chapter 3 lending schemes of public and private...

93

Chapter 3

LENDING SCHEMES OF PUBLIC AND PRIVATE SECTOR

BANKS IN KERALA

Lending being one of the prominent sources of income for all banks, its

proper management demands noteworthy attention. An ideal management of

credit ensures a proportionate and sensible balance between liquidity and safety

of funds and the profitability of operations. After the nationalization of banks

in 1969, direct credit policy in the financial sector captured commendable

attention for which the RBI recommended to advance 40 per cent of net bank

credit to priority sectors, which include agriculture, SSI sector, retail traders,

self employed people, etc. This persuaded commercial banks to focus on social

obligations rather than profitability. Owing to increased thrust to compete,

public as well as private sector banks began considering rural and neglected

sectors, employment generation and promoting entrepreneurial skills as their

primary objective. Again, there are government sponsored schemes like

PMEGP with a nominal interest rate and schemes like Kissan Credit Card (of

State Bank of Travancore) and Federal Kissan Card (of Federal Bank) which

can be availed by any common man without much paper formalities and

expenses. Besides, some schemes are accompanied by subsidies which relieve

the beneficiary of financial distress to some extent.

Lending schemes of commercial banks are of three types- short term

loans ranging from six months to twelve months, granted for the purpose of

94

raising crops, medium term loans ranging from one year to five years issued to

agriculturists to purchase tractors, pump sets, bullocks, etc. and long term loans

of more than five years, granted against hypothecation of immovable property.

In spite of all these, finance to corporate as well as partnership firms is also

provided for allied activities like dairy, fishery, piggery, poultry, beekeeping,

etc. Borrowers are now aware of the majority of the schemes of commercial

banks through newspapers, magazines, internet, television, etc. Moreover,

newspapers are also playing a major role in propagating the government

sponsored loan schemes. Of late, bank approach towards borrowers has also

changed considerably. If the project is feasible, banks make certain

arrangements to favour the project somehow and never reject it due to the lack

of adequate collateral security.

The total advance made by commercial banks in India during 2002-03

was Rs.759210 crore. It was raised to Rs.2857525 crore during 2008-09, i.e. an

increase of 27 per cent. But a major portion of these advances is availed by

industrially advanced states like Maharashtra, Tamil Nadu, Andhra Pradesh,

etc. (RBI, 2009). But the total advance to Kerala during the period was only

Rs.81612 crore (i.e.3%). Again, the total bank credit by commercial banks in

Kerala showed a declining trend. The growth rate in bank credit was14.58 per

cent in 2009, but the growth rate in 1999 was 17.4 per cent (Economic Review,

2009).

95

The Credit Deposit (CD) Ratio of all the commercial banks in India by

the end of March 2009 was 73 per cent. Tamil Nadu occupied the topmost

place among the major 15 States in the CD ratio (108.90%) followed by

Andhra Pradesh (97.60%) and Maharashtra (91%). In Kerala the CD ratio was

noted as 60.40 per cent in March 2009 (Economic Review, 2009).

The total bank credit comprises priority sector advances and other

advances. Agriculture and MSME sector come under the priority sector. The

priority sector advance as a percentage of net advances was 46.4 per cent in

2001. It went up to 64.59 per cent in 2008 and then plunged to 59.2 per cent in

2009. Out of the total advances of Rs.81612 crores in 2009, Rs.15959.34 crores

(19.6%) was for agriculture sector and Rs.8095.32 crores (9.9%) was for

MSME sector. (SLBC, Kerala).

The present chapter assesses the perception of borrowers and bank

managers on the lending schemes of public and private sector banks in Kerala,

based on some well defined variables (given in Chapter 1). The chapter has

been divided into two sections for analysis - A and B. Section A is for

analyzing the personal traits of the sample borrowers, whereas Section B is for

assessing the perception of borrowers and bank managers on the lending

schemes.

96

SECTION A

Personal Traits of the Sample Borrowers

For analyzing the personal traits of the sample borrowers, variables viz.

age, gender, community, marital status, education, occupation, marital status,

type of family and number of family members have been used.

(a) Age

Age of the borrowers has a direct bearing on the selection of occupation,

level of knowledge, earning capacity, etc. Usually people belonging to the old

generation are traditional and conservative and may not be receptive to new

ideas and they are less dynamic, compared to the younger generation.

Regarding the age of the borrowers, Table 3.1 reveals that a majority of the

borrowers (66.5%) in the public and private sector banks are in the age group

of 35 to 50 years. Further, 15.7 per cent are in the age group of below 35 years

and 17.8 per cent are in the group of above 50 years. But the mean age of the

sample borrowers is 43 years. The sector-wise analysis also finds no wide

variation.

Table 3.1: Age of Borrowers

Source: Primary data. Figures in parentheses are percentages to respective totals. Mean Age= 43years.

Age (in years)

Public sector bank Private sector bank Total

South Central North Total South Central North Total

< 35 26

(11.8) 35

(17.3) 7

(12.7)68

(14.2)6

(20.0)14

(19.7) 6

(28.6) 26

(21.3) 94

(15.7)

35-50 174

(78.7) 119

(58.9) 37

(67.3)330

(69.0)18

(60.0)42

(59.2) 9

(42.9) 69

(56.6) 399

(66.5)

> 50 21

(9.5) 48

(23.8) 11

(20.0)80

(16.7)6

(20.0)15

(21.1) 6

(28.6) 27

(22.1) 107

(17.8)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

97

(b) Gender

Women constitute almost half of the total population in Kerala. In order

to empower women, a number of schemes are offered by commercial banks.

Some schemes carry lower interest rates, but others are collateral-free. The

gender-wise classification of the sample borrowers given in Table 3.2 depicts

that a majority (72.3%) of borrowers in the public and private sector banks are

males and the rest are females. The sector-wise analysis reveals that among 478

borrowers in the public sector banks, 70.3 per cent are males and 29.7 per cent

are females. Similarly, among 122 borrowers in the public sector banks, 80.3

per cent are males and 19.7 per cent are females.

Table 3.2: Genders of Borrowers

Gender Public sector bank Private sector bank

Total South Central North Total South Central North Total

Male 165

(74.7) 125

(61.9) 46

(83.6)336

(70.3)21

(70.0)58

(81.7) 19

(90.5) 98

(80.3) 434

(72.3)

Female 56

(25.3) 77

(38.1) 9

(16.4)142

(29.7)9

(30.0)13

(18.3) 2

(9.5) 24

(19.7) 166

(27.7)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100) Source: Primary data. Figures in parentheses are percentages to respective totals.

(c) Caste

In Kerala, we find different sections in the society because of the

existence of different religions and castes. The caste-wise analysis helps to

know the category which approaches banks most. Table 3.3 reveals that 74.2

per cent of the borrowers in the public and private sector banks belong to the

general category. But 14.3 per cent are from SC/ST and 11.5 per cent are from

OBC categories. While in the public sector banks 72.6 per cent of the

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borrowers belong to the general category, in the private sector banks, it

accounts for 80.3 per cent.

Table 3.3: Caste of Borrowers

Source: Primary data. Figures in parentheses are percentages to respective totals.

(d) Marital Status

Marriage changes the standard of living, attitude towards life,

commitments, etc. It is a motivation for better living and generating earnings

too. Table 3.4 illustrates that 88.7 per cent of the respondents are married. The

rest are either unmarried or widowed. The sector-wise analysis also finds no

considerable variation between public and private sector banks with regard to

marital status.

Table 3.4: Marital Status of Borrowers


Caste Public sector bank Private sector bank


SC/ST 34

(15.4) 36

(17.8) 7

(12.7)77

(16.1)1

(3.3) 8

(11.3) -

9 (7.4)

86 (14.3)

OBC 5

(2.3) 48

(23.8) 1

(1.8) 54

(11.3)-

1 (1.4)

14 (66.7)

15 (12.3)

69 (11.5)

General 182

(82.4) 118

(58.4) 47

(85.5)347

(72.6)29

(96.7)62

(87.3) 7

(33.3) 98

(80.3) 445

(74.2)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

Marital status



Married 202

(91.4) 178

(88.1) 41

(74.5) 421

(88.1) 25

(83.3) 68

(95.8) 18

(85.7) 111

(91.0) 532

(88.7)

Unmarried 174

(78.7) 18

(8.9) 10

(18.2) 42

(8.8) 2

(6.7) 3

(4.2 3

(14.3) 8

(6.6) 50

(8.3)

Widowed 21

(9.5) 6

(3.0) 4

(7.3) 15

(3.1) 3

(10.0) - -

3 (2.5)

18 (3.0)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

99

(e) Education

Education, entrepreneurship and development are interrelated. The

education of borrowers affects their credit habits and ability to make a rational

and intelligent use of credit. Table 3.5 portrays that a majority (40.2%) of the

borrowers in the public and private sector banks are graduates. Again, while

20.7 per cent of the borrowers have secondary qualification 19 per cent have

higher secondary qualification. The sector-wise analysis reveals that 38.3 per

cent of the borrowers in the public sector banks and 47.5 per cent in the private

sector banks are graduates.

