CHAPTER – 7

REVIEW OF PRIORITY SECTOR LENDING

OPERATIONS BY COMMERCIAL BANKS IN

SRIKAKULAM DSITRICT

7.1 District credit planning

7.2 Broad categories of Priority Sector lending

7.3 Service Area Villages

7.4 Analysis of Targets of Commercial banks under District Credit Plans

7.5 Sector-wise Analysis of performance of Commercial banks

7.6 Sector-wise variation in targets to previous year‟s achievements

7.7 Bank Group-wise analysis of performance

7.8 Bank group-wise variation in targets

7.9 Impact of Priority Sector Lending on the development of the district

7.1 DISTRICT CREDIT PLANNING

7.1.1 Lead Bank Scheme – Phase-1

A credit plan presupposes the existence of a development plan so that the former

can sub serve the objectives of the latter.140

The study group under the leadership of Prof. Gadgil in October‟1969

recommended “Area approach” to develop banking and credit facilities in the country

on the basis of the conditions prevailing in different areas. The Committee of Bankers on

Branch Expansion Programme of Public Sector Banks appointed by Reserve Bank of

India under the Chairmanship of Shri F.K.F. Nariman (Nariman Committee) supported

the idea of area of approach in its report in November 1969. The Committee

recommended that the public sector banks should be entrusted with „lead role‟ in certain

districts in order to encourage them to discharge their social responsibilities. RBI

accepted this recommendation and formulated the Lead Bank Scheme (LBS) in

December 1969141

.

The bank which is assigned the lead responsibility is called Lead Bank of the

district and such district for the lead bank is termed as Lead District. Contiguity of the

district, ability to handle the responsibility and resources are the criteria for allotting the

districts to banks.

The Lead Bank has to act as a team leader for coordinating the efforts of all credit

institutions in the district for expansion of banking facilities and for meeting the credit

needs of the rural people. All the districts in the country except the metropolitan cities of

140

Chapter 8, Report of NABARD, www.narabd.org, pp.181, 141

Report of the High Level Committee to review the Lead Bank Scheme, 2009. www.rbi.org.in pp-1.

Mumbai, Chennai, Kolkata and Union Territories of Chandigarh, Delhi and Goa were

allotted among public sector banks and a few private sector banks. Later on, the Union

Territory of Goa, Daman and Diu and also the rural areas of the Union Territories of

Delhi and Chandigarh had been brought within the purview of Lead Bank Scheme.

The lead bank scheme has enabled the rapid branch expansion in unbanked and

under-banked areas. In about 5 years after nationalization of banks, the branch network

was expanded by 129 per cent.142

As at the end of March 2009, 26 banks (public and

private sector) have been assigned lead responsibility in 622 districts of the country.143

7.1.1a. First round of District Credit Plans

The first round of District Credit plans were completed by 1978. However, they

did not serve the purpose, as they were not aligned with the development schemes of the

districts. They did not fully cover the agriculture and allied activities which form the

mainstay of the rural economy. Later on, the district credit plans covered aspects like

period, credit estimates and allocation of shares among credit institutions etc.

7.1.1b. Formation of District Consultative Committee

In order to make the district plans effective, an organized set up is needed. The

Banking Commission (1972) stressed the need for formation of a co-ordination

committee at the district level in all the states. The Committee comprises of

representatives of the lending agencies as members and the senior most officer of the

142

Dr. Srinivasa Rao K, Nationalization of banks – An Anchor for Financial Inclusion, The Journal of

Indian Institute of Banking and Finance, July-September, 2010. Pp- 143

Report of High Level Committee to review the Lead Bank Scheme, pp-2, www.rbi.org.in

State Government in charge of development of the district as the Chairman to assess the

credit needs of the various productive activities.144

In the light of this recommendation, formation of District Consultative

Committees (DCCs) was the major development in Lead bank scheme to facilitate the

coordination of activities of all the banks and financial institutions on the one hand and

government departments on the other hand.

7.1.2. Lead Bank Scheme – Phase-2

RBI had set up a High Power Committee on the working of Lead Bank Scheme in

1976. The study group recommended for implementation of the second phase of Lead

Bank Scheme – viz. formulation and implementation of area development programmes

covering the activities in priority sectors to fill the credit gaps in rural areas. The second

and the crucial phase in Lead Bank Scheme was formulation of District Credit Plans

(DCPs). The credit planning exercise under the scheme covers the priority sectors and

aimed at the overall development of the district through the coordinated efforts of banks

and the developmental agencies of the State Governments at the District Level.

District Credit Plans/Annual Action Plans (AAPs) are prepared block wise, bank

wise and sector/sub-sector wise for each block. The banks were familiarized in the

mechanism of credit planning by the time the third and fourth round (1988-90) of DCPs

and AAPs were prepared. The cooperative banks were also involved in the preparation

of DCPs. Targets were fixed to these banks also under priority sector/government

programmes.

144

Ibid, Pp-187.

Various Forums145

are created for planning and monitoring the performance of

the participating credit institutions and agencies etc. at block, district, state and national

levels. These forums also discuss and solve the operational difficulties in implementation

of the plans.

Block Level:

1. Block level bankers‟ committee (BLBC)

District level:

1. District Consultative Committee(DCC)

2. District Level Review Committee (DLRC)

3. Standing Committee (SC)

State level:

1. State Level Bankers‟ Committee (SLBC)

2. State Level Review Committee (SLRC)

National Level:

1. High Power Committee (HPC)

2. Regional Consultative Committee(RCC)

7.1.2a. Preparation of District Credit Plans

Planning is a pre-requisite for any developmental activity, particularly in the field

of agriculture and rural economy. The District Credit Plans are prepared with the chief

objective of increasing productivity, production and employment opportunities in various

sectors in rural areas and especially among weaker sections. 146

The district plans are

primarily aimed at balanced development of different districts/blocks within the district

by providing basic needs of the poorer sections. Hence, plans are prepared with labour

intensive schemes which generate employment, increase productivity of land and other

allied sectors. Besides, the schemes must be bankable147

when they are to be financed

145

www. slbcap.ac.in 146

REPORT OF NABARD, op. cit., www.nabard.org.in pp.183 147

A scheme becomes bankable only when its forward and backward linkages are ensured.

through bank loans. Optimum utilization of resources and co-ordination between

government development programmes and bank lending is needed to achieve these

objectives.

Reserve Bank of India introduced „Service Area Approach‟ in 1989 to accelerate

the pace of Rural Development. The Service Area Approach facilitates the banks to

operate within a specified area to provide agricultural finance. A Committee headed by

the Lead District Officer of the Reserve Bank of India with Lead Bank Officer of the

district and the concerned officer from NABARD as members allocate the service areas

to the bank branches148

.

This approach emphasizes involvement of village level functionaries from banks

and developmental agencies at block level in preparation of the plans. The branch

managers/ village development agencies feel proud to participate in the task of

preparation and implementation is also becomes easy, as the plans are being made by

them. The Branch Managers/Village Level Developmental Agencies have to conduct

surveys in the entire village falling in their service area taking into consideration the

infrastructure and market potential of the area.

These grass root level functionaries interact at Block Level Bankers‟ Committee

meetings and pave way for compilation of realistic Service Area/ Non-service branch

credit plan for each bank branch operating in a block. The annual action plan/district

credit plan should be prepared on the basis of updated village profile. The unit of

planning under service area approach is “village”. Therefore, the credit plan has to be

148

Report of the High Level Committee to review the Lead Bank Scheme, 2009, pp.14, www.rbi.org.in

drawn from the village and aggregated at grass-root level, i.e. first branch level, thereafter

at block level and finally at the district level.

District credit plans are simply aggregation of the block credit plans of the blocks

falling in a district. These plans are compiled, collated, reviewed and finalized in DCC

meetings and are given a final shape as District Annual Credit Plans. The District Credit

Plan represents the aggregation of block credit plans/credit plans of all credit agencies

operating in the district. The district credit plans are aggregated into state annual credit

plans and State Level Bankers Committee will do this job.

7.1.2b. Time Frame for preparation of annual credit plans149

There is a time frame for finalization of the district credit plans. The process starts

by 1st December and completed by 31st December of every year by the bank branches

falling in urban and rural areas. These plans are submitted to the controlling offices by

31st December every year. The controlling offices approve the plans by 31 January of the

next year so that the plans are placed in the respective block level bankers committees for

their approval by the end of February. The approved block credit plans are placed in the

District Consultative Committee meeting for discussion/approval so that the district plans

are launched by 1st April. Schedule of annual credit plans is as below:

1. Supply of back ground papers by the lead banks to branches : 15th

December

2. Preparation of branch credit plan : 31stDecember

3. Approval of Branch credit plan by controlling office : 31st January

4. Finalization of branch credit plan at SLBC : 28th

February

149

Annual Credit Plan 2005-06 of Srikakulam District

5. Aggregation of plan at block level : 5th

March

6. Aggregation at the district level : 31st March

7. Launching of District Credit Plan :1st April

Srikakulam District is considered as a backward district due to its low per capita

income of Rs.35959150

and it requires special attention and efforts for improvement of the

economic activities in the district. The district is primarily agro based economy and the

major thrust is on development of Agriculture, Allied Activities, and Agro based

industries in the district. As credit is an important input for accelerating the economic

development, generation of employment and incomes, banks have to play a key role in

delivering the credit in the following areas which contributes for higher productivity.

Loans for raising crops (crop loans) during Kharif and Rabi seasons

Loans for tenant farmers under Joint Liability Groups(JLGs) for productive

activities

Loans for self-help groups for taking up economic activities for generation of

income.

Financing for land development and minor irrigation schemes

Financing to allied activities for providing employment during the off season in

rural areas.

Financing for establishment of Medium, Small and Micro Enterprises.

National Bank for Agriculture and Rural Development (NABARD) prepares the

Potential Linked Plans (PLPs) taking into consideration the potential for each activity and

fixes the scales of finance. Credit plans are prepared every year basing on the potential

for various activities in the district. Thus, the Potential Linked Plans are base for the

annual credit plans.

150

A.P.Economic Survey 2011-12, Directorate of Economics, www. aponline.org

The objective of studying the priority sector lending under district credit plans is to

know whether there is any difference between targets and achievements of commercial

banks and to know whether there is any difference between the performance of public

sector banks and private sector banks in achieving the targets. Also, to assess the impact

of priority sector advances on the development of the district. For this purpose, the

following hypotheses are framed.

H1: There is no significant difference between target and achievement percentages in the

Crop Loans sector.

H2: There is no significant difference between target and achievement percentages in the

Agri-Term Loans Sector.

H3: There is no significant difference between target and achievement percentages in the

Allied Activities sector.

H4: There is no significant difference between target and achievement percentages in the

Non-Farm sector.

H5: There is no significant difference between target and achievement percentages in the

Other Priority sector.

H6 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to Crop Loans.

