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CHAPTER - I Review of Literature and Methodology
aiAPTER - I
REVIEW OF LITERATURE AND YTHODOLOOY
"Far di8coveries are m r e i r r i t a t i n g than thole which expoae the pedigrw of ideaam.
Agriculture i s the f i r s t cul ture t h a t man lea rn t
to pract ice as a means of l iv ing and a way of l i f e .
However, with the advancement of knowledge, cul ture
and civi l izat ion, the place, pattern, pract ices and
po ten t i a l i t i e s of agricul ture, have bean continually
undelqoing a process of t r a n a f o m t i o n . From a lwm
primitive way of l i f e and a source of livelihood, it
haa coma to be real iaed a4 a commercialiaed a c t i v i t y
and profi table businaaa gropoaition and a v i t a l instru-
msnt of progress. In India the v i t a l ro le of agri-
culture a r i s ~ a out of the posi t ion the agrarian sector
occupies i n the overal l economy of Me country. Agri-
cul ture i s the largeat sector of the economic a c t i v l t p
and has a c ruc ia l mle to play i n the country's econo-
mic development by providing h o d and raw matarlalr ,
employmnt to a very large proportion of population,
capi tal for i t s own development and surpluses fo r
national economic development. Thus the irrqortance of
agriculture despifo rapid industr ial isat ion has not in
any way dlminlahed. ~t has become necessary not only
to achieve self-sufficiency in matters of food and agri-
cul tural raw-materials, but to highly mderniae agricul-
ture so aa to throw up surplusee t o bs made avai lable
for investment in the other aactora of economy a s well1.
The adoption of new technology has given r i s e to increas-
ing demand for farm credi t which i s the )cay factor In,
and l i f e blood of agricul tural developmant. The o q a n i -
sation of inst i tut ional c red i t i s one of the major factor6
governing agricul tural production part icular ly tha t of
small and marginal farmers. But it i s no wonder tha t a l l
farmers especially small peasants, m a t of necessity
borrow a t one tims o r other. The rural masea borrow
a l m s t habitually, passing on the burden of debt to the
next generation. It la, perhapa, t h i s phenomenon of
agriculture tha t compelled Nicholson t o obaarve I
"The lesson of universal agrarian hiatory from Rom
t o Scotland l a tha t an essent ial of agrioulture i s credi t .
Neither the condition of the country nor the nature of
I. ch0ub.y p,N., Inmtitutional Finance fo r A r i cu l tu r s l yT$;b;t, Sharad mgate, Subhada S a r a d t , Qune,
the land tenurea, nor the position of agriculture, affects
the one grsat fact that agriculturists rust borrow",
The peasantry of India is no exception. This has
been amply borne out by records of heavy rural indebted-
ness, historically described in the words;
"A farmer is brn in debt. lives in debt,
kequeathes in debt and dies in debtn.
The agricultural arsdit is a diversified and coinplex
subject. The existanca of a strong and efficient credit
institution ia like winning more than half the battle,
aspeelally in developing countries, and the success of
credit oriented development projects is significantly
dependent upon the soundness of the credit structure - that of the credit institution and the oredlt system3.
Farm credit in India like that of davaloping coun-
tries conaiats of institutional and non-institutional
sectors. The non-institutional sector consista minly
of the professional and agricultural mneylendsrs, land-
lords, camission agents, tradars and the farmera. rela-
tives and friends. The institutional sector mainly
compriaea of cooperatives, o o m r c i a l banks, regional
r u r a l banks and ~overnments'.
On tha i n s t i t u t i o n a l s i d e t h e main landers a r e a g r i -
c u l t u r a l o r development banks, uaual ly e s t a b l i s h e d by
the Government, and p a r t i a l l y o r m r e f requent ly f u l l y
Goverrumnt ownadt coopera t ives o r farriers associn t iona ,
o f t e n Government organised, an8 p r i v a t e o r na t ional iaed
c o m e r c i a 1 banka. Many c e n t r a l banka a r e involved i n
various ways and degrees i n the del ivery of a g r i c u l t u r a l
arsdit5. Cooperatives have numeroua advantages compared
with o ther i n s t i t u t i o n a l agencies. They have tended t o
work beat i n areas where land holdings have been homoge-
neous, tennnt farmers have equal s t a t u s , some a o c i a l
cohesion e x i s t s a t t h e g r a s s r o o t s and where l i t e r a c y
has a t t a i n e d reasonable level6.
C h a r a c t e r i s t i c of formal c r e d i t programmes i a a
high incidence of defaul t . Informal lenders tend to be
f l e x i b l e about repaymant timing while formal lenders have
f ixed due dates. Wstponinp. a loan rspaymant i s l i q u i d i t y
management b o l t and s i n c e formal c r e d i t is l e n s va luable
4. Karunanidhi. M I Farm Credi t S i t u a t i o n i n Asia, Aaian Product iv i ty Organisation (APOI, Tokyo, Japan, 1984, ~ . 2 9 3 .
5. The World mnk, Tha Aasaul t on World Pover t , The SohnB Hopkina M i v a r a i t y Presa, London. 1975, p.&.
6. Pischke, J.D.V. e t al., I The Rural F i n a n c i a l H a r b t a i n Developing Countries ( e n . , London. Tha Johna Hopkina M i v e r s i t y Preaa, 1983, p.157.
than Boma other l iqu id i ty reserves, the cost of losing
i t s avai labi l i ty as a r e s u l t of non-repayment Is r e l a t i -
vely low. Current consumgtion, the rapaynwnt of the
informal loans o r the replenshing of l iquid asaets and
inventories wi l l often take precedence over repayment of
formal loans. Relativaly few penalties a re severe enough
t o cause hormwers t o reorder these p r io r i t i e s .
Another feature of formal c red i t programes i s the t
moat loans go to a few, r e l a t ive ly wealthy borrowers.
One raason l a tha t low in te res t rates froce lenders to
ration limited funds, frequently on the basis of r isk.
The incentive to reduce r isk, as well a s transaction
costs, favours users of large amounts of credi t . Trans-
action costs per rupee borrowed are lowered fo r lendera
in the case of large loans, and wealthy borrowers are
more l ikely than poor ones to be making large, "lumpy"
investment expenditures. In addition, formal c red i t
providea a comparatively low-eoat l iquidi ty managemnt
tool for wealthy borrowers7.
A good number of studies have examined tho relevance
of different ins t i tu t iona l agencies in financing agricul-
ture. Some of theas atudias have examined the role of
7. Ibid., p.109.
inst i tut ional agencies in providing long-term credi t
f a c i l i t i e s t o the farmers, while a few others confined
themselves t o the atudy of short-term and medium-term
loans. The studies seeking t o measure the impact of
cooperative c red i t on Indian agriculture have howaver,
missed to examine the peculiar credit related t o pmblems
of semi-arid regions lib ~ayalaaeama* with a preponde-
rance of small and marginal farmers. To provide nece-
ssary background for tha present study some empirical
and evaluative rtudiee on the subject a t International,
National and local level are reviewed and the lacuna
therain are identified.
