THE ROLE OF DISTRICT CENTRAL CO-OPERATIVE

BANKS IN THE AGRICULTURAL DEVLEOPMENT

OF INDIA: AN ANALYSIS

Dr. R.UMA DEVI

Dr. ATULYA BHOI

1
THE ROLE OF DISTRICT CENTRAL CO-OPERATIVE
BANKS IN THE AGRICULTURAL DEVLEOPMENT
OF INDIA: AN ANALYSIS

Dr. R.UMA DEVI*

umadevidandu@gmail.com
Mobile: 09885977877
Land: 0884-2321698
Dr. ATULYA BHOI*
atulyabhoi@gmail.com
Mobile: 9440469392
Land: 0884-2324393

*ASSISTANT PROFESSORS OF COMMERCE

P.G. DEPARTMENT OF COMMERCE
Dr. S.R.K.GOVERNMENT ARTS COLLEGE
PONDICHERRY UNIVERSITY
YANAM-533464
INDIA

2
3
 PREFACE
In the present days the economic development of the World is closely related with
the development of different regions and the people in particular. The growth in
economic standards of people brings in a remarkable growth in the development of
the whole economy. Hence an increase in the personal income of the people is taken
as a major yardstick of their living standards. Majority of the people in India depend
on agriculture for their livelihood. Thus the development of agriculture is put on par
with their economic development.

Credit is an important input in the agricultural development as it facilitates access to

resources and services. By recognizing the importance of credit, the Government of
India adopted a multi-agency approach consisting of Commercial Banks, Credit Co-
operatives and Regional Rural Banks. Of them, Co-operative Credit Societies were
the first in the chain to extend credit to the rural people.

In Andhra Pradesh, particularly in East Godavari District most of the people depend
upon agriculture for their livelihood. Though East Godavari is contributing major
share of food grains, most of the agriculturists are poor in nature that are not self-
sufficient for adoption of modern inputs. It resulted in low yield and income per
acre. For their economic development it is felt that better financial services are to be
provided to improve their agricultural productivity. The District Central Co-
operative Bank was set up in the district for that purpose only. To find out how far
this goal has been achieved by the District Central Co-operative Bank is the main
objective of this study. Many important data and information have been utilized to
broaden the scope of the study. It is hoped that the study would help Academicians,
Researchers, Planners and others in future.

The entire study is presented in eight chapters. Chapter I contains a brief

introduction including the relevance of the study, objectives and limitations of the
study. Chapter II deals with Research Methodology. Chapter III contains a brief
review of literature. Chapter IV contains the growth and development of Co-
operative Credit Institutions in India. Chapter V contains the Growth and

4
Development of Co-operatives in Andhra Pradesh with special reference to East
Godavari District. Chapter VI contains the Growth and Performance of District
Central Cooperative Bank (DCCB), Kakinada along with Primary Agricultural
Societies (PACS). In Chapter VII an attempt has been made to assess the impact of
District Central Co-operative Bank’s role on the sample borrowers in the
development of agricultural & allied sector in East Godavari District. The last but
not the least chapter i.e., Chapter VIII summarizes the major results and findings,
suggestions and practical utility of the study and scope for further research.

Place: YANAM (Dr. R. UMA DEVI)

Date: 27th January, 2012 (DR. ATULYA BHOI)

5
 ABSTRACT

The Indian economy is still globally recognized as an agrarian economy as 57

percent of its work force depends on agricultural sector coupled with 15.7 percent
contribution of this sector to the GDP of the Country. The growth of this sector, in
terms of production and productivity, is highly required for the growth of its inter-
linked sector i.e. industrial sector in particular and the entire economy in general.
Accordingly, proper emphasis has been given to agricultural sector during all plan
periods. On an average, about 12 percent of the total plan outlay is allocated for this
sector. The green revolution in India has accelerated the productivity of agricultural
sector through the use of HYV seeds, fertilizer, resource allocation, cropping pattern
and intensity etc. But despite the impressive performance of agricultural sector, the
annual growth in the food grain production during post-green revolution period was
only 2.62 percent which is a little above the rate of population growth.

The Planning Commission has proposed in 11th plan for doubling agricultural
growth to 4 percent to pave the way for double – digit economic growth by the end
of the plan period. India occupies a prominent place in the world in terms of
production of agricultural product, but its productivity is far below the world’s
average productivity. The low productivity may be attributed to many factors such
as the inefficient resource management, lack of education and knowledge,
inadequate supply of finance, ineffective marketing, inadequate irrigation and other
infrastructural facilitates etc. Recently, in a precise way Dr. Manmohan Singh, the
Prime Minister of India highlighted (The Times of India, October 19, 2006) four
deficits that needed to be bridged to enhance productivity and output. “The four
deficits are public investment and credit deficit, the infrastructure deficit, the market
economy deficit and the knowledge deficit.” He also said that the current
government was committed to provide farmers access to adequate and affordable
credit.

6
Credit plays a crucial role in oiling the wheels of agricultural production. It is said
to be the life blood of agriculture and therefore, the need for timely and adequate
farm finance is obvious. The credit need of agricultural sector is met chiefly by
informal sources (like Private Persons and Money Lenders etc.) and to a lesser
extent by formal sources (like Cooperative Banks, Regional Rural Banks and
Commercial Banks). The development of institutional or formal source of credit is
regarded as a basic condition for agricultural productivity and rural transformation.
The objective of this type of credit is to make a break through the vicious cycle of
poverty, rack – renting, usury and debt to stimulate farmers to boost the agricultural
productivity. Institutionalization of credit has reduced the dependence on money
lenders. Co-operative Banks, Regional Rural Banks and Commercial Banks are the
major institutional source of finance to agricultural sector. The credit need has
become more important since the introduction of modern technology (such as HYV
seeds, Fertilizer, Pesticide, irrigation, hired human & machine labour etc.)

The Credit Co-operatives are the first and foremost institutional agencies to enter
into the field of agricultural finance and were the first in the chain to extend credit
to the rural people. The Credit Co-operatives have three-tier structure having
Primary Agricultural Co-operative Societies (PACS) at grass root level, Central Co-
operatives Banks (CCBS) at district level and State Co-operative Banks (SCBs) at
apex/state level. The Central Co-operative Banks act as a link pin between PACS
and SCBs rendering very valuable service to the rural people.

In India and Andhra Pradesh, particularly in East Godavari people depend upon
agriculture to meet their day to day needs. For their agricultural development
provision of adequate and timely credit is essential. The District Central Co-
operative Bank (DCCB), Kakinada was established in the year 1987 for that
purpose. By choosing East Godavari District for sample study, the result could be
generalized to the state of Andhra Pradesh. With regard to this the present study was
undertaken to know the importance and impact of Co-operative credit on
agricultural sector.

The present study clearly enunciated the advantages enjoyed through improved
technology with the efforts of the bank for the beneficiaries in terms of high

7
production, increased net returns and subsidiary incomes. The results further
emphasized the need to enlighten the farmers about the superiority and profitability
of improved technology through the extensive credit services. By and large the role
of DCCB is highly impressive and clearly exhibited in the socio-economic
development gained by the beneficiaries.

Finally it can be concluded that the District Central Co-operative Bank (DCCB),
Kakinada is playing a significant role in the development of agricultural and allied
sector in the district by providing adequate & timely credit to the farmers.

8
 CONTENT

CHAPTER
CHAPTER TITLE PAGE NO.
NO.

List of Tables

List of Figures

List of Abbreviations

Chapter I Introduction 1 to 12

Chapter II Research Methodology 13 to 21

Chapter III Review of Literature 22 to 49

Growth and Development Co-operative Credit

Chapter IV 50 to 108
Institutions in India

Growth & Development of Co-operatives in Andhra

Chapter V 109 to 153
Pradesh with Special Reference to E.G. District

The Growth & Performance of DCCB, Kakinada

Chapter VI 154 to 194
along with PACS

Chapter VII Impact Study 195 to 240

Chapter VIII Major Findings and Conclusions 241 to 257

Bibliography

List of Annexure

9
 List of Tables

Table
No. Description Page No.

4 1 Population & Agricultural workers

51
4 2 Annual Growth Rate of GDP of Factor Cost in Agriculture during 2000-01 to 2006-
07 54
4 3 Share of Agricultural exports in total (in percent)
55
4 4 Employment in Agricultural Sector (in Millions)
56
4 5 Ratio of agricultural credit to Agricultural GDP, Total GDP and Total Credit
60
4 6 Agricultural Credit from different sources (in percent)
64
4 7 Institutional Credit to Agriculture share in Total ( in percent)
65
4 8 Institutional Credit to Agriculture share in Total ( in percent)
67
4 9 Expansion of Commercial Bank branches in India
73
4 10 Progress of RRBs in India
74
4 11 Trend of financial parameters of PACS for 10 years (Rs. In crores)
90
4 12 Growth of PACS (Rs. In Crores)
91
4 13 All India Position of PACS
92
4 14 Statistical Details of District Central Co-operative Banks
93
4 15 Agricultural Credit provided by Co-operative Central Banks (Percentage in total)
95
4 16 Financial Information of DCCBS (Rs. In Crores)
95
4 17 District Central Co-operative Banks
96
4 18 Financial information of SCBS
98
4 19 State Co-operative Banks
99
4 20 Statistical details of Co-operative Instructions as on 31-3-04 by Co-operative Banks
100
4 21 A Profile of Rural Co-Operative Banks
101
4 22 Targets and achievements of loans by cooperative banks
102
4 23 Recovery (Crop Loans) performance
103
4 24 Region – wise profit / loss making DCCBS (As on March)
105
5 1 Agriculture and Agro based Exports
114
5 2 Size of holdings
117
5 3 Consumption of Fertilizers in terms of Nutrients
119
5 4 Utilization of Pesticides in Andhra Pradesh
120
5 5 Farm Mechanization in A.P.
121
5 6 Banking in A.P.
123
5 7 Profile of Co-operative Societies in Andhra Pradesh
124
5 8 Working of PACS
131

10
5 9 Lending by DCCB – SAO
135
5 10 Progress of the District Central Co-operative Bank
138
5 11 Working of CCBs in A.P.
140
5 12 Working of SCBs in A.P.
145
5 13 Prior & After SWCD system
146
5 14 Key Financial indicators
147
5 15 Ratio of credit -deposits of APCOB
147
5 16 Trend of total deposits during 1996-97 to 2005-06
148
5 17 Trend of total advances during 1196-97 to 2005-06
149
5 18 Working of SCBs in A.P.
151
5 19 Prior & After SWCD
152
5 20 Trend of total deposits of APCOB
153
5 21 List of Cooperative Banks in the district
156
5 22 Comparison of the district with the state
157
6 1 Details of Business and no. of branches of DCCB
167
6 2 Trend of Deposits during 1995 – 96 to 2004 – 05
169
6 3 Current & Savings Deposits
171
6 4 Term and Fixed Deposits
172
6 5 Details of different deposits
173
6 6 Disbursement of total advances
174
6 7 Types of advances provided by DCCB
175
6 8 Components of farm loans
177
6 9 Agricultural loans disbursed by DCCB
180
6 10 Share of Agricultural Credit in the total
183
6 11 Target and achievement of agricultural credit disbursed by DCCB, Kakinada
184
6 12 Working of PACS including Farmers Service Societies
186
6 Details DCCB prior and after SWCD system
13 189
6 14 Working of Co-operative Central Banks
192
6 15 Total Deposits and Advances
193
6 16 Credit / Deposit Ratio
193
6 17 Progress of the District Central Co-operative Bank
196
7 1 Distribution of Sample Beneficiaries according to Educational Attainment
205
7 2 Distribution of Beneficiaries on the Basis of size of Land Holding
205
7 3 Distribution of Beneficiaries on the basis of Caste
206
7 4 Distribution of Borrowers on the basis of size of Family
206
7 5 Distribution of Age group of sample Beneficiaries
207
7 6 Percentage in irrigated land in Pre-Loan and Post-Loan Period of Borrowers of
different Sample Groups
208
7 7 Percentage in irrigated land in Pre-Loan and Post-Loan Period of Borrowers on the
basis of Caste 208
7 8 Percentage in irrigated land in Pre-Loan and Post-Loan Period of Borrowers on the
basis of Operational Holding 209
7 9 Percentage change in the use of HYV and non HYV seeds of Beneficiaries of different
Operational Holding during Pre-Loan and Post-Loan Period
211

11
7 10 Percentage change in the use of HYV and non HYV seeds of Beneficiaries on the
basis of Caste during Pre-Loan and Post-Loan Period 211
7 11 Percentage change in the use of HYV and non HYV seeds of Beneficiaries of different
Sample Groups during Pre-Loan and Post-Loan Period 211
7 12 Usage of Fertilizer / Pesticides etc., per acre in Pre-Loan and Post-Loan Period by
different Caste of Beneficiaries 212
7 13 Usage of Fertilizer / Pesticides etc.. per acre in Pre-Loan and Post-Loan Period by
different Caste of Beneficiaries
211
7 14 Usage of Fertilizer / Pesticides etc. per acre in Pre-Loan and Post-Loan Period by
Borrower in different Sample Groups
213
7 15 Labour cost per acre of different size of cultivators during Pre-Loan and Post-Loan
Period 212
7 16 Labour cost per acre of different Caste of cultivators during Pre-Loan and Post-Loan
Period 214
7 17 Labour cost per acre of different Sample Groups during Pre-Loan and Post-Loan
Period 214
7 18 Yield rate of Paddy of per acre of different size of farmers in Pre-Loan and Post-Loan
Period 215
7 19 Yield rate of Paddy of Caste of farmers in Pre-Loan and Post-Loan Period
215
7 20 Yield rate of Paddy per acre of different Sample Groups during Pre-Loan and Post-
Loan Period
216
7 21 Income per Borrower of different size of holding in Pre-Loan and Post-Loan Period
217
7 22 Income per Borrower of different Caste in Pre-Loan and Post-Loan Period
217
7 23 Income per Borrower of different Sample Groups in Pre-Loan and Post-Loan Period
218
7 24 Income per acre on the basis of size of holding
218
7 25 Income per acre on the basis of Caste
219
7 26 Income per acre on the basis district
219
7 27 Distribution of Sample Beneficiary according to Educational Attainment
221
7 28 Distribution of Sample Beneficiary according to Land Holding
221
7 29 Distribution of Sample Beneficiary according to Caste
222
7 30 Distribution of Sample Beneficiary according to size of Family
222
7 31 Distribution of Sample Beneficiary according to Age group
223
7 32 Distribution of Sample Beneficiary according to purposes
223
7 33 Impact of ATL on irrigation on different size of holding
224
7 34 Impact of ATL on irrigation on different Caste
224
7 35 Impact of ATL on irrigation on different Sample Groups
225
7 36 Impact of ATL on cropping pattern different size of holding
226
7 37 Impact of ATL on cropping pattern different Caste
226
7 38 Impact of ATL on cropping pattern different Sample Groups
227
7 39 Consumption of Fertilizer and Pesticides per acre by different size of cultivators
228
7 40 Consumption of Fertilizer and Pesticides per acre by different Castes of cultivators
228
7 41 Consumption of Fertilizer and Pesticides per acre by different Sample Groups
229
7 42 Labour cost per acre of different size of cultivator
230
7 43 Labour cost per acre of different Caste of cultivator
230
7 44 Labour cost per acre of different Sample Groups in Pre-Loan and Post-Loan Period
230
7 45 Yield rate of Paddy per acre of different size of farmer in Pre-Loan Period and Post-
Loan Period
231

12
7 46 Yield rate of Paddy per acre of different Caste of farmer in Pre-Loan Period and Post-
Loan Period 232
7 47 Yield rate of Paddy per acre of different Sample Groups in Pre-Loan Period and Post-
Loan Period 232
7 48 Income per Borrower of different size in Pre-Loan and Post-Loan Period
233
7 49 Income per Borrower of different Caste in Pre-Loan and Post-Loan Period
233
7 50 Income per Borrower of different Sample Groups in Pre-Loan and Post-Loan Period
234
7 51 Income per acre in the basis of size of Land Holding
234
7 52 Income per acre in the basis of Caste of Borrowers
235
7 53 Income per acre of Borrowers on the basis of Sample Groups
235
7 54 Distribution of Borrower according to different type of activities in different Sample
Districts 236
7 55 Distribution of Beneficiaries according to activities and Caste
237
7 56 Distribution of Beneficiaries according to size of Family
237
7 57 Distribution of Beneficiaries according to age
238
7 58 Distribution of Beneficiaries according to Educational Attainment
239
7 59 Occupation of beneficiary was ancestral or not
239
7 60 Average Income of the Borrowers in Pre-Loan and Post-Loan Period
240
7 61 No. of day engaged in Pre-Loan Period and Post-Loan Period in different Sample
Groups 241
7 62 Average Income of the Borrowers of Goat and Sheep rearing in Pre-Loan and Post-
Loan Period in different districts 242
7 63 Average number of days engaged in Pre-Loan and Post-Loan Period in different
Sample Districts 242
7 64 Average Income of Borrowers in Pre-Loan Period and Post-Loan Period in different
Sample Groups 243
7 65 Average number of day engaged in Pre-Loan and Post-Loan Period in different
Sample Groups 244
7 66 Average number per Borrower in Pre-Loan Period and Post-Loan Period in different
districts 244
7 67 Number of day engaged by Borrower in Pre-Loan Period and Post-Loan Period in
different Sample Groups
246
7 68 Distribution of Borrowers according to type of activities in different Sample Groups
247

13
 LIST OF FIGURES

S .No. Description P. No.

4 1 Pictorial representation of total population and Average annual Exponential Growth

Rate of Agricultural in total Exports 52
4 2 Pictorial representation of Rural population and Agricultural workers
52
4 3 Pictorial representation of contribution of Agriculture and Allied Sectors to GDP
55
4 4 Pictorial representation of share of Agricultural exports to total exports
56
4 5 Pictorial representation of Employment Generation in Agricultural sector
57
4 6 Pictorial representation of ratio of Agricultural Credit to AGDP
61
4 7 Pictorial representation of Agricultural Credit obtained from different sources
64
4 8 Pictorial representation of Institutional Credit flow (Rs. In crores)
65
4 9 Pictorial representation of Banking System
72
4 10 Pictorial representation of disbursal of institutional Credit to Agriculture
84
4 11 Pictorial representation of Cooperative Credit institutions
85
4 12 Net work of Agricultural Co-operative Credit Structure
86
4 13 Short – term Co-operative Credit structure
88
4 14 Pictorial representation of various models of the Short term credit structure
89
4 15 Pictorial representation of total memberships and paid-up capital
94
4 16 Pictorial representation of total deposits, advances and CD ratio
94
4 17 Pictorial representation of Credit issued in crores
97
4 18 Pictorial representation of target and achievements of loan recoveries
103
4 19 Pictorial representation of demand and recovery of loans
104
5 1 Pictorial representation of membership of Cooperative societies in A.P.
124
5 2 Pictorial representation of paid up and working capital details of Cooperative societies
125
5 3 Pictorial representation of loans, advances, outstandings of CCS
125
5 4 Pictorial representation of memberships of PACS
132
5 5 Pictorial representation of share capital, working capital and borrowings of PACS
132
5 6 Pictorial representation of advances, recoveries, overdues of PACS
133
5 7 Pictorial representation of lending by NABARD
136
5 8 Pictorial representation of various Seasonal Agricultural operations
136

14
5 9 Pictorial representation of Progress of DCCBS
139
5 10 Pictorial representation of working of CCBs in A.P.
140
5 11 Pictorial representation of Performance of DCCBS
140
6 1 Pictorial representation of operational map of DCCB, Kakinada
161
6 2 Pictorial representation of expansion of business per branch
167
6 3 Pictorial representation of business ratio and business per branch
168
6 4 Pictorial representation of deposit mobilization
170
6 5 Pictorial representation of deposit mobilization and their percentage variation
170
6 6 Pictorial representation of current and saving deposits
171
6 7 Pictorial representation of term and fixed deposits
172
6 8 Pictorial representation of total deposits
173
6 9 Pictorial representation of disbursement of total advances
174
6 10 Pictorial representation of farm and non-farm loans
175
6 11 Pictorial representation of Classification of Advances
178
6 12 Pictorial representation of Agricultural term loans disbursed by DCCB
180
6 13 Pictorial representation of Crop loan disbursements and achievement targets
184
6 14 Pictorial representation of growth of PACS
187
6 15 Pictorial representation of sources of funds
187
6 16 Pictorial representation of details of loans & advances
188
6 17 Pictorial representation of Deposits – Advances CCB
194
6 18 Pictorial representation of Credit deposit ratio of CCB
194
6 19 Pictorial representation of rate of deposits and Credit of CCB
195
6 20 Pictorial representation of CD ratio of CCB
195
6 21 Pictorial representation of progress of CCB
197

15
 ABBREVIATIONS

ACD : Agricultural Credit Department

AIRCS : All India Rural Credit Survey
A.P. : Andhra Pradesh
APCOB : Andhra Pradesh Co-operative Bank
ARDC : Agricultural Refinance and Development Corporation
ARDR : Agricultural Rural Debt Relief
ATL : Agricultural Term Loan
Avg. : Average
BDP : Business Development Plans
CARG : Compound Annual Rate of Growth
CBEC : Central Banking Enquiry Committee
CBFS : Co-operative Better Farming Societies
CCBs : Co-operative Central Banks
CCDS : Co-operative Credit Delivery System
CCS : Co-operative Credit Societies, Co-operative Credit Structure
CDP : Community Development Programme
CLDB : Co-operative Land Development Bank
CMP : Common Minimum Programme
CRAR : Capital to Risk Weighed Assets Ratio
DCCB : District Central Co-operative Bank
DTP : Development of Tribal Production
E.G. Dist. : East Godavari District
FSS : Farmers Service Societies
GCA : Gross Cropped Area
GDP : Gross Domestic Product
GIS : Godavari Irrigation System
GOI : Government of India
HYV : High Yield Variety
IAAP : Intensive Agricultural Area Programme

16
IADP : Intensive Agricultural Distribution Programme
ICDP : Investment Credit Development Programmes
IDBI : Industrial Development Bank of India
IPM : Integrated Pest Management
IRDP : Integrated Rural Development Programme
KCC : Kisan Credit Cards
KKD : Kakinada
LAMPS : Large-sized Adivasi Multipurpose Societies
LTCCS : Long Term Co-operative Credit Structure
LPG : Liberalization, Privatization and Globalization
Marginal Farmers and Agricultural labourers Development
MFALDA :
Agency
MoU : Memorandum of Understanding
MT : Medium Term
NABARD : National Bank for Agriculture and Rural Development
NAFSCOB : National Agricultural Federation of State Co-operative Banks
NAIS : National Agricultural Insurance Scheme
NAP : National Agricultural Policy
NCDC : National Co-operative Development Corporation
NCUI : national Co-operative Union of India
NDP : Net Domestic Product
NGC : New Generation Co-operatives
NIMC : National Level Implementing & Monitoring Committee
OPP : Oil Seed Production Programme
OTS : One Time Settlement
PACS : Primary Agricultural Co-operative Societies
PCARDB : Primary Co-operative Agricultural and Rural Development Bank
PIA : Project Implementing Agency
PLR : Prime Lending Ratio
PPP : Purchasing Power Parity
RBI : Reserve Bank of India
RCCS : Rural Co-operative Credit Structure
SAO : Seasonal Agricultural Operations

17
SAP : Structural Adjustment Programme
SCARDB : State Co-operative Agricultural & Rural Development Banks
SCB : State Co-operative Banks
SDBI : Small Scale Industries Development Bank of India
SFDA : Small Farmers Development Agency
SCLDBs : State Co-operative Land Development Banks
SHGs : Self-Help Groups
SLR : Statutory Liquidity Ratio
ST : Short Term
STCCS : Short Term Co-operative Credit Structure
SWCDS : Single Window Credit Delivery System
W.G. Dist. : West Godavari District

18
19
 CHAPTER-I

INTRODUCTION

1. 1 Introduction

1. 2 Significance of the Study

1. 3 Objectives of the Study

1. 4 Limitations

1. 5 Chapters scheme

20
1.1. INTRODUCTION

Agriculture is the most important and crucial sector of Indian economy. It provides
food, income and employment to the largest section of population of the country. It
contributes 15.7 percent to the Gross Domestic Product (GDP) and provides
employment to about 57 percent of the total working population in the country. It
contributes to the exports as well as economic growth of the country. The
agricultural exports amounts to Rs. 49802.92 (in Crores) of total national exports of
Rs. 454799.97 (in Crores) for the year 2005-06, which is 10.95 percent of total
national exports.

Agriculture plays an important role in the development of any country. It has been
categorically observed that the performance of agriculture influences to a great
extent the level of economic activities of all the other sectors and also the overall
rate of growth of any economy. According to some eminent economists, the
functions of agriculture include: supplying food to consumers in both the
agricultural and non-agricultural sectors, supplying raw materials to the non-
agricultural sectors, transferring surplus labour to the non-agricultural sector,
supplying capital funds through taxes and saving to the non-agricultural sectors,
providing exports direct or through processing in the non-agricultural products both
for final consumption and investment. Agriculture and general economic
development are part of a single process having reciprocal reaction between each
another. Increasing agricultural productivity makes important contribution to
general economic development. If agriculture stagnates, it acts as a brake on
industrial expansion and halts the real growth. Hence, development of agriculture
forms the backbone of the overall development of the country.

Dominantly, agricultural countries are generally found to be poor not because they
are agricultural, but because of their agricultural backwardness. Hence agricultural
development is essential for the overall development of the country. A considerable
progress has been evidenced in the agricultural sector through ushering in ‘Green
Revolution’ and agricultural productivity registered a fairly steep rise and appears to
be on the threshold of achieving self-sufficiency in food grain requirement.

21
Indian agriculture is mainly dominated by small, marginal farmers and landless
laborers who live in the subsistence economy and are not in a position to finance
agricultural inputs for the development of agriculture. So, to meet their agricultural
requirements, adequate credit is crucial for the agricultural development. Credit is
an important input which ensures adequate working capital as well as infrastructural
development. Adequate and timely credit provision significantly increases
agricultural output which leads to an increase in the economic development of the
cultivators and people attached to cultivation. Moreover, agricultural credit serves
as an instrument for stimulating increase in output, income and employment.

The advanced technological changes in the agricultural sector necessitated the

requirement of more working capital. Hence, the poor peasants in India are in search
of adequate and timely credit. The financial demand of the Indian farmers is
classified into three types depending upon the need and the period of their
requirement:

A. Short-Term Credit (Crop Loan)

B. Medium-Term Credit

C. Long-Term Credit

The Short-Term credit is for a short period of less than 15 months for the purpose of
seasonal cultivation. The Medium-Term credit is for a period between 15 months to
5 years to make some improvement on land, buying cattle, agricultural equipments
etc., whereas the Long-Term credit is for more than 5 years period. Short-term
credit should be provided to meet the seasonal agricultural operations (SAO) and to
buy mechanical tools and for land reclamation agriculturists require long-term
credit. As such agriculture requires appropriate institutional mechanism to provide
both short-term and long-term credits to the farmers.

To cater these fund requirements various sources have been categorized as:

A. Non-Institutional Sources

B. Institutional Sources

The Non-Institutional Sources are also called as Informal credit, which include
money-lenders, trade merchants, commission agents, relatives, landlords and others,

22
whereas the Institutional Sources are also called Formal credit which include
Cooperative Credit Institutions, Land development Banks, Commercial Banks ,
Regional Rural Banks and other financial institutions.

Initially, the Indian agriculturists were depending more on non-institutional sources

for their credit requirements and unfortunately, these sources used to squeeze the
blood of the poor peasants by charging high rates of interest. The main objective of
these sources is not to increase the agricultural productivity, but to bring the farmers
into the grip of perpetual indebtedness. Hence, adequate and timely credit to the
farmers on liberal terms and conditions become Sine qua non of agricultural
development in the country.

So as to prevent exploitation and help farmers to raise their productivity and

maximize the income, institutional credit schemes by various institutions were
launched. The foundation of the institutional credit structure in rural India was laid
with the organization of Co-operative Credit Societies at the beginning of this
century. After the Independence, the Government of India (GOI) had adopted a
multi-agency approach for farm credit in order to provide adequate, cheap and
timely credit. But in the initial periods i.e., during 1951-52, the contribution of the
institutional agencies to farm credit was a meager 7.3 percent only, where as the
non- institutional credit was around 92.7 percent. In this context, a well known
economist, Rao (2004) had rightly pointed out that non-availability of institutional
credit was not only the bottleneck that keeps agricultural improvement at bay, but
also largely responsible for distorting the agrarian structure in favor of the non-
institutional agencies. However, the Reserve Bank of India (RBI) had implemented
many schemes in order to improve the flow and structure of agricultural credit in
our country. But now, the share of institutional credit had gone upto 61.1 percent
and the share of non-institutional was 38.9 percent for the year 2002.

In this context, the All India Rural Credit Survey Committee (1954) had come out
with the suggestion that “the Cooperative credit is the best suited agency to
institutionalize the rural credit structure”. The committee also observed that
Cooperatives had a vital role in channeling credit to the farmers. Initially in the year

23
1951, the provision of credit through Co-operatives remained meager with only 3.3
percent, but now it increased to 37 percent in the year 2003-04.

In the year 1892, Sir Fredrick Nicholson recommended the establishment of rural
Co-operative Credit Societies on German pattern in order to provide agricultural
credit facilities to the farmers. Subsequently, the Famine Commission (1901)
recommended the introduction of Co-operatives in the country. In the year 1904, the
Cooperative Societies Act was passed and Cooperatives were seen as the premier
institutions for disbursing agricultural credit. The scope of Co-operative Societies
was subsequently enlarged by the Co-operative Societies Act 1912. By the
recommendations of Narasimham Committee, Regional Rural Banks (RRBs) were
set up in the year 1975. By the end of 1977, three separate institutions were emerged
for providing rural credit, which was often described as the “multi-agency
approach”. The National Bank for Agriculture and Rural Development (NABARD)
was set up in 1982 to provide credit for the promotion of agriculture. It had played a
central role in providing financial assistance, facilitating institutional development
and encouraging promotional efforts in the area of agricultural credit.

Indian agricultural credit system although began with taccavis, Cooperatives formed
its backbone. In the year 1951-52, the share of Credit Co-operatives in the total
institutional finance was 3.1 percent which further became 20.9 percent in the year
2006-07. In the context of liberalization, privatization and globalization of the
Indian economy, Co-operatives had been recognized as the only institutions, which
might improve the quality of rural households.

Rural Credit Co-operatives in India were originally envisaged as a mechanism for

pooling the resources of people with small means and providing them with access to
different financial services. Democratic in features, the movement was also an
effective instrument for development of degraded waste lands, increase in
productivity, providing food security, generating employment opportunities in rural
areas and ensuring social and economic justice to the poor and vulnerable.

24
The history of the Co-operative Credit Movement in India can be divided into four
phases.

In the First Phase (1900-30), the Cooperative Societies Act was passed (1904) and
“Co-operation” became a provincial subject by 1919.

The major development during the Second Phase (1930-50) was the pioneering role
played by RBI in guiding and supporting the cooperatives. However, even during
this phase, signs of sickness in the Indian Rural Co-operative Movement were
becoming evident. The Cooperative Planning Committee (1945) had discerned these
signs in the movement, finding that a large number of Co-operatives were “saddled
with the problem of frozen assets because of heavy overdues in repayment”.

Even so, also in the Third Phase (1950-90), the way forward was seen to lie in Co-
operative Credit Societies. The All India Rural Credit Survey was set up which not
only recommended state partnership in terms of equity but also partnership in terms
of governance and management. The NABARD was also created during this phase.

The Fourth Phase from 1990s onwards saw an increasing realization of the
disruptive effects of intrusive state patronage and politicization of the Co-
operatives, especially financial cooperatives, which resulted in poor governance and
management and the consequent impairment of their financial health. A number of
Committees were therefore set up to suggest reforms in the sector.

The Co-operative institutions provide not only credit, but also non-credit services
for all activities under primary, secondary and tertiary sectors of rural economy.
Further Cooperatives are considered as the agencies for mobilization and
development of rural resources in a planned and cost effective manner besides
providing inputs, services and marketing facilities to the rural economy.

The Co-operative Credit Structure in the country has been divided into two
structures basing on the time duration viz., Long-term Co-operative Credit Structure
(LTCCS) and Short-term Co-operative Credit Structure (STCCS). The Long-term
Co-operative Credit Structure (LTCCS) consists of two-tier viz., State Co-operative
Agricultural and Rural Development Banks (SCARDB) and Primary Agricultural
and Rural Development Banks (PCARDB). The Short-term Co-operative Credit

25
Structure (STCCS) has three tiers consisting of State Cooperative Banks (SCBs) at
apex (state) level, District Central Cooperative Banks (DCCBs) at district level and
primary Agricultural Cooperative Societies (PACS) at grass root level. Among the
Cooperative Credit Institutions, the Primary Agricultural Cooperative Societies
(PACS) are considered to be the ultimate sources of credit as they have local
participation on demographic lines. They are more responsive to the local needs of
the farmers and have intimate knowledge about the farm production as they are
operating at village level.

Of high relevance for financial inclusion of lower income people is especially the
Short-term Rural Co-operative Credit Structure (STCCS) providing mainly short
and medium-term credit besides other financial services. According to statistics of
the National Federation of State Co-operative Banks (NAFSCOB), at present
(March 2010), the three tier Short Term Co-operative Credit Structure (STCCS )
consists of nearly 94647 Primary Agricultural Credit Societies (PACS), 372 District
Central Cooperative Banks (DCCBs) with 13181 branches and 31 State Cooperative
Banks (SCB) with 1015 branches or a total of 122,590 service outlets. On an
average, there is one PACS for every 6 villages; these societies have a total
membership of more than 120 million rural people making it one of the largest rural
financial systems in the World. The Long-Term Cooperative Credit Structure
(LTCCS) provides mainly long-term investment loans and consists of 20 State Co-
operative Agricultural and Rural Development Banks (SCARDBS) and 696 Primary
Co-operative Agriculture and Rural Development Banks (PCARDB).

The District Central Co-operative Banks (DCCBs) act as a link between State
Cooperative Bank (SCBs) and Primary Agricultural Cooperative Societies (PACS).
The PACS depend on the finances provided by the DCCB. Hence, the DCCBs play
a vital role in providing agricultural credit to the agricultural sector. The PACS are
working at village level by covering 97 percent of the Indian villages. The PACS is
the foundation stone on which the whole cooperative structure was built. The PACS
function as flood gates through which funds are directly provided to the farmers.
The Co-operatives have played an important role in diffusion of Green Revolution
in India. Co-operatives have occupied an important place in agricultural

26
development of the country as they provide basic credit which lubricates the wheel
of agriculture.

The DCCB occupies and forms an important position in the Co-operative Credit
Structure. The success of the Co-operative credit movement largely depends upon
the role and financial strength of the DCCB. The finance granted by the DCCB is
given to the cultivators through PACS. Hence, the Co-operative Banking Structure
has been conceptualized to play vital role in providing timely, adequate and cheaper
credit to the farmers for basic support to core agricultural activities.

Andhra Pradesh is basically an agrarian economy and is known as “Granary of the

South” by producing one-tenth of India’s total output of food grains. As A.P. is
predominantly agricultural in character, around 70 percent of the population
depends on it for their livelihood. In Andhra Pradesh, the Co-operative Credit
Societies play an important role in serving the needy farmers by providing short-
term, medium- term and long -term loans at lower rates of interest.

In the state, the Credit Co-operatives has three tier structures. Andhra Pradesh
Cooperative Bank (APCOB) is the apex institution which guides and frames the
total network of the Co-operative credit system. Under it there are 22 DCCBs
working with 579 branches extending their services to the agricultural and allied
sector. PACS are the grass root level institutions that have direct interaction with
farmers. In the state there are 2746 PACS working to serve the needy farmers.
Andhra Pradesh is the first state which implemented the Single Window Credit
Delivery System (SWCDS) in 1987.It is an innovative programme in which PACS
are expected to provide multi-farm credit and multi-functional services at a single
contact point. In the state, the short term and long term credit structures have been
amalgamated under this system. According to the system, the total Co-operative
credit structure was reorganized. At the time of introduction of SWCDS, there were
6695 PACS and 27 DCCBs in the state which were reorganized into 4564 viable
PACS and 23 DCCBs in order to maintain the norm of “One District - One DCCB”.

The APCOB has continued its efforts to provide increased financial assistance to the
farming community through the DCCBs and PACS by bridging gap between the

27
assistance from The NABARD and the credit requirements at the grass root levels
augmenting the credit support from its own resources.

The District Central Co- operative Bank (DCCB), Kakinada was established in the
year 1987 as a result of Single Window Credit Delivery System (SWCDS), by the
amalgamation of four District Central Co- operative Banks (DCCBs) viz., The
Kakinada Co-operative Central Bank, The Ramachandrapuram Co-operative
Central Bank, The Konaseema Co-operative Central Bank and The Rajahmundry
Co-operative Central Bank. Actually, it has operations from the year 1917 itself. It
is serving the rural clientele with 47 branches and 310 PACS throughout the district.
Kakinada is the head quarters of East Godavari district. It is an agriculturally
developed district where the paddy cultivation occupies upto 53 percent of the total
cultivated area with an average yield of 2625 kg/acre. Coconut and banana are also
cultivated by the farmers. The district is known as “The Rice Bowl of Andhra
Pradesh”. In the district, Co-operatives are functioning in most efficient manner by
providing adequate, cheap and timely credit to agriculture and allied sector.

28
1.2. SIGNIFICANCE OF THE STUDY

From the above facts, past studies and subsequent analysis, it is clear that in India,
Co-operative Credit Institutions have been playing significant role in extending
credit to the farm sector besides providing inputs, marketing and extension services.
Particularly in the state of Andhra Pradesh, Co-operatives play a very important and
crucial role in the growth and development of agricultural sector. After the
introduction of SWCDS in April 1987, the PACS have gained importance as they
pave the way for providing multi-term credit and multi-functional services at a
single contact point.

It is evident that there has been no study conducted so far regarding the role of the
DCCB, Kakinada in agricultural development. The present study is an attempt to
analyze the role of DCCB in agricultural development of E.G. District. Its’ focus is
regional and pertains to E.G. District only. It may be treated as an addition to the
existing bulk of literature in the field of agricultural co-operative credit.

In view of this, an attempt has been made to study the role of the DCCB, Kakinada
and PACS working under it for the growth and development of agricultural sector in
the East Godavari District of Andhra Pradesh.

29
1.3. OBJECTIVES OF THE STUDY

In order to study the role of District Central Cooperative Banks in the agricultural
development of India and specifically East Godavari District of Andhra Pradesh
the following objectives are undertaken:

1. To study the growth and development of the District Central Cooperative

Banks in India, Andhra Pradesh and East Godavari district.

2. To analyze the advances given by the District Central Cooperative Bank,

Kakinada through Primary Agricultural Cooperative Societies to different
sections of agricultural sector.

3. To analyze the trend of deposits, the ratio of fixed and savings deposits in
inculcating the saving habit among the customers which in turn enhances the
capital formation and credit deployment.

4. To assess the impact of Co-operative credit on the beneficiaries of

agricultural and allied sector.

5. To analyze the impact of Co-operative credit on the agricultural inputs used

by the beneficiaries.

6. To evaluate the role of District Central Cooperative Bank, Kakinada and

Primary Agricultural Cooperative Societies in agricultural development of
East Godavari District.

7. To identify the area of further research and make consideration of further

development of agriculture through Co-operative credit.

30
1.4. LIMITATIONS

i. The sample chosen for the present study is relatively small in size which
may not reflect the genuine characteristics of the universe. Hence all the
limitations associated with the small samples exist in the present study.

ii. No attempt has been made to evaluate the contribution of other variables in
the process of agricultural development.

iii. One of the major limitations of the study is that it has been confined to E.G.
District only, which is rather not a representative unit for realistic data
acquisition and virtual comparisons of the performance of various similar
District Central Cooperative Banks.

iv. The period of study is only for 10 years (1995-2005) which was not
sufficient to depict the clear picture of the study.

v. Only paddy cultivation has been taken for the present study as paddy
cultivation is the main agriculture activity in E.G. District.

vi. While collecting the primary data recall method was employed. As the
sample respondents have no habit of maintaining records of their operations
especially income, output etc., there may be chances of errors in the data
collected.

31
1.5. CHAPTER SCHEME

The entire study has been presented in eight chapters.

The CHAPTER I contains a brief Introduction which provides an insight into the
relationship between Co-operative Credit and its role in Agricultural & Allied
Sector in development of an economy. It also contains relevance of the Study,
Objectives and Limitations of the Study.

The CHAPTER II contains Research Methodology which is a very crucial part of

the thesis. It gives the Sources, Collection and Analysis of required data,
Hypotheses, various Statistical Tools used for the Analysis and Interpretation of the
Data.

The CHAPTER III contains A Brief Review of Literature that gives the opinions of
experts regarding Agriculture, sources of Agricultural Credit and Co-operative
Credit in relation to Agricultural Development.

The CHAPTER IV contains the Growth and Development of Co-operative Credit

Institutions in India. It provides the detailed view of Institutional and Non-
Institutional agencies in provision of Agricultural Credit in General and Co-
operative Credit in Particular.

The CHAPTER V contains the Growth and Development of Co-operatives in

Andhra Pradesh with special reference to East Godavari District.

The CHAPTER VI contains the Growth and Performance of District Central Co-
operative Bank (DCCB), Kakinada along with Primary Agricultural Societies
(PACS). It represents the Branch Expansion, Deposit Mobilization, Deployment of
Credit, Credit-Deposit Ratio, and Sect oral Advances etc. of DCCB, Kakinada.

In CHAPTER VII an attempt has been made to assess the impact of District Central
Co-operative Bank’s role on the sample borrowers in the Development of
Agricultural & Allied Sector in East Godavari District.

The Last Chapter i.e., CHAPTER VIII summarizes the major Results and Findings,
Suggestions and Practical Utility of the study and scope for further research.

32
33
 CHAPTER-II

RESEARCH METHODOLOGY

2. 1 Introduction
2. 2 Need for the study
2. 3 Scope and period of the study
2. 4 Statement of the problem
2. 5 Research Design
2. 6 Hypotheses
2. 6.1 Testing of Hypotheses

2. 6.2 The level of significance

2. 7 Sources and Collection of Data
2. 7.1 Primary Data
2. 7.2 Secondary Data
2. 8 Sample Design
2. 9 Analysis of the Data
2. 9.1 Statistical tools

34
2.1. INTRODUCTION
The present chapter deals with the methodology aspect of the research work which
is very crucial for deriving logical solutions to the research problem. It provides the
scientific analysis of the research problem along with the logic behind them. It gives
not only the methods but also the assumptions underlying the techniques. This
chapter contains the need for the study, scope and period of the study, research
design, hypotheses, sources and methods of data collection, sampling and statistical
tools used for the analysis and interpretation of the research problem.

2.2. NEED FOR THE STUDY

In India Co-operative credit institutions are playing significant role in extending
credit to the farm sector besides providing inputs, marketing and extension services.
Particularly Co-operatives play a very important and crucial role in the growth and
development of agricultural sector. In the state of Andhra Pradesh after the
introduction of Single Window Credit Delivery System in April 1987, many
remarkable changes were made in Co-operative credit structure and its performance
in the state.

In view of this, an attempt has been made to evaluate the impact of Co-operative
credit on the beneficiaries and on agricultural sector.

2.3. SCOPE AND PERIOD OF THE STUDY:

Agricultural development in the present work has been assessed through the flow of
Co-operative credit to farm sector in India, Andhra Pradesh, particularly East
Godavari district and its impact on the sample borrowers.

The period of study was confined to ten years i.e., between 1995-96 and 2005-06
because during this period many remarkable events have under gone. As Co-
operatives are providing cheap, adequate and timely credit to agriculture and allied
sector for the overall development of the economy, there is every need to assess the

35
impact of District Central Cooperative Banks and its role on the developmental
activities in general and agricultural production in particular.

36
2.4. STATEMENT OF THE PROBLEM
The study was focused to evaluate the role and impact of the Co-operative Central
Banks in India. The problem was titled as below:
“The Role of District Central Co-operative Banks in India: An Analysis”

2.5. RESEARCH DESIGN

A research design is the arrangement of conditions for collection and analysis of
data in a manner that aim to combine relevance to the research purpose with
economy in procedure.
Exploratory research design has been adopted basing on the nature and purpose of
the study, nature and sources of data required etc. The basic criteria beyond the
selection of exploratory research are that it should be flexible enough to provide
opportunity for considering different dimensions of the present problem. The main
objective of adopting this design is for an in depth or more precise investigation, or
for developing working hypotheses from an operational aspect.

District Central Co-operative Bank, Kakinada has taken as the case study which
represents the overall Co-operative credit structure and its role on the agricultural
development of India. Case study method explores and analyses the life or
functioning of a social or economic unit. The objective of this method is to examine
the factors that cause the behavioral patterns of a given unit and its relationship with
the environment.

2.6. HYPOTHESES
Hypothesis means a mere assumption or preposition to be proved or disproved.
Keeping in view the objectives of the study a number of research questions arose.
On the basis of the research questions, the hypotheses had formulated.
In order to test the validity of the objectives undertaken for the present study, the
following hypotheses have been framed:
1. The District Central Cooperative Bank, Kakinada is not playing any crucial
role in providing credit to the agricultural sector.

37
 2. The District Central Cooperative Bank is not providing sufficient credit to
agricultural sector in East Godavari district.
3. The Co-operative credit has not any significant impact on Agriculture and
Allied sector in East Godavari district.
4. The growth and development of the District Central Cooperative Bank,
Kakinada and PACS are not satisfactory.
5. The Co-operatives have no significant impact on the agricultural inputs used
by the beneficiaries.
6. The credit provided by the District Central Cooperative Bank, Kakinada to
allied sector has no impact on employment generation and income of the
beneficiaries.

2.6.1. TESTING OF HYPOTHESES

In the context of statistical analysis, hypothesis is of two types, viz., null hypothesis
and alternative hypothesis. Null hypothesis should always be specific hypothesis
i.e., it should not state about or approximately a certain value. The conclusion of
rejecting the null hypothesis is called alternative hypothesis. Generally in hypothesis
testing, we proceed on the basis of null hypothesis which is expressed as ‘Ho’.

2.6.2. THE LEVEL OF SIGNIFICANCE

The significance level reflects the maximum value of the probability of rejecting Ho
when it is true, and which is usually determined prior to testing the hypotheses.
In the present study one percent and ten percent levels of probability were chosen
for testing significance in this analysis.

2.7. SOURCES AND COLLECTION OF DATA

The study was based on two sets of data viz., Primary and Secondary. Primary data
means the data collected for the first time where as secondary data is the data that
has been already collected.

38
2.7.1. PRIMARY DATA
The primary data relating to socio-economic background, credit structure, incomes,
use of fertilizers and HYV seeds, yield per acre, employment generation, and land
infrastructure etc. were collected from 432 sample beneficiaries of East Godavari
District by direct personal interview method. The sample beneficiaries were selected
by stratified random sampling method.
The following instruments were used for the collection of primary data.
QUESTIONNAIRES:

A questionnaire was prepared so as to get comprehensive information about socio-

economic background, credit structure, incomes, use of fertilizers and HYV seeds,
yield per acre, employment generation, and land infrastructure etc. Subjective
questions are generally avoided. Some open-ended questions were however
included so as to have knowledge on the individual respondent’s specific and
personal views. Certain information had gathered through informal interview with
the officials of the concerned PACS.
OBSERVATIONS:

Some of the information had collected through personal observations by the

researcher
2.7.2. SECONDARY DATA
The secondary data relating to the growth and development of various banks and
financial agencies in India etc. were collected from the various publications &
websites of the RBI, NABARD, the Directorate of Economics and Statistics. The
data pertaining to Co-operatives in A.P. was obtained from the annual reports &
websites of APCOB and DCCB, Kakinada.

2.8. SAMPLE DESIGN

Sample design is a definite plan determined before any data are actually collected
for obtaining a sample from a given population. Samples can be chosen either
probability or non- probability samples. Probability samples are those based on
simple random sampling, systematic, stratified and area samplings.

39
For collecting primary data, stratified random sampling technique has been used. In
the present study, the entire E.G. District was grouped into three stratus and the
beneficiaries selected from each stratum was based on simple random sampling,
first stratification and then simple random sampling is known as stratified random
sampling.

2.9 ANALYSIS OF THE DATA

Consistent with the objectives of the study, different techniques had used for the
analysis of the data. The collected data was suitably classified and tabulated for the
purpose of analysis and interpretation. On the basis of these classified data relevant
conclusions and inferences were drawn and the results were interpreted objectively.

2.9.1. STATISTICAL TOOLS

The data pertaining to the study was analyzed and presented in tabular forms to
make the findings meaningful and easily understandable with simple statistical tools
of analysis like ratios, percentages etc. Other statistical tools and techniques such as
Compound annual growth rate, trend growth rate and simple correlation were used
for analyzing the growth rate, association between the variables etc. In case of
certain hypotheses, advanced statistical tools had been put to use. Interpretation for
data was based on rigorous exercises aiming at the achievement of the study
objectives and findings of the existing studies. To test the hypotheses Paired ‘t’ test
etc. was used.
A) COMPOUND ANNUAL GROWTH RATE (CARG)

The compound annual growth rate is worked out for a period of all years into
consideration. The compound growth rate of deposits, advances and different
sectoral advances are calculated.

A
CARG = N ------------- X 100 _ 100
P

Whereas,
n = No. of years

40
 A= Value of the current year
P=Value of the initial year

B) ANALYSIS OF TIME SERIES:

The analysis of time series is to be used for the purpose of forecasts and for
evaluating the past performances. Trend growth rate is one of the methods of the
time series analysis.
TREND GROWTH RATE

Trend growth rate for advances, deposits etc. calculated under Least square method.
The method of least square, when used to fit trend links to time series data was
employed mainly because it is simple, practical method which provides best fits
according to reasonable criterion. The least square method is the sum of deviations
of the actual value of Y and the trend value is equal to zero.
The straight line trend is represented by the following equation.

Trend value (Y) = a + b x

Σy
Whereas, a = ------------
N

Σxy
B = ------------
Σx2

x = deviations
∑y = n a + b ∑x
∑ x y = a ∑ x +b ∑ x 2

C) SIMPLE CORRELATION

Coefficient of correlation between two variables is a measure of the degree of

association (i.e., strength of relationship) between them.

41
Karl Pearson’s Coefficient of Correlation method is used for measuring the
association between deposits and advances.

Σxy
R = ------------
Σx2y 2
Whereas,
r = correlation
x = X – Assumed Mean of X
y = Y - Assumed Mean of Y
xy = Product of x & y
If r = 1 indicates, there exists perfect, positive correlation between the two variables
If r =-1 indicates, there exists perfect, negative correlation between the two
variables.

D) PAIRED -t TEST

Paired t-test is a non-parametric test. Non-parametric data do not follow the normal
curve of the probability and have unequal or immeasurable scale intervals between
the variables.
Paired t-test is a way to test for comparing two related samples, involving small
values of n that does not require the variances of the two populations to be equal.
Such a test is generally considered appropriate in a before - and – after treatment
study.

To test the significance of the variation in income, use of HYV seeds, fertilizers,
labour cost and employment generation between pre-loan and post-loan period, the
paired‘t’ test statistic is employed.
The formula is given below:

_
ñ-0

T = ------------
S / √n

42
 Σd
_
= ------------
Whereas, ñ
N

d = y-x

∑d2 - (ñ)2X n
S = ------------
n-1

N = Sample size
n= Number of matched pairs
x = Value of post-loan period

y = Value of pre-loan period

d = Deviations taken from the two values
ñ = Mean of differences
S = Standard deviation of differences
It should be noted that‘t’ is based on ‘n-1’degree of freedom.

