MSc

The study entitled "Loan Recovery Management in Primary Co-operative
Agricultural and Rural Development Banks in Kerala" was conducted to examine the
effectiveness of the existing loan recovery management of Primary Co-operative
Agricultural and Rural Development Banks in Kerala and to identify the factors
influencing recovery.
The study was conducted among four PCARDBs of Ernakulam and
Thrissur district viz., Kanayannur CARDB (B 1), Ernakulam CARDB (B2), Cochin
CARDB (B3) and Irinjalakuda CARDB (B4). The sample size included 80
respondents i.e., 20 borrowers from each bank at random, of which 15 were defaulters
and five were non-defaulters or prompt repayers. Ten officials (including secretaries
and BODs) from each bank were also interviewed to collect information on the
effectiveness of the loan recovery system of the banks. Secondary data on selected
performance indicators of the banks were also used for the study. Statistical tools like
AAGR, simple averages, percentages, simple growth rate, simple correlation,
efficiency index, priority index and bi-variate tables were used for the analysis.
The analysis on the overdue amount of the selected PCARDBs, revealed
that Cochin CARDB (B3) had the highest amount of overdues among all the banks,
,
during the reference period.
Profits of all banks have eroded due to provisronmg for accumulated
overdues. B4 has shown the best performance in terms of lower overdues and higher
profitswhen compared to the other banks. An increase in the demand for nOI1-
agricultural loans, particularly RHLs was found, which indicates a shift in the lending
pattern. Overdues above four years were growing tremendously in all the banks.
Most of the females were found to be prompt repayers. Inspite of having
better education, the borrowers were creating huge overdues. This indicates the
existence of wilful defaulters. The study found that the defaulters of all t11:;: banks
except B4, having annual income above the subsistence level had higher am aunt of

overdues, This highlights the fact that, even after having sufficient income, they were
deliberately making dues as a result of the inefficient loan recovery management of
the bank.
The study revealed that procedural delays, lack of adequate securities to
hypothecate, misutilisation of loans and inadequate income restricted the borrowers
from getting timely loans. It was further observed that defective loaning policy,
conspicuous consumption, and illness of family members as well as hope for 10a11
write-off policy were the other reasons behind non-repayment by borrowers.
Misutilisation of loan amount was least in B4, which indicates the presence of
effective supervision and monitoring mechanism in the bank. Loan amount was
mainly diverted for meeting ceremonial expenses, consumption needs and educational
expenses of children. The most serious problem in obtaining loam was revealed to be
the procedural delay.
From the inter-bank comparison on the effectiveness of the present loan
recovery management system, it was found that B4 showed an outstanding
performance in this regard, whereas B3 revealed to be the least efficient bank.
According to the officials and employees of the banks, the reasons for poor
recovery included lack of modern management techniques, lack of adequate staff
training programmes, lack of infrastructural facilities and inefficiency of the legal
machinery for recovering dues from borrowers. As a remedial measure to minimise
overdues, coercive action against wilful defaulters and incentives for proper
repayment must come into effect. For checking the rising trend of over dues in future,
an effective loan appraisal as well as loan monitoring cell managed by professionals
has to be established in each bank. The banks must put into effect the SARF AESI Ad,
2002 in order to bring a solution to the problem of overdues. The banks must therefore
perceive that prolonged existence of this disease is not beneficial to the organisation
and a strong mechanism to check this menace has to be created.