Arvind virmanis i n h i s paper on he Nature 05
credi t Merkets in Developing Countriea" analyses various
forms of government intervention in tha loan mariut in
terms of the i r effect on efficiency. This providea the
essential basis fo r evaluating and judging these policies.
I t also shows where ea r l i e r policy prescriptions are
correct, incomplete o r wrong. One of the implications
of the paper 1s tha t the c red i t market d i f f e r s fundamen-
t e l l y from the markat for ordinary goods and services.
Conseqwntly conventional analysis of the loan markers,
baaed on tha theory applicable ta product markets, can
be misleading even where s imilar prescript ions a re reaohd,
Rayalaseem region of Andhra Pradesh Couprises of Kllrnaol, Cuddapah, Anantapur and Chittoor Districts. 8. ~ N i n d ~ i r m a n i r The Nature of Credit mrke t s in
Dnnlosina Countriea, Washington D.C.. 1982.
Another important highlight of the paper i s the v i t a l
role of co l l a t e ra l in the loan market. These two issues
a re addreaaed in the introductory discussion on the s p -
cia1 nature of credi t msrketa, which forma an important
pre-requisite fo r understanding the subsequent sections
of the papar. The paper focusses i t s a t tent ion exolu-
sively on one of the underlying reasona for Govemnant
intervention namely market fai lure in the c red i t msrktt.
It examines the causes and oonaequencea of market inger-
fectiona or failurea in the m a 1 credi t s t ructure and
the effects of different types of intervention and tha i r
implications for different policies for correcting market
imperfections on the loan side of the marbt . I t assume8
the dcgoait side of the market as given.
The gaper provides unified framework for analysing
credl t marksts and allows apparently desparate obser-
vstiona and facts in the banking and ins t i tu t iona l l i t e -
rature to be understood and interpreted. Mare importantly
i t provides a unique fearrework fo r determining the e f fec t
of government policy on c red i t marb t efficiency.
Rural Financial Markets in Developing Countriaat
Their use and ~ b u S e ~ i s based on the neoclassical madel.
Thia volum does i l lua t ra t e , howaver, new viewa tha t
9. Vonpischke, J.D. Dale W.Adama, Gordan Donald $da) I Rural Pinanoial Yarkets i n Davelo~ing Countriear The* use and Abuse, The Johns Hopkine University Prsal, London, 1983.
stress examination of rural financial transactions within
financial markets. Agricultural credi t has t radi t ional ly
b@en viewed as having more t o do with agriaulture than
with finance, but thin perception i s changing. Exami-
nation of farm credi t p rograms and inst i tut ions has
led 8om devslopmnt economists to a broader view of
rural finance. More attention i s being given to financial
markets in rural arena, t o their performance, structure,
institutions, oparations, costs and nature of the i r ser-
vices to rural people. The concept of Rural Financial
Market (RFM) has been develope3 from the bottom up and
constitutes a theoretical construct for dealing with issues
arising from the performance of farm credi t projects.
mny authors in th i s book, however, a s se r t that
farmers in develoging countries are rat ional in the i r
use of financial markets, Thia conclusion has important
implications for ths way RFM interventions are designed.
rt strongly suggests tha t supply-led s trategies fo r rural
development ought to be deemphaaiaed. Rather than merely
increasing the aupply of loanable funda, a t tent ion should
be directed towards improving the range and qual i ty of
rural financial services. In particular, deposit f ac i l i -
t i e s should be provided fo r small savers. Thia s e n i c e
i s not handled well in informal f inancial markets and
is outsids the scope of the typical c red i t p r o g r a m .
A Mlnprehensive reading of these contributions however
suggests tha t d i f f e ren t ins t i tu t ions have d i f f e ren t
strengths and short cominqs. Some are very awkward in
dealing with small loans and small deposits while others
may display weaknesses a s specialiaed lenders o r in daa-
l ing with the r iska of f inancial intermediation i n ru ra l
areas. I t i s , tharefore, not the form of f inancial
inst i tut ion but the progress of f inancial intermediation
tha t deserves more at tent ion. Too l i t t l e e f f o r t has been
devoted to understanding why exist ing f inancial inter-
mediaries of almost any form often f a i l t o provide, the
services which planners and the project designers believe
they should provide.
The contribritions in t h i s velum indicate tha t
developlnental role of RFMa i 5 not real ised by augmentinq
the supply of conceasionally priced agricul tural loans.
I f policy makers and project designers permit and en-
courage f inancial intermediaries t o perform a broader
role, they can improve income distr ibut ion, the e f f i -
ciency of resource al locat ion, and the overal l v i t a l i t y
of f inancial markets aerving ru ra l people. The specif ic
measures required t o improve the qual i ty of RFMs i n
different economies wi l l vary. But it appears tha t
maat e f fo r t s should contribute toward the integrat ion
of these markets, emphasize voluntary savings mobiliza-
t ion by formal ins t i tu t ions , and allow i n t e r e s t r a t e s
t o be determined f lexibly by market forces.
Dale w.~dams'O in h i s vork Vndermining Rural Deva-
lopment with Cheap Credit" out l ines tha t in the pas t
several decades large amounts of mney have gone in to
agricul tural c r e d i t programas in low income countries.
The re su l t s of theae e f f o r t s have often been d i s a p p i n t -
ingl Persistence of ser ious loan recovery problems? the
r i ch get t ing m e t of the cheap loans; low in te rea t r a t ea
discouraging local savings and deposits? and c o m n polis
t i c a l intrusions. Hence many f inancial in s t i tu t ions in
low income countries are floundering. The contr ibutors
t o th i s book c i t e ubiquitous low-increase r a t e po l i c i e s
and imgroper use of f inancial marlcets a s pr incipal rea-
sons fo r theae problems, recommending higher and more
f lexible in t e rea t rate .
10. Dale W.Adams e t al., I Undermining Rural Developmnt with Cheap Credit (EBB) r Went View press, Boulder, 1984.
David ~.~athrick" in his critical work nAgricultu-
ral Credit for Small s a w Development I Policies and
Practices" explains that agricultural credit ahould be
viewed not in isolation but in relation to dupporting
services and the needs of improved technology. V.S
agricultural credit mdels based on individualised
supervision approach cannot be replicated in developing
countries. The overview amarisea also the evaluation
of ideals on policy issues pertaining to eligibility
criteria and security requirements, interest rates end
the merits of interest subsidies, repaymant performance
and credit channels. A glaring omlssion in the over-
visw is the inadequacy of attention to the inter-
ralationahip between agrarian structure, and inadequacy
of credit to the small farmers on one hand, and the
preferred model of the institutional system of credit,
on the other. The critical operational problems identi-
fiad by the author pertain to management information
systems, project evaluation systema, quality of supporting
services, loan approval considerations, centralisation
vis-a-vis decentralisaticn of organiration, peraonnel
matters, and management and personnel administration
systems. The purpose of the Nicaraguan caae is to illu-
strate how thaae operational problems in developing
effective credit managemant aystema for the small farmers
are sought to lm eolved. The sco7e of t h i s book i s l i m i -
ted to opsrational aspects, and there i s l i t t l e documan-
tation on how the improved systems contributed to the
fulfilment of management objectives. The obvious weak-
ness of t h i s book i s tha t it f a i l s to capture the con-
f l i c t between the management objectives of INVTERNO and
the agrarian s tructure in Nicaraguan immediately before
the downfall of Somaza Oovarnment.
