Rakesh Mohan: Economic growth, financial deepening and financial inclusion
Address by Dr Rakesh Mohan, Deputy Governor of the Reserve Bank of India, at the Annual Bankers'
Conference 2006, Hyderabad, 3 November 2006.
This draws heavily on my earlier lecture on a similar subject at the FICCI-IBA Conference in Mumbai on 26 September 2006.
* * *
I. Introduction
I would like to thank the Indian Banks Association and the Andhra Bank for inviting me to this
Conference, which has become an annual feature of the calendar for bankers and financial sector
professionals.
In view of the theme of the conference, viz., 'Inclusive Growth - A New Challenge', I thought it would
be appropriate to place financial inclusion within the broad context of economic growth. There is yet
another motivation for choosing the theme. What is the big change that has taken place in India since
2004? The Indian growth story has been steadily coming of age and the performance of the Indian
economy has attracted worldwide attention. The Indian growth story is now mentioned in the same
breath as that of China. The economy has been averaging a growth rate of more than 8.0 per cent
during the last three years. The recently released numbers from CSO have placed the first quarter
growth (April to June, 2006) at 8.9 per cent, more than the overall growth rate of 8.0 per cent reiterated
recently by the Reserve Bank in its Mid-Term Review.
On an earlier occasion in this forum, in its earlier avatar as BECON in December 2002, I had noted the
slow growth of credit and taken to task that audience of bankers as 'lazy bankers' (Mohan, 2002).
Fortunately, you seem to have taken this observation seriously and non-food credit growth from
2002-03 to 2005-06 averaged 28.8 per cent. This growth shows little sign of abating in the current year
when it has recorded a growth of over 30.0 percent. The growth in broad money since 2002-03 has
averaged 16.2 per cent, which during the present year has been of the order of 19.0 per cent. These
trends signal further that India is on a high economic growth path accompanied by financial
deepening.
A new concern has emerged in the process: that of financial inclusion. Moreover, the Government of
India has also expressed its explicit concern on the issue of overall inclusion in the development
process through its various initiatives such as the Rural Employment Guarantee Scheme, the Bharat
Nirman Sarva Shiksha
programme, the Abhiyan, and the like. A committee on financial inclusion
(Chairman: Dr. C. Rangarajan) has also been constituted by the Government of India in June 2006 to
recommend a strategy to achieve higher financial inclusion in the country.
Likewise, enabling access to a greater number of the population to the structured and organised
financial system has explicitly been on the agenda of the Reserve Bank since 2004. Unlike several
central banks, which focus solely on inflation, many developed and emerging economies, including
ours, focus also on growth. There is currently a clear perception that there are a vast number of
people, potential entrepreneurs, small enterprises and others, who are excluded from the financial
sector, which leads to their marginalisation and denial of opportunity for them to grow and prosper.
The Reserve Bank has therefore introduced various new measures to encourage the expansion of
financial coverage in the country. Not only is financial inclusion essential because of its implications for
the welfare of citizens but it needs to be stressed that it has to be an explicit strategy for fostering
faster economic growth in a more inclusive fashion. It is in this context that I thought it would be
appropriate to place the strategy of financial inclusion in the wider context of economic growth and
financial deepening.
My ideas on this topic are organised along the following lines. To begin with, I shall dwell upon the
process of growth and financial deepening in India. This will be followed by definitional aspects and
some evidence from the experience of other countries, with regard to financial inclusion. Thereafter,
the focus would be on interlinking the relevance of financial inclusion in our economy, which has
entered a high growth orbit, with the rural economy. The penultimate section focuses on the role being
played by the Reserve Bank in this regard. My concluding thoughts would be in the nature of issues
that have a bearing on financial inclusion.
II. Economic growth
The growth trend of the Indian economy over the last few years appears to indicate the beginning of a
new phase of higher growth. From an average growth rate of around 6.0 per cent for a quarter of a
century, the growth rate has accelerated to 8.1 per cent over the last few years. Along with declining
population growth, this suggests high growth in per capita income in excess of 6 per cent in recent
years, and perhaps approaching 7 per cent, which would lead to doubling of per capita income every
ten years. Most importantly, the current growth process is not a flash in the pan and is exhibiting signs
of sustainability along with financial stability, notwithstanding the pressures from unforeseen external
shocks.
