Institutional Credit through Cooperatives in Maharashtra: A Region-wise Analysis

The paper states that:

• The rural credit delivery system is plagued by the non-performing assets (NPAs) of rural financial institutions (RFIs);
• Though NPAs are seen across the country and across various institutional types, PACS in Maharashtra have the highest number of NPAs;
• There is a need to restructure cooperatives to make rural credit delivery more efficient.

The paper presents the following findings:

• The reason for the poor performance of PACS is the adverse environment created by financial sector reforms;
• These reforms have given cooperatives the flexibility to invest in non-target avenues like shares and debentures of corporate organizations leading to a diversion of funds meant for farm finance;
• Credit cooperatives in Maharashtra also have other deficiencies, such as low operational efficiency, high-incidence of overdue, low-level of recovery, etc.

Finally the paper suggests that:

• The major problems faced by cooperatives, such as high transaction costs, poor repayment performance, etc. should be tackled with more fiscal jurisprudence;
• There is a need to focus on strategies that tackle issues such as sustainability and viability operational efficiency recovery performance small farmer coverage and balanced development.