Price Inflator:
Between pre-loan and post-loan period, there was an inflationary rise in price. That
is why it is necessary to deflect the pre and post loan income and expenditure of the
beneficiaries. In the present study pre-loan and post-loan year (period) is not
possible to take specifically; hence it is to be mentioned. However 2000-01 has
taken as base year. Implicit price deflator has been used as a proxy price index in
the present study.

43
44
 CHAPTER-III

REVIEW OF LITERATURE

3. 1 Introduction
3. 2 Agriculture
3. 3 Agricultural credit
3. 3.1 Non-Institutional credit
3. 3.2 Institutional credit
3. 4 Impact of credit on cropping pattern, cropping intensity, income and
employment
3. 5 Role of Co-operative Credit Institutions
3. 5.1 Progress of Co-operatives
3. 5.2 Strengths and Weaknesses of Co-operatives
3. 5.3 Restructuring of Co-operative Credit structure
Summary

45
3.1. INTRODUCTION
Agricultural finance as a strategic input in farm production and credit as a tool in
productivity has attracted considerable attention of the researchers. Co-operative
credit for agriculture and allied activities occupied a predominant position in the
Co-operative movement to fulfill the economic needs of nearly 80 percent of the
population living in villages.

The findings of earlier studies might possibly give indications of the problem on the
one hand and also provided certain guidelines for the present study. In addition, the
earlier studies provided the necessary cushion for a proper understanding of the role
of Co-operative credit and its role in helping farmers so that pointed attention was
focused which in turn would enable the policy makers to plan appropriate strategy
and apply corrective measures, whenever and wherever necessary. For the sake of
brevity and convenience, the earlier works are reviewed under the following heads:

A. Importance of Agriculture

B. Agricultural Credit

C. Impact of credit on cropping pattern, cropping intensity, income and

employment

D. Role of Co-operative Credit

3.2. IMPORTANCE OF AGRICULTURE

Agriculture forms the backbone of the Indian economy. It is a dominant sector and
the entire economy depends on it. It contributes 15.7 percent of Gross Domestic
Product (GDP) of the total economy (2009-10). It has been the source of supply of
raw materials to leading industries. It also plays an important role in foreign trade
by exporting agricultural products. Agricultural growth has direct impact on poverty
eradication. Recognizing the crucial role played by this sector enabling the widest
dispersal of economic benefits, the Tenth Plan has emphasized that “Agricultural
Development is central to rapid economic developing of the country”. General
economic development will require rapid agricultural development. Any failure in

46
the agricultural sector spelt disaster to the entire planning process. Any change in
the agricultural sector has a multiplier effect on the entire economy.

Carl and Lawrence (1917) have rightly pointed out that “agricultural development
in India is essential for its economic development”. The agriculture sector will
develop only when it produces maximum output. In order to increase the quality and
quantity of agricultural output, the farmers have to adopt the modernized tools and
techniques such as HYV seeds, fertilizers, pesticides and modern inputs etc.

Samuelson and Solow (1953) opined that if agriculture stagnates, it acts as a brake
on industrial expansion and halts the real growth.

Jacob (1957) observed that predominantly agricultural countries found to be poor

not because of their dependence on agriculture, but their backwardness in
agriculture.

According to Christensen (1966) increased agricultural productivity is essential for

the following three reasons;

1. To supply an economic surplus for further agriculture production or to

provide capital for industrial growth.

2. To make possible the release of labour and other resources for use in non
agricultural sectors.

3. To increase the purchasing power of farmers and rural people.

Dantwala (1991) observed that much agriculture development has taken place after
the introduction of HYV seeds, but it was confined to limited states like Punjab,
Haryana, Uttar Pradesh and coastal Andhra Pradesh.

The National Agricultural Policy (2000) had given emphasis on promoting

technically sound, economically viable and socially acceptable use of country’s
natural resources to promote sustainable agriculture.

Sisodia (2003) found that the agricultural sector acted as the main engine of
economic growth in most developing countries and contributed about 35 percent of
Gross Domestic Product.

47
The Union Budget (2004-05) had given preference to agricultural sector by aiming
at 7 to 8 percent of annual growth and doubling the growth of agriculture in the next
three years.

3.3. AGRICULTURAL CREDIT

The Green Revolution characterized by capital – intensive technology played a

significant role in agriculture. The agriculturists needed the funds for both
production and investment purpose. Basically the Indian farmers are poor and have
no funds enough to meet their financial requirements. Hence, they usually depend
loans and credit. Without adequate and timely credit the peasants are not in a
position to get good yield. Hence, agricultural credit is the life-blood of Indian
farmers.

Deccan Ryots Commission (1875) and Famine Commission (1880) concluded from
evidence collected that majority of land holdings were deeply and inextricably in
debt. The Central Banking Enquiry Committee (1929) observed that institutional
credit provided to the agriculturists covered only a smaller portion.

Black (1955) has emphasized the importance of credit and observed that credit
provision was the first and foremost input to be increased, which enabled the
farmers to buy more labour saving equipment, better seeds and fertilizers etc.

Ford Foundation (1959) had recommended supply of adequate farm credit in order
to increase the final productivity.

Horace Belashaw (1959) expressed after making a study on agricultural credit in

economically under-developed countries, that there had been no net increase in the
output, or income of the peasant or in his assets at the end of the credit period. The
general problem was to convert this static agricultural credit to a dynamic one.

Reserve Bank of India (1960) while exploring the possibilities of introducing Land
and Agricultural Banks in Madras state recognized that finance was essential for
enterprises including agriculture. It was further added that agricultural credit was
not only essential but also inevitable.

48
Ballendix (1961) stated that credit alone could not change the outlook of
conservative and subsistence farmers in India.

Sharma (1967) stated that for agricultural development, credit was an important
input which ensures adequate working capital as well as infrastructural
development. Adequate credit increases significantly agricultural output which leads
to the economic development of the cultivators and people attached to cultivators.

Sharma and Prasad (1970) estimated that the credit needs as per the farm size and
regions at different stages of technological development in agriculture, examined
the impact of credit and technology in increasing different sizes of farms in Uttar
Pradesh using Linear Programming technique and found that credit needs were
more on irrigated farms. The optional use of credit increased the income
substantially even at the prevailing stages of technology.

In a particular study, Maharatha (1970) found that just as in any other industry, in
agriculture also, finance was the major component which can bring about the
desired change. He also envisaged that in most cases of agricultural loans,
especially, short- term loans lose their utility and purpose unless they are sanctioned
at the right time.

Rashid (1973) observed that the availability of credit through nationalized banks
was more among the farmers in the small size holding groups and the influence of
farmers with large size holdings appears to be conspicuous in the working of Co-
operatives.

Gangwar and Gakhar (1973) revealed that the working capital required for adopting
improved level of technology was almost twice that of the working capital required
at the existing level of technology. Further, that working capital of farmers was
inadequate even for the optimum plants with the existing level of technology not to
think of improved level of technology. The credit requirements of small farmers per
acre were found to be Rs.212 and Rs.510 with the existing and improved level of
technology. Thus, the study showed that problem was primarily shortage of working
capital to the small farmers. If the banks could provide adequate capital, it would
facilitate a change in the cropping pattern and adoption of improved technology.
Ultimately this would result in increasing the income of the small farmers.

49
Mishra (1982) has observed that modernization of agriculture necessitated huge
capital investment. Hence, farm credit becomes sine qua non of agricultural
development in the country.

Muniraj (1987) said that farm finance is the amount extended to the farmers to
stimulate the productivity of limited farm resources. It’s not a mere credit, but an
instrument to promote the well-being of the society. Farm credit acts as a lever
with forward and backward linkages to the economic development both at micro
and macro levels.

Rayudu and North (1991) observed that a large sector of rural community in India
has to depend upon outside finance for financing their activities.

Reddy and Raghuram (1996) said that one of the important principles of credit is the
principle of productivity. Under this principle, the farm credit was meant for
increasing the productivity of the farm sector.

3.3.1. NON-INSTITUTIONAL SOURCES

Informal or non-institutional sources are the primary source of credit to the farmers
which include moneylenders, trade merchants, landlords and other private
institutions etc. These are easily accessible but costs high. It makes the farmers as
slaves in their hands. On this aspect several experts expressed their views and
opinions which are as follows:

Henry W. Wolf (1927) observed in his study that non-institutional credit was the
bond of debt that shackles agriculture.

Darling (1984) had rightly remarked that the high rate of interest and the compound
rate system led to the exploitation of the ryot who was easily shorn in his gain as the
sheep of it fleece.

Mishra (1991) had stated that rural institutions were providing sufficient agricultural
credit, but were not qualitative in nature.

Satyasai and Viswanathan (2003) observed that the share of money lenders during
1991-92 was as much as 42.3 percent. They charge usurious rates of interest and

50
resort to money malpractices such as binding arrangements for supply of free
labour, bonded labour, forced sale of produce, exploitative terms of contract and so
on.

Arunoday Sarkar (2004) rightly stated that the farmers were borne in debt, they
incurred debts during their life time and died leaving heavy burden of debt on their
successors.

The malpractices of non-institutional credit ultimately led to extensive suicides of

small and marginal farmers allover India, especially in Andhra Pradesh and
Karnataka.

Hon. Finance Minister Chidambaram (2005) has rightly said that credit delivery was
a daunting task in rural area. There were ten crores of farmers in the country and all
the credit institutions put together had provided credit to 467 crore families only and
the rest borrowed from money lenders. The normal rate of interest of money lenders
varies from 36 to 120 percent per annum. Hence, the whole agricultural sector is in
debt trap of money lenders.

3.3.2. INSTITUTIONAL CREDIT

The need for institutional credit arises because of the weaknesses or inadequacy of
private agencies in the supply of credit to farmers. In order to release the poor
peasants from the clutches of the private agencies, development of institutional
credit is inevitable.

Deccan Ryots Commission (1875) and Famine Commission (1880) concluded from
evidence collected that majority of land holding classes were deeply in extricable in
debt.

The Central Banking Enquiry Committee (1929) observed that institutional credit
provided to the agriculturists covered only a small proportion.

The All India Rural Credit Survey (1954) reported that only 3.1 percent of credit
needs had been met by all the Co-operatives.

51
Horce Belashaw (1959) observed in his study on agricultural credit in
underdeveloped countries that there had been no net increase in the output or
income of the peasants or in his assets at the end of the credit period. The general
problem was to convert this static agricultural credit to a dynamic one.

The Reserve Bank of India (1960) while exploring the possibilities of the
introducing Land and Agricultural Banks in Madras State recognized that
agricultural credit was not only essential but also inevitable.

Rajagopalan (1968) stressed the importance of institutional finance in stimulating

agricultural growth through new capital investment and the dissemination of new
agricultural technology.

From a study in Punjab, Johi and Singh (1965) found that the government loan
provision was inadequate to meet the genuine needs of the farming community.

Vashist (1968) pointed out that the progress made by the credit institutions had been
quite encouraging, yet it is not adequate. It is important that commercial banks
should also offer farm credit complimentarily with the federal Co-operatives.

Mosher (1986) described institutional credit agencies as efficient agencies which

were extending credit to farmers, as the credit acts as an accelerator for
agricultural development.

Bandhopadhyay (1993) had observed that during the last few years, the investment
on agricultural sector has declined considerably. As a result the output as well as
productivity had also showed decline.

Jacob (1995) observed that in order to increase the productivity, sufficient and
timely institutional credit should be provided to farmers.

Srivastav (1995) suggested in his study that banks should provide adequate credit to
agricultural sector for increasing production and productivity for the prosperity of
the nation.

Chaudhuri (2001) has also concluded in his study regarding interaction of formal
and informal credit market in backward agriculture. He opined that the formal credit
was very much essential for improving the agricultural productivity and the welfare

52
of farmers were the key issues of interest for the prospects of farming besides
farmers’ well-being.

The observations of Chaudhuri (2001) were strongly supported by Shetty (2004)

and suggested that in order to increase the productivity of agriculture, better
institutional credit delivery mechanisms were to be conceptualized, planned and
executed urgently.

Kanthimatinathan (2004) added to the above arguments and opined that without
cheap credit it is not possible for small and marginal farmers to carry out their
activities.

Sivaloganathan (2004) observed that adequate credit facilities were highly essential
for agricultural growth because there was a vast gap in the vital sectors of the
economy. The multi-agency approach has to be initiated as it facilitates access to
resources and service. More over credit for agriculture serves as an important
instrument for stimulating increase in output, income and employment.

Sanjay Jog (2004) viewed that the crop loan overdues of farmers due to natural
calamities might be clubbed together and rescheduled into a term loan repayable
over a period of five years including an initial moratorium period of two years.

Agricultural Credit and agricultural improvement should go hand in hand; the

farmers should improve farming methods for which they need adequate, cheap and
timely credit. (Datta and Sundaram, 2005)

Subbaiah and Selva Kumar (2005) observed that the institutional finance to
agriculture which had enhanced the agricultural productivity and growth which
further contributed to 22.1 percent of GDP in 2003-2004. They also quoted that the
government had estimated the credit flow from all lending institution for the year
2003-2004 at Rs. 80, 000 cores and has planned to enhance the level of flow to Rs.
1,05,000 cores for the year 2004-2005, which represents a 30 percent increase over
the previous year.

Sharma (2005) observed that an Advisory Committee on Rural credit was

constituted by the RBI to accelerate the flow of credit to the agricultural sector. It

53
had been proposed that co-operatives might waive security requirements for
agricultural loans from Rs. 10,000 to Rs. 50,000.

Subrahmanyam (2005) in his study observed that the government of India examined
the flow of agricultural credit and related issues in consultation with RBI,
NABARD and announced the farm credit package to ensure doubling the flow of
agricultural credit in the next three years more particularly to ensure 30 percent
increase over the previous year.

The Farm Credit Package involves:

• Enhancing the total flow of agricultural credit

• Debt relief measures to farmers

He also observed that the Union Budget of 2004-05 announced the proposals on
‘Credit’ as a part of Agriculture and the rural economy.

Yadav (2005) observed that the decadal average growth of volume of institutional
credit for ST agriculture remained stagnant at around 15 percent and that for
investment, credit had declined from 20.2 percent in 1970 to 11.9 percent in 1990.
In late Nineties, the economists warned of the decline in capital formation in
agriculture and continued slackness in the flow of bank credit for agriculture.

Ingle (2005) moots important suggestions to revamp the rural banking structure in
the country. He suggested providing loans to farmers and other backward classes at
the rate of cost plus two percent formula, so that they could easily repay their loan
which may enhance the working level of rural banking.

Yadav (2005) expressed that the government measures called for widening the
agricultural production credit, rapid increase in the capital formation in agriculture;
enhancing access to credit to small farmers and ensuring highest participation of
farmers in the credit programmers.

Basu (2005) and Patil (2005) stressing the importance of formal credit and pointed
out that strategies should be designed to increase the access to institutional finance
for farmers.

54
Ghosh (2005) had strongly criticized the commercial banks for their negligence
towards agricultural sector. He strongly pointed out that the productivity of
agriculture and allied sectors had to receive primary focus.

Subah Singh Yadav (2006) opined that more bank branches are needed in rural
areas to provide timely credit. To double the credit in the subsequent years, a
growth of 30 percent was suggested.

3.4. IMPACT OF CREDIT ON CROPPING PATTERN, CROPPING

INTENSITY, INCOME AND EMPLOYMENT

Several economists viewed that there was a close relationship between agricultural
credit and productivity. New agricultural strategies or Green revolution necessitated
capital investment for which large farm credit should be made available. The key
note of agricultural strategy was the application of advanced technology for
increasing yield per hectare.

Shaw (1958) observed in his study that farmer’s income and his financial position
had a direct relationship with his economic progress. Better techniques, better
production patterns and increased savings help in the economic progress to a certain
extent.

Sharma (1966) opined that the meager irrigation facilities would have a much
greater impact on productivity and consequently, any increase in the irrigation
would definitely go in a long way in influencing the increase in productivity in dry
and rainfed regions.

Venkatappaiah (1969) recognized that small farmers were not less progressive than
the large farmers and their productivity was in no way inferior to that of large
farmers operating in similar conditions.

Venkatappaiah (1971) opined that it would be necessary to provide adequate credit

for the success of ancillary activities like dairying, poultry and pig rearing for fuller
and more remunerative and also for supplementing their income.

In a particular study, Suleman (1972) noticed a shift in cropping pattern to the

extent of 89.65 percent increase over the filter point irrigation conditions. The

55
analysis further revealed a significant increase in resource productivity after
investment also. He further added that investment increased the income by 68.09
percent and repaying capacity of the farmer also became high.

Rashid (1973) found that as the amount of farm credit per acre increased there was
corresponding increase in additional income generated. This was found to be
substantial among large and small size farms and negligible among medium size
farms.

Rajagopalan (1974) concluded that the capital investment provided by Agricultural

Development Bank helped in developing sound infrastructural facilities resulting in
a change of cropping patterns and gross income.

Bank of India (1975) conducted a study in Sholapur District of Maharashtra state,

covering borrower and non-borrower farmers in selected villages. The results
revealed that the bank credit had made a good impact on borrower farms with
regard to intensity of cropping which recorded an increase of 61.5 to 111.28 percent
during 1972-75. Similarly borrower farmers have recorded increased crop output
and per acre net income during the above period.

Tej Bahadur (1975) revealed a significant relationship between the amount

borrowed and gross income generated. As a result, the gross income of a borrower
was much higher than the non-borrower.

Sharma (1976) reported that rice High Yield Varieties (HYV) needed more inputs
particularly fertilizers and insecticides and hence, the total cost per hectare was
higher than that of local varieties. The average total cultivation of rice HYVs is
about one-third more per hectare than local varieties. The net return per hectare is
also lower or less than 50 percent of rice HYVs.

Mishra (1978) pointed out that there was a significant increase in the percentage of
area cultivated, employment and incomes of small and marginal farmers under
HYV cropping patterns.

Gill and Singh (1978) studied the impact of credit on farm productivity through
Liberalization – Privatization (LP) technique on borrower and non-borrower farms

56
and reported that the improved technology increased the income only when
adequate credit supply was assured.

Singh (1978) indicated that in the normative cropping and production patterns
developed at higher levels of technology along with partial and full relaxation of
credit restraint through capital borrowing, there occurs a significant shift in favour
of the more remunerative cereals and fibre crops at the cost of relatively
remunerative oil seed and pulse crops. These shifts were also accompanied by
increase in the cropping intensity in all the zones for all the size categories. He also
indicated that there was indiscriminate use of labour and fertilizers.

Jain and Jain (1979) expressed that the bank finance resulted in an increase of the
area under HYVs and also the cropping intensity.

Vasudev (1986) studied the quantum of agricultural finance available to the farmers
and its utilization, and impact of institutional finance on irrigated area, cropping
pattern, cropping intensity, productivity, income and employment of farmers in pre-
loan and post-loan periods with respect to term and crop loans. He observed that
there was only marginal change in the cropping pattern of term and crop loanee
farms. Both term and crop loans helped the farmers to provide more employment to
human and bullock labours. The term loans and crop loans had a positive impact on
gross and net farm loans.

Garg (1989) observed that there was a marked shift in the cropping pattern on
borrower farms of all the size groups as compared to non-borrowers. The shift was
found to be in favour of HYVs and cash crops on large areas.

Nagabhushan and Saibaba (1991) while studying the impact of improved

technology on the economic feasibility tests on farms in West Godavari District, it
was revealed that both in deltaic and upland farms, the returns criteria sounded very
well. Even the risk bearing ability and repaying capacity were very well compared
as a result of utilization of credit for innovative agriculture.

Singh (1992) observed that the credit advances on borrower farms resulted in
bringing more area under irrigation and in increasing the cropping intensity which

57
in turn enhanced the level of income and employment in comparison to non-
borrowers.

Mohanty (1995) reported that the cost of cultivation and crops increased
significantly and also yield rate of different crops increased in case of irrigated lands
than non-irrigated. He also found that profits per acre in irrigated farms were much
higher than non-irrigated farms.

Chowdhury (1997) found that the average cropping intensity on the farm borrowers
was higher by about 44 percent than that of non-borrower farms. He also estimated
that the overall investment on fixed assets per acre was more than the non-borrower
farms.

Seni (1998) has emphasized in his study regarding the three dimensional approach
consisting of HYV programme, adoption of modern technology and food grains
Minimum Price Support Policy (MPSP) of new agricultural strategy.

Dantwala (1999) has stated that the HYV technology includes use of modern inputs,
fertilizers and pesticides and use of HYV seeds etc. It necessitated huge investment
which in turn results in an increase in yield, income, employment and so on.

Ramana (2001) concluded that the adoption of improved technology coupled with
adequate credit facility increased the income and employment of labour in
particular and agricultural sector in general.

Mamoria and Tripathy (2003) rightly stated that the agricultural output and
efficiency largely depened upon the inputs applied and methods adopted.

Ganesan and Narayanasamy (2004) found that the scientific method of crop patterns
enabled the poor farmers to procure the fertilizer needed for cultivation of
agriculture and promote sustainable agricultural development in rural areas. He
found that agriculture contributed nearly 42 percent of National Domestic Product
(NDP) and providing employment to 67 percent of the working force i.e., three-
fourth, of the country.

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3.5. ROLE OF CO-OPERATIVE CREDIT

Indian planners considered co-operatives as an instrument of economic

development. The Co-operative movement in India was started with a view to
providing agriculturists funds for agricultural operations at low rates of interest and
to protect them from the clutches of money lenders (Datta and Sundaram, 2005).

In a study entitled “Review of the Co-operative Movement in India”, Reserve Bank

of India (1960) observed that significant improvement in the development of the
Co-operative movement in various states and the increasing state participation as
well as growing dependence of the movement on the RBI.

Sinha and Verma (1965) in a case study of functioning of an agricultural society at

Bariapur district of Bihar expressed that debit was incurred not for enterprise or
development of production but for physical and social survival of a member. They
further added that only economically better off groups had benefited from Co-
operative Credit.

Shetty (1968) suggested that the Primary Co-operative credit societies should be
enabled to function as banks i.e., they treated each individual separately and on
merit for overall development of the members in general.

Bhalerao (1971) opined that the borrowings from Co-operatives and Commercial
Banks fell short of requirements particularly for the small and medium farmers.

While analyzing the Co-operative movement, Sharma (1973) found that Co-
operatives had penetrated deep into the rural areas and they were in a stronger
position with regard to the size and number of loans. The organization and working
of Co-operative institutions should be revised to make them responsive to the
farmer’s needs.

In a study entitled “Co-operative Societies in Developing Nations,” Fernado (1976)

concluded that Co-operatives were used by the state to achieve its goals such as
creation of employment, food distribution etc and added that successful co-
operation pre-supposes a degree of social and economic modernization.

Barnala (1977) in a study entitled “Role of Co-operative in rural development”

stressed much on providing employment as well as improving the economic

59
conditions of rural people, besides the need for adequately meeting the credit needs
of the farmer members.

In another study on “Defaults of Co-operative loans, problems, causes and strategy

for solution”, Desai and Narayana Rao (1978) identified four causes for defaulting
by members:

• Contrary to expectation, returns from credit use could be lower.

• The matching of terms of loans with the needs of rural households would be
inappropriate.

• The post-disbursal credit administration by the Co-operatives could be weak.

• Political will to repay and to recover loans might be weak.

They further suggested certain remedies such as strengthening of machinery for

supervisory and recovery of loans, creation of stabilization fund, great emphasis on
the economic feasibility and repayment capacity criteria in relation to the collateral
feasibility for lending and so on.

Sharma (1980) described PACS were the primary units at village level functioning
as flood gates through which funds were purveyed directly to the borrowers and
hence, PACS need to be organized and regulated for effective functioning.

Verma (1999) viewed that today’s rural development was recognized as a sin-a-qua
-non for faster economic development and welfare of the masses. Credit Co-
operatives play a significant catalytic role in accelerating the pace of agricultural
and rural development by providing required investment support for agricultural and
rural development.

Bhagat Singh (1999) opined that today, Co-operatives had emerged as a very strong
economic force committed to provide a host of services to our farmers, artisans and
other weaker sections of community for their socio-economic upliftment by having
a nation-wide spread and Federal structure.

Goyal (2000) viewed that the programmes of National Co-operative Development

Corporation (NCDC) had given a boost to agro-processing sector and helped to
create income generating activities and community assets in rural areas.

60
Hota (2000) found that the agricultural credit and fertilizers distributed by the Co-
operatives out of the total requirements in India were more than 60 and 30 percent,
respectively.

Sharma (2002) observed that development of Co-operatives and rural areas was
closely connected with the growth of agriculture sector and the development of
agro-processing facilities.

Sisodia (2002) observed that the flow of rural credit through Co-operatives had
increased from 43 percent of the total rural credit in 1991 to 46 percent in 1998-99.

Amin (2003) strongly promulgated that the Co-operative effort had to be deemed
and accepted as the only economic system to reduce poverty in India.

Kurien (2003) aptly viewed that the co-operation and cooperative movements were
the most effective tools for rural development and empowerment of our economy.

Robby Tulus (2004) viewed that Co-operatives were positioned as prime vehicles to
carry specific programmes in order to meet national development targets of the
Govt., analogous to sustaining the life blood of the Co-operatives in India so far as
external aid was available.

Subrahmanyam (2004) found that unless Co-operative Banks were healthy and
credit worthy, it would not be possible to reach credit to every farmer in need of
hour for credit.

Sanjiv Chopra (2004) categorically emphasized that the pivotal role played by the
Co-operatives in disbursing 2.43 crore Kisan Credit Cards (KCC) from out of 4.14
crore cards issued in the country. He also observed that the Co-operative sector had
the strength to achieve the desired socio-economic transformation and to attain the
national objectives.

Tangirala (2004) viewed that Co-operatives have a tremendous role in nation

building in a different form i.e., as professional organizations.

Murty (2004) found that the Co-operative Better Farming Societies (CBFS) relieved
the poor from indebtedness. Hence, they should be so structured as to serve all
needs of their members such as with timely and adequate credit, crop insurance,
supply of quality inputs, extension services and transport etc.

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Sharma (2005) observed that Co-operatives played an important role in unshackling
farmers and weaker sections from the stifling hold of moneylenders by lending 60
percent of their loans and advances.

Chatterjee (2005) said that Co-operatives constituted a systemic tool for ensuring a
dignified existence to the poor and the oppressed in any capitalist economy.

Ranjana Kumar (2005) observed that long-term credit structure played an important
role in the rural credit scenario and made a significant contribution in getting the
indebted farmers out of the clutches of the money lenders and also in the private
capital formation of rural areas.

The Rural Credit Survey Committee recommended that promotion of Co-operatives

be accepted as a part of state policy in the development of various economic
activities, particularly the agriculture. Farm credit by Co-operatives amounts to
46.15 percent of the total farm credit. These were expected to play a crucial role in
attaining the annual growth rate of 4 percent in the agricultural sector as visualized
in the Tenth plan (2002-07).

Yadav (2006) opined that to double the agricultural credit in the subsequent years, a
growth of 30 percent credit by Co-operative Banks was suggested and its branches
needed to be spread over to rural areas to provide timely credit.

3.5.1. PROGRESS OF CO-OPERATIVES

The main aim of Co-operatives is to provide cheap and timely credit to agriculture
and allied sectors was achieved to some extent. Still, Co-operatives have to take
several progressive steps in order to achieve their goals to ultimate level. Several
economists observed that the working and progress of Co-operatives in the country
during the pre and post Independence era and expressed their opinions on several
aspects.

Today, India’s Co-operative credit structure with over 13 crore members (including
6 crore borrowers) constitutes one of the largest financial systems in the World. The
over one lakh PACS could be regarded as the veritable bedrock of India’s rural
economy. The co-operative credit structure has 50 percent more clients than

62
Commercial Banks and RRBs. Directly or indirectly, it covers nearly half of India’s
total population. The Co-operative Credit Structure services include provision of
credit for farm input distribution, crop production, processing and marketing etc.

Bhalerao (1971) mentioned in his study that the borrowing from Co-operatives fell
much short of requirements particularly for the small and medium farmers.

In a study, Kanoujea (1972) opined that the Co-operative Land Development

Bank’s (CLDB) activities had improved the economic conditions of the cultivators
and noticed that the increased income had been ploughed back in agriculture itself
to a large extent.

Fernado (1976) in his study concluded that successful Co-operation pre-supposes a

degree of social and economic modernization.

Siva Prakash (1977) reviewed the performance of Co-operatives pertaining to the

promotion of the weaker sections among the cultivators. He suggested certain
important measures like lending to be production-oriented rather than security-
oriented activities and operations. Priority was to be given to small farmers and
separate credit limits were to be fixed for them.

Barnala (1977) in a study stressed that much to be done for providing employment
as well as improving economic conditions of rural people, besides the provision of
adequate credit.

Pathania (1987) analyzed the utilization of Co-operative credit in agricultural

sectors in Himachal Pradesh and concluded that proper utilization of credit hiked
the agricultural output.

Vaikunth (1988) observed that with the help of Co-operative credit, the farmers can
purchase modern inputs in appropriate time which gives increased yield and returns.

The above observations were strongly supported by Sharma (1989), Modi and Rai
(1993) and Sathey (1996). All of them unanimously opined that Co-operative credit
had great impact on agriculture as well as allied sectors.

Patnaik (1999) said that the existence of Co-operatives in the face of stiff
competition enjoyed the confidence of the rural masses. During 1996-97, the Co-

63
operatives accounted for 55 percent of the production credit disbursement and 25
percent of investment credit disbursement in the country.

Shantanu Ghosh (2003) reported that the Co-operatives had developed into a strong
network of 50.3 million Co-operatives with a wide spread network from village to
the national levels.

Katar Singh (2003) observed that Co-operative Banks were based and managed on
the principle of Co-operation, self-help and mutual-help, and its main aim was to
provide cheaper credit to their members, but not to maximize profits.

Subrahmanyam (2005) viewed that Co-operatives’ Rural Credit Delivery System

had been farmer friendly and had out-reached to serve agriculture. About 76 percent
of the total farm credit provided by them was out of their own resources and the cost
of mobilizing their resources is very high. The Prime Lending Ratio (PLR) of
resource mix of Co-operative Credit Structure worked out to 13.7 percent.

Ravindran (2005) observed that Agricultural Credit Package announced on 18th July
2004 envisaged an Annual Growth Rate of 30 percent in agricultural credit flow with a
target of Rs. 39,000 crores for Co-operatives during 2004-05.

Balraj Vishnoi (2006) opined that Co-operatives can play the role of promoter to
strengthen economic status of rural people.

Sisodia (2006) viewed that with sincerity, dedication and focus on goals, Co-
operatives were well poised to become an engine of socio-economic growth in the
coming years.

3.5.2. STRENGTHS AND WEAKNESSES OF CREDIT CO-OPERATIVES

Though Co-operative Credit plays an important role in rural development and

economy, it suffers from some drawbacks in lending credit to the needy farmers in
time. Regarding this aspect, the All India Rural Credit Survey Committee
(AIRCSC) has pointed out the following weaknesses:

• Lack of spontaneity in lending credit

• Lack of funds

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 • Loans for productive (agricultural production) purposes only

• Providing credit only and failed in providing marketing, processing and

better farming etc.

• Competition from private agencies

• Lack of Co-operation on the part of the people

• Defective management and leadership

• The nature of Indian rural society

The Rural Credit Survey Committee (1954) recognized the importance of Credit
Co-operatives in lending Short-term loans for Seasonal Agricultural Operations
(SAO) as also Long-term investment needs of the farming communities.

The Rural Credit Survey Committee report in 1954 recommended that promotion of
Co-operatives be accepted as a part of state policy in the development of various
economic activities particularly agriculture.

Hate (1998) observed that only 60 percent of the PACS were working viably.

Patnaik (1999) found out the following Strengths:

• Co-operatives cover all villages in the country having grass root level
network of the credit structure that forms 69 percent of the rural credit
network.

• Short-term credit sector employs around 2, 20,000 members and Long-term

structure 31,000 members.

• Good experience in purveying rural credit

• Co-operative activity being multi-functional facilitates smooth recovery

without any additional transaction and administration cost.

• These Banks maintain lower reserve requirements i.e., 3 percent (25 percent
Statutory Liquid Ratio).

• Out of NABARD’s annual refinance, Co-operative Banks enjoy more than

75 percent production credit and 60 percent investment credit on
concessional terms.

65
Prasad and Rao (2000) observed that unsatisfactory recovery of dues, low margins
and non-viable nature of many PACS are important factors affecting the working of
PACS.

Manmohan (2004) observed that the PACS constitute fulcrum of Co-operative

credit movement in India and remained to be a link in rural credit delivery system in
terms of mobilization of rural deposits (5 percent) but provided 37 percent of
advances.

Bhagawati Prasad (2005) observed that the geographical spread of Co-operative

Banks had been highly uneven and about 80 percent of these banks were
concentrated in five states of Maharashtra, Gujarat, Karnataka, Tamil Nadu and
Andhra Pradesh. As on 31st December 2003, these banks had mobilized deposits of
Rs.1, 03,748 Crores and advanced loans of Rs.61, 930 Crores.

Credit Co-operatives are expected to play a crucial role in attaining the annual
growth rate of 4 percent in the agriculture sector as visualized in the Tenth Plan.
Credit Co-operatives are facing the problem of sizeable levels of non-performing
assets and loan overdues. In order to overcome these weaknesses, they have to
strengthen their loan appraisal mechanism and monitor the utilization of Co-
operative loans for the specified objectives. The Government of India (GOI) had
been also committed to strengthen the capital resource base of weak Co-operative
Banks by providing recapitalization package to promote into viable Co-operatives.

For the progressive growth and successful functioning, many experts had given their
valuable views and suggestions as enlisted below:

Dubashi (1999) observed that reforms in relation to promotion of the Co-operative

sector should also form a part of the second generation of economic reforms.

Katar Singh (2002) concluded that Co-operatives had a bright future if they are
transformed into member-owned autonomous organizations governed by elected
representatives, managed professionally and liberated from unnecessary legal and
government controls.

Srinivas Gowd (2003) opined in his study that Co-operatives must emerge
themselves as autonomous, efficient, strong and self-reliant and member responsive

66
enterprises. He also stated that structural reforms and reorganization also assume a
significant role in professionalizing the Co-operative management.

Dwivedi (2003) found that Co-operatives need measures that were initiated to relax
the government control and the RBI has to appoint various committees for in depth
study of various aspects and issues relating to Co-operation followed by making
appropriate suggestions.

Mohan Dharia (2003) found that it was obligatory on the part of Government to free
Co-operatives from the clutches of Beaurocracy and political interference.

Kartikeyan and Karunagaran (2004) viewed that the Co-operatives continue to be

influenced, directed and governed by the government through the mechanism of
stringent Co-operative law. Co-operatives as voluntary, people centered, self-help
organizations deserve potential for contributing to the objectives of Structural
Adjustment Programme (SAP).

Pothireddy (2004) found that the DCCBs which were functioning well are suffering
because of the non-performing assets. Some of the new items discouraged and
created panic among depositors and Co-operators and others concerned and has
driven them to lose confidence in Co-operatives.

The Co-operatives in our country have tremendous potentialities which must be

tapped in an effective manner with all crafted strategies.

Sharma (2004) observed that an Advisory Committee on rural credit to be

constituted by RBI to accelerate the flow of credit to the agriculture sector. It has
been proposed that Co-operatives may waive margin/security requirements for
agricultural loans from Rs. 10,000 to Rs. 50,000 and in the case of agri-business and
agri-clinics for loans upto Rs.5 lakhs (without any collateral security). The RBI has
formulated a restructuring plan for weak Co-operatives to revitalize the Co-
operative credit structure involving an outlay of Rs. 15,000 crores to be shared
between the centre and state governments in an appropriate ratio.

Srivastava (2004) found that Agricultural Co-operatives had to move from the
regime of protection and patronage to the regime of competition, freedom,
autonomy, and democratic and professional management. A major initiative needed

67
is to develop the PACS as multi-purpose business entities meeting the demand of
the members at their doorstep of which diversification of their activities have to take
place in a professional manner.

The National Conference on Rural Co-operative Credit (NCRCC) appreciated the

role of NAFSCOB for the last four decades in promoting Short-term Co-operative
Credit Structure (SCCS) by advocating its cause, by educating its members and
their affiliates and effectively monitoring the progress made by Co-operatives.

Purushottam Jha (2004) said that New Generation Co-operatives (NGC) is a concept
which is more applicable in the case of “Value addition” Co-operatives rather than
Commodity Co-operatives. These can perform economic functions in a better way
than traditional Co-operatives affecting effective economic growth.

Bhagawati Prasad (2004) found that Agricultural Co-operatives are taking various
initiatives such as cost reduction, quality control and technology upgradation to
strengthen their competitive edge in the liberal economic environment. These are
now determined to move on to the high pedestal of efficiency and productivity in
the new millennium. He also observed that the National Policy on Co-operatives
(NPC) has been announced to promote autonomous and democratic functioning of
co-operatives. He viewed that efforts be made to make PACS viable through the
implementation of Business Development Plans (BDP), linkage of PACS with self-
help groups (SHG) and through bringing about diversification of their operations.

Tiwari (2005) observed in his study that Co-operatives could not be viable unless
they worked in a truly democratic manner.

Ranjani Kumari (2005), the chairperson of NABARD suggested the Co-operative

Credit Institutions to widen their customer base and asked Co-operative Banks to
adopt fiscal discipline for improving their financial health besides raising loan
recovery rates to continue their welfare work in era of economic liberalization. She
called for wide ranging reforms in Co-operative Credit Structure for making Co-
operative Banks viable, improving finances of PACS, restructuring of banking loans
in the case of rural and marginal farmers.

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On vision 2020, the National conference appreciated the government’s commitment
in the Common Minimum Programme (CMP) to double the rural credit in three
years and strongly called for recapitalization support to the Co-operative Credit
Institutions (CCI) to the extent of Rs. 15,000 crores without any pre-conditions. It
also recommended that the coming budget should strengthen the Co-operative
Credit Delivery System.

Subrahmanyam (2005) observed in his study that the GOI examined the flow of
agricultural credit and related issues in consultation with the RBI, NABARD and
announced the farm credit package to ensure doubling the flow of agricultural credit
in the next three years more particularly to ensure 30 percent increase over the flow
of credit in previous year. During 2004-05, the Co-operative credit amounted to Rs.
39,000 crores which ensures 30 percent increase over the previous year.

Vilasrao Deshmukh (2005) said that the credit Co-operatives in India account for
more than half of industrial finance advanced to agriculture and one-fifth of private
capital formation. Presently, the agriculture credit through Co-operatives was to the
tune of Rs. 70,000 crores.

Dubey (2005) observed that the service oriented viable PACS are necessary for
strong Co-operative movement and for the overall development of farmers and
weaker communities in the country. He suggested that the interest rate be reduced
from 12 to 9 percent on farmer loans and that a two-tier structure which will reduce
unnecessary cost burden of PACS be adopted.

Ingle (2005) moots important suggestions to revamp the rural banking structure in
the country. He suggested providing loans to farmers and other backward classes at
the rate of cost plus two percent formula, so that they can easily repay their loans.
Thus, working level of rural banking can be enhanced.

Thanikodi (2005) expressed that the success of the Co-operative Central Banks
(CCB) is to be judged by the manner in which they have promoted the healthy
functioning and development of PACS in rural areas. He also viewed that the CCBs
have to mobilize not only by offering competitive rates of interest but also by
providing essential banking facilities and services to depositors. They should
simplify loan procedure to speed up the disbursal of loan which is to be utilized for

69
that purpose and recovery is made regularly. They should have a close watch on the
recovery procedure of the PACS. The government should also pass effective and
stringent regulations on recovery of loans.

Sisodia (2006) viewed that with sincerity, dedication and focus on goals, Co-
operatives are poised to become an effective and efficient engine of socio-economic
growth in the coming years.

Rajnath Singh (2006) called upon the government to make necessary steps so that
farmers may not have to pay more than 6 percent interest on agricultural loans.

Mohan Dharia (2006) criticized the over-interference of the government and other
political leaders. To overcome these difficulties, the co-operatives must be
autonomous and independent in their working.

Dubhashi (2006) also supported his views and also found that many DCCBs are
suffering from financial scams in recent years due to the self-servicing decisions by
the directors in total disregard of co-operative principles, values and procedures.

3.5.3. RESTRUCTURING OF CO-OPERATIVE CREDIT STRUCTURE

The GOI recognized the necessity of restructuring of Co-operatives by the

recommendations of State Governments, Capoor Task Force Committee (2000),
ECRC (2000), Vikhe Patil Committee (2001) etc. In August 2004, the GOI
constituted a Task Force committee under the chairmanship of Mr. Vaidhyanathan
for suggesting measures for the revival of Credit Co-operative Structure. The Task
Force report revealed that more than 35 percent of CCBs and more than 50 percent
PACS were in loss. About 20 percent of SCBs and 38 percent DCCBs had eroded
their net worth. The erosion of deposits was to the tune of Rs. 31, 000 crores at the
level of DCCBs and Rs. 142 crores at the level of SCBs.

To protect the interests of depositors, of DCCBs and SCBs are required to observe
the prescribed prudential norms. The Rural Credit Co-operative Structure (RCCS)
must support all Co-operative Credit Structure (CCS) units with external resources
to achieve a minimum Capital to Risk Weighted Assets Ratio (CRAR) of 7 percent

70
which increase through internal accretions to 9 percent and 12 percent within 3
years and 5 years, respectively from the date of capitalization.

The Task Force Committee (TFC) recommended a financial package of Rs. 14,839
crores for Rural Credit Co-operatives, of which the central government granted a
financial assistance of Rs. 13,596 crores. NABARD has been designated as the
implementing agency for the revival of the Short-term Co-operative Credit
Structure. A National Level Implementing and Monitoring Committee (NIMC) have
been set up under the chairmanship of the Governor of the RBI for guiding and
monitoring the implementation of the revival package. In order to avail financial
assistance under the package, the state governments have to sign a Memorandum of
Understanding (MoU) with NABARD. So far 17 states (Andhra Pradesh, Arunachal
Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Madhya Pradesh, Maharashtra,
Rajasthan, Orissa, Uttarkhand, Uttar Pradesh, Tripura, Nagaland, Tamil Nadu,
Punjab and West Bengal) have signed the MoU and 4 more states and 3 union
territories have agreed to implement the package. The Task Force has also
submitted its report for revival of Long-term Co-operative Credit Structure
(LTCCS).

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From the analysis of above mentioned studies, we found they have focused their
attempt on the following major aspects:

• Causes for the low productivity of agriculture

• Inefficiency of formal sources in lending credit
• Structural problems in credit lending
• Government policies and strategies towards Co-operative credit structure
• Need of human resource development and up-to-dated technology in Co-
operatives
• Role and progress of Co-operatives
• Necessity for the growth and development of Co-operatives
• Strategy for revamping Co-operatives
The literature review extended valuable information relating to the research work
while analyzing the different aspects such as agricultural credit in general and
Cooperative credit in particular. It also framed some guidelines in analyzing the
strengths and weaknesses of Co-operative credit structure which formed crucial in
drawing conclusions of the present research work.

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3.6. SUMMARY

i. Agriculture is one of the most predominant sectors in Indian Economy. The

Government of India recognized its importance and emphasized in Tenth
plan as agricultural development is central to rapid economic development
of the country.

ii. The Green Revolution necessitated huge capital investment which resulted
in an increase in quality and quantity of productivity, employment and
incomes of farmers. The financial requirements can be fulfilled by two
sources viz., formal and informal. Informal sources are traditional in
character, who lends money at higher rates of interest. These sources are not
beneficial to poor peasants rather very harmful to them. In order to
overcome the drawbacks of informal sources, formal sources came into
existence. The main motto of these sources is to relieve the poor peasants
from the clutches of the informal sources and provide cheap and adequate
credit in time.

iii. Institutional or formal sources include Commercial Banks and Regional

Rural Banks. Of these, Co-operatives had traditional background in serving
the agriculture and allied sectors. It extended its services to remote areas
also. These branches were spread over to the rural areas by providing not
only credit but also by providing HYV seeds, fertilizers, pesticides and other
agricultural inputs at cheaper rates.

iv. India’s Co-operative Credit System constitutes one of the largest financial
system in the World. Though its’ services are good enough, it is suffering
from some weaknesses such as lack of funds, Co-operation and management
skills, non-performing assets and over dues etc.

v. However, the Government of India recognizing its role in rural credit,

appointed several committees to study the strengths and weaknesses of Co-
operative Credit Structure. The TFC recommended the GOI for a revival
package to restructure and recapitalize the Co-operative Credit Structure.

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74
 CHAPTER IV
GROWTH AND DEVELOPMENT OF CO-OPERATIVE CREDIT
INSTITUTIONS IN INDIA

4. 1 Introduction
4. 1.1 Physiography
4. 1.2 Geography
4. 1.3 Climate
4. 1.4 Soils
4. 1.5 Demography
4. 1.6 Per capita income
4. 1.7 Irrigation
4. 2 Agriculture
4. 2.1 Characteristic features of Indian Agriculture
4. 3 Agricultural Credit
4. 3.1 Non-Institutional Sources
4. 3.2 Institutional Sources
4. 3.3 Agricultural Credit Policy
4. 3.3.1 Kisan Credit Cards
4. 3.3.2 Rate of Interest on Farm Loans
4. 3.3.3 Agricultural Insurance
4. 4 Banking industry
4. 4.1 Commercial Banks
4. 4.2 Regional Rural Banks
4. 5 Co-operative Credit Societies
4. 5.1 Co-operative Movement and its origin
4. 5.2 Evolution of the Co-operative Movement
4. 5.2.1 Pre-Independence Period
4. 5.2.2 Post-Independence Period
4. 5.3 Progress during Plan periods
4. 5.4 Objectives of Co-operative Credit Societies
4. 5.5 Functions of Co-operative Credit Societies
4. 5.6 Structure of Co-operative Credit Societies
4. 5.6.1 Long-term Co-operative Credit Structure
4. 5.6.2 Short-term Co-operative Credit Structure
4. 5.6.2.1 Primary Agricultural Co-operative Societies
4. 5.6.2.2 District Central Co-operative Banks
4. 5.6.2.3 State Co-operative Banks
4. 5.7 Performance of Co-operatives
4. 5.8 Reforms of Co-operative Credit Societies
4. 5.9 Revival of Co-operative Societies
Summary

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 4.1. INTRODUCTION

India is a country with rich heritage and abundant natural resources. It is known for its
great culture and ancient civilization. India is a land of great physical and socio-cultural
contrasts marked by Unity in Diversity and Diversity in Unity. It is a country of great
geographical extent and distinctive character, often characterized as a sub-continent.
India has diversified physiographic conditions with a variety of landforms like
snowcapped Himalayan Mountains on the North; vast Indo-Gangetic plains in the
Middle; number of plateaus in the Peninsula as well as the dry desert sands on the West
and the Coastal plains of the Indian Ocean shores. The landmass of this sub-continent is
intersected by great rivers viz., the Ganga, the Brahmaputra, the Godavari and the
Krishna.

The name ‘India’ is derived from the great river the Sindhu or the Indus located in the
north-west part of the Country. Another name ‘Bharat’ originated after the great ruler of
this land ‘Bharat’ in the ancient times.

4.1.1. PHYSIOGRAPHY

The great Indian Peninsula is situated in the southern part of continent of Asia, girdled
by the Himalayas on the North and washed by the waters of the Indian Ocean on the
South and the Arabian Sea on the South-West, and the Bay of Bengal on the South-East.
The Indian Peninsula is separated from mainland Asia by the Himalayas.

4.1.2. GEOGRAPHY

The country lies between 8 0 41 and 370 6l north latitude and 680 7l and 970 25 l East
Longitudes, forming part of Northern and Eastern Hemispheres. It measured 3214
kilometers from North to South and 2933 kilometers from East to West with a total land
area of 3,287,263 square kilometers. The Indian sub-continent occupies a fairly large
area of the Globe. India is the seventh largest country in the World. It has a coast line of

76
 7516.6 kilometers encompassing the mainland, Lakshadweep islands and the Andaman
and Nicobar Islands. The mainland comprises of four regions viz., mountain zone, plains
of the Ganga and the Indus, the desert region, and the southern peninsula.

4.1.3. CLIMATE

The climate of India can be described as ‘tropical monsoon type’. According to

Thornthwaite method of ‘Water Balance Concept,’ India is divided into six climatic
regions viz., Perhumid, Humid, Moist Sub-Humid, Dry Sub-Humid, Semi-Arid and
Arid regions. The entire country has a tropical climate marked by relatively High
Temperatures and Dry Winters.

4.1.4. SOILS

The soils play a significant role in economic progress of the country where
agriculture occupies predominant importance. Soils endowed with a proper
combination of texture, salts and humus yield good results to farming community
and in turn to the national economy. The rich variety of soils is an asset for Indian
agriculture which include alluvial soils, black cotton soils, red soils and laterate
soils, mountain soils and desert soils. The coverage of various soils in the country is
as shown below.

Type of soil % coverage

Alluvial soil : 23.4
Black cotton soil : 24.12
Red soils : 29.08
Laterite soils : 4.3
Mountain soils : 10.64

4.1.5. DEMOGRAPHY
India occupies a unique position in the World population. It is the second most
populous country in the World next only to China. India’s population as on 1st
March 2001 stood at 1,028 million (532.1 million males and 496.4 million females).

77
 Table 4.1.
Population and Agricultural Workers
Average Annual Agricultural Workers
Total
Year Exponential Growth Rural Population Agricultural
Population Cultivators Total
Rate (%) Labourers
298.6 69.9 27.3 97.2
1951 361.1 1.25
(82.7) (71.9) (28.1) (100)

360.3 99.6 31.5 131.1

1961 439.2 1.96
(82.0) (76.0) (24.0) (100)

439 78.2 47.5 125.7

1971 548.2 2.22
(80.1) (62.2) (37.8) (100)

523.9 92.5 55.5 148

1981 683.3 2.2
(76.7) (62.5) (37.5) (100)

628.9 74.6 185.3

1991 846.4 2.14 110.7 (59.7)
(74.3) (40.3) (100)
742.6 106.8 234.1
2001 1028.7 1.95 127.3 (54.4)
(72.2) (45.6) (100)
Sources: Registrar General of India, New Delhi

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 Fig 4.1.

Pictorial representation of Total population and AEGR

Fig 4.2.

Pictorial representation of Rural Population and Agricultural workers

It is observed from the above table 4.1 that of the total population of 361.1,
cultivators and agricultural labourers shares 69.9 and 27.3 in 1951 and of 1028.7
total, their share is 127.3 and 106.8, respectively.

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4.1.6. PER CAPITA INCOME
India is today one of the six fastest growing economies of the World. The country
is ranked fourth place after USA, China and Japan in terms of Purchasing Power
Parity (PPP) in 2001. The GDP - Real Growth Rate (RGR) registers at 8 percent
during the second quarter of 2005-06. The composition of GDP contributed by
various sectors is as depicted below (as of September, 2010):

Sector % Contribution to total GDP

Services : 52.7
Agriculture : 15.7

Industry : 29.1
According to the report of the committee on India Vision 2020, India’s labour
force has reached approximately 375 million in 2002. However, 26.10 percent of
population was found to be below poverty line as on 1999-2000.

