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4
Trends in Bank Credit for Agriculture: A Report Card on the
Performance of Scheduled Commercial Banks
Two pillars of public policies for involving scheduled commercial banks
including regional rural banks (RRBs) in agricultural lending have been:
(i)
‘priority sector’ targets and sub-targets; and
(ii)
the spread of branch network by these banks into rural and semi-
urban areas as well as in underdeveloped and under-banked
states and regions.
The policy of spreading branch network in rural and semi-urban areas
has been combined with also the target of 60% credit-deposit ratio to be
achieved by bank branches in these areas. In addition, the branch banking as
an institutional arrangement was also strengthened at one time with the help
of staff support, particularly a substantial number of qualified agricultural
graduates and other technically qualified staff, spread over nooks and corners
of the country.
With the help of these policy thrusts, significant progress was made in
expanding agricultural credit until the beginning of the 1990s, but thereafter, in
response to the emerging infirmities in the working of the banking system, the
hard core components of these policies got jettisoned and there has occurred a
serious reversal of the progress made in sectoral credit delivery. Concurrently,
many demand-side factors have also played a role in the deterioration of the
absorptive capacity of the agricultural sector for bank credit. Some details of
these policy contours as well as those of demand-side factors are required to
be noted in this study, but before doing so, an attempt is made here to present
a review of the trends in agricultural credit and its distribution across land-
size classes as well as size classes of loans. In the same section, details of
distribution of agricultural credit across states and regions are presented. In all
of these respects, a comparison over time is made as between the performance
attained during the post-nationalisation period of the 1970s and 1980s and the
post-reform period of the 1990s and thereafter.
A. Agricultural Credit: Overall Trends
Table 4.1 presents times series of borrowal accounts and agricultural
credit outstanding as rendered by scheduled commercial banks over the past
four decades from March 1972 to March 2011, essentially depicting the long
post-nationalisation picture, for which systematic data series are available
