major gap existed in the sphere of

investrant cradi t and considerable progreea had to bo

made i n respect of long-term financing of agricultura

19. national Council of Applied Economic Rasearch: Credit Raauimmmts for Agriculkrra, New Delhi, 1974. -

through ins t i tu t iona l agencies i.e., Primarily the

Co-operative Land Dnvelopment Banks.

Another finding of the study was tha t with g rea te r

inst i tut ional isat ion, the r a t e of in t e res t on loan8 from

a l l source8 showed a decline. Farmers in 1970-71 could

f u l f i l a b u t 29 per cent of the i r c red i t requirements

through funds obtained a t 8-10 per cent in t e res t , about

23 per Cent a t 18-24 per cent interent and about 1 9 per

cent free of interest . The average ra t e charged by

private agencies waa 22 per cent which was much lower

than tha t it was p r io r to independence. However, owing

t o the i r heavier rel iance on non-institutional sources

of credi t , the average i n t e r e s t cost of borrowing (18

per cant1 fo r the amallent category of farmers i.e.,

upto 2 hactares was much higher than tha t (9 per cent)

of the largest categories (about 6 hectares) of farmera.

In respect of long-term 'developmental' financing the

cooperative agenciea a re s t i l l not playing an important

role accounting fo r only about one f i f t h of the t o t a l

disbursement of credi t . However, there has been a nota-

ble change in the advances portfol ia of the Land Dove-

lopment Banks consequent upon a reorientat ion of t h e i r

lending pol icies toward developmantal finance.

The National Connnission on ~ g r i c u l t u r a ~ ~ , i n t s r a l i a

was asked ha examine the requirements of new strategy of

specif ic agricul ture in the shape of supply of r equ i s i t e

inputs with special considerations of sources of supply

and problems of improved seeds, f e r t i l i ae r s , measures

for plant protection and agricul tural c red i t from ina t i -

tut ional agencies.

The committee emphasized the need fo r an integrated

agricul tural c red i t service covering a l l aspects of m a 1

development including production, marketing, t ransport

and proceasing and providing the requisi te c red i t with

the f a c i l i t y for i t a conversion into production inputs

and investments in resource development. The commission

envisaged greater involvement of commercial banks in

financing agricul tural development. It indicated tha t

the share of agricul tural advances to t o t a l advances by

them should r i e e from 8.8 per cent i n 1974 t o 15 per cent

in 1985. The commission recommended tha t the RBI and

the Government should immediately i n i t i a t e planning fo r

business and man power developmant in the ins t i tu t iona l

agencias to equip them fo r undoetaking such programnea.

The conmission suqgs#tsd greater weightage to the

needs of small and marginal farrnsra and provision of

20. ooMrnlnent of India: National C o d s s i o n on Aaricul- m, Bar Delhi, 1976.

credi t to them on preferent ial t e n a in respect of both

interest charges and quantum of advances to enable them

to upgrade and modernise agriculture. Suggestions were

also made for inpmvements in Farmrs Service Societies,

the ground level organisation, i n the l igh t of their

record of performance.

Subrata Ohatak2' has made the poineering study of

the Indian Rural Credit Market. His study was directed

to answer the following issues:

I. the nature, conprosition and working of organised and

unorganised money markets in the Indian Rural Economy,

2. to examine the factors effecting the &emand side of

agricultural credit!

3. to analyse the nature and Beteninante of m r a l inte-

rest rateat

4. to discuss the working of the major organieed aqenaisat i

and

5. to specify the exiating links between the rural money I\

markets and to derive any pnlicy implications which

may emerge from the study.

