Critically Examine the decline of cooperative sector in agricultural credit in the State.

Question

Ghissu Editorial · Accepted Answer

Cooperative agricultural credit in Telangana declined because of the shift to mortgage-based lending, poor management and mounting overdues, competition from commercial banks and RRBs, and political interference. The result is reduced access for small, marginal and tenant farmers who relied on PACS, pushing them towards informal moneylenders.

**Introduction**

The cooperative sector’s decline in agricultural credit in ==Telangana== undermines affordable finance for small farmers, threatening rural livelihoods and financial inclusion. Cooperatives historically provided accessible credit, but their shrinking role risks pushing vulnerable farmers into exploitative informal credit sources.

**Causes of Decline**

SKETCH: mindmap | Causes of Decline in Cooperative Credit  
- Mortgage-based lending  
- Poor management and overdues  
- Competition from banks  
- Government dependence and interference

1. **Weak Management and Political Interference**: Poor governance, mounting overdues, and government dependence have eroded cooperatives’ financial health and autonomy, causing delays in credit disbursement and recovery.  
2. **Competition from Commercial Banks and RRBs**: Post-nationalisation, commercial banks and Regional Rural Banks expanded rural credit aggressively, offering diversified products and better technology, drawing borrowers away from cooperatives.

**Consequences**

1. **Reduced Credit Access for Marginal Farmers**: Decline in PACS availability forces small farmers toward informal moneylenders with exploitative terms, increasing indebtedness and agrarian distress.  
2. **Impact on Agricultural Productivity**: Limited timely credit restricts investment in quality inputs and technology, affecting crop yields and sustainability in ==Telangana==’s agriculture.

**Way Forward**

1. **Digitalisation and Capacity Building**: Implement ERP systems and train cooperative staff in ==Telangana== to improve efficiency, transparency, and service delivery, as recommended by NABARD’s reports on cooperative reforms.  
2. **Policy Reforms for Autonomy**: Amend cooperative laws to reduce political interference, promote democratic governance, and link government aid to performance benchmarks, following the recommendations of the Vaidyanathan Committee.  
3. **Inclusive Credit Products**: Develop schemes targeting tenant, landless, and women farmers, integrating with initiatives like Rythu Bandhu to enhance outreach and inclusiveness.

**Conclusion**

Revitalising cooperatives through governance reforms, digitalisation, and inclusive credit is essential for sustainable agriculture and financial inclusion in ==Telangana==. Strengthened cooperatives can support the state’s goal of doubling farmers’ income, aligning with Atmanirbhar Bharat and SDG 2 on zero hunger.

Critically Examine the decline of cooperative sector in agricultural credit in the State.

Model answer

Practise this question

Agriculture and allied sectors in Telangana7 questions

Ghissu