Table 3.5: Education of Borrowers

Source: Primary data Figures in parentheses are percentages to respective totals.

(f) Occupational Status

The banks now consider occupation as one of the important factors

before advancing credit which has a direct bearing on the repayment of credit.

Regarding the occupational status of borrowers in the public and private sector

Education Public sector bank Private sector bank


No formal education

- 7

(3.0) -

7 (1.5)

- - - - 7

(1.2)

Primary 31

(14.0) 29

(14.4) 1

(1.8) 61

(12.8) 1

(3.3) 5

(7.0) 8

(38.1) 14

(11.5) 75

(12.5)

Secondary 50

(22.6) 51

(25.2) 2

(3.6) 103

(21.5) 5

(16.7)9

(12.7) 7

(33.3) 21

(17.2) 124

(20.7) Higher

secondary 34

(15.4) 35

(17.3) 25

(45.5) 94

(19.7) 7

(23.3)12

(16.9) 1

(4.8) 20

(16.4) 114

(19.0)

Degree 100

(45.2) 60

(29.7) 23

(41.8) 183

(38.3) 14

(46.7)40

(56.3) 4

(19.0) 58

(47.5) 241

(40.2) Post

graduate 6 (2.7)

20 (9.9)

4 (7.3)

30 (6.3)

3 (10.0)

5 (7.0)

1 (4.8)

9 (7.4)

39 (6.5)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

100

banks, 50 per cent are either agriculturists or MSMEs. While analyzing the two

categories of banks individually, among 478 borrowers in the public sector,

56.5 per cent are agriculturists and the rest (43.5%) are SMEs. On the contrary,

among 122 borrowers in the private sector, 75.4 per cent are MSMEs and the

rest (24.6%) are agriculturists.

Table 3.6: Occupational Status of Borrowers

Occupation


South Central North Total South Central North Total Agriculture

132 (59.7)

110 (54.5

28 (50.9)

270 (56.5)

8 (26.7)

16 (22.5)

6 (28.6)

30 (24.6)

300 (50.0)

SME 89

(40.3) 92

(45.5) 27

(49.1)208

(43.5)22

(73.3)55

(77.5) 15

(71.4) 92

(75.4) 300

(50.0)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600


(g) Location of Borrowers

Location may be a factor in the choice of a bank by borrowers. The

majority (55.3%) of the borrowers in the public and private sector banks in

Kerala belong to urban areas, whereas 36 per cent belong to semi-urban areas

and the rest 8.7 per cent are from rural areas. The sector-wise analysis also

finds no considerable difference as to the location of borrowers (Table 3.7).

Table 3.7: Location of Borrowers


Location Public sector bank Private sector bank


Urban 165

(74.7) 52

(25.7) 52

(94.5) 269

(56.3) 23

(76.7) 35

(49.3) 5

(23.8) 63

(51.6) 332

(55.3) Semi-urban

55 (24.9)

108 (53.5)

3 (5.5)

166 (34.7)

5 (16.7)

34 (47.9)

11 (52.4)

50 (41.0)

216 (36.0)

Rural 1

(0.5) 42

(20.8) -

43 (9.0)

2 (6.7)

2 (2.8)

5 (23.8)

9 (7.4)

52 (8.7)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

101

(h) Type of Family

Family pattern determines the borrowers’ choice of loan to some

extent. The family pattern of the sample borrowers in the public and private

sector banks in Kerala given in Table 3.8 reveals that a majority (81.8%) of the

borrowers belong to nuclear family and the rest belong to joint family. The

sector-wise analysis also finds no considerable variation.

Table 3.8: Type of Family of Borrowers

Type of family



Joint 22

(10.0) 61

(30.2) 3

(5.5) 86

(18.0) 6

(20.0) 11

(15.5) 6

(28.6) 23

(18.9) 109

(18.2)

Nuclear 199

(90.0) 141

(69.8) 52

(94.5) 392

(82.0) 24

(80.0) 60

(84.5) 15

(71.4) 99

(81.1) 491

(81.8)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600


i) Number of Members in the Family

The number of members in the family affects the saving and spending

pattern of individuals in the family. Regarding the number of members in the

family, Table 3.9 reveals that 39.8 per cent of the borrowers in the public and

private sector banks have four members in the family. But 29 per cent have

more than five members and 20.3 per cent have only three members. Again, no

considerable variation was observed in the public and private sector banks as to

the number of members in the family of borrowers.

102

Table 3.9: Total Number of Members in the Family


(j) Number of Earning Members in the Family

The number of earning members in the family is one among the factors

positively considered by banks while selecting a borrower. Table 3.10 shows

that the majority of the borrowers in the public and private sector banks

(87.7%) have only one earning member in the family. But 10.8 per cent have

two earning members and 1.5 per cent have more than three members. The

sector-wise analysis also finds no considerable variation.

Table 3.10: No of Earning Members in the Family


No of members



1 7

(3.2) 1

(0.5) 2

(3.6) 10

(2.1) -

3 (4.2)

- 3

(2.5) 13

(2.2)

2 31

(14.0) 7

(3.5) 2

(3.6) 40

(8.4) 3

(10.0) 9

(12.7) -

12 (9.8)

52 (8.7)

3 63

(28.5) 21

(10.4) 20

(38.4) 104

(21.8) 2

(6.7) 14

(19.7) 2

(9.5) 18

(14.8) 122

(20.3)

4 96

(43.4) 71

(35.1) 21

(38.2) 188

(39.3) 15

(50.0) 27

(38.0) 9

(42.9) 51

(41.8) 239

(39.8) 5 &

above 24

(10.9) 102

(50.5) 10

(18.2) 136

(28.5) 10

(33.3) 18

(25.4) 10

(47.6) 38

(31.1) 174

(29.0)

Total 221 (100)

202 (100)

55 (100)

478 (100)

30 (100)

71 (100)

21 (100)

122 (100)

600 (100)

No of earning members



1 218

(98.6) 134

(66.3) 54

(98.2)406

(84.9)29

(96.7)70

(98.6) 21

(100) 120

(98.4) 526

(87.7)

2 - 62

(30.7) 1

(1.8) 63

(13.2)1

(3.3) 1

(1.4) -

2 (1.6)

65 (10.8)

3 1

(0.5) 6

(3.0) -

7 (1.5)

- - - 7

(1.2)

4 2

(0.9) - -

2 (0.4)

- - - 2

(0.3)

Total 221 (100)

202 (100)

55 (100)

478 (100)

30 (100)

71 (100)

21 (100)

122 (100)

600 (100)

103

(k) Annual Family Income

An analysis of the family income of the borrower helps the banker to

know his repayment capacity. The analysis of the annual family income of

borrowers in the public and private sector banks given in Table 3.11 reveals

that a majority (44.3%) of the borrowers belong to the income slab of Rs.1to

Rs.5 lakh. For 25.3 per cent of the borrowers, the income is less than Rs.1 lakh

and for 16 per cent the income is in between Rs.5lakh and Rs.10 lakh. But 13

per cent belong to the income slab above Rs.10 lakh. The sector wise analysis

also finds no considerable variation as to annual family income.