On the savings front, the increasing trend in gross domestic saving as a proportion of GDP witnessed
since the early 2000s has also continued unabated. The gross domestic savings rate has improved
from 23.6 per cent of GDP in 2001-02 to 29.1 per cent in 2004-05, led by a turnaround of 4.2 per cent
in public saving, from a dis-saving of 2.2 per cent of GDP in 2001-02 to a saving of 2.0 per cent in
2004-05, mainly reflecting the fiscal consolidation process. Household savings continue to grow and
increased corporate savings reflect their healthy growth in profitability. The encouraging sign of a pick
up in investment has also strengthened unhindered. Along with the improvements in savings and
investment rates, there has also been a marked lowering of inflation from 7.8 per cent in the 1990s to
4.7 per cent in recent years. With such healthy increases in savings and investment rates financial
intermediation is assuming increasing importance (Annex Table 1).
Alongside these improvements there has also been a resurgence of manufacturing activity. There had
been noted stagnation in manufacturing during 1997-2003. Overall industrial recovery set in during
2002-03 and this has been sustained since then on the back of healthy growth in domestic demand,
along with that of exports supported by high world economic growth, increasing capacity utilisation,
augmentation of capacity, and positive business and consumer confidence. But there is little evidence
of significant growth in manufacturing employment leading to emerging doubts in the inclusive nature
of this growth.
The current high industrial growth is reflected in the acceleration in growth of bank credit in recent
years. Average growth in non-food credit between 1970 and 2000 had been 16.9 per cent, which had
been seen as evidence of finance led industrialisation by some (Bell, 2001). In the period of industrial
slowdown, 1998 to 2002, annual growth in non-food credit had also slowed to 14.5 per cent - leading
to my comment on "lazy banking". In recent years, during 2002-03 to 2005-06, this growth has
accelerated significantly to 28.8 per cent, possibly signalling financial deepening of the system.
Much of this recent expansion in non-food credit has been fuelled by an increase in retail credit.
During the same period, 2002-03 to 2005-06 annual growth in retail credit was 46 per cent: its share in
overall bank credit consequently increased from 6.4 per cent in 1990-91 to 25.5 per cent in
20052006. Earlier, most of bank credit had gone to the industrial corporate sector. Hence this shift to retail
credit can also be seen as a move toward financial deepening, and one that itself fuels industrial and
overall economic growth through expansion of greater demand for consumer goods.
The high industrial growth is also corroborated by the record of very healthy performance of the
corporate sector, which has recorded unusually high profit growth over the past three years: over 40
per cent growth in profit after tax for 11 successive quarters from 2002-03 to 2005-06. Although
Q3 Q1
this growth has slowed somewhat in the last four quarters, it continues to be high, between 25 and 35
per cent. Corporate sector savings have grown from 4.4 per cent of GDP in 1999-2002 to 5.3 per cent
in 2004-05. Hence, the probability of continued high corporate growth in terms of output is made more
likely by the availability of high retained earnings, burgeoning valuations, and continued productivity
growth.
All these developments point to overall financial deepening but, once again, one has to ask the
question whether such performance extends to small and medium enterprises also and, whether there
has also been extension of financial intermediation for such enterprises, raising issues of financial
inclusion.
The high industrial and credit growth of recent years has also been supported by high trade growth in
both merchandise goods and services. Merchandise exports have grown from 5.8 per cent of GDP in
1990-91 to about 13.1 per cent in 2005-06; and gross invisible receipts have grown from 2.4 per cent
to 11.5 per cent of GDP. If we take gross trade, the sum of both current account receipts and
payments, as a proportion of GDP as an index of the openness of the economy, this has increased
from 19.2 per cent in 1990-91 to 49.5 per cent in 2005-06. Since all such receipts and payments pass
through the banking system, this increasing openness of the economy has also added to financial
deepening, while aiding the acceleration in economic growth (Annex Table 2).
The high credit growth witnessed in recent years has, however, not been matched by adequate
deposit growth. The growth in deposits since 2001-02 has been far lower than that required to support
overall credit expansion (Graph 1). Banks have been financing much of the incremental credit
expansion by unwinding their surplus investments in government securities. What deposit growth that
has been observed is, moreover, concentrated in the larger cities: presumably it has been helped by
the high corporate profitability leading to high corporate cash balances. The trend therefore indicates
that while banks may have been proactive in credit deployment, their focus on deposit mobilisation
may have been less than adequate. The indication that deposit growth in non metro areas has been
slow could also mean that financial inclusion may have suffered. We also need to understand that if
deposit growth does not match credit growth, excess demand would inevitably lead to increases in real
interest rates leading to further possibility of financial exclusion.