J.A,Banks of London University and G,N.Ostergaard
of the University of Birmingham made of small sc i en t i f i a
investigation in 1954 of the working of cooperative
democracy in practicei2.
This investigation involved a comarat ivr survey of
methods of democratic control in 4 0 sociehiea mainly in
the midland area of England, and a caee study of the
electoral process in a large r e t a i l midland society
during a period of ten years (1945-54). As pointed out
by the authors, t h i s study was 'fragmentary i n character'
and served as a p i l o t study for a national lave1 stuay
made subsequently.
12. Banka, J.A. and Ostergaard, G.N.1 Coo e ra t ive DemoCra.2 - A gtudv of As a c t s of +tic Process :n Certain RetallPCocperative ~ o c i e t m Stanford Hall (England) Cooperative Union, 195
Findings of t h i s Study.:
Between 1933 and 1994, the average proportion of
mombars attending busineae meetings and voting i n
elections to board haa declined. There i s an inverse
relationship between the s i ae of a sociaty and the pm-
portion of menbra attending and voting, the larger the
society the smaller the proportion of members attending
and voting.
The electoral chances of employees in board elec-
tions were well above those of non-employees. The
olderstyle pure moperator i s becoming rarer and h i s
place i s being taken by the cooperator who i s a lso act ive
in ~ o l i t i c s .
The agricul tural c red i t department was organlsed
simultaneously with the establishment of the Reserve Bank
in April 1935. The i n i t i a l task of the department was
t o make a atudy of the problems of agricul tural credit
enjoined on the bank under the t ransi tory sect ion 55 of
the RBI Act. A few aspects of the working of the
Reserve Bank of India have been so atriking, in comparison
with other central banks generally, as i t s role in the
sphere of rural finance. The bank's responsibi l i ty i n
this f i e ld has h e n occasioned by the predominantly
agricul tural basis of the Indian econonry and the urgent
need t o expand and coordinate the c red i t f a c i l i t i e s
available to the agricul tural sector.
All India Rural Credit Survey ( A I R c s ) ~ ~ , one of the
biggest and most s ignif icant empirical surveys mver
undertaken in Asia, covered 1,27,343 families in 600
vi l lages selected in 75 d i s t r i c t s e l l over the country.
Investigations were also held in several other ru ra l and
urban places which were the marketing or the sea t s of
administration. To thrs study of rural c red i t and a l l i e d
economic ac t iv i t i e s on the hi therto unprecedented scale
was added a careful analysis of the views which the conanis
t t ee had e l i c i t ed from o f f i c i a l s and non-officials. The
cornittee examined the record of various c red i t agencies,
private as well as s t a t e o r staae-associated, in order
to assess past performance and future significance.
The findings of the survey comnittee confirmed the
dominant position occupied by the moneylender i n the
rural c red i t market. I t observed that agricul tural
c rea i t f e l l short of the r igh t quantity, was not of
the r ight tygc, did not serve the r igh t purpose and
often fai led t o go to the r igh t people. Rural ar t isans,
13. RBI8 All India Rural Credit S w e y (Summary), Vol.I!. Bombay, 1955, P.8.
agricultural labourers and other alaaaes of the group
of non-cultivatoru a re not usually able to obtain acm-
mdation from cooprat ivss . The comit tae a l w observed
that althougli the prformance of the cooperatives i n the
sphere of agricultural credi t was deficient in several
ways, the cooperative agency still remained by f a r the
leaat unsatiefactory channel of credi t and s m d up i t a
approach in the statement - 'cooperation has failed, but
cooperation muat suoceed'.
In 1966, the Reserve Bank ant up . A l l India Rural
Credit Review comit teeJ4 in order to reasseas the dsve-
lopments that had taken place in the f i e ld of rural nredit
since 1954, that is, subsequent to the subdsaion of the
report of the All India Rural Credit Burvey Conunittee and
to make recommendations. The review committee submitted
i t s report in m l y 1969. It emphasized that while orga-
nisation of cooperative c red i t ehould he pursued and the
integrated scheme implemented vigamualy, e f fo r t s should
not b concentrated Bolely in the cooperative sector, and
considering the magnitude of the problem of agricul tural
credit, the comercia1 banka, especially the nationalised
banks, ahould embark on wide and intensive e f fo r t s for
proviaion of agricul tural credit. The adoption of a nunbar
of progressive measurea by both the cooperative and Ohr
14. Reserve Bank of Tndia (RBI), A11 India Rural Credit Review cornittee, c om hay, 1963.
comercial hanka was suggested fo r ensuring the timely
and adequate flow of credi t . The Raviaw committee also
recornended the establishment of two new organiaations,
via., the rural e lectr i f icat ion echemea through the S t a t e
Electr ici ty Boards and the Rural Eleotric Cooperatives
and the Small Farmers Development Agency (SPDA) designed
to iaent ify the pmblems of small but potent ial ly viable
farmers and to ensure that agricul tural inputs, aervicas
and ceredit are made available to them. The committee
rscomnendad the enlargement of the Reserve Bank role i n
regard to the cooperative movement. While endorsing the
policy pursued till then by the RBI in the proviaion of
ml credi t through the cooperative agency, it suggested
liberalidation in some respects and also the introduction
of certain meaaures to correct the tendency on the part
of the cooperative banks to borrow mrre from the Reserve
Bank, by linking the rate of refinance to the cooperative
banks with the i r efforts to mobilise d e ~ o s i t s .
The scheme of financing of the Primary Agricultural
credi t Societies (PACS) by commercial banksi5 was a part
of A l l India Debt and Investment S w e y sponsored by
the RBI i n 1970 in Pive states* where the cooperative
15. ?BII Financing of Primary Xgriculsurai CreEit Socie- t i e s ~y c o m r c i a l aanks, Bombay, 1976.