Table 3.11: Annual Family Income of Borrowers


(l) Average Annual Expenses

The annual expenses of the borrower also determine his repayment

performance. Table 3.12 depicts that the average annual expenses of 33.8 per

Family income (Rs in Lakh)



<1

50 (22.6)

70 (34.7)

28 (50.9)

148 (31.0)

2 (6.7)

- 4

(19.0) 6

(4.9) 152

(25.3)

1-5 132

(59.7) 61

(30.2) 10

(18.2)203

(42.5)17

(56.7)43

(60.6) 3

(14.3) 63

(51.6) 266

(44.3)

5-10 35

(15.8) 22

(10.9) 10

(18.2)67

(14.0)4

(13.3)25

(35.2) -

29 (23.8)

96 (16)

10-15 1

(0.5) 17

(8.4) 4

(7.3) 22

(4.6) 4

(13.3)2

(2.8) 3

(14.3) 9

(7.4) 31

(5.2)

>10 3

(1.4) 32

(15.8) 3

(5.5) 38

(7.9) 3

(10.0)1

(1.4) 11

(52.4) 15

(12.3) 47

(7.8)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

104

cent of the borrowers are less than Rs.1 lakh and for 38.8 per cent of the

borrowers the expenses are in between Rs.1lakh and Rs.5lakh. But for 8.7 per

cent borrowers the average expenses are above Rs.10 lakh. The sector-wise

analysis reveals that 50 per cent of the borrowers in the private sector banks are

spending between Rs.10 lakh and Rs.50 lakh. But in the public sector this

category came to 36 per cent.

Table 3.12: Average Annual Expenses


SECTION B

Perception of Borrowers and Bank Managers on the Lending Schemes

This section attempts to assess the perception of borrowers and bank

managers on the various lending schemes of public and private sector banks in

Kerala.

Expenses (Rs.in lakh)



<1 63

(28.5) 99

(49.0) 28

(50.9) 190

(39.7) 3

(10.0) 4

(5.6) 6

(28.6) 13

(10.7) 203

(33.8)

1-5 120

(54.3) 43

(21.3) 9

(16.4) 172

(36.0) 18

(60.0) 41

(57.7) 2

(9.5) 61

(50.0) 233

(38.8)

5-10 34

(15.4) 26

(12.9) 16

(29.1) 76

(15.9) 8

(26.7) 25

(35.2) 3

(14.3) 36

(29.5) 112

(18.7)

10-15 1

(0.5) 7

(3.5) -

8 (1.7)

1 (3.3)

1 (3.3)

- 2

(1.6) 10

(1.7)

>15 3

(1.4) 27

(13.4) 2

(3.6) 32

(6.7) - -

10 (47.6)

10 (47.6)

42 (7.0)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

105

a) Lending Schemes Availed by Borrowers (Discussion of First Hypothesis)

The public and private sector banks in Kerala offer two categories of

schemes for the promotion of agriculture and MSME, viz. government

sponsored schemes and schemes as per banks schedule. The agriculture-based

schemes take care of the production requirements of the farmers including

requirements for the ancillary activities like maintenance of agricultural

machineries/ equipment, electricity charges, etc. Under the scheme, credit is

also extended to farmers for allied agricultural activities such as fisheries,

poultry, piggery, sheep/ goat rearing, etc. The MSME based schemes take care

of the production and distribution requirements of the small and medium

entrepreneurs. Likewise, there are several schemes, as per the banks’ schedule,

catering to all needs of farmers as well as MSMEs. The perception of the

borrowers of the public and private sector banks in Kerala with regard to the

schemes availed by them is assessed as under:

The analysis shows that, out of the various lending schemes for the

agricultural sector, 33.2 per cent of the borrowers availed either Kissan Credit

Card scheme or Federal Kissan Card scheme. 11.7 per cent made use of Prime

Minister’s Rozgar Yojana (PMRY) scheme, which is now known as PMEGP.

Again in the SME sector, 17.9 per cent of the borrowers utilised either SSI

special loan or Trader’s special loan. While comparing the number of loan

schemes of the public and private sector banks, the public sector banks are

offering a large number of schemes both for the agriculture and MSME sectors

(Table 3.14).

106

Table 3.13: Lending Schemes Availed by Borrowers (Opinion of Borrowers)


Table 3.15 reveals that most of the borrowers (52%) in the sample

availed MSME loans than agricultural loans. While analyzing the sectors

separately, 52.9 per cent in the public sector banks availed agricultural loans

and 71.3 per cent of borrowers in the private sector banks took MSME loans.

But, the chi-square tests worked out for the sectors separately find no

Name of schemes

Public sector banks Private sector banks Total

South Central North Total South Central North Total Agriculture

KGC/FGC 2 (0.9)

6(3.0)

2(3.6)

10(2.1)

2(6.7)

3(4.2)

1 (4.8)

6(4.9)

16(2.7)

KCC/FKC 93 (42.1)

51(25.2)

26(47.3)

170(35.6)

8(26.7)

16(22.5)

5 (23.8)

29(23.8)

199(33.2)

Allied 29 (13.1)

23(11.4)

1(1.8)

53(11.1) - - - - 53

(8.8)

Others 2 (0.9)

15(7.4)

3(5.5)

20(4.2) - - - - 20

(3.3)

Total 126 (57.0)

95(47.0)

32(58.2)

253(52.9)

10(33.3)

19(26.8)

6 (28.6)

35(28.7)

288(48.0)

MSME

PMRY 28 (12.7)

44(21.8)

3(5.5)

75(15.7) - - 5

(23.8) 5

(4.1)80

(11.7)

SGSY 4 (1.8)

15(7.4)

1(1.8)

20(4.2) - - - - 20

(3.3)SME easy loan

4 (1.8)

11(5.4)

5(9.1)

20(4.2) - - - - 20

(3.3)SSI special/ Federal Vanijya loan

6 (2.7)

7 (3.5)

5 (9.1)

18 (3.8) 2

(6.7)

34 (47.9)

4 (19.0)

40 (32.8)

58 (9.7)

Margin free special

6 (2.7)

6(3.0)

2(3.6)

14(2.9) 14

(2.3)Petroleum special

21 (9.5)

8(4.0)

2(3.6)

31(6.5) - - - - 31

(5.2)Trader’s special/Federal traders

18 (8.1)

9 (4.5)

2 (3.6)

29 (6.1)

12 (40.0)

7 (9.9)

1 (4.8)

20 (16.4)

49 (8.2)

MSME special 8 (3.6)

7 (3.5)

3 (5.5)

18 (3.8)

1 (3.3) - - 1

(0.8) 19

(3.2)

FSLS - - - - - 5

(7.0) 3

(14.3) 8

(6.6)8

(1.3)

FILS - - - - 5(16.7)

6(12.7)

2 (9.5)

13(10.7)

13(2.2)

Total 95 (43.0)

107(53.0)

23(41.8)

225(47.1)

20(33.3)

52(73.2)

15 (71.4)

87(71.3)

312(52.0)

Grand Total 221 (100)

202(100)

55(100)

478(100)

30(100)

71(100)

21 (100)

122(100)

600(100)

107

significant difference of opinion among respondents in both the sectors

(p>0.05). However, the perception of borrowers tested with chi-square between

the public and private sector banks find a significant difference of opinion

(p<0.05).

Table 3.14: Category of Lending Schemes Largely Availed by Borrowers (Opinion of Borrowers)

Schemes Public sector banks Private sector banks


Agriculture 126

(57.0) 95

(47.0) 32

(58.2)253

(52.9)10

(33.3)19

(26.8) 6

(28.6) 35

(28.7)288

(48.0)

MSME 95

(43.0) 107

(53.0) 23

(41.8)225

(47.1)20

(33.3)52

(73.2) 15

(71.4) 87

(71.3)312

(52.0)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(66.7)71

(100) 21

(100) 122

(100) 600

(100) Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df=2) = 4.91; p value = .086* Private sector banks-Chi square (df=2) = .446; p value =.800* Public and private sector banks -Chi-square (df=1) = 21.920; p value = .000** (p<0.001) *Not significant at per cent level. ** Significant at 1 per cent level. 99% Confidence limit = 48% to 56%

Thus, the above analysis clearly establishes the fact that though the

public and private sector banks in Kerala are offering a number of schemes for

the agricultural and MSME borrowers and most of them availed MSME

schemes compared to the borrowers who availed agricultural schemes with 99

per cent confidence limits of the proportion varying from 48 per cent to 56 per

cent (i.e., if we put the question to the entire population, not less than 48 per

cent will state in the same direction, but not more than 56 per cent). Hence, the

null hypothesis stating that there is no significant difference between public

sector banks and private sector banks in Kerala as to their lending schemes for

agriculturists and small and medium enterprises stands rejected.