Graph 1: Growth in aggregate deposits and credit
Overall, it is clear from the recent performance of the economy and that of the financial sector that a
good deal of financial sector growth has accompanied the recent acceleration of economic growth. We
also observe that a good part of credit growth has gone towards financing consumption and housing
which suggests widening of the financial system. But deposit growth has been slow, particularly
outside metro areas, leading to questions concerning financial deepening and inclusion.
III. Financial deepening
There is a general consensus among economists that financial development spurs economic growth.
Theoretically, financial development creates enabling conditions for growth through either a
supplyleading (financial development spurs growth) or a demand-following (growth generates demand for
financial products) channel. A large body of empirical research supports the view that development of
the financial system contributes to economic growth (Rajan and Zingales, 2003). Empirical evidence
consistently emphasises the nexus between finance and growth, though the issue of direction of
causality is more difficult to determine. At the cross-country level, evidence indicates that various
measures of financial development (including assets of the financial intermediaries, liquid liabilities of
financial institutions, domestic credit to private sector, stock and bond market capitalisation) are
robustly and positively related to economic growth (King and Levine, 1993; Levine and Zervos, 1998).
Other studies establish a positive relationship between financial development and growth at the
industry level (Rajan and Zingales, 1998). Even the recent endogenous growth literature, building on
'learning by doing' processes, assigns a special role to finance (Aghion and Hewitt, 1998 and 2005).
A developed financial system broadens access to funds; conversely, in an underdeveloped financial
system, access to funds is limited and people are constrained by the availability of their own funds and
have to resort to high cost informal sources such as money lenders. Lower the availability of funds and
higher their cost, fewer would be the economic activities that can be financed and hence lower the
resulting economic growth.
Some of the recent concerns on financial inclusion have emanated from the results of the All-India
Debt and Investment Survey (AIDIS), 2002. Over a period of 40 years, the share of non-institutional
sources of credit in sources of credit for cultivator households had declined sharply from about 93 per
cent in 1951 to about 30 per cent in 1991, with the share of money lenders having declined from 69.7
per cent to 17.5 per cent. In 2002, the AIDIS revealed, however, that the share of money lenders had
again increased to 27 per cent, while that of non-institutional sources overall rose to 39 per cent (Table
1). In other words, notwithstanding the outreach of banking, the formal credit system has not been
able to adequately penetrate the informal financial markets; rather it seems to have shrunk in some
respects in recent years.
Coincidentally, it is also true that the rate of agricultural growth during the last decade has slowed
down and it is particularly striking in respect of foodgrains production. Since the green revolution,
banks have been mainly focused on financing crop loans connected largely with food grains. There is,
therefore, reason to believe that financial exclusion may actually have increased in the rural areas
over the last 10-15 years.
One of the key features of financial deepening is that it accelerates economic growth through the
expansion of access to those who do not have adequate finance themselves. Typically, in an
underdeveloped financial system, it is the incumbents who have better access to financial services
through relationship banking. Moreover, incumbents also finance their growth through internal
resource generation. Thus, in an underdeveloped financial system, growth is constrained to the
expansion potential of incumbents. In mature financial systems on the other hand, financial institutions
develop appraisal techniques, and information gathering and sharing mechanisms, which then enable
banks to even finance those activities or firms that are at the margin, thereby leading to their
growthinducing productive activities in addition to the incumbents. It is this availability of external finance to
budding entrepreneurs and small firms that enables new entry, while also providing competition to
incumbents and consequently encouraging entrepreneurship and productivity.
What has been the case in India? As I mentioned earlier, the incredible corporate profit growth, in
excess of 40 per cent for almost three years consecutively, would suggest that there should have been
massive new entry to whittle down profitability to more moderate levels. This, however, does not seem
to be the case on the ground yet with corporate profitability still growing at an annual rate of around 35
per cent during April-June 2006. That entry of new firms has possibly been limited is also indicated by
the fact that among the different categories of credit growth, lending to SMEs has been the lowest,
though there are some signs of higher growth in recent months.