H7 There is no significant difference between the performance of Public Sector Banks and

Private Sector Banks in lending to Agriculture Term Loans.

H8 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to the Allied Activities sector

H9 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to the Non-Farm sector.

H10 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to the Other Priority Sector.

H11: Are targets for banks fixed by considering the previous year‟ performance

H12 Priority Sector Advances have significant impact on the development of district.

7.2 BROAD CATEGORIES OF PRIORITY SECTOR LENDING UNDER

DISTRICT CREDIT PLANNING

The District Credit Plans cover only priority sectors and are grouped into five

categories. Plans are prepared sector wise and targets for lending are fixed mandal –

wise, sector -wise, and bank-wise. The sector-wise classification is made under the

following heads:

Crop Loans

Agriculture Term Loans:

a. Investment Credit

b. Minor Irrigation

c. Land Development

d. Farm Mechanization

e. Plantation and Horticulture

f. Other Agriculture Loans

Allied Activities

a) Dairy Development

b) Poultry

c) Fisheries

d) Storage and Market yards

e) Other allied activities

Non-Farm Sector/Small Scale Industries

Other Priority Sector

7.2.1 Crop Loans

Under this category, banks give loans for buying agricultural inputs like seeds,

fertilizers etc. They also provide loans for buying additional land, making improvements

on the existing land, to clear the old debts and to purchase agricultural machinery.

7.2.2 Agricultural Term Loans

The Agricultural Term Loans comprise of the following sub-sectors.

7.2.2(i). Investment Credit

Banks grant investment credit in the shape of term loans to agriculturists for

purchase of farm equipment. E.g., tractors, power-tillers, pump sets, power threshers,

winnowers, sprayers, live-stock, land improvement, sinking of wells etc.

7.2.2(ii). Minor Irrigation

Banks grant loans for Minor Irrigation Projects, Lift irrigation, Drip irrigation and

Sprinkler irrigation etc.

7.2.2(iii). Land Development and Watershed Management

Under this category, banks grant loans for On-Farm Development works, Tank

Silt Application, Production of Organic Manures, Comprehensive Land Development

Programme and centrally sponsored Rain Water Harvesting Scheme for SC/ST farmers

etc.

7.2.2(iv). Farm Mechanization

Loans are granted for purchase of Power tillers, Wooden Ploughs, Diesel

Engines, Electric pump sets, Power Sprayers etc.

7.2.2(v). Plantation and Horticulture

Loans are granted for cultivation of horticultural crops.

7.2.2.(vi). Sericulture

Banks grant loans for promoting sericulture activity. Department of Sericulture

guides this activity.

7.2.2(vi). Forestry and Waste Land Management

Loans are granted for setting up of commercial nurseries for raising seedlings,

fodder, forest wood, timber and growing of other fruit species.

7.2.3 Allied Activities (Animal Husbandry)

Allied activities support the agriculture and create employment for the rural

people. These activities have huge potential in the district. The important economic

activities are dairy development, poultry farming, fisheries, piggery, bio-gas etc.

7.2.3(i). Dairy Development

It is an allied activity which supports the agriculture. Loans will be granted for

purchase of cattle etc.

7.2.3(ii). Poultry Farming, Sheep, Goat and Piggery development

It is another allied activity which is suitable for rural areas.

7.2.3(iii). Fisheries

Banks grants loans for purchase of boats, nets, ice boxes, transport vehicles etc.

Banks also provide working capital loans to fish vendors.

7.2.3(iv). Storage Godowns and market yards

Loans will be granted for construction of market yards for cash crops such as

cotton, chilies, sericulture cocoons etc. Banks also provide loans for construction of cold

storage facilities for horticultural crops, vegetables, etc. and milk chilling units.

7.2.3(v). Bio-Gas

Bio-gas is a cost effective alternate source of energy which is being encouraged

by both Government of India and Government of Andhra Pradesh for implementation in

rural areas. Loans will be sanctioned for setting up of bio-gas plants.

7.2.3(vi). Bullocks and Bullock Carts

Banks sanction loans for purchase of bullocks by small and marginal farmers who

possess small land holdings.

7.2.4 Non-Farm Sector

Loans will be sanctioned for setting up of village, cottage and decentralized

household / tiny and small scale industries.

7.2.5 Other Priority Sector

Loans will be granted for Transport Operators, Retail Trade/Small Business,

Professional and Self-employed, Education Loans, Housing Loans, Consumption Loans

and other miscellaneous activities.

7.3 SERVICE AREA VILLAGES - SRIKAKULAM DISTRICT

Srikakulam District is one of the districts covered under the lead bank scheme and

Andhra Bank has been designated as the Lead Bank for this district. Lead Bank

formulates the District Credit Plans (DCPs)/Annual Credit Plans (ACPs) for the entire

district. Reserve Bank of India has introduced the „Service Area Approach‟ in order to

facilitate the commercial banks to operate within the service area and to concentrate on

the credit needs of the people residing in that area. Service Area Approach is also

intended to promote the standard of living of the people. In Srikakulam District, the

following banks are assigned the task of preparing the service area credit plans to all the

revenue villages in the district. They are:

Andhra Bank

State Bank of India

United Bank of India

Allahabad Bank

Canara Bank

Syndicate Bank

Indian Bank

Vysya Bank

The branch managers will prepare the service area credit plans with the help of

potential linked plans prepared by NABARD. These credit plans are aggregated into

block level credit plans which in turn are aggregated into district credit plans.

7.4 ANALYSIS OF TARGETS OF COMMERCIAL BANKS’ UNDER DISTRICT

CREDIT PLANS

7.4.1 Block-Wise Targets

Table 7.1 exhibits the block-wise targets of credit from 2004-05 to 2010-11 for 16

blocks. As shown in the table, the block- wise targets had increased for all the blocks in

2005-06 credit plan over the previous year except for Kotabommali Block. The

percentage growth ranges between 7 per cent and 85 per cent during this year.

In 2006-07 credit plans, the targets had increased for all the Blocks over the year

2005-06. The percentage growth varied between 6 per cent and 79 per cent during the

year. In 2007-08, credit targets increased to all the Blocks except for Ichapuram, Kottur

and Veeraghattam and percentage of growth varied between 1 per cent and 49 per cent.

In the year 2008-09 also, the same trend has been noticed with an exception of

decline in targets for two Blocks i.e. Kotabommali and Ranastalam. In 2009-10, also

targets increased to all blocks except for Veeraghattam. The percentage increase varied

between 4 per cent and 234 per cent during the reference period. In 2010-11 credit plan,

allocation of credit has been reduced to eight blocks over the previous year i.e., 50

percent of the blocks have witnessed a steep reduction in credit allocation. The allocation

for the remaining eight blocks has increased from 4 per cent to 60 percent.

It may be observed that the targets for all mandals are not uniform. Abnormal

increase or decrease in allocation of credit has been observed for some mandals in some

years. The reasons for this may be attributed to the potential for activities under priority

sector category.

BLOCK-WISE TARGETS UNDER DISTRICT CREDIT PLANS (Rupees in Thousands)

(Source: Annual Credit Plans of various years)

TABLE: 7.1

Block 2004-05 2005-06 % increase 2006-07 %

increase

2007-08 %

increase

2008-09 %

growth

2009-10 %

increase

2010-11 %

increase

1 Amadalavalasa 268854 297211 11 329408 11 450438 37 501296 11 729331 45 650099 -11

2 Gara 462280 626182 35 808109 29 1207694 49 1762502 46 2243388 27 2994871 33

3 Ichapuram 104465 128136 23 224042 75 216808 -3 263417 21 555297 111 590821 6

4 Kasibugga 214702 230541 7 563692 45 568545 1 657797 16 927088 41 655143 -29

5 Kotabommali 194266 162848 -16 259828 60 357883 38 334245 -7 691030 107 686633 -1

6 Kottur 179330 231902 29 415424 79 343260 -17 352946 3 553037 57 658692 19

7 Narasannapeta 213765 235379 10 405513 72 482908 19 702558 45 730716 4 871553 19

8 Polaki 257600 354242 38 481745 36 597670 24 847150 42 849195 0 941978 11

9 Ponduru 259238 310109 20 435029 40 468806 8 633078 35 856704 35 889365 4

10 Rajam 345918 426854 23 451985 6 670665 48 1108193 65 1201912 8 1172167 -2

11 Ranastalam 169240 251837 49 295538 17 362557 23 213584 -41 713396 234 546965 -23

12 Seetampeta 28005 43198 54 76476 77 91180 19 104750 15 191002 82 138014 -28

13 Sarava 209713 277894 33 358430 29 447293 25 737157 65 922444 25 782733 -15

14 Sompeta 173953 244054 40 316247 30 414970 31 546569 32 968989 77 959351 -1

15 Tekkali 267202 348147 30 407107 17 448854 10 519360 16 721697 39 1152082 60

16 Veeraghattam 102812 190427 85 309438 62 291275 -6 491273 69 425868 -13 504075 18

Total 3451343 4358961 6138011 7420494 10075875 13281094 14194542

7.4.2 SECTOR-WISE TARGETS

Table 7.2 highlights the sector-wise targets for commercial banks in the district

credit plans from 2000-01 to 2010-11.

Sector-wise targets for Commercial Banks in District Credit Plans in Srikakulam

District

(Rupees in Lakhs)

Year

Sector Wise Targets of Commercial Banks in District Credit Plans

To

tal

sha

re o

f

Co

mm

erci

al

ba

nk

s

Crr

edit

Total

District

credit

plan*

Crop Loans Agri-term

loans

Allied

activites NFS/SSI OPS

TA

RG

ET

S

% s

ha

re

TA

RG

ET

S

% s

ha

re

TA

RG

ET

S

% s

ha

re

TA

RG

ET

S

% s

ha

re

TA

RG

ET

S

% s

ha

re

2000-

01 3553.12 24 952.95 6 0 -- 1010 7 2264.2 15 52 15004

2001-

02 4172.46 22 1094 6 0 -- 1128 6 2641.3 14 48 19237.24

2002-

03 5165 21 1224 5 651 3 1487 6 3390 14 49 24600

2003-

04 6794 21 1181 4 803.5 3 1700 5 5735.5 18 51 31803.5

2004-

05 8917 23 1776 5 1331 3 1256 3 5065 13 47 38246

2005-

06 11232 25 2889 6 1680 4 1750 4 6647 15 54 45000

2006-

07 14059 23 3172 5 2921 5 5520 9 7734 13 55 61380

2007-

08 17629 24 4330 6 3848 5 7635 10 8688 12 57 74201

2008-

09 29941 29 7579 7 4769 5 7486 7 11512 11 59 101759

2009-

10 30915 23 13411 10 5233 4 15212 11 14291 11 59 132743

2010-

11 50879 36 -- -- -- -- 17755 13 17856 13 62 141800

(Source: Annual Credit Plans of various years)

Table 7.2

In order to make a comprehensive study on district credit plans in Srikakulam

District, a detailed analysis of targets of commercial banks for disbursing credit to

priority sectors from 2000-01 to 2010-11 is made. The total outlay (includes the targets

for Regional Rural Banks and Cooperative Banks) of Annual Credit Plans was considered

to know the share of commercial banks‟ targets in the total district annual credit plans.

