Appraisal of the formulation and implementation of the district credit plan in Kottayam District

Abstract

The study ‘An Appraisal of the formulation and implementation of the District Credit plan in Kottayam District’ has been carried out to examine the extent to which the lead banks have followed the methodology suggested for formulation of the District Credit Plan (DCP) and the Annual Action Plan (AAP).It also aims at examining the extent of co-ordination between the banks and the development departments. Comparative performance of commercial banks and the co-operative banks and assessing the extend of inter bank. Inter sectoral and inter block variations in the achievement of targets fixed under the DCP and AAPs in the Third round and until the formation of the fourth round of the District Credit Plan. The study covered all the commercial banks and co-operative banks in the Kottayam District in Kerala during the period 1983 to 1987 ie.. the 3rd round of the DCP and the AAPs prepared thereafter. A sample study of the District coordinators of the various banks were also employed for the purpose of assessing the extent of co-ordination between banks and development departments and the methodology actually followed for the preparation and implementation of the DCP. The study revealed that the RBI guidelines for formulation amd implementation of DCP and AAPs could be followed only to a limited extent in the Kottayam District due to certain built-in constraints like the absence of a District Development Plan. the lack of an effective co-ordination mechanism between banks and the development departments and the lack of synchronization between preparation of the Annual Plans by the Government and the AAP by the lead bank and the performance budgets of the commercial banks. Yet another problem was the added work load imposed on the development departments and the banks due to the implementation of the DCP. It was seen that no adequate number of staff to prepare and carry out the plan was made available to the development departments and the commercial banks. It was seen that no scientific criteria like the past performance of the banks or the credit potential of the area were effectively employed while fixing the targets for each bank as well as for the different sectors. The co-efficient of correlation between the previous year’s achievements and the succeeding year’s targets showed no significant relationship which invalidates the claim of the banks that targets have been fixed according to previous years achievements. It was noticed that in all the years the performance under the Secondary sector was much below the targets. This indicated that targets were not fixed scientifically. It was pointed out by the lead bank that the SSI targets were fixed based on the District Industries Centre (DIC) Action Plan which in turn were based on the units that sought provisional registration with it. So there was no viability or in-depth study undertaken of the potential for these schemes. High co-efficient of variation implying high degree of disparities were observed between the achievements of banks, sectors and blocks. Eventhough block-wise variations have registered a decline indicating a decline in disparities; no such trend was noticed in the sector-wise or bank-wise achievements. It was seen that the banks were more concerned with attaining the overall targets rather than achieving the individual sector targets. This was partly due to the inadequacy of the monitoring system which did not give proper attention to sectorial and block-wise targets. Thus the basic requirement that banks should deploy 40 per cent of the total advances to the priority sectors alone was considered seriously by the banks as well as by the RBI. This had lead to the banks reallocating their targets under the different sectors so as to suit their convenience. This hardly goes to justify the concept of District Credit planning exercise but is rather a negation of it.