ROLE OF LEAD BANK IN THE DEVELOPMENT OF DISTRICT MUZAFFAftNAGAR-1970-1980 (A CASE STUDY OF SMALL AND MARGINAL FARMERS)

Abstract

The development strategy lays stress on adoption of schemes which yield increased agricultural and industrial production, create employment and help to alleviate poverty. 'Area Approach' under 'Lead Bank Scheme' assigns responsibility on the Lead Bank to help farm families to relate their credit needs with the planned programmes of development. Although banks have been called upon to play a major role in the implementa tion of various agricultural credit programmes under Lead Bank Scheme, yet these banks are faced with certain difficulties in financing small and marginal farmers like the unsuitability of agricultural security, the peculiarities of agricultural finance, seasonal changes, the uneconomic nature of the farming industry, illiteracy among the farmers, the imperative necessity of keeping their funds liquid and lack of personal knowledge about cultivators. The task is crucial for Lead Bank and calls for intelligent and dedicated approach to the whole problem with reforming practices and procedures to ensure that funds are properly utilised and desired results are achieved. At this stage, a case study becomes essential to find out the causes which help or hinder the proper implementation of Lead Bank Scheme. The present study extends over^Muzaffarnagar / -liidistrict, to ascertain the impact of credit supply by banks on small and marginal farmers under Lead Bank Scheme. The objective of the study is to evaluate the impact of financial assistance on production, income, savings and recovery of loans on small and marginal farmers of the district, which in turn effects the imple mentation of the Lead Bank Scheme. In order to explore this, following criteria were adopted: i) critical analysis of the existing pattern of advancing loans under Lead Bank Scheme, ii) credit gaps at existing and improved level of technology, iii) increase in income and savings of small and marginal farmers after taking loan, iv) assessment of the implementation of the Lead Bank Scheme in the district. The study is based orv scmple Random Sampling method. Two hundred farmers were randomly selected as the representative of the present study and were classified according to the size of their owned holdings falling into marginal, small, medium and large farmers. On the basis of a structural schedule, data regarding the occupation, credit requirement, supply of credit, credit gaps, product ion, income and savings before and after taking loan, recovery of loan, were collected. -iv- After critical analysis and interpretation of the collected data, it was found that there was a general increase in the net income of the sampled farmers which resulted in comparatively increased recovery of loans. Moreover, it was found that only small and marginal farmers lagged behind in gaining significant increase in income and savings due to diversion of funds in undesirable channels which resulted in reduced repayment capacity of small farmers when compared to medium and large farmers. It also came into light that despite banks' increasing involvement in financing small and marginal farmers, a huge credit gap remained, even in the genuine needs of the sampled farmers. Another phenomenon, which came into focus was that banks were found to be reluctant in granting adequate loans to the farmers due to low recovery of loans which was partly due to irrigational pre-sanction appraisal of the loan-proposals, inadequate post-sanction follow-up and unsuitable and untrained staff with the bank and partly due to willful default by the borrower and growing political interference which encouraged low recovery. Credit, beinn a critical input in increasing the efficiency of other resources and production pattern, should readily be made available to the cultivators, consistent with their production needs.Although, much X < -V - has been done in this direction, yet fevv bottlenecks, as revealed by the present study, should be overcome through a still more bold credit policy by Punjab National Bank, the Lead Bank of the District Muzaffarnagar,in raising the productivity of land and net earnings of small and marginal cultivators.