MSc.

The study entitled “Indebtedness of farmers: A study of farmers borrowers of
Primary Agricultural Credit Societies in Palakkad District was conducted to examine
the factors that contribute to the problems of indebtedness among the farmers in
Palakkad District and to suggest the measures to be taken to solve the problems.
The study was conducted among two PACS of Palakkad District viz.,
Peruvemba Service Co-operative Bank (PACS 1) and Polpully Service Co-operative
Bank (PACS 2). The sample size included 90 respondents i.e., 45 borrowers from each
PACS at random, of which 76.67 per cent were defaulters and rest were nondefaulters.
Ten officials (including President and Secretary) from each PACS were
also interviewed to collect information on the effectiveness of the loan operation
system of the PACS. Secondary data on selected performance indicators of the PACS
were also used for the study. Statistical tools like Average Annual Growth Rate
(AAGR), simple averages, percentages, simple growth rate, simple correlation,
efficiency index, priority index and bi-variate tables were used for the analysis.
The analysis revealed that inadequacy of income, natural calamities and crop
failures, non availability of labourers and high wages were the main reasons for
indebtedness. Faith in loan waiver or write off policy, non institutional loan and high
interest rate, defective loan policies, illness of borrower or family members,
ceremonies, fixation of unrealistic due and lack of access to consumption loans and
diversification of income have also been pointed out as reasons behind increasing
indebtedness of farmers.
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 loan
write-off policy were the other reasons behind non-repayment by borrowers. Majority
of the defaulters opined that the loan amount provided by PACS were insufficient to
meet the project cost there by forcing the borrowers to approach other sources for
finance. This inturn puts an additional burden on farmers.
From the interbank comparison on the effectiveness of the present loan
operation system, it was found that the loan operation system of PACS (1) is least
efficient and in the case of PACS (2) it is moderately efficient. The overall
performance of PACS, commitment of BODs, management, member relations, intrabank
relations were appreciable. But in the opinion of the bank officials, Presidents
and Secretaries there was something more to be perfected in the existing loan
operation system.
According to the officials and employees of PACS, the reasons for
indebtedness include natural calamities, high cost of cultivation, insufficient income
from agriculture, non availability of labourers etc. The mounting overdues affecting
the net profit position of PACS. Misutilisation of loan due to inadequate staff for field
supervision and loan appraisal was yet another problem as far as the PACS were
concerned. The effectiveness of any scheme to a greater extent is correlated to the
number of visits made by the bank officials to the beneficiaries. There exist a drastic
need for skilled personnel for field supervision and loan appraisal. It is obvious that
co-operatives are still following traditional methods and techniques of management,
which has to be replaced by modern measures of management and accounting.