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An analysis into funding of crop loan schemes by DCC bank in Pune

An analysis into funding of crop loan schemes by DCC bank in Pune
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This paper examines the concerns and issues in agricultural funding in Pune District. It analyses the awareness and usage of agricultural credit by Marginal and small farmers in Pune district.

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  1. International Journal of Management (IJM)
    Volume 9, Issue 3, May–June 2018, pp. 129–138, Article ID: IJM_09_03_014
    Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=9&IType=3
    Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com
    ISSN Print: 0976-6502 and ISSN Online: 0976-6510
    © IAEME Publication

    Purvi Shah
    Assistant Professor, Indira Institute of Management, Pune, India

    Prof. Dr. Medha Dubhashi
    HOC, Vaikunth Mehta National Institute of Co-operative Management, Pune, India

    Agriculture has been the mainstay of India’s economy. More than 60% of Indian
    population depends upon agriculture for their livelihood. Agriculture is a way of life, a
    tradition and will continue to be central to all the strategies for socio-economic
    development of the country. Rapid growth of agriculture will not only ensure continued
    food security but also aid growth in industry and GDP. To sustain the growth in
    agriculture, credit plays a crucial role. The quantum of agriculture credit provided by
    the banking system increased from year to year. The cooperative sector has played a
    key role in the economy of the country and always recognized as an integral part of our
    national economy. The cooperative banks have more reach to the rural India, through
    their huge network of credit societies in the institutional credit structure.
    This paper examines the concerns and issues in agricultural funding in Pune
    District. It analyses the awareness and usage of agricultural credit by Marginal and
    small farmers in Pune district. The analysis states that the demand and supply of
    agriculture credit continues to be insufficient.
    Cite this Article: Purvi Shah and Dr. Medha Dubhashi, An Analysis Into Funding of
    Crop Loan Schemes by DCC Bank In Pune, International Journal of Management, 9
    (3), 2018, pp. 129–138.

    The Governments’ various credit policies have ensured the flow of bank credit to finance a
    range of farm related activities in the form of short- term/long-term credit loans. The agriculture
    credit system in Maharashtra is similar to that of other parts of the country. Though there are
    many sources of credit available to farmers in Maharashtra, the general source of borrowing
    (for short-term credit) for an annual crop is through co-operatives, which falls under
    institutional credit. State level Co- operative banks disburse loans to Primary Agricultural Co-
    operative Credit Societies (PACS) through District Central Co-operative Banks (DCC). Hence,
    the entire flow of credit to farmers depends on PACS that are linked to DCC banks, which are
    federated to State Co-operatives banks. The State Co- operative Banks, in turn get funds for

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  2. An Analysis Into Funding of Crop Loan Schemes by DCC Bank In Pune

    agricultural credit from the National Bank for Agricultural and Rural Development

    Agricultural Credit Cards are not new concept in the field of agricultural banking in India. The
    scheme had already been introduced by number of public sector banks in few states much
    earlier. These schemes were niche marketed and were exclusively preserved for the privileged
    class of farmers. Similarly cash credit facility was being extended by several public sector bank
    and co-operative banks to farmers with the view to improving their access to credit. Again this
    scheme was used only selectively.
    Kisan Credit Card Scheme (KCC) scheme was introduced in 1998-99 to provide farmers
    with timely credit for their agricultural operation. The main objectives of the Scheme is to meet
    the short term credit requirements for cultivation of crops, post-harvest expenses, provide loan
    for marketing of crop, consumption requirements of farmer, working capital for maintenance
    of farm assets and allied activities to agriculture like dairy, animals, poultry, inland fishery etc.
    The revolving cash credit facility allows any number of withdrawals and repayments within the
    limit. This limit is fixed on the basis of operational land holding, cropping pattern and the scale
    of finance. Sub-limits may be fixed at the discretion of banks. In this scheme eligible farmers
    are provided with a Kisan Credit Card and a passbook.
    KCCs have now been converted into Smart Card cum Debit Cards to facilitate its operation
    through ATMs. The cumulative number of live KCCs issued by Commercial Banks,
    Cooperative Banks & Regional Rural Banks as on 31 March, 2016 was 752.72 lakh with
    outstanding loan amount of Rs.530034.58 crore. Some of the major features of revised KCC
    Scheme are:
    • Assessment of crop loan component based on the scale of finance for the crop plus insurance
    premium x Extent of area cultivated + 10% of the limit towards post -harvest/ household/
    consumption requirements + 20% of limit towards maintenance expenses of farm assets.

