Overdues in Primary Agricultural Co-operative Banks in Vellore District: A Case Study

Abstract

Primary agricultural co-operative banks are the foundation of the co-operative credit movement in India. The strength of primary co-operative society lies in its internal resource mobilisation, efficient deployment of resources, and least cost operation due to high recovery performance and further relending. The primary agricultural co-operative banks (PACBs) are expected to play, in the context of changing economic environment, a very significant role in making institutional credit accessible to farmers of all categories: small, marginal, and large farmers, besides providing assistance to nonfarm sectors and other weaker sections of the society, petty traders and socially weaker groups in the community. Primary agricultural credit societies, which number about 90,000 at present, constitute the foundation of the three-tier co-operative credit structure in the country. They operate at the village level, along with the Farmers’ Service Societies (FSS) and the Large Sized Adivasi Multi Purpose Cooperative Societies (LAMPS) in tribal areas. In Tamil Nadu, primary agricultural co-operative banks numbering 4,498 have distributed `.698 crore as short term loans and `.101 crore as medium term loans for taking subsidiary occupations. Nearly 65 per cent of the medium term loans are issued to the identified beneficiaries under IRDP Tamil Nadu State Co-operative Bank (apex level) channelises the funds provided by the National Bank for Agricultural and Rural Development (NABARD) towards short term loans for seasonal agricultural investment. The aggregate deposit of the PACBs as on 31st March 1998 was `.1,506.23 crore. The aggregate loans issued by the societies steadily increased from `.4,366.52 crore in 2005-06. The overdues of PACBs have been steadily increasing year after year. This trend is found in almost all the states in India. Unless the problem is tackled, it would affect the structure. The mounting overdues in the primary agricultural co-operative banks in the country have been causing serious concern to the Central Government, State Governments and to the co-operative credit institutions themselves. Hence, in this paper an attempt has been made to analyse the trend and causes for overdues pertaining to a primary agricultural co-operative bank, namely, Arcot, Pudupadi primary agricultural co-operative bank in Arcot Block, Vellore district.