4.1.7. IRRIGATION
India as an agricultural country is always in great need of sufficient supply of
water to crops. As agriculture is the main stay of the economy, irrigation
considered to be decisive factor in agricultural deelopment. The most important
sources of irrigation in India are wells, tanks and canals. Well irrigation is the
most significant source as it accounted for 52.9 percent, canals 34.1 percent, tanks
6.5 percent and others 6.5 percent in 1992-93. The proportion of irrigated area to
the cultivated area in the country is 35.7 percent. The highest proportion of
irrigated soils could be found in Punjab while the lowest in Mizoram state.

4.2. AGRICULTURE

India is essentially an agricultural country and two-thirds of the work force

derives their livelihood from agriculture and allied activities. Agriculture is the
back-bone of Indian economy. India occupies an outstanding position in the
World with respect to several agricultural products. Agriculture is the most

80
important sectors of the Indian economy from the perspective of Poverty
Alleviation and Employment Generation. Agriculture accounts for about 25
percent of India’s national income. The share of agriculture in national income has
been declining from 56.5 percent in 1950-51 to 30 percent in 2009-10. A majority
of population in India depends on their sector for employment, income and source
of livelihood. Undoubtedly, about 70 percent people depend upon agriculture and
allied sectors for employment and income generation. The work force engaged
was about 75.9 percent (number being 143.2 million workers) in 1961, which
gradually declined to 52.1 percent in 2009-10. Though most of the people engaged
in agriculture, its’ contribution towards national income has been only 30 percent.
Agriculture provides not only food but also raw materials for manufacturing
industries like textiles, sugar, vegetable oil, jute and tobacco. Agriculture is not
only an important occupation, but also a way of life, culture and custom. Most of
the Indian customs and festivals are observed in consonance with agricultural
seasons, activities and products.

Table. 4.2.

Annual Growth Rate of GDP of Factor Cost in Agriculture during 2000 - 07

At Current prices At 1999-00 Prices

Agriculture, Agriculture,
Year
Agriculture Forestry & Agriculture Forestry &
Fishing Fishing
2000-01 -0.1 0.7 -0.6 -0.2
2001-02 8.3 8.3 6.5 6.3
2002-03 -3.8 -3.0 -8.1 -7.2
2003-04 13.7 12.9 10.9 10.0
2004-05 10.1 10.6 -0.2 0.0
2005-06(a) 10.6 10.9 6.3 6.0
2006-07(A) NA 9.6 NA 2.7
(a) Quick Estimates (A) Advance Estimate
Sources: Central Statistical Organization, New Delhi
As per the data in the table 4.2, the share of agriculture in GDP at current prices
and 1999-00 prices has significantly varied with the gross contributions and
productivities of such sectors. At both prices the contribution of agriculture was
increased.

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 Fig.4.3.
Pictorial representation of contribution of agriculture & allied sectors to GDP

Table 4.3.
Share of Agricultural exports in total (Percent)

Year Agriculture Total Share in %

1996-97 24161.29 118817.32 20.33
1997-98 24832.45 130100.64 19.09
1998-99 25510.64 139751.77 18.25
1999-00 25313.66 159095.20 15.91
2000-01 28657.37 201356.45 14.23
2001-02 29728.61 209017.97 14.22
2002-03 34653.94 255137.28 13.58
2003-04 37266.52 293366.75 12.70
2004-05 39863.31 356068.88 11.20
2005-06 49802.92 454799.97 10.95
Sources: Central Statistical Organization, New Delhi

It is evident from the table 4.3 that the share of agricultural exports was decreased
from 20.33 percent (1996-97) to 10.95 percent (2005-06). It may be due to the
decrease in the low productivity and high cost of production. Fig. 3.4 is the graphical
representation of the share of agricultural exports in the total.

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 Figure. 4.4.
Pictorial representation of Share of Agricultural exports in total

Table 4.4.
Employment in Agricultural sector (in Millions)

Employment 1951 1961 1971 1981 1991 2001

Cultivators 69.9 99.6 78.2 92.5 110.7 127.3
Agricultural labourers 27.3 31.5 47.5 55.5 74.6 106.8
Total 97.2 131.1 125.7 148 185.3 234.1
Sources: Central Statistical Organization, New Delhi

Table 4.4 gives the clear view of the working population dependent on
agricultural sector from the year 1951 to 2001. It reveals the categories of working
force such as cultivators and agricultural labourers. In total the work force was
increased from 97.2 percent (1951) to 234.1 percent for the year 2001. Fig. 3.5
gives the pictorial representation of the data represented in the table 4.4.

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 Figure 4.5.
Pictorial representation of employment generation in Agriculture sector

4.2.1. CHARACTERISTIC FEATURES OF INDIAN AGRICULTURE

1. The Indian agriculture is mostly rain fed, about two-thirds of the total
cropped area still depends on monsoon rains.

2. About one-third of the total cropped area is cultivated under irrigation

conditions.

3. Small and marginal land holdings are predominant which accounts for
more than three-fourths of the total operational holdings. The average
size of land holding is only 1.7 hectares.

4. The Indian agriculture is highly crop intensive, where two or three crops
are cultivated in the same piece of agricultural land in an agricultural
year.

5. There are mainly two crop seasons in India viz., Kharif (June to October)
and Rabi (November to March). The third crop season known as Zayad
(summer) is also grown after Rabi in the months of April, May and June
where irrigation is abundant.

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 6. Indian farmers grow a variety of crops both food crops and industrial
crops.

7. The Indian agriculture is highly traditional, subsistent and food grain

oriented and less mechanized.

8. Plantation crops like tea, coffee, rubber etc. and cash crops like cotton,
tobacco, jute etc. occupy relatively a small area; but, their contribution in
the total agricultural income is significant.

9. The modernization of agriculture constituting of farming of hybrid and

transgenic seeds is also achieving significance.

10. However, the average productivity of crops in India is very low.

Since Independence, concerted efforts are being made to revolutionize the Indian
agriculture. During the plan periods, particularly, in the First and Second Five-
Year Plans, great emphasis was given for the development of irrigation and
agriculture in the country. The Government has launched many Agricultural
Developmental Programmes such as (i) Community Development Programme
(CDP), (ii) Small Farmer’s Development Agency (SFDA), (iii) Marginal Farmer’s
and Agricultural Labourers Development Agency (MFALDA), (iv) Intensive
Agricultural Development Programme (IADP), (v) Intensive Agricultural Area
Programme (IAAP), (vi) High-Yielding Variety Programme (HYVP), (vii)
Multiple Cropping Programmes (MCP) for increasing agricultural production and
productivity, particularly food grain production to solve the food crisis. In this
direction, the ‘Green Revolution’ i.e., hybridization of agriculture has taken a
pride of place in agricultural scenario for bringing new trends in the practices and
production systems on modern scientific lines. Green Revolution refers to the
development and cultivation of high yielding varieties under crop intensive and
fertilizer-rich conditions for the increase of crop production.

India is making rapid progress in the field of agricultural development. Green

Revolution in India was marked by two distinct features i.e., innovative
technologies in the form of High Yield Varieties (HYV) of various staple food

85
crops and a complete restructuring of rural credit institutions. Both these factors
led to a phenomenal growth in Indian agriculture. During the Pre-Green
Revolution period (1963-64 to 1980-81), the output of all crops amounted to an
average growth rate of 3.13 percent per annum which was mainly on account of
an increase in area under agriculture. During the subsequent period, the growth
rate remained subdued at 2.10 percent. This is because expansion of area under
agriculture is being slowed down considerably while the high growth output was
achieved through improvement in the yield attributes.

4.3. AGRICULTURAL CREDIT

Indian agriculture is mainly dominated by small, marginal farmers and landless laborers
who live in the subsistence economy and are not in a position to finance agricultural
inputs for the development of agriculture. The advanced technology necessitated huge
requirement of capital. So to meet their agricultural requirements, adequate credit is
essential. Hence, the poor peasants in India are in search of adequate, cheap and timely
credit.

Credit plays a crucial role in lubricating the wheels of agricultural production. It is said
to be the life blood of agriculture and therefore, the need for timely and adequate farm
finance is obvious. To obtain a substantial increase in agricultural output, the provision
of credit accompanied by and coordinated with a sufficient amount of technical advice
and availability of necessary inputs in time. In fact, with the break- through in the late
sixties, agricultural credit has become more productive than ever before.

Therefore, the adoption of new strategy of agricultural development based on HYVs of

crops depends critically on the availability of necessary finance, assured water supply,
as well as on the farmers’ ability to use fairly large quantities of inputs.

India occupies a prominent place in agricultural output, but its productivity is far less
than that of World’s average productivity. It may be due to many factors such as the
inefficient resource management, lack of education of appropriate technologies, slow
rate of capital formation, inadequate finance supply, ineffective marketing, inadequate
irrigation and other infrastructural facilities etc. Recently, in a precise way Dr.

86
Manmohan Singh, the Prime Minister of India highlighted four areas of deficit those
needed to be bridged to enhance productivity and output. “The four deficits are Public
Investment & Credit Deficit, the Infrastructure Deficit, the Market Economy Deficit
and the Knowledge Deficit”. He also said that the current government is committed for
providing farmers access to adequate and affordable credit.

Agricultural development bears a close positive correlation with credit and finance.
Credit is an important input in the agricultural development as it facilitates access to
resources and services. Moreover, credit for agriculture serves as an important
instrument for stimulating productivity. Timely credit is one of the important
ingredients for survival and growth of agricultural sector.

Table 4.5.
Ratio of Agricultural Credit to Agricultural GDP, Total GDP and Total
Credit

Agricultural Agricultural Agricultural

Year Credit/Agricultural Credit/Total Credit/CS (Other
GDP GDP Banks’ credit)
1950-51 0.5 0.3 0
1960-61 3.3 1.3 0
1970-71 5.4 2.1 10.8
1980-81 8.3 2.6 8.5
1990-91 7.4 2 6.4
1999-00 10 2.6 8.1
2000-01 11.3 2.8 7.9
2001-02 12.2 3 8.2
2002-03 13.7 3.1 7.8
2003-04 15.1 3.5 8.6
Sources: Central Statistical Organization, New Delhi

87
 Fig.4.6.
Pictorial representation of ratio of agricultural credit to AGDP, TGDP & CS

Table 4.5 depicts the ratio of agricultural credit to agricultural GDP, total GDP and total
credit. Both agricultural GDP and total GDP increased to 15.1 and 3.5 percent (2003-04)
respectively from 0.5 and 0.3 percent, respectively (1951). Figure 4.6 gives the clear
view of the table.

The financial demand of the Indian farmers has been classified into three types
depending upon the need and the period of their requirement:

1. Short Term Credit / Crop Loan

2. Medium Term Credit
3. Long Term Credit
Short term credit has great demand by small and marginal farmers to meet
expenses incurred towards their seasonal agricultural operations. In lending to
small farmers, subsidies play a significant role in reducing their burden of debt
and making the programme available proposition. Short - term credit is production
oriented whereas Medium term and Long term credit are investment- oriented.

To cater these requirements, various sources have been identified and categorized as

1. Informal / Non-institutional sources

2. Formal / Institutional sources

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4.3.1. NON-INSTITUTIONAL SOURCES

Non-institutional sources include money lenders, trade merchants, commission

agents, landlords and others.

MONEY LENDERS: Usually they are two types viz., agriculturist money lenders
and the professional money lenders. Their easy accessibility and the simple
procedure followed make them dominant and popular over others. However, since
their operation is based on profit motive they usually resort to malpractices and
exploit the poor farmers.

TRADERS AND COMMISSION AGENTS: They also supply easy funds to

farmers for productive purposes much before the crop matures. In return, they
force the farmers to sell their produce at low prices by charging a heavy
commission.

RELATIVES AND FRIENDS: Close relatives or/& friends provide cash or kind in
order to tide over temporary difficulties. Though, this source is devoid of
exploitation, source of finance is very uncertain.

LANDLORDS: Landlords provide finance to small farmers and tenants to meet

their financial requirements. By charging higher interests, they used to trap the
poor farmers in perpetual indebtedness converting them as slaves.

Thus, the prime defects of private sources can be summed up as:

• Use of credit for unproductive consumption purposes.

• High rates of interest and hence, inability of farmers to repay principal

with huge rates of interest.

• The grave difficulties faced by small farmers to raise credit.

Initially, the Indian agriculturists entirely depend on these sources for their credit
requirements. They lend credit to farmers at high rates of interest. Even through
the interest rates are high, the poor peasants have no other alternative except these
sources as there was no proper institutional set-up in lending timely and adequate

89
credit. Another cause for choosing these sources is that it is easy to obtain loans
whereas in institutional sources the loan sanctioning is a time consuming, tedious,
corruptive and costly affair. Hence, the poor peasants had been under the trap of
these non-institutional sources. They used to squeeze the blood of the poor
peasants. The main objective of these sources is not to increase the agricultural
productivity, but to bring the farmers into the grips of perpetual indebtedness.
Hence, the poor farmers are becoming landless and bonded labourers. Hence,
adequate and timely credit to the farmers on liberal terms and conditions become
sine a qua non of agricultural development in the country.

4.3.2. INSTITUTIONAL SOURCES

Institutional sources include Commercial Banks, Co-operative Credit Institutions,

Land Development Banks, Regional Rural Banks and other financial institutions.
The development of institutional sources is regarded as a basic prerequisite for
agricultural development and rural transformation. The objectives of this type of
credit are to make a break-through in vicious circle of poverty, rack-renting, usury
and debt to stimulate farmers to boost agricultural productivity.

Institutionalization of credit has gradually reduced the dependence on money

lenders. Such efforts are initiated to provide adequate, cheap and timely credit to
the farmers, so that the farmers do not fall into the clutches of money lenders. So
as to prevent exploitation and help farmers to raise their productivity and
maximize the income, institutional credit schemes by various institutions were
launched.

After the Independence, the GOI has adopted a multi-agency approach for farm
credit in order to provide adequate, cheap and timely credit. But in the initial
periods i.e., in the year 1951-52, the contribution of the institutional agencies to
the farm credit is 7.3 percent only whereas the non-institutional credit is around
92.7 percent. But, now the share of institutional credit is 61.1 percent and the
share of non-institutional is 38.9 percent for the year 2002-03.

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 Table 4.6.
Agricultural Credit from different sources (in percent)

Sources of credit 1951 1961 1971 1981 1991 2001

Non-Institutional credit 92.7 81.3 68.3 36.8 30.6 38.9
Moneylenders 69.7 49.2 36.1 16.1 17.5 26.8
Institutional credit 7.3 18.7 31.7 63.2 66.3 61.1
Cooperative Banks 3.1 15.5 22.7 29.8 30.0 30.2
Commercial banks 0.9 0.6 2.4 28.8 35.2 26.3
Unspecified 3.3 2.6 3.6 4.0 3.1 4.6
Total 100 100 100 100 100 100
Sources: Central Statistical Organization, New Delhi

Table 4.6 and Figure 4.7 elucidates about different sources of agricultural credit
from the year 1951 to 2001 which gives the comparative view of both institutional
and non-institutional credit sources. Initially in 1951 the informal sources
occupied major share of 92.7 percent in the year 1951 which was decreased to
38.9 percent in 2001, whereas the share of formal credit was increased from 7.3
percent to 61.1 percent.
Figure 4.7.

Pictorial representation of agricultural credit obtained from different sources

91
 Table 4.7.
Institutional Credit to Agriculture Share in Total (percent)

Commercial Regional Total (Rs.

Year Co-operatives
banks Rural banks Crores)
1970-71 100 - - 744
1980-81 61.6 38.4 - 3,292
1990-91 49 47.6 3.4 9,830
2001-02 44 45 11 41,386
2002-03 34 57.2 8.7 69,480
2003-04 30.9 60.3 8.7 86,897
2004-05 25.1 65.0 9.9 1,25,309
2005-06 21.8 69.7 8.4 1,80,486
2006-07 20.9 69.1 10.1 2,03,297
Sources: Central Statistical Organization, New Delhi

Table 4.7 gives the share of credit of different formal sources. Initially the
Cooperative Banks are the only prime source of formal credit. But, later
Commercial Banks and Regional Rural Banks also participated in that. Now the
share of their contribution was 20.9, 69.1 and 10.1 percent respectively of the
Credit Co-operatives, Commercial Banks and Regional Rural Banks for the year
2006-07.

Fig. 4.8
Pictorial representation of Institutional Credit to Agriculture Share in Total (%)

92
Since Independence, a multi-agency approach known as Institutional Credit has
been adopted to provide farm credit. The basic objectives of this policy are:

1. To ensure timely and increased flow of credit to farm sector

2. To reduce and gradually eliminate the non-institutional credit

3. To reduce regional disparities

4. To provide larger credit support by special programmes like Pulses

Development Programmes (PDP), Special Rice Production Programme
(SRPP) and National Oil Seeds Development Project (NODP).

However, these institutions didn’t reach the expected goals and levels due to
several causes. This is because of the reasons that commercial Banks had been
concentrating on the industrial sector only and didn’t give due importance to rural
sector. However, the participation of Commercial Banks is inevitable in rural
credit along with Co-operatives and Regional Rural Banks so as to make the
farmers be ensured of timely credit at reasonable rate of interest.

93
 Table 4.8.
Institutional Credit to Agriculture

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07
Institutions

Co-operative Banks 11,944 14,085 15,957 18,363 20,801 23,604 24,296 26,959 31,231 39,404
42,480
a Short Term 9,238 10,895 12,571 14,845 16,583 18,828 20,247 - - - -
Medium/long
b 2616 3,190 3,386 3,518 4,218 4,776 4,049 - - - -
term
c Share (%) 45 44 43 40 39 38 34 - - - -
RRBS Banks 1,684 2,040 2,460 3.172 4,219 4,854 5,467 7,581 12,404 15,223 20,434
a Short Term 1,121 1,396 1,710 2,423 3,245 3,777 4,156 - - - -
Medium/long
b 563 644 750 749 974 974 1,311 - - - -
term
c Share (%) 6 7 7 8 8 8 9 10 8 10
Commercial Banks 12,783 15,831 18,443 24,733 27,807 33,587 14,047 52,441 81,481 1,25,477 1,40,382
a Short Term 6,549 9,622 9,622 11,697 13,486 17,904 21,878 - - - -
Medium/long
b 6,234 8,821 8,821 13,036 14,321 15,683 19,169 - - - -
term
c Share (%) 50 50 53 53 54 58 60 65 70 69
Total 26,411 31,956 36,860 46,268 52,827 62,045 70,810 86,981 1,25,116 1,80,104 2,03,296
Percent Increase 20 21 15 26 14 17 14 23 44 44 13
Sources: NABARD

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The multi-agencies have been providing short-term and medium / long term credit
to the agriculturists as depicted in table 4.8. Of the total the share of Commercial
Banks was more i.e. 69 percent when compared to Co-operatives and Regional
Rural Banks. But the total agricultural credit was decreased from 20 percent
(1996-97) to 13 percent (2006-07).The GOI in consultation with RBI and
NABARD and announced the farm credit package to ensure doubling the flow of
agricultural credit in the next three years more particularly to ensure 30 percent
increase over the previous year.

The Farm Credit Package involves:

I. To enhance the total flow of farm credit

II. Debt relief measures to farmers

All India Rural Credit Survey (1951-52) made the first systematic attempt to
assess the credit needs of the agricultural sector in the country. The survey
revealed that about 47 percent of cultivators borrow for meeting family
expenditure, about 32 percent for the purpose of current expenditure on farming
and about 11 percent for cultivation expenditure.

The Rural Credit Review Committee (1969) estimated that a credit requirement of
agriculture sector was Rs. 2,000 crores during Fourth Plan and Rs. 3,000 crores
during Fifth Plan.

The Planning Commission Working Group had estimated agricultural credit

requirement at Rs. 30,000 crores during Seventh Plan period, Rs. 93,680 crores
during the Eighth Plan and Rs. 1,76,220 crores during the Ninth Plan periods. The
Tenth Plan has given 51 percent to this sector.

The highlights of the policy are:

Credit flow to farm sector to be increased at the rate of 30 percent per year.

Debt restructuring in respect of farmers in distress and farmers in arrears

providing for rescheduling of outstanding loans over a period of 5 years

95
 including moratorium of 2 years, thereby making all farmers eligible for
fresh credit.

Special one-time settlement scheme for old and chronic loan accounts of
small and marginal farmers.

Banks allowed extending financial assistance for redeeming the loans

taken by farmers from private money lenders.

Commercial Banks finance at the rate of hundred farmers per branch, 50

lakh new farmers to be financed by the banks in a year.

New investments in agriculture and allied activities at the rate of two or

three projects per branch.

Refinement in Kisan Credit Cards (KCC) and fixation of scale of finance.

The farm credit package announced in June 2004 targeted doubling the flow of
institutional credit for agriculture in the next three years.

4.3.3.1. KISAN CREDIT CARDS

To provide adequate and timely support to the farmers, Kisan Credit Card (KCC)
scheme was introduced in August 1988 for short and medium term purposes.
About 705.55 lakh Kisan Credit Cards have been issued upto November 2007. It
covers short term and medium term credit and a reasonable component of
consumption credit within the overall limit sanctioned to the borrowers.

4.3.3.2. RATE OF INTEREST ON FARM LOANS

From Kharif 2006-07, the rate of interest on crop loans should be 7 percent upto
Rs. 3,00,000. The GOI would provide necessary interest subvention to NABARD
and other banks for this purpose and also made a provision of Rs. 1,677 crores in
the Union budget 2007-08.

4.3.3.3. AGRICULTURAL INSURANCE

The National Agricultural Insurance Scheme (NAIS) for crops has been
implemented from Rabi 1999-2000 season with the objective of providing

96
insurance coverage in the event of crop failure due to natural calamities, pests and
diseases. The scheme is available to all the farmers irrespective of their size of
holdings and operates on the basis of “Area approach”

4.4. BANKING INDUSTRY

Banks occupy an important place in the economic development as they provide

credit which lubricates the wheel of agriculture and industrial enterprise. Bank
industry plays an important and constructive role in providing credit to different
sectors of the economy.

The first Joint Stock Bank was established in the year 1786 in name of “General
Bank of India”. Then, gradually three Presidency Banks were established viz., The
Bengal Bank in 1806, Bank of Bombay in 1840 and Bank of Madras in 1843. In
the year 1920, these banks were amalgamated and a new bank called, “Imperial
Bank of India” was established on 27th January 1921. In the year 1935, the RBI
was established and agricultural credit department was established. In 1944, the
GOI appointed an Agricultural Finance Sub-Committee under the chairmanship of
Prof. D.R. Gadgil. During British rule, the development of banking industry was
in infant stage. After Independence, several reforms were made in banking
industry. In the year 1949, the RBI was nationalized and the Banking Regulation
Act (1949) was passed. On 19th July, 1969 fourteen (14) major banks and on 15th
April 1980 six (6) Commercial Banks were nationalized.

97
g. 4.9. Pictorial representation of Banking system in India

98
4.4.1. COMMERCIAL BANKS

The involvement of Commercial Banks in rural finance was negligible till

1955. Prior to the introduction of Social Control in 1967, it may be said that
Commercial Banks were not involved at any rate in providing direct finance to
agriculture. Prior to nationalization i.e., 1966-67, Commercial Banks advances
for agricultural operations amounted to Rs. 6 crores, a mere 0.2 percent of the
total advances. After nationalization, the Commercial Banks started providing
direct and indirect finance to agricultural and other priority sectors. Apart from
this, Commercial Banks are also participating in Poverty Alleviation
Programme such as Integrated Rural Development Programme (IRDP),
Twenty Point Economic Programme (20PEP), Scheduled Castes Special
Component Programme (SCSCP) and Tribal Sub Plan etc.

Table 4.9
Expansion of Commercial Bank branches in India

Particulars 1969 1975 1991 2003 2009

1833 6807 35206 32386 31,684

Rural
(22.19) (36.34) (58.46) (48.69) (39.74)
6429 11923 25014 34128 48,051
Others
(77.81) (63.66) (41.54) (51.31) (60.26)
8262 18730 60220 66514 79,735
Total
(100) (100) (100) (100) (100)
Sources: Report on Trend & Progress of Banking in India, Various issues, RBI
Publication.

Table 4.9 depicts the clear picture of the expansion of commercial banks in the
country. The number of commercial banks increased from 8262 in the year
1969 to 79,735 in the year 2009. It clearly gives a growth rate of nine times
during the period.

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4.4.2. REGIONAL RURAL BANKS

The Government of India promulgated the Regional Rural Bank (RRB)

Ordinance on 26th September 1975 and set up five Regional Rural Banks on a
pilot basis in Moradabad, Gorakhpur (Uttar Pradesh), Bhiwani (Haryana),
Jaipur (Rajasthan) and Malda (W. Bengal). The five RRBs started functioning
from 2 nd October 1975. The Regional Rural Bank ordinance was later replaced
by the Regional Rural Bank Act 1976, which came into face with effect from
9th February 1976.

The prime objective of RRBs is to provide credit and other facilities to small
and marginal farmers, agricultural labourer, rural artisans and small
entrepreneurs in rural areas. The RRBS have been helping those vulnerable
communities from all the calamities.

Table 4.10
Progress of Regional Rural Banks in India

Year No. of Branches Advances (Rs. Deposits (Rs. C-D ratio (In
RRBs In Crores) In Crores) Percentage)
Dec.1976 40 189 7.72 7.02 109.97
Dec.1980 85 3279 199.83 243.38 82.11
Dec.1985 188 12606 1285.82 1407.67 91.34
Dec.1990 196 14527 4040.94 3554.04 113.7
Dec.1995 196 14497 11140.66 6290.97 177.09
Dec.2000 196 14301 32204.25 13186.15 244.23
Dec.2006 133 14494 71328.83 39712.57 179.61
Source: Compiled from Regional Rural Banks key statistics, NABARD Dept.

Table 4.10 clearly enunciates the progress of RRBs during the period of 1976
– 2006. The table shows the fluctuations in all the indicators of the table. In
the year 1976 only 40 RRBs were opened with 189 branches. The deposits
were only Rs. 7.72 crores and the advances were Rs. 7.02 crores only.

100
 Performance of RRB as on 31st March 2006

Total No. of RRBs : 133

Total districts covered : 525

No. of branches : 14,494

Deposits (Rs. In lakhs) : 71,32,883.39

Advances (Rs. In lakhs) : 39,71,257.21

Total advances to priority sector (Rs. In lakhs) : 32,17,727.80

Total advances to agricultural sector (Rs. In lakhs) :21,50,967.9

C / D ratio : 56.68 %

4.5. CO-OPERATIVE CREDIT SOCIETIES

Credit Co-operatives play an important role in the Indian financial system

especially at the village level. These are one of the important components of
multi-agency system which plays a vital role in the development of the nation.
These are the oldest and the most numerous of the all types of Co-operatives
in India.

“In the village itself no form of credit organization will be suitable except
the Co-operative society, Co-operation failed, but Co-operation must
succeed”.

-All India Rural Credit Survey.

Rural Credit Co-operatives in India were envisaged as a mechanism for

pooling the resources of people with small means and providing them with
access to different financial services. Democratic in features, the movement
was also an effective instrument for development of degraded waste lands,
increasing productivity, providing food security, generating employment

101
opportunities in rural areas and ensuring social and economic justice to the
poor and vulnerable.

4.5.1. CO-OPERATIVE MOVEMENT AND ITS ORIGIN

Co-operative Movement in India was started primarily for dealing with the
problem of rural credit. The establishment and growth of Co-operatives was
regarded as one of the important instruments for economic, social and cultural
development in developing countries.

The origin of Indian Co-operative Banking started with the enactment of Co-
operative Societies Act, 1904. The objective of this Act was to establish
Agricultural Co-operative Credit Societies “to encourage, thrift, self-help and
co-operation among agriculturists, artisans and persons of limited means”.
The Co-operative Act, 1912 recognized the need for establishing new
organizations for Supervision, Auditing and Supply of co-operative credit. In
the year 1938, a new dimension was given to co-operatives where from the
multi-purpose societies came into existence for the purpose of all requirements
of agriculturists. Co-operative Credit Institutions and banks have emerged as a
ray of hope and vehicles of rural finance for economic development. Till the
first nationalization of 14 Commercial Banks in 1969, the organized sector to
provide rural credit was Co-operative Banking network only. The major
beneficiary of Co-operative Banking is the agricultural sector in particular and
the rural sector in general.

In India, the Government gave the lead, participated and propagated the co-
operative movement. The RBI has been playing a very active role in the
formation, promotion of Co-operative Banks as well as support activities
extended to them. The co-operative principle of managing finance in India serves
as a via media between sophisticated institutions like modern Commercial Banks
on the one hand and usurious and unscrupulous money lenders on the other.
Despite the tremendous and vast network of Commercial Banks, Co-operative

102
 Banking remains an effective instrument of credit delivery for rural borrowers
even to this day.

After Independence in 1947, a systematic approach of institution-building of the

Rural Financing Institutions (RFI) began with the implementation of the All India
Rural Survey Committee in 1954. The co-operatives have expanded both
vertically and horizontally. Today with about 175 million memberships, a
network of 3,53,000 co-operatives of various types working at different levels
with about 70 percent coverage of rural households is in vogue.

4.5.2. EVOLUTION OF THE CO-OPERATIVE MOVEMENT

The Indian Co-operative Movement was initiated by the Government. The

evolution of Co-operatives can be reviewed during Pre-Independence and Post-
Independence periods in general and of Credit Co-operatives in particular, over
the past century.

4.5.2.1. PRE-INDEPENDENCE PERIOD (1900-1947)

The thought of Co-operation was given by Sir Fredrick Nicholson’s report of

1895-97, in which, he advocated the introduction of Credit Co-operatives similar
to those funded in Germany by Raiffeisen. He observed, “It must be credit which
will only be so obtainable that the act and effort of obtaining it, shall educate
discipline and guide the borrower, the method of providing it, must teach the
lessons of self and mutual help, and suggest the extension of those lessons outside
of mere credit”. The report was summed up in two words “Find Raiffeisen”.

The GOI perceived the Indian farmer’s dependence on usurious money lenders
to be a major cause of their indebtedness and poverty. The GOI thought that
the Co-operative movement was the best means of liberating Indian farmers
from the crushing burden of debt and the tyranny of money lenders.

103
The passage of Credit Co-operatives Act in 1904, and the Enactment of more
Comprehensive Societies Act in 1912 marked the beginning of a government
policy of active encouragement and promotion of Co-operatives and so, “co-
operation” became a provincial subject in 1919.

Reports of Frederic Nicholson and Edward Law Committee on Co-operative

legislation confirmed and reiterated the need for the state to actively promote
co-operatives. A decade later, a Maclagan Committee (1915) advocated that
“there should be one Co-operative for every village and every village should
be covered by a Co-operative”. In 1928, Royal commission observed that “if
co-operation fails, there will fail the best hope of rural India”.

In the year 1934, the Rural Bank of India established an Agricultural Credit
Department (ACD) for extending refinance facilities to the co-operative credit
system. Since 1940, it also started extending credit to provincial co-operative
banks for Seasonal Agricultural Operations (SAO) and marketing of crops. In
1945, the GOI set up the Agricultural Finance Sub-Committee and the Co-
operative Planning Committee to analyze the causes for the failure of Credit
Co-operatives. These committees identified the small size of the Primary Co-
operatives as the principal cause, followed by frozen assets and heavy
overdues in repayment. It also advocated state protection to the Co-operative
sector from competition.

4.5.2.2. POST -INDEPENDENCE PERIOD (1947 onwards)

After Independence, rapid and equitable economic development necessitated

the co-operatives in general and rural financial co-operatives in particular. All
India Rural Credit Survey (AIRCS) recommended government partnership in
Equity, Governance and Management. The Hazari Committee recommended
integration of short term and long term structures. The Bawa Committee in
1971 recommended setting-up Large Multi-purpose Co-operatives in tribal
areas. The National Commission on Agriculture (1976) promulgated the

104
setting-up Farmer’s Service Co-operative Societies with the active
collaboration of the nationalized banks. In 1981, Sivaraman Committee
recommended more broad-based organization at the apex level to extend
support and guidance to credit institutions in formulation and implementation
of rural development programmes. By an act of parliament The NABARD was
set up in July 1982 to take over the functions of the Agricultural Refinance
Development Corporation (ARDC) and financing of RBI in relation to co-
operative banks and RRBs. The Agricultural Review Committee (Khusro
Committee, 1989) observed the importance of members’ thrift and savings for
the Co-operatives and also emphasized the need for better business planning at
the local level and for strategies to enable Co-operatives to be self-sustaining.

During the period 1900-2004, there has been an increasing realization of the
destructive effects of intrusive state patronage, politicization and the
consequent impairment of the role of Co-operatives in general and of Credit
Co-operatives in particular, leading to a quest for reviving and revitalizing the
Co-operative movement.

Several committees headed by Chaudhry, Brehm Perkash, Jagadish Kapoor,

Vikhe Patil and V.S. Vyas were set up. All of them did suggest that reforms in
Co-operative sector need to be taken-up during this period. The Brehm
Perkash Committee emphasized the need to make Co-operatives self-reliant,
autonomous and fully democratic and hence, he proposed a model law. They
also recommended revamping and streamlining the supervision mechanism,
introducing prudential norms and bringing Co-operatives Banks fully under
the ambit of the Banking Regulation Act, 1949. The Mutually Aided Co-
operatives Societies Act was passed by the Andhra Pradesh government
in1995, which marked a significant step towards reforms. According to this
new law, Co-operatives should be democratic, self-reliant and member-
centric, without any state involvement or financial support.

105
4.5.3. PROGRESS OF CO-OPERATIVES DURING FIVE-YEAR
PLAN PERIODS

The Co-operative Credit Institutions are being called upon for a greater
involvement in credit dispensation during successive Five-Year Plans. During
the First Five Year Plan period (1951-56), Co-operatives were regarded as an
indispensable instrument of planned actions in the country. They must cater to
the multiple needs of its members featured with democratic planning,
combining initiative, mutual benefit and special purpose.

During the Second Five Year Plan period (1956-61), special emphasis was laid
on the organization of Co-operative Banking Structure with a view to
establishing a strong Central Bank in each district, the organization and re-
organization of PACS and the re-organization of Large Sized Adivasi Credit
Societies (LSACS).

During the Third Plan period (1961-66), revitalization of PACS with

management subsidy etc. should be given sufficient attention and these cover
all the villages.

The Fourth Five Year plan (1969-74) aimed at revitalization of Co-operative

Credit Structure at the primary level and high priority was accorded for the
reorganization of the societies into viable units.

During the Fifth Five-Year plan period (1974-79), Co-operatives were

expected to expand their credit operations and at the same time provide a
variety of ancillary services such as the provision of inputs, farm guidance and
assistance in the marketing of crops. This plan realizes the critical
essentialities like management, man power development for the success of the
Co-operative movement in India.

The Sixth Five Year Plan (1980-85) aimed at strengthening PACS and makes
them function effectively as multi-purpose units catering to diverse needs of
their members.

106
The Seventh Five Year Plan (1985-90) has given greater emphasis to the
financial self-reliance of Co-operatives. The GOI planned to refinance the Co-
operatives through the RBI and NABARD.

The Eighth Five Year Plan (1992-97) aimed at building up the Co-operatives
as a self-managed, self-regarded and self-reliant institutions set-up by giving
more autonomy.

During the Ninth Five Year plan period (1999-2002), emphasis was given for
increasing loans and advances not only to the agriculture but also to the allied
sector. Many measures were taken to mobilize deposits and to lessen the
interest rates on advances in order to lessen the overdues or outstandings of
PACS.

The Tenth Five Year Plan period (2002-07) was regarded as the “Reform
period for Co-operatives” as many reforms were planned to accelerate the
growth and development of Co-operatives through-out the country. The
Working group on Agricultural Credit, set-up by the Planning Commission,
has made a projection of credit flow at Rs. 737,000 crore at 4 percent growth
rate in agriculture GDP. Of this, the Co-operative Credit Structure alone was
required to provide Rs. 2,71,000 crore from Rs. 24,000 crore during the first
year (2002-03), with an assumption that it would maintain its share of at least
42 percent in the total credit purveyed. During the periods 2003-04 and 2006-
07, Co-operatives have purveyed credit to the tune of Rs. 136,229 crores for
agriculture and allied sector.

107
4.5.4. OBJECTIVES OF CO-OPERATIVE CREDIT SOCIETIES

• To ensure timely and increased flow of credit to the farming sector

• To reduce and gradually eliminate the money lenders

• To reduce regional disparities throughout the country

• To provide longer credit support to various rural development

programmes

• To provide cheap credit with or without any security

Co-operative Banks are organized and managed on the principle of Co-

operation, self-help and mutual help and function with the rule of “one
member, one vote”, function on “no profit, no loss” basis. Co-operation as
principle, does not pursue the goal of profit maximization.

4.5.5. FUNCTIONS OF CREDIT CO-OPERATIVES

• Basic function is to provide cheap and timely credit to agriculture and

allied sector

• To provide working capital loans and term loans

• To provide house loans up to Rs. 1 lakh to as individual

• Provides advances against shares and debentures also

4.5.6. STRUCTURE OF CREDIT CO-OPERATIVES

The Co-operative system is both economic and social. However, it is a

peoples’ democratic movement. Underlying this philosophy, the Co-operatives
can be classified broadly into:

1. Welfare Co-operatives

2. Business Co-operatives

• Non-Credit Co-operatives

• Credit Co-operatives

108
The Non-Credit Co-operatives include Marketing Societies, Processing
Societies, and Fisheries Co-operatives etc. whereas the Credit Co-operatives
constitute the organized sector of the Indian Banking System. The credit Co-
operatives can be classified into Non-Agricultural Co-operative Banks
including Urban Co-operative Banks and Employees Credit Societies. Khusro
Committee (1989) reaffirmed that the desirability of the three-tier Credit Co-
operative Structure especially from the point of view of its appropriateness in
the dispensation of agricultural credit at village level.

109
Figure 4.10 Pictorial representation of credit disbursal by Cooperative credit institutions in India

SCB : State Cooperative Bank PLDB : Primary Land Development Bank

DCCB : District Cooperative Credit Bank CLDB : Central Land Development Bank
PACS : Primary Agricultural Cooperative Societies UCB : Urban Cooperative Bank
ECCB : Employees Cooperative Credit Bank
Sources: NAFSCOB

110
Fig.4.11. Pictorial representation of structure of Cooperative Credit
Institutions in India

Sources: NAFSCOB

111
Figure 4.12 Network of Agricultural Co-operative Credit Structure in
India as on March 2010

Sources: NAFSCOB

ACCS : Agricultural Co-operative Credit Structure

SCB : State Cooperative Bank
SCARDB : District Cooperative Bank

112
PACS : Primary Agricultural Cooperative Societies

The Co-operative Banking System has been identified with agricultural Co-
operative Banks mainly because of their magnitude of operations and
importance. There are two wings of the Co-operative Credit Structure viz., one
supplying short-term and medium-term requirements and the other long-term
investment credit. The Co-operative Banks are organized as a three-tier
structure for short term credit and as a two-tier structure for long term credit.

The Long-term Co-operative Credit Structure (LTCCS) provides mainly long

term agriculture investment loans and consists of 20 State Co-operative
Agricultural and Rural Development Banks (SCARDBs) and 696 Primary Co-
operative Agricultural and Rural Development Banks (PCARDBs).

Co-operative Banking in India is federal in its structure. There are two

refinancing agencies in the country at the national level. The RBI provides
through its Agricultural Department Refinance (ADR) to State Co-operative
Banks (SCBs) for both short term and medium term credit. On the other hand,
the Agricultural Refinance and Development Corporation (ARDC) renamed as
NABARD which provides finance in the form of long term developmental
loans mainly to State Co-operative Land Development Banks (SCLDBs).

4.5.6.1. SHORT-TERM CO-OPERATIVE CREDIT STRUCTURE (STCCS)

According to the National Federation of State Cooperative Banks

(NAFSCOB) the 3-tier Short term Co-operative Credit Structure (STCCS)
consists of nearly 1.09 lakh PACS, 368 DCCBs with 12,858 branches and 30
SCBs with 953 branches or a total of 122590 service outlets. On an average,
there is one PACS for every six villages; these societies have a total
membership of more than 120 million rural people making it one of the largest
rural financial systems in the World.

113
Fig.4.13. Short-term Co-operative Credit Structure

Sources: NAFSCOB
114
Figure 4.14 Various models of Short term Co-operative Credit Structure
as on 31 st March, 2010

Sources: NAFSCOB

115
4.5.6.1.1. PRIMARY AGRICULTURAL CO-OPERATIVE
SOCIETIES (PACS)

The importance and usefulness of PACS had been rising steadily. These are
the credit institutions at the grass root level dealing directly with individual
members/clients. A large proportion of PACS also serve as outlets for inputs
and for the public distribution system (PDS) for food and other essential items.
The total membership of PACS as on 31st March 2005 aggregated to 1,274
lakhs, of which, the borrowing members at 451 lakhs constituting around 35
percent. The total as well as borrowing members of PACS declined during
2004-05. Deposits and borrowings of PACS increased by 5 and 17 percent,
respectively as on 31 st March 2005 over the previous year. The loans issued
increased by 12 percent during 2004-05 as compared to an increase of 3.3
percent during 2003-04 over the previous year.

Table.4.11.
Trend of financial parameters of PACS for 14 years (Rs. in crores)
Owned Loans Loans Recovery Losses
Year Deposits Borrowings
funds issued outstanding (%) (No.)
1992 -93 2,120 1,943 7,898 6,891 8,438 54 28,636
1993-94 2,694 2,102 9,117 7,511 10,535 57 31,082
1994-95 3,412 2,962 10,170 10,795 12,141 66 35,490
1995-96 3,943 3,740 11,381 12,732 14,463 65 36,993
1996-97 4,250 5,108 12,106 13,606 16,008 65 39,425
1997-98 4,673 5,279 12,164 13,724 17,121 65 40,126
1998-99 4,900 7,062 17,326 17,768 21,301 65 45,082
1999-00 5,338 12,459 22,349 23,661 28,546 65 44,119
2000-01 5,594 13,481 25,890 25,698 34,522 65 41,991
2001-02 6,855 14,846 29,475 30,770 40,779 68 43,511
2002-03 8912 19120 30278 33996 42411 62 42531
2003-04 8397 18114 34257 35119 43873 63 42987
2004-05 9172 18976 40249 39212 48785 66 43624
2005-06 9292 19561 41018 42920 15779 70 41268
Sources: Co-operative perspective, Vol. 39, No.3, Oct- Dec’04 and NAFSCOB

116
It is clear from the table 4.11that the trend of different financial parameters of
PACS for 14 years i.e. 1992-2006. All the parameters show increasing trend.
Even though there is increase in deposits and advances, no. of PACS in losses
is also very high. It may be due to increased loan outstandings.

Table 4.12
Growth of PACS: Comparison of 1986 & 2006(Rs. in crores)
Particulars 31-03-86 31-03-06
Number (in lakhs) 0.92 1.06
Membership (in lakhs) 7 1252
Borrowing membership 197 639
Borrowing membership in Percentage 27 52
Owned Funds 1128 9292
Deposits 572 19561
Borrowings 2927 41017
Loans issued 3140 42919
Loans outstanding 4323 51779
C/D ratio (%) 548.95 219.41
Sources: ACRC (1985-86) and NAFSCOB (2002-03)

As per the data available with the NAFSCOB, small and marginal farmers
constitute 70 percent of the total membership of PACS at the national level,
while Scheduled Castes and Scheduled Tribes constitute 34 percent.

117
Table 4.13. Statement showing all India position of PACS including FSS and LAMPS in respect of main items at a glance
from 1996 – 97 to 2005 – 06
(AS ON 31ST MARCH) (MEMBERSHIP AND BORROWERS IN 000) (Rs. IN LAKHS)

S. Main items (all 1996-97 1997-98 1998-99 1999- 2000- 2001- 2002- 2003- 2004- 2005-
No. India position) 2000 2001 2002 2003 2004 2005 2006
1 No. of Societies 91588 92838 95156 101546 98843 98247 112309 105735 108779 106384
2 Total Membership 80258 80205 89568 108627 99918 102141 123552 135411 127406 125197
3 Paid up capital 226506 250337 280594 363324 388352 438953 495339 516642 557136 564425
4 Owned Funds (3 +4) 425025 467268 490001 533837 559375 685503 819798 839736 919705 929201
5 Total Deposits 510809 527919 706170 1245855 1348107 1484570 1912023 1814253 1897604 1956119
6 Total Borrowings 1210607 1216419 1732644 2234962 2588966 2947508 3027791 3425718 4024949 4101760
7 Total Loans 1360589 1372399 1776780 2366186 2569831 3076999 3399586 3511924 3921172 4291959
8 Working Capital 2277367 2419700 3176544 4271013 5386747 5190490 6114243 6204685 7540741 7338667
9 Total Demand 1760830 1784606 2093538 2679781 2876407 3407721 4034070 4423677 4778528 5097948
10 Total Collection 1147190 1155221 1361817 1731339 1872619 2300994 2505133 2794160 3173305 3550325
11 Total Balance 613640 629385 731721 948442 1003788 1106727 1528937 1629517 1605223 1547623
(Overdues)
11 Percentage of 34.85 35.27 34.95 35.39 34.9 32.48 37.9 36.84 33.59 30.36
overdues
12 Number of Staff 109687 113938 171550 203842 207453 206505 261463 347176 388118 241609

Table 4.13 gives the all India position of PACS and their several parameters which represents its growth position. The percentage of
overdues was decreased to 30.36 percent from 34.85 percent.
118
 4.5.6.1.2. DISTRICT CENTRAL CO-OPERATIVE BANKS

The DCCB acts as an intermediate tier serving the rural clients directly and
through PACS. These function as a link between PACS and SCB. The DCCB
serve as balancing centre in the district central financing agencies and
organize credit to Primaries. The success of PACS at the primary level and the
SCB at the apex level is largely dependent on the efficiency of DCCBs.
Financially sound and organizationally strong DCCBs are sine qua non for
providing required financial assistance to PACS and support to SCBs. As a
federation of PACS, DCCBs have an important role to guide, supervise and
even to direct the activities of PACS towards conceptualization and realization
of targets.

It is evident from the table below 4.18 that the number of DCCBs and its
membership had increased from 1996-97 to 2005-06 along with it’s paid up
capital. Its deposit mobilization also had been in progressive way, but its
advances showed fluctuations. And hence its C-D ratio was in decreasing
trend.

Table 4.14.
Statistical Details of District Central Co-operative Banks (Amount in Rs.
Of Crores)
Year No. of Total Membership Paid-up capital Total Advances C/D ratio
DCCBs (in 000) Deposits (in %)
1996-97 367 1797587 190682 3200935 4078057 127.4
1997-98 367 1742213 216724 3626271 3977824 109.69
1998-99 369 1839147 254368 4553775 4290543 94.22
1999-00 369 2281449 278648 5382693 4127042 76.67
2000-01 370 1986370 301578 6207013 4081745 65.76
2001-02 371 18374 338800 6679721 6130249 91.77
2002-03 366 2183731 357680 7239443 5903366 81.54
2003-04 368 2149071 381003 7688452 5752901 74.83
2004-05 368 2145876 411547 8049350 6535578 81.19
2005-06 370 2267850 451147 8665222 6931761 80.00
Source: NAFSCOB

119
 Figure 4.15
Pictorial representation of total memberships & paid-up capital

Figure 4.16

Pictorial representation of total deposits, advances and CD ratio

120
 Table 4.15.
Agricultural Credit provided by Co-operative Central Banks (Percentage
in total)

Year Amount (Rs. In Crores) Share in Percentage

1996-97 11,944 45
1997-98 14,085 44
1998-99 15,937 43
1999-00 18,363 40
2000-01 20,801 39
2001-02 23,604 38
2002-03 24,296 34
2003-04 26,759 31
2004-05 31,231 28
2005-06 39,404 22
Sources: NABARD, Economic Survey 2004-05

It is clear from the above table 4.15 that the share of CCBs in total agricultural
credit reduced to a great extent i.e., nearly half of the share has been decreased
during 1996 – 97 to 2005-06.

Table 4.16.
Financial information of DCCBs (Rs. in Crores)
PARTICULARS 31-3-01 31-03-02 31-03-04 31-03-05 31-03-06 Growth
Rate %
Number 367 368 367 368 372 1.36
Owned funds 10,916 11,288 16,573 16,788 18,594 70.33
Deposits 61,875 68,586 73,879 80,493 86,652 40.04
Borrowings 16,772 18,772 19,635 21,557 23,202 38.33
Loans issued 51,798 55,915 64,665 65,355 69,318 33.82
C/D Ratio 83.71 81.52 87.52 81.19 79.99 -3.72
Loans outstanding 52,428 59,283 64,048 72,089 76,737 46.31
Sources: Statistical data on DCCBS – NAFSCOB’ 2006

121
 Table 4.17 DISTRICT CENTRAL CO OPERATIVE BANKS (ALL INDIA POSITION)
(AS AT THE END OF THE YEAR) (Rs. IN LAKHS)

Main items (all India 1999- 2000- 2001- 2002- 2003- 2004- 2005-
1996-97 1997-98 1998-99
position) 2000 2001 2002 2003 2004 2005 2006
No. of DCC Banks 367 367 369 369 370 371 366 368 368 370
Total Membership
1797587 1742213 1839147 2281449 1986370 1837433 2183731 2149071 2145876 2267850
(No.)
Paid up capital 190682 216724 254368 278648 301578 338800 357680 381003 411547 451147
Total Reserves 501809 409134 470867 528440 675021 792982 967591 1120824 1267286 1408294
Total Deposits 3200935 3626271 4553775 5382693 6207013 6679721 7239443 7688452 8049350 8665222
Total Borrowings 1117923 1202756 1371038 1438373 1656668 1827605 1923847 2112810 2155710 2320213
Working Capital 4063497 5905383 7318032 7942209 8954136 10202039 10909239 11890531 12263289 13124185
Total loans issued 4078057 3877824 4290543 4127042 4595130 6130249 5903366 5752901 6535578 6931761
Total loans outstanding 2924275 3259452 3885579 4469799 5056989 6016562 6205049 6361984 7208961 7673738
Total Demand 2182908 2458369 2755755 3259926 3608914 416602 4614306 5015057 5485797 5722694
Total Collection 1402625 1547860 1860246 2094758 2332733 2704314 2887134 3160328 3682622 3909087
Balance (Overdues) 780283 910509 895509 1165168 1276181 4162288 1727172 1854729 1830175 1813607
Percentage of overdues 35.75 37.04 32.5 35.74 35.36 35.1 37.43 36.98 32.87 31.69
Number of Employees 103794 102550 102755 114757 113012 113088 110812 110360 109124 211770

Sources: NAFSCOB

Table 4.17 elucidate that the all India position of DCCBs and their important parameters which reveals their performance position. It shows
a decrease in their percentage of over dues.
122
 Figure 4.17
Pictorial representation of credit issued in crores and percentage

The above figure depicts the trend of loans issued by the District Central
Cooperative Banks. The amount of loans increased from Rs. 4078057 to Rs.
6931761 for the period 1996-2006.

4.5.6.1.3. STATE CO-OPERATIVE BANKS

The SCBs are the apex institutions in the Co-operative structure. The
NABARD constitutes 50 to 90 percent of the working capital of SCBs. In
2001-02 the 30 SCBs had lent Rs. 34,220 crores to CCBs and PACSs.