- ~ n d h r a Pradesh, HaLyana, Karnataka, Madhya Pradesh and Uttar Pradash.
credi t atnrcture was f inancial ly and adminlstrativaly
weak. 57 out of 114 PACS financed by 19 commsrcial banka
0 for each branch) and the remaining 57 financed by the
16 d i s t r i c t cooperativa central banka were coverad by the
survey which made extensive use of questionnaires a t
different levels with a view to meeting tho c red i t gaps
and revi tal is ing the PACS. Po ge t a fu l l e r picture of
the working of the scheme, the survey data had b a n supple.
mented to include a l l commercial banks part ic ipat ing i n
the scheme. Thus the report presents a detai led appraisal
of the progress and performance of the commercial banks
in the financing of agriculture through the medium of
societies during the span 1970-75. ?he report while high-
lighting the progress achieved by the commercial banka in
terms of quantum of loans to the societies, a l so pointed
out certain short wmings observed i n the working of the
scheme in some areas of the selected f ive s tates , such
as high incidence of overduea against societ iea financed,
persistence of operational weakneasea in the socliarties
ceded ta the banks, low volume of medium term loans
issued to the rnembera of societies, inadequate financing
of amall farmers.
R.K.Hasar1 ~ommi t t ee '~ a f t e r discussions with Chief
Ministers and Ministers for cooperation, o f f i c i a l s and
non-efficials in 13 atates and by conducting studies
on integration of the two wings, short and long-term
cooperative c red i t r e m m n d e d the intagration of the
two wings of the m p e r a t i v e c red i t s t ructure a t a l l
levels, I.e., the prinnry, the intermediate ( d i s t r i c t )
and the apex ( s t a t e ) . However, one of the members of
the camnittee Mr.B.Viswanathan, in h i s capacity a s
chairman of the National Cooperative Land Developmsnt
Bank Federation i n h i s minutes of dissent found tha t
the diaadvanteges outweigh the advantage af integration,
and pleaded tha t the long-term credi t s t ructure should
not be disturbed. It my be noted here with in te res t
that the 'Madhavadaa Committee' also recommended inte-
gration of cooperative c red i t inst i tut ions in the north
eastern atates.
RBI in i t s report of the Committne to Review Arranga-
m n t s for Inst i tut ional Credit for Agriculture and Rural
Development (CRAFICARD)~~ examined the followingr
16. ARDC, Report of the Committee on Integration of Cooperikive Credit Inst i tut ions, Bombay, 1976.
11. RBI, Report of the Conunittee to Review Arrangemnts ?or Inst i tut ional Credit for Aariculture and Rural Developrent (CRRFICARDI, Bcmbay, 19
a Objectives I
1, to review the structure and operation of the
Agricultural Refinance and Developmant Corporation (ARDC)
in the l igh t of growing need for term loans fo r agricul-
tural and a l l i d ?uposes end other aemices relevant to
Integrated Rural Development (IUD)!
2. to examine the need for and the f eas ib i l i ty of,
integrating short-term and medium-term credi t structure
with long-term1 . 3. to consider t i e relat ive merits of three-tier
and two-tier structures for cooperative financing ins t i -
tutions, etc.,
b) Field oE Enquiry1
The committee vis i ted 14 s tates for the f i e ld level
discussions and issued a check l i s t of points for dis-
cussions a t the Block, Distr ic t and State levels. This
was followed by separate questionnaires, one on the
national level inst i tut ions and the second on tho f i e ld
level credi t delivery system to scheduled commercial banks,
s t a t e cooperative banks and s t a t e cooperative land develop-
ment banks.
1. Over the period 1969-80, the outstanding i n s t i -
tut ional credi t increased from Rs.1075 crorea to Re.6329
crores. Cooperatives accounted for 59.4 per cent, comer.
c ia1 banks 38.8 per cent and regional rural banks 1.8
per cent.
2. some of the major recommandationa of the RBI'a
study team on overdues have not been given e f fec t to by
m s t of the State Oovernments. On the other hand som
of the State Oovernrnenta have issued from time to time
blanket s tay ordera on or banned coercive action fo r
recovery of cooperative dues.
3. The recovery perforfnance of the banks i n reapact
of the i r d i r ec t loan8 to agricul ture haa not shown any
perceptible change over thm past few years i n tha t the
recovery b v e r e d a t around ha l f the dmmand.
4. The committee was of the firm view t h a t wilful
default i n rapayrnent of cooperative loana i s not merely
a Oivil misderneanour but a criminal offence. It should
no longer go unpenalised and must a t t r a c t deterrent
punishment under the criminal law of the country.
5. The pass books being issued by aome commsroial
banks to their c l ientele belonging t o target groups mrst
be improved to include a l l relevant date so as to aervm
as aafe-guards against malpractices.
National Bank for Agriculture and Rural Developmnti8
launched f i e ld studies in 9 s t a t e s to gain perception
into the problems of delinquency in loan repayment from
tha demand side. The demand aide studies covering 2
states* with good recoveries and 7 s tatest* with goor
recoverias, were undertaken with varying number of de-
faulters/non-defaulters and the following findinge were
arrived at.
The level of overdues was higher fo r investment
credi t (term loana) than for crop loans (short-term
cradi t) . A considerable p r o ~ r t i o n (190 per cent to 45
per cent) of the default i n reapect of investment c rad i t
(extended by PLDea) wan over f ive years old, where aa
in the case of short-term croploana (borrowed from PACS)
it was typically less than 2 years old. One wondera
therefore whether the greater and prolonged defaul t i n
18. NABRRDr Seminar on Rewament of Inst i tut ional Credit, New DeUii, Vigyanbhavan, lg84.
'Punjab and Kerala. Bihar, Oujarat, Karnataka, Mamya Pradesh, Maharastra, Tamil Nadu and West Bengal.
respect of investmnt credi t i s amaociated with the less
frequent need for i t s borrowing. Large farmers defaulted
mre than the s m l l farmers. 25 per cent and 35 per cent
of the defaulters were respectively those who had made
partial repayment and defaulted on Me ent ire amount.
The supply side studies conducted in 5 s tater via., Bihar,
Oujarat, Karnataka, Madhya Pradesh and West Bengal examined
the i w c t of faulty lending and mcovery procedures follow-
ed by Land Developmnt Banks.
The pattern of credi t requiremanta was analysad in
detai l in the report Vred i t Requirements tor ~ g r i c u l t u r a " ~ ~ .
A atudy indepth of what actually happens in the village8
i n the matter of aqricultural credi t should therefore be
of considerable practical interest. The factual basis
of this study was a comgmhenaive field auwey of 3109
cultivating households of which 1906 wars hormwing houae-
holds. The sampling was done with as much scient i f ic
rigour as circumstances permitted, with suitable over-
sampling in rare developed areas. The analysis clsarly
brought out that a major gap existed in the sphere of
investrant cradi t and considerable progreea had to bo
made i n respect of long-term financing of agricultura
19. national Council of Applied Economic Rasearch: Credit Raauimmmts for Agriculkrra, New Delhi, 1974. -
through ins t i tu t iona l agencies i.e., Primarily the
Co-operative Land Dnvelopment Banks.