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  3. Heena Sunil Oza

    • Flexi KCC with simple assessment prescribed for marginal farmers.
    • Validity of KCC for 5 years
    • For crop loans, no separate margin need to be insisted as the margin is in-built in scale of
    • No withdrawal in the account to remain outstanding for more than 12 months; no need to bring
    the debit balance in the account to zero at any point of time.
    • Interest subvention /incentive for prompt repayment to be available as per the Government of
    India and / or State Government norms.
    • No processing fee up to a limit of Rs.3.00 lakh.
    • One time documentation at the time of availing the loan for the first time and thereafter simple
    declaration (about crops raised/ proposed) by farmer.
    • KCC cum SB account instead of farmers having two separate accounts. The credit balance in
    KCC cum SB accounts to be allowed to fetch interest at saving bank rate.
    • Disbursement through various delivery channels, including ICT driven channels like ATM/
    POS/ Mobile handsets
    KCC has ability to provide aid to Farmers and give benefits to the Bank also. Some of the
    benefits are as follows:

    To Farmers
    • Access to adequate and timely credit to farmers.
    • Full year’s credit requirement of the borrower taken care of.
    • Minimum paperwork and simplification of documentation for withdrawal of funds from the
    • Flexibility to draw cash and buy inputs.
    • Assured availability of credit at any time enabling reduced interest burden for the farmers.
    • Sanction of facility for 5 years subject to annual review and satisfactory operation and provision
    of enhancement.
    • Flexibility of withdrawals from a branch other than issuing branch at the discretion of the bank.
    • Assured availability of credit any time enabling reduced interest burden for the farmers

    To the Bank
    • Reduction in work load for branch staff by avoidance of repeat appraisal and processing of loan
    papers under taken KCC scheme.
    • Improvement in recycling of funds and recovery of loan.
    • Reduction in transaction cost to the banks.
    • Better banker-client relationship.

    • To study the Pune District Credit Co-operative Bank’s (PDCC Bank) initiative towards
    agricultural credit for small and marginal farmers in Mulshi Taluka, Pune.
    • To analyze the awareness and usage of agricultural credit for marginal and small farmers.

    Various studies have been conducted and numerous suggestions were sought to bring
    effectiveness in the working and operations of financial institutions. Narsimham Committee
    (1991) emphasized on capital adequacy and liquidity, Padamanabhan Committee (1995)
    suggested CAMEL rating (in the form of ratios) to evaluate financial and operational efficiency,

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  4. An Analysis Into Funding of Crop Loan Schemes by DCC Bank In Pune

