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ROLE OF COOPERATIVE BANK IN AGRICULTURAL CREDIT: A STUDY BASED

ON CHHATTISGARH

Article · October 2012

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 ROLE OF COOPERATIVE BANK IN AGRICULTURAL
CREDIT: A STUDY BASED ON CHHATTISGARH
Anil Kumar Soni1 and Dr. Harjinder Pal Singh Saluja2

1
Research Scholar, Govt. VYT Autonomous PG College Durg, Chhattisgarh
Email: anil_sims@rediffmail.com
2
Professor, Govt. VYT Auto. College Durg, Chhattisgarh

ABSTRACT
The cooperative banking sector is one of the main partners of Indian
banking structure, the cooperative banks have more reach to the rural India,
through their huge network of credit societies in the institutional credit
structure. The cooperative sector has played a key role in the economy of the
country and always recognized as an integral part of our national economy.
Cooperatives have ideological base, economic objects with social outlook
and approach. The cooperative covers almost all cent percent villages in
India. The cooperative form of organization is the Ideal Organization for
economically weaker sections in the country. According to recent study by
World Bank and National Council for Applied Economic Research, the
Primary Agriculture Credit Societies (PACS) amount for about 30 percent of
micro credit in India. This paper attempts to analyze the role of co-operative
bank in agricultural credit.
Keywords: Cooperative Bank, Agricultural Credit, Rural Development,
PACS