21. Ohatak Subra ta~ Rural Credit Markets in In419 MacMillan Co. Ltd.. New Delbi, 1976.

He has examined the foregoing issues on the basis

of available data (secondary data) using quanti ta t ive

techniques and s t a t i s t i c a l tools . He considera the work-

ing of PACS on tne supply aide of ina t i tu t iona l c red i t

and comes to the conclusion tha t they generally f a i l ed

to sa t i s fy the d i f f e ren t c r i t e r i a of f inancial v i a b i l i t y

so f a r as the composition of the f inancial s t ruc tu re and

loan operations are concerned. Increasingly g rea te r

dependence on botrowing, f a i lu re to m b i l i s a deposita

appreciably as wall as munting overdues become t h e i r

chief problems. There i s a posi t ive correlat ion between

income and rapaymenta, and negative correlat ion betwslen

the r a t e of in t e res t and income and repayment.

v.l'.laidu'aZ2 study reviews the progreaa o f the

cooperative c red i t movement in India and i s concerned

with i t s f inancial soundness and business eff iciency.

He proposed to examine the following object iveat

1. t o evaluate the cooperative c red i t movement in

India!

2. t o examine d e v ~ l o p m n t of PACS during the period

1951-611

3. t o describe the soc ia l aapecta of coogerationr

22, Naidu, V.T; Farm Credit and Cooneratives in India Vora and Co., hlbl ishers Private Ltd.. Bombay, 1$68.

4. t o assess the integrated credi t schtmer

5 , t o analyse the role of cooperatives in helping

the weaker aectiona t and

6, to examine the atate 'a support in cooperative

deve lopment.

8 w t h ~ d ~ i ~ ~ l

Hia study waa based on the secondary data. He collec.

te8 secondary data from many national and internat ional

reports /~ul let ins . Besldes sore other publications l ike

s t a t i s t i c a l statement5 relat ing to cooperative nwvement

in India, Rural credi t followvp surveys are also made

uee of.

The following are the major findings of Dr.V.T.Naidu.

1. Cooperative credi t movement has regis tered a

s ignif icant pmgresa during 1951-61, especially nince

the implementation of the integrated c red i t schem sugge-

sted by rural c red i t survey.

2. A large number of PACS are weak and dormant!

3. Though the decade under rcview (1951-61) wit-

nessed a signif icant r i l e in the volume of loans advanced

by PACS, the position with regard to the i r recoveries was

not sat isfactory,

2 8

4. The ways and means adopted i n the west to s t r i k e

a happy mean between the two equal important aspects

of cmperation viz., the business and cooperative a s p c t s

were not preaent in India.

5. The c red i t supplied by cooperatives i s biased i n

favour of the big and in f luen t i a l cul t ivators . The small

cul t ivators got only 11 t,¶ 12 per cent of t h e i r total

borrowings from the cooperatives.

6. The policy of the government in regard t o s t a t e

partnership and the s ize of the primary society was

vaci l la t ing, creating in consequence uncertainty and

indecision. This came in t he way of reorgsnising the

cooperative ins t i tu t ions e t the base level.

he main objectives of ~ a m i ~ e d d y ' s ' ~ s t a y wan to

investigate the important characteristics of We defaul-

t ing c red i t cooperatives, delinquent borrowers and non-

borrowers (in non-memhers of PACS) I

Following a re the apecif ic hypotheses testad:

1. In highly productive regions c red i t cooperatives

have less of a problem of repaying loans t o the central

bank before the dun dates than fo r those in poor areaar

23. ROml RedGy, S I Farm Credit Through Cooparatives in India - A Case Study of a Region in Andhra Qradesh, ? ~ o c t o r a l Thesis), Xal tair , Andhra University, 197

2. Defaulting borrowers have larger debts. They

divert their cooperative borrowings e i the r fo r the re-

paymnt of other debts o r for conaunlption o r for other

unproductive purpoaesr and

3 , Both the non-borrowing and the non-members a re

r l l i t e ra t e s and belong to lower caste groups. They ope-

r a t e small farms and rely mostly on off-farm sources of

employment.

Data and Method:

The data pertaining to PAC5 were obtained from the

central cooperative bank's branches a t Chodavaram and

Visakhapatnam during 1969-70. The data were collected

from the borrowing and non-borrowing (including non-

members) households in the area served by select c red i t

cooperatives in Chodavaram taluk.