Sector-wise Share of Targets of Commercial Banks in District Credit Plans

Figure: 7.1

As shown in table 7.2 and figure 7.1, the targets for crop loans varied between

Rs. 3553.12 lakhs to Rs.50879 lakhs from 2000-01 to 2010-11. This sector has received

a major share in all the annual credit plans. The share varied between 21 per cent and 36

per cent during the period under reference. Targets for crop loans included targets for

agri-term loans and allied activities in 2010-11 credit plan.

Agriculture term loans sector‟s targets varied between Rs. 952.95 lakhs in 2000-

01 to Rs. 13411 lakhs in 2009-10. Share of this sector in total plan varied between 4 per

cent and 10 per cent. Its share was minimum (4 per cent) in 2003-04 and maximum in

2009-10 i.e. 10 per cent.

Targets for allied activities varied between Rs.651 lakhs in 2002-03 and Rs.5233

lakhs in 2009-10. Its share ranges between 3 and 5 per cent during the study period.

Targets for non-farm sector had increased from Rs. 1010 lakhs in 2000-01 to

Rs.17775 lakhs in 2010-11 and its share fluctuated between 3 and 13 per cent during the

above period.

0

5

10

15

20

25

30

35

40

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

CL share ATL share AA share NFS share OPS share

Targets for other priority sector had increased from Rs. 2264.2 lakhs in 2000-01

to Rs.17856 lakhs in 2010-11. Next to crop loans, Other Priority sector has received

considerable share during the entire study period and its share varied between 11 per cent

and 18 per cent.

In addition, following are the highlights of credit plans in various years:

In 2004-05, Central Government has sanctioned a special project for development

of Coir in Srikakulam district with a project cost of 676.95 crores151

.

Priority for the year 2005-06 was given for Minor Irrigation due to low and

uncertain rainfall in the district. Measures were initiated to adopt drip irrigation and

sprinkler irrigation systems for water conservation and as well as for increased

productivity. Government of Andhra Pradesh launched Andhra Pradesh Micro Irrigation

Plan (APMIP) during this year. 20 Nos. of projects were sanctioned for Andhra Pradesh

from Tribal Development Fund with a total outlay of 6438.57 crores. Out of 20 projects,

3 Nos. of Tribal Development Fund projects were allotted to this district. State Bank of

India has taken up area development schemes for the development of Salt industry at

Naupada, Fiber boat manufacturing at Kaviti and Tribal development scheme at

Pathapatnam with the active co-operation of Non-Governmental Organizations and

District Rural Development Agency under this head.152

Schemes like APMIP, Special

SGSY project for Coir and Fisheries have balanced the loan portfolios of the banks.

Credit Linked Capital Subsidy Scheme for Technology up-gradation of small scale

industries has been introduced to give boost to the small scale industries in upgrading

their technologies and to improve their competitiveness.

151

Annual Credit Plan 2004-05 152

Annual Credit Plan 2005-06

The credit plan for 2007-08 has made a separate allocation for small and medium

enterprises as per the guidelines of State Level Bankers Committee. Rs.10635 lakhs

were fixed as target for small scale industries and Rs.7500 lakhs for medium enterprises.

With this, the total credit for small and medium enterprises goes to Rs. 18135 lakhs.153

Target for Non-Farm Sector has increased two fold i.e. from Rs.7486 lakhs in 2008-09 to

Rs.15212 lakhs in 2009-10, resulting in 100 per cent increase. 154

Plan for the year 2009-

10 has given priority for financial inclusion and medium enterprises which are considered

as important tools for development of the district. The Credit Plan for SMEs has stood at

Rs.20735 lakhs, out of which Micro enterprises share was Rs.2600 lakhs, Small

enterprises share was Rs.10635 lakhs and Medium enterprises share was Rs.7500 lakhs.

Plan for the year 2010-11 has made a separate allocation of Rs.3000 lakhs for Micro

enterprises, Rs.10635 lakhs for Small enterprises and Rs.7500 lakhs for Medium

enterprises.

Observations:

Agriculture being the major activity in the district, credit allocation for crop loans

was maximum i.e., 21 per cent to 36 per cent in all the credit plans during the study

period. Next to crop loans, priority has been given to Other Priority Sector in the

allocation of credit (share ranges between 11 to 18 per cent). The other sectors have

also been given due importance by increasing targets every year according to the

potential for the activities. From 2007-08 credit plan onwards, separate allocation for

small and medium enterprises was made as per the guidelines of State Level Bankers

Committee. Total share of commercial banks under district credit plans ranges between

48 per cent and 62 per cent. Hence, it is inferred that more than 50 per cent of the

responsibility in district development lies with the commercial banks.

153

Annual Credit Plan 2007-08 154

Annual credit Plan 2009-10

7.5 ANALYSIS OF PERFORMANCE/ACHIEVEMENT OF TARGETS OF

COMMERCIAL BANKS

7.5.1 Sector-Wise Achievements

The sector-wise performance of commercial banks under the District Credit Plans

from 2000-01 to 2010-11 is studied as under:

7.5.1a. Crop Loans Sector

Figure 7.2 and 7.3 highlights the performance of commercial banks in disbursing

loans to agricultural sector against the targets from 2000-01 to 2010-11.

In crop loans sector, (Fig 7.2) target credit stood at Rs.3553.12 lakhs in 2000-01

and had increased to Rs.50879 lakhs in 2010-11 and the achievements had increased

from Rs.3416.04 lakhs to Rs.35923 lakhs. Targets and achievements had increased year

on year. The percentage of achievement varied between 71 per cent and 116 percent

(Figure 7.3). Highest achievement (116%) has been registered in 2006-07. Overall

performance of the Commercial banks in Crop Loans Sector is consistent over the period.

Performance of Commercial Banks in Crop Loans Sector

35

53

.12

41

72

.46

51

65

67

94

89

17

11

23

2

14

05

9

17

62

9

29

94

1

30

91

5

50

87

9

34

16

.04

46

72

.52

53

05

66

94

.96

85

62

10

14

4

16

27

8

18

73

7

21

62

1

27

92

8 35

92

3

0

10000

20000

30000

40000

50000

60000

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Years

TARGETS ACHIEVEMENTS

Figure: 7.2

Percentage of achievement of targets by commercial banks in Crop Loans Sector

Figure: 7.3

Rs.3416.04 lakhs was the minimum credit in 2000-01(as against a target of

Rs.3553.12 lakhs) and Rs.35923 lakhs of credit (against a target of Rs.50879 lakhs) was

the maximum achievement in 2010-11. Banks had exceeded their targets in four credit

plans and their performance varied between 90 to 99 percent in five credit plans. Only

70-80 percent of the targets were met in two credit plans. The average crop loans

disbursed during the period under study was Rs.14480 lakhs. The compound growth rate

was 26.52 per cent.

7.5.1b. Agriculture Term Loans

The major and minor irrigation projects in the district numbering around 10. The

source of irrigation in the district is mainly by canals, tanks, wells, and bores. In addition

to this, lift irrigation, drip irrigation and sprinkler irrigation are also being used for

cultivation. Vamsadhara right canal was completed in 2005-06 which provides assured

irrigation facility for 4000 ha. NABARD has sanctioned 326 projects under RIDF in the

96

% 11

2%

10

3%

99

%

96

%

90

%

11

6%

10

6%

72

%

90

%

71

%

0%

50%

100%

150% % Achievement

district in various activities like irrigation, roads, bridges, rural water supply, water shed

development, soil and moisture conservation and joint forest management with a project

cost of Rs.159.32 crores during the same year. The major projects in the district are

Vamsadhara Major Irrigation Project, Salihundam Rural Water Supply Scheme. Andhra

Pradesh Micro Irrigation project (APMIP) was implemented with a project cost of

Rs.694.70 lakh in 29 mandals in Srikakulam District. The project covers 1000 ha for

Horticulture, 464 ha for Agriculture, 30 ha for Sericulture and 1000 ha for Sugarcane.

National Watershed Development Project for Rain Fed Areas (NWDPRA)

administered by Department of Agriculture and Watershed Development Programme

(WDP) by the department of Rural Development through District Water Management

Agency are the two important projects under land development and watershed

management in the district.

During the year 2002-03, a separate credit plan was prepared to meet the

requirements in these areas with an outlay of Rs.2.51 crore. On-Farm Development

works, Tank Silt Application, Production of Organic Manures, Comprehensive Land

Development Programme and Centrally sponsored Rain Water Harvesting Scheme for

SC/ST farmers have good potential in the district and banks are showing interest for

financing these activities.

Figure 7.4 exhibits the advances made by commercial banks against the targets

under district credit plans in agri-term loans sector from 2000-01 to 2010-11.

Performance of Commercial Banks in Agriculture Term Loans Sector

Figure: 7.4

In Agriculture Term Loans Sector, target allotment increased from Rs.952.95

lakhs in 2000-01 to Rs.13411 lakhs in 2009-10 and achievement had increased from

1073.21 lakhs to Rs.16449 lakhs during the same period (Fig.7.4).

Minimum achievement was Rs. 725 lakhs against a target of Rs. 1224 lakhs

(2002-03) and maximum achievement was Rs. 16449 lakhs against a target of Rs. 13411

lakhs (2009-10 194 per cent of achievement has been registered in 2003-04 (Rs.2288.29

lakhs against the target of Rs.1181 lakhs).

Percentage of achievement of targets by commercial banks in Agri-term loans sector

95

2.9

5

10

94

12

24

11

81

17

76 28

89

31

72 43

30

75

79

13

41

1

10

73

.21

75

4.4

2

72

5

22

88

.3 44

10

28

25

32

91

15

91

72

12

16

44

9

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Targets

Achievements

Figure: 7.5

The achievement percentage varied between 37 percent and 248 per cent

(Fig.7.5). Commercial Banks have shown an inconsistent performance in achieving the

targets in Agricultural Term Loans Sector as the variation in achievement of the targets

was very high. Banks have exceeded their targets by 248 per cent in the year 2004-05

(Rs. 4410 lakhs as against a target of Rs.1776 lakhs). This may be attributed to the

demand for use of drip and sprinkler irrigation systems. The priority for the financial

year 2005-06 was on Minor irrigation due to uncertain and low rainfall in the district and

adoption of drip and sprinkler irrigation systems for water conservation as well as for

increased productivity.155

Only 37% of the target was achieved in 2007-08 (Rs. 1591

lakhs against the target credit of Rs.4330 lakhs) which was the least percentage during

the study period under consideration.