INTRODUCTION
India is agricultural based country and its 70% population stay in rural area. The
cooperatives which are the life blood of the Indian economy and the mechanism for any
developmental programs. Especially in an agriculture dominated rural sector, cooperative
banks play a pivotal role in bolstering the common individual and financing his business and
personal needs. The cooperative credit structure is serving the Indian society since 1904 and
since then it has seen several ups and downs. Despite of several limitations such as
restriction of area of operations, limited clients, small volume of business, political
interference, this movement is standing since last 108 years and serving the societies.
Economy of the Chhattisgarh is mainly dependent on agriculture as more than 80% of the
total population is engaged in this sector. The Chhattisgarh Government has implemented
from 2008-2009 the scheme of providing agricultural loans at the rate of 3%. Chhattisgarh is
basically known as “Rice Bowl” The State has witnessed tremendous growth in the
cooperative sector. Empirical analysis results show that the increase in the level of
agricultural loans granted by the cooperative banks positively influence development of
agriculture in India.
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OBJECTIVES
1. To study the performance of cooperative banking in respect of agricultural credit and
rural development.
2. To study the role of cooperative bank in agricultural credit.
3. To study the agricultural credit structure of the cooperative bank.
HYPOTHESIS
Cooperative banking is an important sector in Chhattisgarh as far as its role in agricultural
credit and socioeconomic development of Chhattisgarh is concerned. It has no alternative in
the era of economic reforms also.
AREA OF THE STUDY
The study is based on the agricultural credit of cooperative bank of Chhattisgarh. Therefore,
study covers Chhattisgarh to the fulfillment of objectives of the study.
PERIOD OF THE STUDY
For collection of the secondary data on the agricultural credit of the cooperative bank, three
years i.e. from 2009-2010 to 2011-2012 were taken as the reference period. The required
primary data were collected from the members and actual own experience in the field and
discussion with all concerns during the year 2011-2012.
REVIEW OF LITERATURE / COMMITTEE REPORT
Credit is a crucial input process of development. For historical reasons, Indian farming
community failed to make huge investments in agriculture. There is an adage which says that
“Indian farmer is born in debt, lives in debt and dies in debt”. In order to mitigate the
problems of the farming community, the Cooperative Credit Societies Act was passed in
1904, which permitted the formation of credit societies. They provided institutional support
to farmers for short, medium and long term purposes. Subsequently, tiers at state and district
levels were too conceived to strength these credit co-operatives. Apart from these
cooperative institutions, nationalization of commercial banks and introduction of regional
rural banks also helped in increasing credit supply to farmers. As mentioned before, by now
the Indian credit cooperatives have a century long history. During this period these
institutional financing agencies failed to a large extend, to meet the requirements
(consumption and production) of the farmers. Some of the factors responsible for their
failure are inadequate supply of credit, poor recovery, demand-supply gaps, interference by
politicians, lack of monitoring, mis-utilisation of credit, problems in identification of target
groups, high transaction costs, and lags in time, natural calamities and competition from
informal credit agencies.
A number of committees such as the Rural Banking Inquiry Committee (1949), the All India
Rural Credit Survey Committee (1954), the Committee on Cooperative Credit (1960), the
All India Rural Debt and Investment Survey (1962), the All India Rural Credit Review
Committee (1969), the Working Group on Rural Banks (1975), the Committee to Review
Arrangement for Institutional Credit for Agriculture and Rural Development (1981), the
Agricultural Review Committee (1989) and the Narasimhan Committee (1991 and 1998)
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were constituted by the Government of India to look into their working and made several
recommendations to improve their health and functioning. Of the total credit provided by
these institutions 44 per cent was met by the cooperative banks and 48 per cent by the
commercial banks leaving a paltry amount by the regional rural banks.
RESEARCH METHEDOLOGY AND DATA COLLECTION
The present study is based on the secondary data published by office of the Registrar of
Cooperative societies, Chhattisgarh, Raipur. The required data and literature for the study
purpose were collected from the number of reference books, Journals and Internet.
SCOPE AND LIMITATIONS OF STUDY
1. Study is limited to concept of cooperative and agricultural credit.
2. The information collected from 50 respondents of Kabirdham District only.
3. The study is applicable to other Districts of Chhattisgarh.
Agricultural Credit
The Agricultural Credit Policy essentially lays emphasis on augmenting credit flow at the
ground level through credit planning, adoption of region-specific strategies, rationalization
of lending policies and procedures and bringing down the cost of borrowing. Bank credit is
available to the farmers in the form of short-term credit for financing crop production
programs and in the form of medium-term/long–term credit for financing capital investment
in agriculture and allied activities like land development including purchase of land, minor
irrigation, farm mechanization, dairy development, poultry, animal husbandry, fisheries,
plantation, and horticulture. Loans are also available for storage, processing and marketing
of agricultural produce.
National Bank for Agriculture And Rural Development (NABARD)
The NABARD provides refinance to the Apex Bank and CARD Bank. NABARD is an apex
institution accredited with all matters concerning policy, planning and operations in the field
of credit for agriculture and other economic activities in rural areas. It is an apex refinancing
agency for the institutions providing investment and production credit for promoting the
various developmental activities in rural areas. It co-ordinates the rural financing activities of
all the institutions engaged in developmental work at the field level and maintains liaison
with Government of India, State Governments, Reserve Bank of India and other national
level institutions concerned with policy formulation.
Primary Agricultural Cooperative Societies (PACS)
PACS are playing a crucial role in improving the economic and social conditions of the
common masses of Chhattisgarh. They provide short-term and medium-term loan to the
members/farmers at reasonable interest rates to meet their various needs. They are providing
credit to the farmers for agriculture purposes at cheap and easy terms. PACS is the
foundation of the Cooperative Credit System on which the super structure of the short-
term cooperative credit system is built.