Sample households were a t r a t i f i d into defaulting

and non-defaulting members. Of the 149 households inter-

viewed, 61 were from aon-members and non-brrowers. A m p

the borrowing households, 1 0 out of 38 in the productive

regions and 19 out of 50 in the less productive regions

were deliquent borrowers. Discriminant analysis was used

t o t e s t the hpothesised relationshipa,

The resu l t s of the thes i s bring out sharply how

the role of c red i t cooperatives d i f f e r s between the

well developed and less developed regions. In t h e

former, i n which the returns t o investment are reasona-

ble, adequate and f luctuate only within narrow margins,

overdues a re basical ly r e l a t ed to the leadership r o l e i n

cooperatives. In the l a t t e r , with inadequate and widely

fluctuating returns on investment, the agro-economic

environment within which cooperatives operate needs to

be improved, overdues a re mainly traceable t o the

fluctuating agricul tural income.

The review made i s only a sample of several empiri-

c a l and evaluative s tudies on the growth and s t ruc tu re

of the cooperative c red i t organiaations. Most of the

studies have tended to cover the nation-wide scene pro-

bably due tc t he ready ava i l ab i l i ty of the published

data a t the nat ional level. m e r e have alao h e n qui te

a good nurber of studies on inter-regional va r i a t ions a s

also in te r -d i s t r i c t variat ions.

K.rishnaswamya4 in 1967 made e s t a t ewide invest i -

gation of the working of cooperative democracy.

24. Mlshnaawamy, 0.R I 'Cooperative Dmcracy in Action', Somaiya Publications Pvt. Ltd., Bombay, 1976.

The maln objectives of t h i s ~ t u d y are1

1. t o study the s t ruc tu re of the government of ag r i -

cul tural cooperative short-term c red i t s t r u c t u e i n the

selected s tate!

2. t o atudy the working of derocrat ic control i n

practice in agricul tural c r e d i t cooperativaa?

3. t o study the influence of aocio-economic factor6

on democratic control in societ iea i n order t o iden t i fy

the factors which p m m t e o r retard! and

4 , t o study the operation of democratic control a t

the control and apex level financing banks.

Methodoloqy~

Thin study was based on the survey method, s i r a t

hand data were collected from the f i e l d d i r ec t ly from

the records of the selected institutions and through

garacnal inwrviews and mail questionnaires aa a l so

by observation. A multi-stage sarrgling design was

planned for the study, The study of working of denw-

c r a t i c control a t the primary level was confined t o ona

d i s t r i c t . Three large s ired societ ies and 15 small

siaed nocist ies were selected on random method. S t ra t i -

f ied sampling technique was applied t o se l ec t the

3 2 members in the mnaging comit tec, borrowera and

non-tarrowera of BACS. 16 DCCBs were taken ou the

basin of s t rat i f icat ion. Census mthod was adopted in

selecting the directors a t DCCBs levml. a t r a t i f i e d

sampling method was emlayad i n selecting the individual

members of the apex bank. With regard to the delegates

of CCBs and directors of the bank cenllus mthod was

employed.

Findings I

The findings lead to the inevitable conclusion Mst

demcracy in PhcS exist# i n the written constitution only,

but not in actual practice. The lgnorancs of memhers,

t he i r aocio-economic dispari t ies , the socir tLesl depen-

dence on CCBs for funds, robbing of v i t a l matters of

decision from the i r hands, lack of aordial relat ions

among members, the mechanical way of conducting maetings,

a l l these lead to the weakening of democratic control a t

grass roota level. As a r e su l t of thie, more than 50

per cent of the high caste families hold o f f i ces fo r

m r e than 10 years.

The individual members in central banks do not

genarally poseeea cooperative knowledge to be a source

of strength to the banks. The pattern of division of

33 of functiona clearly involves placing managerial res-

ponsibilities primarily on the h a r d or the executive

cornittee and the president. The secretary, who i s the

chief executive, i s not the effective administrative head

and minly the President performs thia function. 2ach

of the sample banks (CCBs) had conducted s ix meetings

during four years.

A t the apex level, the individual members' par t ic i-

pation in the meetings was insignificant. Their atten-

dance was low whereas that of the delegates of DEB8 and

the directors of the bank was high. Hence, there i s a

democratic control a t the apex level.

suryanarayana ~ a j u ' s ~ ~ etudy pmpoeed the main abjec-

tive viz., identifying different aspect8 of the perfor-

mance of DCCBs and PACS and to aaaess the nature of regional

variations in the performance of credit cooperatives.