123
 Table 4.18
Financial information of SCBS (Rs. in crores)
Particulars 31-03-01 31-03-02 31-03-03 Growth Rate
%
3 Tier 2Tier 3Tier 2Tier 3Tier 2Tier 3Tier 2Tier
Number 17 12 18 12 17 13 - -
Owned Funds 5,395 319 4,838 370 7,144 528 47.66 42.82
Deposits 3,00,047 2,207 33,752 2,508 36,400 2,935 7.85 14.29
Borrowings 28,115 103 11,562 111 1,205 143 4.35 29.68
Loans issued 31,767 665 34,013 650 37,909 733 11.45 12.8
C/D ratio 10.59 30.13 100.77 25.91 104.14 24.97
Loans O/s 28,608 1,063 31,564 1,146 33,466 1,292 9.12 12.69
Source: NAFSCOB

Table 4.18 gives the financial position of State Co-operative Banks for the
period of 2001 to 2003 and the change in the growth rate over the above
period. Except the owned funds all other parameters showed an increase in
their growth rate.

124
Table 4.19 STATE CO-OPERATIVE BANKS (AS ON 31ST MARCH) (Rs. IN LAKHS)
Main items (all India position) 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
No. of State Co Op. Banks 28 28 29 29 30 30 30 30 30 30
Total Membership (No.) 147229 151058 144477 19064 122464 104607 133688 150975 156623 153697
Paid up capital 48683 48653 57618 63475 69711 84659 89715 92455 99228 109424
Total Reserves 197807 224409 274054 314910 371172 53485 500168 557200 658981 734251
Total Deposits 1728228 2191854 2530913 2927892 3261295 3617028 3911178 4286301 4406765 4767221
Total Borrowings 684726 878818 993370 1093544 1198335 1168348 1198508 1352265 1467097 1687166
Working Capital 2992601 3506475 4043920 4641047 5221689 5669673 6075475 6521629 7068213 7454366
Total loans issued 3375052 3409464 3580053 3989345 3361254 3406531 3920286 3486449 4432506 4880354
Total loans outstanding 1777505 1939465 2169977 2535701 2548276 3255352 3505215 3563719 3530652 3896099
Total Demand 1409701 1486194 1448653 1573991 1688722 1958116 2241279 2203774 2329419 2438956
Total Collection 1225878 1285335 1255838 1374698 1437699 1686897 1843742 1833145 1973608 2130349
Balance (Overdues) 183823 200859 192815 199293 251023 271219 397537 370629 355811 335607
Percentage of overdues 13.04 13.51 13.31 12.66 14.86 13.85 17.74 16.82 15.27 13.76
Number of Employees 16169 16413 16229 16119 16186 16360 15793 15554 15288 14742
Sources: NAFSCOB

The data shown in table 4.19 explains that the all India position of State Co-operative Banks. It depicts the clear picture of its groth
rate in performance by giving several parameters.

125
Only SCBs and DCCBs are qualified to be called Banks in the Co-operative sector under the
Banking Regulation Act 1949. Hence, only these banks are licensed to conduct full-fledged
banking business.

However, the Credit co-operatives in India have made remarkable progress in the rural
segment of Indian Economy. Co-operatives are contributing predominant role in the credit
sector despite of keen competition from nationalized and private sector banks. Co-operatives
are disbursing nearly 46 percent of total agricultural credit. They are distributing 36 percent
of total fertilizers in the country. The Government of India has initiated various measures
under the process of economic reforms to strengthen the Credit Co-operatives.

Table 4.20.
Statistical Details of Co-operative Institutions as on 31-03-06
(Rs. in Crores)
PARTICULARS PACS DCCBs SCBs

No. of societies 1,06,384 370 30

No. of Branches _ 13181 1015
Membership(in thousands) 1,25,197 226785 153697
Owned Funds (Rs. In lakhs) 9,29,201 10,07,352 8,43,675
Deposits 19,56,119 86,65,222 47,67,221
Borrowings 41,01,760 23,20,213 16,87,166
Loans & advances 42,91,959 69,31,761 48,80,354
Loans outstanding 51,77,866 76,73,738 38,96,099
% of over dues 30.36 31.69 13.76
No. of employees 2,41,609 211770 14742
Sources: NAFSCOB

Table 4.20 gives the various financial parameters of cooperative institutions as on 31st March
2006. The data relating to this period gives the present position of SCBs , DCCBs and PACS
in the country.

Table 4.21

126
 A profile of Rural Co-operative Banks (At End- March 2006 )
(Rs. in Crores)

Table 4.21 shows both the short-term and long-term structure of Co-operatives and their
profile. It gives the Balance sheet indicators, financial performance and non-performing
assets also.

KHARIF AND RABI LOAN DISBURSEMENTS BY CO-OPERATIVE BANKS

127
The Cooperative Banks in India maintaining their status in rural credit through disbursing
Short term crop loans (i.e., Kharif and Rabi loans) through their wide net- work of PACS at
rural level. The following data and chart for the last 10 years reveals the same:

Recovery (Crop loans) performance:

The recovery performance of the Cooperative Banks in India under Short term Crop loans
(Kharif and Rabi) had been gradually improving. The data for the last 10 years is as follows:

Table 4.22.
Target and achievements of loans by Cooperative Banks (Rs. in crores)
Year Target Achievement % of achievement
1995-96 7736 7350 92.62
1996-97 10851 7111 65.53
1997-98 17055 25387 148.85
1998-99 14445 15212 105.31
1999-00 16405 25014 152.48
2000-01 13390 25186 188.10
2001-02 20158 23293 115.55
2002-03 17392 22618 130.05
2003-04 28744 36778 127.95
2004-05 25685 43193 168.16
Sources: NAFSCOB

Table 4.21 explains the crop loan disbursements of Central Co-operative Banks, their target
and achievement during the period of 1995-96 to 2004-05.It showed an increase in its
achievement percentage which was increased from 92.62 percent to 168.16 percent.

Figure 4.19
Pictorial representation of target& Achievement of loans by cooperative banks

Table
4.23.
Details of demand and recovery of loans (Rs. in crores)

128
 Year Demand Recovery Balance (OD) % of Recovery
1995-96 36612 8893 27719 24.29
1996-97 49771 12371 37400 24.86
1997-98 84826 23555 61271 27.77
1998-99 56576 16326 40251 28.86
1999-00 61509 18407 43101 29.93
2000-01 66848 22328 44520 33.40
2001-02 61265 31398 29867 51.25
2002-03 62657 18603 44054 29.69
2003-04 75394 26698 48696 35.41
2004-05 61046 27124 33922 55.57
Sources: NAFSCOB

Figure 4.20.
Pictorial representation of demand and recovery of loans by CCBs

Table 4.22 and Figure 4.20 explain the demand and recovery of loans, balance of overdues
and the recovery ratio of Credit Co-operatives.

4.6.8. THE NATIONAL FEDERATION OF STATE COOPERATIVE BANKS

(NAFSCOB)

129
It was established on 19th May 1964 with a view to facilitate the operations of State and
Central Co-operative Banks in general and development of Co-operative credit in particular.

OBJECTIVES:

o To provide a common forum to the member banks to examine the problems of Co-
operative credit, banking and allied matters and evolve suitable strategies to deal with
them
o Promote and protect the interests of the member banks in all spheres of their activities
and to give expression to the views of the member banks
o Co-ordinate and liaison with GOI, RBI, NABARD, respective state governments, and
other higher financing institutions for the development of Co-operative Credit on
behalf of the member banks
o Provide research and consultancy inputs to the member banks in order to facilitate
them to strengthen their own organizations
o Organize conferences/meetings to share the views of common interest with a view to
contribute for better policy decisions

Though the network of Commercial Banks and RRBs has spread rapidly and has nearly
50,000 branches, their reach in the country side both in terms of the number of clients and
accessibility to the small and marginal farmers and other poorer segments is far less than that
of Co-operatives. In terms of number of agricultural credit accounts, the STCCS has 50
percent more accounts than the CBs and RRBs put together. Of these, 70 percent are
estimated to be marginal and sub-marginal farmers. Directly or indirectly, it covers merely
half of India’s total population. The PACS have also spread to hilly terrains, deserts and other
areas with poor access. Regarding deposits, its share is less than that of Commercial Banks
and RRBs. However, Co-operatives are to be treated as “Refinance windows” instead of
incentivizing them into becoming genuine thrift and credit institution. Co-operatives have a
37 percent share in the aggregate crop loans particularly in remote, hilly and desert areas the
share is upwards of 50 percent.

4.6.9. REFORMS IN CO-OPERATIVE CREDIT SECTOR

130
The UPA Government constituted the Task Force Committee (TFC) under the chairmanship
of Sri Vaidhyanathan in the year 2004 to study on “Short term Rural Co-operative Credit
Structure” and submitted its report during the year 2005. As per the recommendations of the
government, the Union Cabinet has approved Rs. 13, 59,500 crores package for the revival of
STCCS on 15th December 2005. The salient features of the package are as follows:

• It includes wiping out accumulated losses covering both invoked and un-invoked
guarantees given by the state government as also their other dues

• The package would provide assistance to all Credit Co-operatives to increase the
capital to a specified minimum level. PACS would raise its capital to Risk Weighted
Assets Ratio (CRAR) of 7 percent and 9 percent 3 years. The SCB and DCCBs would
raise the capital to Risk Weighted Assets Ratio (CRAR) as prescribed by the capital to
Risk Weighted Assets Ratio

• The package would ensure the state government’s share in the equity of each
institution in the three-tiers did not exceed 25 percent of the total subscribed capital

• There would be no nominee of the state government on the board of a PACS even if it
has provided equity contribution

All PACS with a recovery of at least 30 percent of the demand as on 30th June 2004 would be
eligible for the revival package and receive financial assistance. Capitalization would be full
for PACS with recovery levels of 50 percent and above, in three annual back-ended
installments for those PACS with 30 to 50 percent recovery levels.

The Central government is expected to bear about 68 percent of the package, estimated at Rs.
1,359,600 crores, the state governments about 28 percent and the CCS could bear the rest of 4
percent. Already 8 states have already given their acceptance for going by the scheme by
bearing 28 percent of the share of contribution and 4 percent by the CCS.

4.7. REVAMPING OF CO-OPERATIVE CREDIT STRUCTURE

131
In January 2006, the GOI announced a package for revival of SRCCS involving financial
assistance of Rs. 13,596 crore. A Department for Co-operative Revival and Reforms has been
set up in The NABARD for facilitating the implementation process. States are required to
sign a MoU with NABARD committing to implement the legal, institutional and other
reforms. 17 states (A.P., Arunachal, Bihar, Chhattisgarh, Gujarat, Haryana, M.P,
Maharashtra, Rajasthan, Orissa, Uttarkhand, Uttar Pradesh, Tripura, Nagaland, Tamilnadu,
Punjab and West Bengal) have signed the MoU with the GOI and NABARD and 4 more
states and 3 Union Territories have agreed to implement the package. The Task Force has
also submitted its report for revival of LTCCS. A financial package for revival of LTCCS
would be developed based on the suggestions of state governments.

The financial sector reforms envisaged improving the efficiency and productivity of the rural
credit delivery system, which in turn would accelerate the requisite credit flow to the
productive sectors of the economy. The Vaidhyanathan committee report has suggested an
Implemental Action Plan (IAP) for the Revival of the LTCCS with substantial financial
assistance for recapitalization. The implementation of the Revival Package would result in
the emergence of strong and robust Co-operatives with conducive legal and institutional
environment for it to prosper. The committee is of the view that Co-operatives are a good
forum for enabling financial inclusion through SHGs. The committee also recommends the
setting-up of a Credit Guarantee Fund as a risk mitigation mechanism. The committee hopes
for the emergence of a more robust well-managed and self-reliant Co-operative Credit
System with improved governance structures and technology applications.

132
4.8. SUMMARY

o Agriculture forms the backbone of the Indian Economy. It contributes 18.5 percent to
the GDP and provides employment to about 52 percent of the total working
population during the year 2006-07. The advance technological changes in the
agricultural sector necessitated the requirement of more working capital. Hence, the
poor peasants in India are in search of timely credit

o Agricultural credit is of two types viz., Non-institutional and institutional. Non –

institutional sources include money lenders, trade merchants etc., who meet the short-
term and the consumption needs of the farmers. They are squeezing the blood of the
poor peasants by charging high rates of interest

o Institutional or formal sources include Commercial Banks, Co-operatives and

Regional Rural Banks. The main motto of these institutions is to provide cheap,
adequate and timely credit to agriculture and allied sector

o Co-operatives were established on the principle of Co-operation and to serve the poor
peasants. The main function of these banks is to relieve the poor farmers from the
clutches of the money lenders. Commercial Banks even though established to serve
the poor, could not succeeded in that aspect due to obvious reasons. To fill this
functional gap in the rural credit system, RRBs have emerged. The main objective of
RRBs is to reach all major strata of rural area

o By the beginning of 20th century, the GOI recognized the root causes of the
indebtedness and poverty of the Indian farmers and started credit Co-operatives. The
main objective of credit Co-operatives is to provide adequate credit at cheap rates and
in time

o The Credit Co-operatives had emerged as a result of the Co-operatives Societies Act
in the year 1904. The major development made during the period 1930 to 1950 was
the pioneering role played by RBI in guiding and supporting the Co-operatives.
During the period 1950-90 the All India Rural Credit Survey was set up which not
only recommended state partnership in terms of equity but also partnership in terms of
governance and management, The NABARD was also set up during this period. From
1990 onwards, there has been an increasing realization of the disruptive effects of
instructive state patronage and politicization of the Co-operatives which resulted in
poor governance and management

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o The Co-operative Banks are organized as a three-tier structure for Short-term Credit
and as a two tier structure for Long-term Credit. There are 30 SCBs, 368 DCCBs and
1.09 lakh PACSs for serving the rural clientele

o But in the Post Independence Era, due to Non-Performing Assets (NPA) and heavy
overdues, the Co-operatives have been suffering from heavy losses. In order to
support Co-operatives, The NABARD was set up to refinance them. A number of
committees were set-up to suggest reforms in the sector. However, the Credit Co-
operatives play a prominent role in the development of agriculture and allied sectors
by providing cheap, adequate and timely credit to the small and marginal farmers in
the country.

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135
 Chapter -V
GROWTH & DEVELOPMENT OF COOPERATIVES IN
ANDHRA PRADESH WITH SPECIAL REFERENCE TO E.G.
DISTRICT

5. 1 Introduction
5. 1.1 History
5. 1.2 Physiography
5. 1.3 Geography
5. 1.4 Demography
5. 1.5 Per Capita Income
5. 2 Agriculture
5. 2.1 Land Utilization
5. 2.2 Rainfall
5. 2.3 Irrigation
5. 2.4 Land Holdings
5. 2.5 High Yield Variety
5. 2.6 Fertilizer Policy
5. 2.7 Pesticides
5. 2.8 Farm Mechanization Scheme
5. 3 Agricultural Credit
5. 3.1 Banking in A.P.
5. 4 Co-operative Movement in Andhra Pradesh
5. 4.1 Development of Co-operatives
5. 5 Co-operative Credit
5. 5.1 Single Window Credit Delivery System
5. 5.2 Primary Agricultural Credit Societies
5. 5.2.1 Sources of Funds
5. 5.2.2 Functioning of PACS prior & after SWCDS
5. 5.3 District Central Co-operative Banks
5. 5.3.1 Sources of Funds
5. 5.3.2 Performance of DCCBs
5. 5.3.3 Progress of DCCBs
5. 5.4 Andhra Pradesh State Co-operative Bank
5. 5.4.1 Sources of Funds
5. 5.4.2 Functions
5. 5.4.3 Performance of APCOB
5. 6 Profile of East Godavari District
5. 6.1 Soils
5. 6.2 Climate & Rainfall
5. 6.3 Agriculture
5. 6.4 Banking
5. 6.5 Co-operative Credit in E.G. District
Summary

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5.1. INTRODUCTION

India is a country having different religions, cultures and languages etc. For administration
purposes, India is divided into 28 states and 7 centrally administered union territories. Andhra
state is the first state in India that has been formed on a purely linguistic basis. It was formed
by the great sacrifice of Sri Potti Sriramulu, on 1st October 1953 with 11 districts separated
from the then composite Madras states and with Kurnool as capital. On 1 st November 1956,
in accordance with the recommendations of the state’s reorganization commission, the state
was enlarged by adding 9 districts from the farmer Hyderabad state and with Hyderabad as
capital. The new state is called Andhra Pradesh.

5.1.2. HISTORY

The word “Andhra” is equally applicable to the land, the people and the language, although
the language in course of time developed a name of its own- Telugu, a Dravidian Language.
The Andhra, originally belonging to Aryan race migrated to the South of Vindhyas where
they mixed with the Non-Aryan stocks. Andhra Pradesh entered History as part of the great
Mauryan Empire.

5.1.3. PHYSIOGRAPHY

Andhra Pradesh is the Fifth largest State in India, both in Area and population. It is bounded
by Tamil Nadu in South, Orissa in the north-east, Maharashtra and Chhattisgarh in the in the
North, Eastern Maharashtra and Karnataka in the West and by the Bay of Bengal in the East.
It forms major link between the North and South of India. The climate is generally Hot and
Humid. Annual rain-fall is 125cm. The Krishna and the Godavari are the major river systems
in the state.

5.1.4. GEOGRAPHY

Andhra Pradesh situated between longitudes 760 15 1 E and 840 50 1 E and latitudes 120 41 N
and 19 0 54 1 N. It consists of three major regions viz.., Rayalaseema, Andhra and Telangana
with 23 districts, 181 revenue taluqs, 325 Panchayat samities and 26614 villages comprising

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an area of 2,75,000 square kilometers with a population of 7.6 crores (2001 census). Andhra
Pradesh receives a normal rainfall of 940 millimeters while the temperature varies between
140c – 430c in a year.

Basing on physical, social and economic conditions, Andhra Pradesh can be divided into
three regions viz., Coastal Andhra. Rayalaseema and Telangana. There are 9 districts in
coastal Andhra Pradesh region. They are Srikakulam, Vizianagaram, East Godavari, West
Godavari, Krishna, Guntur, Prakasam, and Nellore. The area of coastal Andhra Pradesh is
92,900 square kilometers. A major Portion of food and commercial crops are from this region
only. “Granary of South India”. As this region is agriculturally well developed, it is equally
well developed in trade and transport sectors. There are many industries based on agricultural
produce.

5.1.5. DEMOGRAPHY

According to 2001 census the population of Andhra Pradesh stands at 75.7 millions, which
constitutes 7.37 percent of India’s total population. It occupies fifth place in population.
Highest population density is found in the delta regions of East Godavari District, where
agriculture is well developed.

5.1.6. PER CAPITA INCOME

The per capita income of Andhra Pradesh amounted to Rs. 25,526 crores while its Gross
Domestic Product (GDSP) amounts to Rs.2, 25,896 crores and Net Domestic Product
(NDSP) amounts to Rs.2, 04,312 crores at current prices for the year 2005-06. The rice bowl
of the coastal Andhra, the coal belts of the Telangana and the rich power potential of the
Rayalaseema regions provide the people of this state potential for an overall agro-industrial
development.

5.2. AGRICULTURE

Andhra Pradesh is predominantly agricultural in character producing more than one - tenth of
India’s total output of food grains every year. It has a widely diversifies farming base with a
rich variety of cash crops. It has surplus in food grains, produces 10 million tons of rice and
can rightly claim to be the “Granary of the South”. Agricultural sector accounts for around
50 percent of the state’s income and provides livelihood for 70 percent of the population. It
ranked first in the production of Tobacco with a virtual monopoly of virgin Tobacco.

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It occupies fourth place in the production of food crops in the country. In Andhra Pradesh
16.02 million tons of food grains were produced in 7.65 million hectors of land in 2000-01.
Though paddy is grown in all the districts of the state, mainly the twin districts of Godavari
and Krishna 2-3 percent of the total production is grown in Kharif and the rest in Rabi
seasons. It occupies seventh place in the production of pulses, fifth place in the production of
sugar-cane and second place in the production of oil seeds. Various crops are grown here in
about 41 percent of the geographical area. In Andhra Pradesh 11.27 million hectors of land is
under agriculture.

Table 5.1.
Agriculture and Agro based exports (Rs. In crores)
Year Total Exports Agriculture & Agro % Share of Agricultural
based Products Exports to total exports
1994-95 3477 956 27.49
1995-96 5172. 1810 35.00
1996-97 6777 2646 39.04
1997-98 7002 2681 38.29
1998-99 7555 2780 36.80
1999-00 8315 2575 30.97
2000-01 12,400 2861 23.07
2001-02 13,615 3035 22.21
2002-03 15,381 1805 11.74
2003-04 18,281 11512 62.97
2004-05 24,408 1210 4.96
2005-06 40,601 4893 12.05
Sources: Commissioner of Industries & Commerce & Exports Promotion Wing, Government of
Andhra Pradesh, Hyderabad.

It is observed from the table 5.1 that the share of agriculture and Agro-based products occupy
a major share in total exports and increased during the period 1994 to 2000.It increased from
27.49 percent (1994-95) to 30.97 percent (1999-00).

5.2.1. LAND UTILIZATION

The total geographical area of the state is 274.40 lakh hectares. The utilization of the area is
39.5 percent net area sown, 22.6 percent forests, 8.9 percent fallow lands, 9.5 percent for non-
agricultural uses, 7.6 percent barren and uncultivable and the remaining 11.9 percent under
others. The net area sown during the year 2005-06 is 108.39 lakh hectares.

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5.2.2. RAINFALL

Agriculture in Andhra Pradesh is mostly dependent on rainfall. The state receives major
portion of its rainfall from south-west monsoon. It is predominant in Telangana region (715
millimeters) followed by coastal Andhra (620 millimeters) and Rayalaseema (407
millimeters). During south-west monsoon 2006, the state received an average rainfall of 627
millimeters as against the normal of 624 millimeters. Andhra Pradesh has a mean annual
rainfall of 858 millimeters.

5.2.3. IRRIGATION

The role of irrigation in increasing agricultural output has been well recognized. The state is
rightly called “A River State” as it is blessed with the major river systems like the Godavari,
the Krishna and Pennar and 37 others.

The gross area irrigated in the state declined from 60.92 lakh hectares in 1998-99 to 57.46
lakh hectares in 1999-00. The gross area irrigated under wells accounted for a major share of
25.95 lakh hectares followed by canals with 22.08 lakh hectares and tanks with 7.19 lakh
hectares in 1999-00.The net area irrigated in the state declined from 15.39 hectares in 1998-
99 to 43.84 lakh hectares in 1999-00. Net area irrigated under wells accounted for a major
share with 19.00 lakh hectares followed by canals 16.34 lakh hectares and tanks 6.52 lakh
hectares in 1999-00.

The gross area irrigated in the state is 59.96 lakh hectares during 2005-06. The gross area
irrigated under wells accounted for a major share of 46.6 percent (27.96 lakh hectares)
followed by canals with 37.2 percent (22.31 lakh hectares) and Tanks with 12.7 percent (7.62
lakh hectares) in 2005-06. The Net area irrigated is 43.93 lakh hectares during 2005-06 under
which wells accounted for 45.2 percent (19.87 lakh hectares) followed by canals 35.8 percent
(15.72 lakh hectares) and tanks 15.1 percent (6.62 lakh hectares).

5.2.4. LAND HOLDINGS

Success in agriculture depends to a considerable extent upon the size of the unit of
cultivation. According to the census of land holdings, the average size of the land holdings in
Andhra Pradesh was 1.36 (1995-96census). According to it, there were 106.03 lakh holdings

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comprising 143.73 lakh hectares. 59.4 percent of the holdings were below one hectare and the
total area under them was one-fifth of the total extent.

Table 5.2.
Distribution of land holdings
Size of No. of holdings(in % to total Area (in lakh % to total Average size
holdings lakhs) hectares) of holdings
Marginal 63.00 59.42 29.04 20.20 0.46
Small 22.62 21.33 32.29 22.47 1.43
Semi
13.95 13.16 37.36 25.99 2.68
Medium
Medium 5.63 5.31 32.31 22.48 5.74
Large 0.83 0.78 12.73 8.86 15.31
Total 106.03 100.00 143.73 100.00 1.36
Sources: Directorate of Economics & Statistics, Government of Andhra Pradesh, Hyderabad.

5.2.5. HIGH YIELD VARIETIES (HYV)

The High Yield Varieties programme was initiated in the state during 1966-67 with the main
objective of covering maximum are under high yield varieties of five crops viz., Rice, Wheat,
Jowar, Bajra and Maize to increase output. The total area covered under this programme
during 2005-06 was 52.74 lakh hectares.

Andhra Pradesh and Punjab led the country’s Green Revolution of the 1960s and earned for
itself the distinction of becoming India’s ‘bread basket’. The Green Revolution introduced a
new technology of production in agriculture. The technology consisted of a package of
inputs, such as, high-yielding varieties of seeds, chemical fertilizers, pesticides, insecticides,
weedicides, machines like tractors, threshers, pump sets/motors, combine harvesters/ reapers
and others. The proper usage of these inputs required an assured irrigation system, a
peasantry with the will and capacity to adopt the new technology and a government willing to
lend its support and investment. All these conditions were present in Andhra Pradesh in
General and Coastal Districts in particular.

High-yielding dwarf varieties of paddy from the IRRI, Philippines, were introduced leading
to bumper crops. The availability of assured irrigation for fertile lands provided a conducive
environment that enabled a dynamic peasantry to accept innovations in seed technology.
Several farmers already possessed the immediate capacity (supported by the government) to
make the necessary investments in the new technology. These initial innovators were

141
immediately imitated by other farmers, irrespective of the size of their holdings, when they
observed the sudden jumps in per hectare yield

5.2.6. FERTILIZER POLICY

Total fertilizer nutrient requirement during 2006-07 has been estimated at 31.69 lakh Million
Tons (14.81 lakh Million Tons – Kharif and 16.88 lakh Million Tones – Rabi).

Optimum fertilizer application plays a crucial role in improving the productivity of various
crops. Fertilizers are Artificial Manures used to supplement key soil nutrients, i.e. Nitrogen
(N), Phosphorus (P) and Potassium (K). The preferred usage ratio of NPK is 4:2:1. Urea, Di-
Ammonium Phosphate (DAP) and Single Super Phosphate (SSP) are the widely used
fertilizers in India.

Concerted efforts were made way back in 1977 to encourage fertilizer usage. Retention
Pricing Scheme (RPS) was one such method introduced to increase fertilizer consumption
and in turn improve productivity. The scheme was successful in attaining its objective.
Fertilizer consumption increased from about 38kgs/hectare to the current levels of about
90kgs/hectare. As per the scheme, all producers would earn 12% post-tax return on
investments while fertilizer prices were kept low by way of subsidies.

Table 5.3
Consumption of fertilizers in terms of nutrients (Lakh MTs)
Year Nitrogen(N) Phosphorus(P) Potassium(K) Total NPK
2001-02 11.83 5.48 2.56 19.57
2002-03 10.36 4.34 2.03 16.73
2003-04 11.39 4.74 2040 18.53
2004-05 11.57 5.39 2.92 19.88
2005-06 14.66 6.86 3.32 24.84
2006-07 15.60 6.94 4012 26066
Source::Agricultural Department & Economic Survey

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5.2.7. PESTICIDES
The pesticide consumption has been decreasing gradually with the adoption of Integrated Pest
Management (IPM) advocated intensively. During Kharif 2006 about 425 Million Tones of
active ingredients were utilized for plant protection, which is the lowest even recorded so far.
Usage of pesticides per se for controlling the pests, diseases and weeds in the agricultural
fields has been considered Vital for ensuring Food Security. Agriculture is the lynchpin of
the Indian economy. Ensuring food security for more than 1 billion Indian population with
diminishing cultivable land resource is a herculean task. This necessitates use of high
yielding variety of seeds, balance use of fertilizers, judicious use of quality pesticides along
with education to farmers and the use of modern farming techniques. It is estimated that India
approximately loses 18% of the crop yield valued at Rs.900 billion due to pest attack each
year. The use of pesticides help to reduce the crop losses, provide economic benefits to
farmers, reduce soil erosion and help in ensuring food safety & security for the nation.
CARE Research feels that the demand for pesticides can be augmented only through
sustainable growth in agriculture. With the government’s focus on development of the
agriculture sector, the industry may see a better future. The Indian pesticide industry is also
likely to move towards the global product mix, with an increase in the use of herbicides and
fungicides. Exports will continue to remain the growth driver.
Table 5.4.
Utilization of Pesticides in Andhra Pradesh
Year Utilization of pesticides in terms of technical grade( in tons)
1996-97 8702
1997-98 7298
1998-99 4741
1999-00 4054 (un reconciled)
2000-01 3241
2001-02 3850
2002-03 3401
2003-04 2333
2004-05 2781
2005-06 1918
2006-07 1394
Source: Agricultural Dept. & Economic Survey (A.P)

Table 5.4 depicts the utilization of pesticides during the period 1996-97 to 2006-07. During
the period there was a decrease in pesticides consumption.

5.2.8. FARM MECHANIZATION SCHEME

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Farm mechanization is gaining importance in the last five years for carrying out various farm
activities effectively in less time with less effort. This scheme is being implemented since
2000-01 and the Agricultural Department has been distributing various farm machinery and
implements on 50 percent subsidy subject to a maximum of Rs.30, 000 per unit to accelerate
present pace of mechanization.

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 Table 5.5
Farm Mechanization in Andhra Pradesh (Physical Units in Nos.)
Power Harvest
District Tractors Misc. Total
Tillers Comb.
Srikakulam 360 50 0 150 560
Vizianagaram 200 20 0 500 720
Visakhapatnam 200 20 5 1000 1225
East Godavari 400 300 10 80 790
West Godavari 600 300 5 100 1005
Krishna 600 200 25 1100 1925
Guntur 950 250 0 100 1300
Prakasam 1159 132 0 493 1784
Nellore 550 250 30 200 1030
Andhra Region 5019 1522 75 3723 10339
Chittoor 400 20 0 200 620
Cuddapah 595 0 0 350 945
Kurnool 450 90 0 800 1340
Anantapur 450 0 0 0 450
Rayalaseema Region 1895 110 0 1350 3355
Khammam 550 30 2 10 592
Karimnagar 650 250 0 1000 1900
Warangal 570 60 0 1500 2130
Nalgonda 700 14 6 0 720
Mahaboobnagar 700 20 0 90 810
Medak 480 70 0 230 780
Nizamabad 550 5 3 250 808
Adilabad 600 50 0 1200 1850
Rangareddy 450 75 0 75 600
Telangana Region 5250 574 11 4355 10190
Andhra Pradesh 12164 2206 86 9428 23884

Sources: National Bank for Agriculture and Rural Development, Andhra Pradesh Hyderabad.

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5.3. AGRICULTURAL CREDIT
The emphasis on agricultural credit continued to be on progressive institutionalization for
providing timely and adequate credit to farmers for increasing agricultural output and
productivity. It also aims at better access to institutional credit for small and marginal farmers
and other weaken sections to enable them to adopt modern technology and improved
agricultural practices. This has been one of the major objectives of the country’s agricultural
policy.

Agricultural Credit has been distributed through a multi-staged network consisting of

Commercial Banks, Regional Rural Banks and Co-operations. These are providing not only
the credit but also the crop insurance in the event of crop failures due to drought, cyclone and
incidence of pest and diseases. The scheme is being implemented in the state with active
participation and involvement of District Central Co-operative Banks, Commercial Banks,
Regional Rural Banks and Primary Agricultural Co-operative Society.

5.3.1. BANKING

A Sound Banking System is the sine qua non of accelerated economic growth. Bank performs
two functions viz.,

• They encourage the habit of savings.

• And channelize the savings through the form of credit for various people.
Banks play an important role in providing agricultural credit to the needy farmers at low rated
of interest. The multi-staged network was spread over to the remote areas in order to serve
the needy farmers.

Table 5.6.

Banking in Andhra Pradesh

Item 1961 1971 1981 1991 1997 2005 2009
Banking Offices (no.) 4705
332 917 2782 4585 5076 5415
Scheduled & Commercial
Villages having Banking 1410
37 272 1450 2675 2445 -
offices (No.)
Sources: RBI, Central Office, Mumbai

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It is observed from table 5.6 that the banking industry shows a progressive growth during the
period 1961 to 2005. In 1961 the number of banks was 332 where as in 2005 these increased
to 5415.

5.4. CO-OPERATIVE MOVEMENT IN ANDHRA PRADESH

Co-operative Movement in Andhra Pradesh has been playing an important and vital role in
the economic development of the state. The agriculturists in particular derived considerable
benefits through the Co-operative movement. Co-operatives as an instrument of change
started a century ago to finance agriculturists and to relieve them from the clutches of money
lenders and had enlarged its activities to different spheres of activity.

Co-operatives have been promoted and organized for the achievement of social and economic
betterment of the people in a democratic structural framework in pursuance of the National
and State objectives, such as

• Provision of adequate agricultural credit to farmers to enhance agricultural output.

• Provision of gainful employment and alleviation of poverty and destitution especially

in rural areas.

• Decentralization of economic development, effort and

• Development through mutual-help and Co-operative effort.

Table 5.7.

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 Profile of Co-operative Societies in Andhra Pradesh (Rs. In lakhs)
Year No. of Membership Paid-up Working Loans Loans
Societies (in 000) capital capital advanced Outstanding

1990-91 20205 15157 4180180 47044806 23557038 40119870

1991-92 20411 15787 3989373 54679031 21758305 44371539

1992-93 20257 16657 4401668 64472601 31867219 53386518

1993-94 20489 16812 4662758 75564550 34878348 58465752

1994-95 20582 17182 4813190 96207167 50443475 75121257

1995-96 22426 19022 6303876 102071454 57167641 82248613

1996-97 23155 20050 6635722 107199887 60026944 86361043

1997-98 25265 21052 9767508 112559881 63028291 90679095

1998-99 28675 22104 7315883 118187875 66179705 95213049

1999-00* 29663 22767 7535359 121733511 68165096 98069440

2000-01 s4359 12654 4900650 4415800 21063650 46703764

2001-02 4103 20885 7751600 4133400 19974429 4756698

2002-03 4312 21946 5269620 4619600 22457439 31117818

2003-04 4491 22009 5642490 4619600 24036942 5191575

2004-05 4064 22157 5640480 4840700 23940299 59486873

2005-06 4064 22000 5810750 4871800 27053788 56335770

Sources: Commissioner & Registrar of Co-operative Societies, Government of Andhra Pradesh,
Hyderabad.
* Figures are provisional for the years 1999-00
Figure 5.1.
Pictorial representation of memberships of Co-operative Societies in A.P.

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 Fig. 5.2.
Pictorial representation of paid-up capital and working capital details of Co-operative
Societies in Andhra Pradesh

Fig. 5.3.
Pictorial representation of loan advances and outstandings of
Co-operative Societies in Andhra Pradesh

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5.4.1. DEVELOPMENT OF CO-OPERATIVES

The Co-operative movement has been assigned a very important role in the establishment of
socialistic pattern of society in the country. The tentative Fourth Plan provision for Co-
operation sector in Andhra Pradesh was Rs.31.20 crores. The annual plans of 1969-70, 1970-
71 and 1971-72 were formulated with various schemes keeping in view the National Policy
envisaged in the National Fourth Plan to help the small, marginal and medium farmers and
weaker sections of the community in achieving self-reliance.

During the year 1968-70, the Andhra Pradesh Co-operative central land Mortgage Bank had
programmed to issue long-term credit to the extent of Rs.25 crores as against it advanced
Rs.19.19 crores only. The State Government contributed financial assistance to poor and
landless farmers under Uppal Committee scheme in the annual plans of 1969-70, 1970-71
and 1971-72. In the year 1964 the Andhra Pradesh Co-operative Societies Act was enacted
amending and consolidating the Madras Act of 1932 and Hyderabad Act of 1952.

In the year 1968, Taluka Level officers were appointed on the pattern of Hyderabad state. By
the recommendations of Anantha Raman Commission in the year 1970 the Andhra Pradesh
Backward Classes Co-operative Finance Corporation was established in the 1987 by the
recommendation of High Power Committee an innovative scheme i.e., the single window
system was adopted to restructure the credit Co-operatives. In the year 1995 Andhra Pradesh
passed mutually Aided Co-operative Societies Act. In the year 2001, major amendments were
made to Andhra Pradesh Co-operative Societies Act of 1964.

5.5. CO-OPERATIVE CREDIT

Co-operative Credit is the supervised credit subject to the financial and monetary discipline,
which are the essentials of sound banking and vital to the health of the economy of the
country as a whole. The Co-operative credit institutions occupy a place of pride in the overall
credit delivery system for their role in agricultural and rural development. Initially they were
concerned with the short-term loans only and later extended their services to investment loans
also.

In Andhra Pradesh the Co-operative Credit was divided into short-term, medium-term and
long-term credit having a multi-tier structure. The short and medium Co-operatives, which is

150
known as Rural Credit Co-operative structure has a three-tier structure with Andhra Pradesh
State Co-operative Bank (APSCOB) at the Apex Level, District Central Co-operative Banks
(DCCB) at the district level and Primary Agricultural Co-operative Societies (PACS) at the
village level. The Primary Agricultural Co-operative Societies are not banks, but only
societies. However the Primary Agricultural Co-operative Societies are the basic foundation
for the whole edifice of Co-operative credit.

Under the long-term credit structure (two-tier) State Co-operative Agricultural and Rural
Development Banks (SCARDB) are at the state level and affiliated Primary Agriculture and
Rural Development Banks (PARDB) at the district or taluk levels.

5.5.1. SINGLE WINDOW CREDIT DELIVERY SYSTEM (SWCDS)

The Single Window Credit Delivery System is the first of its kind in the Nation itself. It is an
innovative programme in farm credit. Under this system Primary Agricultural Co-operative
Societies are expected to provide multi farm credit and multi functional services at a single
contact point. In the state, the short-term and long-term credit structures have been integrated
under the Single Window Credit Delivery System.

The Government of Andhra Pradesh has appointed a High Power Committee in 1982 headed
by Sri Mohankanda to suggest on reorganization of Credit Co-operatives in the state. This
committee has recommended the introduction of Single Window Credit Delivery System.
After obtaining the approval from the Central Government, the Government of Andhra
Pradesh has introduced the system with effect from 1st April 1987 to make the existing
primary Agricultural Co-operative Societies more viable.

Though there is not much of a difference in the structure of these societies after the
reorganization, the functions have increased enormously. At the time of introduction of the
Single Window Credit Delivery System, there are 6695 Primary Agricultural Co-operative
Societies in the state which were reorganized into 4564 viable societies to maintain the
viability criterion. Similarly the 27 District Central Co-operative Banks (DCCB) were
reduced in order to maintain the norm of “One District Central Co-operative Banks (DCCB)
for one District”. The Primary Agricultural and Rural Development Banks (PARDB) were
abolished and their assets and liabilities were allotted to the respective DCCB. With the
approval of the Central Government, the Andhra Pradesh State Co-operative Agricultural

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Rural Development Banks (SCARDB) was merged with Andhra Pradesh Co-operative Bank
in April 1994.

5.5.2. PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETIES (PACS)

In the three-tier Credit Co-operative structure, Primary Agricultural Co-operative Societies

are the grass root level institutions having direct interaction with farmers. Viability of the
Primary Agricultural Co-operative Societies is critical to the very functioning of the Co-
operative Credit Structure since Primary Agricultural Co-operative Societies are the
foundation of which the entire edifice of Co-operative Credit Structure stands.

Primary Agricultural Co-operative Society is an association of borrowers and non borrowers

who residing in one locality, know about one another and take interest in one another’s
affairs. Membership is open to any inhabitant of the same locality irrespective of caste, creed
or calling through which it promotes a true spirit of Co-operative brother hood.

The societies provide production credit and supply of seeds, fertilizers and domestic
requirements to the members. “Intensive Agricultural District programme” and “The
Intensive Agricultural Area Programme” were introduced in ten selected districts to provide
timely package finance for raising the crops according to the requirements of planned
production in each village under expert guidance.

There are 361 Agricultural Credit Co-operative Societies in Intensive Agricultural District
Programme are which engaged in the distribution of fertilizers supplied up to 20908 tones to
their members.

The viability of Primary Agricultural Co-operative Societies depends on volume of business,

margin to the Primary Agricultural Co-operative Societies, recovery percentage, activities
carried out and the cost of management. In order to be viable the Primary Agricultural Co-
operative Societies have to invariably increase its turnover.

The Government of India advised Primary Agricultural Co-operative Societies to prepare

‘Business Development Plans’ and implement the same for their better working. Primary
Agricultural Co-operative Societies also have taken up financing of Self Help Groups
(SHGs).

5.5.2.1. SOURCES OF FUNDS

152
The working capital of Primary Agricultural Co-operative Societies (PACS) has been
obtained from

• Owned funds comprising share capital, entrance fees and the reserve fund.

• Deposits from members and non-members.

• Loans from Central Co-operative Banks and the Government.

5.5.2.2. FUNCTIONING OF PRIMARY AGRICULTURAL CO-OPERATIVE

SOCIETIES BEFORE AND AFTER THE INTRODUCTION OF SINGLE
WINDOW CREDIT DELIVERY SYSTEM

The Primary Agricultural Co-operative Societies have always played an important role in
providing credit to agriculture and allied activities in Andhra Pradesh. Further with the
introduction of Single Window Credit Delivery System (SWCDS) in 1987, these Primary
Agricultural Co-operative Societies have been playing critical functions by providing multi-
term credit and multi-functional services to the farmers in the state.

It is evident from the above table that there is a significant growth in the membership of the
Primary Agricultural Co-operative Societies after the introduction of Single Window Credit
Delivery System. But there is considerable decline in the number of societies during the
period. This significant decline in the number of Primary Agricultural Co-operative Societies
has been attributed to the consolidation and amalgamation of Primary Agricultural Co-
operative Societies on the basis of viability criteria under the Single Window Credit Delivery
System.

With regard to the actual performance of the Primary Agricultural Co-operative Societies,
data reveals a significant growth in terms of share capital, deposits, borrowings, loans and
advances, loans outstanding etc. From the above table, it is evident that the deposits and
advances were increased during the period 1962 – 1999. The number of societies has been
decreased basing on their viability, but the membership has increased.

153
 Table 5.8.

Working of Primary Agricultural Credit & Multipurpose Co-operative Societies (Rs. in Crores)

No. of Membership Share Loans

Year Deposits Borrowings W.C.
Societies (000) capital Advances Recovered O/s Overdues

1962-63 15328 1599 4.67 0.94 22.43 29.52 29.72 19.20 34.32 6.05

1972-73 14950 2283 11.28 4.20 41.53 75.27 31.61 26.11 48.58 27.23

1982-83 7001 7159 36.82 9.93 191.89 324.83 186.70 150.53 222.70 111.27

1992-93 4638 11924 136.91 72.80 860.85 1122.28 737.60 461.66 1482.02 416.87

2002-03 4678 16026 589.01 309.88 3251.40 6169.47 3368.24 1273.61 4434.38 1485.23
Sources: A.P. Statistical Handbook.

It is evident from the above table 5.8 that there is a significant growth in the membership of the Primary Agricultural Co-operative
Societies after the introduction of Single Window Credit Delivery System. But there is considerable decline in the number of
societies during the period. This significant decline in the number of Primary Agricultural Co-operative Societies has been attributed
to the consolidation and amalgamation of Primary Agricultural Co-operative Societies on the basis of viability criteria under the
Single Window Credit Delivery System.

154
 Fig 5.4. Fig 5.5.

Pictorial representation of memberships of PACS Pictorial representation of share capital, working capital,
deposits & borrowings of PACS

155
Fig 5.6 Pictorial representation of advances, recoveries, over-dues of PACS

156
5.5.3. DISTRICT CENTRAL CO-OPERATIVE BANKS

The District Central Co-operative Banks are the intermediary bodies in

between Andhra Pradesh State Co-operative Bank (APCoB) and Primary
Agricultural Co-operative Societies. These institutions offer valuable services
to the agricultural sector particularly to small and marginal farmers by
providing cheap, adequate and timely credit.

The District Central Co-operative Bank is a federation of Primary Agricultural

Co-operative Societies in a specified area, one or more taluqs or district. The
Central Co-operative Banks finance the Primary Agricultural Co-operative
Societies, balance the excess and deficiency of their sources. They work as
“balancing centres” by transferring the funds of the societies.

5.5.3.1. SOURCES OF FUNDS

• Share capital

• Reserve funds

• Deposits such as savings, fixed, recurring etc.

• Surplus funds of Primary Agricultural Co-operative Societies affiliated

to them.

• Finance from Andhra Pradesh State Co-operative Bank (APCOB) and

NABARD in times of deficiency of funds.

The DCCBs lend funds to affiliated Primary Agricultural Co-operative

Societies within the limits of the borrowing capacity fixed for each society.
Their lending rates have to be nearly three percent higher than their borrowing
rates, to cover expenses to build up a reserve fund and to pay a moderate
dividend. Twenty five (25) percent of their net profits must be carried forward
to the reserve fund. They also keep sufficient liquid resources to pay the
claims of deposits.

157
 As the District Central Co-operative Bank is the most important linkage in the
functioning of the three-tier Co-operative structure, the success of Primary
Agricultural Co-operative Societies at the primary level and the State Co-
operative Banks at the apex level are largely depends on the efficiency of The
District Central Co-operative Banks. Financially sound and organizationally
strong The DCCBs are sine qua non for providing required financial assistance
to Andhra Pradesh State Co-operative Bank.

Initially there were 25 DCCBs in the state. Of them ten were identified as
weak which need loan assistance and share capital contribution. But now, the
number of DCCBs comes down to twenty two. This is due to the reason that
these banks were reorganized in order to maintain the norm of ‘One bank for
one district’ after the introduction of Single Window Credit Delivery System.

5.5.3.2. PERFORMANCE OF THE DISTRICT CENTRAL CO-

OPERATIVE BANKS

The DCCBs are providing both crop loans (Kharif and Rabi) and investment
credit. It is providing credit under Seasonal Agricultural Operations (SAO),
Oil Seed Production Programme (OPP) and Development of Tribal Production
(DTP).

Table 5.9.
Lending by DCCB – Seasonal agricultural operations (Rs. In Crores)
Disbursement during
Purpose NABARD APCOB to DCCB
Kharif Rabi Total
SAO 1044.99 1507.32 1170.86 866.37 2037.23

OPP 67.11 160.05 160.69 85.45 246.14

DTP 25.57 52.65 21.97 11.81 33.78

1137.51 1720.02 1353.52 963.63 2317.15

158
Sources : APCOB 42nd Annual Report (2004 – 05), SAO: Seasonal Agricultural
operations; OPP : Oil Seed Production Programme, DTP : Development of Tribal
Production

Fig. 5.7.
Pictorial representation of lending by NABARD for SAOs

Fig. 5.8
Pictorial representation of various SAOs

159
It is evident from the above table; the DCCB is disbursing a credit of Rs.
2037.23 lakhs for Seasonal Agricultural Operations (SAO), Rs.246.14 lakhs to
Development of Tribal Production (DTP). It is clear from the above, the
DCCBs are providing major share to SAO.
It is clear that the DCCBs are concentrating more on crop loans than
investment credit. Even though NABARD is financing for long-term loans, the
DCCBs are concentrating on crop loans only. The viability of any credit
structure depends upon its recovery of loans. The DCCBs are in a safe position
in the recovery of loans.

The DCCBs are performing all banking functions viz., mobilization of deposits
and disbursement of credit. Deposits are one of the sources of funds of the
District Central Co-operative Banks. Hence, the DCCBs are concentrating
more on mobilization of deposits by adopting attractive schemes.

For the year 2004-05, Andhra Pradesh State Co-operative Bank (APCOB)
fixed target deposits of Rs. 2807.53 crores for all DCCBs, and could achieve
upto Rs. 2427.22 crores only.

The Government of Andhra Pradesh in order to strengthen the share capital

base of the DCCBs which could not comply with section 11 (i) of the Banking
Regulation Act 1949 sanctioned and released an amount of Rs. 21,666 crores
to nine DCCBs during the year 2004-05. This enabled the said DCCBs to
improve their net worth and qualify for NABARD refinance facilities.

160
5.5.3.3. PROGRESS OF THE DISTRICT CENTRAL CO-OPERATIVE
BANKS

The progress of the DCCBs can be analyzed through its’ amount of share
capital, reserves and profit / loss.

It is evident from the table below that the share capital of the DCCBs had
increased nearly two and half times during the ten years period i.e., from
1995-96 to 2004-05. The share Capital for 1995-96 is Rs. 1812.33 Crores
where as it is Rs. 4,348.10 Crores in 2004-05. Its reserves for 1995-96 are
Rs.1, 544.93 Crores and for 2004-05 was Rs.1, 11,439.18 Crores. Though it
showed a loss of Rs.815.04 Crores for the year 1995-96, it came to profit of
Rs.132.28 Crores in 2004-05. It was observed that there were some
fluctuations in the profits, may be due to its recovery of loans, less deposits,
non-performing assets and lack of management skills etc.

Table 5.10

Progress of the DCCBS during 1995– 06 to 2004 – 05 (Rs. In Crores)

Year Share Capital Reserves Profit / Loss

1995 – 96 1812.33 1544.93 - 815.04
1996 – 97 2553.71 1466.1 - 135.44
1997 – 98 3083.14 2168.69 + 122.83
1998 – 99 3830.99 3337.54 - 420.94
1999 – 00 4068.29 4703.2 + 21.58
2000 – 01 4302.6 5416.6 + 502.79
2001 – 02 4299.59 7919.04 - 993.30
2002 – 03 4382.47 6815.03 - 1908.86
2003 – 04 4371.41 8820.15 - 867.19
2004 - 05 4348.1 111439 + 132.28
Sources: Directorate of Economics & Statistics, A.P.

161
It is evident from the table 5.10 that the share capital of the District Central
Co-operative Banks was increased nearly two and half times during the ten
years period i.e., from 1995-96 to 2004-05. It was observed that there are
some fluctuations in the profits, may be due to its recovery of loans, less
deposits, non-performing assets and lack of management skills etc.

Fig. 5.9.

Pictorial representation of Progress of the DCCBs

162
Table 5.11. Working of District Central Co-operative Banks in A.P. (Rs. in Crores)
Year No. of Share Reserves Deposits Borrowings Working Loans
banks Capital Capital Advances Recovered O/S Overdue
1962 – 63 25 4.93 2.22 6.83 20.65 34.64 35.42 35.35 28.02 5.08
1972 – 73 25 10.86 6.33 22.68 23.22 66.4 39.78 43.94 49.71 20.95
1982 - 83 27 38.44 11.87 128.64 191.78 426.98 278.68 180.03 336.53 114.87
1992 – 93 22 149.28 28.51 625.17 1514.77 2096.07 1115.72 596.65 1637.13 564.31
2002 – 03 22 705.45 41.79 2647.95 4022.86 7456.28 2086.2 1893.82 8124.82 2000.9

Fig. 5.10. & Fig. 5.11. Pictorial representation of Working of CCBs in A.P

163
5.5.4. ANDHRA PRADESH STATE CO-OPERATIVE BANK (APCOB)

The Andhra Pradesh State Co-operative Bank is a Scheduled State Co-

operative Bank for the state of Andhra Pradesh. It was formed by the
amalgamation of Andhra State Co-operative Bank Limited, Vijayawada and
Hyderabad Co-operative Apex Bank Limited under the APSC Bank Limited
(Formation Act 1963) (Act 12 of 1963) and started functioning from 4 th
August 1963. Later under Single Window Credit Delivery System, the Andhra
Pradesh Co-operative Central Agricultural Development Bank Limited,
Hyderabad merged with the APCOB with effect from 30th April, 1974.
APCOB is also a leading scheduled bank in the state with “A” class audit
classification and it is also government partnered bank.

