Effective financing of agricultute with specific emphasis onrecoveries

There has been a substantial expansion in the volume of agricultural credit lent by the commercial banks in India during the last one decade. It is now in the neigh bourhood of Rs. 10,000 crores accounting for 14.5 percent of the total bank advances. Considering the volume of credit and its components, the expansion achieved by the banks is indeed commendable. It is however, debatable as to whether the expansion is adequate considering the growing needs of the agricultural sector. The acceleration in the flow of credit to the rural economy, through a wide network of branches opened in the recent past, has created a number of problems, both managerial and operational. The mounting overdues is one of the problems.

The increase in the default ratio is causing concern to the bankers and the central bank authorities. It is not only the steady decline in the recovery rate which is causing concern, but also the factors which influence this deterioration. The apprehension is that the overdues which are the bane of the cooperative credit system in India should not plague the commercial banks' operations. The periodical announcements of the programmes for writing off the agricultural dues based on political expedien cies have a tendency to increase wilful default among the borrowers. They also would tend to influence the borrowers who are prompt in their repayment. Bad advances are not an unknown element in credit deployment. A small percentage of the total credit lent becoming sticky is inevitable in real life situation. Its expansion, however, beyond reasonable limit is undesirable. The overdues in the case of agricultural advances are of the magnitude of 45 per cent and there has been no percept ible improvement in it in the recent years.