Trends and patterns of institutional credit flow for agriculture in India
| Published date | 11 January 2013 |
| Pages | 44-56 |
| Date | 11 January 2013 |
| DOI | https://doi.org/10.1108/15587891311301016 |
| Author | R.R. Biradar |
| Subject Matter | Strategy |
Trends and patterns of institutional credit
flow for agriculture in India
R.R. Biradar
Abstract
Purpose – The aim of the study is to attempt to analyze the trends and patterns of institutional credit
flow, deployed by the CBs, SCBs and RRBs, for production and investmentpurposes in agriculture and
allied activities in India in the light of banking sector reforms initiated in the early 1990s.
Design/methodology/approach – The study is based on secondary data collected from the
Handbook of Statistics of Indian Economy, 2009-2010 published by the Reserve Bank of India,
Agricultural Statistics at a Glance, Economic Survey of India, etc. The data relating to institutional
credit at the all India level were collected for 1971-1972 to 2007-2008. The period from 1971-1972 to
1980-1981 is considered as the beginning of multi-agency approach and bank branch expansion,
from 1981-1982 to 1990-1991 is regarded as the pre-reform period, from 1991-1992to 2007-2008, as
the post-reform period. In order to examine the extent of institutional credit flow for development of
agriculture and allied activities, the indictors such as the average institutional credit per hectare
cultivated area and as percentage of agricultural GDP were estimated, besides the CAGR during
different periods.
Findings – The study found that the annual growth rate of total institutional credit for agriculture
and allied activities was much higher during the reform period as compared to that of pre-reform
period. The average institutional credit per hectare and as a percentage of agricultural GDP has
gone up significantly during the reform regime. The RRBs followed by the SCBs registered highest
growth rates of production credit as compared to that of CBs during the entire period; it was higher
during the reform than the pre-reform period. The growth rate of investment credit was highest for
SCBs followed by the RRBs as against the CBs during the reform period. It has been observed that
the CBs have lost their historical prime position in provision of agricultural credit. The growth
pattern of production as well as investment credit constituted what can be described as the
‘‘U-shaped’’ curve. This implies that the bulk of the increase in institutional credit for agriculture and
allied activities during the reform period was attributed to the banking sector reforms initiated in the
early 1990s.
Research limitations/implications – The data on institutional credit provided by the SCARDBs
and PCARDBs were not included under the co-operative sector prior to 1999-2000, and it covered
credit by only PACs. Hence, the temporal comparability of data on institutional credit under the
co-operative sector for the period 1998-1999 to 2007-2008 with that of earlier periods may be
erroneous.
Practical implications – Adequate and timely inflow of both production and investment credit for
development of agriculture and allied activities through further reforms in the banking sector would go a
long way in sustained growth of agriculture and food security for a great majority of the rural masses in
India.
Originality/value – The study establishes the ‘‘U-shaped’ ’ curve for the growth pattern of institutional
credit for development of agriculture and allied activities in India. This follows that the increase in the
growth rates of institutional credit during 1991-1992 to 2007-2008 was largely due to the banking sector
reforms.
Keywords Agriculture, Commercialisation, Banking sector reforms, Co-operatives,
Scheduled commercial banks, Regional rural banks, Institutional credit, Production credit,
Investment credit, U-shaped curve, Banks, India
Paper type Research paper
PAGE 44
j
JOURNAL OF ASIA BUSINESS STUDIES
j
VOL. 7 NO. 1 2013, pp. 44-56, QEmerald Group Publishing Limited, ISSN 1558-7894 DOI 10.1108/15587891311301016
R.R. Biradar is based at the
Department of Economics,
Karnatak University,
Dharwad, India.
The author is thankful to Dr
Sthanu R. Nair, Dr Shubhasis
Dey, IIM Kozhikode, Dr Arif
Khurshed, University of
Manchester, UK and Dr S.T.
Bagalkoti, Karnatak University,
India for their comments and
suggestions on the earlier
version of the paper.
To continue reading
Request your trial