By Dr. Amrit Patel

One of the objectives of the rural credit policy has been to minimize the dependence of rural poor on non-institutional sources of credit. The study of Basic Statistical Returns, 2005; Census data, 2001 and the Debt and Investment Survey during 1992 and 2003, however, exhibited a dismal performance of rural credit institutions, their policy and implementation.

Average population per branch served by scheduled commercial banks in rural areas was 13,462 in 1991 as compared to 14,484 in urban center. However, in 2001 and 2005, population per rural branch progressively increased to 15,667 and further to 16,650 whereas it declined to 14,137 and 13,619 per urban branch respectively. Between 1993 and 2007, while 4,750 rural branches were closed down, 4858 braches were added in semi-urban, 4,230 branches in urban and 6073 branches in metro centers.  Thus, the banking system paid focused attention more on semi-urban, urban and metro centers’ customers than rural customers.  The profit-motivated policy directly impacted on the performance of their operations. The number of deposit and credit accounts per 1000 population in urban branches were 483 and 104 respectively as against 270 and 64 in rural branches.  The number of deposit and credit accounts per urban branch were 6,155 and 1,321 respectively as compared to 4,202 and 1000 per rural branch. Deposit and credit amount per urban branch was as high as Rs.199.2 million and Rs.379.4 million respectively as against Rs.49.8 million and Rs.63.7 million per rural branch.  Balance per deposit and credit account in urban branches was as high as Rs.32,360 and Rs.287,910 respectively as against Rs.11,840 and Rs.63,740 in rural branches.  Credit-Deposits Ratio was as high as 190.5% in urban centers as compared to 127.9% in rural areas.

Out of total 89.3 million households, 45.9 million farmer households [51.4%] do not access credit either from institutional or non-institutional sources. Practically the flow of institutional credit in agriculture was stagnant between 1991-92[55.65%] and 2002-03 [57.09%]. In Meghalaya institutional credit sharply declined from 91.88% in 1991-92 to 38.11% in 2002-03 whereas in Jammu and Kashmir it shot up from 42.80% to 82.74% reflecting abrupt change. Institutional credit in 2002-03 ranged from as low as 7.76% in Manipur to as high as 84.54% in Mizoram as compared to the lowest at 25.56% in Andhra Pradesh and the highest at 98.58% in Sikkim in 1991-92, showing extreme variance among States’ access to institutional credit and heavy dependence on non-institutional sources of credit in 2002-03. In 2002-03 institutional credit in 11 States was below national average [57.09%], viz Andhra Pradesh [37.5%], Assam [46.43%], Bihar [23.51%], Manipur [7.76%], Meghalaya [38.11%], Punjab [53.82%], Rajasthan [38.69%], Tamil Nadu [46.63%], Uttar Pradesh [53.61%], Uttrakhand [53.94%] and West Bengal [48.63%].

Annual Interest rate percentage in 2002-03 on borrowings from non-institutional sources was extremely exploitative as against institutional sources in 18 States, viz, 30.87/12.75 [Andhra Pradesh], 36.02/11.73 [Bihar], 27.40/13.91 [Chhatisgarh], 23.85/13.54 [Haryana], 18.89/8.29 [Jharkhand], 25.19/14.33 [Karnataka], 29.48/13.15 [Kerala], 24.78/15.05 [Maharashtra], 51.17/25.36 [Manipur], 29.59/12.89 [Madhya Pradesh], 41.72/13.00 [Orissa], 18.24/12.72 [Punjab], 22.69/13.38 [Rajasthan], 13.29/9.89[Sikkim], 35.09/15.48 [Tamil Nadu], 26.30/11.95 [Uttar Pradesh], 27.52/11.92 [Uttarakhand] and 23.85/11.76 [West Bengal]. Rs.180 billion debt out of Rs.480 billion non-institutional debt carried 30% annual interest rate.

