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58 Table 18-Size and growth of rural deposits and ruralloans in the rural institutional finance system, India, 1961/62-1985/86 Rural Deposits Rural Loans Period Annual Average Compound Growth Rate Annual Average Compound Growth Rate 1961/62-1965/66 1966/67-1970/71 1971/72-1975/76 1976/77-1980/81 1981/82-1985/86 1961/62.1985/86 (1970/71 (percent) (1970/71 Rs billion) Rs billion) (percent) .1.6,1 5.03 7.33 5.17 1-1.09 61.9-1 15.18 30.83 31.29 3.02 26.67 3.27 67.16 13.22 51.68 11.80 113.90 7.11 1.58 7.26 .17.36 18.15 30.5-1 11.33 Source: Desai and Namboodliri 1991. 1970/ 71 prices. Notes: Annual averages are in constant Rs billion at 1980s. At the etid of ite 25 )ears, the credit-de)osit ratio was 65 of the pelcelit. Moreover, the ratio of iicnretiielital rrtal creclit to rural deposits was 0.63 ill tle secotdI period, 0.48 in the third period, 0.44t in the fourth period, anld 0.26 itihlif It period. This stiggests that ille rural instituable to adieve :ahrge ilet tional fitatnce ssttit ill hn(lia ])as bee transfer of ftialicial rtsoll('c.s fotill tile rItral seclor. This concliusiolt will in leice of high loan ovet, ltlletS because tilidCer slch c-ircltlit hold even tno new loas will be Illiad to delii(ltient I)OITOVcIS. Ililasttltc stanices as the incremental rural credit-rural decposit tatio was cottsidlrably lower than 0.6 in the last two neriods, it 1itay also intpiily that tle tttral se.c:tor was deprived of adequate credlit. Futlicr, by the carly I980s only about of tie variable cost, atnd oneone-tenth of agiicttltual NDP, oite-fottil third of the capital fbrtttalt ion it agricitltutc wcre fitatwcel by the RFIs. re of' \lictltilal loans. h'llerc ate two types of Functional Struict for all agriculltltal structtres for agrictllltral loanls. Otie is the patterti loans-tlose fo tile agricultural iplt)tits (listritiltion tls)sysltlw (AIS), (A\PS), and the agrictltural marthe agrictiltural I)rodlctiolt stbsystcni 1te;rct aitd itldircet ketiig anol J)rocessittg stibsystctli (AMI'S)-iti which patient of APS agricultittral crldit call be classificd. 'he other is tlile loans----loains for curreiclt )rodltction growth and stability (CPGS), include loats for cro) piroduction, soil and tiioisttirc which ntainly ituproetw ellts, irrigatiot assets, farm itlj)leCents atId cliptitent, plow anitials and carts; curretit j)rodutction diversificatioti antI growth (CI'DG), which ,naitily inctide loans for dairy farnIing, sheep farning, tlinitititizatioln potiltry, and oilier livestock; and cutiet 1)l0(1 cllioti I,,Ss itil debt recletmp (CPLM), which includes reschedtittg of past loans first tyl)e of classification are available for all tiolt. While dlata ot tile vliblc only for PACS aiiCI coop)erative RFIs, data ott the latter are ar land (lcveloj)lnettt batiks.
59 Although APS loans were dominant thr'oughout tile period, the annual average of AIS and AMPS loans increased continuously (Table 19). But the annual compound growth rate in APS loans was lower than that in eithcr AMPS or AIS loans. These rather disparate performances suggest an imbalance between the demand for and supply of farin inputs encouraged through APS and AIS loans, respectively. It also suggests a lack of sustained credit support for an activity crucial to transfer of ncw technology to APS. 7he pattern of APS loans shown in Table 20 reveals that CPGS loans advanced by cooperatives clearly domiusted, followed distantly by CPLM loans, and then CPI)G Iok1s.ils Over the four periods, the average amount of CPGS loans increased continuously, while that of CPLM loans varied significantly. The annual Comipotnd growth rate in CPGS loans increased quite draniatically il tile second half of' the 1960s, then it declined a id finallyimarginally incrCased. Such large flncti tions ill growth, in so far as they are caused by cxternal factors, ai unfortunate because they cause similar fluctuations in the adoption of new teclnology by farmers. Association of Agpidltural Progess with R1Is. Both agricultur.d productivity and agricultural investments (such as fertilizer use, minor irrigation development, plow animnals, animal hus)andry, tillage implements, iri|gation equipment, threshers, and t:actors) are positively associated with deisity of RFIs, rural deposits, AIS loans, AS loans, AMPS loans, CPGS loans of coope t'3ivcs, CPI)G loans of' cooperatives, and CPLM loans of' cOOlpeatives. Delinqueno Rate of /11'S Loans. This is mlasnrcd as 100 nlilis loans recovered as a peceimt of those due. The delinquency ratc was about ,15 perceit during 1973/71-1981/82. This rate was the highet, '8 percent, in the severe dirought year of 1979/80. fi four out oflint years, the rate declined, but it never went below '13 pcrca. The delinquency rate could be lowered to about 35 p)eccni if it wer- measrecd as 100 Iinus loans recovered as a percent of loans ouitstaniding.2 1 Such a measure would to some extent allow for loan recoveries after the naturity (late, which usually coincides with the hat-vest time. Nonetheless, even this rate is likely to be high. 'lie reasons for tile high rate of delinquency are complex and varied. The following arC sotire of'tle. iiportant ones: (1) natuti-al factors like drought and floods; (2) inadequate increases in production and marketable su-)lus; (3) misntatches between the time schedule fixed for loan recovery and the tiic when farniers can repay loans; ('4) inadequate credit resulting fiot i an age-old formula used to determiie the scale of' 1 9 The relative importance of these three types of loans would commercial be reversed banks if data were on also considered, which was not possible because data types on the of three APS loans made by commercial banks were not available. 20 For a similar finding based on more disaggregated data of uvijor states in India, see Desai, Gupta, and Singh 1988. 2 'This was not computed because the required data for comnmercial banks were not available.