    Tarapore Committee (1997) talked about Non -performing assets and asset quality, Kannan
    Committee (1998) opined about working capital and lending methods, Basel committee (1998
    and revised in 2001) recommended capital adequacy norms and risk management measures.
    Kapoor Committee (1998) recommended for credit delivery system and credit guarantee and
    Verma Committee (1999) recommended seven parameters (ratios) to judge financial
    performance and several other committees constituted by Reserve Bank of India to bring
    reforms in the banking sector by emphasizing on the improvement in the financial health of the
    Some studies related to the various issues of agriculture credit are: Sharma and Prasad
    (1971) stated that the introduction of latest technology without credit facilities would not have
    significance influence on the income of the farmers. Agriculture credit has direct relationship
    with the income level farm productivity and agriculture development.
    Naryanan (1987) Studied most of villagers who took loan were small and marginal farmers
    and agricultural labourers. He further observed that due to inadequate credit given to them,
    there was no increment in the income of beneficiaries.
    Prasad (2005) in his research paper titled, “Co-operative Banking in a Competitive Business
    Environment” stated that the technology had made tremendous impact on entire banking sector,
    which had thrown new challenges, and exposed co-operative banks competition and risk
    management. Therefore, they needed a combination of- new technologies and better processes
    of credit and risk appraisal, treasury management, product diversification, internal control and
    external regulation along with infusion of professionalism. He emphasised on need for
    transformation in the identity, business operations, governance and systems & procedures of
    the co-operative banks to face the environmental challenges
    Golait (2007) examined the issues in agricultural credit in India. The analysis revealed that
    the credit delivery to the agriculture sector continues to be inadequate. His study revealed that
    the banking system is still hesitant on various grounds to provide credit to small and marginal
    farmers. It was suggested that concerted efforts were required to expand the flow of credit to
    agriculture, along with exploring new innovations in product design and methods of delivery,
    through better use of technology and related processes. Facilitating credit through processors,
    input dealers, NGOs, etc. that was vertically integrated with the farmers could increase the
    credit flow to agriculture significantly.
    J.P. Bhosale (2005), in his study on “A Study of PACS in Junnar, Ambegaon and Khed
    Talukas of Pune District” examined working of PACS to improve the efficiency of the societies
    for the benefit of the members. His study was focused on the role of PACS in rural development
    loan advancement, various services provided, organization and management of PACS.
    Dr. T. G. Gite (2005 in his thesis titled, “An Economic Analysis of Mechanization of
    Agriculture in Pune District, Maharashtra state” to University of Pune emphasised on the broad
    objectives : 1. To Review of overall farm mechanization of agriculture at global, national level
    and in State of Maharashtra. 2. To study the trends of Mechanization in the State of Maharashtra
    in general and Pune district in particular. 3. To study the impact of mechanization on cropping
    pattern and yield and returns and employment. 4. To suggest measures for improvement in the
    present stage of farm mechanization in the context of changed scenario after emergence of
    WTO. His observations include: In India the farm mechanization is limited to use of tractors
    and implements which are used along with the tractor. Special purpose modern farm equipment
    is beyond the reach of the common Indian agriculturists as it involves high capital investment.
    The use of farm equipment can allow farmers to increase their yields and reduce their
    consumption of water, seed, fertilizers, and pesticides. Farming being a time and climate
    sensitive process, critical farm operations such as land preparation, sowing and crop protection
    need to be completed within a short span of time.

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  5. Heena Sunil Oza

    Pawar A.M. (2006)in his study of “Review of Agricultural Credit Provided by DCCB in
    Pune District”, found that the Pune District Central Co-operative Bank (PDCCB) has adopted
    Kisan Credit Card (KCC) method for advancing the crop loans to the farmers. The state of
    Maharashtra has been implementing National Agricultural Insurance Scheme since 1999.
    PDCC bank has also implemented this scheme for some crops. It was observed that PDCC bank
    provided maximum amount of short-term credit to agriculture as compared to medium-term
    and long-term credit. The PDCC bank has also provided other types of loans but proportion of
    other types of total loan decreased, whereas the proportion of agricultural loans to total loans
    increased during 1996-97 to 2003-04. Thus it was found that the production and productivity
    of agriculture as well as income and standard of living of the farmers has increased due to
    agricultural credit provided by sample branches of PDCC bank to the farmers in Pune district.
    It was found that overdues of loans were due to drought, irregular electricity supply and natural

    Present Study has been conducted on the basis of Primary data as well as Secondary data.
    50 Marginal and Small farmers having account with PDCC bank from Mulshi Taluka of
    Pune has been selected. For the study 35 Marginal farmers, 15 Small farmers were interviewed.
    Marginal Farmers means a farmer cultivating (as owner or tenant or share cropper)
    agricultural land upto 1 hector (2.5 acres). Small farmers means a farmer cultivating (as owner
    or tenant or share cropper) agricultural land of more than 1 hectare and upto 2 hectares (5 acres).
    The questionnaire was administered and got filled up through direct interview as well as
    indirect interview. Secondary data was collected from internet, various journals, books and
    newspapers etc.
    5.1. Type of Research: Analytical research is used to study the awareness and usage of Finance
    loan products by Small and Marginal Farmers and initiatives taken by PDDC bank to provide
    various agricultural credits.

