CHAPTER-1 INTRODUCTION AND DESIGN OF THE STUDY

1.1 INTRODUCTION Agriculture plays a vital role in Indian economic development. It is the back bone of Indian economy. It contribute around 22 per cent of Gross Domestic product (GDP) and provides employment to65 per cent of rural labour. It contributes 14.7 per cent to the total export earnings. It is a source of supply of raw materials to leading industries. Nearly one third of Indias industrial outputs depends upon the supply of agricultural commodities such as raw cotton, jute, oil seeds, tobacco, spices and constitute major items of Indias exports. Sardar Vallabhai Patel, the first deputy minister of India, had rightly pointed out that Indias culture is agriculture. Realizing the significance of agriculture sector, the government of India implemented various programmes for agriculture development. In particular, the Green Revolution Programme was implemented in 1965. This made Indian economy self sufficient in food grain production. But the Indian population is now growing at a high rate. Therefore, there is a dire need for an innovative strategy to increase agricultural production further. In other words, there is a need to ensure effective use of inputs under assured condition of irrigation to meet the need of the growing population and face the stiff competition in the era of globalization. Under these condition the farmers who own meagre resources require capital to make a break-through in agriculture production. The growing important of capital for transformation of agriculture implies increase for credit when a majority of cultivators have little owned funds to operate new technology. In the early stage of the adoption of any new technology, owned funds is the main source of finance because the big and medium farmers are the main participants in it. But in the later stage the need for credit is felt more intensively when the small and marginal farmers also adopt the new technology. Agricultural credit is one of the most crucial inputs for agricultural development. Money lenders were the major primary sources of credit to the farmers for a long time. But this source was inadequate and highly exploitative. The main aim of the money lenders was to grab the lands of the small and marginal farmers. In this regard, the report of All Indian Rural Credit Survey has admirably observed that private credit is wholly unsuitable in the context of planning for larger agricultural production. As a result of unscrupulous practices of the non-institutional sources, the government set up co-operative credit societies and land mortgage banks to ensure adequate flow of credit to the farm sector. But

these co-operatives could meet barely 3.3 percent of the total credit requirement of farmers while the money lenders accounted for 93 percent of credit needs. It is quite pertinent to note here the observation of the All Indian Rural Credit Survey committee (1954) that co-operation has failed, but co-operation must succeed. The Reserve Bank of India took a series of measures to strengthen co-operative institute based on the recommendation of the committee. Despite the various measure the co-operative credit societies could not rise to the expected level. In this regard, the All Indian Rural Credit Survey committee (1969) pointed out that the rural credit could not be met by co-operative societies alone and that commercial bank should also play an important role in rural credit. This government adapted multi agency approach consisting of co-operatives, commercial banks Regional Rural Banks to provide cheaper and adequate credit to farmers. The Reserve Bank of India also took serious efforts to ensure adequate farm credit. It set up the Agriculture Refinance Development Corporation (ARDC) to provide refinance support to banks for promoting the programmes of agricultural development. The NABARD was then set up in July 1982 by an Act of Parliament to take over the function of the ARDC. The NABARD now plays a dual role as an apex institution and as a refinance institution. 1.2 STATEMENT OF THE PROBLEMS There is a growing need for capital to transform Indian agriculture. But the poor income earned by the farmers due to irregularity and shortage of monsoon prevent the farmers from spending on their own on agriculture activities. More over, most of the farmers were inherent with their family liabilities. Therefore credit requirement of the farmers should be adequately met through institution sources. A credit is the life blood of any economic activity. It is the foremost lubricating factor which turns the wheels of all the sectors of the economy toward property. Which turns the wheels of all the sectors of an economy towards property. Agriculture is no exception to it. Credit is one of the most critical inputs for agriculture development. It is an important component in the production process for resources-scarce farmers. Further, the demand for farm credit increased manifold after implementation of Green Revolution Programme in Indian agriculture. Realizing the importance of agriculture credit, the government adopted various programmes to make credit easily accessible to farmers. It encourages the co-operatives sectors and commercial banks to lend the farm sector liberally on easy terms and condition. The multi-agency approach and services approach are adopted to finance agriculture on priority basis. The lead bank scheme was also

introduced to ensure effective role of the commercial banks in extending credit farm sector. The commercial banks now extend various types of loan to farm sector. Some of them include farm development loan, farm machinery loan, sprinkler irrigation loan, bullock cart loan and crop loan. They also extend loan for other allied activities. The kisan credit card scheme was introduced in 1998. The basic question is whether the farmers have been aware of all these schemes made available by the commercial banks to agriculture sector. Further, it becomes essential to evaluate the attitude of the borrowers towards the schemes and lending condition of the commercial banks. The other problem in agriculture credit is poor recovery of loan. The soaring ever dues affect the recycling of credit. The problems of over dues has become a hard nut to crack. The available literature reveal that lack of follow-up action, improper use of borrowed funds and reluctant attitude of borrowers and fluctuating income are some of the causes of over dues of farm credit. In this content the researcher made an attempt to analyse the levels of awareness and the attitude of borrowers towards the various schemes and lending practice of the canara bank. An attempt has also been made to examine the causes of wilful default of repayment of farm credit. 1.3 REVIEW OF LITERATURE