Another finding of the study was tha t with g rea te r
inst i tut ional isat ion, the r a t e of in t e res t on loan8 from
a l l source8 showed a decline. Farmers in 1970-71 could
f u l f i l a b u t 29 per cent of the i r c red i t requirements
through funds obtained a t 8-10 per cent in t e res t , about
23 per Cent a t 18-24 per cent interent and about 1 9 per
cent free of interest . The average ra t e charged by
private agencies waa 22 per cent which was much lower
than tha t it was p r io r to independence. However, owing
t o the i r heavier rel iance on non-institutional sources
of credi t , the average i n t e r e s t cost of borrowing (18
per cant1 fo r the amallent category of farmers i.e.,
upto 2 hactares was much higher than tha t (9 per cent)
of the largest categories (about 6 hectares) of farmera.
In respect of long-term 'developmental' financing the
cooperative agenciea a re s t i l l not playing an important
role accounting fo r only about one f i f t h of the t o t a l
disbursement of credi t . However, there has been a nota-
ble change in the advances portfol ia of the Land Dove-
lopment Banks consequent upon a reorientat ion of t h e i r
lending pol icies toward developmantal finance.
The National Connnission on ~ g r i c u l t u r a ~ ~ , i n t s r a l i a
was asked ha examine the requirements of new strategy of
specif ic agricul ture in the shape of supply of r equ i s i t e
inputs with special considerations of sources of supply
and problems of improved seeds, f e r t i l i ae r s , measures
for plant protection and agricul tural c red i t from ina t i -
tut ional agencies.
The committee emphasized the need fo r an integrated
agricul tural c red i t service covering a l l aspects of m a 1
development including production, marketing, t ransport
and proceasing and providing the requisi te c red i t with
the f a c i l i t y for i t a conversion into production inputs
and investments in resource development. The commission
envisaged greater involvement of commercial banks in
financing agricul tural development. It indicated tha t
the share of agricul tural advances to t o t a l advances by
them should r i e e from 8.8 per cent i n 1974 t o 15 per cent
in 1985. The commission recommended tha t the RBI and
the Government should immediately i n i t i a t e planning fo r
business and man power developmant in the ins t i tu t iona l
agencias to equip them fo r undoetaking such programnea.
The conmission suqgs#tsd greater weightage to the
needs of small and marginal farrnsra and provision of
20. ooMrnlnent of India: National C o d s s i o n on Aaricul- m, Bar Delhi, 1976.
credi t to them on preferent ial t e n a in respect of both
interest charges and quantum of advances to enable them
to upgrade and modernise agriculture. Suggestions were
also made for inpmvements in Farmrs Service Societies,
the ground level organisation, i n the l igh t of their
record of performance.
Subrata Ohatak2' has made the poineering study of
the Indian Rural Credit Market. His study was directed
to answer the following issues:
I. the nature, conprosition and working of organised and
unorganised money markets in the Indian Rural Economy,
2. to examine the factors effecting the &emand side of
agricultural credit!
3. to analyse the nature and Beteninante of m r a l inte-
rest rateat
4. to discuss the working of the major organieed aqenaisat i
and
5. to specify the exiating links between the rural money I\
markets and to derive any pnlicy implications which
may emerge from the study.
21. Ohatak Subra ta~ Rural Credit Markets in In419 MacMillan Co. Ltd.. New Delbi, 1976.
He has examined the foregoing issues on the basis
of available data (secondary data) using quanti ta t ive
techniques and s t a t i s t i c a l tools . He considera the work-
ing of PACS on tne supply aide of ina t i tu t iona l c red i t
and comes to the conclusion tha t they generally f a i l ed
to sa t i s fy the d i f f e ren t c r i t e r i a of f inancial v i a b i l i t y
so f a r as the composition of the f inancial s t ruc tu re and
loan operations are concerned. Increasingly g rea te r
dependence on botrowing, f a i lu re to m b i l i s a deposita
appreciably as wall as munting overdues become t h e i r
chief problems. There i s a posi t ive correlat ion between
income and rapaymenta, and negative correlat ion betwslen
the r a t e of in t e res t and income and repayment.
v.l'.laidu'aZ2 study reviews the progreaa o f the
cooperative c red i t movement in India and i s concerned
with i t s f inancial soundness and business eff iciency.
He proposed to examine the following object iveat
1. t o evaluate the cooperative c red i t movement in
India!
2. t o examine d e v ~ l o p m n t of PACS during the period
1951-611
3. t o describe the soc ia l aapecta of coogerationr
22, Naidu, V.T; Farm Credit and Cooneratives in India Vora and Co., hlbl ishers Private Ltd.. Bombay, 1$68.
4. t o assess the integrated credi t schtmer
5 , t o analyse the role of cooperatives in helping
the weaker aectiona t and
6, to examine the atate 'a support in cooperative
deve lopment.
8 w t h ~ d ~ i ~ ~ l
Hia study waa based on the secondary data. He collec.
te8 secondary data from many national and internat ional
reports /~ul let ins . Besldes sore other publications l ike
s t a t i s t i c a l statement5 relat ing to cooperative nwvement
in India, Rural credi t followvp surveys are also made
uee of.
The following are the major findings of Dr.V.T.Naidu.
1. Cooperative credi t movement has regis tered a
s ignif icant pmgresa during 1951-61, especially nince
the implementation of the integrated c red i t schem sugge-
sted by rural c red i t survey.
2. A large number of PACS are weak and dormant!
3. Though the decade under rcview (1951-61) wit-
nessed a signif icant r i l e in the volume of loans advanced
by PACS, the position with regard to the i r recoveries was
not sat isfactory,
2 8
4. The ways and means adopted i n the west to s t r i k e
a happy mean between the two equal important aspects
of cmperation viz., the business and cooperative a s p c t s
were not preaent in India.
5. The c red i t supplied by cooperatives i s biased i n
favour of the big and in f luen t i a l cul t ivators . The small
cul t ivators got only 11 t,¶ 12 per cent of t h e i r total
borrowings from the cooperatives.
6. The policy of the government in regard t o s t a t e
partnership and the s ize of the primary society was
vaci l la t ing, creating in consequence uncertainty and
indecision. This came in t he way of reorgsnising the
cooperative ins t i tu t ions e t the base level.
he main objectives of ~ a m i ~ e d d y ' s ' ~ s t a y wan to
investigate the important characteristics of We defaul-
t ing c red i t cooperatives, delinquent borrowers and non-
borrowers (in non-memhers of PACS) I
Following a re the apecif ic hypotheses testad:
1. In highly productive regions c red i t cooperatives
have less of a problem of repaying loans t o the central
bank before the dun dates than fo r those in poor areaar
23. ROml RedGy, S I Farm Credit Through Cooparatives in India - A Case Study of a Region in Andhra Qradesh, ? ~ o c t o r a l Thesis), Xal tair , Andhra University, 197
2. Defaulting borrowers have larger debts. They
divert their cooperative borrowings e i the r fo r the re-
paymnt of other debts o r for conaunlption o r for other
unproductive purpoaesr and
3 , Both the non-borrowing and the non-members a re
r l l i t e ra t e s and belong to lower caste groups. They ope-
r a t e small farms and rely mostly on off-farm sources of
employment.
