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REVIEW OF LITERATURE
CHAPTER II
REVIEW OF LITERATURE
Quantitative targets were set for lending to priority sector and separate
sub-targets were also set for lending to agriculture and weaker sections of the
society. As a result, lending to the borrowers in priority sectors have increased
substantially. Increased flow of credit to the different sectors assisted the
developmental activities and thereby expanded the income as well as the
standard of living of the people.
PN
10.111
('(>7')\
loans and advances to the priority sector, including self employment schemes.
This is mainly due to the reason that the banks have no clear and precise role
about the scope of lending to the priority sector. He has also argued that the
Reserve Bank of lndia should give a clear definition of the different components
of the priorlty sectcr, which will enable the commercial banks to increase their
Purohit M,C (1973)~,in his study on Small Artisans and Potential for
Bank Financing, conducted in Jaipur City,
requirement alone accounts for 89 per cent of the total financial requirements.
The share of raw material in the total working capital requirement is substantial.
He adds that 36 per cent of the artisans run their units with borrowed 'funds.
These artisans who borrowed funds had mainly relied upon non-bank financing
intermediaries No artisan has borrowed from any co-operative agency or
governmental agency, a few relied on commercial banks. Ignorance about the
facilities provided by the commercial banks and the. inability of the artisans to
fulfill the bank requ~rementsto avail easy loans have forced the artisans to take
financ~alassistance from non-banking financial institutions at a higher rate of
interest.
persons, etc, is one of the major reasons for their backwardness. The banks are
reluctant to take up the financing of the priority sectors due to the smallness of
their size arid their precarious existence at the margin of viability. Their urban
origin, security orientation, methods and procedures of operations are not
suitable for financing the priority sectors. Financing of priority sectors is a new
experience for the banks and presents a number of problems. They have to
reorient their lending policies with a shift of emphasis from security to viability of
the project. He also states that the role of commercial banks in the priority
sectors does not end with the provision of finance but it also includes the
evaluation of the feasibility of a project and to aid the entrepreneurs to select
the right type of projects. An improved co-ordination between various agencies
including governmenl agencies and commercial banks is necessary for a better
result.
S.L.Shetty ( 1 9 7 8 ) conducted
~
a study on the achievement of commercial
banks since nationalization. HIS study, reveals that the credit deposit ratio of
banks which are not relatively participating in priority sector lending is h i g h s
than the average credit deposit ratio. He also states that a few branches of
banks performed well in priority sector lending by concentrating in certain areas
I.G.Patel (1979)~is of the view that banks in the country have a very
important role rn uplifting the socio-economic status of the weaker sections. For
accelerating the development of the economy, it is the poorest section of the
people which have to be uplifted. The banks have a special responsibility to
uplift the poorest strata of the people. Towards this end, they should give more
attent~on in financ~ng schemes with objectives of providing employment
opportunities to the weakest of the weaker section of the people whether they
are in the rural or urban areas.
IS
major responsibility iri branch expansion and credit extension. The stress is laid
on the lead bank's hason role in integrating credit with complimentary inputs
and services. The priority sector lending involves considerable extension
efforts. The credit agencies or the government departments or both have to
ensure the critical integration of credit with inputs and services. This would
require co-ordination among financial institutions and in many cases collective
act~onby them. These tasks would become immensely complex if individual
agencles act ~ndeperidently In the short run the Lead Bank Scheme can only
facilitate the flow of a given quantum of credit to the priority sector, but may not
be able to increase this quantum. The Lead Bank Scheme can only be
expected to reflect the local needs and genuine regional grievances, the
influence of which could be felt only in the long run.
B.K. Sarkar (1983)" opines that success of a marketing drive for the
target group in the priority sector depends on a careful study of each segment
of the society. The need and capacity of the borrowers and their willingness to
take activities, etc. should be thoroughly analysed. The desired result can be
achieved only if the borrowers utilize the amount borrowed by them for the
purpose for which it has been lent
Sche~;ie The study i n s also thrown l~ghtto the fact that a number of el~gible
borrowers could not avail loan under the DRI scheme but at the same time a
number of well settled influential persons availed loans under the scheme.
IS
The tendency to misutilise the loan is due to the fact that the consumption
priorities of tribal farmers are of more urgent nature than asset building
~riorities
Raj Kishore Panda (!985)16 states that the diversion of credit towards
non-productive purposes is more among medium and large farmers than
among small farmers.
Ramesh Chand and Sidhu (1985)" in their study states that high level of
education of the borrowers or family members of the borrowers contributes
towards non-defaulters This factor which places the borrowers into defaulters
group are the higher values of ratio of dependence on the family, capital
expenditure and total borrow~ng.While lower levels of education, ratio of
dependents in the family. consumpt~on expenditure and net cash income
account willful default and reverse is true for non-willful defaulters.
machinery or because of
I.Satya Sundaram (1986)" conducted a study on DRI Scheme and points out
some of the problems of the Scheme. Fund allocation under the DRI Scheme is
insufficient when compared wlth the number of borrowers under the scheme.
Moreover the borrower utilizes the loan amount of loan for purposes that are
outside the scope of the scheme There is no change in the standard of living of
the beneficiaries even after implementation of the scheme. He is of the view
that for achieving the desired result under the scheme, some means of control
are necessary.
such
development.
essent~alto ensure that the borrowers utilize the amount borrowed by them for
product~vepurposes.
