Until independence, the rural population had little or no access to institutional agencies for their credit needs. With the dawn of freedom, the institutional credit system geared up to play a greater role in transforming the conditions of rural life. While sectoral budgetary allocations were, to an extent, instrumental in giving shape to the policy concerns of the Sate, institutional credit played pivotal role in successful implementation of development strategies, programmes and plans of governments. The joint commitment of governmental agencies and financial institutions towards growth of economy and welfare of the masses is most significantly reflected in priority sector financing (PSF), towards which banks were expected to commit at least 40% of their total advances. Although various agencies involved in PSF have, by now, evolved mutually acceptable strategies for discharging their respective responsibilities, a number of underlying issues still need serious thought and efforts. Recovery of bank overdues is one of these issues.

Though, entire exercise in strengthening partnership between government and banks call for greater cooperation, state efforts for recovery of bank overdues assumes greater significance. Commercial Banks assist State Government in meeting targets for institutional financing of government sponsored programmes and schemes of poverty alleviation and self employment. As disbursement of loans to beneficiaries under government sponsored schemes are target oriented, very often recoveries are not upto the mark. Recoveries are lifeblood of financial system, as these make recycling of funds possible. Therefore, Commercial Banks have constantly been urging State Government to assist them in recoveries, just like the banks assist State Government in meeting targets.