Data and Method:
The data pertaining to PAC5 were obtained from the
central cooperative bank's branches a t Chodavaram and
Visakhapatnam during 1969-70. The data were collected
from the borrowing and non-borrowing (including non-
members) households in the area served by select c red i t
cooperatives in Chodavaram taluk.
Sample households were a t r a t i f i d into defaulting
and non-defaulting members. Of the 149 households inter-
viewed, 61 were from aon-members and non-brrowers. A m p
the borrowing households, 1 0 out of 38 in the productive
regions and 19 out of 50 in the less productive regions
were deliquent borrowers. Discriminant analysis was used
t o t e s t the hpothesised relationshipa,
The resu l t s of the thes i s bring out sharply how
the role of c red i t cooperatives d i f f e r s between the
well developed and less developed regions. In t h e
former, i n which the returns t o investment are reasona-
ble, adequate and f luctuate only within narrow margins,
overdues a re basical ly r e l a t ed to the leadership r o l e i n
cooperatives. In the l a t t e r , with inadequate and widely
fluctuating returns on investment, the agro-economic
environment within which cooperatives operate needs to
be improved, overdues a re mainly traceable t o the
fluctuating agricul tural income.
The review made i s only a sample of several empiri-
c a l and evaluative s tudies on the growth and s t ruc tu re
of the cooperative c red i t organiaations. Most of the
studies have tended to cover the nation-wide scene pro-
bably due tc t he ready ava i l ab i l i ty of the published
data a t the nat ional level. m e r e have alao h e n qui te
a good nurber of studies on inter-regional va r i a t ions a s
also in te r -d i s t r i c t variat ions.
K.rishnaswamya4 in 1967 made e s t a t ewide invest i -
gation of the working of cooperative democracy.
24. Mlshnaawamy, 0.R I 'Cooperative Dmcracy in Action', Somaiya Publications Pvt. Ltd., Bombay, 1976.
The maln objectives of t h i s ~ t u d y are1
1. t o study the s t ruc tu re of the government of ag r i -
cul tural cooperative short-term c red i t s t r u c t u e i n the
selected s tate!
2. t o atudy the working of derocrat ic control i n
practice in agricul tural c r e d i t cooperativaa?
3. t o study the influence of aocio-economic factor6
on democratic control in societ iea i n order t o iden t i fy
the factors which p m m t e o r retard! and
4 , t o study the operation of democratic control a t
the control and apex level financing banks.
Methodoloqy~
Thin study was based on the survey method, s i r a t
hand data were collected from the f i e l d d i r ec t ly from
the records of the selected institutions and through
garacnal inwrviews and mail questionnaires aa a l so
by observation. A multi-stage sarrgling design was
planned for the study, The study of working of denw-
c r a t i c control a t the primary level was confined t o ona
d i s t r i c t . Three large s ired societ ies and 15 small
siaed nocist ies were selected on random method. S t ra t i -
f ied sampling technique was applied t o se l ec t the
3 2 members in the mnaging comit tec, borrowera and
non-tarrowera of BACS. 16 DCCBs were taken ou the
basin of s t rat i f icat ion. Census mthod was adopted in
selecting the directors a t DCCBs levml. a t r a t i f i e d
sampling method was emlayad i n selecting the individual
members of the apex bank. With regard to the delegates
of CCBs and directors of the bank cenllus mthod was
employed.
Findings I
The findings lead to the inevitable conclusion Mst
demcracy in PhcS exist# i n the written constitution only,
but not in actual practice. The lgnorancs of memhers,
t he i r aocio-economic dispari t ies , the socir tLesl depen-
dence on CCBs for funds, robbing of v i t a l matters of
decision from the i r hands, lack of aordial relat ions
among members, the mechanical way of conducting maetings,
a l l these lead to the weakening of democratic control a t
grass roota level. As a r e su l t of thie, more than 50
per cent of the high caste families hold o f f i ces fo r
m r e than 10 years.
The individual members in central banks do not
genarally poseeea cooperative knowledge to be a source
of strength to the banks. The pattern of division of
33 of functiona clearly involves placing managerial res-
ponsibilities primarily on the h a r d or the executive
cornittee and the president. The secretary, who i s the
chief executive, i s not the effective administrative head
and minly the President performs thia function. 2ach
of the sample banks (CCBs) had conducted s ix meetings
during four years.
A t the apex level, the individual members' par t ic i-
pation in the meetings was insignificant. Their atten-
dance was low whereas that of the delegates of DEB8 and
the directors of the bank was high. Hence, there i s a
democratic control a t the apex level.
suryanarayana ~ a j u ' s ~ ~ etudy pmpoeed the main abjec-
tive viz., identifying different aspect8 of the perfor-
mance of DCCBs and PACS and to aaaess the nature of regional
variations in the performance of credit cooperatives.
ATea of Study and SOUICCLI of Data t
For the purpose of th i s study, DCCBa in 297 d i s t r i c t s
covering a l l the major s tates in India were selected. To
further examine the findings a t a much more disaggregated
level, 50 PACS were selected randomly from different tnluks
of Viaakhagatnam d i s t r i c t i n A.P., for the year 1975-76.
25. Raju, l . 5 1 nter-Eisuict Variations in the Parformanee of Aqricult&el Cradit C?opcratives in India :Coctlrar l iasar tdt ionl , Andhra Univarsity, Waltair, 677.
The data r e l a t ing to DCCBs were drawn from s t a t i s t i c a l
statements of RBI and PAC3 from D i s t r i c t Cooperative
off ices a t Visakhapatnam, Anakapalle and Vijayanagaram,
Information re l a t ing t o the agro-economic va r i ab les waa
taken from the vi l lage records. Principal component
analysis and multiple regression analysis were used.
Results of the Study8
The overal l performance of DCCBs, a s seen through
the composite index, i a the highest i n Ksrala followed
by Punjab, Tamil Nadu, Oujarath and Maharastra. The
weakest DCCBa a re in the eastern pa r t of the country.
In th i s study cooperatives a r e handicapped in s i tua t ions
i n which there i s a continuing legacy of adverse tenures
and low level of development of infrastructure, The
finding6 tha t the p r r fonance of PACS especial ly i n rela .
t i on to advences i a ba t t e r in atatea with well developed
agricul ture i s cormbarate8 by a study of PACS in
Visakhapatnam d i a t r i c t . However, societ ies with ba t t e r
perfonnance in r e l a t ion t o advances do not show equally
good performance i n recovery and there is no s ign i f i can t
association between recovery ratea and o the r aspects of
eff iciency,
Dadhich i n h i s analyt ical study" proposed the
following objectives I
1. To assess the s t ructure of overdues i n agrioul-
tu ra l cooperativa c red i t i n Rajaathan and i t a impactt
2. To study the socio-economic factors influencing
repayment of cooperative dues r
3. To make an enquiry in to the causes of overdues
a t various levelsr and
4. To suggest measures f o r minimizing overdues.
a ) Plan of Enuuiqt
He divided the s t a t e in to thres zones according t o
rainfal l . He selected three d i s t r i c t cooperative central
banks one from each zone for h i s study. Further three
Primary Agricultural Cooperative 3ociet ies have been
choeen from the jurisdiction o f each of the selected
cwperat ive central banks. A census s t d y of a l l the
members of these selected primary cooparatives haa been
taken for analysia of socio-economic factors influencing
repayment of cooperative dues. The reference year was
1968.
