Co-operative Credit in
Rural India
Vishal Singh
vishalsingh@rediffmail.com
Agriculture, a
key to the economic development of India, continues to play a pivotal
role in ensuring livelihoods to more than two-thirds of the entire
country’s population. Agricultural development has had been given its
due importance, starting from the first five year plan to the ninth one.
The all round rural development depends on the agricultural development
of the country. Out of the various inputs needed in agriculture in
India, credit constitutes an important part. In each plan period, since
independence, there has been a continued emphasis on rapid and
progressive institutionalisation for the supply of timely and adequate
credit support to the so called poor, small and marginal farmers and the
weaker sections of the society, in order to enable them to adopt modern
agricultural technology and improved agricultural practices for enhanced
growth, production and productivity.
Government of
India’s policy initiatives for strengthening the rural credit delivery
mechanism has laid emphasis on enhancing the flow of credit at the
grassroots level through an appropriate credit planning, adoption of
region-specific strategies and rationalisation of lending policies and
procedures. Out of a multi-agency network of different banks (i.e.
commercial banks, regional rural banks etc.), the co-operatives have a
vast and wide network for supplying agricultural credit to the farming
community. The co-operatives, with their long mixed history, now have an
important role to play in ensuring the achievement of targeted
agricultural growth of our nation.
Indian
Planners perceived that the economic development of the disadvantaged
and those living below the poverty line, particularly in rural areas,
would only be possible if a system of co-operation could be imbibed
among them and a culture of participatory community development through
co-operatives established. They really realised the importance of the
concept behind the co-operation and non-exploitative character of
co-operatives, voluntary nature of membership, the principle of one man
- one vote and decentralised decision making, for which they considered
the co-operative as an indispensable instrument of rural economic
development.
To enhance
the supply of institutional credit to small and marginal farmers, to
provide agriculturists easy and non-exploitative funds for agricultural
operation at a low rate of interest, to eliminate moneylenders and other
non-institutional financial intermediaries from the rural credit scene,
the co-operative movement was launched vigorously after independence and
the provision of co-operative credit was organized at large in
successive plan period in India.
Rural
co-operative credit institutions, which occupy a vital position in the
Indian financial system as far as their volume of operation, reach and
purpose of their service, are concerned, play an important role in rural
credit delivery mechanism with credit co-operatives forming almost 70
per cent of the Rural Credit Outlets.
"Over the years, cooperative
credit institutions
have remained the prime institutional agencies
with their vast network, wider coverage
and outreach extending to the
remotest part of the country."
Cooperative
Banking Structure has a unique position in the rural credit delivery
system of India. The cooperative banking sector, especially with its
existence of about a century, has made significant strides in the field
of rural credit. Since then, the co-operative credit institutions, both
in the short and the long term structures continued to play their
crucial role in dispensation of credit for agriculture and rural
development. Over the years, they have remained the prime institutional
agencies with their vast network, wider coverage and outreach extending
to the remotest part of the country. Both the short term and long term
cooperative credit institutions are basically farmers’ organisations,
primarily meant to meet their credit related requirements. Although
commercial banks since nationalisation, have entered rural areas and
opened large number of branches and RRBs have also established a large
network of rural branches to cater to the credit need of rural poor,
cooperatives continue to enjoy a place of crucial importance in the
rural credit scenario. There are some niche areas where co-operatives
have no competitors and cannot be replaced. The reasons for their
essential existence are provided below:
l
These institutions are primarily owned by the farmers, rural artisans,
etc.
l
They have been set up with
the objective of promoting thrift and mutual help.
Cooperative
credit societies at the grassroots level are intended not only to cater
to credit requirements of the members but also to provide several other
credit linked services like input supply, storage and marketing of
produce, etc. Keeping in view these special features of cooperatives,
time and again, their role in dispensation of credit and allied services
in the rural areas has been emphasised and their relevance underlined by
several Committees — right from the All India Rural Credit Survey
Committee in the early 50's to the Expert Committee on Rural Credit (ECRC),
2000.
From a meager
credit share of 2.7 percent during the early 50's, the share of
agricultural credit purveyed by cooperatives has increased to a
phenomenal 45 percent by March 2001.