APCOB is the apex institution in three-tier Co-operative Credit Structure. The

Credit Co-operative Structure in the state has a wide network of 2746 PACS at
primary level, 22 District Central Co-operative Banks with 579 branches at
district level and APCOB with 26 banking locations. The bank monitors its
credit system through seven zonal offices at Visakhapatnam, Vijayawada,
Ongole, Cuddapah, Hyderabad, Nizamabad and Warangal. It has also a
network of 24 branches and also the head office main branch in the twin cities
of Hyderabad and Secunderabad and also one branch at Tirupati to meet the
exclusive needs of the urban clientele.

5.5.4.1. Sources of Funds

• Share capital

• Reserve fund

• Various kinds of deposits

• Short-term loans, cash credit and overdrafts from State Bank of India
and other Banks

164
 • Deposits of surplus funds of District Central Co-operative Banks
affiliated to them.

The Reserve Bank of India provides support in cases of temporary shortage of

funds. APCOB acts as a monitoring mechanism over Co-operative Central
Banks. The Bank is committed to agricultural and rural development through
the Credit Co-operatives. The APCOB and affiliate credit structure in Andhra
Pradesh showcase a unique experiment of Single Window Credit Delivery
System, as a first of its kind in the country under which, both investment and
production credit for agriculture is provided at the grass root level through a
single agency. The Primary Agricultural Societies at village level have been
modeled as a one stop for the farmer for availing of varied short, medium and
long – term loans both under production and investment credit, input
requirement, produce shortage facilities, essential commodities, banking and
other rural based services.

5.5.4.2. FUNCTIONS

The Andhra Pradesh Co-operative Bank (APCOB) through the District

Central Co-operative Banks and Primary Agricultural Co-operative
Societies provides refinance support for agricultural production credit for
seasonal agricultural operations (crop loans), investment credit for
investment in agriculture for Minor Irrigation, Farm Mechanization, Land
Development, Horticulture, Diary and other diversified investments and
allied activities.

In times of natural calamities, the bank provides credit stabilization

arrangements by way of conversion, rephasement, postponement and
reschedulement of agricultural loans.

165

The bank extends its helping hand to ameliorate the sufferings of the
weaker sections of the society and to bring them above the poverty line.

The bank is advancing more than 60 percent of the total term loans to the
small farmers.

Loans to Employee Credit Societies are also extended to provide timely

financial support to employees of various organizations through the
District Central Co-operative Banks.

The bank finances Industrial Co-operatives and Agro- processing

industries.

To promote rural development, it provides assistance for programmes

under Swarna Jayanti Gram Swayam Rojgar Yojana, non-farm sector
finance for self employment, micro credit through Self Help Groups
(SHGs) etc.

The APCOB is also implementing Intensive Credit Development

Programme (ICDP) schemes in all districts with a view to achieve
sustainable development of Co-operative institutions from grass root level.

It offers all types of banking services like any other Nationalized Bank.
The Board of Management of the Bank is composed of the presidents of the 22
District Central Co-operative Banks, three nominees of the Government of
Andhra Pradesh, one nominee of NABARD and the M.D. of the bank is an ex-
officio member of the board.

166
5.5.4.3. PERFORMANCE OF THE BANK

The performance of the bank can be analyzed through its growth in share
capital, amount of deposits and advances, their recovery etc.

There were two apex banks at the State level upto 1962-63 one for Andhra
area and another for Telangana area and they were merged to form the APCoB
since 04.08.1963.

It is providing credit for all purposes such as seasonal agricultural operations

and investment through its affiliated District Central Co-operative Banks. The
deposits of the bank include current, fixed, savings, money at call and short
notice and other deposits.

167
 Table 5.12
Working of State Co -operative Bank in A.P. (Amount in Rupees of Crores)
Loans Bad &
S. Share
Year Reserve Deposits Borrowings W.C. Over Doubtful
No. Capital Advances Recovered O/s
due debts
1 1996 – 97 10,437 23,346 57,043 2,55,189 3,46,016 201,241 1,61,966 3,01,949 42,510 3,439
2 1997 – 98 10,932 26,204 81,295 2,83,409 3,94,595 2,34,359 1,99,556 3,29,806 54,590 5,433
3 1998 – 99 16,084 34,984 1,05,233 3,64,693 5,52,846 2,72,583 2,12,838 3,83,277 69,655 11,553
4 1999 – 00 16,923 45,609 1,45,290 3,54,143 5,61,966 2,84,803 2,23,133 4,09,453 45,224 9,581
5 2000 – 01 17,949 8,268 1,62,055 3,47,848 5,76,469 3,07,041 2,89,686 4,35,990 59,630 14,301
6 2001 – 02 18,599 53,566 1,53,412 3,35,231 5,61,708 3,06,668 2,80,903 4,61,753 84,297 18,839
7 2002 – 03 18,910 62,375 1,35,963 3,35,937 5,28,477 2,38,583 2,87,099 4,53,237 85,040 1,66,852
8 2003 – 04 19,014 64,271 1,67,794 3,21,937 5,73,016 3,38,583 3,33,547 4,47,782 74,998 1,37,485
9 2004 – 05 19,190 1,12,400 1,86,764 3,12,352 6,30,706 9,11,807 8,43,942 5,15,847 59,325 76,231
10 2005 - 06 19,193 1,19,555 1,69,715 4,07,473 4,63,095 9,43,602 8,95,466 5,64,068 63,809 86,801
Source:Commission for Co operation and Registrar of Co operative societies, A.P. &
Directorate of Economics & Statistics, Govt. of A.P. Statistical abstract of A.P. different issues.

Table 5.11 & 5.12 shows the decadal growth of DCCBs from 1962-63 to 2002-03. It is clear from the table that all the key financial
indicators were increased during the period. The number of banks was decreased due to Single Window Credit Delivery System from
25 to 22.It also make clear the recovery performance of the bank which doesn’t shows any positive progress.

168
 Table 5.13

Prior & after Single Window Credit Delivery System - Working of State Co- operative Banks in A.P. (Amount in Crores)

Loans Bad &

S. No. of Share
Year Reserve Deposits Borrowings W.C. Over Doubtful
No. Banks Capital Advances Recovered O/S
due debts

1 1962-63 2 2.13 0.85 3.04 18.85 24.87 39.92 39.99 21.87 1.33 0.07
2 1972-73 1 2.39 3.31 16.71 9.67 32.84 40.95 55.86 25.96 2.26 0.03
3 1982-83 1 12.94 4.5 117.76 124.88 291.35 289.89 187.44 231.82 15.32 0.77
4 1992-93 1 36.46 82.13 422.25 703.86 1244.7 1024.34 912.51 880.44 84.19 11.87
5 2002-03 1 189.1 623.75 1359.63 -3359.37 5284.77 2385.83 2870.99 4532.37 850.4 1668.52
Sources : Directorate of Economics & Statistics, Govt. of A.P.

169
 Table 5.14.
Key Financial indicators (Amount in Crores)
Particulars As on 31.03.06
Paid up Share Capital 191.93
Reserves 1195.55
Own Funds 1387.48
Deposits 1697.15
Borrowings 4074.73
Loans & Advances 5640.68
Investments 785.83
Working Capital 7159.35
Net Profit 5.7
Credit – Deposit ratio 332.36%
Sources : Directorate of Economics & Statistics, Govt. of A.P. Statistical abstract of
A.P. different issues.

Table5.15.
Ratio of Credit -Deposits of APCOB
Year Total Advances Total Deposits C/D ratio (in %)

1996 – 97 2,01,241 57,043 352.78

1997 – 98 2,34,359 81,295 288.28
1998 - 99 2,72,584 1,05,233 259.03
1999 – 00 2,84,803 1,45,290 196.02
2000 – 01 3,07,041 1,62,055 189.47
2001 – 02 3,06,668 1,53,412 199.9
2002 – 03 2,38,583 1,35,963 175.48
2003 – 04 3,28,670 1,67,794 195.88
2004 – 05 9,11,807 1,86,764 488.21
2005 - 06 9,43,602 1,69,715 555.9
Sources : Directorate of Economics & Statistics, Govt. of A.P. Statistical abstract of
A.P. different issues.

170
Table 5.14 & 5.15 reveals the total deposits and advances of DCCB for the
period 1996-97 and 2005-06. By observing the above table it is clear that the
credit-deposit ratio of DCCB has fallen from 127.4 percent (1996-97) to 80.0
percent (2005-06).

The bank has shown a satisfactory growth in deposit mobilization. Deposit

continuance of hostile environment for Co-operative bank. The total deposits
increased from Rs. 1,677.93 Crores to Rs. 1,867.64 Crores registering a
growth rate of 11.30 percent. The growth in fixed deposits is 18.78 percent in
savings deposits is a marginal increase of 1.09 percent. The current account
deposits have recorded a growth rate of 25.17 percent during the year.

Borrowings are one of the sources of funds of APCOB. It is getting

borrowings from the State Government, NABARD, IDBI / SIDBI, NCDC and
others. Borrowings have further decreased by 2.97 percent during 2004-05.

Table 5.16.
Trend of total deposits during 1996-97 to 2005-06
Year Total Deposits Increase / Decrease Increase / Decrease in %
1996-97 3200935 - -
1997-98 3626271 927504 25.58
1998-99 4553775 828918 18.20
1999-00 5382693 824320 15.31
2000-01 6207013 472708 7.62
2001-02 6679721 559722 8.38
2002-03 7239443 449009 6.20
2003-04 7688452 360898 4.69
2004-05 8049350 615872 7.65
2005-06 8665222 -8665222 -100.00
Sources: A.P. Statistical Handbook

171
 The data shown in the tables 5.15 & 5.16 depicts variations in the total deposit
and advances issued by DCCBs during 1996 to 2006. The total deposits
increased with time however, the rate of increase has been fallen from 25.58%
to 7.65% with all time low of 4.69 % during 2003-04. The total advances have
been significantly falling with time whereas a marginal increase was observed
during 1998-99, 2001-02 and 2004-05.

Table 5.17.
Trend of total advances during 1996-97 to 2005-06
Advances
Year Increase/Decrease Increase/Decrease in Percentage
(Rs. In lakhs)
1996-97 4078057 - -
1997-98 3977824 -100233 -2.46
1998-99 4290543 312719 7.86
1999-00 4127042 -163501 -3.81
2000-01 4081745 -45297 -1.10
2001-02 6130249 2048504 50.19
2002-03 5903366 -226883 -3.70
2003-04 5752901 -150465 -2.55
2004-05 6535578 782677 13.60
2005-06 6931761 396183 6.06
Sources: A.P. Statistical Handbook

PREVAILING INTEREST RATES

NABARD to APCOB : 8.00 %

APCOB to DCCBs : 8.50%
DCCBs to PACS : 10.50%
PACS to ultimate borrowers : 12.50%

172
The percentage of recovery during 2004-05 is 80.89 percent as against 73.82
percent registered during the previous year. The Government of Andhra
Pradesh approved the One Time Settlement (OTS) scheme as on 22 nd February
2002 formulated by NABARD to reduce the debt burden of the farmers by
offering waiver of penal interest,, legal charges and other expenses. The
burden of waiver charges is shared by the Primary Agricultural Co-operative
Societies, District Central Co-operative banks and Andhra Pradesh Co-
operative Bank in the ratio of 25:35:40 respectively. The last date for
settlement of OTS cases and for payment of 25 percent of the settled amounts
was 31st December 2003. The loanees were allowed time upto 31 st December
2004 to pay the balance of 75 percent of the settled amount. The progress
achieved under the scheme is as under

173
 Table 5.18
Working of State Co -operative Bank in A.P. (amount In Crores)
Share Loans
Year Reserve Deposits Borrowings W.C.
Capital Advances Recovered O/s Over due
1996 – 97 10,437 23,346 57,043 2,55,189 3,46,016 201,241 1,61,966 3,01,949 42,510
1997 – 98 10,932 26,204 81,295 2,83,409 3,94,595 2,34,359 1,99,556 3,29,806 54,590
1998 – 99 16,084 34,984 1,05,233 3,64,693 5,52,846 2,72,583 2,12,838 3,83,277 69,655
1999 – 00 16,923 45,609 1,45,290 3,54,143 5,61,966 2,84,803 2,23,133 4,09,453 45,224
2000 – 01 17,949 8,268 1,62,055 3,47,848 5,76,469 3,07,041 2,89,686 4,35,990 59,630
2001 – 02 18,599 53,566 1,53,412 3,35,231 5,61,708 3,06,668 2,80,903 4,61,753 84,297
2002 – 03 18,910 62,375 1,35,963 3,35,937 5,28,477 2,38,583 2,87,099 4,53,237 85,040
2003 – 04 19,014 64,271 1,67,794 3,21,937 5,73,016 3,38,583 3,33,547 4,47,782 74,998
2004 – 05 19,190 1,12,400 1,86,764 3,12,352 6,30,706 9,11,807 8,43,942 5,15,847 59,325
2005 - 06 19,193 1,19,555 1,69,715 4,07,473 4,63,095 9,43,602 8,95,466 5,64,068 63,809
Sources: Commission for Co-operation and Registrar of Co-operative Societies, A.P. &
Directorate of Economics & Statistics & Statistical Abstract of A.P. different issues.
Table 5.16 shows the different key financial indicators of Andhra Pradesh State Co-operative Bank by which it is clear that it shows a
progressive growth during the period 19996-97 to 2005-06.

174
 Table 5.19.
Prior & after Single window credit delivery system - Working of State Co- operative Banks in A.P. (amount in Crores)
Loans
No. of Share
Year Reserve Deposits Borrowings W.C. Over
Banks Capital Advances Recovered O/s
due
1962-63 2 2.13 0.85 3.04 18.85 24.87 39.92 39.99 21.87 1.33
1972-73 1 2.39 3.31 16.71 9.67 32.84 40.95 55.86 25.96 2.26
1982-83 1 12.94 4.5 117.76 124.88 291.35 289.89 187.44 231.82 15.32
1992-93 1 36.46 82.13 422.25 703.86 1244.7 1024.34 912.51 880.44 84.19
2002-03 1 189.1 623.75 1359.63 -3359.37 5284.77 2385.83 2870.99 4532.37 850.4
Sources: Directorate of Economics & Statistics, Govt. of A.P.

There were two apex banks at the State level up to 1962 – 63 one for Andhra area and another for Telangana area and they were
merged to form the APCOB since 04.08.1963

Table 5.19 gives the clear picture of APCOB prior and after Single Window Credit Delivery System i.e. before 1987 and after 1987.
It shows that before SWCD system there were two SCBs but after 1987 both were merged as single bank

175
Number of Beneficiaries : Rs. 1,09,190
Amount recovered under OTS : Rs. 8,472 lakhs
Amount of share released by APCOB : Rs. 3, 007.18 lakhs

APCOB is acting as Project Implementing agency (PIA) and is implementing

Investment Credit Development (ICDP) in the districts of East Godavari,
Nizamabad, Chittoor, Krishna, Nalgonda and Kurnool.

APCOB as a leader of the Credit institutions in Co-operatives undertakes

annual inspections of District Central Co-operative banks by deputing its
officers and staff. To provide efficient and timely customer services in the
present competitive banking environment, APCOB has initiated the process of
computerization of its banking functions through a centralized banking
solution.

Table 5.20.
Trend of Total Deposits of APCOB
Increase / Increase /
Year Total Deposits Decrease in Rs. Decrease in
Percentage
1996 – 97 57,043 - -
1997 – 98 81,295 24,252 42.51
1998 - 99 1,05,233 23,938 29.44
1999 – 00 1,45,290 40,157 38.06
2000 – 01 1,62,055 16,765 11.54
2001 – 02 1,53,412 -8,643 -5.33
2002 – 03 1,35,963 -17,449 -11.37
2003 – 04 1,67,794 31.831 23.41
2004 – 05 1,86,764 18,970 11.30
2005 - 06 1,69,715 -17,049 -9.12
Sources: Directorate of Economics & Statistics, Govt. of A.P. Statistical abstract of A.P. different
issues.

176
It was observed from the table 5.18 that there were many fluctuations in the deposits
during the period 1995-96 to 2005-06.The main cause for these fluctuations may be due to
low productivity and high costs by which people may not be in a surplus position.

5.6. PROFILE OF EAST GODAVARI DISTRICT

East Godavari is one of the Eastern Coastal districts of the Andhra Pradesh. It
is situated in the geographical co-ordination of 16 0- 300 and 18 0-20 0
of the
0 0 0 0
northern latitude and 81 - 30 and 82 – 36 of the eastern latitude.

The district is bounded on the north by Visakhapatnam and the state of Orissa,
on the east by Bay of Bengal, on the south and on the west by West Godavari
and Khammam districts. It can be broadly classified into three natural zones –
the delta, upland and agency tracts. It has an area of 10, 807 square kilometers
and Kakinada is its head quarters.

5.6.1. SOILS

The main soils in the district are Alluvial (Clay loamy), Red soils, Sandy
loams and Sandy clay. The soils are of mostly Alluvial in Godavari delta area
and sandy clay at Tailand portions of Godavari. There are red loamy soils in
uplands and agency area of the district.

5.6.2. CLIMATE AND RAINFALL

As per 2001 census there are 1337 inhabited villages, 67 uninhabited villages
and 20 towns in the district with a population of 48.72 lakhs with an area of
10, 807 square kilometers. East Godavari is one of the most populous and
densely populated districts in the state. The density of population is 451 square
kilometers. Out of the total population 23 percent live in urban areas,
remaining 77 percent live in rural areas. In the district out of every hundred,
58 people can read and write. A large section of the working population,

177
nearly two-third depends on agriculture for their livelihood. As per 2001
census, the population of Scheduled castes is 8.816 lakhs and that of
Scheduled Tribes 1.91 lakhs of the total population of the district.

5.6.3. AGRICULTURE

The net area cultivated with crops forms about 41 percent of the total
geographical area of the district. Out of the net area sown a large portion of the
area is irrigated by the network of irrigation canals in the district. The
Godavari Irrigation System (GIS) irrigates all the mandals in delta region. The
Yeleru irrigation channels irrigate Peddapuram, Pithapuram, Prattipadu,
Jaggampet, Kirlampudi and Yeleswaram mandals. Thhe Thandava and Pumpa
river channels supply water to a limited number of villages in Tuni and
Thondangi. In upland area there are a few irrigation tanks fed by Hill streams.
The net area irrigated forms about 64 percent of the net area sown. Along with
West Godavari and Krishna districts, this district also shares the distinctions of
being “Rice Bowl of Andhra Pradesh”. Paddy forms 53 percent of the total
area sown with an average yield of 2625 kgs. / acre in the district. The district
stands first in the cultivation of the coconut and bananas. Out of the total
production of bananas and coconuts in the state 36 percent and 57 percent of
the production is from this district only.

5.6.4. BANKING

Banking institutions in the district consists of Public sector banks, Private

sector banks, Regional Rural Banks and District Central Co-operative Banks.
Andhra bank is the Lead Bank in the district.

178
 Table 5.21.
List of Banks operating in the district
Particulars Number
a. Nationalized Banks 295
b. Co-operative Banks 47
c. Rural Banks 16
d. Private Banks 40
Total 398
Source: District Statistical Handbook, E.G. District 2005

5.6.5. CO-OPERATIVE CREDIT INSTITUTIONS

Co-operative Credit institutions at district level are serving the agriculture and
allied sector to a great extent in the East Godavari District. They spread to the
remote areas of the district in order to serve the needy farmers.

The District Central Co-operative Bank was established in Kakinada in the

year 1987. It performs all the banking functions as per the Banking Regulation
Act 1949. Now the bank is rendering services with 47 branches and 293
Primary Agricultural co-operative Societies in the district.

The bank accepts deposits and lends both short-term and long-term credit for
production and investment purpose through Primary Agricultural co-operative
Societies and also directly to the farmers. As on 31st March 2005 there were
48 branches including head office, 1534 Primary Agricultural Co-operative
Societies with a membership of 47,532. These institutions mobilized deposits
of Rs. 23, 131 Crores and issued short-term loans of Rs. 24, 567 lakhs and
non-agricultural loans of Rs. 4545 lakhs. It earned a profit of Rs.124 lakhs for
the year 2004-05.

179
 Table 5.22

Comparison of the District with the State 2005-06 (as per 2001 & 2005
census)

District
Item District State
Characteristics
Area (Sq. km) 10818 275069 3.93
Population Total 4901420 76210007 6.43
Population Urban 1151885 20808940 5.54
Population Rural 3749535 55401067 6.77
Density of population
453 277 164
(Per sq. km)
Working population 1940214 34893859 5.56
Scheduled Caste
881650 12339496 7.14
population
Scheduled Tribe
191561 5024104 3.81
population
Normal rainfall (mm) 1219.0 940 129.68
Gross cropped area
7.47 132.62 5.63
(lakh ha)
Net cropped area 4.1 107.45 3.82
Gross irrigated area 4.75 59.96 7.92
Gross area irrigated
as % to total area 63.59 45.21 140.64
(%)
Net irrigated area
2.66 43.93 6.06
(lakh ha)
Sources : District Statistical Handbook

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 5.7. SUMMARY

i. Andhra Pradesh is the first linguistic state in India which was formed on
1 st October 1953. It is the fifth largest state in the country both in area
and population. It is known as “Granary of the south” by producing one-
tenth of India’s total output of food grains. It ranked first in the
production of tobacco. As Andhra Pradesh is predominantly agricultural
in character, around 70 percent of the population depends on it for their
livelihood.
ii. As agriculture is the backbone of the economy, the government has to
provide sufficient credit to their sector in order to adopt modern
technology and improved agricultural practices. Agricultural credit is
disbursed through a multi-staged network consisting of Commercial
Banks, Regional Rural banks and Credit Co-operatives.
iii. Credit Co-operatives play an important role in serving the needy farmers
by providing short-term, medium-term and long-term loans at low rates
of interest.
iv. The Credit Co-operatives have three structures- APCOB is the apex
institution which guides and frames the total network of the Co-operative
credit System. Under it 22 District Central Co-operative Banks are
working with 579 branches and 2746 Primary Agricultural Co-operative
Societies. The District Central Co-operative Banks are district level
institutions and acts as a link between Primary Agricultural Co-operative
Societies and APCOB. The Primary Agricultural Co-operative Societies
are the grass root level institutions that have direct interaction with
farmers. Andhra Pradesh is the first state which implemented the Single
Window credit Delivery System.
v. East Godavari is one of the north-eastern districts of Andhra Pradesh. It
shares the distinctions of “Rice Bowl of Andhra Pradesh” by producing
paddy of 2625 kg per acre. In this district Co-operatives are functioning

181
in most efficient manner by providing adequate, cheap and timely credit
to the agriculture and allied sector.

182
 CHAPTER –VI
GROWTH AND PERFORMANCE OF THE
DISTRICT CENTRAL CO- OPERATIVE BANK,
KAKINADA – ALONG WITH PACS

6. 1 Introduction
6. 2 Single Window Credit Delivery System
6. 3 Network of the Bank
6. 4 Objectives
6. 5 Resources of the Bank
6. 5.1 Share capital
6. 5.2 Deposits
6. 5.3 Borrowings
6. 6 Deployment of funds
6. 6.1 Loans & advances
6. 6.2 Investments
6. 7 Branch Expansion
6. 7.1 Business per branch
6. 8 Mobilization of deposits
6. 9 Disbursement of loans
6. 9.1 Farm Advances
6. 9.1.1 Crop loans
6. 9.1.2 Agricultural term loans
6. 9.2 Non-Farm Advances
6. 10 Performance in circulating credit
6. 11 Primary Agricultural Co-operative Societies
6. 12 Progress of DCCB
6. 13 Highlights of the Bank
Summary

183
6.1. INTRODUCTION

East Godavari is the “Rice Bowl of Andhra Pradesh”. As it is situated on the

coastal side of Andhra Pradesh, majority of the East Godavari district people
depend on agriculture and allied sectors for their livelihood. It is one of the
highest population density regions, as agriculture is well developed. Rice,
tobacoo, pulses and coconut etc are the major crops of this district.

Kakinada is the headquarters of East Godavari District. It is a planned town

with a population of around 3 lakhs. It is an educational centre having medical
and engineering colleges, other professional colleges and P.G. Centre etc. It
has a deep sea port, boat building yard and fishing harbour. Now, it is an
industrially developed area and is surrounded by green fields of paddy and
coconut trees.

The Government of Andhra Pradesh set up Co-operative Central Bank at

district level in Kakinada. As Kakinada is the district headquarters and
surrounded by so many villages, it is suitable for establishing Co-operative
Central Bank.

The East Godavari District Cooperative Central Bank Ltd., Kakinada (DCCB)
is one of the biggest Cooperative Central Banks in Andhra Pradesh catering
the needs of the Agriculturists in East Godavari District. The DCCB is deemed
to have been registered as Cooperative Society under Section 7 of Andhra
Pradesh Cooperative Societies Act, 1964. It started its operations 88 years ago
(i.e., from 22.01.1917). The jurisdiction of the Bank extends to the entire East
Godavari District and is servicing the rural clientele through 47 Branches in
the District.

6.2. SINGLE WINDOW CREDIT DELIVERY SYSTEM

184
Prior to 1987, four Co-operative banks viz., The Sri Konaseema Co-operative
Central Bank Limited (Amalapuram), The Ramachandrapuram Co-operative
Central Bank Limited (Ramachandrapuram), The Rajahmundry Co-operative
Central Bank Limited (Rajahmundry) and The Kakinada Co-operative Central
Bank Limited (Kakinada) and 14 Primary Agricultural Development Banks
(PADB) were functioning to meet the credit requirements of the people of the
district. Following the introduction of SWCDS in 1987, by the Government of
Andhra Pradesh which envisages only one DCCB for one District to provide
all types of credit needs (short, medium and long-term) at one place to
agriculturists in the district, all the above mentioned banks had been
amalgamated into one resulting in the formation of DCCB, Kakinada. This is
one of the biggest Co-operative Central Banks in the state and is serving the
rural clientele through 47 branches and 293 PACS in the district.

6.3. NETWORK OF THE BANK

The Bank had 47 branches throughout the district. The 47 bank branches and
the following are affiliated to PACS to the bank have been serving the rural
clientele in the entire East Godavari District.

Primary Agricultural Co-operative Societies : 293

Handloom Weavers Co-operative Credit Societies : 61

Employees Co-operative Credit Societies : 252

Other Societies : 619

185
6.1. OPERATIONAL MAP OF THE BANK AS ON MARCH 2010

The DCCB Limited is member-driven and democratic in character. The Bank

performs the role of both Credit Purveyors and that of Banking Institution.
The bank is covered under the provision of the Reserve Bank of India Act
1934, the Banking Regulation Act 1949 (AACS) and respective Provincial
Co-operative Societies Act etc.

The Bank accepts deposits and lends both crop and investment loans through
PACS and also directly.

186
6.4. OBJECTIVES

The main aim of DCCB is to provide adequate and timely credit to needy
people. To fulfill the concern, some other objectives have to be achieved
which are as follows

I. Primarily to finance the PACS registered under section 7 of Andhra

Pradesh Co-operative Societies Act, 1964 and secondarily to finance
all other Co-operative Societies in the district
II. To finance individuals, firms, companies, corporations etc., by
admitting them as members for purposes approved by higher
financing agencies and Government from time to time either
individually or jointly with other financing institutions
III. To raise funds by way of deposits, loans, cash credits, overdrafts and
advances from Apex Bank, Government and other financing
agencies
IV. To open regional offices, branches with the prior permission of the
Registrar both for banking purposes and issue and recovery of short
term, medium term and long term loans
V. To Advice, Develop, Assist & Co-ordinate, and Supervise & Inspect
the functioning of the PACS and also to assist supervise the
functioning of the affiliated and indebted societies
VI. To buy, sell or deal with securities, debentures or bonds or scripts or
other forms of securities on its behalf or on behalf of members of
other Co-operative institutions
VII. To maintain a library of Co-operative and Banking literature
VIII. To act as an agent of Government or Apex Bank or any institution in
financing loans for Agricultural & Rural Development, and allied
activities and to accept and administer any funds for such purposes
IX. To carry on the general business of Banking not repugnant to the
provision of Section 7 of Andhra Pradesh Co-operative Societies

187
 Act, 1964 and the rules framed there under or the Banking
Regulation Act, 1949 as applicable to Co-operative Societies and the
rules made there under
X. To act as an Agent of an Insurance Company as per rules approved
by the Insurance Regulatory and Development Authority

6.5. RESOURCES OF THE BANK

The Bank will ordinarily obtain funds from the sources such as:

• Share capital
• Deposits from members and others with the approval of the Registrar
• Other borrowings from various sources
• Entrance fee and miscellaneous receipts
• Grants from Government and other agencies

6.5.1. SHARE CAPITAL

The Share Capital of the Bank shall be Rs. 50.00 crores made up of 50,00,000
“A” class share of Rs. 100/- each (member should take at least shares value of
Rs. 300/- each). The value of each share is paid in one lump-sum on
admission. The shares are allotted to the Cooperative Societies and State
Government. Every member except the Government shall pay an entrance fee
of Rs.10/- per “A” class share, subject to a maximum of Rs. 1000/- for all
shares allotted.

6.5.2. DEPOSITS

As per the Section 22 of Banking Regulation Act, 1949 (as Applicable to

Cooperative Societies), the Bank may accept deposits from the members,
individuals and others as per the interest rates fixed by the Board of the Banks
from time to time. The Reserve Fund, the Bad Debt Reserve, Thrift Deposits,

188
Special Bad Debt Reserve and other Reserves of such nature of Cooperative
Societies shall be received as Term deposits at such rates of interest as may be
fixed by the Board from time to time.

6.5.3. BORROWINGS

The Bank may from time to time borrow money for the use of the Bank from
the APCOB, NABARD or from Government. However, it is open to the Bank
to raise funds from other sources including the Commercial Banks with the
approval of the Registrar/Government. The bonds and other documents in this
behalf shall be signed by the General Manager and other officers as authorized
by the Board of Management of the Bank.

6.6. DEPLOYMENT OF FUNDS

The Bank is deploying its resources in the areas of Investments, Loans and
Advances and maintaining Liquid Assets as per the Banking Regulation Act,
1949.

6.6.1. LOANS AND ADVANCES

The loans and advances include Short, Medium and Long term loans for
production and investment purposes

A. The funds of the bank shall be utilized for issue of loans as laid down
in the objectives of the bye-laws of the Bank. The loans shall be
granted mainly for the purposes approved by NABARD and any other
purposes with the permission of Apex Bank and Registrar
B. The Bank may also issue Bank Guarantees to members/individuals as
per the terms prescribed by NABARD, Apex Bank and Registrar from
time to time

189
C. The lending rates of interest on several advances shall be fixed by the
Board in consultation with Apex Bank and with the approval of
Registrar
D. Loans may also be granted to non-member depositors by the Officers
of the Bank as authorized by the Board on the security of their deposits
keeping the margin as fixed by RBI/NABARD from time to time
E. Loans may also be granted to such members as provided under bye-
laws for purposes approved by Apex Bank from time to time. The
second and subsequent installments due may also be disbursed direct
to such members
F. Overdraft facility may be provided to depositors of long standing
nature on such terms and conditions as may be prescribed by Registrar
G. Loans may be issued to such members as provided in the bye-laws on
the security of gold and silver on such terms and conditions as may be
prescribed by the Board of the Bank in conformity with the
directions/guidelines issued by RBI/NABARD
H. The loans and advances to members shall not exceed the Maximum
Borrowing Power of the Societies and shall also be limited to such
share proportion to borrowing as may be prescribed by Registrar for
various purposes from time to time.
I. The Board shall prescribe the period of repayment of loans and
advances to members subject to such guidelines issued by
NABARD/Registrar and Apex Bank from time to time.
J. Any extension of term of repayment of crop loans or term loans in the
event of occurrence of natural calamity shall be made according to the
procedure prescribed by NABARD/Registrar and Apex Bank.
K. The Board shall also take all measures for recovery of loans in time
and if necessary, by taking such legal action as required.
L. Subject to availability of funds and subject to such terms and
conditions as prescribed in the Service Regulations, it shall be
competent for the Board to grant loans and advances to its employees

190
 according to such terms and conditions prescribed for the purpose and
approved by Apex Bank and by the Registrar.
M. The Board shall sanction Short term, Medium term and Long term
loans fixing repayment period purpose-wise in conformity with the
guidelines issued by the higher financing agencies and Registrar from
time to time.

6.6.2. INVESTMENTS

The Bank used to invest its surplus funds in the Andhra Pradesh State
Cooperative Bank Ltd., Hyderabad towards Share Capital in accordance with
the Short term loans (Crop loans) and Long term loans (investment purpose
loans) and in other Cooperatives in India. The major part of the Investments is
Fixed Deposits in the Andhra Pradesh State Cooperative Bank Ltd.,
Hyderabad for the following purposes:

a. Reserve Fund
b. Bad and Doubtful Debt Reserve Fund
c. Special Bad and Doubtful Debt Reserve Fund
d. Risk Cover Fund
e. Dividend Equalization Fund
f. Agricultural Credit Stabilization Fund
g. Staff Security Deposit
h. Fixed Deposits made from out of General Fund (for SLR purpose)

6.7. BRANCH EXPANSION

Through PACS, DCCB extended its services even to the remote places of the
district. It established PACS in every revenue mandal. During 1995-96, the
number of PACS was 354 with a membership of 1560 thousands. Basing on
the viability of PACS, the number of PACS during 2004-05 was 355 with a
membership of 807 thousands. The business per branch has increased from
513.12% to 1197.94% during study period of 10 years i.e., 1995 to 2005.

191
 Table 6.1.

Details of business details and no. of branches of DCCB, Kakinada

Year Business (Rs. in lakhs) No. of branches Ratio

1995-96 24116.6 40 602.915
1996-97 35605.3 40 890.133
1997-98 42509.5 40 1062.74
1998-99 52400.5 44 1190.92
1999-00 53444.2 46 1161.83
2000-01 54716.7 47 1164.19
2001-02 55997 47 1191.43
2002-03 57324.7 47 1219.67
2003-04 53800.6 47 1144.69
2004-05 56303 47 1197.94
Sources: Compiled from Annual reports of annual reports of DCCB, Kakinada

As per the data in table 6.1, fig 6.3 & 6.4, the business performance in terms
of lakhs rupees and ratio of business/branch increased significantly during the
period of study. The number of branches also increased from 40 to 47 while
the ratio increased from 602.9 to 11.97 during 1995-96 to 2004-05.

Figure 6.2.
Pictorial representation of Business per branch

192
 Figure 6.3

Pictorial representation of Business ratio and business/branch

6.8. MOBILIZATION OF DEPOSITS

The main aim of Co-operative Credit is the pooling of savings of the farmers
which is to be used for the mutual benefit of the members. Hence,
mobilization of deposits is an important task of credit Co-operatives. In order
to inculcate the saving habit among the members, the DCCB, Kakinada
(KKD) has been adopting attractive schemes.

As per the Section 22 of Banking Regulation Act, 1949 (As Applicable to

Cooperative Societies), the Bank may accept deposits from the members,
individuals and others as per the interest rates fixed by the Board of the Bank
from time to time. The Reserve Fund, the Bad Debt Reserve, Thrift Deposits,
Special Bad Debt Reserve and other Reserves of such nature of Cooperative
Societies shall be received as Term deposits at such rates of interest as may be
fixed by the Board from time to time.

The DCCB and other branches of it are providing more interest on the deposits
of the customers. They are also providing insurance to the deposits. They are

193
paying 4 percent interest per annum on savings deposits and 5.0 to 9.75
percent on fixed deposits depending upon the period. They are paying the
highest rate of interest @ 10 percent on “Sowbhagya Deposit Scheme” for
550 days. The bank is also giving more priority to the senior citizens by giving
an extra interest of 0.50 percent on their deposits.
As deposits are one of the main sources of funds for DCCB, it is inevitable to
study and analyze the trend of its mobilization.

It is evident from the annual reports of DCCB during the period of 1995-96 to
2004-05; the trend growth shows some ups and downs. During 1995-96 to
2000-01, the trend growth was increasing. But, it assumed slow down trend in
the later period. However, the compound annual rate of growth was 87.46
percent which is statistically significant at 0.1 percent level.
However, over the years the DCCB has been playing a vital role and has
emerged as champion in the mobilization of deposits of rural agriculturists.
Table 6.2.
Trend of deposits during 1995-96 to 2004-05
Total Deposits Increase/Decrease in
Increase/Decrease in
Year in value (Rs. in value (amount in
Percentage
Lakhs) Lakhs)
1995-96 6582.26 - -
1996-97 9478.68 2896.42 44.00
1997-98 12428.63 2949.95 31.12
1998-99 17202.68 4774.05 38.41
1999-00 22144.12 4941.44 28.72
2000-01 25711.78 3567.66 16.11
2001-02 25817.74 105.96 0.041
2002-03 24850.16 -967.58 -3.75
2003-04 24191.75 -658.41 -2.55
2004-05 23130.37 -1061.38 -4.39
Sources: Compiled from Annual reports of DCCB, Kakinada

It is clear from the table 6.2, Fig 6.5 & 6.6 that the deposits mobilized by the
DCCB during tenure of study showed a negative trend. In the year 1995-96 the

194
amount of deposits were Rs. 6582.26 lakhs whereas it was 23130.37 lakhs
during 2004-05. However, from the year 2002-03, it started declining.

Figure 6.4.
Pictorial representation of Deposit Mobilization

Figure 6.5.

Pictorial representation of Deposit Mobilization and their percent

variations

195
 Table 6.3.
Details of current and saving deposits vis-à-vis total deposits
(Rs. In lakhs)
Year Current & Savings Deposits Total Deposits Ratio (%)
1995-96 1019.49 6582.27 15.49
1996-97 1455.87 9478.68 15.36
1997-98 1351.20 12428.64 10.87
1998-99 1663.53 17202.68 9.67
1999-00 1733.48 22144.12 7.83
2000-01 1783.97 25711.78 6.94
2001-02 1865.11 25817.74 7.22
2002-03 1875.97 24850.16 7.55
2003-04 2247.22 24191.75 9.29
2004-05 2770.85 23130.37 11.98
Sources: Compiled from Annual reports of annual reports of DCCB, Kakinada

As per the data in table 6.3 and Fig 6.5, it could be understood that current
savings increased gradually while total deposits increased initially and
decreased, hence, the ratio of deposit to total deposits appears as inverse
parabola. During the period of study of last ten years (1995-2005), the low
cost deposits ranging from 6.94% (2001-01) to 15.49% (1995-96) was below
the advisable level of 40%.

Figure 6.6.
Pictorial representation of variation of ratio current & savings deposits to
total depositsTable 5.4. Details of Term and Fixed Table 6.4
deposits vis-à-vis total deposits

196
 Table 6.4.
Details of Current and Fixed deposits vis-à-vis total deposits (Rs. In lakhs)

Year Term and Fixed Deposits Total Deposits Ratio (%)

1995-96 5562.78 6582.27 84.51
1996-97 8022.81 9478.68 84.64
1997-98 11077.43 12428.64 89.13
1998-99 15539.15 17202.68 90.33
1999-00 20410.64 22144.12 92.17
2000-01 23927.81 25711.78 93.06
2001-02 23952.63 25817.74 92.78
2002-03 22974.19 24850.16 92.45
2003-04 21944.53 24191.75 90.71
2004-05 20359.52 23130.37 88.02
Sources: Compiled from Annual reports of annual reports of DCCB, Kakinada

The data/chart as shown in Table 6.4 & fig 6.7 indicates high cost of deposits
ranging from 84.51% (1995-96) to 92.78% (2001-02) during the study period
of ten years i.e., 1995-2005.

Figure 6.7.
Pictorial representation of variation of ratio term deposits to total
deposits

197
 Table 6.5.
Details of various deposits (Rs. In lakhs)

Current & Savings Term and Fixed Total

Year
Deposits Deposits Deposits
1995-96 1019.49 5562.78 6582.27
1996-97 1455.87 8022.81 9478.68
1997-98 1351.20 11077.43 12428.64
1998-99 1663.53 15539.15 17202.68
1999-00 1733.48 20410.64 22144.12
2000-01 1783.97 23927.81 25711.78
2001-02 1865.11 23952.63 25817.74
2002-03 1875.97 22974.19 24850.16
2003-04 2247.22 21944.53 24191.75
2004-05 2770.85 20359.52 23130.37
Sources: Compiled from Annual reports of annual reports of DCCB, Kakinada

The current & savings deposits increased marginally during the study period
while the increase in term & fixed deposits and total deposits has been
significantly high as shown in table 5.5 & fig. 5.7.

Figure 6.8.
Pictorial representation of current & savings, term & fixed and total
deposits

198
6.9. DISBURSEMENT OF LOANS

The main aim of DCCB is to serve the rural clientele by providing needed
funds in the district through its PACS established in 67 mandals of the district.
The advances provided by DCCB have been broadly categorized into

• Farm advances

• Non-farm advances

Table 6.6.
Disbursement of total advances
Total Advances in
Increase/Decrease in Increase/Decrease
Year value (Rs. In
value (Rs. In Lakhs) in Percentage
Lakhs)
1995-96 15968.5
1996-97 26204.5 10236.1 64
1997-98 30588.8 4384.3 16.73
1998-99 28030.8 -2558 -8.36
1999-00 25316.6 -2714.3 -9.68
2000-01 26975.3 1658.73 6.55
2001-02 25036.2 -1939.1 -7.19
2002-03 27981.5 2945.37 11.76
2003-04 25867.3 -2114.2 -7.56
2004-05 35616.5 9749.16 37.69
Sources: Compiled from Annual reports of annual reports of DCCB, Kakinada

Figure 6.9
Pictorial description of total advances (lakhs) issues during 1995 to 2005

199
The table 6.6 and the figure 6.9 give the clear picture of total advances
provided by the DCCB for the study period of 1995-96 to 2004-05. Initially,
the advances were very low, but gradually started increasing. Though, there
may be some ups and downs in the period, it stood high in the year 2004-05.

Table 6.7.
Types of Advances provided by DCCB (Rs. In lakhs)
Year Farm loans Non-Farm loans Total Loans
1995-96 23351.51 707.73 24059.24
1996-97 34734.39 813.59 35547.98
1997-98 31398.95 111.55 31510.5
1998-99 50678.64 1721.8 52400.44
1999-00 51241.37 2244.2 53485.57
2000-01 52037.22 2718.01 54755.23
2001-02 52986.6 2951.77 55938.37
2002-03 51584.57 2173.22 53757.79
2003-04 51221.17 2480.33 53701.5
2004-05 51793.64 2339.32 54132.96
Sources: Compiled from Annual reports of annual reports of DCCB, Kakinada

Figure 6.10
Pictorial representations of Farm & Non-farm loans

200
The above table 6.7 and figure 6.10 reveals that the Bank’s farm loans
occupied a major share in the initial period i.e., 1995-96 and maintained the
same rate of growth during the period of study whereas the amount of non-
farm loans increased at a considerable rate during the period of study.

6.9.1. FARM ADVANCES

The farm advances include crop loans and agricultural term loans, both for
agricultural and allied sector. These include short term, medium term and long
term advances both for production and investment purposes.

201
 Table 6.8.
Components of Farm loans (Rs. in lakhs)
Year Short-term loans Medium-term loans Long-term loans Crop loans Total Farm Advances
1995-96 10539.6 1757.6 11022.58 31.7 23351.48

1996-97 18488.41 3188.47 13057.49 0 34734.37

1997-98 12065.54 12219.28 17109.1 0 31398.95

1998-99 16016.87 15261.7 19400 0 50678.64

1999-00 17995.29 13025.73 20260.31 0 51281.33

2000-01 21324.48 9855.55 20857.16 0 52037.19

2001-02 23383.43 8306.13 21297.04 0 52986.6

2002-03 25978.31 10651.84 23896.73 0 60526.88

2003-04 28197.94 4934.3 18088.93 0 51221.17

2004-05 30496.43 3810.22 17486.99 0 51793.64

Sources: Compiled from Annual reports of DCCB, Kakinada

202
 Figure 6.11.
Classification of advances issues as different term loans

The table 6.8 & fig 6.11, shows the details of farm advances containing short-
term, medium-term, long-term and crop loans for the period of 1995-96 to
2004-05. It is clear that the crop loans were stopped from the year 1995-96
and combined with term loans. Of the total advances, long-term loans
constitute a large share i.e., more than 50 percent in the initial period (1995-
96), but it was decreased in subsequent years. Though the share of short-term
loans was less in 1995-96, but it was increased to a considerable share in
2004-05.It was found that there were some fluctuations in the amounts of
medium- term loans for the above period.

6.9.1.2. CROP LOANS

Agricultural development bears a close positive correlation with credit and

finance. An important form of production-oriented farm credit is the short-
term crop loans which are issued to enable farmers to meet the outlay on
inputs. Conceptually, a crop loan is expected to bridge the gap in short-term or
long-term resources, respectively of borrowers.

203
Crop loans are given to the farmers to meet their working capital needs and to
generate surplus for agricultural development. It is mostly given to small and
marginal farmers and potentially viable cultivators to meet the pesticides,
labour cost etc. These are meant for short period only usually for one year and
are mainly for the purpose of improving the cropping patterns such as for
buying HYV seeds, fertilizers, pesticides etc. The DCCB lent crop loans of Rs.
31.70 lakhs in the year 1995-96. In the subsequent years, the crop loans were
mixed with short-term loans. In place of crop loans the PACS are providing
HYV seeds, fertilizers, pesticides and crop insurance etc.

6.9.1.2. AGRICULTURAL TERM LOANS

The agricultural term loans are given on long-term basis which include allied
sector loans also. The term loans are used for the investment and replacement
of assets i.e., agricultural tools and implements which increase the agricultural
productivity. The investment credit enhances the production potential of the
concerned farms through the prices of net capital formation.

204
 Table 6.9.
Agricultural loans disbursed by DCCB (Rs. in lakhs)
Type of loan 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Short term 176.99 124.52 152.79 152.52 175.23 158.17 206.93 216.29 246.21 389.33
Medium-term 258.52 116.49 4.14 3 3.1 2.32 3.62 2.47 0.14 2.9
Long-term 50.86 49.54 0 28.14 30.6 28.07 25.14 10.93 12.43 60.96
Total 486.37 290.55 156.93 183.66 208.93 188.56 235.69 229.69 258.78 453.19
Source: Compiled from Annual reports of DCCB, Kakinada

Figure 6.12.
Details of agricultural loans issued during 1995 to 2005

205
Of the total term loans of Rs. 253.71 Crores, short-term loans account for Rs.
177.1 Crores, medium-term loans Rs. 25.85 crores and long-term loans Rs.
50.86 crores, respectively during 1995-96. It shows that short-term loans came
to 70 percent of the total advances and showed an increasing trend during the
period which was Rs. 389.33 Crores in 2004-05, whereas medium-term loans
increased in first two years, but later decreased to Rs. 2.9 Crores in 2004-05.
During 1998-99, the DCCB did not lend any long-term loans. It showed varied
fluctuations during the period and ultimately during 2005-06, the long-term
loans amounted to Rs. 60.96 Crores, which was 13.45 percent of the total
advances of Rs. 453.19 Crores.

There is an inverse relationship between crop loans and term loans. If the
demand for crop loans increases, the demand for term loans will decrease
and vice versa. Since these two types of advances are inter-related and
provided for agricultural purposes, any increase in one component will result
in a decrease in the demand for the other.

However, it has been evident that the trend of advances provided was in
increasing mode during the first three years of study i.e., 1995-96, 1996-97
and 1997-98. But during the subsequent two years, the advances showed a
negative trend. There were huge fluctuations in the trend of advances during
the period of study i.e., ten years. There was a little growth in 2000-01 and a
fall in 2001-02, again a raise in 2002-03 and a fall in 2003-04 and again a rise
in 2004-05. By analyzing the trend of advances, it is clear that there was no
uniformity in lending advances of the DCCB. There were so many ups and
downs in trend growth rate of total advances.

However, the Compound Annual Growth Rate (CARG) of advances at 49.34

percent which is statistically significant at 0.1 percent degree of freedom.

By analyzing the advances and its growth rate, the following reasons were
found out for the fluctuations in the trend growth rate

206
 • The farmers are very poor with small size of land holdings
• Unable to meet out the cost burden due to increase in prices of inputs.
• No supporting prices for their output.
• Misuse of loan funds, instead of using for productive purpose utilizing
them for personal purposes.
• Due to crop failures because of natural calamities such as cyclones,
floods etc. and the farmers fail in repayment of loans.
• Low amount of mobilization of deposits also cause low deployment of
credit.
• Due to large sum of overdues the bank decreased the amount of credit.
• Bank is not providing any crop loans and that to for poor peasants
only.
• Allocated very less funds for long-term loans which have long-term
perspective.

The aforesaid analysis signifies the dominance of short-term component in the

total advances. Long-term loans are the second largest component of total
advances. It also indicates the role of the DCCB in agricultural development
of East Godavari District. The allied activities also might boost the economic
conditions of agricultural labourers and landless labourers. In a nutshell the
amount of farm advances supplied by DCCB in the district might act as an
accelerator in the process of the agricultural development of the said area.

Usually the major portion of advances of DCCB is directed towards

agricultural sector which is the main substance for a majority of population.
However, the DCCB has not neglected the non-farm sector.

6.9.2. NON-FARM ADVANCES

The non-farm advances are meant for providing employment opportunities to

individuals as well as to develop the resources of a person. Generally such
advances are for long period only. The non-farm advances have been broadly

207
classified into three categories viz., rural artisans, village and cottage
industries, retail trade, small business and miscellaneous loans.

The DCCB, Kakinada has been providing advances not only to agricultural
sector but also to its allied sector. During 1995-96 of the total advances of Rs.
240.59 Crores, farm and non-farm advances amounted to Rs. 233.52 and
Rs.7.08 Crores respectively. The amount of farm loans was increased during
the period of study which was Rs. 517.94 Crores in 2004-05, whereas the non-
farm advances except in the years of 1997-98, 2003-04 and 2004-05 showed
an increasing trend. The CARG of farm and non-arm advances is 48.9 and
81.8 percent, respectively which is statistically significant at 0.1 percent level.
The ratio of farm and non-farm loans showed a favourable and positive result
in serving the rural clientele in the district.

The table below reveals the amount of credit provided by DCCB, Kakinada to
agricultural sector during the period of study. Its share decreased during the
period of study i.e., 1995-96 to 2004-05.

Table 6.10.
Share of Agricultural credit in the total (Rs. in Lakhs)

Year Agriculture Total Share in Percentage

1995-96 24161.29 118817.32 20.33
1996-97 24832.45 130100.64 19.09
1997-98 25510.64 139751.77 18.25
1998-99 25313.66 159095.2 15.91
1999-00 28657.37 201356.45 14.23
2000-01 29728.61 209017.97 14.22
2001-02 34653.94 255137.28 13.58
2002-03 37266.52 293366.75 12.7
2003-04 39863.31 356068 11.2
2004-05 49802.92 454799.97 10.95
Source: Compiled from Annual reports of DCCB, Kakinada.