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Agricultural Cooperative Credit Structure
Short-term structure is a three tire structure with PACS in rural areas, Co-operative Central
Banks at the district level and the Apex Bank at the state level. The short-term credit
structure provides short-term credit for crop production and medium-term credit for small
developments. Chhattisgarh State Cooperative Agriculture and Rural Development Bank
(CSCARDB) at the State level and Primary CARD Bank at the Block level cater to the long-
term credit needs in the two tier credit delivery system.
In the short term credit structure, 1333 PACS including 476 LAMPS are functioning. In
addition to this, there are 6 District Cooperative Central Banks with 209 branches.
Chhattisgarh State Co-operative Apex Bank is functioning as state level financial institution.
In the long term credit structure CSCARD Bank with 12 District CARD Banks including 77
branches are functioning.
Short Term Agricultural Cooperative Credit Distributions and Recoveries
Table 1 shows the short-term credit distribution and Table 2 presents short-term credit
recoveries for the last three years from 2009-2010 to 2011-2012. Graph 1 and Graph 2 show
the same. The credit distribution was increased year by year and recovery of credit was poor.
Table 1. Short-term Agricultural Loan Distribution
Year Kharif Rabi Total
2009-2010 82141 12417 94558
2010-2011 90784 20809 111674
2011-2012 121739 5203 126942 (up to 31.12.2011)
Source: Cooperative Department Report - 2010-2011. *(Figures- Rs. in lakhs)

140000

120000
Kharif
100000

80000
Rabi
60000

40000 Total
20000

0
2009-2010 2010-2011 2011-2012

Graph 1. Short-term Agricultural Loan Distribution

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Table 2. Short-term Agricultural Loan Recovery
Year Demand Recovery % of Recovery
2009-2010 148086 114659 77
2010-2011 170724 133681 78
2011-2012 188864 68210 36 (up to 31.12.2011)
Source: Cooperative Department Report - 2010-2011. *(Figures- Rs. in lakhs)

200000
180000
160000
140000
120000
Demand
100000
80000
60000 Recovery
40000
20000
0
2009-2010 2010-2011 2011-2012

Graph 2. Short-term Agricultural Loan Recovery

Long-term Agricultural Cooperative credit distributions and recoveries
Table 3 shows the long term credit distribution and Table 4 presents long-term credit
recoveries for the last three years from 2009-2010 to 2011-2012. Graph 3 and Graph 4 show
the same. The credit distribution was increased and target achieved above 90%, and poor
recovery of credit.
Table 3. Long-term Agricultural Loan Distribution
Year Target Distribution % of Distribution
2009-2010 1500 1379 92
2010-2011 1424 1355 95
2011-2012 1215 126 10 (up to 31.12.2011)
Source: Cooperative Department Report - 2010-2011. *(Figures- Rs. in lakhs)

1600
1400
1200
1000 Target
800
600 Distribution
400
200
0
2009-2010 2010-2011 2011-2012

Graph 3. Long-term Agricultural Loan Distribution

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Table 4. Long-term Agricultural Loan Recovery
Year Demand Recovery % of Recovery
2009-2010 10943 5784 53
2010-2011 10235 4870 48
2011-2012 9764 722 07 (up to 31.12.2011)
Source: Cooperative Department Report - 2010-2011. *(Figures- Rs. in lakhs)

12000
10000
8000
Demand
6000
Recovery
4000
2000
0
2009-2010 2010-2011 2011-2012

Graph 4. Long-term Agricultural Loan Recovery

KISAN Credit Card
In Chhattisgarh the KCC was introduced from 1999 in District Central Co-operative Bank
for short-term and medium-term loans to provide adequate and timely credit support from
the banking system in a flexible and cost-effective manner. The cash and goods ratio of the
scheme is 60:40. Maximum limit of KCC is rupees five lakhs. 1366514 KCC issued since
the scheme introduced.
Restructuring Cooperative Credit / Revival Package
In August 2004, the Government of India constituted a task force under the chairmanship of
Professor A. Vaidyanathan for suggesting measures for the revival of cooperative credit
institutions. The task force submitted its report in respect of a short-term cooperative credit
structure and recommended a financial package of Rs 14839.00 crore for rural credit
cooperative institutions. Based on the consensus arrived at with the state governments and
other stakeholders on the recommendations made by the task force, the central government
approved the revival package that involves financial assistance of Rs 13596.00 crore.
NABARD has been designated as the implementing agency for the revival of the short-term
cooperative credit scheme. A Department for Cooperative Revival and Reforms has been set
up in the head office of NABARD for facilitating the implementation process. The provision
of financial assistance under the package has been linked to reforms in the cooperative
sector. In order to avail financial assistance under the package, the state governments are
required to sign MOU. The Chhattisgarh Govt. signed MOU of 541.42 crores package on
25.09.2007.

