95
has found a reduction in loan account share, got a substantial increase in loan
amount share, implying a growing rise in the average size of loans in the state.
F. Bank Group-Wise Distribution of Agricultural Credit
The profiles of agricultural lendings by different categories of banks
provide a picture of diversity. Table 4.22 broadly sums the picture. First,
overwhelming proportions of bank loan accounts in both the major categories
of banks, namely, (i) SBI and its subsidiaries, and (ii) nationalized banks, have
been agricultural loan accounts. In both the cases, the proportions which were
at roughly one-third in the early 1970s, have reached near or over 50% in the
latest period of March 2011. This is one aspect of social banking embedded
in the policy of bank nationalization, which is truly commendable. It does not
mean that there has not been any problem with bank lendings for agriculture;
there have been many a problem.
As explained earlier, the decline in the share of agriculture in total bank
credit outstanding, preference of banks for large-size loan accounts, overtly
large and growing operations of banks on the periphery of rural areas, that
is, in urban and metropolitan areas, for farm lendings, etc. are issues that
raise doubt regarding the quality of agricultural lendings. Even so, the social
obligations shouldered by the public sector banks are sure to impose a heavy
operational cost on these banks. This is brought out rather starkly when we
realise that over 99% of bank accounts of the foreign banks operating in India
pertain to more lucrative services sector area, or in the case of private sector
banks, only about 10% of loan accounts belong to the agricultural sector and
they also possess near 90% of accounts from those lucrative services sector
areas. Contrasted to these, public sector banks have to shoulder heavy social
responsibilities in the form of agricultural loans and largely small-size loans.
As for the agricultural sector’s share in total bank credit rendered by
the public sector banks, it is worth recalling that both SBI and its subsidiaries
and the nationalised banks expanded their exposure to the agricultural
sector sizeably in the 1970s and 1980s under the impulse of socio-economic
philosophy embedded in the nationalisation objectives. But, interestingly, as
soon the reforms began and a competitive environment was promoted in the
1990s, the banks began to unshackle themselves from the heavy burden of
agricultural lendings in terms of amounts. With the help of creating many
agricultural branches, the SBI group had expanded its farm sector share in
total advances to near 26% in the mid-1980s, but it steadily declined to 11.4%
in March 2011. Likewise, the nationalised banks, which had raised their share
to near 17%, slipped to a low share of 11.2% in the latest period (Table 4.22).