155

Annual Credit Plan 2005-06

113

69 59

194

248

98 104

37

95

123

00

50

100

150

200

250

300

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

% of Achievement

As a whole, banks have surpassed the targets in five annual credit plans. This

sector had registered a compound growth rate of 35.43%. The Average loan disbursed

during the period of ten years for agricultural term loans sector was Rs.4061.99 lakhs.

7.5.1c. Allied Activities

Figure 7.6 highlights the credit deployment by commercial banks against the

targets under district credit plans in allied activities sector from 2000-01 to 2009-10.

Performance of Commercial Banks in Allied Activities Sector

Figure: 7.6

Allied activities help the farmers to generate income during off seasons. Poultry,

bee-keeping and dairying are some of the important allied activities in the district. Crop

loans include allocation of credit for allied activities also during the year 2000-01 and

2001-02. From 2002-03 onwards, separate targets were given in the district credit plans

due to the importance of these activities in generating income and employment. Figure

7.7 shows the percentage of achievement of banks in allied activities sector.

Percentage of achievement of targets by commercial banks in

0

2000

4000

6000

8000

10000

0 0

65

1

80

3.5

13

31

16

80 2

92

1 38

48 47

69

52

33

0 0

78

9 15

22

.4

16

54

18

95 3

08

5

98

25

60

42

15

39

TARGETS ACHIEVEMENTS

Allied Activities Sector

Figure: 7.7

Targets for allied activities sector had increased from Rs.651 to Rs.5233 lakhs

between 2002-03 and 2009-10. Achievements had increased from Rs.789 lakhs to 1539

lakhs during the same period (fig.7.6). The achievement of targets in terms of percentage

varied between 29 per cent and 255 per cent during the reference period (Fig.7.7). From

2003-04 annual credit plan onwards, separate targets were given to banks ranging from 5

per cent to 8 per cent of the total plan. Minimum loans disbursed for this sector was

Rs.789 lakhs as against a target of Rs. 651 lakhs in 2002-03 and Rs.9825 lakhs were the

maximum achievement against a target of Rs.3848.1 lakhs in 2007-08. Commercial

banks have exceeded their targets in all the years except in 2009-10. During this year,

banks have achieved only 29 per cent of the target and it was the least percentage of

achievement during the entire period. Banks have deployed loans above 255 per cent of

their targets (Rs.9825 lakhs as against the target of Rs. 3848.10 lakhs) in 2007-08, which

is the highest percentage of achievement during the reference period (Fig.7.7). The

0 0

12

1

18

9

12

4

11

3

10

6

25

5

12

7

29

0

50

100

150

200

250

300

% of Achievement

above data shows that allied activities have good potential in the district and banks have

utilized this opportunity by disbursing loans in various mandals over and above their

targets in all the credit plan periods. The average loan sanctioned for allied activities

during the study period was Rs. 3294 lakhs. 10% compound growth rate has been

registered during the period of study. Banks have surpassed their targets in seven credit

plans.

7.5.1d. Non-Farm Sector/SSI Sector

Srikakulam district has endowed with rich natural resources and it has great

potential for setting up of small scale industries. In this context, President of Federation

of Andhra Pradesh Industries (FAPI) requested the authorities to identify adequate land

for industrial estate in the district. He also pointed out that nationalized banks are not

coming forward to finance industrial units on the pretext of piling up arrears from some

units and some units are falling sick. He advised setting up of monitoring committees at

the state and district levels. These banks will verify all aspects of the loans sanctioned to

industries and find out whether banks had been financing industrial units as per the

guidelines of the RBI. The President urged the Chief Minister to go on „Parishramika

Baata‟ on the lines of pallebata and nagarabata for development of industries in the

state.156

Fig. 7.8 shows the targets and achievements of commercial banks in Non-Farm

sector/ Small Scale Industries sector. The targets increased from 1009.9 lakhs to Rs.

17755 lakhs and the achievements had increased from Rs.1003 lakhs to Rs.19569 lakhs

156

Bankers‟ panel urged for industrial progress, http://www.the hindu.com dated 29.12.2005.

between 2000-01 and 2010-11. Percentage of achievements varied between 45 per cent

and 226 per cent during the reference period. They have exceeded their targets by 226

per cent in 2004-05 annual plan period. Minimum achievement was Rs.1003 lakhs as

against a target of Rs.1487 lakhs in 2002-03 and Maximum achievement was Rs. 19569

lakhs as against a target of Rs. 15212 lakhs in 2009-10.

Performance of Commercial Banks in Non-Farm Sector

Figure: 7.8

Percentage of achievement of targets by commercial banks in Non-Farm Sector

10

09

.9

11

27

.6

14

87

17

00

12

56

17

50

55

20 76

35

74

86

15

21

2 17

75

5

12

10

.71

14

68

.95

10

03

12

20

.29

28

38

25

58 5

63

0

38

23

89

16

19

56

9

80

35

0

5000

10000

15000

20000

25000

TARGETS

Figure: 7.9

The average loan disbursed to non-farm sector during the study period was Rs.

5116 lakhs. This sector had registered a compound growth rate of 20.83 per cent. Banks

exceeded their targets in seven annual credit plans except in 2002-03 (67%), 2003-04

(72%), 2007-08 (50%) and 2010-11 (45%). Highest percentage of achievement 226%

has been registered in 2004-05 under reference period. Credit linked Capital Subsidy

Scheme for Technology up-gradation of small scale industrial units was introduced to

give strength to the small scale industries in upgrading their technology and improve their

competitiveness.157

This scheme will improve the credit flow to SSIs along with

support to handlooms, leather, rural housing and rural godowns. NABARD, Village

Organizations and Non-Governmental Organizations (NGOs) are training the rural

entrepreneurs and providing support for marketing their products. Banks should make

use of this facility to promote the small scale industries in the district.

157

Annual Credit Plan 2005-06, Srikakulam District.

120130

67 72

226

146

102

50

119129

45

0

50

100

150

200

250 % of Achievement

7.5.1e. Other Priority Sector

Other priority sector includes the loans granted for transport operators, retail

trade/small business, professional and self-employed persons, education loans,

consumption loans and other miscellaneous loans.

Figure 7.10 and 7.11 shows the targets and achievements of banks in Other

Priority Sector. In this sector, targets increased from Rs.2264.21 lakhs to Rs. 17856

lakhs and achievements increased from Rs.3929 lakhs to Rs. 17297 lakhs during the

period of study (Fig.7.10).

Performance of Commercial Banks in Other Priority Sector

Figure: 7.10

Percentage of achievement of targets by commercial banks in Other Priority Sector

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

22

64

.21

26

41

.32

33

90

57

35

.5

50

65 6

64

7 77

34

86

88

11

51

2

14

29

1 17

85

6

40

92

.59

39

29 51

13

39

93

.81

61

70 72

98 8

82

4

12

32

8

12

11

0

17

29

7

98

56

TARGETS

ACHIEVEMENTS

Figure: 7.11

Percentage of achievement varied between 55 per cent and 181 per cent

(Fig.7.11). Highest percentage of achievement was recorded in 2000-01 with 181 per

cent. However, banks could not reach their targets in 2003-04 and 2010-11. Minimum

loans disbursed were Rs.3929 lakhs and maximum loans were Rs.17297 lakhs during the

period under consideration. The average loan disbursed to other priority sector during the

study period i.e. 11 years was Rs.8274 lakhs. This sector has recorded a compound

growth rate of 9.18 per cent. The achievement exceeded 100 per cent in nine annual

credit plans.

The total targets for priority sector under annual credit plans had increased from

Rs.7780.18 lakhs to Rs.86491 lakhs and achievements had increased from Rs. 9792.6

lakhs to Rs.82782 lakhs during the reference period and registered a compound growth

rate of 18.58 per cent. The total percentage of achievement ranges from 62 per cent to

129 per cent. The total average loan for priority sector under district credit plans stood at

Rs.33958 lakhs during the period of study.

181

149 151

70

122110 114

142

105121

55

0

50

100

150

200% of Achievement

SECTOR-WISE PERFORMANCE OF COMMERCIAL BANKS UNDER DISTRICT CREDIT PLANS

(Rupees in Lakhs)

Year

ending

March

Crop Loans Agri- Term Loans Allied Activities Non-Farm Sector Other Priority Sector Total T

argets

Ach

iev

emen

ts

% A

ch

ievem

en

t

Targets

Ach

iev

emen

ts

% A

ch

ievem

en

t

Targets

Ach

iev

emen

ts

%A

ch

iev

emen

t

Targets

Ach

iev

emen

ts

% O

f A

ch

iev

emen

t

Targets

Ach

iev

emen

ts

% O

f A

ch

iev

emen

t

Targets

Ach

iev

emen

ts

% O

f A

ch

iev

emen

t

2001 3553.12 3416.0

4 96

952.9

5 1073.21 113 0 0 0 1010 1210.71 120 2264.21 4092.59 181 7780.18 9792.6 126

2002 4172.46 4672.5

2 112 1094 754.42 69 0 0 0 1128 1468.95 130 2641.32 3929 149 9035.38 10825 120

2003 5165 5305 103 1224 725 59 651 789 121 1487 1003 67 3390 5113 151 11917 12935 109

2004 6794 6694.9

6 99 1181 2288.3 194

803.

5 1522 189 1700 1220.29 72 5735.5 3993.81 70 16214 15720 97

2005 8917 8562 96 1776 4410 248 1331 1654 124 1256 2838 226 5065 6170 122 18345 23634 129

2006 11232 10144 90 2889 2825 98 1680 1895 113 1750 2558 146 6647 7298 110 24198 24720 102

2007 14059 16278 116 3172 3291 104 2921 3085 106 5520 5630 102 7734 8824 114 33406 37108 111

2008 17629 18737 106 4330 1591 37 3848 9825 255 7635 3823 50 8688 12328 142 42130 46304 110

2009 29941 21621 72 7579 7212 95 4769 6042 127 7486 8916 119 11512 12110 105 61287 55901 91

2010 30915 27928 90 13411 16449 123 5233 1539 29 15212 19569 129 14291 17297 121 79062 82782 105

2011 50879 35923 71 -- -- -- -- -- -- 17755 8035 45 17856 9856 55 86491 53814 62

CGR%

26.52

35.43

10

20.83

9.18

18.58

(Source: Annual Credit Plans of 2001 to 2011 and Reports of Lead Bank ) TABLE: 7.3

Table showing the 100 % achievement of targets by commercial banks from 2000-01

to 2010-11

Year

ending

March

Crop

Loans

Agriculture

term loans

Allied

activities

Non-Farm

sector

Other

Priority

sector

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Total 4 5 7 7 9

(Source: Table No.7.3)

Table 7.4

Compound Growth Rates and Average Loans of Commercial Banks to various

sectors

Sector Compound

Growth Rate

Average

Loan (Rs. in

Lakhs)

No. of years

of 100%

achievement

in DCPs

Crop Loans 26.52 14480 4

Agriculture

Term Loans 35.43 4062 5

Allied

Activities 10 2635 7

Non-Farm

Sector 20.83 5116 7

Other Priority

Sector 9.18 8274 9

(Source: Tables: 7.3 and 7.4)

Table: 7.5

Observations:

A comparison of sector-wise compound growth rate shows that the CGR% was

highest in agriculture term loans sector and crop loans occupy next position by 26.52%.