There are, however, other signs of financial deepening (Mohan, 2004). According to one indicator of
financial deepening, the ratio of bank assets to GDP, financial depth in India was among the lowest in
the world (Barth, Caprio and Levine, 2001). Comparable cross-country data indicated that in 2001, this
ratio, at 48 per cent for India, was lower than those prevalent in Asian economies such as Indonesia
(101 per cent), Korea (98 per cent), Philippines (91 per cent), Malaysia (166 per cent) and much lower
than developed economies, such as UK (311 per cent), France (147 per cent) and Germany (313 per
cent). In India, while the ratio of bank assets to GDP has increased significantly to a shade over 80 per
cent in 2005-06 - obviously a consequence of the high credit growth in recent years - it is still lower
than other emerging countries. In absolute terms, the annual expansion in non-food credit has
increased from Rs.64,302 crore in 2001-02 to Rs.3,54,193 crore in 2005-06, while retail credit has
increased from around Rs.16,000 crore to Rs.1,09,129 crore. So, it needs to be recognised that
financial deepening has been taking place on an accelerated pace on a macro basis in recent years,
that banking productivity has improved significantly, and that bankers have clearly been very busy.
Whereas banks have clearly taken to heart my remarks on "lazy banking" on the asset creation side,
they have not matched this creditable performance on the liability side. Dare I repeat the same
expression!
An important question that arises logically is: has commensurate financial deepening been taking
place at the micro-level? There is sufficient anecdotal evidence to suggest that the poor or less well-off
people find it difficult to open a bank account in any area - rural, urban or semi-urban. Thus, not only
is the common individual deprived of access to banks for generating savings or availing credit, but so
is the financial system of resources commensurate with the burgeoning growth of incomes all over the
country. It is this very feature that the process of financial inclusion seeks to address. This is an aspect
to which I turn next.
IV. Financial inclusion
I begin by looking at exactly the opposite of financial inclusion, i.e., financial exclusion. Broadly
defined, financial exclusion signifies the lack of access by certain segments of the society to
appropriate, low-cost, fair and safe financial products and services from mainstream providers.
Financial exclusion is thus a key policy concern, because the options for operating a household
budget, or a micro/small enterprise, without mainstream financial services can often be expensive.
This process becomes self-reinforcing and can often be an important factor in social exclusion,
especially for communities with limited access to financial products, particularly in rural areas.
Two major factors have often been cited as the consequences of financial exclusion. First, it
complicates day-to-day cash flow management - being financially excluded means households, and
micro and small enterprises deal entirely in cash and are susceptible to irregular cash flows. Second,
lack of financial planning and security in the absence of access to bank accounts and other saving
opportunities for people in the unorganised sector limit their options for providing for themselves for
their old age. From the macroeconomic standpoint, being without formal savings can be problematic in
two respects. First, people who save by informal means rarely benefit from the interest rate and tax
advantages that people using formal methods of savings enjoy. Second, informal saving channels are
much less secure than formal saving facilities. Those who can afford it least suffer the highest risk.
The resultant lack of savings and saving avenues means recourse to non-formal lenders, like money
lenders. This, in turn, could lead to two adverse consequences - a) exposure to higher interest rates
charged by formal lenders; and b) the inability of customers to service the loans or to repay them. As
loans from non-formal lenders are often secured against the borrower's property, this raises the
problem of inter-linkage between two apparently separate markets. Judged in this specific context,
financial exclusion is a serious concern among low-income households, mainly located in rural areas.
Once access to financial institutions improves, inclusion affords several benefits to the consumer,
regulator and the economy alike. Establishment of an account relationship can pave the way for the
customer to avail the benefits of a variety of financial products, which are not only standardised, but
are also provided by institutions that are regulated and supervised by credible regulators, and are
hence safer. The bank accounts can also be used for multiple purposes, such as, making small value
remittances at low cost and making purchases on credit. Furthermore, the regulator benefits, as the
audit trail is available and transactions are conducted transparently in a medium that can be
monitored. The economy benefits, as greater financial resources become transparently available for
efficient intermediation and allocation, for uses that have the highest returns. In other words, the single
gateway of a banking account can be used for several purposes and represents a beneficial situation
for all the economic units in the country.