H C. Malhotra and Kulshrestha (1987)'~ opines that bank loans will not
improve the quality of life of the poor unless the borrower utilizes the fund for
productive purses. To ensure utilisation of fund for productive purposes, proper
monitoring and supervision by the lending banks are essential. They suggest
co-ordination between the lending agencies and minimizing competition to
improve the better util~zationof fund by the borrowers.
P.D.Ojha (1987)"~
the then Deputy Governor of RBI, made a comment
on the Banking and Economic Development in India while inaugurating a
seminar at Sukhadai Jniversity, Udaipur. He remarks the borrowers default in
repayment of loans by the beneficiary is a common feature of the bank loans
under sponsored schemes like DRI, SSI. Self-employment and other priority
sector advances The accumulat~onof such default affects the efficient working
of the banking system. Banks flnd it difficult in recycling the credit and they are
discouraged in lending under sponsored schemes. He requests the banks to
make necessary appraisal of the proposal and grant loans only against viable
projects and that banks should have eKective supervision and control over the
utilization of fund disbursed.
cent (weighted average) and one of the main reasons responsible for the gross
under utilization is finance. T~melyand adequate availability of credit to this
sector would enable the capacity utilization to go up substantially both in the
short and the medium term. Thls would also enhance export capability.
Inadequate or lack of supervision and follow-up as well as lack of interpersonai relationship between banker and borrowers - are the major causes for
the misutilisation 1 diversion of loans, which lead to low income, low savings and
rlon repayment If these factors are taken into consideration, the overdues can
be minimised to the extent of 60 to 70 per cent.
the poorest among the poor shouid be identified and they should be provided
with financ~alassistance against v~ableprojects. They should also be provided
with adequate train~ngfor the proper utilization of loan amount and be informed
about the responsibil~tyin repayment of the loan.
for obta~ning loans The study also reveals that though there is no much
progress in the social status, the loans have helped the beneficiaries to improve
their income status.
They are also of the view that the government policy of waiving of loans
~ n a k erecovery of bank llsans more difficult. The beneficiaries who are regularly
repaying the loans wrll refrain from repaying the loans and this will result in non-
recycling the loan for further lending. Ultimately such policy affects the
economic progress.
the
performance of commercial
banks in the
implementation of
developmental schemes for weaker sections. The study reveals that bank credit
is essential for improving economic conditions of the weaker section. The study
also reveals that the petformance of the commercial banks in financing the
developmental schemes in rural and semi urban areas is satisfactory.
in the Development of Small Scale Industries. In the study, he remarks that the
importance of small scale industries in the economic development of our
A.R. Patel (1996)~'opines that the Government can help the commercial
banks in the implementation and monitoring of schemes for the development of
rural areas. The Government can also help the banks by appropriate measures
l
over dues in future. State participation
in recovering the loans which w ~ lreduce
will help to increase the productivity and the amount of credit to the weaker
sect~~,ns.
be scrutinized by only one agency either the bank or the District Industries
Centre. They also suggest that the PMRY Scheme must be operated for the
benefit of the deserv~ngpeople
A.V. Dhond (1999)~'remarks that small scale industries are best suited
for a developing country like lndia for solving the problems Of unemployment
and capital formation. He reports that small scale industries in lndia account for
95 per cent of total industrial units, 80 per cent of industrial work force, 50 per
cent of turnover of manufacturing sector and 36 per cent of total exports. He
requests the banks and Government departments to increase the support to
SSI units by evolving new mechanism to deal with dues by SSI units.
The
PMRY
Scheme
is
implemented to
generate
employment
IS
literature reveals that the schoiars have not made any attempt to analyse the
employment generatea by the PMRY Units. This study aims at analyzing the
FOOT NOTES
1
'
"
Patel I.G., ,.Indian Banking During the Coming Decade," Reserve Bank
of lndia Bulletin, V o l XXXlll (11). November 1979, pp. 767-772.
Singh and Balraj, "Perceived Advantage of Taking Loans From Banks
and Suggestion for Improvement," The Banker, Vol. XXVl (lo), December
1979, p. 24.
a
Sarkar, B K., "Banks Marketing for the Target Groups in the Priority
Sector," Prajnan, Vol XI1 (4), October-December 1983, pp. 315-325.
''
Raut, "A Study on the Scope and Problems of Financing Tribal Farm
Development by Land Development Banks, " Land Bank Journal, Vol. XXll (3),
March 1984, p, 57.
16. Rai Kishore Pande (1965) "A study into the borrowing and utilisation
among the fakmers in Puri district"; Financing ~ ~ r i c u l t u r~e0, 1 . 1 7(2), April-June
1985.
17
Satya Sundaram, I.,"A fresh look at the DIR Scheme," Facts for you,
Vol. Vlll (3), Segtember 1986, pp 23-26.
21
26
27.
".
34
Kalra, S S
April 1990, pp 25-3 1.
. "Menace of
Toor, N. S , "Banks Finance for SSI: Need for New Approach," The
Banker, Vol XL (6). August 20, 1993, pp. 20-23.
"