Least CGR% has been registered for other priority sector due to non-achievement of

targets in 2010-11 credit plan. However, there is huge potential for this activity in the

district and this has led to achievement of targets by banks in nine credit plans. In

addition, the credit allocation for this sector also occupies second place due to its high

potential in the district. CGR per cent of non-farm sector stood at 20.83 per cent

implying the promotion of small scale industries in the district. Though the CGR% of

allied activities was less compared to other sectors, this activity is gaining momentum

due to its importance in generation of employment and income during off-seasons.

Banks had achieved their targets in nine credit plans in other priority sector.

Allied activities and non-farm sector occupied next position by seven credit plans.

However, they could achieve their targets in crop loans in only four credit plans despite

of crop loans being the major thrust area and main occupation in the district. They failed

to purvey the credit as per the targets to this sector in seven credit plans. Hence, it is

not out of place to mention here that District Level Credit Committee fixes the targets

considering the potential linked plans prepared by NABARD.

As regards the average loan disbursed to different sectors, crop loans occupied

first position with Rs. 14480 lakhs during the study period. Other Priority Sector

occupied next position by Rs.8274 lakhs implying its huge potential. Average loans

disbursed for non-farm sector stood at Rs. 5116 lakhs which signifies its importance in

the district. Average loan for Allied activities was Rs. 2635 lakhs which was the least

compared to other sectors. However, banks had achieved their targets in seven credit

plans in this sector.

Sector- Wise Targets and Achievements to Total Targets and Achievements in

Percentage

Year

End

March

Crop Loans Agri- Term

Loans

Allied

Activities

Non-Farm

Sector

Other Priority

Sector

T A T A T A T A T A

2001 46 35 12 11 0 0 13 12 29 42

2002 46 43 12 7 0 0 13 14 29 36

2003 43 41 10 6 5 6 13 8 29 39

2004 42 43 7 15 5 10 11 7 35 25

2005 49 36 10 19 7 7 6 12 28 26

2006 46 41 12 11 7 8 7 10 28 30

2007 42 44 9 9 9 8 17 15 23 24

2008 42 41 10 3 9 21 18 8 21 27

2009 49 39 12 13 8 11 12 16 19 21

2010 39 34 17 20 7 2 19 23 18 21

2011 59 67 -- -- -- -- 21 15 20 18

Co-

efficient

of

range

0.20 0.33 0.42 0.74 0.29 0.83 0.56 0.53 0.32 0.40

(Source: Table 7.3) T=% to total target, A = %Achievement to total achievement

(Table: 7.6)

Note: By using the data in Table 7.3, the targets and achievements in all the sectors are converted into

percentages to total targets and achievements for calculating co-efficient of range and hypotheses testing.

Co-efficient of range is calculated to ascertain the consistency in fixing the

targets and achieving the targets by commercial banks in various sectors. Table

No. 7.7 exhibits the co-efficient of range for targets and achievements of banks in

various sectors.

Co-efficient of range for targets and achievements of commercial banks in various

sectors

Crop Loans Agriculture

term loans

Allied

activities

Non-Farm

sector

Other Priority

sector

Tar

get

s

Ach

iev

emen

ts

Tar

get

s

Ach

iev

emen

ts

Tar

get

s

Ach

iev

emen

ts

Tar

get

s

Ach

iev

emen

ts

Tar

get

s

Ach

iev

emen

ts

Co-

efficien

t of

Range

0.20 0.33 0.42 0.74 0.29 0.83 0.56 0.53 0.32 0.40

(Source: Table: 7.6)

Table: 7.7

The co-efficient of range is less for targets given to commercial banks in Crop

Loans Sector i.e. 0.20 during the study period compared to the co-efficient of range

values for other sectors. Hence, it can be inferred that there is consistency in fixing the

targets for crop loans sector during the study period.

Similarly, commercial banks exhibited consistency in achieving the given targets

also in Crop Loans Sector as the value of co-efficient of range is less i.e., 0.33 compared

to the achievements in other sectors. Hence, consistency is observed in both targets and

achievements in crop loans sector.

In order to know whether there is any significant difference between sector-wise

targets and achievement percentages, Wilcoxon Signed Rank Test is used. The following

null hypotheses were framed for this purpose.

H1: There is no significant difference between target and achievement percentages in the

Crop Loans sector.

H2: There is no significant difference between target and achievement percentages in the

Agri-Term Loans Sector.

H3: There is no significant difference between target and achievement percentages in the

Allied Activities sector.

H4: There is no significant difference between target and achievement percentages in the

Non-Farm sector.

H5: There is no significant difference between target and achievement percentages in the

Other Priority sector.

Wilcoxon signed rank test is used to test the hypotheses.

Wilcoxon signed rank test:158

It is a non-parametric test for correlated samples. The Wilcoxon signed-ranks

test assesses the significance of the imbalance. This test assumes that we can rank

158

www.Vissarstats.com

differences between paired observations. This test is a useful alternative to the t-test. The

data for the test will consist of a number of pairs of scores; each derived from a single

subject, or from a pair of matched subjects. Under the null hypothesis, that there is no

difference in the distributions of the populations from which the samples are drawn. The

„z „values are calculated using the formula.

If the observed value of z is less than the critical value, accept the hypothesis.

Sector-wise Targets and Achievement percentages: Wilcoxon Signed Rank Test

(At 0.05 percent Level of significance)

SECTOR CALCULATED

VALUE

TABLE

VALUE

RESULT

1.Crop Loans

Sector 1.76 1.96 Accept H1

2. Agri-Term

Loans

sector

-1 35 Accept H2

3.Allied

Activities

Sector

-13 24 Accept H3

4.Non-

Farm/SSI

Sector

0.51 1.96 Accept H4

5.Other -1.44 1.96 Accept H5

Priority

sector

(Source: Table 7.6)

Table 7.8

In order to test the hypotheses, „Z‟ values are calculated for all the sectors and are

shown in Table 7.8. As per the results, it is inferred that the calculated value of „Z‟ for

Crop Loans, Agri-Term Loans, Allied Activities, Non-Farm Sector and Other Priority

sector is less than the table value at 0.05 per cent level of significance. Hence, the

hypotheses are accepted in all the cases. The results indicate that there is no significant

difference between the targets and achievement percentages in all the sectors.

7.6 SECTOR-WISE VARIATION IN TARGETS TO PREVIOUS YEAR’S

PERFORMANCE

A comparison of targets with the previous years‟ achievement is made for

different sectors in order to know whether targets are fixed in line with the previous

year‟s achievements or not.

Sector-wise variation in Targets to Previous Year’s Achievements

YEAR Percentage of variation in targets to previous years‟ achievements

Crop

loans

Agri-

Term

Loans

Allied

Activities

Non-

Farm/SSI

Other

Priority

sector

Total

targets

2000-01 28 66 -- 51 49 12

2001-02 22 2 -- -7 -35 -8

2002-03 11 62 -- 1 -14 10

2003-04 28 63 2 69 12 25

2004-05 33 -22 -13 3 27 17

2005-06 31 -34 2 -38 8 2

2006-07 38 12 54 116 6 35

2007-08 8 32 25 36 -2 14

2008-09 59 376 -51 96 -7 32

2009-10 43 86 -13 71 18 41

2010-11 82 -- -- -9 3 4

(Source: Table 7.3)

Table: 7.9

As per the table No.7.9, the target credit for Crop Loans Sector was more than

the previous year‟s achievements during the entire reference period. In Agri-Term

Loans sector, target credit was less than previous year‟s achievement in 2004-05 and

2005-06 Annual credit Plans. In Allied Activities sector, the targets were fallen short of

previous year‟s achievements in three credit plans i.e., in 2004-05, 2008-09 and 2009-10.

In SSI sector also, the same tendency has been noticed in three annual credit plans i.e. in

2001-02, 2005-06 and 2010-11. In Other Priority Sector, the targets were less than

previous year‟s achievements in four credit plans.

While considering the total targets, the targets were more than the previous year‟s

performance of the banks except in 2001-02. Total targets were less than the previous

year‟s achievements by 8 per cent in 2001-02 credit plan period.

The data reveals that the growth rate of targets in all the sectors was not uniform.

Targets were increased or decreased without considering the previous year‟s

achievements of banks in all the sectors, as targets were less than the previous year‟s

achievements in some years and abnormally increased in some years. Hence, it is

inferred that the credit plans in the district are not prepared basing on the previous year‟s

performance of the banks and the base for credit plans are potential linked plans prepared

by NABARD.

H20: Are targets for banks fixed by considering the previous year‟s performance.

It is proved that the targets are not fixed by considering the previous year‟s performance.

7.7 BANK GROUP-WISE PERFORMANCE IN PRIORITY SECTOR LENDING

UNDER DISTRICT CREDIT PLANS

7.7.1 Bank Group-wise Share of Priority Sector Advances to Total Priority Sector

Advances under District Credit Plans:

Table 7.10 shows the bank group-wise share of priority sector advances under

district credit plans from 2000-01 to 2010-11.

Bank group-wise share of Priority Sector Advances under District Credit Plans

YEAR

PERCENTAGE SHARE OF PRIORITY SECTOR

ADVANCES

Public Sector

Banks

Private Sector

Banks Total

2000-01 40.71

(11)

9.79

(01)

50.50

(12)

2001-02 55.64

(11)

2.44

(01)

58.08

(12)

2002-03 41.57

(11)

6.96

(01)

48.53

(12)

2003-04 49.02

(11)

0.25

(01)

49.27

(12)

2004-05 53.57

(11)

0.90

(01)

54.47

(12)

2005-06 52.61

(11)

1.02

(01)

53.63

(12)

2006-07 57.19

(11)

1.15

(01)

58.34

(12)

2007-08 51.15

(12)

9.81

(03)

60.96

(15)

2008-09 58.23

(14)

3.31

(04)

61.54

(18)

2009-10 60.35

(15)

0.97

(06)

61.32

(21)

2010-11 47.49

(18)

3.10

(06)

50.59

(24)

(Figures in brackets indicate the number of Commercial banks assigned targets

under District credit plans in Srikakulam District)

TABLE: 7.10

The share of public sector and private sector banks in priority sector lending

under Credit plans from 2000-01 to 2010-11 is analyzed in table 7.10 and Fig.7.11.