108

b) Amount of Loan Demanded

The borrowers usually demand loan on the basis of project estimates to

meet their fixed assets and working capital requirements, cost of raising crops,

etc. While analyzing the amount of loan demanded by borrowers, a large

portion of the sample borrowers (50%) revealed that their demand for loan was

below Rs.1 lakh. But 35.3 per cent demand loan amount between Rs.1 lakh and

Rs.5 lakh (Table 3.15). While comparing the public and private sector banks, it

is found that a majority of the borrowers in the public sector banks (54%)

demand loan below Rs.1 lakh and a majority of the borrowers in private sector

banks (53.3%) demand a loan amount between Rs.1 lakh and Rs.5 lakh.

Similarly, the chi-square tests worked out for the banks separately and between

them also show a significant variation in the opinion among borrowers

(p<0.05).

Table 3.15: Amount of Loan Demanded (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df=6) = 36.207; p value = .000* Private sector banks-Chi square (df=6) = 68.997; p value =.000* Public and private sector banks –Chi-square (df=3) = 23.185; p value =.000* * Significant at 5 per cent level.

Amount (Rs.in Lakh)

Public sector banks Private sector banks Total


<1 110 (49.8)

120 (59.4)

28(50.9)

258(54.0)

13(43.3)

21(29.6)

8 (38.1)

42 (34.4)

300(50.0)

1-5 87 (39.4)

40 (19.8)

20(36.4)

147(30.8)

15(50.0)

48(67.6)

2 (9.5)

65 (53.3)

212(35.3)

5-10 21 (9.5)

19 (9.4)

6(10.9)

46(9.6)

2(6.7)

2(2.8)

3 (14.3)

7 (5.7)

53(8.8)

>10 3 (1.4)

23 (11.4)

1(1.8)

27(5.6) - - 8

(38) 8

(6.6) 35

(5.8)

Total 221 (100)

202 (100)

55(100)

478(100)

30(100)

71(100)

21 (100)

122 (100)

600(100)

109

c) Amount of Loan Sanctioned

The bank officials usually will not sanction the entire amount demanded

by the borrowers. They sanction the amount adhering to bank’s schedule and

rating of the borrowers. But in the case of government sponsored schemes, they

may waive certain conditions.

The perception of the borrowers as to the amount of loan sanctioned

given in Table 3.16 reveals that most of them (89%) have been sanctioned the

full amount demanded. But 8.3 per cent of the borrowers have been sanctioned

below 80 per cent of the loan demanded and 2.7 per cent have been sanctioned

between 80 per cent and 90 per cent. The sector wise analyses also do not find

any significant variation. The chi-square tests worked out for the private sector

banks and between the public and private sector banks also found no significant

variation in the opinion among borrowers (p>0.05). But the chi-square

calculated for the public sector banks find a significant variation in the opinion

(p<0.05).

Table 3.16 Amount of loan Sanctioned (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df=4) = 13.884; p value = .008* Private sector banks-Chi square (df=4) = 7.680; p value =.104** Public and private sector banks-Chi-square (df=2) = 2.030; p value = .362** * Significant at 5 per cent level. ** Not Significant at 5 per cent level.

Amount (%)



Below 80 13

(3.7) 26

(5.4) 1

(0.2) 40

(8.3) 3

(2.4) 1

(0.8) 6

(4.9) 10

(8.2) 50

(8.3)

80-90 6

(1.3) 9

(1.9) -

15 (3.1)

- -

1 (0.8)

1 (0.8)

16 (2.7)

90-100 202

(42.3) 167

(34.9) 54

(11.3)423

(88.5)27

(22.1)70

(57.4) 14

(11.5) 111

(91.0) 534

(89.0)Total

221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

110

d) Rate of Interest

Interest on loan is an important consideration by a borrower while

availing a loan and also for selecting a bank. Prime Lending Rate (PLR) is the

most important aspect for deciding the rate of interest on loan both by the

public and private sector banks.

Regarding the rate of interest, 50.5 per cent of the borrowers pay a rate

of interest of below 10 per cent. Again, 37.3 per cent of the borrowers pay a

rate of interest between 11 and 13 per cent and 12.2 per cent pay a rate of

interest between above 14 per cent (Table 3.17).

Table 3.17: Rate of Interest (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df=4) = 7.363; p value =.118** Private sector banks-Chi square (df=4) = 11.512; p value =.021* Public and private sector banks-Chi square (df=2) = 133.43; p value = .000* * Significant at 5 per cent level. ** Not Significant at 5 per cent level.

By analyzing the two sectors, a majority (55.6%) of the borrowers in the

public sector banks pay an interest rate below 10 per cent for their loans. But a

majority (42.6%) of the borrowers in the private sector banks is paying an

interest rate above 14 per cent. The chi-square tests calculated for the private

sector banks and between the public and private sector banks also found a

Rate of interest

(%)



10 and below

110 (49.8)

120 (59.4)

36 (65.4)

266 (55.6)

10 (33.3)

16 (22.5)

11 (52.4)

37 (30.3)

303 (50.5)

11-13 98

(44.3) 75

(37.1) 18

(32.7)191

(40.0)11

(36.7)21

(29.6) 1

(4.8) 33

(27.0) 224

(37.3)14 and above

13 (5.9)

7 (3.5)

1 (1.8)

21 (4.4)

9 (30.0)

34 (47.9)

9 (42.9)

52 (42.6)

73 (12.2)

Total 221 (100)

202 (100)

55 (100)

478 (100)

30 (100)

71 (100)

21 (100)

122 (100)

600 (100)

111

significant difference in the opinion among borrowers (p< 0.05). But the chi-

square calculated for the public sector banks find no significant variation in the

opinion (p>0.05).

e) Period of Loan

Both the public and private sector banks offer three types of loan based

on their time span viz. short term loans longing to 12 months, medium term

loans ranging from one year to five years and long term loans extending above

five years.

Table 3.18 Period of Loan (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df=6) = 38.153; p value =.000* Private sector banks-Chi square (df=6) = 10.765; p value =.096** Public and private sector banks-Chi square (df=2) = 133.43; p value = .000* * Significant at 5 per cent level. ** Not significant at 5 per cent level.

The perception of borrowers with regard to the period of loan given in

Table 3.18 reveals that the majority (47.2%) of the borrowers’ loan period

ranged from 13 to 36 months and for 20.7 per cent of the borrowers, the time

period for loan was in between 37 and 72 months. But the sector-wise analysis

reveals that 43.2 per cent of the borrowers in the public sector and 63.1 per cent

Period of loan (in months)



<12 48

(21.7) 36

(17.9) 14

(25.5)98

(20.5)2

(6.7) 9

(12.7) 2

(9.5) 13

(10.7) 111

(18.5)

13-36 111

(50.2) 64

(31.8) 31

(56.4)206

(43.2)21

(70.0)44

(62.0) 12

(57.1) 77

(63.1) 283

(47.2)

37-72 37

(16.7) 75

(37.3) 10

(18.2)122

(25.6)- -

2 (9.5)

2 (1.6)

124 (20.7)

>72 25

(11.4) 27

(13.4) -

52 (10.9)

7 (23.3)

18 (25.4)

5 (23.8)

30 (24.6)

76 (12.7)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

112

in the private sector opined that their loan period was in between 13 and 36

months. The above view tested with the chi-square for the public sector banks

and between the public and private sector banks also found a significant

variation in the opinion among borrowers (p<0.05). But the chi-square for the

private sector banks finds no significant variation in the opinion (p>0.05).

f) Security for the Loan

Security for a loan is really a constraint for agricultural and MSME

borrowers. But the banking companies are very particular in the security as

they want to reduce the occurrence of Non Performing Assets (NPA).

Regarding the security for the loan, most (48.5%) of the borrowers gave tax

receipt/title deeds/FD receipt as security for the loan, whereas 38.7 per cent

gave land building as security (Table 3.19).

Table 3.19: Securities for the Loan (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals Public sector banks-Chi square (df=4) = 4.156; p value =.385** Private sector banks-Chi square (df=4) = 46.436; p value =.000* Public and private sector banks-Chi square (df=2) = 35.353; p value = .000* * Significant at 5 per cent level. **Not significant at 5 per cent level.

