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The study entitled "Non-performing assets of District Co-operative Banks
in Kerala with special reference to agricultural advances" is conducted with the
following objectives:
i) To examine the magnitude and composition of non-performing assets (NPAs) of
District Co-operative Banks (DCBs) in Kerala
ii) To assess the extent ofNPAs in agricultural advances and
iii) To identify the factors leading to NPAs
A comparison of three selected DCBs - Kasaragod (KDCB), Palakkad
(PDCB) and Thrissur (TDCB) is done in terms of level and extent of NPA. Three
PACS each that have defaulted in short-term (ST) agricultural advances to DCB have
been selected randomly from each DCB. For identifying the grass root level reasons
for non-repayment of ST agricultural loans by farmers to PACS, 90 defaulters are
surveyed randomly selected from each PACS.
For identifying the reasons for default by PACS and their members,
structured interview schedules are used for the survey. Mostly bi-variate and multi-
variate tables have been used for the analysis of collected data. The first and second
objectives of the study are analysed with the help of averages, percentages and growth
rates. The third objective is analysed using priority index and statistical and
econometric tools like Chi-square test, Regression analysis and analysis of variance
(ANOVA).
The study reveals that the magnitude ofNPAs was the highest in TDCB to
the tune of Rs.8077 lakhs followed by PDCB at Rs.3368 lakhs as on 31 st March 2001.
The amount of NP As is the lowest in KDCB at Rs.455 lakhs. Thus the magnitude of
NP A is a major problem for TDCB compared to PDCB and KDCB. The study has
brought out that the share of sub-standard assets to total NP A is higher in the region of

60 to 85 per cent in all the selected DCBs during the study period. However, the share
of loss assets to total NP A is the lowest in all the three selected DCBs in the range of
,
1.2 to 21 per cent. The dominant share of sub-standard assets to total NP A is mainly
due to the applicability of NP A norms to DCBs only from 1996-97 onwards. If not
checked, a substantial portion of sub-standard assets will gradually slip to doubtful
assets and subsequently to loss assets.
In the case of KDCB, NP As in ST agricultural advances are present only in
2000 and 2001 to the extent of Rs.l9.87 lakhs and Rs.9.57 lakhs respectively. ST
agricultural NP As of PDCB have accounted for more than 90 per cent of the total
, agricultural NP As. The share of ST agricultural NP As of TDCB has reached 100 per
cent in 2001 from a mere 53.9 per cent in 1997. The extent ofNPAs in agricultural
advances is negligible in selectedDf.Bs and thereby the lion's share of the NPAs is
accounted for by non-agricultural advances. Moreover, in recent years, NP As have
existed only in ST agricultural loans. The lower magnitude of NPAs in agricultural
advances of DCBs is mainly due to their thrust on non-agricultural lending policy and
thereby acting as 'urban banks' with 'agricultural' tag.
Non-payment of ST agricultural loans by customers is the most important
reason ranked by selected PACS of the three DCBs. Secretaries of several PACS have
severely criticized the attitude of their DCBs for adopting a repayment schedule,
which is creating asset-liability mismatch for them. Some of the secretaries have
questioned the intermediary role played by DCBs in agricultural advances and
demanded direct agricultural fmance from NABARD at lower interest rates.
The study reveals from the Chi-square test and regression analysis that
there exists significant relationship between annual family income and NP As of
defaulters ofPACS under selected DCBs. In the case of defaulters in PACS ofTDCB,





delay and diversion are also major factors that resulted in NP As. Inadequacy of
income is the most important factor leading to NPAs by defaulters of PACS of
selected DCBs. A close observation reveals that inadequate income was the result of
lower prices for agricultural produces of defaulters in PACS of KDCB and TDCB.
But, in the case of PDCB, drought has resulted in lower income for farmers.
Moreover, farmers believe that Government will write off agricultural loan amount.
Reduction of interest rate on loans by PACS is ranked the most crucial step for
reducing NP As of selected DCBs.
It is obvious that the income of farmers and agricultural labourers should
be substantially increased for ensuring proper repayment of agricultural advances by
maintaining stable remunerative prices for agricultural produces in an era of
globalisation of Indian agriculture. The direct linking of NABARD credit to PACS
may benefit the farmers in a big way by availability of cheaper credit. The study raised
some doubts regarding the role played by DCB as an intermediary in agricultural
loans. It will be relevant to do away with the indirect agricultural finance by DCBs
and merge urban co-operative banks with them so that there will be a strong presence
of co-operatives in the non-agricultural banking sector. The need of the hour is to take
effective steps in right direction that will benefit the living conditions of millions of
farmers who feed us without feeding themselves.