ATea of Study and SOUICCLI of Data t

For the purpose of th i s study, DCCBa in 297 d i s t r i c t s

covering a l l the major s tates in India were selected. To

further examine the findings a t a much more disaggregated

level, 50 PACS were selected randomly from different tnluks

of Viaakhagatnam d i s t r i c t i n A.P., for the year 1975-76.

25. Raju, l . 5 1 nter-Eisuict Variations in the Parformanee of Aqricult&el Cradit C?opcratives in India :Coctlrar l iasar tdt ionl , Andhra Univarsity, Waltair, 677.

The data r e l a t ing to DCCBs were drawn from s t a t i s t i c a l

statements of RBI and PAC3 from D i s t r i c t Cooperative

off ices a t Visakhapatnam, Anakapalle and Vijayanagaram,

Information re l a t ing t o the agro-economic va r i ab les waa

taken from the vi l lage records. Principal component

analysis and multiple regression analysis were used.

Results of the Study8

The overal l performance of DCCBs, a s seen through

the composite index, i a the highest i n Ksrala followed

by Punjab, Tamil Nadu, Oujarath and Maharastra. The

weakest DCCBa a re in the eastern pa r t of the country.

In th i s study cooperatives a r e handicapped in s i tua t ions

i n which there i s a continuing legacy of adverse tenures

and low level of development of infrastructure, The

finding6 tha t the p r r fonance of PACS especial ly i n rela .

t i on to advences i a ba t t e r in atatea with well developed

agricul ture i s cormbarate8 by a study of PACS in

Visakhapatnam d i a t r i c t . However, societ ies with ba t t e r

perfonnance in r e l a t ion t o advances do not show equally

good performance i n recovery and there is no s ign i f i can t

association between recovery ratea and o the r aspects of

eff iciency,

Dadhich i n h i s analyt ical study" proposed the

following objectives I

1. To assess the s t ructure of overdues i n agrioul-

tu ra l cooperativa c red i t i n Rajaathan and i t a impactt

2. To study the socio-economic factors influencing

repayment of cooperative dues r

3. To make an enquiry in to the causes of overdues

a t various levelsr and

4. To suggest measures f o r minimizing overdues.

a ) Plan of Enuuiqt

He divided the s t a t e in to thres zones according t o

rainfal l . He selected three d i s t r i c t cooperative central

banks one from each zone for h i s study. Further three

Primary Agricultural Cooperative 3ociet ies have been

choeen from the jurisdiction o f each of the selected

cwperat ive central banks. A census s t d y of a l l the

members of these selected primary cooparatives haa been

taken for analysia of socio-economic factors influencing

repayment of cooperative dues. The reference year was

1968.

26. Dadhich, C.LI Qverduas i n Farm Co-ogerativa Craditt A study of Rajasthan, Popular Prakashan, mimay, 1'977,

For analysis of other aspect#, via., wilful default^

diversion of credi t etc., ha selected 20 members, according

to the siee of the i r cultivating holdings from each soci-

e ty under study. He classif ied the cultivating holdings

into three groupa-large, madium and small farmers. Pw-

ther, on the basis of random tables, 6 menbers from Me

large as well as eml le r and 0 mankern from medium group

were selected. Thus, 180 nmmbers were selected from

three diritricts to provide a bass fo r his atudy.

b i statement of Hypotheses1

1. The larger the landholdings, the lesser wil l be

the number of defaulters:

2. The number of defsulters in the case of middle

caste borrowers i a less ae compared to the upper and

lower caste borrowers1

3. The number of defaulters in case of i l l i t e r a t e

borrowers i s higher than l i t e ra t e borrowers:

4 , Borrowers with i r r igated holdings default lean

than borrowers with un-irrigated holdings]

5. Borrowers growing caah crops default less than

borrowers growing crops other than caah:

6. Uaars of chemical f e r t i l i s e r s de fau l t l e s s than

non-users of chemical f e r t i l i s e r s t

7. Thr smaller is the anwunt bcrmwed, the Ierrsar

wi l l ba the dsfaul tr and

8. Borrowers whose principal occupation i s c u l t i -

vation defaul t lose than tho le who depend p r inc ipa l ly

on occupations other than cul t ivat ion.