In addition, I would like to flag an important perspective. Improvements in rural infrastructure in terms
of availability of electricity, improvement in connectivity through provision of rural roads and
telecommunications, and construction of warehouses, are expected to lead to better overall supply
chain management, enhance productivity of physical resources in the rural areas and greater addition
in agriculture. These developments would lead to much greater demand for banking activity in rural
areas. The two-fold implications of these developments for the banking sector are apparent. First, with
higher financing needs of such new activities vis-a-vis traditional ones, the overall financing intensity of
agriculture is likely to experience a manifold rise. Second, along with growth in rural infrastructure,
there is also likely to be an increase in rural non-farm activities, such as repair activities, education,
housing, restaurants and medical services. These activities, both traditional and emerging ventures,
would be available for financing by the banking sector.
Thus, as the economy begins to grow rapidly, the rate of financial intermediation is expected to
increase further. In other words, the banking system will be expected to increasingly provide larger
quantum of funds to existing and emerging enterprises. And without adequate deposit growth,
however, credit expansion might not be sustainable over the medium-term, without putting immense
pressure on real interest rates and impacting the overall stability of the financial system.
International experience
Typically, countries with low levels of income inequality tend to have lower levels of financial exclusion,
while high levels of exclusion are associated with the least equal ones. In Sweden, for example, lower
than two per cent of adults did not have an account in 2000 and in Germany, the figure was around
three per cent (Kempson, 2006). In comparison, less than four per cent of adults in Canada and five
per cent in Belgium, lacked a bank account (Buckland et al, 2005). Countries with high levels of
inequality record higher levels of banking exclusion. To illustrate, in Portugal, about 17 per cent of the
adult population had no account of any kind in 2000 (Kempson, 2006).
The policy responses to such exclusion have been varied (Box 1). In Sweden, for example, banks
cannot refuse to open a saving or deposit account under Section 2 of the Banking Business Act of
1987; in France, Article 58 of the Banking Act, 1984 recognised the principle of the right to a bank
account; in the US, federal government introduced the Community Reinvestment Act in 1997, partly in
response to concerns about bank branch closures in low-income neighbourhoods. Under this
legislation, federal bank regulatory agencies rate banks on their efforts to serve low-income
communities. These early legislations were designed to ensure access to a deposit account but did
not spell out the nature of banking services that should be on offer. Refinements in this area have
actually taken place in the latter half of the 1990s, resulting partly from a wider concern regarding
social exclusion (Caskey et al, 2006, Kempson et al, 2000). It may, thus, be noted that financial
inclusion is a concern even in developed countries and legislative or regulatory measure to achieve it
are a common feature.
Present situation in India
I would like to share with you certain data that highlight my concern on financial exclusion. The share
of deposits and credit in rural and semi-urban areas is on the decline. In contrast, the share in
metropolitan areas is rising. The share of credit is lower than that of deposits in all regions except
metropolitan, implying that resources get intermediated into metropolitan areas (Table 2). This in itself
may not necessarily be undesirable or unexpected if resources are being intermediated to their best
uses. However, they do provide some indication for concern and for the need for more investigation.
The total number of saving accounts, considered to be a better indicator of banking penetration than
other deposit accounts, as per cent of number of households, was 137 in rural areas and 244 in the
urban areas on the eve of reforms in 1991. By 2005, despite the reforms, the differential continues to
be similar. In the case of credit accounts, the situation has deteriorated for rural households while
showing significant improvement in the urban areas (Table 3), corroborating the very significant
increase in retail credit.
Total deposits, as per cent of GDP, increased from 32.2 in 1991 to 47.1 in 2005 in rural areas and
from 37.3 to 61.2 in urban areas. Similarly, credit extended, as per cent of GDP, increased from 17.3
to 22.3 in rural and from 24.8 to 45.0 in urban areas (Table 4). In terms of banking penetration, the
number of deposit and credit accounts of scheduled commercial banks as per cent of adult population
are significantly lower in the rural areas as compared with the urban areas (Table 5).
Even in terms of financial widening, the scope for improvement remains. In terms of regional
dis-aggregation since 1991, population per bank office has increased in rural areas from 13,462 in
1991 to 16,650 in 2005 and, as expected, declined in the urban areas from 14,484 to 13,619 over the
period. Three regions, North-Eastern, East and Central have higher population per office than the
all-India average and it has increased significantly in the rural areas in 2005 over 1991 (Table 6).