26. Dadhich, C.LI Qverduas i n Farm Co-ogerativa Craditt A study of Rajasthan, Popular Prakashan, mimay, 1'977,
For analysis of other aspect#, via., wilful default^
diversion of credi t etc., ha selected 20 members, according
to the siee of the i r cultivating holdings from each soci-
e ty under study. He classif ied the cultivating holdings
into three groupa-large, madium and small farmers. Pw-
ther, on the basis of random tables, 6 menbers from Me
large as well as eml le r and 0 mankern from medium group
were selected. Thus, 180 nmmbers were selected from
three diritricts to provide a bass fo r his atudy.
b i statement of Hypotheses1
1. The larger the landholdings, the lesser wil l be
the number of defaulters:
2. The number of defsulters in the case of middle
caste borrowers i a less ae compared to the upper and
lower caste borrowers1
3. The number of defaulters in case of i l l i t e r a t e
borrowers i s higher than l i t e ra t e borrowers:
4 , Borrowers with i r r igated holdings default lean
than borrowers with un-irrigated holdings]
5. Borrowers growing caah crops default less than
borrowers growing crops other than caah:
6. Uaars of chemical f e r t i l i s e r s de fau l t l e s s than
non-users of chemical f e r t i l i s e r s t
7. Thr smaller is the anwunt bcrmwed, the Ierrsar
wi l l ba the dsfaul tr and
8. Borrowers whose principal occupation i s c u l t i -
vation defaul t lose than tho le who depend p r inc ipa l ly
on occupations other than cul t ivat ion.
C ) Resultst
1. There i s no association between landholding8 and
repayment performance.
2. Borrowers belonging t o middle classes de fau l t
l e s s a s compared to upper and leaper caste borrowers.
3. No association between l i t s r acy and repayment.
4. Borrowers who have i r r iga t ion f a c i l i t y de fau l t
less as compared to those who do not have i r r iga t ion
fac i l i ty .
5. Borrowers growing cash crops ae fau l t l a s s a s
compared to those who grow crops other than cash.
6. Ueers of chemical f e r t i l i z e r s de fau l t l e s s a s
compared to non-users of f e r t i l i z e r s .
7. No association i s found between ainount hrmwdl
and repayment.
8. mrmwerr who mainly depend on cul t ivat ion
default l e s s than those who do not m i n l y depend on
cultivation.
~ h s deciding factors in repaymsnt are i r r iga t ion
and caste of the b r m w e r s as a l l variables f f e r t i l i a e r s ,
crops, occupation) centre around irr igat ion and caste2'.
Dadhich's i s an essent ial ly socio-e~onomio invest i -
gation of the factors influencing and the causes contr i -
suting to the emergence of overdues in cooperatives i n
Rajasthan during the l a t e 1960~.
~nter-regional as well as intra-regional d i spa r i t i e s
i n the flow of c red i t have been examined in a study mads
by A.Mukhopodhyay and others2'. Data have been extracted
from the combined reports O n the studies i n the economics
of Farm Xanagemant fo r the Firozepur Dis t r i c t of Punjab,
Thanjavur of Tamil Nadu and Cuddapah of Andhra Pradesh.
Factore influencing the demand fo r c red i t along with
the supply of c red i t a re noted to be crucial in explain-
ing the inter-regional variat ion in the actual flow of
credi t per u n i t of land.
28. A.mkhopodhyay and others, "Variation i n the flow of c red i t - A cm#d sect ional analysis" Financin Agriculture, Vol.XI, j u l y - S e p t e m b e r l 1 l 4 .
A plethora of l i t e ra tu re on Primary Agrimltural
Cooperative Societies vis-a-vis agricul tural development
has been published in different journals l ike Indian
cooperative review, Financing Agriculture, Indian Journal
Of Agricultural Economics, Kurukshetra, the Cooperator,
Yojana and others from time t o time.
A few studies conducted so f a r have not made an
indepth inquiry into tho problems affect ing the opera-
t ional performance of PACS i n drought prone regions.
alao, studies on inter-regilnal and intra-regional varla-
tions in the performance of PAC8 within a d i s t r i c t i n a
backward region have not been attempted. hlrther, only
a few studies have been carried out to analyse problems
associated with the working of the Primary Agricultural
Cooperative Societies a t a micro level. In a vast country
l ike India with varying agm-climatic conditiuns and
soeio-economic conditions, location specif ic studies are
required. In view of th i s , a study was planned a t a
micro levsl to examine the role of primary aqricul tural
cooperative societ ies in financing farm sector in Cuddapah
Distr ict of Andhra Pradesh with the fo l lwing specif ic
objectives.
1.1 OBJECTIVES OF THE STUDY t
The broad objectives are8
a ) to asmess the role of sample Primary Agricultural
CoQperative Societies i n farm finance in Cuddapah Distr ict
of Andhra Pradssh in the contsxt of Multi-agency approach
to farm credi t)
b) to describe farm credi t structure in the two
regions of the d ia t r i c t and to examine the concentration
of farm credi t disbursed by sample Primary Agricultural
Co-oprative Socistieat and
c ) t o analyse the inter-society variations in farm
credit operations such as menbership, borrowership, menage-
ment, capi tal , loans advanced and overdues.
1.2 THE HYPOIYESES r
The following hypotheses are tested i n the study1
a ) There i s no s ignif icant difference in the ave rap
level of inst i tut ional credi t disbureed per household
between the Delta and Non-delta societies of the d la t r io t )
b) There i s no difference in the Skewness of eo-
operative loans (bath current and outstanding) disbursed
in the sample societ iest and
a ) Inter-aociety variat ions in the s t ruc tu re of
membership, borrowership, repayment and pmf i t / lo s s
are not s ignif icant hstwsen Me #ocieties and over
a Five Year Period of time.
1.3 SAMPLE DESIONl
40 oov@r the wide range of population spread over
the d iu t r i c t two stage sampling plan was considered tD
be nore e f f i c i en t and f lexible . Selecticn of PACS formed
the f i r s t stage and selection of borrowers and non-
borrowers the second stage.
A t the end of June, 1988 there were 128 P r imry
Agricultural Cooperative Societ ies in the Cudclapah
X s t r i c t . PACS in the d i s t r i c t are divided in to two
groups, those working in the del ta region and those
working in the nondel ta region. The del ta region i s
predominantly i r r igated by the :Wnool-Cuddapah Canal
water supplied by r ive r Thungabhadra and the non-delta
region i s subjected to the vagaries of monsoons. Out
of 2 1 PAC8 i n del ta region and 107 PACS in non-delta
region two societ ies from de l t a region and two aociet les
from non-delta region were purposively selected f o r f i e ld
investigation on considerations of proximity and be t t e r n n
familiarity.