The share of Public Sector Banks in total priority sector lending varied between

40.71 per cent and 60.35 per cent. State Bank of India and Andhra Bank disbursed major

portion of the loans due to their wide net work of branches in the district. The other

nationalized banks have urban orientation and very few banks are operating in rural areas.

However, the share has declined to 47.49 per cent in 2010-11.

Banks group-wise Share of Priority Sector Advances under District Credit Plans

Figure: 7.12

It is observed that the Private Sector Banks‟ share of lending towards priority

sector was very little due to their limited presence in the District. As per the data, only

one private bank i.e., Vysya Bank was operating in the district till 2006. Slowly other

private sector banks like City Union Bank Ltd., Karur Vysya Bank, HDFC, ICICI, Axis

Bank etc. have entered into the market in the district. Hence, their share varied between

0.25 per cent and 9.81 per cent during the reference period. Below 1 per cent share has

been observed in 2003-04, 2004-05 and 2009-10 annual credit plans. Private sector

banks‟ share has been decelerated despite of the increase in their number in 2009-10. It

is notable that only one bank was able to achieve a share of 9.79 per cent share in 2000-

01 credit plan period, whereas six banks were able to achieve a share of only 0.97 per

cent in 2009-10. However, their share has increased to 3.1 per cent by March end 2011.

The reason for this may be attributed to their presence in urban areas. While observing

0

10

20

30

40

50

60

70

40

.71 55

.64

41

.57

49

.02

53

.57

52

.61

57

.19

51

.15

58

.23

60

.35

47

.49

9.7

9

2.4

4

6.9

6 0.2

5 0.9

1.0

2 1.1

5

9.8

1 3.3

1

0.9

7

3.1

Private Sector Banks' share

Public Sector Banks' share

the share of Commercial Banks‟ advances towards priority sector as a whole, it varied

between 48.53 per cent and 61.54 per cent during the period of study.

In 2006-07 credit plan, Karur Vysya Bank has advanced loans of Rs. 289 lakhs

without any targets under annual credit plan. In 2007-08 credit plan, targets were not

assigned to Corporation Bank, Punjab National Bank, Bank of Baroda, Axis bank and

ICICI bank. However, Corporation Bank, Axis bank and Punjab National Bank have

given crop loans and other priority sector loans. Axis bank has lent Rs. 5929 lakhs to

Other Priority Sector without any targets during this credit plan. In 2008-09 credit plan,

targets were not given to Bank of Baroda ICICI bank and HDFC bank. However, they

have disbursed loans under annual credit plan. In 2009-10, also targets were not given to

Oriental Bank of Commerce and UCO bank. However, they have lent to crop loans

sector and other priority sectors. The reasons for not assigning the targets might be due to

their entry after finalizing the district credit plan. It is also observed that the recently

entered public sector banks and private sector banks have their branches in urban areas

and hence the targets were so little under various heads.

7.7.2 Bank group-wise performance in Priority Sector Lending under District

Credit Plans

Bank group-wise performance under district credit plans in Srikakulam District

(Rupees in Lakhs)

Year Public Sector Banks Private Sector Banks Total

Ending

March

Tar

get

s

Ach

ievem

ents

%A

chie

vem

ents

Tar

get

s

Ach

ievem

ents

%A

chie

vem

ents

Tar

get

s

Ach

ievem

ents

%A

chie

vem

ents

2001 7666.78 7893.77 103 113.4 1898.78 1674 7780.18 9792.55 126

2002 8643.4 10369.9 120 392 455 116 9035.4 10824.9 120

2003 11477 11081 97 440 1854 421 11917 12935 109

2004 15491 15639.9 101 723 79.9 11 16214 15719.8 97

2005 18201 23242 128 144 392 272 18345 23634 129

2006 23908 24250 101 290 470 162 24198 24720 102

2007 32885 36377 111 521 731 140 33406 37108 111

2008 40591 38854 96 1539 7451 484 42130 46305 110

2009 58844 52896 90 2443 3005 123 61287 55901 91

2010 76046 81474 107 3016 1308 43 79062 82782 105

2011 81971 50514 62 4520 3300 73 86491 53814 62

CGR% - 20.39 - - 5.68 - - 18.57 -

(Source: Annual Credit Plans of various years of Srikakulam District)

Table: 7.11

100% achievement of targets by different bank groups in priority sector lending

Year ending

March

Public sector

banks

Private sector

banks

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Total 7 8

(Source: Table: 7.11)

Table 7.12

Bank group-wise targets and achievements have been shown in table 7.11 and

7.12 for different bank groups.

The table 7.11 reveals that the target credit for public sector banks had registered

an increase from Rs.7666.78 lakhs to Rs.81971 lakhs during the period 2001-01 to 2010-

11. Their achievements had increased from Rs.7893.77 lakhs to Rs. 81474 lakhs during

the same period. It has been observed that there was a continuous increase in

achievements from 2001-01 to 2009-10. However, a sudden deceleration took place in

the year 2010-11 as only Rs.50514 lakhs were disbursed as credit during this year. The

percentage of achievement exceeded 100 per cent in seven credit plans (table 7.12) and

surpassed 90 per cent in three credit plans. Yet, only 62% achievement took place in

2010-11 annual credit plans. 20.39 per cent compound growth rate has been registered in

the achievements of Public Sector Banks. The Average Loan disbursed by public sector

banks during the study period under annual credit plans was Rs.32053 lakhs

The targets of Private Sector banks during the study period varied between

Rs.113.4 lakhs and Rs.4520 lakhs from 2000-01 to 2010-11. The achievements varied

between Rs.79.9 lakhs and Rs.7451 lakhs during the same period. Yet the trend shows

fluctuations in both targets and achievements. They exceeded their targets in some

credit plans by 1674 per cent in 2000-01 and 421 per cent in 2002-03 and 484 per cent

2007-08. This can be inferred as their outstanding role in fulfilling the targets of the

credit plans. However, least performance of 11 per cent has been recorded in 2003-04

credit plan. As a whole during the study period, their achievements exceeded 100% in

eight credit plans under consideration except 2003-04, 2009-10 and 2010-11 Credit

Plans. Hence, it is inferred that Private Sector banks have played a significant role in

making the credit plans a success. Private Sector banks registered a compound growth

rate of 5.68 per cent in their achievements during the reference period. The Average Loan

disbursed by private sector banks during the study period under annual credit plans was

Rs.1904 lakhs.

The overall performance of Commercial Banks in the district (table No. 7.11)

shows that the targets had increased from Rs. 7780.18 lakhs to Rs.86491 lakhs from years

2000-01 to 2010-11. The achievements during the same period had increased from Rs.

9792.55 lakhs to Rs. 82782 lakhs. Commercial Banks as a whole, achieved a compound

growth rate of 18.57 per cent during the study period under district credit plans. The trend

shows a continuous increase in achievements from 2001-01 to 2009-10 as in the case of

Public Sector Banks. Nevertheless, a sudden decline in achievement has been observed

in 2010-11 as Rs.53814 crores were disbursed accounts for only 62 per cent of priority

sector advances. It has been noticed that the Commercial Banks‟ performance was well

above the targets during the study period except in 2003-04, 2008-09 and 2010-11 credit

plans.

A comparison of compound growth rates and average loans disbursed by public

and private sector banks is exhibited in the table No.7.13

Comparison of Compound Growth Rates and Average Loans of different bank

groups under district credit plans in Srikakulam district

Public sector banks Private sector banks

Compound Growth

Rate 20.39 5.68

Average Loan (Rupees

in Lakhs) 32053 1904

100% achievement in

Credit plans (years) 7 8

Table: 7.13

As shown in the table 7.13, the compound growth rate of public sector banks was

far above than the private sector banks. This implies the better performance of public

sector banks in advancing credit to priority sectors under district credit planning. The

average loan also signifies the similar trend. However, it is observed that private sector

banks superseded the public sector banks in achieving the targets in eight credit plans.

7.7.3 Bank group-wise performance in various sectors

The performance of Public and Private Sector banks in lending to different sectors

under District Credit Plans from 2000-01 to 2010-11 are shown in Table No.7.14 and

7.15.

7.7.3(i). Crop loans sector

In Crop Loans sector, Public sector banks‟ disbursements had increased from

Rs.3411.78 lakhs to Rs.33923 lakhs (Table 7.12) from 2000-01 to 2010-11. Public sector

banks had achieved more than 100 per cent of the targets in three Credit Plans (table

7.13). Their performance varied between 70 to 99 per cent in eight Credit Plans.

Private sector banks‟ disbursements had increased from Rs.3 lakhs to 2000 lakhs

during the same period. The Private Sector banks‟ performance was more than the

targeted credit in six credit plans and they have achieved only 1 percent of their targets in

2001-02 which is negligible and 12 per cent in 2003-04.

However, the percentage of achievement varied between 70 to 95 per cent in the

three credit plans. These banks have achieved 2768 per cent (disbursed Rs.1024 lakhs

against a target of Rs.37 lakhs in 2002-03) which was the highest achievement during the

study period. This achievement was possible by a single bank i.e. Vysya Bank.

7.7.3(ii). Agriculture Term Loans Sector

In Agri-Term Loans sector, public sector banks‟ disbursements had increased

from Rs. 723 lakhs to 16399 lakhs during the study period. These Banks had achieved

more than 100 per cent of their targets in five credit plans. Their achievements varied

from 37 per cent to 93 per cent in four credit plans. Least performance score of 37 per

cent has been recorded in 2007-08.

Private sector banks‟ advances to Agriculture Term Loans sector had increased

from Rs. 2 lakhs to Rs.308.92 lakhs during the period of study. Private Sector Banks had

surpassed their targets in three credit plans i.e., 6178 per cent in 2001, 620 per cent in

2001-02 and 178 per cent in 2009-10. This can be inferred as their splendid performance

in these years. However, except in 2004-05, their performance was quite insignificant as

it varied between 9 per cent and 30 per cent.

7.7.3(iii). Allied Activities sector

Public Sector Banks‟ advances to Allied activities had increased from Rs. 709

lakhs to Rs.9882 lakhs during the period of study. These banks had exceeded their

targets in seven credit plans (Table 7.13). However, they could not achieve the target

in 2009-10. It can be inferred that public sector banks had utilized the potential in this

area.

Private sector banks‟ performance had increased from Rs. 2 lakhs to Rs.80 lakhs.

They were able to achieve more than 100 per cent of the targeted credit in only two credit

plans. Further, the performance score is only 30 and 40 percent in two credit plans. Yet,

Private Sector Banks have shown „zero‟ performance in 2002-03; 2005-06 and 2008-09

as these banks have not disbursed any loans to these activities despite of the targets given

to them.

7.7.3(iv). Non-Farm Sector

In Non-Farm Sector, Public Sector Banks utilized the business opportunity by

giving loans above the target level in seven credit plans. Their advances had increased

from Rs. 957 lakhs to Rs. 19495 lakhs during the study period. Their achievements

varied between 44 per cent 213 per cent during the same period. They have surpassed

their targets by 213 per cent in 2004-05 credit plan period. However, they were far

below the targets in only two credit plans.