C ) Resultst

1. There i s no association between landholding8 and

repayment performance.

2. Borrowers belonging t o middle classes de fau l t

l e s s a s compared to upper and leaper caste borrowers.

3. No association between l i t s r acy and repayment.

4. Borrowers who have i r r iga t ion f a c i l i t y de fau l t

less as compared to those who do not have i r r iga t ion

fac i l i ty .

5. Borrowers growing cash crops ae fau l t l a s s a s

compared to those who grow crops other than cash.

6. Ueers of chemical f e r t i l i z e r s de fau l t l e s s a s

compared to non-users of f e r t i l i z e r s .

7. No association i s found between ainount hrmwdl

and repayment.

8. mrmwerr who mainly depend on cul t ivat ion

default l e s s than those who do not m i n l y depend on

cultivation.

~ h s deciding factors in repaymsnt are i r r iga t ion

and caste of the b r m w e r s as a l l variables f f e r t i l i a e r s ,

crops, occupation) centre around irr igat ion and caste2'.

Dadhich's i s an essent ial ly socio-e~onomio invest i -

gation of the factors influencing and the causes contr i -

suting to the emergence of overdues in cooperatives i n

Rajasthan during the l a t e 1960~.

~nter-regional as well as intra-regional d i spa r i t i e s

i n the flow of c red i t have been examined in a study mads

by A.Mukhopodhyay and others2'. Data have been extracted

from the combined reports O n the studies i n the economics

of Farm Xanagemant fo r the Firozepur Dis t r i c t of Punjab,

Thanjavur of Tamil Nadu and Cuddapah of Andhra Pradesh.

Factore influencing the demand fo r c red i t along with

the supply of c red i t a re noted to be crucial in explain-

ing the inter-regional variat ion in the actual flow of

credi t per u n i t of land.

28. A.mkhopodhyay and others, "Variation i n the flow of c red i t - A cm#d sect ional analysis" Financin Agriculture, Vol.XI, j u l y - S e p t e m b e r l 1 l 4 .

A plethora of l i t e ra tu re on Primary Agrimltural

Cooperative Societies vis-a-vis agricul tural development

has been published in different journals l ike Indian

cooperative review, Financing Agriculture, Indian Journal

Of Agricultural Economics, Kurukshetra, the Cooperator,

Yojana and others from time t o time.

A few studies conducted so f a r have not made an

indepth inquiry into tho problems affect ing the opera-

t ional performance of PACS i n drought prone regions.

alao, studies on inter-regilnal and intra-regional varla-

tions in the performance of PAC8 within a d i s t r i c t i n a

backward region have not been attempted. hlrther, only

a few studies have been carried out to analyse problems

associated with the working of the Primary Agricultural

Cooperative Societies a t a micro level. In a vast country

l ike India with varying agm-climatic conditiuns and

soeio-economic conditions, location specif ic studies are

required. In view of th i s , a study was planned a t a

micro levsl to examine the role of primary aqricul tural

cooperative societ ies in financing farm sector in Cuddapah

Distr ict of Andhra Pradesh with the fo l lwing specif ic

objectives.

1.1 OBJECTIVES OF THE STUDY t

The broad objectives are8

a ) to asmess the role of sample Primary Agricultural

CoQperative Societies i n farm finance in Cuddapah Distr ict

of Andhra Pradssh in the contsxt of Multi-agency approach

to farm credi t)

b) to describe farm credi t structure in the two

regions of the d ia t r i c t and to examine the concentration

of farm credi t disbursed by sample Primary Agricultural

Co-oprative Socistieat and

c ) t o analyse the inter-society variations in farm

credit operations such as menbership, borrowership, menage-

ment, capi tal , loans advanced and overdues.