While analyzing the sectors separately, 54 per cent borrowers in the

public sector banks gave Tax receipts/Title deeds/FD receipt as security for the

Security Public sector bank Private sector bank


Land and building

82 (37.1)

59 (29.2)

16 (29.1)

157 (32.8)

18 (60.0)

46 (64.8)

11 (52.4)

75 (61.5)

232 (38.7)

Tax receipts/ title deeds/ FD receipt

109 (49.3)

118 (58.4)

31 (56.4)

258 (54.0)

8 (26.7)

18 (25.4)

7 (33.3)

33 (27.1)

291 (48.5)

Others

30 (13.6)

25 (12.4)

8 (14.5)

63 (13.2)

4 (13.3)

7 (9.9)

3 (14.3)

14 (11.5)

77 (12.8)

Total

221 (100)

202 (100)

55 (100)

478 (100)

30 (100)

71 (100)

21 (100)

122 (100)

600 (100)

113

loan whereas, 61.5 per cent in the private sector banks gave land and building

as the security. The above view tested with the chi-square for the private sector

banks and between the public and private sector banks also found a significant

variation in the opinion among borrowers (p<0.05). But the chi-square for the

public sector banks finds no significant variation in the opinion (p>0.05).

g) Equated Monthly Instalment

The most commonly adopted method of repayment of loan is Equated

Monthly Instalment (EMI), where the principal and interest is repaid through

equal monthly instalment over the fixed tenure of the loan. It is fixed on the

basis of the loan amount, interest rate and the tenure of loan. The borrowers can

also opt for a non-EMI scheme of loan repayment.

Table 3.20: Equated Monthly Instalment (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df=4) = 105.03 p value =.000* Private sector banks-Chi square (df=4) = 22.505 p value =.000* Public and private sector banks-Chi square (df=2) = 3.903 p value = .1421** * Significant at 5 per cent level **Not significant at 5 per cent level

Regarding the EMI for the loan, the majority of the borrowers in the

public sector (65.1%) and private sector banks (69.7%) have opted for non-

EMI schemes. The rest have opted EMI scheme for their loan repayment. The

EMI (Rs.)


South Central North Total South Central North Total No

EMI 175

(79.2) 81

(40.1) 55

(100.0)311

(65.1)29

(96.7)39

(54.9) 17

(81.0) 85

(69.7) 396

(66.0)Below 1000

17 (7.7)

54 (26.7)

- 71

(14.9)1

(3.3) 19

(26.8) -

20 (16.4)

91 (15.2)

Above 1000

29 (12.9)

67 (33.2)

- 96

(20.1)-

13 (18.3)

4 (19.1)

17 (14.0)

113 (18.9)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

114

sector-wise analysis also finds no considerable variation. Though the chi-

square tests worked out separately for the public sector and private sector banks

show a significant variation in the opinion among borrowers (p< 0.05) the chi-

square test worked out between the public and private sector banks found no

significant variation in the opinion (p>0.05).

h) Purpose of Loan

Both the public and private sector banks offer a wide range of loan

products from basic to special financial requirements of farmers and MSME

borrowers. Agriculture lending is of two types, viz. direct advance and indirect

advance. Direct finance is intended for individuals (including Self Help

Groups, Joint Liability Groups for agriculture and allied activities), whereas

indirect finance is intended for corporates, partnership firms and institutions for

agriculture and allied activities.

The perceptions of borrowers and bank managers with regard to the

purpose of loan are assessed as under:

(i) Perception of Borrowers

Table 3.21 reveals that the majority of the borrowers in the public and

private sector banks (36.5%) took loan for meeting working capital

requirements. While 28.5 per cent of the borrowers took loan for meeting

cultivation expenses 10.5 per cent took loan for purchasing manure, seeds etc.

The other purposes include: purchasing land, machinery, constructing building,

technology upgrading, meeting marketing expenses and improving irrigation

115

methods. The sector-wise analysis also did not find any considerable variation

as to the purpose of loan. But the chi-square test calculated separately for the

public sector and private sector banks and also between the banks show a

significant variation in the opinion among borrowers (p< 0.05).

Table 3.21: Purpose of Loan (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df=10) = 127.26; p value =.000* Private sector banks-Chi square (df=10) = 37.354; p value =.000* Public and private sector banks-Chi square (df=5) = 28.834; p value = .000* * Significant at 5 per cent level.

(ii) Perception of Bank Managers

The perception of bank managers with regard to the purposes for which

the loan was granted depicted in Table 3.22 illustrates that all of them are

providing loans to agriculturists for purchasing manure/ seeds and for

purchasing land along with other purposes. For SMEs, they provide loans for

the purchase of machinery and for meeting working capital. Again, no

Purpose of loan



Purchasing machinery

4 (1.8)

34 (16.8)

1 (1.8)

39 (8.2)

1 (3.3)

- 4

(19.0) 5

(4.1) 44

(7.3)

Cultivation expenses

98 (44.3)

41 (20.3)

3 (5.5)

142 (29.7)

8 (26.7)

16 (22.5)

5 (23.8)

29 (23.8)

171 (28.5)

Purchasing manures

14 (6.3)

24 (11.9)

24 (43.6)

62 (13.0)

- - 1

(4.8) 1

(0.8) 63

(10.5)

Technology upgradation

6 (2.7)

11 (5.5)

3 (5.5)

20 (4.2)

2 (6.7)

- 2

(9.5) 4

(3.3) 24

(4.0)

Working capital

82 (37.1)

57 (28.2)

17 (30.9)

156 (32.6)

17 (56.7)

37 (52.1)

9 (42.9)

63 (51.6)

219 (36.5)

Purchasing farm animals

17 (7.7)

35 (17.3)

7 (12.7)

59 (12.3)

2 (6.7)

18 (25.4)

- 20

(16.4)79

(13.2)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

116

considerable variation was observed in the public and private sector banks as to

the purpose for which the loan is sanctioned.

Table 3.22: Purpose of Loan (Opinion of Bank Managers)


Purpose of loan


South Central North Total South Central North Total Agriculture Purchase of land

8 (100)

6 (100)

3 (100)

17 (100)

3 (100)

6 (100)

4 (100)

13 (100)

30 (100)

Constructing building

5 (62.5)

6 (100)

2 (66.7)

13 (76.5)

3 (100)

5 (83.3)

2 (50.0)

10 (76.9)

23 (76.7)

Cultivation expenses

8 (100)

6 (100)

3 (100)

17 (100)

3 (100)

5 (83.3)

4 (100)

12 (92.3)

29 (96.7)

Purchasing manures

8 (100)

6 (100)

3 (100)

17 (100)

3 (100)

6 (100)

4 (100)

13 (100)

30 (100)

Marketing expenses

5 (62.5)

6 (100)

2 (66.7)

13 (76.5)

3 (100)

6 (100)

2 (50.0)

11 (84.6)

24 (80.0)

Irrigation 8

(100) 6

(100) 2

(66.7)16

(94.1) 3

(100) 5

(83.3) 4

(100) 12

(92.3) 28

(93.3)Purchase of farm animals

8 (100)

6 (100)

2 (66.7)

16 (94.1)

3 (100)

6 (100)

4 (100)

13 (100)

29 (96.7)

Others

7 (87.5)

3 (50.0)

2 (66.7)

12 (70.6)

2 (66.7)

4 (66.7)

1 (25.1)

7 (53.8)

19 (63.3)

Total 8

(100) 6

(100) 3

(100) 17

(100) 3

(100) 6

(100) 4

(100) 13

(100) 30

(100) MSME Purchase of land

8 (100)

5 (83.3)

2 (66.7)

15 (88.2)

3 (100)

6 (100)

3 (75.0)

12 (92.3)

27 (90.0)

Purchasing machinery

8 (100)

6 (100)

3 (100)

17 (100)

3 (100)

6 (100)

4 (100)

13 (100)

30 (100)

Meeting working capital

8 (100)

6 (100)

3 (100)

17 (100)

3 (100)

6 (100)

4 (100)

13 (100)

30 (100)

Marketing expenses

6 (75.0)

5 (83.3)

2 (66.7)

13 (76.5)

3 (100)

6 (100)

3 (75.0)

12 (92.3)

25 (83.3)

Technology upgradation

8 (100)

5 (83.3)

2 (66.7)

15 (88.2)

3 (100)

6 (100)

3 (75.0)

12 (92.3)

27 (90.0)

Others

7 (87.5)

4 (66.7)

3 (100)

14 (82.4)

2 (66.7)

3 (50.0)

2 (50.0)

7 (53.8)

21 (70.0)

Total

8 (100)

6 (100)

3 (100)

17 (100)

3 (100)

6 (100)

4 (100)

13 (100)

30 (100)

117

j) Amount of Subsidy

Both the public sector and private sector banks in Kerala provide

subsidies for government sponsored loan schemes. Subsidy is an incentive for

the borrowers to pursue loan. The perception of borrowers and bank managers

with respect to subsidy for loan is assessed as under:


The perception of borrowers with respect to subsidy received for the

loan in Table 3.23 reveals that there was no subsidy for 39.3 per cent of the

borrowers and subsidy was below five per cent for 26.3 per cent of the

borrowers. Again, 14.7 per cent of the borrowers have received 5 to10 per cent

of loan as subsidy, whereas 12.5 per cent have received 10 to 15 per cent as

subsidy. However, while analyzing the public and private sector banks

individually, one finds a significant variation in the opinion of the borrowers.