Private sector banks‟ advances had increased from Rs. 26 lakhs to Rs.500 lakhs

during the reference period. These banks have lent above the target level in three credit

plans. These banks have surpassed the targets by 172% in 2000-01, 610% in 2004-05

and 182% in 2005-06 credit plans. 91 per cent and 88 per cent achievement was recorded

in 2001-02 and 2010-11 credit plans. However, in the other years, their performance was

quite low and varied between 23 per cent and 60 per cent.

These banks had not given any loans to small scale industries in 2003-04 though

targets were set to these banks.

(Source: Annual Credit Plans) T= Targets, A= Achievements

Table: 7.14

Targets and achievements of Public Sector Banks and Private Sector Banks in various sectors

(Rupees in Lakhs)

Ye

ar

Crop Loans Agri-Term Loans Allied Activities Non-Farm Sector Other Priority Sector

PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs

T A T A T A T A T A T A T A T A T A T A

2000-01

3547.12 3411.78 6 4.26 947.95

764.29 5 308.92 -- --

949.9 1107.71 60 103 2221.81 2609.99 42.4 1482.6

2001-

02 3915.46 4669.52 257 3 1089 723.42 5 31 -- --

1081.6 1426.95 46 42 2557.32 3550 84 379

2002-

03 5128 4281 37 1024 1214 723 10 2 651 709 0 80 1217 957 270 46 3267 4411 123 702

2003-04

6745 6688.96 49 6 1002 2234.4 179 53.9 800.5 1520.4 3 2 1416 1220.29 284 0 5527.5 3975.81 208 18

2004-

05 8905 8517 12 45 1724 4361 52 49 1327 1648 4 6 1214 2582 42 256 5031 6134 34 36

2005-06

11182 10060 50 84 2777 2799 112 26 1697 1895 1 0 1694 2456 56 102 6576 7040 71 258

2006-

07 13934 15860 125 418 3074 3274 98 17 2920 3082 1 3 5520 5604 43 26 7480 8557 254 267

2007-

08 17425 17931 204 806 4226 1563 104 29 3838 9882 10 3 7095 3540 540 283 8007 5998 681 6330

2008-

09 29293 20548 648 1073 7409 6909 170 303 4637 6042 132 0 7171 8790 315 126 10334 10607 1178 1503

2009-

10 30020 27077 895 851

1285

9 16399 552 50 5083 1479 150 60 14888 19495 324 74 13214 17024 1077 273

2010-11

44751 33923 2130 2000 -- -- -- -- -- -- 17189 7535 566 500 16115 9056 1741 800

Sector-wise Performance (Achievements) of Different Bank Groups in Srikakulam District

(In percentage)

Year Crop loans Agri-Term loans Allied activities Non-farm/SSI Other priority

sector

Total

PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs

2000-01 96 71 81 6178 -- -- 117 172 117 3497 103 1674

2001-02 119 1 66 620 -- -- 132 91 139 451 120 116

2002-03 83 2768 60 20 109 -- 79 17 135 571 97 421

2003-04 99 12 223 30 190 67 86 0 72 9 101 11

2004-05 96 375 253 94 124 150 213 610 122 106 128 272

2005-06 90 168 101 23 113 0 145 182 107 363 101 162

2006-07 114 334 107 17 106 300 102 60 114 105 111 140

2007-08 103 395 37 28 257 30 50 52 75 930 96 484

2008-09 70 166 93 178 130 0 123 40 103 128 90 123

2009-10 90 95 128 9 29 40 131 23 129 25 107 43

2010-11 76 94 -- -- -- -- 44 88 56 46 62 73

(Source: Table: 7.14) Table 7.15

Sector-wise Achievements of Public and Private Sector Banks

(Rupees in Lakhs)

Year Crop Loans Agri-Term

Loans

Allied

Activities

Non-Farm

Sector

Other Priority

Sector

PSBs Pvt.B

s PSBs Pvt.Bs PSBs

Pvt.B

s PSBs

Pvt.B

s PSBs

Pvt.B

s

2000-01 3411.7

8 4.26

764.2

9 308.92 --

1107.7

1 103

2609.9

9

1482.

6

2001-02 4669.5

2 3

723.4

2 31 --

1426.9

5 42 3550 379

2002-03 4281 1024 723 2 709 80 957 46 4411 702

2003-04 6688.9

6 6

2234.

4 53.9

1520.

4 2

1220.2

9 0

3975.8

1 18

2004-05 8517 45 4361 49 1648 6 2582 256 6134 36

2005-06 10060 84 2799 26 1895 0 2456 102 7040 258

2006-07 15860 418 3274 17 3082 3 5604 26 8557 267

2007-08 17931 806 1563 29 9882 3 3540 283 5998 6330

2008-09 20548 1073 6909 303 6042 0 8790 126 10607 1503

2009-10 27077 851 1639

9 50 1479 60 19495 74 17024 273

2010-11 33923 2000 -- -- -- 7535 500 9056 800

CGR%

25.82

85 40.59 -18.32 11.08 -4.03 21.13 17.12 13.25 -5.98

(Source: Lead Bank Reports, Srikakulam District)

Table: 7.15(a)

100% achievement of targets by Public and Private Sector banks in Srikakulam

District

Year

end

March

Crop Loans Agri-term

Loans

Allied

Activities

Non-Farm

Sector

Other Priority

Sector

PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

--

(Source: 7.15)

Table: 7.16

7.7.3(v). Other Priority Sector

In Other Priority Sector, the Public Sector Banks‟ disbursements had increased

from Rs. 2609.99 lakhs to Rs.17024 lakhs during the period under study. Their

achievements varied between 56 per cent and 139 per cent. These banks have shown a

fair performance in eight credit plans by lending the funds above target level. However,

their performance varied between 56 per cent and 75 per cent in three credit plans.

Private Sector Banks also have shown considerable interest in lending to this

sector. They have played a significant role in eight credit plans by lending the funds well

above the targets on par with the public sector banks. In 2000-01, The Vysya Bank

Limited, being the only Private sector bank in the district had achieved 3497 per cent in

2000-01 by disbursing Rs.1482.6 lakhs as against a target of Rs.42.4 lakhs. In the

remaining seven credit plans also, their lending was most significant as it varied between

106 per cent and 930 per cent. Nonetheless, their performance was far below the targets

in three credit plans. As a whole, they have performed on par with the public sector

banks and utilized the business opportunity by lending actively towards this sector.

The compound growth rate suggests that private sector banks have shown a

spectacular performance in crop loans. However, they failed to exhibit the same

performance in other sectors. Public sector banks have shown a balanced performance in

meeting the targets in all the sectors.

The performance of both public sector banks and private sector banks as whole

surpassed their targets in seven credit plans and they could not meet the targets in only

four credit plans. The performance score of Private Sector Banks indicates that they

have exceeded their targets in eight credit plans. However, they were not able to reach

the targets in only three credit plans and particularly in the year 2003-04 as the

achievement accounts for only 11 per cent during this year.

From the above analysis, it can be inferred that both Public Sector Banks and

Private Sector Banks performed well during the reference period though

underperformance was observed in some years.

Wilcoxon Signed Rank Test is applied to analyze whether there is any significant

difference in the performance of Public Sector Banks and Private Sector banks in lending

to various sectors.

For this purpose, the following hypotheses were framed.

H6 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to Crop Loans.

H7 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to Agriculture Term Loans.

H8 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to the Allied Activities sector

H9 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to the Non-Farm sector.

H10 There is no significant difference between the performance of Public Sector Banks

and Private Sector Banks in lending to the Other Priority Sector.

Bank group-wise Performance in different sectors: Wilcoxon Signed Rank Test

(Level of significance 0.05)

Sector Calculated

value

Table value Result

1.Crop Loans -1.58 1.96 Accept H6

2.Agri-Term

Loans 0.43 1.96 Accept H7

3.Allied

Activities 10 24 Accept H8

4.Non-

Farm/SSI 0.69 1.96 Accept H9

5.Other Priority

sector -1.40 1.96 Accept H10

Table 7.17

In order to test the hypotheses, „Z‟ values are calculated sector-wise and shown in

Table 7.17.

From the above table, it is inferred that the calculated values of „Z‟ for all the

sectors are less than the Table values at 5 per cent level of significance.

Hence, the hypotheses H6 to H10 are accepted. This signifies that there is no

significant difference between the performance of Public Sector Banks and Private Sector

Banks in lending to Crop Loans, Agri-Term loans, Allied Activities, Non-farm Sector

and Other Priority Sectors. The Public Sector Banks and Private Sector Banks have

distributed the loans similarly to all the sectors under district credit plans.

7.8 BANK GROUP-WISE VARIATION IN TARGETS TO PREVIOUS YEARS’

ACHIEVEMENTS

The percentage variation is shown in table 7.18 for both public sector banks and

private sector banks from 2000-01 to 2010-11.

Bank Group-wise variation in Targets to previous years’ Achievements

YEAR Percentage of variation in targets to previous years‟ achievements

Crop laons Agri Term

Loans

Allied

Activites

Non-Farm/SSI OPS

PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs PSBs Pvt.Bs

2000-01 40 -48 65 3471 -- -- -39 -89 49 31

2001-02 15 5932 42 -98 -- -- -2 -55 -2 -94

2002-03 10 1133 68 -68 -- -- -15 543 -8 -68

2003-04 58 -95 -39 8850 13 96 48 517 25 -70

2004-05 33 100 -23 -4 -13 100 0.5 * 27 89

2005-06 31 11 -36 129 2 -83 -34 -78 7 97

2006-07 39 48 10 277 54 * 125 -58 6 -2

2007-08 10 -51 29 512 25 233 27 1977 -6 155

2008-09 63 -21 374 486 -53 4300 103 11 72 -81

2009-10 46 -16 86 82 -16 * 69 15 25 -28

2010-11 65 150 -- -- -- -- -12 665 -6 538

(*indicate „0‟ achievement in previous year)

Table 7.18

In Crop Loans sector, the allocations had increased for all years over the previous

years‟ achievements for Public Sector Banks. However, the same was not observed in

case of Private Sector Banks, as the allocation was less than the achievements in five

Credit Plans. Further, the targets exceeded 1000 per cent in two credit plans and less than

100 per cent in two credit plans and between 100 and 150 per cent in two credit plans for

these banks. Abnormal increase was found in targets (5932% variation in 2000-01 and

1133% variation in 2002-03) in some years.

In Agriculture Term Loans sector, allocation was more than the previous years‟

achievements in seven credit plans for public sector banks. However, they were less in

three credit plans. In Private sector banks, allocation was more than 100 per cent of

achievements in all the credit plans except in three credit plans. In two credit plans,

targets were below the previous year‟s achievements for these banks.