208
 Table 6.11.
Target & achievement of agricultural credit disbursed by DCCB
Year Target Achievement % of achievement
1995-96 7736 7350 92.62
1996-97 10851 7111 65.53
1997-98 17055 25387 148.85
1998-99 14445 15212 105.31
1999-00 16405 25014 152.48
2000-01 13390 25186 188.10
2001-02 20158 23293 115.55
2002-03 17392 22618 130.05
2003-04 28744 36778 127.95
2004-05 25686 43193 168.16
Sources: Compiled from Annual reports of annual reports of DCCB, Kakinada

Figure 6.13.
Crop loan disbursement & achievements of targets, 1995 to 2005

The table 6.10 & 6.13 depicts the targeted credit and its achievement during
the period of study. Its achievement increased over the period 1995-96 to
2004-05. During 2004-05, the DCCB disbursed loans of Rs. 246.2 Crores of

209
which Rs. 155.46 Crores to Kharif and Rs. 90.73 crores to Rabi crops. Of the
total loans disbursed by all the 23 DCCBs in the state (Rs. 2317.16 Crores) the
share of DCCB, Kakinada amounts to Rs. 246.2 Crores. Out of the total,
contribution of NABARD is Rs. 124.02 Crores.

6.10. PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETIES

Through PACS, the DCCB extended its services to the remote places of the
district. It established PACS in every revenue mandal. During 1995-96 the
number of PACS was 354 with a membership of 1560 thousands. Basing on
the viability of PACS, the number of PACS during 2004-05 was 355 with a
membership of 807 thousands. The affiliated PACS of the DCCB advanced
loans of Rs. 128.23 Crores in 1995-96. Except during the years 1996-97 and
1997-98, PACS showed a good progress in lending loans. The advances
during 2005-06 stand at Rs. 310 Crores.

Regarding recovery of loans, PACS have succeeded to a large extent. Their

recovery rate is nearly 70 percent. The recovery rate increased from 50 percent
(1994-95) to 70 percent (2005-06). Regarding outstandings and overdues, the
bank has to adopt certain measures in order to improve its recovery. If the
overdues and outstanding loans increase, the survival of PACS may become a
problem. The outstanding loans were increased by 36.84 percent from 1995-96
to 2004-05, where as in the case of overdues it was only 28.79 %.

The table 6.12 and figures 6.14 & 6.15 shows that the numbers of societies
and membership have decreased during the period of study. These might be
due to their non-viability in character. Its amount of deposits showed an
increasing trend which is very high during 2000-01 and started declining in the
subsequent years. Its trend of advances shows an increasing trend.

210
211
 Table 6.12.
Working of PACS including Farmers Service Societies
Item 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

Societies (No.) 354 354 354 355 334 355 355 355 355 310

Membership (in ,000) 1560 1560 1293 984 1423 1149 1229 961 1144 807

Share capital (Rs. In Lakhs) 2175 2121 2270 4223 6300 4988 4905 5045 4897 4814

Deposits (Rs. In lakhs) 395 541 575 1938 2013 8109 3593 3196 2974 2317

Borrowing (Rs.in lakhs) 17323 19537 19739 28900 30100 87861 42766 42879 41645 34515

Working capital (Rs. In Lakhs) 22370 33252 33590 37498 39683 56595 56479 43849 52837 59304

Loans 36113 15077 17086 49076 50120 103676 88849 105809 99274 96482

a) Advances 12823 8981 8270 21450 22865 26611 29754 28753 28093 31000

b) Recoveries 8028 `4582 5230 13332 16430 19931 20318 26711 20648 21602

c) Outstandings 12030 4398 2296 8118 6255 40602 26974 37686 39929 32653

d) Overdues 3232 1698 1290 6176 4570 16532 11803 12659 10604 11227
Sources: Complied from Annual reports of annual reports of DCCB, Kakinada

212
 Figure 6.14.
Pictorial representation of memberships of PACS including Farmers
Service Societies

Figure 6.15.

Pictorial representation of share capital, borrowings, deposits, working

capital and loans of PACS

213
 Fig. 6.16.
Pictorial representation of overdues, outstandings, recoveries, advances
and loans by PACS

214
 Table 6.13.
Details of DCCB prior to SWCD system pertaining to memberships and
share capital

Prior to SWCD After SWCD System E.G.

ITEM System (1986-87) (1998-99) District
A.P. E.G. Dist A.P. E.G. Dist
Societies(No.) 6785 1087 4678 355 293
Membership (in
80.73 61.1 153.14 42.23 80.7
lakhs)
Share capital (Rs.
62.05 85.34 58.9 193.8 48.14
in lakhs)
Deposits 18.85 21.02 30.98 28.9 23.17
Borrowings 33.24 24.21 32.51 37.49 34.51
Working capital 43.37 35.06 61.69 49.08 59.3
LOANS
Advances 25.06 18.87 33.68 21.45 31.0
Recoveries 21.41 12.03 12.73 13.33 21.6
Outstandings 40.6 8.68 44.34 81.18 32.65
Overdues 15.83 5.23 14.85 61.76 11.22
Sources: Compiled from Annual reports of DCCB, Kakinada

The data furnished in table 6.13 reveals that the number of societies has
decreased by the introduction of SWCDS by the Government of Andhra
Pradesh. The number came down from 6785 (before 1986-87) to 293 in 2005-
06. Basing on their viability, the PACS were restructured. Under this system
PACS are expected to provide multi-farm credit and multi-functional services
at a single contact point. Though the number decreased, its membership
remained at the same. The amount of deposits has increased from Rs. 18.85
crores to Rs. 23.17 crores. The working capital has increased from Rs. 43.37
crores to Rs. 59.3 crores in 2005-06. The amount of borrowings remained
nearly at the same rate. The amount of advances has increased from Rs. 21.41
crores to Rs. 31.0 Crores in 2005-06.The amount of overdues was decreased
from Rs. 15.83 Crores to Rs. 11.22 Crores in 2005-06.

215
6.11. PERFORMANCE IN CIRCULATING CREDIT

One of the important aspects of credit financing of an institutional agency is

that it must be financially sound, otherwise, it will not be able to cater to the
credit needs of its borrowers. If the DCCB does not have adequate resources at
their disposal, it depends upon the sponsored bank i.e., NABARD and the
Government to get funds.

As far as the performance of the DCCB in circulating credit is concerned, it is

highly significant during the period of the study. The credit-deposit ratio gives
the clear picture of its performance which is depicted in the table 5.13. The
credit-deposit ratio was always more than 100 percent except in the year 2001-
02, which is 96.97 percent. During the period 1995-96 to 1999-00, the credit-
deposit ratio is more than 200 percent. Later that period, it started declining.
The highest credit-deposit ratio found was 276.46 percent in the year 1996-97.
In the subsequent years there was a downward fall upto 2001-02 and after that
there has been a steady increase in the credit-deposit ratio. It was 153.98
percent in 2004-05.

Due to gap in advances and deposits, the DCCB depends more on refinance
from NABARD and Government. The gap between the credit and deposit
should be less, so that all the deposits of DCCB will be mobilized properly
and effectively. So far as the circulation of credit is concerned, the DCCB has
done a tremendous job which boosts the overall development of the area.

216
 Table 6.14
Working of Cooperative Central Banks
ITEM 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

Bank branches (No.) 40 40 40 44 46 47 47 47 47 47

Share capital (Rs. in crores) 18.12 22.75 30.83 38.31 40.68 43.02 43.61 43.82 43.5 43.59

Statutory Reserves (Rs. in crores) 94.41 94.41 94.41 33.37 47.03 54.16 79.19 88.15 88.15 88.15

Deposits (Rs. in Crores) 65.82 94.79 124.29 172.02 221.44 257.11 258.17 248.5 239.53 228.19

Borrowing (Rs. in Crores) 186.73 270.63 315.95 372.11 174.97 159.26 170.53 340.54 320.23 317.64

Working capital (Rs. in Crores) 286.13 389.17 472.02 554.87 611.86 526.93 636.35 721.03 691.41 677.57

LOANS 521.44 934.14 721.57 761.7 1103.61 1146.12 1238.49 1350.85 1463.21 1575.57

Outstandings 223.52 355.96 413.93 524 535.44 548.14 559.97 573.25 586.53 599.81

Demand 130.5 157.7 0 0 284.09 298.99 339.26 388.8 438.34 487.88

Recoveries 91.46 355.14 223.95 208.79 253.6 193.49 249.04 217.21 185.38 153.55

Overdues 75.96 65.34 83.69 28.91 30.48 105.5 90.22 171.59 252.96 334.33
Sources: Compiled from Annual reports of annual reports of DCCB, Kakinada

217
 Table 6.15.
Deposits and advances of District Cooperative Central Banks

Total Deposits in Total Advances in value

Year Credit/Deposit ratio
value (Rs. In Lakhs) (Rs. In Lakhs)

1995-96 6582.26 15968.5 242.29

1996-97 9478.68 26204.5 276.46
1997-98 12428.6 30588.8 246.12
1998-99 17202.7 28030.8 225.53
1999-00 22144.1 25316.6 114.33
2000-01 25711.8 26975.3 104.91
2001-02 25817.7 25036.2 96.97
2002-03 24850.2 27981.5 112.6
2003-04 23953.30 25867.3 107.99
2004-05 22819.4 35616.5 156.08
Sources: District Statistical Handbook, E.G. District, 2005

Table 6.16.
Details of deposits and credits of District Cooperative Central Banks (Rs. In Lakhs)
Year Credit (Loans O/S) Deposits C-D Ratio (in %)

1995-96 22352.53 6582.27 366.39

1996-97 35596.12 9478.68 375.64

1997-98 41393.07 12428.64 342.03

1998-99 52400.51 17202.68 304.61

1999-00 53544.22 22144.12 241.35

2000-01 54814.72 25711.78 212.81

2001-02 55996.98 25817.74 216.89

2002-03 57324.67 24850.16 230.68

2003-04 58653.56 23953.3 222.39

2004-05 59981.03 22819.4 243.42

Sources: District Statistical Handbook, E.G. District, 2005

218
 Figure 6.17.
Pictorial representation of deposits and advances of District Cooperative Central Banks

Fig.6.18.
Pictorial representation of deposits and credits of Cooperative Central Banks

Fig.6.19

219
Pictorial representation of deposits and credits of District Cooperative Central Banks

Figure 6.20.
Pictorial representation of C-D ratio of District Cooperative Central Banks

During the period of study i.e., 1995-2005, CD ratio fell from 366.39% to 243.42%, which
indicate that there is a reduction of internal resources of the Bank. However, the Bank had
maintained Cash-Reserve Ratio at required level during the study period.
The outstanding loans for the overall Co-operative Central Bank stands at Rs. 223.52 Crores
in 1995-96 and Rs. 551.90 Crores in 2004-05 which showed an increase of 24.69 percent.

220
The demand for loans increased from Rs. 130.50 Crores (1995-96) to Rs. 408.08 Crores
(2004-05) which is nearly three times more. The recovery rate was increased by 41.72
percent.

6.12. PROGRESS OF THE DISTRICT CENTRAL OOPERATIVE BANKS

The progress of the DCCB can be analyzed by the figures of its share capital, reserves and
profit / loss. Though the share capital and reserves increased at a considerable rate, its’ profit
or loss position was not in increasing mode. There have been huge fluctuations in its
profitability during the period of the study. However, it came into profits during the year
2004-05.

Table 6.17.

Details of progress of DCCB pertaining to share capital, reserves and profit / loss ratio

Year Share capital (Rs. In lakhs) Reserves (Rs. In lakhs) Profit/Loss

1995-96 1812.33 1544.93 -815.04
1996-97 2553.71 1466.1 -135.44
1997-98 3083.14 2168.69 122.83
1998-99 3830.99 3337.54 -420.94
1999-00 4068.29 4703.2 21.58
2000-01 4302.60 54116.6 502.79
2001-02 4299.59 7919.04 -993.3
2002-03 4382.47 6815.03 -1708.86
2003-04 4371.41 8820.15 -867.19
2004-05 4348.10 11143.18 132.28
Source: Compiled from Annual reports of DCCB, Kakinada

221
 Figure 6.21.

Pictorial representation of progress of DCCB pertaining to share capital, reserves and

profit / loss ratio

222
6.13 HIGHLIGHTS OF THE DISTRICT CENTRAL CO-OPERATIVE BANK

It is the Farmer’s Bank in the district having a track record of 88 years.

Capital Adequacy ratio is 12.54 percent (31.305) as against the RBI’s prescribed
minimum of 9 percent.

The deposits of the Bank stood at Rs. 22,718.05 lakhs as on 31st March 2006. The Bank
received two times Best Performance Award from NABARD in the area of deposits
during the year 2000-01 and 2001-02.

The Bank financed a sum of Rs. 436.71 lakhs to 515 Rythu Mitra Groups during the
year 2004-05 and received Best performance Award from government for occupying 1st
place in Andhra Pradesh.

The Bank financed Rs. 60.55 crores to 281 SHGs and in the district.

The share of the low cost deposits is at 11.98 percent as on 31st March 2005.

Rise in advance portfolio by 4.65 percent. The total advances stood at Rs. 62537.83
lakhs of which Short-term crop loans occupied Rs. 389.33 crores.

The average cost of deposits is 8.85 percent, earlier it was 12.06 percent.

The Bank earned a net profit of Rs. 153.35 lakhs during the year 2005-06.

The percentage of NPA declined from 24.57 percent to 19.30 percent.

Co-operative Kisan Credit Cards System was introduced and issued to all.

Bank stood at 1 st place during the year 1996-97 and contributing in first 3 places every
year in recovery portfolio among 22 DCCB in Andhra Pradesh.

Bank stood at 2 nd place in loans and advances portfolio in Andhra Pradesh.

The Chief Auditor of the state classified the Bank as ‘A’ class bank for the year 2004-05
and NABARD Inspection officers also placed the Bank in ‘A’ class category.

Computerization of the H.O. of the Bank and proposed to computerize all the 47
branches in a phased manner.

223
In addition to the banking services, the DCCB also has been providing crop insurance, debt
relief in times of crop failures and natural calamities, and supply of HYV seeds, fertilizers,
pesticides and other agricultural inputs etc. to encourage the poor peasants as who are the
backbone of the entire economy. The DCCB is providing very valuable service to the rural
clientele and let them survive in the competitive economy.

224
6.14. SUMMARY
o Among other districts in AP, the EG District leads in agricultural productivity. As it is
situated on the coastal line of Andhra Pradesh, the main occupation of people is
agriculture. Though this district is full of natural resources, agriculturists lack adequate
funds to reap the fruits of the nature. EG Dt is having fertile lands with high irrigation
facilities, however to serve poor and rural peasants, CCBs were established in this district.
o The DCCB, Kakinada was established in the year 1987 as a result of SWCDS. Now, it is
serving the rural clientele with 47 branches and 293 PACS in the district. It is the
farmer’s bank in the district.
o The role of the DCCB in the field of mobilization of deposits is highly significant. It
collects unutilized savings of the public and mobilizes them in productive channels. The
deposit mobilization of the DCCB enables the people of the rural area to recycle their
funds particularly in the area of credit deployment. They are providing attractive interest
rates on deposits. Though initially the trend increased, it started declining in the
subsequent years. However, the CARG of deposits is 87.46 percent which is statistically
significant at 0.1 percent level.
o The credit deployment of the DCCB was broadly categorized into two viz., farm and non-
farm advances. Farm advances include agricultural term loans and crop loans where as
non-farm advances include advances to rural artisans, self-employed, self-help groups,
small and cottage industries etc. The DCCB has given equal importance to both sectors as
far as the deployment of credit is concerned. Through PACS, the DCCB extended its
services even to the remote places of the district. Except in the years 1995 and 1997
PACS showed a good progress in lending loans. Its advances stand at Rs.310 Crores for
the year 2004-05.
o The credit-deposit ratio was always higher than 100 percent except in the year 2001-02.
To fill the gap in the credit-deposit ratio, The DCCB is getting refinance from NABARD
and Government etc. In addition to the banking services, it is also extending other
valuable services such as crop insurance, debt relief and waivers, supply of agricultural
inputs etc.

225
226
 CHAPTER VII
IMPACT STUDY
7. 1 Introduction
7. 1.1 Selection of the District
7. 1.2 Criterion for selection of villages
7. 1.3 Selection of villages
7. 1.4 Selection of cultivators
7. 1.5 Levels of statistical significance
7. 2 Impact on Agriculture
7. 3 Impact of Agricultural crop loan
7. 3.1 Socio-economic characteristics
7. 3.2 Impact on irrigation
7. 3.3 Impact on cropping pattern
7. 3.4 Impact on usage of fertilizers, pesticides, manures etc.
7. 3.5 Impact on labour cost
7. 3.6 Impact on production
7. 3.7 Impact on income level
7. 3.7.1 Income per borrower
7. 3.7.2 Income per acre
7. 4 Impact of Agricultural term loan
7. 4.1 Socio-economic characteristics
7. 4.2 Purpose-wise distribution
7. 4.3 Impact on irrigation
7. 4.4 Impact on cropping pattern
7. 4.5 Impact on usage of fertilizers, pesticides, manures etc.
7. 4.6 Impact on labour cost
7. 4.7 Impact on production
7. 4.8 Impact on income level
7. 4.8.1 Income per borrower
7. 4.8.2 Income per acre
7. 5 Impact on Allied activities
7. 5.1 Socio-economic characteristics
7. 5.2 Dairy
7. 5.2.1 Income
7. 5.2.2 Employment Generation
7. 5.3 Goat and Sheep Rearing
7. 5.3.1 Income
7. 3.2 Employment Generation
7. 5.4 Piggery
7. 5.4.1 Income
7. 5.4.2 Employment Generation
7. 5.5 Fishery
7. 5.5.1 Income
7. 5.5.2 Employment Generation
7. 6 Impact of bank loan on sample villages
7. 6.1 Impact on income level
7. 6.2 Impact on Employment
Summary

227
CHART OF IMPACT STUDY

228
7.1. INTRODUCTION

The study is conducted with an overall objective of finding out the impact or otherwise of
District Co-operative Central Bank, Kakinada on the agricultural development of borrowers
in terms of cropping pattern, cropping intensity, employment generation, change in
occupational structure and levels of living based on size of farms in selected villages of East
Godavari District. The sample design and the concepts followed in the study are detailed
below;

7.1.1. SELECTION OF THE DISTRICT

East Godavari District is one of the progressive districts in Andhra Pradesh. It is basically
agrarian district. The district was purposely selected since the District Co-operative Central
Bank, Kakinada has been located in operation since 1917 in this district and facilities for
collection of data were adequate. These two factors prompted me to select the district for in-
depth study.

7.1.2. CRITERION FOR SELECTION OF VILLAGES

There are three main considerations that reckoned for selecting this region.

• Firstly the farmers were solely dependent on District Co-operative Central Bank for
short-term and medium-term credit.

• Secondly the district consists of irrigated, semi-irrigated and non-irrigated lands on

which base the sample study was undertaken. There is every chance of comparison
under these three factors.

• Thirdly that no research study has been conducted so far regarding the impact of the
bank on its rural clients/ farmers.

Thus, the present study is important from the point of view of policy makers, agricultural
financing agencies and individual farmers. The study may also develop certain guidelines for
various financing agencies with regard to loaning. To individual farmers, the study would
show the ways and means of approaching the credit institutions to make the best use of such
facilities.

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7.1.3. SELECTION OF VILLAGES

For selection of villages all the 16 revenue villages benefited by the District Co-operative
Central Bank are listed and divided into three groups Such as irrigated, semi-irrigated and
non-irrigated basing on irrigation factor and one village from each group i.e. V1, V2 and V3
were selected from each group for sample study by using the method of Stratified random
sampling.

7.1.4. SELECTION OF CULTIVATORS

All the cultivators in each beneficiary villages were classified into three categories i.e., small
farmers (below 2.5 acres), medium farmers (2.5 to 5 acres) and large farmers (above 5 acres)
from each village. In V1, V2 and V3 sample groups total 432 farmers were selected using the
random sampling technique, giving due representation for the size of holdings. For the study
of both agriculture and allied sector, 152 samples from V1 strata, 138 from V2 and 142 from
V3 stratas were collected. The sample beneficiaries were chosen on the basis of Census
method.

7.1.5. LEVELS OF STATISTICAL SIGNIFICANCE

One percent and ten percent levels of probability are chosen for testing significance in this
analysis.

7.2. IMPACT STUDY

The previous chapter deals with the role of the District Co-operative Central Bank in
financing agricultural and allied sectors in the East Godavari District. In this chapter an
attempt has been made to know the impact of District Co-operative Central Bank’s finance on
sample borrowers. To study the impact of District Co-operative Central Bank, the total area
of study was classified into two categories viz., agriculture and allied sectors. For the study
the sample borrowers were selected on the basis of irrigation under stratified random
sampling method.

230
7.3. IMPACT ON AGRICULTURE

The Green Revolution results in remarkable changes in agricultural sector. The Revolution
initiated through the changes in the approach of the Fourth Five Year Plan envisaged that
modernizing agriculture is more or less a technology of inputs and its judicious management
on scientific basis. This new situation calls for greater financial investment on the part of
farmers for purchasing of the inputs. Consequently the provision of credit to farmers on
liberal terms and conditions become sine qua non of agricultural development in the country.
Entry of Commercial Banks into the field of agricultural credit has accelerated the pace of
agricultural development. The development of Co-operative credit in the form of catalyst has
accelerated the pace of agricultural development.

To know the impact of agricultural credit on borrowers, the study is divided into two
categories viz., (i) Impact on Agricultural Crop loan (ii) Impact on Agricultural Term loan.
Benefits derived by agricultural crop loans and term loans are analyzed on the basis of the
following parameters:

a) Impact on irrigation

b) Impact on cropping pattern

c) Impact on use of fertilizers, pesticides and manures etc.

d) Impact on labour cost

e) Impact on Production and yield per acre

f) Impact on income per borrower and income per acre of holding.

To know the impact on Agricultural crop and term loans again, the borrowers are classified
on the basis of caste and operational holdings.

7.4. IMPACT ON AGRICULTURAL CROP LOAN

Crop loans are given to the cultivators to meet their working capital needs. The short-term
loans are disbursed in the form of ‘A’ and ‘B’ components, such that ‘A’ comprises cash
portion to meet the costs of agricultural operations and ‘B’ comprises kind portion to meet
the costs of seed, fertilizer, pesticides etc., supplied to members through the co-operative
deposits. The interest for crop loan is about 11 percent till 2007-08. But now the interest rate
is going to decrease to a rate of 4 percent from this year onwards. The short-term loans are

231
sanctioned for all crops including local, improved and HYV as per the scale of finance. The
short-term loans advanced for Kharif crop (April- September) are recoverable on harvest of
the same, while loans advanced for the Rabi crop (October – March) are recoverable after
harvest of Rabi. Generally the crop loans are given only for short period usually for 15
months or less than one year. These loans help the cultivators to meet the working capital
needs and to generate surplus for agricultural development.

Before the study of the impact of District Co-operative Central Bank finance on agricultural
crop loan, it might be relevant here to know the socio-economic characteristics of the
borrowers of agricultural crop loan.

7.4.1. SOCIO-ECONOMIC CHARACTERISTICS

The socio-economic characteristics of the borrowers include educational attainment, pattern

of land holdings, caste, size of family and age etc.

7.4.1.1 EDUCATIONAL ATTAINMENT

Basing on the educational qualifications, the beneficiaries can be grouped into illiterate,
primary, secondary and post-secondary. It is observed from the table 7.1 that of the borrowers
(141), 37 borrowers are illiterate (26.2 percent), 46 farmers have got primary education, 32
have secondary education and 26 have

Post secondary education which constitutes 32.6, 22.7 and 18.5 percent respectively. Hence it
is clear that the percentage of primary holders is more than other categories in all three
groups. It is also clear that illiterates are more in V3 sample group.

Table 7.1.
Distribution of sample beneficiaries according to educational attainment
Educational attainment
Village
Illiterate Primary Secondary Post-Secondary Total
V1 10 (22.7) 18(40.9) 9(20.5) 7(15.9) 44 (100)
V2 49(21.4) 18 (42.9) 6(14.3) 9 (21.4) 42 (100)
V3 18(32.7) 10 (18.2) 17(30.9) 10(18.2) 55(100)
Total 34 (26.2) 46 (32.6) 32 (22.7) 26 (18.5) 141 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

232
7.4.1.2. PATTERN OF LAND HOLDINGS
The farmers are classified into three groups basing on the size of land holdings-small (below
2.5 acres), medium (2.5-5 acres) and large farmers (above 5 acres).
Table 7.2.
Distribution of sample beneficiaries on the basis of size of land holdings
Size of land holding in Acre
Village
Small (0-2.5) Medium (2.5-5) Large (above 5) Total
V1 11 (25.0) 24 (54.5) 9 (20.5) 44 (100)
V2 23 (54.7) 10 (23.8) 9 (21.4) 42 (100)
V3 19 (34.5) 23 (41.8) 13 (23.6) 55 (100)
Total 53 (37.6) 57 (40.4) 31 (22.0) 141 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

Table 7.2 reveals that 37.6 percent beneficiaries belong to small and marginal farmers; the
percent is highest in V2 i.e., 54.7 percent. Large farmers occupy 22 percent share in total
holdings of the district.

7.4.1.3 CASTE
The total beneficiaries in the district are categorized into three classes viz., Scheduled Caste,
Scheduled Tribe and General.

Table 7.3.
Distribution of sample beneficiaries on the basis of Caste
Castes
Village
Scheduled Caste Scheduled Tribe General Total
V1 10 (22.7) 9 (20.5) 25 (56.8) 44 (100)
V2 13 (30.7) 8 (19.0) 21 (50.0) 42 (100)
V3 11 (20.0) 14 (25.5) 30 (54.5) 55 (100)
Total 34 (24.1) 31 (22.0) 76 (53.0) 141 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

233
Of the total beneficiaries, 24.1 percent belongs to SC, 22 percent belongs to ST and 53.9
percent belongs to General category. V2 has highest percentage of SC group farmers
(30.9).The total SC/ST agricultural crop loan beneficiaries’ amount to 46.1 percent.

7.4.1.4 FAMILY SIZE

According to the size of family, the beneficiaries are categorized into small (1-3), medium (4-
5) and big (above 5) families.
Table 7.4.
Distribution of sample beneficiaries on the basis of their size of Family
Size of Family in number of members
Village
Small (1-3) Medium (3-4) Large (above 5) Total
V1 23 (52.2) 12 (27.3) 9 (20.5) 44 (100)
V2 6 (14.3) 26 (61.9) 10 (23.8) 42 (100)
V3 7 (12.7) 29 (52.7) 11 (34.5) 55 (100)
Total 36 (25.5) 67 (47.5) 38 (27.9) 141 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.
Of the total beneficiaries medium size families come to 47.5 percent and small families
constitutes 25.5 percent. Of the three sample groups V3 consists of more big families
constituting 34.5 percent.

7.4.1.5 DISTRIBUTION OF AGE

Basing on age the beneficiaries are categorized into three groups. Table 7.5 reveals that 41.1
percent of borrowers belong to 30-40 age group, 37.6 percent belongs to 40-50 age group and
the remaining 21.3 farmers belong to above 50 years age group.

234
 Table 7.5
Distribution of sample beneficiaries on the basis of Age
Age in years
Village
30-40 40-50 Above 50 Total
V1 25 (56.6) 12 (27.3) 7 (25.9) 44 (100)
V2 13 (30.9) 22 (53.0) 7 (16.7) 42 (100)
V3 20 (36.8) 19 (34.5) 16 (29.1) 55 (100)
Total 58 (41.1) 53 (37.6) 30 (21.3) 141 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

7.4.2. IMPACT ON IRRIGATION

As the agricultural crop loan is given to meet the working needs of the beneficiaries, the crop
loan might not have any significant impact on the irrigation facilities of the beneficiaries. The
table 6.6 contains the percentage of irrigated land to the net area sown in pre-loan period and
post-loan period in different sample groups. It also contains the variation in percentage point
between the pre-loan and post-loan periods. The table 6.7 contains the percentage of irrigated
land to the net area sown in pre-loan and post-loan period of different castes of the
beneficiaries along with the variation points. The table 6.8 contains the percentage of
irrigated land to the net area sown in pre-loan and post-loan period of different borrowers on
the basis of operational holdings along with the variation point. It is evident from the tables
that there is no significant change in the percentage of irrigated land of net area sown in post-
loan period as compared to pre-loan period in all sample groups, caste and size of
beneficiaries. From this data it can be concluded that the agricultural crop loan has no
significant impact on the creation of extra irrigation facilities.

The irrigation facilities include river, ponds, canals, pump sets, dug wells, dip irrigation, well
with pump set etc. During the study it is found that there is no impact on irrigation in V1
strata, but there is a great change in V2 and V3 groups after obtaining loans. The size of net
cropped area is increased due to installation of pump sets, dug wells and well with pump set
etc.

The tables 7.7, 7.8 and 7.9 represent the impact of agricultural crop loans on irrigation of
different size and castes of cultivators over pre-loan to post-loan period. The data represents
the percentage of irrigated land to net cropped area.

235
 Table 7.6.
Percentage in irrigated land in Pre-loan and Post-loan period of beneficiaries of sample
groups
Percentage of irrigated land Variation in Percentage
Village
Pre-loan Post-loan Points

V1 97.3 97.3 -
V2 23.9 23.9 -
V3 15.0 15.6 0.6
Total 46.6 47.2 0.6
Sources: Compiled from Questionnaires

Table 7.7.
Percentage in irrigated land in Pre-loan and Post-loan period (Borrowers on the basis of
caste)
Percentage of irrigated land
Caste Variation in Percentage Points
Pre-loan Post-loan
Scheduled Caste 18.4 18.9 -
Scheduled Tribe 46.3 46.3 -
General 68.2 68.8 0.6
Total 46.6 47.2 0.6
Sources: Compiled from Questionnaires

Table 7.8.
Percentage change in irrigated land in Pre-loan and Post-loan period (Borrowers on the
basis of operational holdings)
Percentage of
Size of Farmers irrigated land Variation in Percentage Points
Pre-loan Post-loan
Small & marginal (0-2.5) 21.3 21.3 -

Medium (2.5-5) 54.6 54.6 -

Large (above 5) 49.7 50.3 0.6

Total 46.6 47.2 0.6
Sources: Compiled from Questionnaires

236
7.4.3. IMPACT ON CROPPING PATTERN:

A change in cropping pattern needs more crop loans to enable the farmers to reap the benefits
of advanced technology. The impact of Credit Co-operatives” finance on cropping pattern in
the present study is assessed on the basis of area cultivated under High Yield Variety (HYV)
by comparing the post-loan with pre-loan periods. At the same time the use of non-HYV in
pre-loan and post-loan period is also compared. From the tables 6.9, 6.10 and 6.11 it is
observed that a significant increase in the percentage area cultivated under HYV in post-loan
period as compared to pre-loan period in all sample groups irrespective of caste and size of
land holdings. With the help of crop loans the borrowers are able to increase the use of
HYV seeds from 34.6 percent to 94.3 percent of the total Gross Cropped Area (GCA) in post-
loan period as compared to pre-loan period. Similarly the use of non-HYV seed was
decreased from 55.4 percent to 5.7 percent of the total gross cropped area. However the
adoption of HYV seeds is highest in V1 group both in pre-loan and post-loan periods. The
land of the sample borrowers of the sample groups is fully irrigated. Even though the
irrigation facilities in other two groups are less, still the adoption of HYV seeds in their
pattern of cultivation is highly significant. This is due to the availability of sufficient crop
loans in time.

So far as the size of the farmers is concerned the impact is more in small farmers as compared
to other farmers. The percentage adoption of HYV seeds in post-loan period is almost same
in all three categories. The impact of agricultural crop loan on adoption of HYV seeds is
more in post-loan period in General category as compared to other communities. The
percentage increased in adoption of HYV seed on Gross Cropped Area (GCA) between pre-
loan period and post-loan period are 30.8, 26.4 and 42.9 percent for SC, ST and General
communities respectively. This signifies a significant impact of agricultural crop loan on the
adoption of HYV seeds on GCA by the sample borrowers in post-loan period. On comparison
of the post-loan period with the pre-loan period, it is observed that there is an increase in the
percentage area under HYV in post-loan period in all sample groups, size of cultivators and
communities. The increase in the adoption of HYV is statistically significant. It is observed
that the ‘t’ value of sample groups are 4.68, 5.63 and 3.9 respectively which are statistically
significant at 0.1 percent level.

These observations lead to a conclusion that the agricultural crop loan financed by DCCB,
Kakinada has probably facilitated the adoption of new technology in East Godavari District.

237
 Table 7.9
Percentage change in the use of HYV and non-HYV seeds by beneficiaries of different
operational holdings
Percentage of area GCA* Change in
Pre-loan period Post-loan period percentage
Size
points of HYV
HYV Non-HYV HYV Non-HYV seeds
Small (0-2.5) 33.7 66.3 84.5 15.5 50.8
Medium (2.5-5) 45.6 54.4 96.3 3.7 50.7
Large (above 5) 68.2 31.8 100 5.1 26.7
Total 34.6 55.4 94.3 5.7 49.7
*GCA implies Gross Cropped Area & Sources: Compiled from Questionnaires

Table 7.10.

Percentage change in use of HYV and non-HYV seeds by beneficiaries on basis of Caste
during pre and post loan period

Percentage of area GCA* Change in

Pre-loan period Post-loan period percentage
Caste
points of HYV
HYV Non-HYV HYV Non-HYV seeds
Scheduled Caste 43.8 56.2 74.6 25.4 30.8

Scheduled Tribe 58.3 41.7 84.7 15.3 26.4

General 55.4 44.6 98.3 1.7 42.9

Total 34.6 55.4 94.3 5.7 49.7

*GCA implies Gross Cropped Area & Sources: Compiled from Questionnaires

238
 Table 7.11
Percentage change in use of HYV & non-HYV seeds by different sample groups during
pre & post loan period
Percentage of area GCA* Change in
Pre-loan period Post-loan period percentage
Village
points of HYV
HYV Non-HYV HYV Non-HYV seeds
V1 62.8 37.2 94.6 5.4 31.8

V2 54.3 45.7 83.2 16.8 28.9

V3 16.3 83.7 51.7 48.3 35.4

Total 34.6 55.4 94.3 5.7 49.7

*GCA implies Gross Cropped Area & Sources: Compiled from Questionnaires

From the above tables 7.9, 7.10 and 7.11, it is evident that the crop loan has less impact on V2
villages when compared to V1 and V3 sample groups. The use of HYV is more in V1 group
both in pre-loan and post-loan periods as their lands are naturally fertile and irrigated. Hence
the sample borrowers spent their borrowed funds on use of HYV seeds.

7.4.4. IMPACT ON USAGE OF FERTILIZERS, PESTICIDES AND MANURES

The Green Revolution induced the farmers to use fertilizers and pesticides to get high
productivity. Increase in irrigation facilities, intensive use of HYV seeds and increase in
infrastructural facilities automatically induced them to spend more on fertilizers and
pesticides to have more output per acre. Agricultural crop loans enabled the farmers to apply
proper dose of fertilizers, pesticides etc. at right time and to keep pace with the change in the
new farm technology in agriculture. Supplying adequate loans at right time by the DCCB to
the beneficiaries act as motivating factors.

239
 Table 7.12.
Usage of Fertilizers/ Pesticides etc. per acre in pre and post-loan periods by different
size of beneficiaries
Size Usage of Fertilizer etc. per acre in Rs. Growth in
percentage
Pre-loan period Post-loan period
Small (0-2.5) 200 375 87.5
Medium (2.5-5) 250 495 98.0
Large (above 5) 325 620 90.7
Total 268.4 496.7 85.1
Sources: Compiled from Questionnaires.

Table 7.13.
Usage of Fertilizers/ Pesticides etc. per acre in pre and post-loan periods by different
castes of beneficiaries
Usage of Fertilizer etc. per acre in Rs. Growth in
Caste percentage
Pre-loan period Post-loan period
Scheduled Caste 215 326 51.6
Scheduled Tribe 245 465 89.7
General 290 629 116.8
Total 268.4 496.7 85.1
Sources: Compiled from Questionnaires

Table 7.14.
Usage of Fertilizers/ Pesticides etc. per acre in pre and post-loan periods by
beneficiaries of different groups
Usage of Fertilizer etc. per acre in Rs.
Village Growth in percentage
Pre-loan period Post-loan period
V1 236 356 57.2
V2 215 493 120.3
V3 185 326 81.6
Total 268.4 496.7 85.1
Sources: Compiled from Questionnaires.

The tables 7.12, 7.13 and 7.14 reveal that there is a significant impact on sample borrowers in
consumption of manures and pesticides over pre- loan to post-loan period which is
statistically significant. The‘t’ value of V1 group is 3.27 which is statistically significant at 1

240
percent level where as the ‘t’ value of V2 and V3 are 5.47 and 4.83 respectively which is
statistically significant at 0.1 percent level.

7.4.5. IMPACT ON LABOUR COST

Labour cost occupies a major share in the cost of production. Labour plays a very important
and constructive role in changing cropping pattern of agriculture because the changing
cropping pattern demands more labour. With the help of the agricultural crop loans the
cultivators are able to meet the labour cost at right time. From the tables 6.15, 6.16 and 6.17 it
is observed that the labour cost in three sample groups has increased in post-loan period. The
average expenditure on labour cost per acre by the sample borrowers has increased from
Rs.920.7 to Rs.1537.3. The percentage increase over pre-loan to post-loan period is 67
percent. The average expenditure on labour cost per acre of large farmer is high i.e., 95
percent when compared to other size of farmers. However it is clear that there is a significant
impact of crop loans on labour cost.
Table 7.15.
Labour cost per acre of different size of farmers during pre-loan and post-loan period
Labour cost per acre in Rs
Size of cultivators Growth in percentage
Pre-loan period Post-loan period
Small (0-2.5) 600 1000 66.7
Medium (2.5-5) 850 1500 76.4
Large (above 5) 1000 1950 95.0
Total 920.7 1537.3 67.0
Sources: Compiled from Questionnaires

Table 7.16.
Labour cost per acre of different castes of farmers during pre-loan and post-loan period
Labour cost per acre in Rs. Growth in
Caste
Pre-loan period Post-loan period percentage
Scheduled Caste 750 900 20.0
Scheduled Tribe 500 800 60.0
General 850 1200 41.2
Total 920.7 1537.3 67.0
Sources: Compiled from Questionnaires.

241
 Table 7.17.
Labour cost per acre of different Groups of farmers during pre-loan and post-loan
period
Labour cost per acre in Rs.
Village Growth in percentage
Pre-loan period Post-loan period
V1 700 1200 71.4
V2 850 1300 52.9
V3 550 900 63.6
Total 920.7 1537.3 67.0
Sources: Compiled from Questionnaires.

From the table 7.17 it is observed that the labour cost is more in V1 group as the sample
borrowers depend more on manual labour only. The‘t’ value of sample groups is 5.19, 6.8
and 3.9 respectively and are statistically significant at 10 percent level. Hence above analysis
indicates that the agricultural crop loan has a positive impact on labour cost in post-loan
period.
7.4.6. IMPACT ON PRODUCTION
The important aspect of the impact of crop loan is the positive change in production. Bank
credit induces the borrowers to adopt new technology in the field of agriculture. Adoption of
new technology encourages the intensive use of HYV seeds, fertilizers, pesticides and labour
etc. A change in cropping patterns results in an increase in the productivity of the farmers.
Paddy is the major crop of sample villages and cultivation of other commodities is negligible.

By comparing the yield of paddy of borrowers in the post-loan with that of pre-loan period, it
can be noted that there is an improvement in the yield in all sample groups irrespective of
size of holdings, caste and other factors of the beneficiaries.
Table 7.18.
Yield rate of paddy per acre of different size of farmers during pre-loan and post-loan
period
Yield per acre in bags* Growth in
Size of cultivators
Pre-loan Post-loan percentage

Small (0-2.5) 18 24 33.3

Medium (2.5-5) 21 29 38.1
Large (above 5) 25 38 52.0
Total 22 32 45.5
Sources: Compiled from Questionnaires; * A bag contains 75 kg of paddy.

242
 Table 7.19.
Yield rate of paddy per acre of different castes of farmers during pre-loan and post-loan
period
Yield per acre in bags* Growth in
Caste
Pre-loan Post-loan percentage
Scheduled Caste 21 28 33.3
Scheduled Tribe 19 26 36.8
General 23 34 47.8
Total 22 32 45.5
Sources: Compiled from Questionnaires; * A bag contains 75 kg of paddy.

Table 7.20.
Yield rate of paddy per acre of different Groups of farmers during pre-loan and post-
loan period
Yield per acre in bags* Growth in
Village
Pre-loan Post-loan percentage

V1 28 36 28.6
V2 20 28 40.0
V3 15 24 60.0
Total 22 32 45.5
Sources: Compiled from Questionnaires; * A bag contains 75 kg of paddy.

It can be concluded from the above tables 7.18, 7.19 and 7.20 that there is a significant
increase in the output per acre over pre-loan to post-loan period. The ‘t’ value of sample
groups is 5.01, 3.86 and 7.38 respectively which are statistically significant at 10 percent
level. It is observed that the yield rate has increased irrespective of caste and size of holdings.
This might be due to the change in cropping patterns, intensive use of fertilizers and labour
etc., which can be resulted by the provision of adequate credit in time by DCCB, Kakinada
and its affiliated PACS.

243
7.4.7. IMPACT ON INCOME LEVEL
Change in income level is the best indicator of assessing the impact of farm loans lent by the
DCCB, Kakinada. There is a positive correlation between yield and income of the farmers. A
rise in output automatically results in a raise in the income levels of farmer groups. Change in
cropping pattern and increase in output eventually reflects the income level of the farmers.
For the analysis of this aspect, two factors viz., income per borrower and income per acre
have been taken into consideration. For computation of the income of sample borrowers, the
prevailing market price of paddy has taken into consideration. In order to compute income
per acre the total income is to be divided by the total acres of land whether own or leased.
When the total income is divided by the number of sample borrowers, it gives the income per
borrower.

7.4.7.1. INCOME PER BORROWER

It can be concluded from the tables 7.22, 7.23 and 7.24 that the income per borrower of
different castes, size of holdings and sample group villages has a positive growth. Their
incomes have increased from Rs.15,337 to Rs.25,336 constituting 65.2 percent growth. It is
clear from the table 6.21 that the percentage growth in income of small farmers is more than
that of medium and large farmers. The income per borrower is high in general castes than
other communities over pre-loan to post-loan period. This is due to the fact that 72 percent of
the total borrowers belong to general caste and hold highest land holdings. But the growth
rate is more in ST community followed by SC and General Communities. Table 6.23 reveals
that the income per borrower of V1 sample group is more than that of V2and V3. But the
percentage growth is high in case of V3.

Table 7.21.
Income per borrower per acre of different size of farmers during pre-loan and post-loan
period
Income per borrower in Rs. Growth in
Size of cultivators
Pre-loan Post-loan percentage
Small (0-2.5) 12,140 20,637 69.9
Medium (2.5-5) 15,234 25,222 65.6
Large (above 5) 19,836 31,228 57.4
Total 15,337 25,336 65.2
Sources: Compiled from Questionnaires.

244
 Table 7.22.
Income per borrower per acre of different castes of farmers during pre-loan and post-
loan period
Income per borrower in Rs. Growth in
Caste
Pre-loan Post-loan percentage

Scheduled Caste 14,896 24,334 63.3

Scheduled Tribe 12,393 20,499 65.4
General 20,441 33,236 62.5
Total 15,337 25,336 65.2
Sources: Compiled from Questionnaires.

Table 7.23.
Income per borrower of different Groups of farmers during pre-loan and post-loan
period
Income per borrower in Rs. Growth in
Village
Pre-loan Post-loan percentage

V1 22,483 34,612 53.9

V2 18,921 29,514 55.9
V3 10,223 18,112 77.2
Total 15,337 25,336 65.2
Sources: Compiled from Questionnaires.

However, it can be concluded that there is a significant impact of bank credit on income per
borrower in all categories, castes and sample groups which should be a positive growth in all
cases.

7.4.7.2. INCOME PER ACRE

There is a significant raise in income per acre of sample beneficiaries. The following tables
7.25, 7.26 and 7.27 reveal the fact that the growth percentage per acre on the basis of caste,
size of holdings and sample groups.

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 Table 7.24.
Income per acre of different size of farmers during pre-loan and post-loan period
Income per Acre in Rs. Growth in
Size of cultivators
Pre-loan Post-loan percentage

Small (0-2.5) 6,218 10,466 68.3

Medium (2.5-5) 7,215 11,823 63.8
Large (above 5) 8,300 13,284 60.0
Total 6,730 11,117 65.2
Sources: Compiled from Questionnaires.

Table 7.25.
Income per acre of different caste farmers during pre & post-loan period
Income per Acre in Rs. Growth in
Caste
Pre-loan Post-loan percentage

Scheduled Caste 7,287 11,844 62.5

Scheduled Tribe 8,980 14,572 62.3
General 7,950 13,588 70.9
Total 6,730 11,117 65.2
Sources: Compiled from Questionnaires.

Table 7.26.
Income/acre of different Groups farmers during pre & post-loan periods
Income per Acre in Rs. Growth in
Village
Pre-loan Post-loan percentage

V1 7,980 12,164 52.4

V2 5,130 9,369 82.6
V3 8,940 14,383 60.8
Total 6,730 11,117 65.2
Sources: Compiled from Questionnaires.

From the tables 7.24 & 7.25, it is clear that the income per acre is high in case of large
farmers and growth rate is high in case of small and marginal farmers. The impact of crop
loan on all size of farmers is statistically significant. Table 7.25 reveals that the income per

246
acre is higher in ST communities than the other two communities. Similarly the growth rate
percent is high in case of General category cultivators. The crop loan has the similar impact
on all communities of borrowers which is statistically significant.
It is observed from the table 7.26 that the income per acre of sample groups has significant
raise over pre-loan to post-loan period. It is clear that the income per acre is high in V3. But
the percentage growth rate is high in V2 group than that of other sample groups. Though V3
has high income level per acre, its percentage growth rate is low as the farmers are in high
cost burden. This is due to low fertility and less irrigation facilities. The farmers have to
spend more on irrigation and fertilizers etc. But the output is not increasing in the same
proportion to cost. Another cause for low incomes of this sample groups is they are producing
only one crop for a year. However the‘t’ values of sample groups are 4.32, 7.13 and 5.02
respectively which are statistically significant at 0.1 percent level. Hence it can be concluded
that the agricultural crop loans have a direct significant impact on the income of the borrower
and per acre over pre-loan to post-loan period.

7.5. IMPACT OF AGRICULTURAL TERM LOANS

The agricultural term loans are meant for long-term perspective and are used for development
and investment purposes. Such loans can be payable over a number of years and helps the
cultivators to proper infrastructure for agricultural development.

7.5.1. SOCIO-ECONOMIC CHARACTERISTICS

Before the study of the impact of agricultural term loans sanctioned by DCCB, Kakinada on
sample borrowers, it is relevant to discuss the socio-economic characteristics of the
borrowers of agricultural term loans.

7.5.1.1. EDUCATIONAL ATTAINMENT

It is observed from the following table 7.27 that out of the total borrowers of agricultural term
loans, 37.1 percent are illiterates. The illiterate percentage is more in V1 i.e. 46.9 percent and
less in case of V2 groups whereas the farmers with post secondary is more in V3 i.e. 21.9
percent. It is clear from the table that literacy rate is more in more in V3 group.

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 Table 7.27
Distribution of sample beneficiaries according to educational attainment
Educational attainment
Village
Illiterate Primary Secondary Post Secondary Total
V1 23 (46.9) 9 (18.4) 7 (14.3) 10 (20.4) 49 (100)
V2 13 (24.5) 22 (41.5) 10 (18.9) 8 (15.1) 53 (100)
V3 17 (41.4) 9 (21.9) 6 (14.6) 9 (21.9) 41 (100)
Total 53 (37.1) 40 (28.0) 23 (16.1) 27 (18.8) 143 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

7.5.1.2 PATTERN OF LAND HOLDINGS

Table 7.28 reveals that 50.2 percent of total borrowers belong to small and marginal, 25.9
percent belongs to medium and remaining 26.8 percent belongs to large size farmers. The
percentage of small farmers is more in V2 group i.e., 54.7 percent than V1 and V3 sample
groups. Big farmers are more in V3 group when compared to other groups. Medium size
farmers are also more in V1 group having 28.6 percent.
Table 7.28.
Distribution of sample beneficiaries on basis of size of land holding
Size of land holding in Acre
Village Total
Small (0-2.5) Medium (2.5-5) Large (above 5)
V1 26 (53.1) 14 (20.6) 9 (18.4) 49 (100)
V2 29 (54.7) 13 (24.5) 11 (20.8) 53 (100)
V3 17 (41.4) 10 (24.4) 14 (34.1) 41 (100)
Total 72 (50.3) 37 (25.9) 34 (23.8) 143 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

7.5.1.2. CASTE
The table 7.29 depicts the distribution of sample agricultural term loan borrowers according
to their caste. Out of the total 143 borrowers 45, 34 and 64 farmers belong to SC, ST and
General Categories respectively. It is clear that nearly 55.3 percent of beneficiaries belong to
SC and ST communities. In V3 group SC/ ST are more than other groups having 75.6 percent.

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 Table 7.29.
Distribution of sample beneficiaries on the basis of Caste (ATL)
Caste
Village Total
Scheduled Caste Scheduled Tribe General
V1 12 (24.5) 9 (18.4) 28 (57.19) 49 (100)
V2 16 (30.2) 11 (20.8) 26 (49.1) 53 (100)
V3 17 (41.5) 14 (34.1) 11 (24.4) 41 (100)
Total 45 (31.5) 34 (23.8) 64 (44.7) 143 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

7.5.1.3. FAMILY SIZE

From the table 7.30 it is clear that 13.3 percent of total borrowers have the family size of 1-3
members, 42.7 percent borrowers have 4-5 members and 44 percent have more than 5
members.
Table 7.30.
Distribution of sample beneficiaries on the basis of Family size
Size of Family in number of members
Village
Small (1-3) Medium (3-4) Large (above 5) Total
V1 11 (22.4) 14 (28.6) 24 (41.0) 49 (100)
V2 8 (15.1) 29 (54.7) 16 (30.2) 53 (100)
V3 - 18 (43.9) 23 (56.1) 41 (100)
Total 19 (13.3) 61 (42.7) 63 (44.0) 143 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

7.5.1.4 DISTRIBUTION OF AGE

Table 7.31 reveals that 31.5 percent of the total beneficiaries belong to age group between
30-40, 47.5 percent belong to between 40-50 and remaining 21 percent belong to above 50
years of age.

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 Table7.31.
Distribution of sample beneficiaries on the basis of Age
Age in years
Village Total
30-40 40-50 Above 50
V1 16 (32.7) 24 (48.9) 9 (18.4) 49 (100)
V2 14 (26.4) 28 (52.8) 11 (20.8) 53 (100)
V3 15 (36.6) 16 (39.0) 10 (24.4) 41 (100)
Total 45 (31.5) 68 (47.5) 30 (21.0) 143 (100)
The figures in brackets indicate percentage to total; Sources: Compiled from Questionnaires.

7.5.2. PURPOSE WISE DISTRIBUTION

The table 7.32 gives the purpose wise distribution of agricultural term loans and it is observed
that of the total sample beneficiaries 36 percent of farmers used their loan amount for
purchase of pump sets, followed by bullocks at 30 percent. Very less borrowers i.e., 8 percent
used their funds for the purchase of farm equipment.

Table 7.32
Distribution of borrowers according to purpose
Purpose V1 V2 V3 Total
a. Pump set 18 23 5 55 (38.5)
b. Well with Pump set 7 16 - 23 (16.1)
c. Bullock 5 9 27 41 (28.7)
d. Land Development 11 5 - 16 (11.1)
e. Farm Equipment 8 - - 8 (5.6)
Total 49 53 41 143 (100)
Sources: Compiled from Questionnaires; Figures in brackets indicate percentage.

