62
of agricultural sector in total bank credit of scheduled commercial banks. In
this respect too, the most notable achievement of the banking industry in the
post-nationalisation period of the 1970s and 1980s was manifested in the
decisive shift that occurred in credit deployment in favour of agriculture during
that period. From a puny level at the time of bank nationalisation, the credit
share of the sector had moved to near 11% in the mid-1970s and to a peak
of about 17.5 to 18.0% during the 1980s (Table 4.5). This was the official
target set in relation to some concept of net bank credit under the ‘priority
sector’ policy, initially for public sector banks. Approximately 75% of it was
in the form of direct finance for farmers and the balance was indirect finance
9
(Table 4.6) rendered to institutions for assisting the agriculture sector in the
form of finance for distribution of fertilizers, loans to state electricity boards
for rural electrification, and other forms of indirect finance including deposits
kept with NABARD in RIDF since 1995-96.
More significant achievement of scheduled commercial banks during
the 1970s and 1980s was the rapid increase in the number of agricultural loan
accounts they served. This number shot up from 1.37 million in 1972 to a
peak of 27.74 million in March 1992, that is roughly 1.32 million accounts per
year. Equally impressive was the rise in the share of agricultural loan accounts
in the aggregate loan accounts from about 32% in the early 1970s to over 50%
in the 1980s (Table 4.5).
The average loan per account served remained as low as
`
7,500 or
thereabout, that is, much less than
`
10,000 (at prices of those years), though
the number of loan accounts does not entirely correspond to the number of
borrowers because of the enjoyment of multiple set of accounts by big-size
borrowers. This phenomenon is, of course, more relevant for industrial loans,
but in agriculture, the link between the number of borrowers and the number
of accounts is much closer. The increase in the number of farmer accounts
each year was not dramatic until the reforms began in the 1990s; it was rather
steady and systematic as it was dependent on the building up of financial
infrastructure in the form of bank branches manned by qualified personnel in
the initial phase of bank nationalisation (see the same Table 4.5).
9
The concept of ‘indirect finance’ also originated, as explained subsequently, in the policy
of ‘priority sectors’ target of 18% of the so-called net bank credit for agriculture, of which a
maximum limit of 4.5 percentage points could be in the form of “indirect finance”. This was
introduced in 1997.