1.2 THE HYPOIYESES r

The following hypotheses are tested i n the study1

a ) There i s no s ignif icant difference in the ave rap

level of inst i tut ional credi t disbureed per household

between the Delta and Non-delta societies of the d la t r io t )

b) There i s no difference in the Skewness of eo-

operative loans (bath current and outstanding) disbursed

in the sample societ iest and

a ) Inter-aociety variat ions in the s t ruc tu re of

membership, borrowership, repayment and pmf i t / lo s s

are not s ignif icant hstwsen Me #ocieties and over

a Five Year Period of time.

1.3 SAMPLE DESIONl

40 oov@r the wide range of population spread over

the d iu t r i c t two stage sampling plan was considered tD

be nore e f f i c i en t and f lexible . Selecticn of PACS formed

the f i r s t stage and selection of borrowers and non-

borrowers the second stage.

A t the end of June, 1988 there were 128 P r imry

Agricultural Cooperative Societ ies in the Cudclapah

X s t r i c t . PACS in the d i s t r i c t are divided in to two

groups, those working in the del ta region and those

working in the nondel ta region. The del ta region i s

predominantly i r r igated by the :Wnool-Cuddapah Canal

water supplied by r ive r Thungabhadra and the non-delta

region i s subjected to the vagaries of monsoons. Out

of 2 1 PAC8 i n del ta region and 107 PACS in non-delta

region two societ ies from de l t a region and two aociet les

from non-delta region were purposively selected f o r f i e ld

investigation on considerations of proximity and be t t e r n n

familiarity.

As the main focus of the study i s on ag r i cu l tu ra l

credi t , landlesa agricul tural labour household8 and non-

agricul tural households in the vi l lagee under the juris-

diction of the sanple soc ie t i s s have h e n dropped from

the l i a t . Thus out of 10,657 households, 1,605 landless

agricul tural households and 940 non-agricultural house-

holds were eliminated. Hence, the remaining 8112 cu l t i -

vator households forned the universe of the study. Theme

cul t ivator households were a t r a t i f i ed in to f i v e grouga,

namely I

1. Marginal (0-1 hectares))

2. Small (1-2 hectares 1

3. Semi-msdium (2-4 hectares) I

4. Medium (4-10 hectares) ; and

5. Large (10 and above hectares).

The above f ive grou?s of cul t ivator households were

further c l a s s i f i ed as borrower and ncn-borrower house-

holds. Five per cent of borrower households and two and

half per cent of non-borrower households were randomly

selected for f i e l d investigation. The table 1.1 gives

de ta i l s of the universe and sample.

In order to probe in to the reasons of sample non-

borrowing cul t ivatnr households for not taking the member.

ship of societ ies and borrowing from the societ ies , they

a re classif ied in to non-members and members society-wiae

and t h e de ta i l s are presented in the table 1.2.

TABLE 1.2

NON-hEMBERS AND hSMBERS OF XON-BORRMn'ERS SOCIETYqISE

1987-88 - Society Non- orr rowers

%on-members f4ambera

Channur

val lur

Pondalur

alannur

Total 52 96

SOURCE I Sample Data

The sample households of borrowers are further

classified in to two groups namely, nondafaul ters and

defaul ters f o r analyaing the oausae of da iau l t . This

i s dons society-wise and the de ta i l s a re presented i n

the table 1 . 3 .

TABLE 1.3

NON-DEFAULTERS AND DEFAULTERS SOCIETY-WISE 11487-88

society 80rmwer8 on-Defaulters Defaulters

Chennur

Vallur

Pondalur

Total 43 66

SOURCE I Sample Data

1.4 DATA YISE :

Two types of data i.e., time ser ies data and crose

section data were collected for the present study.

a ) Tim, Bsries Data:

In order to pmvida a necessary background f o r t h e

present study, t h e performance of t h e D i s t r i c t Co-operative

Central Bank over a period i s examined. Time series d a t a

with respect to share c a p i t a l , owned funds, deposits,

recovery performance e t c , were collectrrd f o r t h e per iod

1978-79 t o 1987-88 from t h e recoeas a t D i s t r i c t Cb-

operative Central Bank, Cuddapah. Data r e l a t i n g t o t h e

working of t h e sample s o c i e t i e s were col lec ted from t h e

records of t h e s o c i e t i e s and through discussions with

the s e c r e t a r i e s concerned f o r the period 1983-@4 t o

1987-88, with t h e help of a separa te i n s t i t u t i o n schedule.