Consequently, compared to an all-India average of 29.9 savings accounts per 100 persons in 1991,
virtually all of the states in the Eastern and North-Eastern regions and several pockets in the Central
region had figures lower than this average. In the rural areas, Northern and Southern region are above
the all-India average while in the urban areas, Northern and Western region dominate. In terms of
number of credit accounts per 100 persons, the Southern States, both in rural and urban areas
perform above the all-India average.
Thus, the apparent implication emerging from the above data reveals that the rural areas are not being
served adequately by banks. This suggests that banks need to make efforts to mobilise resources
from the rural sector, where as discussed earlier, scope for increase in business is emerging. Further,
if the banks are to balance their overall deposit mobilisation and credit extension, as generally robust
banking practice would imply, then they would need to devise imaginative ways to mop up the
resources, particularly in rural areas.
V. Rural economy - growth, production patterns and credit extension
It is instructive to examine the rural economy in a bit more detail. Although the share of agriculture in
overall GDP has declined from around 35.8 per cent in 1980-81 to less than 19.9 per cent at present,
the fall in the proportion of population dependent on the sector has been limited (Table 7). In other
words, a majority of the workforce is still dependent on agriculture, while the GDP growth due to
agriculture is marginally above the rate of growth of the population, in contrast to a strong growth rate
in the non-agriculture sector.
The slowdown in agriculture in recent years is characterised by the stagnation in domestic production
in case of commodities like wheat, sugar and pulses. There has been a marked deceleration in the
share of cereals in total production (agriculture and allied) from 31.7 per cent in 1960-61 to 24.1 per
cent in 2004-05 (Table 8). On the other hand, the share of other segments such as livestock and
fishing, and non-cereals are recording a significant increase. There has been a silent revolution over
the last 20 years, unnoticed by researchers and policy makers alike. The value of output of non cereal
vegetarian food and of non-vegetarian food (livestock and fishing) is each higher than that of cereals.
In principle, these activities should be more credit intensive. It is, therefore, of utmost importance that
our image of what is agriculture, changes from that of simple rice and wheat to a more complex
structure, so that policy makers can assign due importance to the sector and respond accordingly
(Mohan, 2006).
Apart from non-cereal food production, service and manufacturing activities have also been growing
faster in rural areas. There are new supply chain activities: sorting, grading, storage, cold storage,
transportation, food processing, and the like. All are in the cash economy and potentially in need of
credit. In fact, it is estimated that agriculture now accounts for less than half of rural GDP: an epochal
change that took place some time in the late 1990s. So "rural" can no longer be equated with
agriculture. The consequence is that rural per capita income has probably been growing at a rate
similar to that of urban per capital income.
There is also good evidence (NCAER) of the dramatic changes in consumption and income growth
and distribution patterns in the rural economy. As classified consistently by NCAER, keeping real
income cut offs constant, the proportion of households classified as "low income" in rural areas has
fallen from about two thirds in the early 1990s to only about a quarter now. At the same time, those
classified as middle income households have risen from a third to almost 70 per cent now (NCAER,
2003). Hence, there should have been a surge in financial savings in rural areas: but we do not see
evidence of this in the number or proportion of households that have bank accounts.
The banking system needs to adjust to the realities in the rural sector. There is evidence they are
finding it difficult. As the ratio of agricultural GDP to total GDP declines, agricultural credit to total GDP
would also decline. However, this is not observed from the data (Table 9). In recent years a concern
over the falling share of agricultural credit as a proportion of total credit has been expressed. The data
reveal that agriculture credit as a ratio of total credit has also been rising in the recent years but is still
below the level of 1970s.
The existing agricultural credit system, as indicated earlier, is geared to the needs of food grain
production. It is gratifying to note that agriculture credit has not fallen as a proportion of agricultural
GDP despite the share of food grain production declining as a proportion of total agricultural
production. In fact, according to available data, agricultural credit has been rising in recent years as a
share of both the value of inputs and the value of outputs (Table 10).
Moreover, long-term credit as a share of private investment has also been rising in the 1990s (Table
11). The balance of evidence also suggests that non-performing loans (NPLs) in agriculture are not
higher than in other sectors, more specifically those in small-scale industries (SSIs). To illustrate,
NPLs in agriculture - both for public as well as private banks - were lower than those in the SSIs as at
end-March 2005 (Mohan, 2006).
In addition to the above data analysis, I must mention that non-institutional agricultural credit has
declined from over 92.7 per cent in 1950s to 38.9 per cent in 2002. Thus, nationalisation of banks and
their increased geog