MSc

The study entitled" An enquiry into the Non-Performing Advances
of Primary Cooperative Agricultural and Rural Development Banks in
Southern Kerala" was conducted with the following objectives:
1 . To examine the causes of Non-performing Advances of Primary
Co-operative Agricultural and Rural Development Banks in Southern
Kerala
2. To inquire into the present loan recovery system of these banks in
Southern Kerala
The study was confined to the three PCARDBs in southern Kerala
viz., PCARDB Neyyattinkara (B1), PCARDB Cherthala (B2) and PCARDB
Irinjalakkuda (B3). The sample frame comprises of 150 respondents ie., 50
borrowers from each bank at random of which 40 are defaulters and 10 are
non-defaulters as a control group. The bank officials and employees were
also interviewed to gather informations on the present loan recovery
practices in these banks. Statistical tools like simple correlation, chi-square
test, percentages, efficiency index, sample averages, weighted mean and
bi-variate tables were used in the analysis.
With regard to all sample banks, the sudden increase in NPAs was
found after the year 1989, which can be attributed to the loan waiver policy
of the then central Government which inhibited the loanees to make prompt

repayments in expectation of another round of write-off. The NPAs above
three years or hardcore NPAs were lower in percentage for all the sample
banks during the period under reference and except 83, the other banks
,
were running on absolute loss.
. ,
The comparison of NPAs on different occupational classes revealed
that with regard to 81 there exists significant relationship between NPAs
and occupational classes like industry, services, business and agricultural
labourers and in the case of 82 there is statistically significant relationship
with agricultural and service class. The occupational classes such as
agricultural and business classes have a significant relationship with NPAs
in the case of 83.
It has been found that the defaulters having an annual income above
the subsistence level were showing more NPAs in the cases of 81 and 82.
This establishes that even after having sufficient income they are wilfully
committing more dues. With regard to the borrowers having land holding
size above 50 cents, the nature of wilful default can be observed in the
cases of 81 and 83. This highlights the need for categorising them under
the group of wilful defaulters. But with regard to the educational level and
NPAs of defaulters,.though most of them are having an educational status
above secondary level in all the cases of 81, 82 and 83, they are not
statistically related with NPAs.
It was observed that lack of adequate securities to hypothicate,
procedural delays and inadequate assistance from banks inhibited the
defaulters and non-defaulters in getting timely loans. It has been found that
inadequacy of income, illness of family members and consequent diversion



of income, hope for write-off policy, conspicuous consumption" defective
loaning policies and lack of access to consumption loans are the major
reasons for non-repayment of loans and advances by borrowers. While
analysing the efficiency of its present loan recovery system, it was also
found that in all the cases, the index value was lower when compared to
other indices which denotes that even in the opinion of bank officials, there
is something more to be perfected in the loan recovery system. From the
interbank comparison, it was found that B3 is outstanding in the case of
loan recovery management.
According to the officials and employees of the banks, the reasons
for poor recovery performance were the inefficiency of legal machinery for
recovering dues from borrowers, lack of adequate staff for field supervision
and loan appraisal and absence of skilled and professionalised managers for
recovery management. As a remedial measure',' to minimise NPAs, certain
steps have to be taken by financial institutions and the government. The
improper relief measures such as loan right-off, should not be resorted to.
Coercive action against wilful defaulters and incentives for proper
repayment should be effected. Before advancing any loans proper
processing and towards that end a proper loan appraisal cell with
professionalised personnel is suggested. In addition to this, an effective
loan monitoring cell and NPA management cell has to be established. The
legal machinery should be strengthened and autonomy to the cooperatives
would be given atleast to enable them with the right to take necessary
-declslons for the better management of NPAs.