While 53.3 per cent of the borrowers in the private sector banks have received

no subsidy for the loan, 64.2 per cent of the borrowers in the public sector

banks have received subsidy. The above view tested with the chi-square for the

public sector banks and between the public and private sector banks also found

a significant variation in the opinion among borrowers (p<0.05). But the chi-

square for the private sector banks finds no significant variation in the opinion

(p>0.05).

118

Table 3.23: Amount of Subsidy (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df= 6) = 135.82; p value =.000* Private sector banks-Chi square (df= 6) = 8.316; p value =.216** Public and private sector banks-Chi square (df=3) = 52.910; p value = .000* * Significant at 5 per cent level. **Not significant at 5 per cent level.


The perception of bank managers as to the amount of subsidy provided

for the loan given in Table 3.24 shows that while a majority of the bank

managers (63.3%) provide a subsidy of 5-10 per cent for the loan, 36.7 per cent

of them provide a subsidy above 10 per cent. The sector wise analysis shows

that while 53 per cent of the bank managers in the public sector banks provide

a subsidy above 10 per cent, 84.6 per cent of the bank managers in the private

sector banks provide 5-10 per cent subsidy. As in the case of the borrowers, the

chi-square found a significant variation in the opinion among managers

belonging to the public sector banks (p < 0.05). But the above view tested with

the chi-square for the private sector banks and between the public and private

sector banks found no significant variation in the opinion among managers

(p>0.05).

Subsidy (%)


South Central North Total South Central North Total No

amount 105

(47.5) 56

(27.7) 10

(18.2)171

(35.8)17

(56.7)40

(56.3) 8

(38.1) 65

(53.3) 236

(39.3)Less

than 5 80

(36.2) 41

(20.3) 33

(60.0)154

(32.2)1

(3.3) 3

(4.2) -

4 (3.3)

158 (26.3)

5-10 25

(11.3) 23

(11.41) 8

(14.5)56

(11.7)5

(16.7)18

(25.4) 9

(42.9) 32

(26.2) 88

(14.7)Above

10 11

(5.0) 82

(40.6) 4

(7.3) 97

(20.3)7

(23.3)10

(14.1) 4

(19.1) 21

(17.2) 118

(17.7)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

119

Table 3.24: Amount of Subsidy (Opinion of Bank Managers) Subsidy

(%) Public sector bank Private sector bank Total

South South Central North Total South Central North Total

5-10 1

(12.5) 5

(83.3) 2

(66.7)8

(47.1)2

(66.7)6

(100) 3

(75.0) 11

(84.6) 19

(63.3) Above

10 7

(87.5) 1

(16.7) 1

(33.3)9

(53.0)1

(33.3)-

1 (25.0)

2 (15.4)

11 (36.7)

Total 8

(100) 6

(100) 3

(100) 17

(100) 3

(100) 6

(100) 4

(100) 13

(100) 30

(100) Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks-Chi square (df= 2) = 7.467 p value =.024* Private sector banks-Chi square (df= 2) = 2.117 p value =.347** Public and private sector banks-Chi square (df=1) = 3.003 p value = .831** * Significant at 5 per cent level. **Not significant at 5 per cent level.

h) Awareness of Various Lending Schemes

Though banking companies are initiating a number of steps for

publicizing their products and services, the people are yet to have a full

knowledge about most of these products and services. In order to ensure

financial literacy, the State Level Bankers Committee (SLBC) has initiated a

Model Scheme called Financial Literacy and Credit Counselling Centres

(FLCCs), which helps borrowers to know the different schemes of the banks,

evaluate them and to chalk out the most apt loan which fulfills all their credit

requirements within their income level. The perception of borrowers and bank

managers with respect to the awareness of various lending schemes is assessed

as under:


The perception of borrowers with respect to the awareness of various

lending schemes reveals that the majority (94.7%) of the borrowers in both the

public and private sector banks know only some of the schemes of the banks

120

(Table 3.25). The sector-wise analysis also does not find any considerable

variation. The above view tested with the chi-square for the public sector banks

and between the public and private sector banks also found no significant

variation in the opinion among borrowers (p>0.05). But the chi-square test for

the private sector banks finds no significant variation in the opinion (p>0.05).

Table 3.25: Awareness about the Various Lending Schemes of Banks (Opinion of Borrowers)

Opinion Public sector bank Private sector bank


Know all schemes

3 (1.4)

26 (12.9)

1 (1.8)

30 (6.3)

1 (3.3)

1 (1.4)

- 2

(1.6) 32

(5.3) Know

some of the

schemes

218 (98.6)

176 (87.1)

54 (98.2)

448 (93.7)

29 (96.7)

70 (98.6)

21 (100)

120 (98.4)

568 (94.7)

Total

221 (100)

202 (100)

55 (100)

478 (100)

30 (100)

71 (100)

21 (100)

122 (100)

600 (100)

Source: Primary data. Figures in parentheses are percentages to respective totals Public sector banks: Chi square (df= 2) = 25.885; p value =.000* Private sector banks: Chi square (df= 2) = .907; p value = .635** Public and private sector banks-Chi square (df=1) = 45.300; p value = .000* * Significant at 5 per cent level. **Not significant at 5 per cent level.


All the bank managers (in the public and private sectors) under the study

are unanimously of the opinion that the borrowers do not know all the lending

schemes of banks, but only some of the schemes.

i) Conduct of Awareness

In the study the bank managers were asked to know whether they

conduct any programmes to make the borrowers aware of the various loan

products. Most of the managers in the public and private sector banks (96.7%)

stated that they are conducting awareness programmes (Table 3.26).

121

Table: 3.26 Conduct of Awareness Programmes (Opinion of Bank Managers)


j) Sources of Awareness about Various Lending Schemes

Regarding the sources of awareness about various lending schemes, all

the borrowers in the public and private sector banks in Kerala gave top

preference to ‘Own enquiry’ and second preference to ‘Bank officials’. ‘News

papers/ magazines’, ‘Panchayat’, ‘Friends/relatives’ and ‘Krishi bhavan’ were

ranked as the other sources of awareness (Table 3.27).

k) Modes of Creating Awareness

In order to propagate the different schemes of banks and also to bring all

the households to the banking fold, the Reserve Bank of India urges the bank

managers to have a door-to-door campaign. This helps the prospective

borrowers to be familiar with financial planning, accessing banking services,

availing loans under various Government sponsored schemes, availing the

services of rural self-employment training institutes and advantages of KCCs.

Most of the bank managers (76.7%) reveal that they distribute pamphlets either

directly to the borrowers or through ATM counters as a mode of creating

awareness (Table 3.28). Loan melas, agriculture meets and seminars are the

other modes. Again, the sector-wise analysis also does not find any significant

difference as to the mode of creating awareness.



Yes 8

(100) 6

(100) 3

(100) 17

(100)3

(100) 6

(100) 3

(75.0) 12

(92.3) 29

(96.7)

No - - - - - - 1

(25.0) 1

(7.7) 1

(3.3)

Total 8

(100) 6

(100) 3

(100) 17

(100)3

(100) 6

(100) 4

(100) 13

(100) 30

(100)

122

Table 3.27: Sources of Awareness of the Various Lending Schemes of Banks

(Opinion of Borrowers)

Source: Primary data. Note: N = Number; M = Mean; R=Rank.