    5.2. Collection of data
    5.2.1 Primary Data
    a. Observation Method
    b. Interview Method
    c. Structured Questionnaire

    5.2.2 Secondary Data
    a. Annual reports of the bank
    b. Manual of instructions on loans and advances of DCC bank
    c. Books
    d. Articles and Research Papers
    e. Internet

    5.3 Sampling Unit
    The Study population includes marginal and small farmers having account with DCC bank.

    5.4 Sampling Size
    Marginal farmers 35 and Small farmers 15.

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  6. An Analysis Into Funding of Crop Loan Schemes by DCC Bank In Pune

    1. The concept is limited to Co-operative and Agricultural credit
    2. The information is collected from 50 farmers (Marginal and Small) of Mulshi taluka of
    3. The study is limited to District Central C-operative Bank

    The District Central Co-operative Bank has taken various initiatives to provide wide range of
    funding schemes to agriculturalists. These schemes includes: Crop loan, Produce Marketing
    Loan Scheme, Loan Against Warehouse Receipts, Kisan Credit Card Scheme, agricultural term
    loans, Land Development Scheme, , Minor Irrigation Scheme, , farm Mechanization Scheme,
    Financing Of Combine Harvesters, Kisan Gold Card Scheme, , Land Purchase Scheme, Krishi
    Plus Scheme, Dairy Plus Scheme, Broiler Plus Scheme, Finance to Horticulture.

    Type of Farmers No of Farmers
    Marginal Farmers 35
    Small Farmers 15

    Present study reveals that 70% of the Respondents are Marginal Farmers and 30% are small

    Awareness and Usage about Financial Loan products by Small and Marginal Farmers w.r.t PDCC Bank
    Aware Fully Partially Not
    Financial Products and Not Total %
    and using aware aware Aware
    Agriculture Equipment Loan 9.2% 56.0% 5.0% 13.5% 16.3% 100%
    Tractor Loan 13.5% 49.6% 10.6% 17.7% 8.5% 100%
    Loan for Installation of tube Well 8.5% 34.0% 7.1% 21.3% 29.1% 100%
    Loan for Purchase of Live Stock 19.9% 38.3% 12.8% 0.0% 29.1% 100%
    Loan for Animal husbandry and
    12.8% 21.3% 5.0% 25.5% 35.5% 100.0%
    Cattle Rearing
    Loan for Purchase of Machinery 34.0% 22.0% 8.5% 14.9% 20.6% 100.0%
    Loan for Marketing of Crops 4.3% 8.7% 1.2% 7.5% 78.4% 100%
    Loan against KCC ( Crop Loan) – 100.0% – – – 100%
    Agriculture Term Loan 0.0% 100.0% 0.0% 0.0% 0.0% 100%
    Land Development Scheme 14.9% 18.4% 3.5% 17.0% 46.1% 100.0%
    Major Minor Irrigation Scheme 11.8% 11.8% 0.0% 0.0% 76.5% 100.0%
    Farm Mechanisation Scheme 17.7% 15.6% 3.5% 17.7% 45.4% 100.0%
    Financing for harvesters 19.1% 13.5% 0.0% 19.1% 48.2% 100.0%
    Kisan Gold Card Scheme 34.0% 22.0% 8.5% 14.9% 20.6% 100.0%
    Dairy Scheme 14.2% 7.1% 10.6% 19.9% 48.2% 100.0%
    Finance to Horticulture 18.4% 7.8% 1.4% 19.1% 53.2% 100.0%