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,AFOOD POLICY EVIEWl Institutional
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FOOD POLICY REVIEW 1 Institutional
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Chapter One Chapter Two Chapter Thr
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15. Unit transaction costs, unit ir
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47. Relative importance of intcecst
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Foreword Thiis report introduces a
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1 Summary This study analyzes two a
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3 Six organizational principles for
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2 Introduction Finance and Economic
Page 19 and 20: An obvious problem innate to an act
Page 21 and 22: 9 Selection of Theme and Issues for
Page 23 and 24: I1 TIhe issue of scale economies is
Page 25 and 26: 13 There is also a problem of indiv
Page 27 and 28: 15 Figure I-Share of borrowing of f
Page 29 and 30: 17 Figure 2-Share of'agricultural l
Page 31 and 32: 19 specific or economywile developm
Page 33 and 34: Table 1- Continued 21 Region, Count
Page 35 and 36: Table 2-Continued Government Nation
Page 37 and 38: 25 regional without higher or lower
Page 39 and 40: 27 Caribbean, compared with Asia. T
Page 41 and 42: Table 3 -Continued Proportion of Pe
Page 43 and 44: 31 LICs (including Bangladesh, Indi
Page 45 and 46: 33 Functional Structure of RFIs and
Page 47 and 48: 35 approximated from available lite
Page 49 and 50: Figure 3-Stylized organizational fr
Page 51 and 52: 5 Transaction Costs, Profitability,
Page 53 and 54: 411 or fiom new borrowers. Moreover
Page 55 and 56: 43 Table 6-Unit transaction costs o
Page 57 and 58: 45 tiotis largely by borrowing fi'o
Page 59 and 60: 47 Table 9 -Transaction costs of br
Page 61 and 62: 49 'T7heSonali Bank's unit uct marg
Page 63 and 64: Table 14-Estimated parameters of th
Page 65 and 66: 53 PACS) was established ill March
Page 67 and 68: 55 Table 16-Deposit growth rates of
Page 69: 57 rIIIIal Output (28 p)Celt) and o
Page 73 and 74: Table 2 0-Pattern of loans advanced
Page 75 and 76: 63 Table 2 1- Unit profit and unit
Page 77 and 78: 65 resources are mainly channeled t
Page 79 and 80: 67 Table 25-Various costs, gross ma
Page 81 and 82: 69 BAAC also en1joyced sc.;le ,~ol
Page 83 and 84: 71 iuzividual farmers at the distri
Page 85 and 86: 73 Agriculture and Cooperatives 197
Page 87 and 88: 75 like the county and plimaly coop
Page 89 and 90: 77 Table 33-Transaction and financi
Page 91 and 92: 79 Table 3 6 -Structure of assets a
Page 93 and 94: Response of Rural Loan Demand to In
Page 95 and 96: 83 Table 3 9-Estimated multivariate
Page 97 and 98: 85 Table 40-Estimated multivariate
Page 99 and 100: 87 separate deteriminants of demand
Page 101 and 102: Table 4 1-Continued Type of Demand,
Page 103 and 104: Table 4 1-Confinued Type of Demand,
Page 105 and 106: Table 4 2 -Evidence on interest ela
Page 107 and 108: 7 Response of Supply of Rural Depos
Page 109 and 110: 97 Table 44-Estimated multivariate
Page 111 and 112: 99 Table 4 6-Relative importance of
Page 113 and 114: 101 I1e positivc respolse of supply
Page 115 and 116: Table 48- Continued 103 eBased on t
Page 117 and 118: Table 4 9 -Pattern of total rural s
Page 119 and 120: 107 is substantial saving even in d
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109 Table 52-Estimated multivariate
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111 nient), and lastly, the inverse
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113 Table 54-Positive and negative
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9 Flow of Funds of the Rural Financ
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117 interest I'evellie and payment.
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Table 5 5 -Continued 119 cin scenar
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10 Conclusions and Implications ase
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123 differential increase in demand
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125 can be attained. Multifunctiona
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127 fully achieved. Had the institu
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129 so doing, improvements in verti
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The standard error of The standard
Page 145 and 146:
Appendix 2 Reasons for Delinquency
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Region/Country 135 Reaso.z Near Eas
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References Abbott, J. C. 1 9 7 3a.
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139 Aku, P. S. 1986. Lending to far
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141 Caibbean Country Department II,
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143 144. Princeton, N.J., U.S.A.: W
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145 1975. Agriculturalcredit in Asi
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__ 147 Gurley, J. G., and E. S. Sha
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149 G. Hunter and A. F. Bottrall, 5
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151 Lee, T. Y., D. H. Kim, and D. W
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153 __ _. 1976. The new economics o
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155 Olu, W. 1985. Formal credit and
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__ 157 Rao, B. P. 1970. The economi
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159 Singh, G., and S. R. Asokan. 19
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-- 161 Verghese, S. K. 1983. tivfit
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