7.5.3. IMPACT ON IRRIGATION

The irrigation facilities include river, ponds, canals, pump sets, dug wells, dip irrigation, well
with pump set etc. During the study it is found that there is no impact of agricultural term
loans on irrigation in V1 strata, but there is a great change in V2 and V3 groups after obtaining
loans. The size of net cropped area has increased due to installation of pump sets, dug wells
and well with pump set etc.

250
As a result of various irrigation activities facilitated by agricultural term loans, the proportion
of net cropped area of sample borrowers increased from 26.2 percent to 56.3 percent with a
growth of 30.1 percent.

The tables 7.33, 7.34 and 7.35 represent the impact of agricultural term loans on irrigation of
different size and castes of cultivators over pre-loan to post-loan period. The data represents
the percentage of irrigated land to net cropped area (NCA).

Table 7.33.
Impact of Agricultural term loans on different sample groups
Percentage of irrigated land Variation in
Village
Pre-loan Post-loan Percentage Points

V1 92 100 8.0
V2 2 46.5 44.5
V3 - 37.3 37.3
Total 26.2 56.3 30.1
Sources: Compiled from Questionnaires

The table 7.33 reveals that the percentage of irrigated net cropped area has increased
significantly in post-loan period over pre-loan period in all sample groups. This is due to the
supply of Agricultural Term Loans by DCCB to borrowers to generate irrigation activities.
Table 7.34.
Impact of Agricultural term loans on Irrigation on basis of caste
Percentage of irrigated land Variation in
Caste
Pre-loan Post-loan Percentage Points

Scheduled caste 21.2 43.9 22.7

Scheduled Tribe 26.1 61.2 35.1
General 23.4 54.3 30.9
Total 26.2 56.3 30.1
Sources: Compiled from Questionnaires

From the table 7.34it is observed that the bank credit has a significant impact on irrigation on
all communities. However the impact of credit on ST borrowers is more as compared to other
communities. It is lowest in SC category. From primary investigation it is observed that 38
percent of SC who had taken loan for irrigation activities is not able to generate irrigation
facilities for their fields. The percentage of failure in General Communities is 10 percent and

251
it is 6 percent for ST. However the bank credit has a very significant impact on irrigation on
all castes of borrowers.

Table 7.35
Impact of Agricultural term loans on irrigation (Borrowers on the basis of operational
holdings)
Percentage of irrigated land Variation in
Size of Farmers
Pre-loan Post-loan Percentage Points

Small (0-2.5) 21.6 48.3 26.7

Medium (2.5-5) 24.3 54.2 29.9
Large (above 5) 31.6 63.1 31.5
Total 26.2 56.3 30.1
Sources: Compiled from Questionnaires

From the table 7.35it is clear that bank loan has a significant impact on operational holdings.
However the impact is more or less significant on all size of holdings. It has a significant
impact of change i.e., 30.1 percent.

7.4.3. IMPACT ON CROPPING PATTERN

An assured supply of water and other infrastructure facilities enables in showing cropping
pattern in favour of more remunerative crops like HYV of paddy. The agricultural term loan
has a great role in providing the infrastructural facilities to agriculture. It is observed from the
table 6.36 that the agricultural term loan has a significant impact on the small and marginal
farmers in the adoption of HYV seeds over pre-loan to post-loan period. The impact is more
in case of medium farmers than small farmers. In pre-loan period the medium farmers have
adopted HYV seeds on 44 percent of Gross Cropped Area. In post loan period the percentage
is increased 84.3 percent. The variation
in percentage is 40.2 percent. It is known from the field survey that about 26 percent of small
farmers did not utilize the loan in productive purposes. Due to this reason the impact on small
farmers is probably less on the adoption of HYV seeds as compared to medium farmers in
post-loan period

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 Table 7.36.
Impact of Agricultural term loans on cropping pattern on different size of holdings
Percentage of area GCA*
Change in percentage**
Size Pre-loan period Post-loan period
points of HYV seeds
HYV Non-HYV HYV Non-HYV
Small (0-2.5) 53.9 46.1 86.1 13.9 32.2
Medium (2.5-5) 44.1 55.9 84.3 15.7 40.2
Large (above 5) 56.2 48.1 100.0 25.2 43.8
Total 48.7 51.3 86.2 15.6 39.5
*GCA implies Gross Cropped Area
** Difference between percentages HYV paddy in pre-loan and post-loan period
*** Total value is calculated on total Gross Cropped Area under ATL
Sources: Compiled from Questionnaires

From the table 7.36 it is observed that the Agricultural term loan has good impact on the
adoption of new cropping pattern by different castes. However it is more in case of ST
communities. This is possibly possible due to extra irrigation facilities generated by the ST s
in post-loan period, as this has been shown in table 7.37.
Table 7.37.
Impact of Agricultural term loans on cropping pattern on different caste
Percentage of area GCA* Change in
Pre-loan period Post-loan period percentage**
Caste
points of HYV
HYV Non-HYV HYV Non-HYV seeds
Scheduled caste 45.2 54.8 79.6 20.4 34.4
Scheduled Tribe 54.2 45.8 93.9 6.1 39.7
General 46.3 53.7 81.3 18.7 35.0
Total 48.7 51.3 86.2 15.6 39.5
*GCA implies Gross Cropped Area
** Difference between percentages HYV paddy in pre-loan and post-loan period
*** Total value is calculated on total Gross Cropped Area under ATL
Sources: Compiled from Questionnaires

The table 7.38 reveals that the cropping pattern of the sample beneficiaries in the sample
groups V1, V2 and V3 in pre-loan and post-loan period. With the help of Agricultural term

253
loans the borrowers have been able to increase the use of HYV seeds from 48.7 percent to
86.2 percent of the total gross cropped area.
Table 7.38.
Impact of Agricultural term loan on cropping pattern on different sample groups
Percentage of area GCA* Change in
Pre-loan period Post-loan period percentage**
Village
points of HYV
HYV Non-HYV HYV Non-HYV seeds
V1 62.2 37.8 94.1 5.9 31.9
V2 42.6 53.4 79.2 20.8 36.6
V3 18.7 81.3 62.7 37.3 44.0
Total 48.7 51.3 86.2 15.6 39.5
*GCA implies Gross Cropped Area
** Difference between percentages HYV paddy in pre-loan and post-loan period
*** Total value is calculated on total Gross Cropped Area under ATL
Sources: Compiled from Questionnaires

The adoption of HYV is more on V1 group in both pre-loan and post-loan periods. The lands
of the sample borrowers in this district are fully irrigated. The irrigation facility on other
districts in post-loan period has increased. So the adoption of HYV seeds in these sample
groups is highly significant. This might be due to availability of agricultural term loans to the
borrowers. However the increase in the use of HYV seeds on GCA over the pre-loan to post-
loan period is also statistically significant. It was observed by the ‘t’ value of each individual
district. The ‘t’ value of V1 is 3.71 is significant at 1 percent level. The ‘t’ value of V2 is 4.79
which are significant at 0.1 percent and ‘t’ value of V3 is 3.68 percent which is also
significant at 1 percent level.

7.4.4. IMPACT ON USAGE OF FERTILIZERS, PESTICIDES AND MANURES

Increase in irrigation facilities, intensive use of HYV and increase in infrastructural facilities
induce the cultivators to use more fertilizers. The tables 7.39, 7.40 and 7.41 present data on
expenditure incurred on fertilizers, pesticides and manures per acre by different size of
farmers, different castes of farmers and districts. The expenditure on fertilizers, pesticides etc.
per acre in total sample has increased from Rs.425 in pre-loan period indicating a growth of
110.8 percent. However the impact on small farmers is more as compared to other size of
farmers.

254
 Table 7.39.
Usage of Fertilizers/ Pesticides etc. per acre in pre and post-loan periods by different size of
beneficiaries
Usage of Fertilizer etc. per acre in Rs
Size Growth in percentage
Pre-loan period Post-loan period
Small (0-2.5) 275 595 116.3
Medium (2.5-5) 350 765 118.5
Large(above 5) 625 1050 68.0
Total 425 896 110.8
Sources: Compiled from Questionnaires

Table 7.40.
Usage of Fertilizers/ Pesticides etc. per acre in pre and post-loan periods by different
castes of beneficiaries
Usage of Fertilizer etc. per acre in Rs. Growth in
Caste
Pre-loan period Post-loan period percentage
Scheduled caste 258 497 92.6
Scheduled Tribe 537 948 76.5
General 412 1127 173.5
Total 425 896 110.8
Sources: Compiled from Questionnaires

Table 7.41
Usage of Fertilizers/ Pesticides etc. per acre in pre and post-loan periods by
beneficiaries of different groups
Usage of Fertilizer etc. per acre in Rs.
Village Growth in percentage
Pre-loan period Post-loan period
V1 262 479 82.8
V2 389 756 94.3
V3 545 1135 108.3
Total 425 896 110.8
Sources: Compiled from Questionnaires

The tables 7.40 and 7.41 reveal that the consumption of fertilizers is more in General
category than other communities. It shows more than double growth i.e., 173.5 percent.
However the consumption of fertilizer per acre has significantly increased in all sample
groups over pre-loan to post-loan period. The consumption of fertilizer is more in V3 group

255
indicating 108.3 percent due to low fertile lands (Tylands). Hence, these villages need more
funds to increase the fertility of the soil.
The increase in the consumption of fertilizer and pesticides per acre is statistically significant.
The ‘t’ value of V3 is 4.67 which is statistically significant at 1 percent level. And the ‘t’
values of V1 and V2 represents 5.86 and 3.93 respectively which are statistically significant at
0.1 percent level. And hence it can be concluded that the increase in the consumption of
fertilizer per acre over pre-loan to post-loan period is probably due to the impact of
agricultural term loans on borrowers.

7.4.5. IMPACT ON LABOUR COST

The agricultural term loan has a significant impact on labour cost per acre of all size of
farmers irrespective of their communities. The average expenditure on labour per acre by
sample borrowers has increased from RS. 1,050 to Rs.1,638. The percentage growth rate is
56. It is evident from the study that large farmers spent more on labour cost than small and
medium size farmers. But the growth percentage is more in case of small farmers than others
i.e., 80.9 percent. For Schedule Tribe cultivators it is 88.8 percent which is higher than other
communities. With the help of agricultural term loans the borrowers might have earned a
sound infrastructural base for cultivation. That might have probably induced the borrowers to
increase the expenditure on labour cost per acre.

Table 7.42.
Labour cost per acre of different size of farmers during pre-loan and post-loan period
Labour cost per acre in Rs Growth in
Size
Pre-loan period Post-loan period percentage

Small (0-2.5) 796 1424 78.9

Medium (2.5-5) 832 1116 34.2
Large (above 5) 1215 1906 56.9
Total 1050 1638 56.0
Sources: Compiled from Questionnaires.

256
 Table 7.43.
Labour cost per acre of different castes of farmers during pre-loan and post-loan period
Labour cost per acre in Rs
Caste Growth in percentage
Pre-loan period Post-loan period
Scheduled caste 567 864 52.4
Scheduled Tribe 760 1335 75.7
General 1114 1542 38.5
Total 1050 1638 56.0
Sources: Compiled from Questionnaires.

Table 7.44.
Labour cost per acre of different Groups of farmers during pre-loan and post-loan
period
Labour cost per acre in Rs
Village Growth in percentage
Pre-loan period Post-loan period
V1 793 1130 42.5
V2 536 958 78.8
V3 1213 1835 51.3
Total 1050 1638 56.0
Sources: Compiled from Questionnaires.

However the growth in labour cost per acre over pre-loan to post-loan period is statistically
significant in sample group villages. The impact is high in V2 group which shows a growth
rate of 78.8 percent. The‘t’ value of the sample groups are 3.87, 2.93 and 4.36 respectively
which are statistically significant at 1 percent level.

7.4.6. IMPACT ON PRODUCTION

Increase in irrigation facilities, adoption of HYV seeds, intensive use of fertilizers, pesticides
etc. increase s the yield rate of paddy. With the effect of these factors the yield rate of paddy
has increased in all sample groups of villages irrespective of the size and caste of the
cultivators. From the field survey it is observed that the term loan for the purchase of
ploughs, bullocks and other implements have played an important role in increasing the yield
of crops. This helps the borrowers to get timely service. The farmer who had taken loans for

257
dug well, or pump set or dug well with pump set or land development is able to facilitate
irrigation and to convert fallow land to agricultural field and thus increase their yield.
Table 7.45
Yield rate of paddy per acre of different size of farmers during pre-loan and post-loan
period
Yield per acre in bags* in Rs Growth in
Size
Pre-loan period Post-loan period percentage

Small (0-2.5) 21 28 33.3

Medium (2.5-5) 25 32 28.0
Large (above 5) 25 38 52.0
Total 24 34 41.7
Sources: Compiled from Questionnaires; *A bag contains 75 kg of paddy.

Table 7.46
Yield rate of paddy per acre of different castes of farmers during pre-loan and post-loan
period
Yield per acre in bags* Growth in
Caste
Pre-loan period in Rs Post-loan period in Rs percentage
Scheduled caste 18 28 55.5
Scheduled Tribe 23 30 30.4
General 25 34 36.0
Total 24 34 41.7
Sources: Compiled from Questionnaires; * A bag contains 75 kg of paddy.
Table 7.47
Yield rate of paddy per acre of different Groups of farmers during pre-loan and post-
loan period
Yield rate per acre in bags*
Village Growth in percentage
Pre-loan period in Rs Post-loan period in Rs
V1 28 38 35.7
V2 20 28 40.0
V3 15 26 73.3
Total 24 34 41.7
Sources: Compiled from Questionnaires; A bag contains 75 kg of paddy

The increase in yield of paddy of pre-loan to post-loan period is also statistically significant
in all sample villages. The‘t’ value of sample groups are 6.51, 4.15 and 5.3 respectively,
which are statistically significant at 1 percent level.

258
7.4.7. IMPACT ON INCOME LEVEL
Change in income level is the best indicator of the impact of bank loan on sample
beneficiaries. Irrigation facilities, change in cropping patterns and increase in yield rate
eventually increase the income of the borrowers. For the analysis of agricultural term loan on
income level of the borrower, two factors viz., income per borrower and income per acre
have been taken into consideration. For computation of the income of sample borrowers, the
prevailing market price of paddy has been taken into consideration. In order to compute
income per acre the total income is to be divided by the total acres of land whether own or
leased. When the total income is divided by the number of sample borrowers, it gives the
income per borrower.

7.4.7.1. INCOME PER BORROWER

It can be concluded from the tables 7.48, 7.49 and 7.50 that the income per borrower has
increased in all cases irrespective of caste, size of holdings and sample group villages.
However the growth of medium farmers’ income is more than the small and big farmers i.e.,
54.9 percent. The growth percentage is less in case of large farmers i.e., 39.5 percent. The
impact of agricultural term loan on income is high in case of Schedule Caste category which
shows 55.8 percent rate of growth. However it is significant on sample groups, but it has
more significant impact on V3 group which shows a growth rate of 63.2 percent.
Table 7.48
Income per borrower per acre of different size of farmers during pre-loan and post-loan
period
Income per borrower in Rs. Growth in
Size of cultivators
Pre-loan period Post-loan period percentage

Small (0-2.5) 13,890 19,473 40.2

Medium (2.5-5) 15,750 24,396 54.9
Large (above 5) 18,915 26,386 39.5
Total 16,250 23,884 47.0
Sources: Compiled from Questionnaires.

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 Table 7.49
Income per borrower per acre of different castes of farmers during pre-loan and post-
loan period
Income per borrower in Rs.
Caste Growth in percentage
Pre-loan period Post-loan period
Scheduled caste 14,236 22,179 55.8
Scheduled Tribe 18,944 27,298 44.1
General 15,690 21,463 36.8
Total 16,250 23,884 47.0
Sources: Compiled from Questionnaires

Table 7.50.
Income per borrower of different Groups of farmers during pre-loan and post-loan
period
Income per borrowers in Rs.
Village Growth in percentage
Pre-loan period Post-loan period
V1 18,365 25,638 39.6
V2 15,490 22,414 44.7
V3 13,675 22,317 63.2
Total 16,250 23,884 47.0
Sources: Compiled from Questionnaires.

However, it can be concluded that there is a significant impact of bank credit on income per
borrower in all categories, castes and sample groups which should be a positive growth in all
cases.

7.4.7.2. INCOME PER ACRE

There is a significant rise in income per acre of sample beneficiaries. The following tables
7.52, 7.53 and 7.54 reveal the fact that the agricultural term loan has the impact on increase in
income per acre on the sample beneficiaries irrespective of caste, size of holdings and sample
groups.

260
 Table 7.51
Income per acre of different size of farmers during pre-loan and post-loan period
Income per Acre in Rs. Growth in
Size of cultivators
Pre-loan period Post-loan period percentage

Small (0-2.5) 6,478 10,332 59.5

Medium (2.5-5) 7,873 10,699 35.9
Large (above 5) 8,416 11,975 42.3
Total 7,896 11,607 47.0
Sources: Compiled from Questionnaires.

Table 7.52
Income per acre of different castes of farmers during pre-loan and post-loan period
Income per acre in Rs. Growth in
Caste
Pre-loan period Post-loan period percentage

Scheduled caste 6,890 10,652 54.6

Scheduled Tribe 8,412 12,256 45.7
General 7,538 10,297 36.6
Total 7,896 11,607 47.0
Sources: Compiled from Questionnaires.

Table 7.53
Income per acre of different Groups of farmers during pre-loan and post-loan period
Income per Acre in Rs.
Village Growth in percentage
Pre-loan period in Rs Post-loan period in Rs
V1 8,115 11,256 38.7
V2 7,267 10,341 42.3
V3 6,626 10,582 59.7
Total 7,896 11,607 47.0
Sources: Compiled from Questionnaires.

From the tables 7.51, 7.52 and 7.53 it is clear that the income per acre has increased from Rs.
7,896 to Rs.11,607 at percentage growth of 47 over pre-loan to post- loan period. The
percentage growth rate is highest in case of small farmers. The increase in income per acre in
all size of the farmers is significant. So far as the caste is concerned the income per acre is

261
highest in case of Scheduled Tribe. But the percentage growth over pre-loan to post- loan
period is high in Schedule Caste. But the increase in income per acre in all communities in
post-loan period is quite significant. The income per acre has significant increase in all
sample groups. The‘t’ value of sample groups are 5.1, 4.15 and 6.52 respectively which are
statistically significant at 0.1 percent level. From this it may be concluded that the
agricultural term loan has a direct significant impact on the income levels of the borrowers.
The positive trend in raising income per borrower and income per acre of holding has been a
constant feature in all categories, caste and groups of farmers.

7.6. IMPACT ON ALLIED SECTOR

The second aspect of the impact study is to know the impact of bank credit on the allied
activities of the beneficiaries. The allied activities include dairy, goat & sheep rearing,
piggery and fishery etc. The main objective of the bank credit is to improve the living
standards of economically weaker sections of the community. For the analysis of the impact
on allied sector, two indicators have been chosen i.e., Income and employment generation.
The table 7.55 presents the distribution of sample borrowers according to various activities
undertaken under allied activities in three sample group of villages.
Table 7.54.
Distribution of beneficiaries according to different types of activities in sample groups
Activities V1 V2 V3 Total
a. Dairy 13 17 16 40 (31.1)
b. Piggery 12 6 6 24 (16.2)
c. Sheep/Goat rearing 17 12 14 43 (29.1)
d. Fishery 17 8 10 35 (23.6)
Total 59 (39.9) 43 (29.1) 46 (31.0) 113 (100)
Sources: Compiled from Questionnaires.

7.6.1. SOCIO-ECONOMIC CHARACTERISTICS

Before the study it is necessary to know about the socio-economic characteristics of
beneficiaries as they play a vital role on the performance of the beneficiaries which in turn
reflects the impact of bank loan on the borrowers.

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7.6.1.1. CASTE
Out of 148 beneficiaries 59(39.9 percent) belong to Scheduled Caste, 53 (35.8 percent)
belong to Scheduled Tribe and 36 (24.3 percent) belong to General category. This has been
shown in table 6.55.
Table 7.55.
Distribution of beneficiaries by Activities and caste
Activities SC ST Gen Total
a. Dairy 11 8 27 46 (31.1)
b. Piggery 24 - - 24 (16.2)
c. Sheep/Goat rearing 14 19 - 32 (28.3)
d. Fishery 7 23 7 43 (29.1)
Total 59 (39.9) 53 (35.8) 36 (24.3) 148 (100)
Sources: Compiled from Questionnaires; (Figures in brackets indicate percentage)

7.6.1.2. FAMILY SIZE

Table 7.56 shows the family size of different borrowers who have taken up loans for allied
activities. It is observed from the table that 17.6 percent beneficiaries belong to the age group
of 20-30, 38.5 percent belong to 30-40 , 24.3 percent belong to 40-50 and rest of 19.6
percent belong to the age group of above 50 years.

Table 7.56.
Distribution of beneficiaries according to Age
Activities 20-30 30-40 40-50 Above 50 Total
a. Dairy 9 22 10 5 46 (31.1)
b. Piggery - 8 6 10 24 (16.2)
c. Sheep/Goat rearing 10 14 11 8 43 (29.1)
d. Fishery 7 13 9 6 35 (23.6)
Total 26 (17.6) 57 (38.5) 36 (24.3) 29 (19.6) 148 (100)
Sources: Compiled from Questionnaires; (Figures in brackets indicate percentage)

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7.6.1.3. EDUCATIONAL ATTAINMENT
The table 7.57 presents educational attainment of the beneficiaries of allied activities who
came under the survey. It is clear from the table that 36.5 percent are illiterate and 31.2
percent had primary education and 22.8 percent had secondary and the rest of 9.5 percent had
post-secondary education. From the above it is clear that the beneficiaries who had post-
secondary or secondary education had concentrated less on activities such as piggery and
goat rearing when compared to other beneficiaries.
Table 7.57.
Distribution of beneficiaries according to Educational attainment
Post
Activities Illiterate Primary Secondary Total
Secondary
a. Dairy 10 17 11 8 46 (31.1)
b. Piggery 13 7 4 - 24 (16.2)
c. Sheep/Goat rearing 19 13 11 - 43 (29.1)
d. Fishery 12 9 8 6 35 (23.6)
Total 54 (36.5) 46(31.2) 34 (22.8) 14 (9.5) 148 (100)
Sources: Compiled from Questionnaires; (Figures in brackets indicate percentage)

7.6.1.4. FAMILY BACKGROUND

Family background also plays an important role on the impact of allied activities. Through
the questionnaires the beneficiaries were asked whether their occupation is ancestral or not.
Their responses are presented in table 6.59. 39.9 percent beneficiaries agreed that their
occupation is ancestral. But about 60.1 percent beneficiaries told that it is a new job to them.
This reveals that more than 50 percent of the beneficiaries without any ancestral background
have undertaking new challenging activities in order to upgrade their standard of living
Table 7.58
Showing the Occupation of Beneficiary was ancestral or not
Answers
Activities Total
Yes No
a. Dairy 15 31 46 (31.1)
b. Piggery 24 - 24 (16.2)
c. Sheep/Goat rearing 11 32 43 (29.1)
d. Fishery 9 26 35 (25.6)
Total 59 (39.9) 89 (60.1) 148 (100)
Sources: Compiled from Questionnaires; (Figures in brackets indicate percentage)

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7.7. DAIRY
Dairy is the most important activity in the allied sector for which the bank extends credit
assistance to the needy farmers. The impact of finance for dairy has been evaluated on the
basis of two parameters viz., income and employment generation.

7.7.1. INCOME
To study the impact of DCCB’s finance on the income level of the borrowers, income of pre
loan period and the income of post-loan period are considered. The average incomes of
borrowers of the two periods are compared. The table 7.61 represents the average income of
the dairy borrowers in pre-loan and post-loan period in all sample groups.
Table 7.59
Average income of the borrowers in pre and post-loan periods
Average income in Rs
Village Growth in Percentage
Pre-loan Post-loan
V1 5667 10247 80.8
V2 6583 8510 29.3
V3 6575 9525 44.8
Total 6120 8710 42.3
Sources: Compiled from Questionnaires.

It is observed from the table 7.59 that the average income of the borrowers in post loan period
has increased in all three sample groups significantly. The overall average income has
increased from Rs. 6120 to Rs. 8710 at percentage growth of 42.3. The positive change in
percentage of income is highest in V1 group i.e., 80.8 where as it is only 29.3 and 44.8
percent, respectively in V2 and V3 groups respectively. The reason behind such growth is the
supply of good quality of livestock to the beneficiaries. Due to the presence of milk co-
operative societies, the borrowers have less marketing problems.

7.7.2. EMPLOYMENT GENERATION

Employment generation is also another aspect of the impact of bank credit on allied sector.
The success of credit is also assessed from days of engagement of borrowers. The number of
days worked by borrowers along with other helping hand is considered as the parameter for

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employment generation. The table 6.61 reflects the number of days engaged in pre-loan and
post-loan period by the borrowers along with his helping hands in different groups.
Table 7.60
No. of days engaged in pre and post-loan periods in different sample groups
No. of days engaged in No.
Village Growth in Percentage
Pre-loan Post-loan
V1 250 355 42.0
V2 321 362 12.7
V3 263 316 20.0
Total 280 345 23.2
Sources: Compiled from Questionnaires.
T
he table reveals that overall employment generation in number of days has increased from
280 to 345 in post-loan period at percentage growth of 23.2 percent. However the impact of
DCCB’s credit on employment generation is highest in V1 group. The reason is the same as
the reason for the income generation. But the percentage growth of employment in pre-loan
to post-loan period is very low in V2 group i.e., 12.7 percent. The impact of bank credit on
employment generation is significant except in V2 group.

7.8. GOAT AND SHEEP REARING

Goat and Sheep rearing is one of the important activities carried out by the borrowers in order
to increase their income and employment facilities. The Government and other agencies are
extending credit to these activities. These borrowers are usually covered under IRDP and DRI
schemes. The impact of bank loan on the borrower is discussed below on the basis of two
indicators i.e., income and employment generation.

7.8.1. INCOME
An attempt has been made to compare the income of borrowers in pre-loan and post-loan
period. The impact of bank credit is evaluated on the bases of the above parameters.

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 Table 7.61
Average income of the borrowers of Goat & Sheep rearing in pre and post-loan periods
Average income in Rs.
Village Growth in Percentage
Pre-loan Post-loan
V1 6125 9250 51.0
V2 5125 6375 24.4
V3 6000 7250 20.8
Total 5750 7650 33.0
Sources: Compiled from Questionnaires.

It is observed from the above table that the income generated in post-loan period is not so
significant. The overall percentage growth of income in pre-loan to post-loan period is only
33 percent. However the gap between the pre-loan and post-loan income is only Rs.1900 per
borrower. V1 has registered highest growth rate. From the field survey it is known that out of
three beneficiaries who have taken loan for sheep rearing two beneficiaries have not been
able to generate extra income in post-loan period and has sold their livestock. Thus goat and
sheep rearing as an income generating option has failed for the entire group of sample
borrowers. In the field survey it is gathered that 47 percent of the total beneficiaries who have
taken loan for this purpose continue to earn their livelihood as daily wage labourers.

7.8.2. IMPACT ON EMPLOYMENT

From the table 7.64 it is observed that the employment generated by the borrowers in post-
loan period as compared to pre-loan period is not significant. The percentage growth is only
10.2 percent over pre-loan to post-loan period.
Table 7.62.
Average number of days engaged in pre and post-loan periods in sample groups
No. of days engaged in
Village Growth in Percentage
Pre-loan Post-loan
V1 313 328 4.8
V2 263 323 22.8
V3 308 328 6.5
Total 295 325 10.2
Sources: Compiled from Questionnaires

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7.9. PIGGERY
Piggery as an income generating activity is financed by DCCB for the upliftment of
borrowers. The impact of bank loan on sample borrowers is discussed on the basis of
parameters viz., income and employment generation in the form of man days worked.

7.9.1. IMPACT ON INCOME LEVEL

Table 7.65 depicts the family income pattern of piggery of sample borrowers in the pre-loan
and post-loan period.
Table 7.65.
Average income of the borrowers in pre and post-loan periods
Average income in Rs
Village Growth in Percentage
Pre-loan Post-loan
V1 5625 8375 48.9
V2 7100 11000 54.9
V3 4250 5875 38.2
Total 5715 8500 48.7
Sources: Compiled from Questionnaires.

It is observed from the table that the income from piggery has increased in three sample
groups in post-loan period. The overall percentage growth rate of income per borrower over
pre-loan to post-loan period is 48.7 percent. The percentage growth rate is 48.7, 54.9 and 38.2
percent respectively for V1, V2 and V3 groups respectively. Piggery is the ancestral
occupation of all beneficiaries.

7.9.2. EMPLOYMENT GENERATION

From the table 7.66 it is observed that the employment generated by the borrowers in post-
loan period as compared to pre-loan period is significant. The overall growth in percentage
over pre-loan to post-loan period is 20.3 percent. The percentage growth rate is highest in V1
group with 34 percent. But it is lowest in V2 group which is 1.8 percent only.

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 Table 7.64
Average number of days engaged in pre and post-loan periods in different sample
groups
No. of days engaged
Village Growth in Percentage
Pre-loan Post-loan
V1 263 353 34.0
V2 337 343 1.8
V3 203 268 32.0
Total 270 325 20.3
Sources: Compiled from Questionnaires.

7.10. FISHERY
DCCB, Kakinada also lent loans to pisciculture. It provides long-term assistance for digging
and renovation of ponds and short-term loans for other inputs. The bank credit’s impact on
pisciculture is studied on the basis of income and employment generation.

7.10.1. IMPACT ON INCOME LEVEL

The income of borrowers who take up pisciculture as their livelihood has increased
remarkably. It is observed from the table 7.65. In the total sample, of 66.7 percent change in
the income level is marked in the post-loan period. The highest percentage of change is
noticed in V3 group, followed by V2 and V1 groups.

Table 7.65
Average income of the borrowers in pre and post-loan periods
Average income in Rs.
Village Growth in Percentage
Pre-loan Post-loan
V1 11375 16500 45.0
V2 12000 21000 75.0
V3 9000 16400 82.2
Total 10800 18000 66.7
Sources: Compiled from Questionnaires.

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7.10.2. IMPACT ON EMPLOYMENT GENERATION
From the table 7.66 it is observed that the bank credit has no significant impact on
employment generation in V3 group. The overall growth of employment generation in pre-
loan period to post-loan period is 6.7 percent. However, the growth is highest in V1 village
i.e., 10.1 percent.

Table 7.66
Average number of days engaged in pre and post-loan periods in different sample
groups
No. of days engaged
Village Growth in Percentage
Pre-loan Post-loan
V1 296 326 10.1
V2 263 279 6.1
V3 360 360 -
Total 300 320 6.7
Sources: Compiled from Questionnaires.

7.11. IMPACT OF CREDIT ON DIFFERENT SAMPLE GROUP

To study the impact of DCCB’s credit on sample beneficiaries who have taken loans for
allied activities, each sample group is considered as a unit. To evaluate the impact of DCCB’s
credit on borrowers income and employment generation has taken as parameters.

7.11.1. IMPACT ON INCOME

From the table 7.67 it is observed that the overall income per borrower in pre-loan to post-
loan period has increased significantly at 48.1 percent. However, the growth is registered
highest in V1 group and lowest in the V3 group.

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 Table 7.67.
Average income of the borrowers in pre and post-loan periods in different sample
groups
Average income in Rs.
Village Growth in Percentage
Pre-loan Post-loan
V1 5950 10250 72.2
V2 6575 10200 55.1
V3 7730 9615 24.3
Total 6750 10000 48.1
Sources: Compiled from Questionnaires.

The increased income over pre-loan to post-loan in all sample groups is statistically
significant. The ‘t’ value of V1 is 4.3 which is statistically significant at 1 percent level. The
‘t’ value of V2 and V3 are 3.7 and 2.9, respectively which are statistically significant at 0.1
percent level. From the above analysis it can be concluded that the increased income in allied
sector in all three sample groups might be due to the credit provided by the DCCB, Kakinada.

7.11.2. IMPACT ON EMPLOYMENT

From the table 7.68 it is clear that the number of days engaged have increased in post-loan
period at percentage of 16.1 percent. However the growth of number of days engaged in post-
loan to pre-loan period is highest in V1 group as the percentage is 26.8 percent and is lowest
in V2 group which is only 4.9 percent.

Table 7.68.
Number of days engaged by the borrowers in pre and post-loan periods in different
sample groups
Average income in Rs
Village Growth in Percentage
Pre-loan Post-loan
V1 265 336 26.8
V2 305 320 4.9
V3 271 313 15.5
Total 280 325 16.1
Sources: Compiled from Questionnaires.

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The growth in number of days engaged in pre-loan to post-loan period is also statistically
significant. The ‘t’ value of V1 is 4.02 which is statistically significant at 1 percent level. The
‘t’ values of V2 and V3 are 4.57 and 2.34 respectively which are statistically significant at 0.1
percent level. The rate of employment generation has significant increase in all three sample
groups due to the provision of timely and adequate credit by the DCCB, Kakinada.

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273
 CHAPTER VIII

SUMMARY & CONCLUSION

8. 1 Introduction
8. 2 The role of Co-operatives in provision of credit to Agriculture and Allied sector
8. 3 The District Central Co-operative Bank (DCCB) – a National Profile

Growth of DCCBs in Andhra Pradesh with special reference to East Godavari

8. 4 District
8. 5 Analysis of development of the DCCB in East Godavari District
8. 6 Impact study

8. 7 Test of hypotheses
8. 8 Major Findings
8. 9 Suggestions
8. 10 Practical Utility of the study
8. 11 Scope for further research

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8.1. INTRODUCTION

The present study embodies the results of field investigation into the agricultural progress of
the beneficiaries compared to pre-loan and post-loan periods under the operational area of the
District Central Co-operative Bank, Kakinada. The main objective of the present study is to
analyze the agricultural changes and impact on farming conditions with regard to cropping
pattern, cropping intensity, employment, income and levels of living.

The entire study of “The Role of District Central Co-operative Banks in the agricultural
development of India: An Analysis” during the period 1995-96 to 2005-06, is broadly
divided into two parts. The first part deals with the theoretical review of literature on the role
of Co-operative institutions in providing credit to needy farmers, the profile of the District
Central Co-operative Bank and socio-economic profile of India, Andhra Pradesh as well as
East Godavari District. The second part is concerned with an empirical analysis of the credit
deployment operations of the District Central Co-operative Bank, growth of its branches and
mobilization of deposits and performance of District Central Co-operative Bank in the overall
and sectoral credit deployment operations and its role in the agricultural development of
Andhra Pradesh. Further, the impact of bank credit on the beneficiaries is studied in depth.
The major findings of both the parts are summarized below:

8.2. THE ROLE OF CO-OPERATIVE INSTITUTIONS IN THE PROVISION OF

CREDIT

India is one of the predominantly agricultural countries in the World. One of the biggest
sources of wealth is the produce from land. Over 57 percent of our population directly
depends on agriculture which contributes to over 18.5 percent of our GDP. Agriculture is the
basis of village life in India and hence, the vital role of planning for agriculture needs more
emphasis.

India is making rapid progress in the field of agricultural development. As a result the recent
breakthrough in agricultural research and availability of a large number of scientific
recommendations; several new programmes have been initiated for increasing the agricultural

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output. But, their successful implementation necessitates not only costly and essential inputs
like HYV seeds, fertilizers and pesticides etc. but also the availability of huge capital.

Most of the Indian farmers are not in a position to meet their capital requirements for
adopting improved agricultural practices. Farmers continued to depend for credit on
institutional and non-institutional sources. Among many, money lender is the primary source
of farmers as far as non-institutional source of finance is concerned. Money lender meets
both the short-term and the consumption needs of the farmers. He is accessible but charges
high and uneven rates of interest.

Co-operatives are the principal source for the provision of credit for agricultural sector. One
of the basic functions of the Agricultural Co-operatives is to provide timely and adequate
credit to needy farmers for short, medium and long-term operations of agriculture. But, these
Co-operatives suffer from certain inadequacies such as problem of getting finances from
NABARD, and lack of professional management etc. Drawbacks of Co-operatives gave raise
to Commercial Banks as the supplier of credit to the rural people, particularly poor peasants.
These banks provide short, medium and long-term loans to the farmers. But, its share to
agriculture is very meager and particularly only well-to-do sections of farming population
have been benefited by its credit disbursements. These banks failed to fill the functional gap
in the rural credit system. In the year 1975, Regional Rural Banks came into existence with
an objective to reach all major strata of rural area. But, these banks achieved its aim to some
extent by providing credit to small and marginal farmers, agricultural labourers etc. However,
due to the utmost importance of Co-operatives in agricultural development, the government
gave top priority to this tier and made many restructuring programmes to strengthen the Co-
operatives.

8.3. NATIONAL PROFILE OF CO-OPERATIVES

The institutional finance to agriculture has taken a shape with the establishment of the first
Co-operative Society in the year 1904 by the recommendations of Fredrick Nicholson. With
the nationalization of the Imperial Bank of India, Reserve Bank of India and the formation of
the State Bank of India under SBI Act, 1955 and nationalization of major Commercial Banks
in the year 1969, which was an important landmark in the history of Banking, there has been
a tremendous change in rural credit scene. In other words, the institutional credit agencies

276
have become most important catalysts for rural development. In spite of the role played by
the Commercial Banks and Regional Rural Banks, there has been a major gap in the rural
credit structure. The RBI has implemented many schemes in order to improve the flow and
structure of agricultural credit in the country.

In this context, the All India Rural Credit Survey Committee (1954) has suggested that the
Co-operative credit is the best suited agency to institutionalize the rural credit structure. The
committee also observed that Co-operatives had a vital role in channeling the credit to the
farmers.

Although the Indian agricultural credit system started with taccavis, Credit Co-operatives
formed its backbone. Its share in total institutional finance was 37 percent in the year 2003-
04. In the context of liberalization, privatization and globalization of the Indian economy, Co-
operatives are being recognized as the only institutions which may improve the quality of
rural households.

The Co-operative Credit Structure has three tiers consisting of the State Co-operative Banks
at apex (state) level, Central Co-operative Banks at district level and Primary Agricultural
Co-operative Societies at grass-root level. The PACS are working at village level by covering
97 percent of the Indian villages. The DCCS act as a link between SCBs and PACS. The
PACS depend on the finances provided by the DCCBs and hence DCCBs play a vital role in
providing credit to the agricultural sector. There is a network of 30 SCBs, 364 DCCBs and
nearly 1, 12,309 PACS working effectively throughout the country. During the period 2003-
04 and 2006-07, Co-operatives have purveyed credit to the tune of Rs. 1, 36,229 Crores for
the agriculture and allied sector.

However, the Credit Co-operatives have made remarkable progress in the rural segments of
Indian economy. They have been disbursing nearly 46 percent of total agricultural credit and
distributing 36 percent of total fertilizers in the country. Hence, the credit deployment of
Credit Co-operatives is significant in rural areas.

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8.4. GROWTH OF CO-OPERATIVES IN ANDHRA PRADESH WITH SPECIAL
REFERENCE TO EAST GODAVARI DISTRICT

Andhra Pradesh is the first linguistic state and is located in the east- coast of India. Andhra
Pradesh is predominantly agricultural in character and more than 70 percent of population is
based on agriculture. Agriculture is the main occupation of the state and majority of the
population is engaged in agriculture and allied sectors. Rice, coconut, tobacco, pulses are
main crops of the state. The per capita income amounts to Rs. 25, 526 crores. It is popular as
Granary of the South by contributing one-tenth of India’s total output of food grains. The net
area sown during the year 2005-06 is 108.39 lakh hectares. The gross area irrigated is 59.96
lakh hectares and net area irrigated is 43.93 lakh hectares during 2005-06. The average size
of land holding in Andhra Pradesh is 1.36 acres. About 59.4 percent of the holdings are
below one hectare and the total area under small and marginal farmers is one-fifth of the total
extent. The shortage of capital is one of the major causes for the under development of the
state.

Before nationalization the banking activities are in primitive stage. Post nationalization of
Commercial Banks brought tremendous changes in the banking structure and services which
ultimately cause an increase in bank branches throughout the state, even to remote areas.
Similarly, the volume of deposits and advances has increased to a great extent.

The Co-operative Credit Institutions occupy a place of pride in the overall credit delivery
system for their role in agricultural and rural development, by providing production and
investment loans. Andhra Pradesh is the first state that adopted SWCDS in which PACS are
to provide multi-farm credit and multi-functional services at a single contact point. Under this
both short-term and long-term credit structures have been integrated. In the state there are 22
DCCBs with 579 branches and 2746 affiliated PACS are working under the apex institution
State co-operative bank. The Government of Andhra Pradesh approved the One-time
settlement (OTS) scheme to reduce the debt burden of the farmers by offering waiver of
penal interest, legal charges and other expenses.

East Godavari is one of the coastal districts of Andhra Pradesh covered by green belts of
coconut trees and fields of paddy, wheat etc. It is a fertile land with abundant natural
resources. Paddy forms 53 percent of the total area sown with an average yield of 2625
Kg/acre. The net area irrigated forms about 64 percent of the net area sown. It is popular as
the “Rice Bowl of Andhra Pradesh” for the major contribution of paddy.

278
The DCCB, Kakinada established in the district head quarters rendering valuable services to
the people of the entire district. It is working with 47 branches and 293 affiliated PACS by
spreading their network of operations even to the remote areas. Initially prior to 1987, there
were four DCCBs in the district, but after adoption of SWCDS, the 4 DCCBs were merged
into a single bank, DCCB, Kakinada. The DCCB, Kakinada is a member driven and
democratic in character. The bank performs all the banking functions as per the Banking
Regulation Act 1949. In addition to those services, it is providing fertilizers, pesticides and
other agricultural inputs and also crop insurance in order to safeguard the interests of the poor
peasantry.

The main function of DCCBs is to mobilize deposits and disbursement of loans and advances
to the needy farmers at low rate of interest. During the period of study i.e., 1995-96 to 2004-
05 showed an upward growth in mobilization of deposits. The Compound Annual Rate of
Growth (CARG) of deposits is 87.41 percent which is statistically significant. The bank is
providing both farm and non-farm loans. The farm loans consist of crop loans and term loans
which has an inverse relationship. Recently the DCCBs merged medium-term loans with
long-term loans. However, the trend of advances shows a cyclical fluctuations due to the
repayment capacity, crop failures, non-performing assets of the bank, loan outstandings etc.
Hence, the CARG of advances is 49.34 percent which is statistically significant.

The overall growth of deposits and advances of the DCCBs is significant. To test the
significance of the growth of advances and deposits, CARG is calculated. The CARG of
deposits and advances are statistically significant at 0.1 percent level.

To know the trend growth rate, least square method was applied and to know the association
between deposits and advances, simple correlation was used.

By using Least Square Method, the trend values of deposits and advances are estimated for
the year 2010 which are Rs. 25, 324 crores and Rs. 21, 814, crores respectively. The deposits
are showing increasing trend, but advances are showing downward trend. Hence, the DCCB
has to take certain measures to increase its advances in accordance with deposits.

It was also observed that the correlation between deposits and advances showing a positive
correlation. By using correlation technique it was found that there exists a degree of
association between two variables i.e., deposits and advances. The correlation between these
variables is 0.63 which is less than 1.0.

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8.5. IMPACT STUDY

The impact of Co-operative credit on the sample beneficiaries is assessed on two angles i.e.,
agriculture and allied sector. Again, the loans offered to agricultural sector is divided into two
categories viz., agricultural crop loans and agricultural term loans.

The impact of agricultural crop loan provided by DCCBs on irrigation is insignificant in V1

group of villages and significant in V3 group of villages. There is only 0.6 percent growth
pertaining to irrigation and hence, it is clear that the crop loan has no significant impact on
irrigation or on the creation of extra irrigation facilities. There is an increase in the
percentage of area under HYV seeds over pre-loan period to post-loan period in the entire
district. The overall increase in the post-loan period to pre-loan period is 49.7 percent in all
strata of sample groups. The impact of increased HYV is significant in case of general
communities which are 42.9 percent and less significant in case of ST communities i.e., 26.4
percent. With the help of agricultural crop loans, the usage of fertilizer, manures and
pesticides per acre in post-loan period has increased to Rs. 496.7. Growth of usage of
fertilizers and pesticides is statistically significant, which is 85.1 percent. The average labour
cost per acre incurred by the sample borrowers has increased from Rs. 920.7 to Rs. 1537.3 at
a growth rate of 67 percent. The growth of average labour cost per acre is statistically
significant in all the sample groups. There was an increase in the yield per acre in all the three
sample groups, in all size of farmers and all sample groups, communities and size of farmers.
The yield rate increased from 22 bags to 32 bags with an increase of 45.5 percent. The
income per borrower also increased as a result of changes in cropping pattern which is 65.2
percent. The growth of income of the borrower in different sample groups is statistically
significant at 0.1 percent level.

The impact of agricultural term loan on irrigation is significant in all sample groups, in all
sizes of farmers irrespective of their communities and literacy levels. The overall increase in
irrigated land has increased from 26.2 percent to 56.3 percent during post-loan period over
pre-loan period. The agricultural term loan has a significant impact on all size of farmers,
castes and sample groups with regard to the usage of HYV seeds is increased from 48.7
percent to 86.2 percent, in pre-loan to post-loan period. The gradual increase in usage of
HYV seeds i.e., 39.5 percent is also statistically significant. The agricultural term loan has a
significant impact on all the sample groups, size of farmers and communities so far as the
consumption of fertilizer per acre is concerned. The increased usage of fertilizers is also

280
statistically significant at 0.1 percent level. The agricultural term loan has significant impact
on labour cost per acre which has increased irrespective of size, caste and sample group of
villages. The term loan has increased the usage of fertilizers, pesticides and other
agrichemicals etc at a growth rate of 110.8 percent and labour cost at a rate of 56 percent.
The agricultural term loan has a significant impact on the output and income per acre. The
agricultural term loans are meant for development and investment purpose has definite
impact on the increase of yield rate and income per acre. It has a remarkable impact on yield
and productivity, which shows a growth rate of 41.7 percent by increasing the output per acre
from 24 bags to 34 bags. An increase in output automatically increases employment levels
and income generation of the beneficiaries. The growth rate of production is statistically
significant in three sample groups irrespective of the caste and size of farmers. The growth
rate in production automatically results in a positive change in income per borrower and
income per acre which are to tune of 47 percent. The growth rate is statistically significant at
0.1 percent level in all sample villages.

The allied activities include cattle rearing, dairy farms, piggery and fish culture etc. Some of
these activities are ancestral and some are new. Whatever may be the family background the
main motive of undertaking those activities is to improve their income levels and standard of
living. Hence, in order to improve the living standards of the poor cultivators the government
and many agencies are sponsoring various schemes to develop allied activities. And hence the
DCCB, Kakinada has been also providing sufficient credit to these sectors. The impact of
credit on allied sectors is significant in the entire district. The people related to allied sector
are benefited to a great extent in increasing the employment and income levels. The dairy
beneficiaries are able to raise their income from Rs. 6120 to Rs. 8710 showing a growth rate
of 42.3 percent in the post-loan loan period. The dairy activities are most successful in all
sample villages. It is found that the employment level in form of ‘man days worked’ has
increased by 23.2 percent. The borrowers who have adopted goat and sheep rearing were able
to raise their income by 33 percent in the post-loan period. It was also found that the
employment level increased by 10.2 percent in post- loan period. It is found that the income
and employment level of piggery increased by 48.7 and 20.3 percent, respectively in post-
loan period. The income of the borrowers who have adopted fishery has increased by 66.7
percent in post-loan period. The employment level has also increased by 6.7 percent over pre-
loan to post-loan period. The overall growth of income of the sample borrowers of allied
sector is 48.1 percent in post-loan period. The growth of employment level is 16.1 percent.

281
The growth of both income and employment generation is statistically significant in all the
sample group of villages.

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8.6. TESTING OF THE HYPOTHESES

While planning the study, a set of hypotheses have been formulated which are presented in
Chapter II. These hypotheses have been examined taking the analysis into consideration.

1.The District Central Co-operative Bank, Kakinada is not playing any crucial role in
providing credit to the agricultural sector

Basically East Godavari is an agrarian district with plenty of natural resources. But its low
development in agriculture is due to low standards of technology, small size of land holdings
and shortage of capital etc. Of these availability of adequate and timely credit is sine qua non
for the fast growth of agriculture. The DCCB, Kakinada has been providing adequate,
authentic and timely credit to both agriculture and allied sector by expanding their area of
operations through PACS in every village. Its main objective is to safeguard the rural
peasantry, of which it has achieved to a great extent. The DCCB in the district plays a crucial
role so far as agricultural development of the region is concerned. It provided short-term,
medium-term and long-term loans at Rs. 389.33 Crores during the period 2004-05 and the
CARG of advances is 48.9 percent. And hence, it can be concluded that the role of DCCB,
Kakinada in providing credit to the agriculture and allied sectors is significant. Hence, it can
be concluded that the above hypothesis is not significant.

2.The District Central Co-operative Bank is not providing sufficient credit to agricultural
sector

The DCCB, Kakinada has been providing credit to farm sector in three forms viz., short,
medium and long-term loans. By the sample study and secondary data available, it is clear
that major share of Co-operative credit has benefited the well-to-do sections of the farming
community. The bank is lending loans to the farmers basing on their repayment capacity. The
processing cost of loan sanctioning is also high which cannot be borne by the small and
marginal farmers. Even though the bank disburses loans to small farmers, it is for productive
purpose only. They are getting very less amount which is not sufficient for agricultural
operations and development works. The impact study reveals the dominance of short-term
component in the total loans. It stopped medium-term loans and merged with long-term loans

283
which amount to 13.45 percent of the total advances. Hence the above said hypothesis is
partially accepted and partially negated.

3.The Co-operative credit has no significant impact on agriculture and allied sector in East
Godavari District

The Co-operative credit in East Godavari District has become essential and obligatory for the
rural and poor agriculturists. To study the impact of Co-operative credit on the sample
borrowers, different indicators have been considered such as income per borrower and
income per acre. An increase in the income levels i.e., income per acre or borrower reveals
the significant impact of Co-operative credit on agriculture sector.

The overall increase in income per acre and income per borrower of the sample beneficiaries
of crop loan during post loan periods is 40.9 percent over pre-loan to post-loan period. The ‘t’
value of the sample groups is statistically significant at 0.1 percent level. Similarly, the
overall increase in income per acre is 44 percent and income per borrower is 44.4 percent of
the beneficiaries of agricultural term loan. The ‘t’ value of all the sample groups is
statistically significant at 0.1 percent level.

With regard to allied sector, the impact can be studied by the indicators of income per
borrower and employment generation. A raise in employment and income levels in allied
sector reveals the significant impact of Co-operative credit on allied sector. The overall
increase in employment generation (man days) after the post-loan period over pre-loan period
is 16.1 percent. The ‘t’ value of the sample groups is significant at 1 percent level.

From the above analysis, it can be confirmed that the Co-operative credit has significant
impact on agriculture and allied sector in East Godavari District and hence, the above
mentioned hypothesis is null and void.