Per hectare credit [Rs.1916] in 2002-03 from institutional sources accounted for 57.1% of the total [Rs.3356] at the national level as against Rs.545 [55.6%] of the total [Rs.980] in 1991-92 revealing insignificant increase. While 15 States had per hectare credit amount below national average [Rs.1916] ranging from Rs.71 in Arunachal Pradesh to Rs.1833 in Maharashtra in 2002-03, seventeen States in 1991-92, had below national average [Rs.545] varying from Rs.45 in Meghalaya to Rs.504 in Arunachal Pradesh. The variance in respect of percentage of institutional credit to total credit per hectare ranged from 23.5 in Bihar to 90.9 in Jharkhand in 2002-03 as against from 25.6 in Andhra Pradesh to 94.4 in Jharkhand in 1991-92. Eleven States in 2002-03 had institutional credit per hectare, less than national average [57.1%] viz Andhra Pradesh [37.5%], Assam [46.5%], Bihar [23.5%], Manipur [7.8%], Meghalaya [Rs.37.8%], Punjab [53.8%], Rajasthan [38.7%], Tamil Nadu [46.6%], Uttar Pradesh [53.6%], Uttarakhand [53.9%] and West Bengal [48.6%] as against 15 States in 1991-92. These States also exhibited similar pattern in respect of percentage of per capita credit from institutional sources in 2002-03 and 1991-92 too.

Between 1991-92 and 2002-03 while the percentage share of landless and marginal households among rural households increased from 33.8 to 39.6 and 39.5 to 41.4 respectively, the share of small, medium and large households declined considerably from 13.0 to 10.6, 8.7 to 5.5 and 5.0 to 2.9 respectively. The percentage of landless and marginal households having access to non-institutional sources shot up sharply from 10.6 and 10.8 in 1991-92 to 13.5 and 13.8 respectively in 2002-03, whereas percentage of small, and large households’ access was considerably less from 10.3 and 7.9 to 9.4 and 7.7 respectively. There was no difference in case of medium households. Interest rate on borrowings from non-institutional sources for landless [30.2%] and marginal households [28.1%] in 2002-03 was much higher than the interest for small [26.3%], medium [25.6%] and large [25.2%] households.

At national level the landless and marginal households accounted for 81% as against 19% of small, medium and large households in 2002-03. However, Kisan Credit Cards [KCCs] issued and credit provided through KCCs to landless and marginal households accounted for 40.4% and 16.1% respectively, as compared to 59.6% of KCCs and 83.9% of credit issued to small, medium and large households in 2002-03. Similarly, use of KCCs by landless and marginal households during 365 days in 2002-03 was 35.07% and 47.39% respectively as compared to 63.69%, 70.97% and 81.24% by small, medium and large households respectively. None of the landless households was issued KCC in five States [Arunachal Pradesh, Manipur, Meghalaya, Nagaland, and Sikkim]; none from small households in three States [Nagaland, Sikkim and Tripura]; none from medium householders in five States [Jhrkhand, Manipur, Ngaland, Sikkim and Tripura], and none from large households in eight States [Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura]. Credit was not provided to any of the KCC holders from landless households in five States [Assam, Chhasitgarh, Himachal Pradesh, Jharkhand, and Mizoram]; marginal households in four States [Arunachal Pradesh, Mizoram, Nagaland, and Sikkim]; small households in Mizoram; medium households in three States [Himachal Pradesh, Mizoram and West Bengal] and large households in two States [Kerala and West Bengal].

The growth rate of food grain production decelerated to 1.2% during 1990-2007, lower than annual population rate averaging 1.9%

This has been the status of institutional credit for rural poor when the flow of institutional credit, since the adoption of “Multi-Agency Approach” in 1969, continuously increased from disbursement of agricultural credit of Rs.2,851.46 million and Rs.6,851.46 million in the Ninth and Tenth Five Year Plan respectively. A serious question, therefore, arises whether access of rural poor to institutional credit would surely improve to the expected level during eleventh Plan when institutional agricultural credit envisaged is of the order of Rs.19,595.24 million.

It is high time for all stakeholders to commit themselves in a coordinated manner to [i] implement effectively the concept of service area approach [ii] make productive use of non-banking working day, disbursement day & business correspondents [iii]introduce novel financial products including biometric smart card[iv]effectively establish Financial Literacy & Credit Counselling Centres[v] Judicious use of Financial Inclusion Fund & Financial Inclusion Technology Fund and [vi] undertake area based research studies to understand field problems and evolve area based policy rather than enforcing rigidly national policy.

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