Defects of Land Development Banks

Defects of Land Development Banks

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Although the land development banks have increased in size numerically over the years, they have not been able to make much headway in terms of giving the farmer long-term financing. The following reasons explain why land development banks have performed below expectations:

i. Uneven Growth - Land development banks have seen uneven growth. In states like Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra, and Gujarat, these have indicated some development. Other states haven't advanced that far. The majority of states don't have any land development banks.

ii. Overdues Issue - The existence of significant overdues is the main issue that land development banks are currently facing. In addition, overdues have been steadily increasing over the years. The percentage of unpaid loans from land development banks in 1991–1992 has been estimated to be between 42 and 44 percent. The major causes of a poor level of overdues include flawed lending policies, insufficient supervision, excessive loan use, ineffective recovery strategies, deliberate defaulters, etc. The state governments have been instructed to create and carry out time-bound programmes for special recovery drives due to the severity of the issue.

iii. Lack of Trained Employees - Despite the land development banks' quantitative growth, they have not made many qualitative advancements in the loan-granting process, mostly because of a lack of technical and supervisory staff. If lending activities are to be broadened for non-traditional developmental reasons and on the basis of non-landed security, modifications in cooperative institutions' legislation are also necessary.

iv. Other Issues - The following list summarises further issues with land development banks:

(a) The interest rates on the loans these banks offer are extremely high

(b) The process of approving loans is extremely slow and bureaucratic

(a) The interest rates on the loans these banks offer are extremely high

(c) If the first loan is not repaid, the second loan will not be advanced

(d) Loan terms and payments are not determined by the borrowers' ability to pay back the debt

(e) The process for obtaining a loan from these banks is so difficult that the farmer is compelled to ask for assistance from the moneylender

(f) Because they lack sufficient land or enough security to give as collateral for loans, weaker segments of rural society, such as landless labourers, village artisans, and marginal farmers, typically are unable to receive loans from these banks for their productive activities

(g) Mostly loans are given for the repayment of old loans and for development purposes