T i m s e r i e s d a t a were a l s o col lec ted from p u b l ~ c a t i o n a of

d i f f e r e n t i n s t i t u t i o n s l i k e Reserve Bank of India, National

I n d t i t u t e of Rural Development and Bureau of Economics

and S t a t i s t i c s of Government of Andhra Pradesh. Besides

:he ?ublished sources, unpublished doctora l theaes and

o ther individual works have a l s o been consulted.

b) Cmss Section Dater

Information from t h e sample borrower and non-borrower

households from t h e ae lec tad Primary Agr icul tura l COT

operative S o c i s t i e s (PACS) waa col lec ted by d i r e c t perso-

na l inves t iga t ion . The schedules used i n t h i s inves t i -

gation were pra-tested and necessary improvements were

effected before conducting the s w e y . Cross seation

data relat ing to the borrowers and non-barrowers ntgard-

ing their croppinq pattern, intensi ty of cropping, a s se t

position, borrowings from different inst i tut ions etc.,

were collected for the year endad 30th June, 1988 only.

1.5 TOOLS OF ANALYSILll

The data drawn from the various sources were sub-

jectad to s t a t i s t i c a l treatment. Measures of central

tendency, co-efficient of variation, skewness, correlation,

Gini co-efficient, analysis of variance (ANOVA) end stu-

dents ' t ' teat are employed. For temporal data l inear

and compound growth rates are cornUte8 and the i r s ignif i -

cance i s tested. Graphs and visual aids are made use

of a t appropriate places.

1.6 SCOPE AND LIYITATIONS l

The scope of this study was limited to tha selecwd

sample PAC5 in Cuddapah d i s t r i o t and the samule borrower

and non-borrower households from these societiee due

to time end resource constraints. Cuddapah d i s t r i c t

wss chosen as the sample d i s t r i c t because of i t s proximity

to the place of work of the inveatigator. The reeul ta

of the investigation partain t o the agrfcul tural economy

of the Delta and Non-delta segments of Cuddapah d i a t r i c t

only.

Racall method was used to gather information from

the respondents ( f a rmrs ) as they did not maintain

records of the i r farm expenditurea and incomes. I n view

of the r eca l l lapse on the part of the respondents, the

information gathered cannot be treated as t o t a l l y free

from errors. However, e f fo r t s were made to co l l ec t

reasonably sat isfactory information from the farmers by

repeated appeals and ~e r suae ion .

The data relat ing t o the working of the sample

Primary Agricultural Co-operative Socist ias were collec-

.ed from the annual audi t r e lo r t s and other records main-

tained by the secretaries. Some of the sample societ iee

did not maintain annual audi t reports properly. The data

i n respect of such societ ies had to be gathered from

Distr ict Co-operative Central Bank, Cuddapah, and a l so

from the diviaional Co-operative offices. Other relavant

data were collected from seconaary sources which are

acknowledged a t the appropriate places.

The t h e s i s i s presented in seven chapters inc luding

t h e present chapter I, comprising t h e review of l i t e r a t u r e ,

objectives, hypotheses, d a t a base, t h e aample design,

t o o l s of analys ia and scope and limitations of the study.

The second chapter is aevoted t o the analyais of Rural

Credit S t ructure i n India. In chapter three Agr icul tura l

Credit S t ructure of Cuddapah D i s t r i c t i s discussed.

Chapter four deals with t h e ?arm Credit S t r u c t u r e i n Delta

and Non-delta regions of t h e d i s t r i c t . Chapter f ive

explores the concentration of co-operative c r e d i t anang

various groups of farmers and chapter s i x i s connected

with In ter -socie ty v a r i a t i o n s i n the working of the

sample s o c i e t i e s . 3 e seventh chapter sunanarises t h e

r e s u l t s of the study.