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  7. Heena Sunil Oza

    • Present study reveals more than half of the farmers are aware and using Agriculture equipment
    Loan and the remaining 44 % of farmer are not using loan for agricultural equipment
    • Half of the farmers are aware and using tractor loan. While 8% of the farmers are not aware of
    tractor loan provide by the PDCC bank, while 42 % of farmers are aware but not taken tractor
    • 34% of the farmers are aware and using loan for installation of tube well, while 29% of the
    farmers are not aware about the credit provided by PDCC Bank for installing tube well and 27
    % of farmers are ware but have not availed credit for installing tube well.
    • 38% of farmers have availed loan for purchase of livestock ( sheep/buffalo’s/ cows)and 29%
    of the farmer are not aware of the loan
    • 21% of the farmers are aware and taken loan for Animal husbandry and cattle rearing and almost
    35 % of the farmers are unaware of the loan
    • Almost three forth farmers are not aware about Loan for marketing of crops and Loan from
    major and minor irrigation schemes
    • 100% of the farmers have availed crop loan through Kisan credit Card.
    • 15 to 18% of the farmers have availed loan for Farm development and farm mechanization
    scheme and almost 48% of the farmers are not aware of the scheme.
    • 13% of the farmers are aware and using financing for harvesters scheme while remaining are
    not using this scheme

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  8. An Analysis Into Funding of Crop Loan Schemes by DCC Bank In Pune

    • 7 % of the farmers have taken advantage of Dairy scheme and Horticulture scheme whereas
    more than half of the farmers are not aware about the scheme.
    From the above findings it is observed that there is less awareness and usage for various
    agriculture credit schemes provided by DCC bank by Marginal and Small farmers. The major
    factors affecting low demand for agricultural credit is summarized below:

    Small Size of Holdings
    Due small size of landholding and subdivision and fragmentation of holding farm fails to
    provide profitable employment to the farmers. Thus their income from agriculture is hardly
    sufficient to meet their day to day expenditure on food, clothing and shelter.

    No loan without security
    The banks disburses agriculture loan to the farmers against a security which could be
    hypothecation of assets owned by the farmers. The farmers find it very difficult to arrange
    satisfactory security to the bank as they possess only land as assets which they find it hard to
    offer as a security. It becomes a big hurdle in obtaining loan from the bank as a result; many
    marginal and small farmers do not get the facility of agriculture loan and remain deprived of
    the benefits of agricultural development.

    Lack of Scientific Methods of Cultivation
    Thus having scientific cultivation with latest techniques is impossible in small farms. In India
    average size of holdings is 1.8 hectares while in developed countries like U.S.A. it is 122

    Another reason for low agricultural productivity is the indebtedness of the farmers. Crop failure
    or lesser production due to shortage of fertilizers, pesticides, good variety of seeds also compels
    farmers not to repay loans. Lesser production causes lesser income and lesser capacity of the
    farmers to meet their financial obligations. Moreover to perform the social ceremonies a farmer
    has to borrow from moneylender at a very high rate of interest.

    Inadequate Irrigation Facilities
    Farmer is dependent on climatic conditions for irrigation. Due to irregularity of Monsoons few
    farmers avail the facilities of irrigation from various sources such as canals, tube wells, etc.
    Natural calamities like floods and drought ruin the crops of the farmers and they are left with
    very little produce. This results in bad quality crop produce and low farm productivity. Also it
    affects their repaying capacity and as a result the recovery of loans becomes a tough task.

