Commercial banks and agricultural credit: a study in regional disparity in India

Commercial banking system is expected to play an important role in fostering the future framework of institutional finance in agriculture. It has made some important strides in this direction in the last decade. A reasonably widespread banking network is now available in the country on the basis of which it has been possible to visualise a fifty per cent share for the small and marginal farmers in the total agricultural credit of commercial banks. The larger question of evolution of effective measures which will equalise agricultural credit, maintain regional balance and promote overall economic development, still remains.

Regional disparity in commercial bank credit to agriculture cannot possibly be studied without reference to level of agricultural productivity, and divergence in agricultural development potential and socio-economic structure of different regions. Dr. Basu has laid special emphasis on the last aspect. He has analysed the effects of a number of socio-economic and productivity variables on inter-district variations in agricultural credit given by commercial banks. The whole study has been undertaken within the framework of a theory of regional development which is based on the tenets of modes of production determining modes of generation and utilisation of economic surplus. The performance of the Commercial banking system in agricultural financing apparently varied regionally partly because of variations in the modes of surplus generation prevalent in agriculture. The regional imbalance in the development of the banking system itself in around 300 selected districts of the country has been analysed in terms of per capita credit, per capita deposit, expansion of bank offices and agricultural credit per hectare of net sown area.