Performance of regional rural banks in Kerala with special reference to South Malabar Gramin Bank
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Date
1986
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Department of Agricultural Economics, College of Horticulture, Vellanikkara
Abstract
Regional Rural Banks were established with the main objective of developing the rural economy by providing credit facilities for the development of agriculture, trade, commerce, industries and other productive industries in the rural areas, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs. The rationale for a specialized institution oriented to rural credit follows the identification of a specific regional and functional gap in the existing institutional credit structure. The new institutions were not intended to replace but to supplement the other institutional agencies in the field.
In Kerala two RRBs viz. North Malabar Gramin Bank at Cannanore and South Malabar Gramin Bank at Malappuram were established in December 1976. The specific objective of the present study were
1. To review the working of RRBs in Kerala.
2. To assess the extent to which they have been able to fulfil their objectives by way of extending credit to the target groups.
3. To assess the impact of finance from RRB on the beneficiaries.
4. To point out shortcomings if any in the working and to suggest remedies.
The study was conducted in two parts. In the first part, available secondary data on the functioning of the two RRBs in Kerala during the past were collected from the head offices of the two banks and also from other published sources like RBI periodicals and journals. Overall aspects like expansion of branches, mobilization of deposits, advances made, income, expenditure and profit/loss position and deployment of credit to various sectors were the points looked into in this analysis. The second part of the study is based on data from the beneficiary level and is confined to the beneficiaries of SMGB. To examine the functioning of the bank at primary level among different groups, both short term and medium term loans were studied separately. This classification envisaged the study of agricultural and non- agricultural advances of the SMGB separately because majority of the short term loans were crop loans whereas majority of the medium term loans were small trade loans. A sample of sixty crop loanees and sixty small trade loanees selected through two stage random sampling were personally contacted and data were collected using well structured interview schedules prepared separately for both the categories. In order to serve as control in respect of short term loans another sample of 30 non-borrower farmers were also interviewed from the same area. Information regarding family status, family income and its sources, cropping pattern and intensity, cost of cultivation of major crops, input use pattern etc. were collected from the sample farmers. Details of type of trade, incremental investment and turnover, incremental income and its contribution to family income etc. were the points concentrated in the case of small traders.
The study revealed that the overall performance of the RRBs in Kerala was satisfactory. The banks could cover the five backward districts of the state and could emerge as premier banking institution in the areas of their operation. The expansion of branches, mobilization of deposits and advances made by these banks made steady progress throughout the past and they in many respects ranked among the better performed RRBs in the country. Relatively low average amount of credit per borrowal account extended and a shortfall in recovery are points to be mentioned as weak spots noticed in their functioning.
The analysis of crop loans suggested that the loans had gone only to the eligible categories though the share received by agricultural labourers were less. The borrower farmers had a high cropping intensity, had used higher doses of inputs especially labour and fertilizer nutrients and had been realizing higher farm income per hectare compared to the non-borrowers. Linear programming analysis of the farms revealed that borrower farms had much better resource use efficiency than non-borrowers. The existing crop combinations was less than optimum in all the farms. There is possibility of increasing their net margins by mere reallocation of the existing resources. Crop plans worked at enhanced levels of capital (at 25% and 50% more than the existing) showed that the net margins could be profitably increased by employing more capital. Improved plans were also able to absorb more labour force, indicating clearly the employment generating capacity of capital.
Besides the agricultural sector, the SMGB finance was found to opening vistas for higher earnings for a good number of young people of the weaker sections. Small trade was one of such ventures which dominated in number as well as in amount advanced. The small trade loans had resulted in incremental investment and hence in incremental turnover in all the categories of trade studied. The small traders with the borrowings had an average incremental investment of Rs.2448 which generated an incremental net income of Rs.747 per annum and an additional gainful employment of 35 mandays per annum.
To conclude, RRBs in Kerala fared better than their counterparts in general in the rest of the country in terms of overall performance. They were found to be generally adhering to the objectives for which they were created.
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