    Lack of Marketing Facilities
    The farmers are unable to get a due reward from the sale of his produce. The middleman takes
    away portion of their profits. Unless farmers are guaranteed fair and remunerative prices there
    is little stimulus for agricultural output to increase.
    Further there is lack of facilities of warehouses where the cultivators can keep their produce
    for a better price. In addition lack transportation facilities also results in low price of the

    Social Factors
    Poor demand for agriculture credit is due to the operation of various socio economic factors
    such as Illiteracy, ignorance, superstition and conservative approach of the farmers. The farmers

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  9. Heena Sunil Oza

    are illiterate and ignorant about the financial management practices. They do not know how to
    make the optimum use of the loan taken.

    Problems faced by Cooperative Banks
    • The cooperative financial institutions are facing following difficulties which have restricted
    their ability to ensure smooth flow of credit:
    • Limited ability to mobilize resources.
    • Low Level of recovery.
    • High transaction of cost.
    • Administered rate of interest structure for a long time.
    • Due to cooperative legislation and administration, Govt. interference has become a regular
    feature in the day– to-day administration of the cooperative institution.
    • The state cooperative banks are not able to formulate their respective policies for investment of
    their funds that include their surplus resources because of certain restrictions.
    • Prior approval of RBI is mandatory for opening of new branches of SCBs. The SCBs and the
    DCC Banks are required to submit the proposal for opening of new branches to RBI through
    NABARD, whose recommendation is primarily taken into consideration while granting

    Agriculture is being increasingly recognized as a commercial activity. Modern farm technology
    is capital intensive. Production requires modern inputs of good quality, and needs expenses to
    be allocated for Farm mechanization and related costs. The farming community requires
    agriculture credit for various activities such as land development, minor irrigation, farm
    mechanization and for the purchase of inputs to cultivate annual and permanent crops. Due to
    the inadequacy of credit facilities as well as other social factors as stated Marginal and small
    farmers are unable to invest in improved seeds and manure, introduce better harvesting
    techniques and adopt new improved technology. Various research studies have shown that the
    credit constraint is an important reason for slow adoption of improved technology. It is therefore
    important that the financial requirements of farmers are adequately met for inclusive growth.
    Further the Agricultural Research has to be extended to reach marginal and small

    [1] Dr. T. G. Gite (2005) thesis titled, “An Economic Analysis of Mechanization of Agriculture
    in Pune District, Maharashtra state” to University of Pune
    [2] Golait, R. (2007). ‘Current Issues in Agriculture Credit in India: An Assessment’, RBI
    Occasional Papers, 28: 79-100. Government of India, Economic Survey’, various issues
    [3] J.B. Sharma and B. Prasad (1971). “An assessment of production credit needs in developing
    agriculture economies, 26(4), 1971. P. 503-511
    [4] J.P. Bhosale (2005), unpublished Ph.D. thesis in the university of Pune “A Study of PACS
    in Junnar, Ambegaon and Khed Talukas of Pune District”
    [5] Pawar A.M. (2006), “Review of Agricultural Credit Provided by DCCB in Pune District”
    [6] Prof. Ratan Lal Godara, Dr. Partap Singh, Dr Sanjay Singla, “Agriculture Credit in India:
    An Analytical Study”, International Journal of Latest Trends in Engineering and
    Technology (IJLTET)

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  10. An Analysis Into Funding of Crop Loan Schemes by DCC Bank In Pune

    [7] Rangarajan, C (1996), “Rural India, the Role of Credit”, Reserve Bank of India Bulletin,
    Reserve Bank of India, Mumbai.
    [8] Reserve Bank of India, (2004). ‘Report of the Advisory Committee on Flow of Credit to
    Agriculture and Related Activities from the Banking System’ (Chairman: Prof. Vyas)

    Reports of the Important Committees or Working Groups or Commissions
    • Narsimham Committee Report(1991)
    • Padamanabhan Committee Report (1995)
    • Tarapore Committee Report (1997)
    • Basel committee Report (1998 and revised in 2001)
    • Kannan Committee Report (1998)
    • Kapoor Committee Report (1998)
    • Verma Committee Report (1999)
    • Performance of DCCBank in Maharashtra

    http://www.iaeme.com/IJM/index.asp 138 editor@iaeme.com

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