Brief Notes on Bank Credit for the Weaker Sections

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During the eighties, the banks have taken special care to cater to the needs of the weaker sections of society.

Weaker sections have been defined to cover small and marginal farmers, landless labourers, tenant farmers, share-croppers, artisans, village and cottage industries, beneficiaries of the IRDP, SC/ST, and beneficiaries of the DRI programmes.

Progress towards the targets prescribed for providing credit to the priority sectors and weaker sections of society has been satisfactory. An overall target of 40 per cent of net bank credit for the priority sector was fixed in the Sixth Plan.

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By the end of June 1985 the public sector banks tried their level best to meet this target by reaching a ratio of 30 per cent. Similarly, the target for the weaker sections was fixed at 10 per cent.

The banks, however, could reach the level of 8.3 per cent. By the end of December 1985, however, banks provided Rs. 894 crores to the weaker sections which constituted 10.2 per cent of net bank credit, and in 1986, it provided Rs. 5,980 crores which formed 10.8 per cent of net bank credit.

Further, under the new 20-point programme, by the end of December 1986, public sector banks provided financial assistance to the tune of Rs. 7,897 crores, forming 14.5 per cent of overall bank credit or 33.2 per cent of total bank credit to the priority sector.

An Evaluation :

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Banks, in general, have done well in playing their assigned role. But, there are many shortcomings.

1. Performance of banks in providing assistance to weaker sections and other beneficiaries of the IRDP has been largely target-oriented rather than result-oriented.

After providing credit to the deserving beneficiaries, there have been rarely any follow-ups to find out whether there has been any productive utilisation.

2. There have been an increasingly high proportion of over-dues in bank advances. Over-dues of the priority sector accounted for twenty per cent of the outstanding credit by the end of December 1986.

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3. Recovery performance in the case of direct agricultural advances also remained unsatisfactory.

4. No sufficient field work has ever been carried out by the rural branch executives for contacting their present and potential clientele for developmental and promotional work such as mobilisation of deposits, monitoring of credit utilisation, recovery of loans, etc.

During 1995 recovery rate increased to 21.9 per cent from 28.8 per cent in the previous year.

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