Determinants of Credit Allocation in Aricultural Sector in Coimbatore District
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Date
2012
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Abstract
The diversification of a large fraction of bank credit from the traditional sector to the
priority sector is a remarkable feature of credit deployment In the post nationalization
era. Due to various policy measures of the government the priority sector lending had
increased considerably. The priority sector lending witnessed a growth of 18 per cent
in 2010-11 over the year 2009-2010. However, the growth of agricultural advances
decelerated to 9 per cent in 2010-11 as compared with the growth of 23 per cent in 2009- 2010. In 2010-11, at the aggreg(^te level, banks have lent more than 40 per cent
of their Adjusted Net Bank Credit to priority sectors. The sub-target prescribed for
agricuiture at 18 per cent of Adjusted Net Bank Credit was also achieved by banks in
2010- ll(Report on trend and progress of banking, 2011). The bank-wise data on
priority sector advances as per cent ofANBC, ho wever, indicated that seven out of 26
public sector banks were not able to meet the priority sector lending target of 40 per
cent of ANBC in 2010^ 11. Further, it is a concern that 18 out of 26 public sector banks
could not meet the target set for agricultural advances in 2010-11. Among the private
sector banks, only one bank could not meet the priority sector lending target'in 2010-
11. However, ten private sector banks did not meet the target set for agricultural
advances in 2010-11. Foreign banks have a slightly different norm for priority sector
lending as the target for them is set at 32 per cent ofANBC. Further, export credit is a
part of priority sector lending of foreign banks. In 2010-11, at the aggregate level,
foreign banks achieved the target of priority sector lending. However, at the bank-level,
nfpw banks cniPH not meet the priority sector lending cent os compared with the
industry average of 22 per cent in 2010-11 (Report on trend and progress of banking,
2011).
In this backdrop, an attempt was made to identify the factors determining credit
allocation in agricultural sector in Coimbatore district.
The factor analysis shows that,among the ten variables, only the number of marginal
farmers, the number of agricultural labourers, the number of large formers and the
total area under cultivation could be selected to. represent the respective factor
components. The Bankers must consider the above four factors in credit allocation to
the blocks. Among these factors, only the variables such as the number of large
farmers was statistically significant to influence credit allocation among blocks.