As the main focus of the study i s on ag r i cu l tu ra l
credi t , landlesa agricul tural labour household8 and non-
agricul tural households in the vi l lagee under the juris-
diction of the sanple soc ie t i s s have h e n dropped from
the l i a t . Thus out of 10,657 households, 1,605 landless
agricul tural households and 940 non-agricultural house-
holds were eliminated. Hence, the remaining 8112 cu l t i -
vator households forned the universe of the study. Theme
cul t ivator households were a t r a t i f i ed in to f i v e grouga,
namely I
1. Marginal (0-1 hectares))
2. Small (1-2 hectares 1
3. Semi-msdium (2-4 hectares) I
4. Medium (4-10 hectares) ; and
5. Large (10 and above hectares).
The above f ive grou?s of cul t ivator households were
further c l a s s i f i ed as borrower and ncn-borrower house-
holds. Five per cent of borrower households and two and
half per cent of non-borrower households were randomly
selected for f i e l d investigation. The table 1.1 gives
de ta i l s of the universe and sample.
In order to probe in to the reasons of sample non-
borrowing cul t ivatnr households for not taking the member.
ship of societ ies and borrowing from the societ ies , they
a re classif ied in to non-members and members society-wiae
and t h e de ta i l s are presented in the table 1.2.
TABLE 1.2
NON-hEMBERS AND hSMBERS OF XON-BORRMn'ERS SOCIETYqISE
1987-88 - Society Non- orr rowers
%on-members f4ambera
Channur
val lur
Pondalur
alannur
Total 52 96
SOURCE I Sample Data
The sample households of borrowers are further
classified in to two groups namely, nondafaul ters and
defaul ters f o r analyaing the oausae of da iau l t . This
i s dons society-wise and the de ta i l s a re presented i n
the table 1 . 3 .
TABLE 1.3
NON-DEFAULTERS AND DEFAULTERS SOCIETY-WISE 11487-88
society 80rmwer8 on-Defaulters Defaulters
Chennur
Vallur
Pondalur
Total 43 66
SOURCE I Sample Data
1.4 DATA YISE :
Two types of data i.e., time ser ies data and crose
section data were collected for the present study.
a ) Tim, Bsries Data:
In order to pmvida a necessary background f o r t h e
present study, t h e performance of t h e D i s t r i c t Co-operative
Central Bank over a period i s examined. Time series d a t a
with respect to share c a p i t a l , owned funds, deposits,
recovery performance e t c , were collectrrd f o r t h e per iod
1978-79 t o 1987-88 from t h e recoeas a t D i s t r i c t Cb-
operative Central Bank, Cuddapah. Data r e l a t i n g t o t h e
working of t h e sample s o c i e t i e s were col lec ted from t h e
records of t h e s o c i e t i e s and through discussions with
the s e c r e t a r i e s concerned f o r the period 1983-@4 t o
1987-88, with t h e help of a separa te i n s t i t u t i o n schedule.
T i m s e r i e s d a t a were a l s o col lec ted from p u b l ~ c a t i o n a of
d i f f e r e n t i n s t i t u t i o n s l i k e Reserve Bank of India, National
I n d t i t u t e of Rural Development and Bureau of Economics
and S t a t i s t i c s of Government of Andhra Pradesh. Besides
:he ?ublished sources, unpublished doctora l theaes and
o ther individual works have a l s o been consulted.
b) Cmss Section Dater
Information from t h e sample borrower and non-borrower
households from t h e ae lec tad Primary Agr icul tura l COT
operative S o c i s t i e s (PACS) waa col lec ted by d i r e c t perso-
na l inves t iga t ion . The schedules used i n t h i s inves t i -
gation were pra-tested and necessary improvements were
effected before conducting the s w e y . Cross seation
data relat ing to the borrowers and non-barrowers ntgard-
ing their croppinq pattern, intensi ty of cropping, a s se t
position, borrowings from different inst i tut ions etc.,
were collected for the year endad 30th June, 1988 only.
1.5 TOOLS OF ANALYSILll
The data drawn from the various sources were sub-
jectad to s t a t i s t i c a l treatment. Measures of central
tendency, co-efficient of variation, skewness, correlation,
Gini co-efficient, analysis of variance (ANOVA) end stu-
dents ' t ' teat are employed. For temporal data l inear
and compound growth rates are cornUte8 and the i r s ignif i -
cance i s tested. Graphs and visual aids are made use
of a t appropriate places.
1.6 SCOPE AND LIYITATIONS l
The scope of this study was limited to tha selecwd
sample PAC5 in Cuddapah d i s t r i o t and the samule borrower
and non-borrower households from these societiee due
to time end resource constraints. Cuddapah d i s t r i c t
wss chosen as the sample d i s t r i c t because of i t s proximity
to the place of work of the inveatigator. The reeul ta
of the investigation partain t o the agrfcul tural economy
of the Delta and Non-delta segments of Cuddapah d i a t r i c t
only.
Racall method was used to gather information from
the respondents ( f a rmrs ) as they did not maintain
records of the i r farm expenditurea and incomes. I n view
of the r eca l l lapse on the part of the respondents, the
information gathered cannot be treated as t o t a l l y free
from errors. However, e f fo r t s were made to co l l ec t
reasonably sat isfactory information from the farmers by
repeated appeals and ~e r suae ion .
The data relat ing t o the working of the sample
Primary Agricultural Co-operative Socist ias were collec-
.ed from the annual audi t r e lo r t s and other records main-
tained by the secretaries. Some of the sample societ iee
did not maintain annual audi t reports properly. The data
i n respect of such societ ies had to be gathered from
Distr ict Co-operative Central Bank, Cuddapah, and a l so
from the diviaional Co-operative offices. Other relavant
data were collected from seconaary sources which are
acknowledged a t the appropriate places.
The t h e s i s i s presented in seven chapters inc luding
t h e present chapter I, comprising t h e review of l i t e r a t u r e ,
objectives, hypotheses, d a t a base, t h e aample design,
t o o l s of analys ia and scope and limitations of the study.
The second chapter is aevoted t o the analyais of Rural
Credit S t ructure i n India. In chapter three Agr icul tura l
Credit S t ructure of Cuddapah D i s t r i c t i s discussed.
Chapter four deals with t h e ?arm Credit S t r u c t u r e i n Delta
and Non-delta regions of t h e d i s t r i c t . Chapter f ive
explores the concentration of co-operative c r e d i t anang
various groups of farmers and chapter s i x i s connected
with In ter -socie ty v a r i a t i o n s i n the working of the
sample s o c i e t i e s . 3 e seventh chapter sunanarises t h e
r e s u l t s of the study.