97
Another commendable aspect of this bank group-wise picture is the
performance RRBs. In their case, the proportions of loan accounts as well as
loan amounts in respect of agriculture are very high (about 55% to 60%) and
interestingly, both of them match each other, implying that size distributions of
loans for agriculture are hardly uneven.
As RRBs are playing a pivotal role in credit delivery in rural areas, particularly
for agriculture, the government has been pursuing a policy of technology and
capital upgradation. Based on recommendations of the Dr. K.C. Chakraborty
committee, a recapitalisation support was to be given to 40 RRBs in 21
states in the ratio of 50:15:35 by the centre, states and sponsor banks. The
recapitalisation process began in 2010-11 and was to be completed by 2011-
12, but the process could not be completed as the state governments did not
release their share. The scheme has thus been extended up to March 2014. Till
December 31, 2012 the central government released
`
668.9 crore in favour of
27 RRBs (The Government of India’s
Economic Survey 2012-13,
p.115).
With a view to further strengthening the operational efficiencies of RRBs
a system of amalgamation of geographically contiguous, RRBs in a state has
been initiated by the Government. Till January 1, 2013, 22 RRBs had been
amalgamated into nine RRBs (Ibid).
G. “Priority Sector” Now a Nebulous Concept
In November 1991, the Committee on the Financial System (Narasimham
Committee – I) had observed that while the directed credit programmes had
played a useful role in extending the reach of the banking system to the then
neglected sectors, two decades of such preferred credit dispensation was a long
enough period for re-examination of its continued relevance; the Committee
argued that the growth of agriculture and small industry in India had reached
a point where the legitimate productive requirements of these sectors (or large
parts of them) could bemet by banks on the basis of their commercial judgement.
Any further pursuit of distributive justice should use the instrumentality of the
fiscal rather than the credit system. The Committee, therefore, suggested that
the system of directed credit programmes should be gradually phased out. In
the meantime, some sectors may continue to need such support; therefore, the
redefined priority sector should consist of “small and marginal farmers, tiny
sector of industry, small business and transport operators, village and cottage
industries, rural artisans and other weaker sections”. The Committee said that
the target for these should be fixed at 10% of aggregate bank credit.
But, because of the society’s imperative needs for distributive justice as
inspired by political undercurrent, the 40% target for the traditionally defined
‘priority sector’ could not be dispensed with. Subsequently, the Committee on
