MSc.

The study entitled “Indebtedness of Farmers in Mullankolly Panchayat of Wayanad District” was conducted with the following objectives:
(1).To assess the extent and magnitude of indebtedness of farmers in Mullankolly Panchayat of Wayanad district.
(2).To identify the reasons for the indebtedness of the farmers.
Both primary and secondary data were used for the study. Primary data was collected from 90 farmers of Mullankolly Panchayat through conducting a survey by administering a pre-structured schedule. Farmers were classified into small, medium and large. The list of farmers was collected from three banks (i.e. Canara Bank, Co-operative Bank and North Malabara Gramin Bank) of the Panchayat. The sample size included 90 respondents i.e., 30 borrowers from each bank at random, of which 20 were defaulters and five were non-defaulters or prompt payers. Twenty 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 which were collected from books and accounts and annual reports of the above three banks were also used for the study. Statistical tools like Average Annual Growth Rate (AAGR), simple averages, percentages, simple growth rate, chi-square test, efficiency index, priority index and bi-variate tables were used for the analysis.
The analysis of the overdue amount of the selected banks revealed that during the reference period, Co-operative Bank of Mullankolly Panchayat (Co.BMP) had the highest amount of overdues. Profits of all banks eroded due to provisioning for accumulated overdues. Ca.BMP has shown the best performance in terms of lower overdues and higher profits when compared to the other banks. There has been an increase in the demand for agricultural loans as well as non-agricultural loans in all the banks, especially the scheme loans and non-farm loans respectively. Along with the increase in demand, the contribution of the overdues of non-agricultural loans to the overdues was also increasing tremendously in the case of Co.BMP and NMGBMP, whereas the contribution of the overdues of agricultural loans to the overdues was in creasing tremendously in the case of Ca.BMP. The overdues above four years were growing tremendously over the years for Co.BMP and NMGBMP whereas Ca.BMP has the highest amount of overdues in the age group of indebtedness of 1 to 2 years.
The study found that in non defaulters’ case majority of the borrowers belong to monthly income group of more than Rs.10000 category (56.7%). In low, medium and high defaulters case, majority of the farmers belong to income group of below Rs.5000 i.e. 50 percent, 57.1 percent and 60 percent respectively. This may be due to the reason that majority of the farmer defaulters belong to farming community. Their major source of income is agriculture and agriculture has become a loss making proposition in the area year by year because of the price fluctuations in the market for their produce.
The reasons for growing volume of indebtedness were multifarious in nature. The defaulters were of the view that inadequate income, fixation of unrealistic dues, lack of access to consumption loans, diversion of income, misutilisation of loans, ill health of borrowers and family members, faith in loan waiver policy and defective loan policies resulted in non-repayment of the loan amount. Since the loan repayment mechanism of these banks were not linked to the salary deduction scheme, it led to greater chances of willful default. Those borrowers who received adequate income had a tendency for conspicuous consumption which added to the magnitude of willful default. Misutilisation of loan amount was least in Ca.BMP, which indicates the presence of effective supervision and monitoring mechanism in the bank. From the inter-bank comparison on the effectiveness of the present loan recovery management system, it was found that Ca.BMP showed an outstanding performance in this regard, whereas NMGBMP revealed to be the least efficient bank.
According to the officials and employees of three banks, the reasons for poor recovery included poor member relations, lack of modern management techniques and absence of Management Information System, lack of staff training programme, lack of infrastructural facilities, inadequate quality of work environment and ineffective legal machinery for recovering dues from the borrowers. As a remedial measure to minimise overdues, legal machinery has to be made effective and legal action should be imposed on defaulters promptly. The suggestion shows that the analysing credit worthiness of the borrowers is the important thing from bankers’ point of view. They were of the opinion that coercive action against willful defaulters would be an essential element for a better recovery system. Formation of special recovery cell has also been emphasised. Identification of the beneficiaries by the bank field level functionaries, incentives for prompt repayment, formation of special recovery cell using the existing staff and Board of Directors are the other suggestions suggested by the three bank officials. 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.