In Allied Activities, targets of public sector banks were less than the previous

year‟s achievements in three credit plans and in four credit plans, targets exceeded the

achievements of previous years. Private sector banks disbursed Rs.80 lakhs in 2002-03

without any target under this head. However, in 2005-06, despite of a little target, these

banks have not advanced any loans under this head. The same trend has been observed in

2008-09 also, where no loans were lent against a target of Rs.132 lakhs.

In Non-Farm Sector, targets had increased in six credit plans and decreased in five

credit plans over the previous years‟ achievements for public sector banks. The same

trend has been noticed for private sector banks also. Private sector banks contribution

was zero in 2003-04 despite of the target of Rs.284 lakhs under Non-Farm sector‟s head.

In other Priority sector, targets for public sector banks had increased in all the

years except in three credit plans and for private sector banks it is only 50 per cent over

the previous years‟ achievement.

The above analysis indicates that the annual credit plans are prepared basing on

the potential linked plans prepared by NABARD.

7.9 IMPACT OF PRIORITY SECTOR LENDING ON THE DEVELOPMENT OF

THE DISTRICT

Economic development generally refers to the sustained, concerted actions of

policymakers and communities that promote the standard of living and economic health

of a specific area.159

The concerted actions include development of human capital,

environmental sustainability, social inclusion, health, safety, critical infrastructure,

literacy etc. Economic development differs from economic growth. Economic

development is a policy intervention which aims at economic and social well being of the

society.

As discussed by Kanagasabai, “Economic development is a process of sustained

increase in per capita output accompanied by substantial structural changes in the

159

Wikipedia.org.

economy, especially in the form of occupational distribution and also a greater balance in

the income distribution and removal of poverty.160

Economic growth refers to increase in market productivity and rise in Gross

domestic product. Famous economist Amartya Sen points out: “economic growth is one

aspect of the process of economic development.” 161

Primary sector, secondary sector and services sector are the three sectors which

contribute output to an economy. Primary sector consists of agriculture and allied

activities to agriculture, secondary sector includes all manufacturing activities and the

services sector includes transport, storage and other services. These three sectors involve

in production of output or providing services by using various factors of production.

Among all factors, capital plays an important role in the process of production. A

producer can make higher production by employing more capital. Hence, capital

decides the level of output in any organization. Level of output influences the

development of the economy.

7.9.1 Priority Sector Advances and Gross Domestic Product (GDP) of Srikakulam

District

Economic development is generally measured by the state domestic product and

per capita income. Therefore, the relation between priority sector lending and gross

domestic product of the district is measured by using correlation and regression

coefficients.

The following hypothesis is framed to know whether there is any positive impact

of priority sector advances on the economic development of the district.

H11: Priority sector advances have significant impact on the development of the district.

Table 7.19 shows the priority sector advances and gross domestic product (GDP)

of Srikakulam district from 2000-01 to 2009-10 i.e. for a period of 10 years.

Priority Sector Advances and Gross Domestic Product (GDP) of Srikakulam

District

160

Kanagasabai , Thesis on Economic analysis of Pondicherry 161

www.wikipedia.org.

(Rupees in Crores)

Year

Priority

Sector

Advances

%growth

Gross

Domestic

Product

%growth

Per capita

income

(Rupees )

2000-01 97.93 -- 3462 -- 12407

2001-02 108.25 11 3632 5 13153

2002-03 129.35 19 3884 7 13819

2003-04 157.19 22 4549 17 16220

2004-05 236.34 50 5060 11 17686

2005-06 247.20 5 5571 10 19214

2006-07 371.08 50 6483 16 22392

2007-08 463.05 25 7615 17 26283

2008-09 559.01 21 8835 16 30008

2009-10 827.82 48 10695 21 35959

(Source: A.P.Economic Survey 2011-12, Directorate of Economics)

Table: 7.19

It may be observed that the priority sector advances during the study period had

increased from Rs.97.93 crores to Rs. 827.82 crores indicating an increase of 8.45 times.

The data on district gross domestic product (GDP) had also increased from Rs.3462

crores to Rs.10695 crores. It shows an increase of 3.09 times during the period of ten

years.

The trend shows that the priority sector advances and gross domestic product of

the district are increasing over the years and showing a positive relationship between the

two variables.

This positive relationship is also being verified by correlation analysis. The

results are summarized in Table.7.20.

The value of correlation coefficient is 0.99 (Table: 7.20) between priority sector

advances and state domestic product. This implies that there is a high degree of positive

correlation between the two variables. R2

value, the coefficient of determination shows

that priority sector advances cause 98 per cent of variation in GDP of the district.

The regression coefficient value implies that one rupee increase in priority sector

advances leads to an increase in GDP of the district of Rs.10.11. This positive and

significant value of the regression coefficient shows that priority sector advances exert

very considerable and positive impact on the GDP of the Srikakulam district.

The observed value of„t‟ is higher than the table value at 0.05 significance level.

Hence, the results suggest a positive impact of priority sector advances on the economic

development of the district.

Per capita income of the district also shows an increasing trend during the study

period. It has almost increased 3 times (increased from Rs.12407 to Rs. 35959) during the

reference period.

To confirm the above results, sector-wise relationship is also verified by using

correlation analysis.

Results of correlation and Regression co-efficient of variables

Sl. No. Variables Correlation co-

efficient

Co-efficient of

determination

(R2)

Regression co-

efficient

1 Priority Sector

Lending and Gross

Domestic Product of

the district

0.99 0.98 10.11

2 Priority Sector

Lending to Primary

Sector and Gross

Domestic product

from Primary Sector

0.99 0.98 4.37

3 Priority Sector

Lending to Industries

Sector and Gross

0.90 0.81 8.06

Domestic product

from Industries

Sector

4 Priority Sector

Lending to Tertiary

Sector and Gross

Domestic product

from Tertiary Sector

0.99 0.98 24.93

(Source: Table 7.19)

Table: 7.20

7.9.2 Priority Sector Lending to Primary Sector and Gross Domestic Product of

Primary Sector:

Loans to Agriculture sector and Gross Value Added of Agriculture Sector

(Rupees in Lakhs)

Year Advances to

Agriculture Sector

Gross Value Added of

Agriculture Sector at

Current Prices

2004-05 14626 131739

2005-06 14864 120160

2006-07 22654 156736

2007-08 30153 197104

2008-09 34875 212843

2009-10 45916 261516

3.14 times 1.99 times

(Source: A.P.Economic Survey 2011-12, Directorate of Economics)

Table: 7.21

The advances to primary sector had increased from Rs.14626 lakhs in 2004-05 to

Rs.45916 lakhs in 2009-10 showing an increase of 3.14 times during five years period.

The gross value added of agriculture sector has increased from Rs. 131739 lakhs to Rs.

261516 lakhs indicating an increase of 1.99 times. The correlation coefficient is 0.99

between advances to Primary Sector advances and Gross Value Added of Agriculture

Sector.

This implies a high degree of positive correlation between the two variables. R2

value, the coefficient of determination shows that advances to primary sector cause 98

per cent of variation in Gross Value Added of Agriculture Sector of the district. The

regression coefficient value implies that one rupee increase in primary sector advances

leads to an increase in gross value added of agriculture Sector of the district by Rs.4.37.

7.9.3 Priority Sector Lending to Industries Sector and Gross Value Added of

Industries Sector at Current Prices

Advances to Industries sector and Gross Value added of industries sector

(Rupees in Lakhs)

Year Advances to

Industries Sector

Gross Value

Added of

Industries Sector

at Current Prices

2004-05 2838 90098.50

2005-06 2558 120337.56

2006-07 5630 124957.29

2007-08 3823 144174.58

2008-09 8916 204816.54

2009-10 19569 242589

(Source: A.P.Economic Survey 2011-12, Directorate of Economics)

Table:7.22

The advances to industries sector had increased from Rs.2838 lakhs in 2004-05 to

Rs.19569 lakhs in 2009-10 showing an increase of 6.9 times during five years period.

The gross value added of industries sector has increased from Rs. 90098.50 lakhs to Rs.

242589 lakhs indicating an increase of 2.69 times. The correlation coefficient is 0.90

between advances to Secondary sector and Gross Value Added of Industries Sector.

This implies that there is a high degree of positive correlation between the two variables.

R2

value, the coefficient of determination shows that advances to secondary sector cause

81 per cent of variation in Gross Value Added of industries sector of the district. The

regression coefficient value implies that one rupee increase in secondary sector advances

leads to an increase in Gross Value Added of Industries Sector of the district by Rs.8.06.

7.9.4 Priority Sector Lending to Services Sector and Gross Value Added of Services

Sector at Current Prices:

Advances to Services Sector and Gross Value added to Services sector

(Rupees in lakhs)

Year Advances to Services

Sector

Gross Value Added of

Services Sector at

Current Prices

2004-05 6170 284162

2005-06 7298 316591

2006-07 8824 366588

2007-08 12328 420247

2008-09 12110 465844

2009-10 17297 565391

(Source: A.P.Economic Survey 2011-12, Directorate of Economics)

Table: 7.23

The advances to services sector had increased from Rs.6170 lakhs in 2004-05 to

Rs.17297 lakhs in 2009-10 showing an increase of 2.8 times during five years period.

The gross value added of services sector has also increased from Rs.284162 lakhs to Rs.

565291 lakhs indicating an increase of 1.99 times. The correlation coefficient is 0.986

between advances to Services Sector and Gross Value Added of Services Sector.

This implies that there is a high degree of positive correlation between the two

variables. R2

value, the coefficient of determination shows that advances to services

sector cause 97 per cent of variation in Gross Value Added of services sector of the

district. The regression coefficient value implies that one rupee increase in services

sector advances leads to an increase in Gross Value Added of Services sector of the

district by Rs.24.93.

The above analysis indicates that priority sector advances have positive impact on

the development of the district. The gross domestic product and per capita income of the

district had increased over the period with the increase in priority sector advances. A

comparison of the regression co-efficient suggests that the gross value added exerted by

lending to agriculture loans is less (4.37) compared to industries sector (8.06) and other

priority sectors (24.93).

The loans given to other priority sectors were more productive as they generate

Rs.24.93 for every one rupee loan. Non-farm sector occupy the second position

indicating the development of industries in the district. However, despite of low

productivity to loans given to agriculture sector, it is important to provide loans to this

sector in view of the nation‟s food security. As mentioned earlier, the District Collector

remarked that only 30-40 per cent of the credit need of the rural people were being met,

forcing them to depend upon private lenders. Banking services should be expanded to

cover all the rural people. Hence, it is of paramount importance to extent loans to

agriculture sector to feed the more than one billion populations.

Further, the analysis of loans to various sectors also suggests that targets for other

priority sector occupy next position to crop loans and the public sector banks and private

sector banks have achieved their targets in more number of years compared to crop loans.

This indicates the demand for loans to transport operators, self-employed persons,

housing loans and education loans.