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Field Survey / Sample Design of The Study
The present study is survey based it attempts to explode the agricultural credit and economic
development of rural sector. For the selection of the sample respondents, the researcher
approached the Apex Bank (State Cooperative Bank). For the study 10 PACS have been
selected from district Kabirdham and from each PACS 10 respondents have been selected by
adopting simple random sampling. Thus 100 respondents were selected.
OBSERVATIONS AND DISCUSSIONS
From the field survey report the following parameters / indicators conclude the observation
and analysis of agricultural cooperative credit.
Table 5. Parameters / Indicators of Analysis
Banking Service 55 (good) 36 (average) 9 (poor) 100
Lending Procedure 60 (timely) 25 (delay) 15 (very delay) 100
Lending Schemes 58 (limited) 32 (outdated) 10 (cant say) 100
Interest (long-term) 70 (high rate) 20 (very high) 10 (cant say) 100
Repayments 64 (repaid) 26 (will paid) 10 (NPA) 100
Awareness 56 (aware) 36 (average) 8 (not aware) 100
Satisfaction 76 (satisfied) 10 (unsatisfied) 14 (cant say) 100
Source: Primary data collected from fieldwork (Survey Data)
RESULTS / FINDINGS
From the above data it is clear that cooperative banks are serving in the field of agricultural
credit and rural development. Maximum numbers of respondents are satisfied with
functioning of cooperative bank. The level of service of cooperative banks is very high.
Cooperative banks are playing extraordinary role for agriculture credit and rural
development. In short we can say that Cooperative Banks are providing rural Chhattisgarh
all round assistance and proved to be an institution where "Growth with Social Justice"
exists. Cooperative Banks plays a major role in rural credit delivery of Chhattisgarh State.
SUGGESTIONS AND RECOMMENDATIONS
1. The Cooperative Banks should try to increase their deposits by opening branches in
business areas, improve the services to their clients, introduce different types of
deposit schemes and offer competitive rates of interest.
2. Cooperative Banks should change their loan policies on the basis of crop loan
systems.
3. The Cooperative Banks must maintain adequate liquid resources, margin, properly
scrutiny of loans and should try to qualitative improvement to the staff.
4. Cooperative Banks should try to co-ordinate between the Board of Management,
Members, Depositors and Employees of bank.
5. Accountability and transparency need to be brought in the implantation of the
schemes.

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CONCLUSION
Cooperative banks belong to the oldest forms of the collective action in India playing
essential role in the realization of the agricultural and in local development. They serve both
rural and urban population, and are main banks in India supporting development of
agriculture and rural areas. Their key role is to give credits financing various rural based
entrepreneurships. Agricultural credits play a number of significant functions of which the
primary include the intensification and growth of the agricultural production. In a developing
State like Chhattisgarh with huge deficits in terms of quality and quantity, the State has to
shoulder the primary responsibility of providing cooperative credit. Considering the low
living standards of common man, incomplete and imperfect markets, and other socio
political considerations it is the primary duty of the government to ensure that its citizens
have easy access to cooperative credit.
REFERENCES
1. Departmental Report of Co-operative, Govt. of Chhattisgarh Year 2011-12.
2. Dasgupta R. 2005), Microfinance in India.
3. Gulati A. and Bhatia S. (2000), Institutional Credit to Indian Agriculture
4. Jadhao S P, Present Scenario of Banking Sector in India, International Research Journal
2010 June.
5. Misal S M, Cooperatives and Rural Development: Indian Streams Research Journal
2011 March.
6. Rajivan A. (2008), Microfinance in India, Yojna, January
7. Sharma, Mandira and Kumar, Rajiv (2008), Rural Short-term cooperative credit
structure, Economic and Political weekly, March 1, pp. 13-18.
8. www.coop.cg.gov.in

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