4. The growth and development of the District Central Co-operative Bank, Kakinada and
Primary Agricultural Co-operative Societies are not satisfactory

The DCCB, Kakinada is rendering services since 1917, but after 1987 it has been established
as a single independent unit by the amalgamation of four DCCBs in the district. The bank

284
extends its valuable services throughout the district by spreading its network. The bank has
47 branches, 293 affiliated PACS, 61 Handloom weavers Co-operative credit Societies and
619 other societies. Through these societies, the bank is purveying both farm and non-farm
credit to the rural clientele in the entire district. Thus, the above hypothesis is not a valid one.

5. The Co-operatives have no significant impact on the agricultural inputs used by the
beneficiaries

The main aim of Co-operative credit is to enable the small and marginal farmers to adopt
modern technologies and inputs of agriculture in order to increase their yield per acre. For
such purpose the DCCB has been providing crop loans and term loans. In addition to credit, it
also provides agricultural inputs at subsidized prices through their affiliated PACS and other
societies. But during the period of study, the DCCB concentrated more on crop loans only
and decreased the amount of long-term loans which is more useful for the purchase of
agricultural inputs. And hence, the small and marginal farmers are utilizing the funds for the
seasonal agricultural operations which give short-term results. If Co-operatives lend long-
term loans to the farmers, that will give long run benefit to them. Thus, it can be concluded
that the above said hypothesis is partially acceptable.

6. The credit provided by the District Central Co-operative Bank, Kakinada to allied sector
has no impact on employment generation and income of the beneficiaries

The impact of credit on allied sector can be studied by considering the factors viz.,
employment generation and income of the beneficiaries. By the impact study, it is clear that
there is a significant rise in the employment generation and income levels of the beneficiaries
over pre-loan to post-loan period. The overall increase in employment generation (man days)
is 16.1 percent. The ‘t’ value of sample village groups are V1 group (4.3) which is significant
at 1 percent level, ‘t’ values of V2 and V3 groups are 4.57 and 2.34, respectively which are
statistically significant at 0.1 percent level. The income per borrower also increased at a rate
of 48.1 percent and its ‘t’ values for V1, V2 and V3 groups are 4.02, 3.7 and 2.9, respectively.
These values are statistically significant at 1 percent for V1 and 0.1 percent for V2 and V3
groups. Thus, the above hypothesis is not acceptable.

285
8.7. MAJOR FINDINGS

The DCCB, Kakinada being a farmer’s bank in the district covered all 1327 villages and 54
Revenue Mandals by its wide network of 47 branches and 293 PACS providing services for
the last 88 years. The DCCBs have been playing very crucial role in serving the rural artisans
of Andhra Pradesh in general and E.G. District in particular.

The following are the major findings of the study:

The growth and development was analyzed by its branch expansion and business per
branch. The number of branches has increased from 40 to 47 and the number of
societies has decreased from 354 to 293 basing on their viability during the period of
1995-2005. The business per branch has increased from Rs. 513.12 lakhs to Rs.
1197.94 lakhs for the above period.

The deposits of the Bank increased from Rs. 6582.27 lakhs to Rs. 23130.37 lakhs,
almost four times increase during this period. It shows that the Bank is implementing
various attractive saving schemes for inculcating the saving habit among the
customers which in-turn mobilizes more deposits.

The Credit-Deposit ratio of the Bank showed a down trend from 242.29 to 153.98
percent during 1995-2005.

The DCCB has been providing adequate finance to the needy farmers through its’
PACS in E.G. District. The amount of farm advances were increased more than
double i.e., from Rs. 15968.46 lakhs to Rs. 35616.45 lakhs during the period of study.

The short-term and long-term loans have increased from Rs. 176.99 lakhs to Rs.
389.33 lakhs and from Rs. 50.86 to Rs. 60.96 lakhs, respectively. The compound
annual growth rate of the Bank for crop loan and term loans is statistically significant
at 0.1 percent.

In order to study the impact of Co-operative credit on agriculture, the entire district
was grouped into three stratas depending upon the factor of irrigation viz., Irrigated
(V1), Semi-irrigated (V2) and Non-irrigated (V3) pockets. There was no significant
impact of crop loans in irrigated villages, whereas there was a significant impact on
Semi-irrigated and non-irrigated villages. When compared to semi and non-irrigated
villages, the crop loans played a very significant role in non-irrigated villages.

286

The impact of Co-operative credit was analyzed by the modernization of agricultural
process during the pre-loan and post-loan periods. There was an enormous increase in
the usage of HYV seeds, modernized inputs, fertilizers and pesticides from pre-loan to
post-loan period.

The modern process of agriculture increased the yield per acre and also the income
per acre which in turn increased the income of the sample borrowers.

The farmers of the district were greatly benefited by the credit provision of the
DCCB, Kakinada. The farmers have taken loans not only to increase the productivity,
but to develop the process of cultivation as a whole.

To analyze the impact on allied sector, 4 activities were taken for sample viz., dairy,
piggery, good & sheep rearing and fisheries. The impact was studied pertaining to two
aspects i.e., employment generation and increase in income level of the beneficiaries
which showed an increasing trend during pre-loan and post-loan periods.

Finally it can be concluded that the DCCB, Kakinada has been playing a significant role in
the development of agricultural and allied sector in the District by providing adequate &
timely credit to the farmers. With the help of the Co-operative credit, the beneficiaries were
able to modernize their agricultural process which resulted in an increase in output,
productivity, employment and income of the borrowers.

287
8.8. SUGGESTIONS

In the light of the different findings of the study, the following suggestions may be offered
for the smooth performance of the DCCB, Kakinada:

• As DCCB is the most prominent and accessible grass root level financial agency for
the rural artisans, it should have played an active and dynamic role in the agricultural
development of the region and the people as well.

• All out efforts should be made to inculcate the habit of saving among the people. It
not only increases the deposit mobilization but also restricts unnecessary expenditure
of the beneficiaries.

• Steps should be taken to ensure that adequate credit is available to the beneficiaries. It
increases the confidence level of the beneficiaries to adopt developed agricultural
methods to boost up the yield rate.

• It has to increase the flow of long-term & medium-term loans which helps the farmers
in implementing the ground water exploitation and dry land farming schemes in water
shed areas.

• In order to improve the credit delivery, recovery, quality of appraisal, pre-sanction

and post-sanction beneficiaries’ contract programme may prove to be useful.
Simultaneously, member education programme should be done extensively.

288
8.9. PRACTICAL UTILITY OF THE STUDY

The study has highlighted mainly the role of DCCBs in the agricultural development of
Andhra Pradesh in general and East Godavari District in particular. The study may be useful
for planners, Central and State governments, NABARD and RBI to formulate policy
measures for the better functioning of Credit Co-operatives and economic upliftment of rural
and poor farmers.

This work is expected to provide information to apex institution of the State in order to
evaluate the role of the DCCB in fulfilling its objectives in its area of operation and take
suitable steps to reinforce their working. It may also provide an insight to SCB, particularly
about the utilization of Co-operative credit by the beneficiaries. Above all, national as well as
state level social organizations, researchers, research institutions can make use of the study
and put forth their proposal for better functioning of Credit Co-operatives and better
utilization of credit by the borrowers.

289
8.10. SCOPE FOR FURTHER RESEARCH

The present study is mainly exploratory in nature. There is need for larger and minor study on
the functioning of Credit Co-operatives. Some of the areas that need further study are:

• A study is possible by indicating larger number of samples, for better generalization

and to make the analysis more comprehensive.

• Scope of the present study is confined to East Godavari District only. Further study is
possible by extending the scope to the entire state. On the other hand for micro
analysis separate studies could be undertaken for each district of the region also.

• A study is also possible on the impact of Co-operative Credit on non-farm sector.

• Similarly a study is also possible on the impact of Co-operative Credit on service

sector.

• A study can be possible on the functioning of Credit Co-operatives after extending

credit facilities to non-target groups of beneficiaries.

290
8.11. CONCLUSIONS

• The present study clearly enunciated the advantages enjoyed through improved
technology with the efforts of the bank for the beneficiaries in terms of high
production, increased net returns and subsidiary incomes. The results further
emphasized the need to enlighten the farmers about the superiority and profitability of
improved technology through the extensive credit services. By and large the role of
DCCB is highly impressive and clearly exhibited in the socio-economic development
gained by the beneficiaries.

• Finally it can be concluded that the District Central Co-operative Bank (DCCB),
Kakinada is playing a significant role in the development of agricultural and allied
sector in the district by providing adequate & timely credit to the farmers.

291
292
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82. Ranjana Kumar, Strengthening the Co-operative movement, The Co-operator, Vol.
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83. Ranjana Kumari, Restructuring rural credit system: some views, The Co-operator,
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84. Rao & Prasad, Growth with justice in Asian agriculture, UN Research Institute for
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85. Rao, V.K.R., Saving, Capital Formation & National Income, Economic and
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86. Rashid, Primary Lending Institutions & Rural Credit Evolution, Kurukshetra, Vol.
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87. Rayudu & North, Union Budget 2004-05, The Co-operator, Vol. 42, No.2, August,
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88. Reddy & Raghuram, RBI’s Annual Monetary Policy Statement & Co-Operatives,
The Co- operator, Vol. 42, No.1, July, 1996.

299
89. Robby Tulus, Co-operatives & Poverty reduction, The Co-operator, Vol. 41, No.8,
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90. S.K. Banerjee, Co-operative banking sector in Changing Scenario: Challenges &
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91. Samuelson & Solow, Balanced growth under constant returns to scale, The
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92. Sanjay Jog, Central Co-operative Banks: Pros & Cons, The Co-operator, Vol. 41,
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93. Sanjeev Chopra, Agriculture Sector: Some Issues, The Co-operator, Vol. 42 No. 5,
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94. Sanjeev Kumar Hota, Co-operatives in Rural Economy”, Kurukshetra, Vol. 48, No.
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300
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301
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302
 LIST OF REPORTS CONSULTED

1. Andhra Pradesh Statistical Handbooks (1994-2006)

2. Annual Reports, Department of Agriculture and Cooperation (DAC), Govt. of
India
3. Annual Reports of APSCOB, Hyderabad
4. Annual Reports of DCCB, Kakinada
5. District Statistical Handbooks (1994-2006)
6. Economic Survey on Indian Economy
7. Economic Survey, Govt. of India, Ministry of Finance and Economic Division.
8. NABARD Bulletins, RBI, Bombay
9. RBI Bulletins, RBI, Bombay
10. Reports, Agricultural Credit Review Committee, RBI, Mumbai
11. Statistical Abstract of Andhra Pradesh
12. Task Force Committee report (2004)

303
304
 100 Years of Co-Operative Movement in India (1904-2004)

1904 The first Co-operative Societies Act in India was passed on 25th March 1904.
1912 Provision was made in the Co-operative Societies Act to organize non-credit societies
also.
1915 Sri ED Meclagan’s committee recommended Co-operative Central and Apex Banks.
1919 Co-operation became a provisional subject as per Montague Chelmsfold Reforms and
different states passed their own Co-operative Societies Act.
1929 As recommended by Townsend Committee the first Central Land Mortgage Bank was
established in Madras.
1931 On the recommendation of Central Banking Enquiry Committee Reserve Bank of
India was formed in 1934 and its Agricultural Credit Department was set up in 1935.
1932 The Madras and Hyderabad Co-operative Societies Acts were passed.
1933 1939 Government of Madras appointed a committee on cooperation to examine the
structure of cooperative financing system and organization of Co-operative
sDepartment.
1942 For the regulation and working of Co-operative Societies whose area of operation
extended to more than one state, Multi Unit Co-operative Societies Act was enacted.
1945 D.R. Gadgil Committee advocated for the spread of Co-operative Movement and state
aid to Co-operatives and recommended for the establishment of Agricultural Credit
Corporations for each state.
1946 M.G. Sarayya Committee recommended organization of employees cooperative
societies.
1949 After Independence The Government of India wanted to bring economic and social
justice to its people. The Rural Banking Enquiry Committee recommended to
strengthen Co-operatives to lay the foundation for the balanced economy in the
country.
1951 Importance was given to Co-operatives in the First Five Year Plan.
1952 First India Co-operative Congress was held in Bombay. The Hyderabad Co-operative
Societies Act 1952 repealed the earlier Act of 1932.
1953 The Government of India appointed a committee with Sri V.L. Mehta was its
chairman to train the personnel of Cooperative Department and Co-operative
institutions.
1954 The All India Rural Credit Survey Committee submitted its report on the Integrated
Policy in respect of rural credit.
1956 The committee on Co-operative law appointed by Government of India prepared a
model bill for Co-operative Societies.

305
1957 Sri Halcoin Darling Committee recommended small and strong societies with
restricted membership 300-500 and recommended education to the members of the
societies also.
1958 Working group on Co-operative farming suggested model bye-laws for Co-Operative
Farming Societies.
1961 Andhra Pradesh Co-operative Central Land Mortgage Bank was formed.
1962 Social Working group on Co-operative for backward classes recommended formation
of Co-operatives for dhobies, sweepers, lathe makers and basket makers etc.
1963 National Co-operative Development Corporation was set up.
1964 The Andhra Pradesh Co-operative Societies Act was enacted amending and
consolidating the Madras Act 1932 and Hyderabad Act 1952.
1967 Indian Farmers Fertilizers Co-operative was established.
1968 Appointment of taluka level officers on the pattern of Hyderabad state was adopted in
Andhra Pradesh.
1969 IN pursuance of the recommendation of the All India Rural Credit Review
Committee, Rural Electrical Co-operatives were started.
1970 The Andhra Pradesh Backward Classes Cooperative Finance Corporation was
established as recommended by Anantha Raman Commission.
1975 Multipurpose Co-operatives Association was formed.
1977 National Co-operative Policy was adopted in the conference of Co-operative
Ministers.
1982 National Bank for Agriculture and Rural Development was formed.
1991 Committee on Model Co-operative Act was appointed under Chowdhary Brahma
Prakash.
1995 Andhra Pradesh passed Mutually Aided Co-operative Societies Act.
2001 Major amendments to Andhra Pradesh Co-operative Societies Act 1964.
2002 Multi State Co-operative Societies Act amended.
2003 Celebrated 50th All India Co-operative Week.
2004 Centenary celebrations of India Co-operative Movement.

Source: Sahakara Samacharam, April 2004.

306
 Annexure-1
LIST OF DCCBS IN ANDHRA PRADESH

S. No. Name of the DCCB Place

1 The Adilabad DCCB Ltd. Adilabad

2 The Anantpur DCCB Ltd. Anantapur

3 Chittor DCCB Ltd. Chittoor

4 Cuddapah DCCB Ltd. Cuddapah

5 Eluru DCCB Ltd. Eluru

6 Guntur DCCB Ltd. Guntur

7 Hyderabad DCCB Ltd. Hyderabad

8 Kakinada DCCB Ltd. Kakinada

9 Karimnagar DCCB Ltd. Karimnagar

10 Khammam DCCB Ltd. Khammam

11 The Krishna DCCB Ltd. Machilipatnam

12 Kurnool DCCB Ltd. Kurnool

13 Mehaboobnagar DCCB Ltd. Mehaboobnagar

14 Medak DCCB Ltd. Medak

15 Nalgonda DCCB Ltd. Nalgonda

16 Nellore DCCB Ltd. Nellore

17 Nizamabad DCCB Ltd. Nizamabad

18 Prakasam DCCB Ltd. Ongole

19 Srikakulam DCCB Ltd. Srikakulam

20 Visakapatnam DCCB Ltd. Visakhapatnam

21 Vizianagaram DCCB Ltd. Vizianagaram

307
 22 Warangal DCCB Ltd. Warangal

Annexure-2

LAND UTILIZATION FROM 2003 – 2004 TO 2005 – 2006

S. YEAR
CATEGORY
No. 2003-2004 2004-2005 2005-2006
1 Forest 323107 323107 323107
2 Barren and uncultivable land 82324 82282 81687
3 Land put to Non Agrl. Uses 131945 132070 133503
4 Cultivable Waste 16441 16415 17531
Permanent Pastures and other Grazing
5 23643 23541 21437
lands
Land under Miscellaneous Tree Crops
6 and Grooves not included in net are 8208 8209 8202
sown
7 Current Fallows 1215 17502 26229
8 Other Fallow Lands 66367 60220 54164
9 Net Area Sown 428587 418496 415982
10 Total Geographical Area 1081842 1081842 1081842
11 Total Cropped Area 764139 735450 753462
12 Area Sown more than once 328912 311499 328137

Sources:ChiefPlanningOfficer,Kakinada

308
 Annexure-3
AREA, PRODUCTION & YIELD PER HECTARE OF CROPS IN EAST GODAVARI DISTRICT FROM 2003 – 04 TO
2005 – 06
Area in ‘000 Hectares
Production in ‘000 tonnes
Yield in Kg. per hectare

S. 2003-2004 2004-2005 2005-2006

Item
No. Area Production Yield Area Production Yield Area Production Yield
1 Rice (K) 235 762 3249 225 744 3312 217 349 1604
2 Rice (R) 165 869 5257 163 366 4704 170 801 4711
3 Jowar (K) 1 2 2958 1 - 535 1 555
4 Maize (K) 2 4 1716 2 6 2954 2 6 3578
5 Maize ( R) 7 36 5600 6 41 6741 8 59 7572
6 Bajra ( K) 2 2 853 2 1 763 2 1 691
7 Greengram (K & R) 72 21 305 62 16 698 64 15 921
8 Blackgram (K & R) 53 19 363 44 11 733 46 9 527
9 Redgram (K) 1 1 423 1 1 662 1 1 606
10 Sugarcane (K) 16 1540 85832 16 1492 84986 18 1621 79571
11 Groundnut (K & R) 1 1 1556 1 1 3025 1 1 3480
12 Sesamum (K & R) 3 1 192 2 1 331 2 1 397
13 Chillies (K & R) 2 7 3281 1 4 6719 1 4 6371
14 Tobacco (N) (R) 2 6 2855 1 2 2004 3 8 3150
15 Tobacco (V) ( R) 5 14 3091 4 5 1206 5 7 1195
Sources: Director, Directorate of Economics and Statistics, Hyderabad.

CCCIX
 Annexure-4

INCIDENCE OF INDEBTEDNESS IN MAJOR STATES

Estimated Number % Share in % Share in Total

of Indebted Estimated Food grains
State
Farmer Farmer House
Households holds Area Production

Uttar Pradesh 69199 15.9 16.3 20.7

Maharashtra 36098 8.3 10.9 5.8
Madhya Pradesh 32110 7.4 9.6 6.7
Rajasthan 27828 6.4 9.5 5.5
Karnataka 24897 5.7 6.1 4.6
Andhra Pradesh 49493 11.4 5.9 7
Bihar 23383 5.4 5.8 5.9
West Bengal 34696 8 5.5 7.5
Punjab 12069 2.8 5.1 12.2
Orissa 20250 4.7 4.4 2.8
Sub-total 330023 76 79.1 78.7
All India 434242 100 100 100
Sources: Report No. 498 (59/33/1). Situation Assessment Survey of Farmers:
Indebtedness of Farmer Household, National Sample Survey 59th Round
(January – December 2003)

CCCX
 Annexure-5

IMPORTS & EXPORTS OF AGRICULTURE COMMODITIES VIS-À-

VIS TOTAL NATIONAL IMPORTS / EXPORTS DURING 1990-91 &
2005-06

Imports Exports
Year
Agriculture Total % Agriculture Total %
1996 – 97 6612.6 138920 4.76 24161.3 118817 20.33
1997 – 98 8784.19 154176 5.7 24832.5 130101 19.09
1998 – 99 14566.5 178332 8.17 25510.6 139752 18.25
1999 – 00 16066.7 215529 7.45 25313.7 159095 15.91
2000 – 01 12086.2 228307 5.29 28657.4 201356 14.23
2001 – 02 16256.6 245200 6.63 29728.6 209018 14.22
2002 – 03 17608.8 297206 5.92 34653.9 255137 13.58
2003 – 04 21972.7 359108 6.12 37266.5 293367 12.7
2004 – 05 22057.5 481064 4.59 39863.3 356069 11.2
2005 – 06 21025.5 630527 3.33 49802.9 454800 10.95
Sources: DGCI & S, Ministry of Commerce, Kolkata
Annexure-6

FLOW OF INSTITUTIONAL CREDIT TO AGRICULTURE (RS.

CRORES)
Commercial Total Institutional
Co –operatives
Year Banks Credit
Amount % Amount % Amount %
1984 – 85 3,440 55 2,790 45 6,230 100
1990 – 91 3,970 55 5,010 56 8,980 100
2001 – 02 23,600 38 38,440 62 62,040 100
2002 – 03 24,296 34 46,514 66 70,180 100
2003 – 04* 30,080 30 49,920 62 80,000 100
* Estimated Sources: GOI, Economic Survey (2003 – 04) P. 159

CCCXI
 Annexure-7

RURAL FINANCIAL INSTITUTIONS VS NABARD (AS ON 31-3-03)

Co operatives
RRBs NABARD
Short Term Long term
Owned funds 24,244 5669 4,666 20,738
Profit (Nos.) 1239 (262) 115 (225) 733 (156) 1,147
Loss (Nos.) 916 (107) 477 (478) 215 (40) -
Accumulated losses 4785 2,949 2,752 -
NPA to loan 18,737 5,140 3200 0.6
Outstanding -19% -23% -14% 0.00%
Sources : NABARD Annual report 2003 – 04

CCCXII
 Annexure-8

AREA, PRODUCTION AND YIELD OF MAJOR CROPS IN INDIA

Area Production Yield
Crop / Group of Crops Season
(ha) (mT) (Kg/ha)
I. Food grains
Rice Kharif 39.12 74.55 1906
Rice Rabi 3.73 11.18 2996
Rice Total 42.85 85.72 2001
Wheat Rabi 26.2 69.73 2662
Jowar Kharif 4.21 4.28 1018
Jowar Rabi 5.03 2.94 585
Jowar Total 9.24 7.22 782
Bajra Kharif 9.34 8.15 872
Maize Kharif 6.37 11.38 1786
Maize Rabi 0.75 2.26 3030
Maize Total 7.12 13.64 1916
Coarse Cereals Kharif 22.65 26.4 1166
Coarse Cereals Rabi 6.43 6.51 1013
Coarse Cereals Total 29.08 32.92 1132
Tur Kharif 3.46 2.38 687
Gram Rabi 6.6 5.3 803
Pulses Kharif 10.87 4.95 455
Pulses Rabi 11.35 8.24 725
Pulses Total 22.22 13.18 593
Total Food grains Kharif 72.64 105.9 1458
Total Food grains Rabi 47.71 95.66 2005
Total Food grains Total 120.35 201.56 1675
II. Oil seeds
Groundnut Total 6.31 6.81 1079
Rapeseed & Mustard Rabi 5.93 6.2 1045
Soya bean Kharif 6.86 6.72 980
Sunflower Total 1.86 1.02 548
Nine Oilseeds Total 24.63 22.6 918
III. Other Cash Crops
Sugar crane Total 4.15 267.34 64473
Cotton Total 8.37 13.46 273
Jute & Mesta $ Total 0.98 11.05 2030
Potato Total 1.31 23.56 17950
Onion Total 0.52 6.08 11678
Note : ‘Nominal’ is worked out as simple average of estimates for 5 years i.e.
2001 – 02 to 2005 – 06
@ : Production in million bales of 170 kg. each
$ : Production in million bales of 180 kg. each
Source: Department of Agriculture

CCCXIII
 Annexure-9
DETAILS OF THE GROWTH IN MEMBERSHIP UNDER THE
CO-OPERATIVES
Branches Branches Branches
Year SCBs DCCBs UCBs Total
of SCBSs of DCCBs of UCBs
1975 18 47 203 - - - 268
1980 20 100 223 159 32 3 537
1985 21 117 236 213 60 17 664
1986 20 128 208 223 59 22 660
1987 20 132 205 244 62 21 684
1988 21 141 202 257 69 25 715
1989 21 144 210 272 76 51 774
1990 21 146 207 262 80 55 771
1991 22 147 203 270 90 98 830
1992 23 160 204 199 98 100 784
1993 24 167 194 196 100 99 780
1994 24 176 192 186 95 63 736
1995 24 181 196 267 97 40 805
1996 24 211 197 268 105 45 850
1997 24 229 198 265 107 51 874
1998 24 232 200 271 109 59 895
1999 25 256 201 296 105 63 946
2000 25 261 202 316 111 65 980
2001 26 268 200 329 109 67 999
2002 26 268 204 355 111 76 1040
2003 25 282 204 384 107 78 1095
2004 25 288 207 406 107 77 1110
2005 25 299 204 427 106 77 1138
2006 25 304 204 443 105 76 1157
2007 25 305 204 444 103 74 1155
Sources: NAFSCOB (2007)

CCCXIV
 Annexure-10

GROWTH OF INDIAN ECONOMY (AN. GROWTH RATE IN % PER

YEAR)

Year GNP Per Capita

1950 – 1980 3.5 1.2
1980 – 1990 5.7 3.4
1990 – 2000 5.8 3.6
2000 – 2005 6.0 4.3
Sources: National Accounts Statistics, Central Statistical organization.

Annexure-11

KEY FINANCIAL INDICATORS OF DCCB, KAKINADA (RS. IN

LAKHS)
S. PARTICULARS 1997- 1998- 1999- 2000- 2001-
No. 98 99 2000 01 02
1. Share Capital 3083 3831 3996 4303 4361
2. Own Funds 6423 7146 8672 9655 1973
3. Deposits 12429 17203 22144 25712 25818
4. Borrowings 31596 3721 34566 32210 32416
5. Investments 3435 5374 7288 7851 7876
6. Loans Out 42568 52459 53544 54814 55997
standing
7. Loans O/S Short 27816 35661 36475 36038 36594
Term
8. Loans O/S Long 14752 16798 17069 18776 19403
Term
9. % of Recovery 81 88 89 65 65
10. % of NPA s to 7.63 12.1 15.13 14.7 22.63
loans O/S
11. Profit & Loss 123 -421 22 503 -993
12. Accumulated 12 433 41 0 993
Losses
13. Cost of 750 812 838 848 786
Management

Source: Compiled from Annual reports of DCCB, Kakinada

CCCXV
 Annexure-12
DIRECT INSTITUTIONAL CREDIT FOR AGRICULTURE AND
ALLIED ACTIVITIES –SHORT-TERM (Rupees in Crores)
Year Loans Issued Loans Outstanding
Co- SCBs RRBs Total Co- SCBs RRBs Total
Operatives Operatives
1970-71 515 - - 589 - -- - -
1971-72 541 - - 640 696 107 - 803
1972-73 613 - - 790 721 139 - 860
1973-74 663 105 - 859 807 179 - 985
1974-75 750 146 - 974 904 246 - 1150
1975-76 881 213 2 1177 1012 364 2 1377
1976-77 1016 254 16 1369 1216 451 - 1667
1977-78 1058 288 44 1488 1348 547 - 1894
1978-79 1207 365 101 1792 1540 759 - 2299
1979-80 1260 455 - 1847 1697 949 168 2814
1980-81 1386 517 - 2047 1908 162 - 3250
1981-82 1796 623 - 2740 2149 1370 - 3792
1982-83 1908 565 98 2759 2225 1351 109 3685
1983-84 2158 872 120 3335 2554 1638 147 4339
1984-85 2323 1035 132 3731 2836 1964 206 5006
1985-86 2747 1252 176 4529 3237 2355 265 5858
1986-87 2620 1482 201 4512 3293 2619 324 6236
1987-88 3120 1672 246 5516 3871 3071 400 7342
1988-89 3594 1765 250 5884 4668 3414 479 8561
1989-90 3974 1898 336 6499 4948 4005 575 9527
1990-91 3448 2048 125 5979 5178 4235 590 10002
1991-92 3934 2341 337 6611 5110 4631 679 10419
1992-93 4394 2432 451 7665 5900 4988 799 11687
1993-94 6039 2860 476 9752 6640 5425 887 12952
1994-95 6996 3842 688 1932 7091 6154 1115 14361
1995-96 9243 4628 849 15273 9312 7173 1308 17793
1996-97 9489 5625 174 16956 9618 8766 1625 20009
1997-98 10084 6233 1457 18632 10060 9522 1914 21469
1998-99 10698 7742 1750 20610 10462 10821 2238 23521
1999-00 11384 9505 2285 23694 10969 12610 2808 26387
2000-01 12135 10704 3095 26421 11517 15442 3692 30651
2001-02 12923 12661 3810 29837 12092 18882 4812 35786
2002-03 P - 16825 4834 - - 23211 6495 -
2003-04P - 24134 6133 - - 31982 7663 -
2004-05P - 29978 9883 - - 42798 10980 -
2005-06P - - 12816 - - - 13877 -
2006-07P - - 16963 - - - 18813 -
P: Provisional (except for SCBs). @ Total includes loans issued by the State
Governments Sources: RBI, NABARD (2007)

CCCXVI
 Annexure-13
DIRECT INSTITUTIONAL CREDIT FOR AGRICULTURE AND ALLIED
ACTIVITIES – LONG-TERM (Rupees in Crores)
Loans Issued Loans Outstanding
Year Co- Total Co-
SCBs RRBs SCBs RRBs Total
operatives @ operatives
1970-71 228.9 - - - - - - -
1971-72 228.0 - -- - - - - -
1972-73 345.1 - - - - - - -
1973-74 213.6 113.8 - 327.4 806.6 178.6 - 985.2
1974-75 289.2 128.2 - 417.4 903.8 246.2 - 1150.0
1975-76 305.3 192.4 1.5 497.7 1345.0 426.5 - 1771.5
1976-77 414.2 254.0 16.2 668.2 1579.9 580.0 - 2159.9
1977-78 386.5 281.3 43.7 667.8 1726.5 793.1 - 2519.6
1978-79 414.5 435.0 100.8 849.5 1843.1 1065.3 - 2908.4
1979-80 561.5 520.0 - 1081.5 2153.4 1414.6 168.4 3568.0
1980-81 643.0 745.8 - 1388.8 2407.3 1881.8 286.4 4289.1
1981-82 683.1 872.5 - 1555.6 2672.3 2171.1 - 4843.4
1982-83 808.8 659.9 124.4 1593.1 2929.8 2792.3 273.1 5995.2
1983-84 780.2 985.8 143.0 1909.0 3180.2 3642.3 362.6 7185.1
1984-85 831.0 1426.1 178.4 2435.5 3531.0 4648.7 490.3 8670.0
1985-86 927.0 1476.5 225.9 2629.4 3710.0 6060.6 605.9 10376.5
1986-87 1081.1 1850.9 275.8 3207.8 4172.1 6735.7 737.2 11645.0
1987-88 1590.6 1854.4 237.4 3682.4 4475.8 8353.0 913.0 13741.8
1988-89 1278.9 2047.9 169.8 3496.6 4740.0 9426.2 1072.7 15238.9
1989-90 1432.8 2384.5 311.6 4128.9 5617.9 11278.5 1263.1 18159.5
1990-91 1371.5 2627.9 209.6 4209.0 5353.0 12796.9 1163.2 19313.1
1991-92 1863.2 2464.7 259.8 4587.7 7066.5 12350.5 1305.5 20722.5
1992-93 2089.0 2528.1 246.9 4864.0 7869.0 13299.6 1407.0 22575.6
1993-94 2445.2 2539.7 276.4 5261.3 8676.0 13687.5 1673.1 24036.6
1994-95 2879.3 3566.3 395.2 6840.8 9718.2 14765.6 1893.8 26377.6
1995-96 3240.0 4646.5 532.1 8418.6 9814.0 16254.6 2158.3 28226.9
1996-97 3765.0 5049.9 574.5 9389.0 109380.0 17560.5 2412.6 30911.1
1997-98 4075.0 5303.7 645.4 10007.1 11330.0 18923.5 2769.1 32949.6
1998-99 4401.0 6921.3 765.0 12087.3 1737.0 18997.8 3151.0 33885.8
1999-00 4731.0 6845.2 700.0 12276.2 12206.0 20831.6 3183.0 36220.6
2000-01 5100.0 5735.6 871.0 1706.6 12720.0 22828.4 3557.0 39105.4
2001-02 5279.0 5976.6 736.0 11991.6 13229.0 26223.5 3474.0 42926.5
2002-03P - 8430.7 1045.3 - - 30592.8 3765.8 -
2003-04P - 8430.7 1045.3 - - 36121.1 4057.8 -
2004-05P - 18389.4 2043.4 - - 52720.8 5729.5 -
2005-06P - - 2483.6 - - - 7632.4 -
2006-07P - - 3425.3 - - - 9150.6 -

CCCXVII
P: Provisional (except for SCBs). @ Total includes loans issued by the State
Governments
Sources: RBI & NABARD (2007)

Annexure-14

DETAILS OF PACS UNDER DCCB, KAKINADA

PACS
Particulars (31 st March)
2003 2004 2005
No.(lakh) 1.12 1.06 1.09
Members (Rs. in Crores) 12.36 13.54 12.74
Borrowers (Rs. in Crores) 6.39 5.13 4.51
Owned funds (Rs. in Crores) 8198 8397 9197
Deposits (Rs. in Crores) 19120 18143 18976
Borrowings (Rs. in Crores) 30278 34257 40429
Loans issued (Rs. in Crores) 33996 35119 39212
Sources: NAFSCOB(2003-05)

Annexure-15

NET AREA IRRIGATED BY SOURCES (IN LAKH HECTARES)

S. No. Source 2005-06 % to 2006 to 07 % to

Total Total
1 Canals 15.72 35.8 16.22 36.4
2 Tanks 6.62 15.1 6.02 13.5
3 Tube wells 13.51 30.7 14.20 31.9
4 Dug wells 6.36 14.5 6.53 14.7
5 Other 1.72 3.9 1.55 3.5
Sources
Total 43.93 100.0 44.52 100.0
Sources: Directorate of Economics and Statistics, Andhra Pradesh.

CCCXVIII
 Annexure-16

DETAILS OF REGION-WISE PACS as on 31 st March 2007

S. No Region Total no. Total membership Average Total borrower Average borrower Credit
of PACS (no.000) membership/ membership membership/ potential
PACS (no.000) PACS available
1 Central 13723 8322.68 606 6810 496 110
2 Eastern 28928 38952.94 1347 11989 414 933
3 North-eastern 3628 3835.62 1057 330 91 966
4 Northern 16819 17084.63 1016 7191 428 588
5 Southern 15349 45832.06 2986 14484 944 2042
6 Western 30332 13378.49 441 4266 141 300
Total 108779 127406.42 1171 45070 414 757
Sources: NAFSCOB

319
 Annexure-17

DISTRIBUTION OF OPERATIONAL HOLDINGS – ALL INDIA

No. of Holdings: (‘000 Number)
Area Operated: (‘000 Hectares)
Average size: (Hectares)
Category of Holdings No. of Operational Holdings Area Operated Average Size of Operational
Holdings
1995-96 2000-01* 1995-96 2000-01* 1995-96 2000-01*
Marginal (Less than1 hectare) 71179 76122 28121 30088 0.40
0.40
(61.6) (63.0) (17.2) (18.82)
Small (1.0 to 2.0 hectares) 21643 22814 30722 32260
1.42 1.41
(18.70) (18.9) (18.80) (20.18)
Semi-Medium (2.0 to 4.0 14261 14087 38953 38305
2.73 2.72
hectares) (12.3) (11.7) (23.8) (23.96)
Medium (4.0 to10.0hectares) 7092 6568 41398 38125
5.84 5.80
(6.10) (5.4) (25.30) (23.84)
Large (10.0 hectares and above 1404 1230 24163 21124
17.21 17.18
(1.20) (1.02) (14.80) (13.21)
All Holdings 115580 120822 163357 159903
1.41 1.32
(100.0) (100.0) (100.0) (100.0)
Note: Figures in parentheses indicate the percentage of respective column total; *Excluding Jharkhand
Sources: website of Agricultural Census Division, Ministry of Agriculture, New Delhi

320
 ANNEXURE-18

LAND UTILIZATION
(lakh hectares)
S. Category 2005- % to 2006- % to
No. 06 Total 07 Total
1. Forests 61.99 22.6 62.10 22.6
2. Barren and Un-Cultural Land 20.84 7.6 20.98 7.6
3. Land put to Non-Agriculture uses 26.15 9.5 25.91 9.4
4. Cultivable Waste 6.92 2.5 6.95 2.5
5. Land under Misc. tree crops and groves not 2.78 1.0 3.20 1.2
included in the Net Area Sown
6. Permanent pastures and other grazing Lands 6.76 2.5 6.02 2.2
7. Current fallow 24.34 8.9 31.66 11.5
8. Other fallow lands 16.23 5.9 15.83 5.8
9. Net Area Sown including fish culture 108.39 39.5 102.39 37.2
10. Total Geographical Area (According to 274.40 100.0 275.04 100.0
Village Paper)
11. Gross Cropped Area 133.62 48.7 128.11 46.6
12. Area Sown more than Once 26.17 9.5 26.64 9.7
Sources: Directorate of Economics and Statistics, Andhra Pradesh

Annexure-19
GROSS DOMESTIC PRODUCT (At current prices: new Series Base 1993-94)

Year Agriculture Agriculture GDP at factor Agriculture

and Allied and Allied
Services Services as %
of GDP
1970-71 19.5 18.4 42.7 47.00
1974-75 31.6 29.5 71.3 -
1979-80 40.2 36.6 108.9 39.00
1980-81 50.6 46.3 130.2 -
1981-82 56.9 51.8 152.1 -
1984-85 78.3 71.3 222.3 -
1989-90 136.9 124.4 438.0 30.0
1990-91 159.8 145.7 51.0 -
1994-95 278.8 255.2 917.1 -
1999-2000 462.0 422.4 1762.0 26.00
2000-2001 478.5 435.1 1917.7 -
2001-2002 522.6 473.4 2094.0 -
Sources: Handbook of Statistics on the Indian Economy, RBI, 2002-03

321
 Annexure-20
PRODUCTION OF PRINCIPAL CROPS

Item 1960-61 1970- 1980- 1990- 1997- 2003-04 2004-05 2005-06

71 81 91 98
Rice 36.6 47.9 70.1 96.5 85.1 89.53 96.01 117.04
Wheat 0.1 0.1 0.1 0.1 0.1 0.07 0.05 0.09
Jowar 13.6 9.7 10.8 8.5 5.1 7.42 5.16 5.88
Bajra 3.0 3.0 3.4 1.7 1.0 1.48 0.81 0.82
All Cereals 61.4 69.7 95.8 16.3 103.1 124.58 123.77 155.75
All Pulses 2.8 4.5 4.1 7.0 5.2 12.39 10.17 13.75
All Food Grains 64.2 74.2 100.0 123.3 108.2 136.97 133.94 169.50
Sugar Cane 8.1 9.5 10.4 13.3 13.5 15.04 15.73 18.65
(Gur)
Cotton 1.2 0.8 4.9 11.1 13.2 18.90 21.90 21.08
(Lint)
Ground nut 6.9 12.3 8.6 22.7 11.6 9.86 16.39 13.66
Sources: Directorate of Economics and Statistics, Hyderabad

Annexure-21

STATE INCOME
(at Current Prices)
Item 1960- 1970- 1980- 1990-91 1997- 2005_06 2006-07
61 71 81 98 (QE) (AE)
(Q)
State Income (Crore 983 2523 7324 29867 78705 42986 50322
Rs.)
Primary Sector 578 1442 3414 10887 25556 67273 70249
(Crore Rs. )
Secondary Sector 279 742 2693 12410 35635 115857 133447
(Crore Rs.)
Tertiary Sector 279 742 2693 12410 35635 115857 133447
(Crore Rs.)
Per Capital income 275 585 1380 4531 10590 26211 29074
(Rs)
P=Provisional Q=Quick Estimates
Source: A.P. Statistical Handbook

322
 Annexure-22

POPULATION

Item 1961 1971 1981 1991 2001

Total (In thousands) 35983 43503 53550 66508 76210
Males (In thousands) 18161 22009 27109 33725 38527
Females (In thousands) 17822 21494 26441 32783 37683
Rural (In thousands) 29709 35100 41062 48621 55401
Urban (In thousands) 6274 8403 12488 17887 20809
Scheduled Castes (In 4974 5775 7962 10592 12339
thousands)
Scheduled Tribes (In 1324 1658 3176 4199 5024
thousands)
Density of Population (Per 131 157 195 242 277
sq.km.)
Literacy rate (%) 21.2 24.6 29.9 44.1 61.11
Sex ratio ( Females per 981 977 975 972 978
1000 males)
% of Urban population 17.4 19.3 23.3 26.9 27.3
Sources: Director, census Operations, A.P., Hyderabad
Directorate of Economics & Statistics, Hyderabad

Annexure-23
AGRICULTURE
Item 1960-61 1970-71 1980-81 1990-91 1997-98 2005-06
Net Area sown(in lakh hectares) 107.8 117.3 107.4 110.2 98.5 108.4
Gross area sown (in lakh hectares) 118.2 133.5 122.8 131.9 121.4 -
Crop Intensity* 1.10 1.14 1.14 1.20 1.23 -
Net area irrigated 29.1 32.1 34.6 43.1 39.0 43.9
Gross area irrigated 34.5 42.2 43.4 53.8 51.6 60.0
% of Gross area irrigated to Gross 29.2 31.6 35.3 40.9 42.5 44.9
area sown
Irrigation Intensity 1.19 1.31 1.25 1.25 1.31 -
* Ratio of Gross area sown to Net area sown
Sources: Director, census Operations, A.P., Hyderabad
Directorate of Economics & Statistics, Hyderabad

323
 Annexure-24

AREAS UNDER PRINCIPAL CROPS (In lakh hectares)

Item 1960- 1970- 1980- 1990- 2000- 2001- 2002- 2003-

61 71 81 91 01 02 03 04
Rice 29.6 35.2 36.0 40.4 35.0 29.75 30.86 39.82
Wheat 0.2 0.2 0.2 0.1 0.1 0.12 0.09 0.11
Jowar 37.3 25.7 20.5 11.9 7.9 6.48 5.00 4.44
Bajra 6.2 5.8 5.2 2.3 1.0 1.38 0.94 0.81
All Cereals 78.9 80.3 73.1 61.3 49.6 46.22 44.63 53.86
All Pulses 12.5 14.5 14.5 16.3 15.9 21.85 18.03 17.82
All food grains 91.4 94.8 87.6 77.6 65.2 68.07 62.66 71.68
Sugarcane area 0.9* 1.2* 0.4 0.5 1.6 2.09 2.10 2.30
sown Rice
Sugarcane area N.A. N.A. 1.3 1.8 1.8 - - -
coming for harvest
Cotton 3.3 3.2 4.2 6.6 9.1 8.37 11.78 10.33
Groundnut 8.0 15.7 13.0 23.9 18.3 14.93 18.41 18.76
* Breakup not available
Source: Director, census Operations, A.P., Hyderabad
Directorate of Economics & Statistics, Hyderabad

Annexure-25
CO-OPERATION

Item 1961 1971 1981 1991 2001

PACS(No.) 13771 14916 7037 4597* 4673
Membership (in thousands) 1438 1871 5262 10291* 15730
Total No. of Co-operative 31064@ 26336@ 41316$ 28165$ 34616#
societies (No.)
Total Members (in thousands) 5180 3365 11221 13929 38393
Working capital (Rs. In 421 128 1702 1532 3464
Crores)
@ Pertains to RCS and Handloom Depts.
$ Fishermen Co-operative societies not included.
# Both credit and non-credit
* Excludes Apex societies of APOD, Industries & Women development & child welfare dept. and Co-
operative societies.
Source: Director, census Operations, A.P., Hyderabad
Directorate of Economics & Statistics, Hyderabad

Annexure-26

324
 RURAL FINANCIAL INSTITUTIONS VS NABARD (as on 31-3-03)

Co operatives
RRBS NABARD
Short Term Long term
1. Owned funds 24,244 5669 4,666 20,738
2. Profit (Nos.) 1239 (262) 115 (225) 733 (156) 1,147
3. Loss (Nos.) 916 (107) 477 (478) 215 (40) -
4. Accumulated losses 4785 2,949 2,752 -
5. NPA to loan 18,737 5,140 3200 0.6
6. Outstanding -19% -23% -14% 0.00%
Sources: NABARD Annual report 2003 – 04
Annexure27

INCIDENCE OF INDEBTEDNESS IN MAJOR STATES

State Estimated Number of % Share in Estimated % Share in Total Food
Indebted Farmer Households Farmer House holds grains
Area Production
1. Uttar Pradesh 69199 15.9 16.3 20.7
2. Maharashtra 36098 8.3 10.9 5.8
3. Madhya Pradesh 32110 7.4 9.6 6.7
4. Rajasthan 27828 6.4 9.5 5.5
5. Karnataka 24897 5.7 6.1 4.6
6. Andhra Pradesh 49493 11.4 5.9 7
7. Bihar 23383 5.4 5.8 5.9
8. West Bengal 34696 8 5.5 7.5
9. Punjab 12069 2.8 5.1 12.2
10. Orissa 20250 4.7 4.4 2.8
Sub-total 330023 76 79.1 78.7
All India 434242 100 100 100
Sources: Report No. 498 (59/33/1). Situation Assessment Survey of Farmers: Indebtedness of Farmer Household,
National Sample Survey 59th Round (January – December 2003)

325
 Annexure-28

RURAL FINANCIAL INSTITUTIONS VS NABARD (AS ON 31-3-03)

Co operatives
RRBS NABARD
Short Term Long term
1. Owned funds 24,244 5669 4,666 20,738
2. Profit (Nos.) 1239 (262) 115 (225) 733 (156) 1,147
3. Loss (Nos.) 916 (107) 477 (478) 215 (40) -
4. Accumulated losses 4785 2,949 2,752 -
5. NPA to loan 18,737 5,140 3200 0.6
6. Outstanding -19% -23% -14% 0.00%
Sources: NABARD Annual report 2003 – 04

Annexure-29

IMPORTS & EXPORTS OF AGRICULTURE COMMODITIES VIS-À-VIS TOTAL

NATIONAL IMPORTS / EXPORTS DURING 1990 – 91 – 2005 – 06
S. No. Year Imports Exports
Agriculture Total % Agriculture Total %
1 1996 – 97 6612.6 138920 4.76 24161.3 118817 20.33
2 1997 – 98 8784.19 154176 5.7 24832.5 130101 19.09
3 1998 – 99 14566.5 178332 8.17 25510.6 139752 18.25
4 1999 – 00 16066.7 215529 7.45 25313.7 159095 15.91
5 2000 – 01 12086.2 228307 5.29 28657.4 201356 14.23
6 2001 – 02 16256.6 245200 6.63 29728.6 209018 14.22
7 2002 – 03 17608.8 297206 5.92 34653.9 255137 13.58
8 2003 – 04 21972.7 359108 6.12 37266.5 293367 12.7
9 2004 – 05 22057.5 481064 4.59 39863.3 356069 11.2
10 2005 - 06 21025.5 630527 3.33 49802.9 454800 10.95
Sources: DGCI & S, Ministry of Commerce, Kolkata

326
 Annexure-30

FLOW OF INSTITUTIONAL CREDIT TO AGRICULTURE

(Amount in Rs. Crores)
Total Institutional
Co –operatives Commercial Banks
Year Credit
Amount % Amount % Amount %
1984 – 85 3,440 55 2,790 45 6,230 100
1990 – 91 3,970 55 5,010 56 8,980 100
2001 – 02 23,600 38 38,440 62 62,040 100
2002 – 03 24,296 34 46,514 66 70,180 100
2003 – 04* 30,080 30 49,920 62 80,000 100
* Estimated
Sources: GO I, Economic Survey (2003 – 04) P. 159

Annexure-31

AREA IRRIGATED BY SOURCES FROM 2001 – 2002 TO 2005 – 2006

SOURCE 2001-02 2002-03 2003-04 2004-05 2005- 06

Canals 176906 170782 185462 156596 161237
Tanks 19754 8208 27378 754 2993
Tubewells & Filter Points 53288 59992 52177 30187 36485
Other Wells 1508 775 734 53 44
Lift Irrigation 5798 4393 9749 72 334
Other Sources 6457 67 3695 422 374
Net Area Irrigated 260085 241516 279195 269233 272178
Gross area irrigated 263711 245354 470408 461320 481249
Area Irrigated more than 3626 3838 191204 187184 209071
once
Sources: District Statistical Hand book

327
 Annexure-32
NORMAL AREA, PRODUCTION AND YIELD OF MAJOR CROPS IN INDIA
Area – Million Hectares; Production – Million Tones; Yield – Kg / Hectare
Crop / Group of Crops Season Area Production Yield
I. Food grains
Rice Kharif 39.12 74.55 1906
Rabi 3.73 11.18 2996
Total 42.85 85.72 2001
Wheat Rabi 26.2 69.73 2662
Jowar Kharif 4.21 4.28 1018
Rabi 5.03 2.94 585
Total 9.24 7.22 782
Bajra Kharif 9.34 8.15 872
Maize Kharif 6.37 11.38 1786
Rabi 0.75 2.26 3030
Total 7.12 13.64 1916
Total Coarse Cereals Kharif 22.65 26.4 1166
Rabi 6.43 6.51 1013
Total 29.08 32.92 1132
Tur Kharif 3.46 2.38 687
Gram Rabi 6.6 5.3 803
Total Pulses Kharif 10.87 4.95 455
Rabi 11.35 8.24 725
Total 22.22 13.18 593
Total Food grains Kharif 72.64 105.9 1458
Rabi 47.71 95.66 2005
Total 120.35 201.56 1675
II. Oil seeds
Groundnut Total 6.31 6.81 1079
Rapeseed & Mustard Rabi 5.93 6.2 1045
Soya bean Kharif 6.86 6.72 980
Sunflower Total 1.86 1.02 548
Nine Oilseeds Total 24.63 22.6 918
III. Other Cash Crops
Sugar crane Total 4.15 267.34 64473
Cotton Total 8.37 13.46 273
Jute & Mesta $ Total 0.98 11.05 2030
Potato Total 1.31 23.56 17950
Onion Total 0.52 6.08 11678
Note : ‘Nominal’ is worked out as simple average of estimates for 5 years i.e. 2001 – 02 to 2005 – 06.
@: Production in million bales of 170 kg. each
$: Production in million bales of 180 kg. Each
Source: Department of Agriculture

328
 Annexure-33

DISTRIBUTION OF LAND HOLDINGS BY SIZE CLASSES 1995-96

S. No. Size of No. of % in total Area (in % in total Average

Holdings Holdings (in lakh size of
lakhs) hectares) Holdings
1 Marginal 63.00 59.42 29.04 20.20 0.46
2 Small 22.62 21.33 32.29 22.47 1.43
3 Semi 13.95 13.16 37.36 25.99 2.68
Medium
4 Medium 5.63 5.31 32.31 22.48 5.74
5 Large 0.83 0.78 12.73 8.86 15.31
Total 106.03 100.00 143073 100.00 1.36
Sources: Directorate of Economics & Statistics, Government of A.P., Hyderabad

Annexure-34

LAND UTILIZATION PARTICULARS FROM 1996-97 TO 1999-00

Item 1996-97 1997-98 1998-99 1999-00

Total geographical Area
Forest 274.40 274.40 274.40 274.40
Barren & Uncultivable Waste 62.45 61.99 61.99 61.99
Land put to non-agricultural use 20.83 21.09 21.09 21.06
Cultural waste 24.72 24.96 24.96 25.12
Permanent Pastures & other Grazing 7.22 7.52 7.74 7.81
lands
Land under Misc. tree crops & Groves not 2.47 2.46 2.41 2.42
included in Net area sown
Other Fallow lands 15.47 16.20 15.28 14.52
Current fallow lands 24.43 33.92 23.33 27.61
Net area sown 109.18 99.33 110.74 107.05
Sources: District Statistical Handbook (2000)

329