CO-operative
Credit Institution
The
Co-operative Credit Structure may be categorized into two types:
(i) Short
term credit structure
(ii) Long term credit structure
i)
Short Term
Credit Structure
The Short-term credit
structure of the co-operatives is a three-tier structure (Primary
Agricultural Credit Society (PAC) at the bottom and State Co-operative
Banks (SCBs) at the top whereas District Central Co-operative Banks (DCCBs)
lying in between these two. The SCBs form the apex of the co-operative
credit structure in respective states and they finance and control the
working of the DCCBs. They also serve as a link between NABARD, DCCBs
and PACs. The task of the DCCBs is to lend village Primary societies and
attract deposits from public and they also serve as a link between SCBs
and PACs.
ii)
Long Term
Credit Structure
In order to meet Long
Term requirement of the Small and Marginal farmers, it was thought that
credit through an institution specially designed to cater to the LT
credit needs of the agriculturists would be mobilised at the right time
of their need. In this process, the rate of interest charged is also
less and the person is asked to repay the loan amount annually and
bi-annually through easy installments. The Long term funding institution
has undergone changes in its nomenclature from Land Mortgage Banks to
Land Development Banks and now Agricultural and rural development Banks.
As per the recommendation of the All India Rural Credit Survey Committee
for at least a LDB in each State, there were 19 SCARDBs with 1219
branches in 19 states/UTs with Rs. 382 crores of deposit mobilisation.
As far as PCARDBs are concerned, there were 755 Banks with a deposit
mobilisation of Rs. 221 crores.
Problems and
solutions of Co-operatives
|
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Large overdue have
become the matter of concern for the co-operative movement in India.
|
|
l |
Lack of cohesiveness
among the members of co-operatives and lack of knowledge about the
nature and the advantages of being in a co-operative have stood as a
stumbling block in the path of progress of the co-operatives. |
|
l |
The needy small and
marginal farmers and weaker sections of the society have not been
ensured timely and adequate credit. |
|
l |
The co-operatives like
SCBs and DCCBs lack in deposit mobilisation. The deposits mobilized
were proportionately very less vis-ŕ-vis the loans issued. |
|
l |
The share of the
co-operative credit flow to rural India is very less (3 to 5%) for
the most needy tenants, Sharecroppers, landless agricultural
labourers and rural artisans who are the poorest and subsist below
the poverty line. |
|
l |
The availability of
credit to small and marginal farmers for purchasing necessary inputs
is very inadequate. |
|
l |
Uneven distribution of
the co-operative benefits among the States. Loan advanced per member
varies widely. |
|
l |
The farmers of Gujarat,
Punjab, Haryana and Tamil Nadu get more credit vis-ŕ-vis those in
Orissa, Bihar, West Bengal etc. |
|
l |
Most of the tribal and
hill districts of the country are still getting negligible
co-operative credit. |
|
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Less membership numbers
in co-operatives are also hampering the dissemination of information
about the co-operatives. |
|
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There has been high
management cost and other managerial problems experienced. |
|
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There are lack of
diversification in business portfolio with less volume of business |
|
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Declining percentage of
borrowing memberships |
|
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Low skilled staff and
lack of professionalism in the institution |
|
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Low interest margin |
|
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Diversification of
loans: The banks have been found not to be promoting credit support
against diversifying loans in order to enable a large number of
farmers and weaker sections to take loans for area specific viable
activities like dairy farming, poultry farming, aquaculture,
pisciculture, goat and sheep rearing, sericulture etc. there is a
need for diversifying agriculture and cropping pattern and for
which, establishing agricultural processing and cottage industries
may be thought of. The co-operatives like SCARDBs and PCARDBs should
explore the possibilities of financing various diversified
activities and benefit from the potential area of agricultural and
rural development. |
|
l |
Professionalism of
co-operatives is a must, along with the democratisation of their
operational procedures, so as to facilitate the development of
co-operatives as self reliant and economically viable financial
organisations. This could only be possible after ensuring better
managerial skills with efficient risk management, safeguarding
against market imperfections, transparency, accountability, quality
service and a high recovery ratio. |
|
l |
The co-operatives must
avail of new opportunities in the Indian food sector, in which there
is a large scope for the much needed development through employment
generation. |
|
l |
The co-operative sector
has a high potential in terms of diversifying itself into different
export promotion activities like - processing of agricultural
commodities like tea, spices, cashew nuts, jute, coir, sugar and its
by-products etc. In this regard, a proper linkage between the
co-operative credit institution and marketing should be established
for better results.
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