Opinion


South Central North South Central North

N M R N M R N M R N M R N M R N M R N M R

Friends/Relatives 221 1.03 7 202 2.43 3 55 1.02 7 30 1.37 4 71 1.44 5 21 1.48 5 600 1.58 5

Bank officials 221 3.20 2 202 2.57 2 55 2.98 2 30 2.60 2 71 2.59 2 21 3.43 2 600 2.88 2

Newspaper/Magazine 221 1.85 4 202 2.27 4 55 1.84 4 30 1.33 5 71 2.20 3 21 1.05 6 600 1.98 3

TV/Radio 221 .11 8 202 1.46 5 55 .44 8 30 1.10 6 71 1.31 6 21 .14 8 600 .79 8

Own enquiry 221 3.30 1 202 3.20 1 55 4.05 1 30 3.80 1 71 4.20 1 21 3.62 1 600 3.48 1

Krishi Bhavan 221 1.20 5 202 1.08 7 55 1.11 6 30 .33 8 71 .24 8 21 .43 7 600 .97 7

Panchayat 221 2.78 3 202 1.24 6 55 1.36 5 30 .97 7 71 .85 7 21 2.19 4 600 1.79 4

Others 221 1.18 6 202 .79 8 55 2.09 3 30 2.30 3 71 2.01 4 21 2.33 3 600 1.33 6

123

Table 3.28 Modes of Creating Awareness (Opinion of Bank Managers)

Source: Primary data. Figures in parentheses are percentages to respective totals. l) Assessment of Scheme before Availing the Loan

A literate borrower normally assesses the loan on the basis of rate of

interest, subsidies, time lag between sanctioning and disbursement, etc. The

perception of the borrowers as to the assessment of the scheme before availing

the loan depicted that most of them (97.3%) assess the scheme before availing

themselves of the loan (Table 3.29). The sector-wise analysis also finds no

considerable variation. Though the above view tested with the chi-square found

a significant variation in the opinion among borrowers belonging to the public

sector banks (p < 0.05) the chi-square for the private sector banks and between

the public and private sector banks found no significant variation in the opinion

(p>0.05).



Exhibitions -

- - - - - - - -

Loan Melas 7

(87.5) 1

(16.7) -

8 (47.1)

3 (100)

6 (100)

- 9

(75.0)17

(56.7) Agricultural meets

6 (75.0)

4 (66.7)

1 (33.3)

11 (64.7)

2 (66.7)

1 (16.7)

- 3

(25.0)14

(46.7) Organizing seminars

5 (62.5)

5 (83.3)

2 (66.7)

12 (70.6)

1 (33.3)

- - 1

(8.3) 13

(43.3) Consumer meets

3 (37.5)

- - 3

(17.6)- - - -

3 (10)

Pamphlets 6

(75.0) 5

(83.3) 2

(66.7)13

(76.5)3

(100) 5

(83.3) 2

(66.7) 10

(83.3)23

(76.7) Organizing farmer’s club

5 (62.5)

- - 5

(29.4)2

(66.7)- -

2 (16.7)

7 (23.3)

Others 3

(37.5) - -

3 (17.6)

- - 2 (66.7)

2 (16.7)

5 (16.7)

Total 8

(100) 6

(100) 3

(100) 17

(100) 3

(100) 6

(100) 4

(100) 13

(100) 30

(100)

124

Table: 3.29 Assessment Criteria before Availing the Loan (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks: Chi square (df= 2) = 13.752; p value =.001* Private sector banks: Chi square (df= 2) = .663; p value = .718** Public and private sector banks-Chi square (df=1) = .02544; p value = .873** * Significant at 5 per cent level. **Not significant at 5 per cent level.

m) Assessment Criteria of the Scheme

The borrowers normally consider a risk return tradeoff between various

factors like rate of interest, ownership of the bank, access, security, speedy loan

disposal, etc. before availing a loan.

The borrowers perception as to the assessment criteria of the scheme

reveals that ‘Nearness to the bank’, ‘Speedy loan disposal’ and ‘Access to the

bank’ are the first, second and third preferences respectively as the assessment

criteria (Table 3.30). The ‘Rate of interest’, ‘Security for the loan’, ‘Number

of installments’, ‘Repayment period’ and ‘Ownership of bank’ are the other

preferences. But the sector wise analysis finds a significant difference.

.



Yes 220

(99.5) 190

(94.1) 55

(100) 465

(97.3) 29

(96.7) 69

(97.2) 21

(100) 119

(97.5) 584

(97.3)

No 1

(.5) 12

(5.9)

13 (2.7)

1 (3.3)

2 (2.8)

- 3

(2.5) 16

(2.7)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

125

Table 3.30: Assessment Criteria of the Scheme (Opinion of Borrowers)

Opinion


South Central North South Central North

N M R N M R N M R N M R N M R N M R N M R

Rate of interest 220 1.06 2 190 1.33 4 55 1.00 2 29 1.14 3 69 1.03 4 21 1.00 2 584 1.14 4

Ownership of bank 220 4.06 6 190 3.74 8 55 4.38 6 29 3.97 6 69 4.25 8 21 4.24 6 584 4.01 8

Repayment period 220 4.19 7 190 3.25 6 55 3.89 5 29 4.00 7 69 3.94 7 21 3.62 4 584 3.80 7

Installment 220 1.93 4 190 3.42 7 55 3.45 4 29 3.90 5 69 3.39 6 21 3.71 5 584 2.89 6

Security for the loan 220 2.02 5 190 2.17 5 55 2.13 3 29 1.97 4 69 2.06 5 21 2.00 3 584 2.08 5

Access to the bank 220 1.69 3 190 .45 2.5 55 .15 1 29 .00 69 .17 3 21 .24 1 584 .83 3

Speedy loan disposal 220 .02 1 190 .45 2.5 55 .00 29 .07 1 69 .03 1 21 .00 584 .16 2

Nearness to the bank 220 .00 190 .07 1 55 .00 29 .14 2 69 .12 2 21 .00 584 .04 1

Others 220 .00 190 .00 55 .00 29 .00 69 .00 21 .00 584 .00

Source: Primary data. Note: N= Number; M=Mean; R=Rank.

126

n) Assessment of the Loan

Bank officials normally assess the loan before its approval based on the

credibility of the borrower, feasibility of the project, applicability, etc.

Regarding the assessment of the loan all the bank managers of both the public

and private sector banks in Kerala opined that they assess the loan.

o) Assessment of the Borrower

Every bank has its own assessment criteria for rating its borrowers. In

order to avoid the incidence of NPA, a thorough assessment is usually made by

banks. In the study the bank managers were asked to know whether they assess

the borrower before granting of a loan. Irrespective of the sector, all the

managers responded with ‘yes’.

p) Assessment Criteria of the Borrower and Loan

The analysis of above two questions revealed that the bank managers in

all the public sector and private sector banks in Kerala assess the borrower and

the loan. They usually consider borrowers’ past repayment record, education,

feasibility of the project, etc. for the assessment.

The perception of bank managers reveals that for assessing the borrower

they consider ‘Repayment capacity of the borrower’, ‘Financial status of the

borrower’ and ‘Past repayment record’ as the first , second and third

considerations respectively. For the loan, they consider ‘loan demanded’,

‘purpose of the loan’, and security for the loan as the important considerations.

127

The sector-wise analysis also does not find any significant variation in the

opinion among managers (Table 3.31).

q) Rating of the Loan Scheme Availed

The borrowers normally rate the loan scheme on the basis of the features

of the scheme, viz. EMI, repayment schedule, rate of interest, security norms,

gestation period, etc.

The perception of borrowers as to the rating of the loan scheme availed

given in Table 3.32 reveals that a majority of the borrowers (68.8%) rated the

scheme they availed as ‘good’ and 26.2 per cent rated the scheme as ‘very

good’. While analyzing the both sectors separately, 73.8 per cent of the

borrowers in the public sector banks rated the loan scheme as ‘good’, whereas,

50 per cent of the borrowers in the private sector banks rated loan scheme as

‘very good’. But the chi-square tests worked out for the banks separately and

between them also show a significant variation in the opinion among borrowers

(p<0.05).

