MSc

Agriculture in India has shared the thought, outlook and culture of the people of India for centuries and constitutes the backbone of Indian economy. Agricultural credit has played an important role in the development of agricultural sector, specifically investment credit in increasing production and productivity. Agriculture, during its primitive stage, the necessity of long term credit was not felt. However, the innovations in agricultural technologies paved way for vast potentialities for agricultural development. Currently, the long term credit has been viewed as essentially a vibrant credit in such a way that it supports the farmer to create assets on land, thereby augmenting his output which subsequently adds to the agricultural production in the country. The most important agency that lends long term investment credit to farmers is the Cooperative Agricultural and Rural Development Banks.
The Cooperative Agricultural and Rural Development Banks were the pioneers in providing investment credit for agriculture and were started primarily for this purpose. The banks have been assigned a vital role in agricultural development in the state. However, the PCARDBs in Kerala are passing through a critical stage of their growth. A good number of them are running at loss and their overdue are mounting over the years (RBI, 2015) which is already explained by a number of studies. It was found that the constraints are due to the poor recovery management, differential rate of interest when compared to commercial banks and private banks, restricted area of operation, restricted mobilisation of funds and restricted investments. In this context, a study on the “Performance Evaluation of Primary Cooperative Agricultural and Rural Development Banks in Central Kerala” was taken up with the objective of analysing the financial performance of these banks, examining the operational and managerial problems existing in the banks and to study the loan utilisation pattern and repayment behaviour of farmers.
The study area covered Thrissur, Ernakulum and Palakkad districts of Central Kerala which were selected based on the highest number of PCARDBs in each district in Central Kerala. From each district, the PCARDB which had the highest loan disbursed during the year 2015-16 was selected for the study. Thus, Irinjalakkuda PCARDB from Thrissur, Aluva PCARDB from Ernakulum and Alathur PCARDB from Palakkad districts were selected for the study.
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The secondary data for studying the financial performance was collected from the Annual reports for ten years (from 2008-09 to 2017-18) of these banks and was analysed with the help of statistical tools such as financial ratios, CAGR and simple growth rate. The primary data for examining the operational and managerial problems existing in the banks was collected from board of directors and employees of the selected banks using a pre-tested structured interview schedule. The data thus collected was analysed using the tools indices, percentages and Kruskal-Wallis H test. The primary data for studying the loan utilisation pattern and repayment behaviour of farmers was collected from randomly selected 180 farmers (60 from each bank) using a pre-tested structured interview schedule and was analysed with the support of the statistical tools percentages, indices, Kendall’s coefficient of concordance and binary logistic regression model.
By analyzing the first objective, it was found that Aluva and Alathur PCARDBs were efficient in mobilising funds, in deployment of the funds and also efficient in its operations. However, Irinjalakkuda PCARDB after bifurcation during the year 2015-16 witnessed decline in their operations resulting in subsequent loss for the bank from the year 2015-16. However, among the three banks, Alathur PCARDB excelled in performance.
The second objective was analysed from the perspective of board of directors and employees. From the point of view of the directors the issue was studied under four heads viz., administrative problems, functional problems, structural problems and human resource related problems. The administrative problems were further subdivided as problems related to board meeting, problems related to general body meeting and problems related to audit. In the same way from the employee’s perspective it was studied under the heads viz., structural, functional, administrative and human resource problems. The results showed that in the opinion of board of directors the major problem confronted by the banks were increasing NPA. Further, according to the board no other major administrative/functional/structural issues were persisting in the banks. However, the perception of employees were different from that of the board of directors. In their opinion, the major problems confronted by the banks were “absence of technological upgradation”, “lack of modern practices of banking” “absence of modern management techniques and MIS” as structural problems, “mounting NPA”, “high interest on loans” “existence of govt. loan waiver schemes” as functional problems “competition from other financial intermediaries” and “impact
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of demonetization” as administrative problems “absence of specialised staff”, “lack of professional skills” and “staff paucity and employee overburden” as human resource related problems.
The analysis of the third objective concluded that majority of the borrowers had diverted the loan for other purposes like renovation, repair and maintenance of houses, marriage ceremonies, building up of commercial space, purchase of inputs, payment of wages, medical expenses, emergency needs of friends and relatives etc. The study on repayment behaviour of farmers found that the variables, age, economic status and membership in bank had statistical significance in repayment behaviour of the borrowers of Aluva bank, whereas education status, income status and land holding were found to have statistical significance for borrowers of Alathur bank and for Irinjalakkuda bank variables education status and duration of membership in the bank had statistical significance on the repayment behaviour of borrowers. Further, high interest rate, reduction in employment and fall in price of agricultural commodities were found to be the major causes of non-repayment of loan by the farmers. Finally, incentives for prompt repayment, timely reminders, reduction in interest rates, small installments and fixation of recovery period in coincidence with the harvest/income period were the suggestions put forth by the farmers for reducing loan default.
The member farmers, the board of directors and the employees are the three important pillars on which the success and sustainability of a cooperative organisation rests. It is obvious from the study that the board of directors of the sample banks are scrupulous, conscientious and meticulous in carrying out their duties and responsibilities supported by a band of committed employees and dedicated member patrons. However, a few issues had been revealed in the study which could be addressed by the concerted efforts of all these three stakeholders. The banks should initiate measures to check the problem of mounting overdue by creating awareness among the borrower farmers for proper loan utilisation and prompt repayment. Banks should introduce mechanisms for post loan supervision and monitoring which should be the joint responsibility of the employees and the members of board. In toto, the overall performance of the selected banks were satisfactory which can be improved further and sustained in the future for the betterment of the cooperative banking structure and to induce confidence in the minds of the member patrons of the cooperatives.