65
Serious Setback in the 1990s
As referred to earlier, the stark reality has been the steady deterioration,
generally against the declared public policies, in the sectoral distribution of
bank credit after the 1990s.
10
The share of agriculture in total bank credit (both
direct and indirect) had dwindled from the peak of about 18% to less than 10%
at the end of the 1990s (Table 4.5). As indicated earlier, the annual growth of
bank credit in real terms had ruled miniscule or negative for about five years
in the early 1990s. This situation persisted till 2001-02 when the share had
dipped to 9.8%. Thereafter, with force of doubling of credit for agriculture
as explained above, the agricultural credit share began to pick up and has
reached 11.9% by the end of March 2009 and 11.3% by end-March 2011.
This development no doubt raises a number of analytical issues
concerning the corresponding decline in the agricultural share in total GDP
and its implications for credit demand. Suffice it to say at this stage that these
issues are being addressed in a separate section subsequently. However, to set
the tone of structural transformation that has taken place in the distribution
of bank credit, Table 4.7 presents the changes over the past four decades after
bank nationalisation. The steady declines in the credit shares of agriculture
as well as industry, particularly after the 1990s, have been accompanied by
comparable increases in the share of the services sector (More on it later).
More serious setback of the 1990s is seen in the sharp decline in the
number of agricultural loan accounts which was reflective of the financial
exclusion of a large segment of the farm community resorted to by the scheduled
commercial banks. The number, which had reached a peak of 27.74 million
in March 1992 as cited above, persistently declined thereafter and touched the
lowest level of 19.79 million in March 1999 or 19.84 million in March 2001.
Thus, in a period ten years, there were about 8 million loan accounts which got
eliminated from the list of agricultural loans. However, with the impulse of the
policy of doubling of farm credit, the number of farmer borrowal accounts has
again risen to 26.66 million by March 2005 and further rather steeply to 46.64
million by March 2011 (Table 4.5).
Charts 4.3 and 4.4 depict rather neatly the three phases of the behaviour
of the number of agricultural loan accounts and the share of farm credit in
total bank credit, respectively. Notwithstanding the divergent causes for their
10
The deterioration both in credit share and the number of loan accounts has occurred in respect
of all informal sectors – small-scale industries, rural artisans and small borrower classes (See
for details, see Shetty 2006, Shetty 2007 and Shukla 2006).