128

Table 3.31: Assessment Criteria of Borrower and Loan (Opinion of Bank Managers)


Total South Central North South Central North

N M R N M R N M R N M R N M R N M R N M R Borrower Repayment capacity

8 1.38 1 6 1.17 1 3 1.00 1 3 1.00 1 6 1.00 1 4 1.75 1 30 1.23 1

Financial status 8 2.5 3 6 2.17 2 3 3.00 3 3 2.67 3 6 2.50 2 4 2.25 2 30 2.47 2 Repayment record

8 2.13 2 6 3.17 3 3 2.33 2 3 2.33 2 6 2.50 2 4 2.75 3 30 2.53 3

Education 8 4.25 4 6 3.83 4 3 4.33 4 3 4.33 4 6 4.33 4 4 4.25 5 30 4.20 4

Govt. guarantee 8 4.75 5 6 4.00 5 3 4.33 4 3 4.67 5 6 4.67 5 4 4.00 4 30 4.43 5 Others 8 6.00 6 6 6.00 6 3 6.00 6 3 6.00 6 6 6.00 6 4 6.00 6 30 6.00 6 Loan Quantum of Loan demanded

8 1.38 1 6 2.83 2 3 2.67 1 3 1.00 1 6 1.83 1 4 1.00 1 30 1.80 2

Purpose of the loan

8 2.5 2 6 2.50 1 3 3.00 2 3 2.00 2 6 2.83 2 4 2.75 3 30 2.60 3

Security for the loan

8 2.5 2 6 2.83 2 3 3.33 4 3 3.00 3 6 2.83 2 4 2.25 2 30 2.73 4

Feasibility and reliability of the project

8 3.63 5 6 2.83 2 3 3.00 2 3 4.00 5 6 3.50 4 4 4.25 4 30 3.50 5

Expected margin 8 5.25 6 6 5.00 5 3 4.33 5 3 3.33 4 6 4.67 5 4 4.75 5 30 4.73 6 Credit risk 8 5.75 7 6 5.00 5 3 4.67 6 3 5.67 6 6 5.33 6 4 6.00 6 30 5.43 7 Others 8 2.63 4 6 .00 3 .00 3 .00 6 .00 4 .00 30 .70 1 Source: Primary data. Note: N=Number M=Mean R=Rank

129

Table 3.32 Rating of the Loan Scheme Availed (Opinion of Borrowers)

Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector banks: Chi square (df= 4) = 118.69; p value =.000* Private sector banks: Chi square (df= 4) = 25.607; p value = .000* Public and private sector banks-Chi square (df=2) = 47.188; p value = .000* * Significant at 5 per cent level.

r) Rating of the Loan Services

The selection of a bank for a loan by a borrower depends on several factors

including their loan servicing. The loan services of a bank are assessed by a

borrower based on factors such as procedures to avail a loan, number of trips to

bank, time span for completing a transaction, behavior of the bank officials,

delivery of the details of the scheme, etc.

The perception of borrowers as to the loan services of banks reveals that a

majority of the borrowers (66.2%) rated the services as ‘high’ and 26.7 per cent

rated the services as ‘very high’. While analyzing the both sector separately, 70.3

per cent of the borrowers in the public sector and 50 per cent of the borrowers in

the private sector banks rated the loan services of the scheme as ‘high’.

Meanwhile, the chi-square tests worked out for the banks separately and between

them also show a significant variation in the opinion among borrowers (p<0.05).

Opinion Public sector bank Private sector bank Total


Very good 2

(0.9) 82

(40.6) 12

(21.8) 96

(20.1) 9

(30.0) 33

(46.5) 19

(90.5) 61

(50.0) 157

(26.2)

Good 210

(95.0) 101

(50.0) 42

(76.4) 353

(73.8) 21

(70.0) 38

(53.5) 1

(4.8) 60

(49.2) 413

(68.8)Reasonably good

9 (4.1)

19 (9.4)

1 (1.8)

29 (6.0)

- - 1

(4.8) 1

(0.8) 30

(5.0)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

130

Table 3.33 Rating of the Loan Services of Banks (Opinion of Borrowers)



Very high 2

(0.9) 87

(43.1) 11

(20.0) 100

(20.9)9

(30.0) 32

(45.1) 19

(90.5) 60

(49.2) 160

(26.7)

High 210

(95.0) 83

(41.1) 43

(78.2) 336

(70.3)21

(70.0) 39

(54.9) 1

(4.8) 61

(50.0) 397

(66.2)Moderate

9 (4.1)

33 (15.8)

1 (1.8)

42 (8.8)

- - 1

(4.8) 1

(0.8) 43

(7.2)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100) Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector bank-Chi square (df= 4) = 155.05; p value =.000* Private sector bank-Chi square (df= 4) = 25.920; p value = .000* Public and private sector banks-Chi square (df=2) = 43.765; p value = .000* * Significant at 5 per cent level.

s) Adequacy of the Loan

Insufficiency of the loan amount leads to further borrowings which

immerse the borrower in the hell of insolvency which affects the repayment. The

perception of borrowers and bank managers with respect to sufficiency of loan

amount sanctioned is assessed as under:


Table 3.34 reveals that 91.8 per cent of the borrowers firmly opined that

they were always satisfied with loan amount sanctioned and the rest 8.2 per cent of

the borrowers were frequently/sometimes satisfied. But the sector-wise analysis

reveals that all the borrowers in the private sector banks were satisfied by the loan

amount sanctioned.

131

Table: 3.34 Adequacy of the Loan (Opinion of Borrowers)



The perception of bank manager with respect to the adequacy of loan

amount depicted in Table 3.35 reveals that a large majority of the managers

(66.7%) are of the view that they always provide sufficient loan and 33.3 per cent

opined that they do not always advanced sufficient loan amount (Table 3.38). The

sector-wise analysis also does not find any significant variation. The chi-square

tests worked out for the banks separately and between them also find no

significant variation in the opinion among managers (p>0.05).

Table 3.35 Adequacy of the Loan (Opinion of Bank Managers)



Always 6

(75.0) 4

(66.7) 1

(33.3)11

(64.5)1

(33.3)6

(100) 2

(50.0) 9

(69.0) 20

(66.7)Not

always 2

(25.0) 2

(33.3) 2

(66.7)6

(35.5)2

(66.7)-

2 (50.0)

4 (31.0)

10 (33.3)

Total 8

(100) 6

(100) 3

(100) 17

(100) 3

(100) 6

(100) 4

(100) 13

(100) 30

(100) Source: Primary data. Figures in parentheses are percentages to respective totals. Public sector bank-Chi square (df=2) = 1.674 p value = .433* Private sector bank-Chi square (df=2) = 5.176 p value = .075* Public and private sector banks-Chi square (df=1) = .06787 p value = .795* * Not significant at 5 per cent level.



Always 220

(99.5 154

(76.2) 55

(100) 429

(89.7)30

(100) 71

(100) 21

(100) 122

(100) 551

(91.8)

Not always 1 (0.5)

48 (23.5)

- 49

(10.3)- - - -

49 (8.2)

Total 221

(100) 202

(100) 55

(100) 478

(100) 30

(100) 71

(100) 21

(100) 122

(100) 600

(100)

132

t) Sources of Managing Insufficient Loan Amount

The analysis in Table 3.37 reveals that the public sector banks in the south

and central zones in Kerala are not advancing the full loan requirements of their

borrowers. So they normally depend on other sources to execute the proposed

projects. The other sources include other commercial banks, private financiers,

moneylenders, gold loan, etc.

The opinion of borrowers as to the source of managing insufficient loan

amount shows that most of them gave first preference to ‘Other commercial

banks’ followed by ‘Gold loan’ and ‘Friends and relatives’ as the second and third

preferences. ‘Moneylenders’ and ‘Private financiers’ were given the last

preferences (Table3.36).

Table 3.36: Sources of Managing Insufficient Loan Amount (Opinion of Borrowers)

Opinion

Public sector bank

South Central North

N M R N M R N M R

Other commercial banks 1 3.00 3 49 2.16 1 55 .00 -

Money lenders 1 2.00 2 49 3.39 4 55 .00 -

Private financiers 1 1.00 1 49 3.55 5 55 .00 -

Friends and Relatives 1 5.00 5 49 3.16 3 55 .00 -

Gold loan 1 4.00 4 49 2.63 2 55 .00 -

Others 1 .00 - 49 .00 - 55 .00 -

Source: Primary data. Note: N= Number; M=Mean; R=Rank.

chapter 3 lending schemes of public and private...

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