Supply utilization and repayment performance of crop loans of commercial banks in Alappuzha district

Abstract

An investigation on the supply, utilization and repayment performance of crop loans of commercial banks in Alappuzha district with special reference to paddy was conducted on the basis of data pertaining to the year 1991-92. Data for the study were generated through a sample survey of borrowing households, conducted during 1992-93. The main objectives were to study the credit requirement, availability and its gap in paddy cultivation, to analyse the extent of utilization and repayment of loan, and to identify the factors discriminating the borrowers into non-defaulters and defaulters. Two stage random sampling technique was used for generating primary data with branches of lead bank is first stage sample and borrowing farmers as second stage. From the list of branches with more than 60 crop loan accounts for paddy for punja season, two branches viz., Edathua and Kainakary were selected at random from each branch. Linear discriminant function and tabular analysis were the tools used for analysis. An inverse relation existed between cost of cultivation and size of holding in the two areas viz., Edathua and Kainakary and also at the pooled level. Input-output ratio was highest for large farmers followed by marginal farmers and small farmers. The credit requirement was Rs.12.747/- for marginal farmers, Rs.12,706/- for small farmers and Rs.12.652/- for large farmers based on the entire paid out cost of cultivation and Rs.9,560/-, Rs.9,489/- and Rs.9,529/- for marginal, small and large farmers respectively based 75 per cent of paid out cost of cultivation. The scale of finance fixed for paddy in punja season for Alappuzha district during 1991-92 was Rs.5,000/- per hectare. Credit gap estimated per hectare of paddy was Rs.7,652/- for large farmers, Rs.7,706/- for small farmers and Rs.7,747/- for marginal farmers based on 100 per cent paid out cost of cultivation and Rs.4,560/-, Rs.4,529/- and Rs.4,489/- for marginal, small and large farmers respectively based on 75 per cent of paid out cost of cultivation. At the pooled level 52.50 per cent of the borrowers utilized the loan for the stipulated purpose while 47.50 per cent utilized it for purposes other than stipulated. Coinciding with the beginning of the crop season 92.31 per cent of large farmers, 62.69 per cent of small farmers and 33.33 per cent of marginal farmers could avail of the loans. Among the borrowers 54.17 per cent were non-defaulters and 45.83 per cent were defaulters. Out of the total loan disbursed in the study area, 49.28 per cent was repaid while 50.72 per cent was overdue. Various reasons attributed to non-repayment by the farmers in the study area were nonremunerative price for the produce, storage of the produce to fetch a high price, divertion and yield due to crop failure. The factors identified as significant discriminators between defaulters and non-defaulters were marketed surplus time of sowing and credit gap. The contribution of these variables to the total distance measured was 77.78, 16.27 and 5.95 per cent respectively. About 65 per cent of the respondents were correctly assigned to their group by the discriminant function.