Mapping Strategies for Efficient Rural Credit Delivery System through Cooperatives in Maharashtra

This paper attempts to assess the performance of various credit cooperatives operating in different districts and regions of Maharashtra with the extension to evaluating the viability of these institutions in forward and backward regions of the state. In this study, the credit cooperatives operating in Maharashtra have not only shown slower growth in their institutional finance coupled with much slower growth in their membership but also faster growth in outstanding loans as against their loan advances during the reform period. The reason for this dismal scenario is traced in adverse environment created by the financial sector reforms, which have reduced the entire rural credit delivery through cooperatives to a moribund state. Since the financial sector reforms accorded greater flexibility to cooperatives to invest in non- target avenues like shares and debentures of corporates, units of mutual funds, bonds of public sector undertakings, etc., this has adversely affected credit flow from these major institutions operating in rural Maharashtra as most of their loans meant for farm finance are diverted to investments. The credit cooperatives in Maharashtra are also noticed to be beset with several other deficiencies, which mainly relate to their low operational efficiency, high incidence of overdue, low level of recovery, distributional aspects of their loan advances, coverage of SC/ST members, etc. The findings of this investigation clearly show lackadaisical approach of PACS towards SC/ST members, particularly in terms of their coverage, pattern of loan advances to them and recovery pattern. The deficiencies do not confine to this but extend to other concurrent issues. Wide variation in total and crop loan advances across various districts and regions is other important issue that need to be taken cognizance of in ensuring effective rural credit delivery through PACS operating in Maharashtra. Although decline in their loan advances with rise in GCA is another issue, the most important one among all is the mounting overdue and NPAs of cooperatives operating in both forward and backward regions of Maharashtra. Due to substantially high NPAs, while BDCCB operating in backward region has shown gross inefficiency in its functioning during the reform period, the SDCCB operating in forward region is marked with deterioration in its financial health during this period. In order to rejuvenate rural credit delivery system through cooperatives, the major problems facing the system, viz., high transaction cost, poor repayment performance, mounting NPAs, distributional aspect of credit, coverage of SC/ST members, etc., need to be tackled with more fiscal jurisprudence reserving exemplary punishment for willful defaults, particularly large farmers.