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REFERENCE
Books:
Magazines:
Business Today
Business Week.
Business World
Newspapers
Economic Times
The Hindu
Times of India
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INDEX
1. INTRODUCTION
7. RESEARCH METHODOLOGY
9. CONCLUSION
10. BIBLIOGRAPHY
11. ANNEXURE
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INTRODUCTION
Rural banking in India has been the subject of study Survey Committee Report in 1954,
literally thousands of reports have examined and investigated the problems relating to the
credit delivery for agriculture and rural area. Latest magnum opus on the subject is the
National Agricultural Credit Review report 2000. The Expert Committee on Rural Credit
(Chairman: Professor V.S.Vyas) submitted its report in 2002.One more High Power
Committee headed by Professor Vyas set up by the Reserve Bank of India recently to review
and advice on improving credit delivery to agriculture has also given its report.
The criticality of this need may be seen from the fact that
even with concerted and extensive attempts to meet the credit needs of the farmers for
agricultural operations etc., informal agencies including money lenders are currently
providing substantial portion of the total credit to this sector. Besides, the agricultural credit
flows themselves are inadequate and the gross capital formation can be improved only if
substantial amount of investment funds flow to the rural areas in the form of credit. Likewise,
there is also a need to provide market information, extension services, marketing support and
government and other public services to the people in a cost-effective manner. For achieving
financial inclusion and economic growth, the ICT can play an important role by increasing
effective access and improving delivery and governance in banking services. Against this
background, the key issue is how technology can be harnessed for improving the efficacy of
the credit delivery and for the minimization of the transaction costs involved, for ensuring
that bank credit actually increases and promotes productive
capital formation and investment in rural areas and helps address the critical problem of the
rural-urban service divide.
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The Rural Economy
Financial liberalization after 1991 decimated the formal system of institutional credit in rural
India. It represented a clear and explicit reversal of the policy of social and development
banking, such as it was, and contributed in no small way to the extreme deprivation and
distress of which the rural poor in India have been victims over the last decade. This paper
examines the impact of changes in banking policy and structure on the rural economy, and on
the rural poor in particular.
Financial liberalization is a crucial component of the programmes of economic reforms that
are being imposed on the people of less-developed countries. The demand that financial
markets be liberalized quickly is high on the agenda of imperialism; in India as well,
advocates of economic reform see financial liberalization as being at the core of structural
adjustment. There are many components of the package of reforms associated with financial
liberalization in India. Chandrasekhar and Ghosh (2002) classify the policies of financial
liberalization in India into three types: first, policies to curtail government intervention in the
allocation of credit, secondly, policies to dismantle the public sector and foster private
banking, and thirdly, polices to lower capital controls on the Indian banking system.
It is well known that the burden of indebtedness in rural
India is very great, and that despite major structural changes in credit institutions and forms
of rural credit in the post-Independence period, the exploitation of the rural masses in the
credit market is one of the most pervasive and persistent features of rural life in India. Rural
households need credit for a variety of reasons. They need credit to meet short-term
requirements of working capital and for long-term investment in agriculture and other
income-bearing activities. Agricultural and non-agricultural activities in rural areas typically
are seasonal, and households need credit to smoothen out seasonal fluctuations in earnings
and expenditure. Rural households, particularly those vulnerable to what appear to others to
be minor shocks with respect to income and expenditure, need credit as an insurance against
risk. In a society that has no law of free, compulsory and universal school education, no
arrangements for free and universal preventive and curative health care, a weak system for
the public distribution of food and very few general social security programmes, rural
households need credit for different types of consumption. These include expenditure on
food, housing, health and education. In the Indian context, another important purpose of
borrowing is to meet expenses on a variety of social obligations and rituals.
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If these credit needs of the poor are to be met, rural
households need access to credit institutions that provide them a range of financial services,
provide credit at reasonable rates of interest and provide loans that are unencumbered by
extra-economic provisions and obligations.
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BANKING POLICY IN RURAL INDIA:1969 TO THE
PRESENT
The period from 1969 to the present can be
characterised as representing, broadly speaking, three phases in banking policy vis--vis the
Indian countryside. The first was the period following the nationalization of Indias 14 major
commercial banks in 1969. This was also the early phase of the green revolution in rural
India, and one of the objectives of the nationalization of banks was for the state to gain access
to new liquidity, particularly among rich farmers, in the countryside. The declared objectives
of the new policy with respect to rural banking - what came to be known as social and
development banking - were (i) to provide banking services in previously unbanked or
under-banked rural areas; (ii) to provide substantial credit to specific activities, including
agriculture and cottage industries; and (iii) to provide credit to certain disadvantaged groups
such as, for example, Dalit and Scheduled Tribe households
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well recognized, were wheat and rice, and the application of the new technologies was
primarily in the irrigated areas of the north-west and south of India, with the benefits
concentrated among the richer classes of cultivators.
The second phase, which began in the late 1970s and early
1980s, was a period when the rhetoric of land reform was finally discarded by the ruling
classes themselves, and a period when the major instruments of official anti-poverty policy
were programmes for the creation of employment. Two strategies for employment generation
were envisaged, namely wage-employment through state-sponsored rural employment
schemes and self-employment generation by means of loans-cum-subsidy schemes targeted at
the rural poor. Thus began a period of directed credit, during which credit was directed
towards the weaker sections. The most important new scheme of this phase was, of course,
the Integrated Rural Development Programme or IRDP, a scheme for the creation of
productive income-bearing assets among the poor through the allocation of subsidized credit.
The IRDP was initiated in 1978-79 as a pilot project and extended to all rural blocks of the
country in 1980. There is much writing on the failure of IRDP to create long-term income-
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bearing assets in the hands of asset-poor rural households. Among the many reasons for this
failure were the absence of agrarian reform and decentralized institutions of democratic
government, the inadequacy of public infrastructure and public provisioning of support
services and the persistence of employment-insecurity and poverty in rural society.
Nevertheless, the IRDP strategy did lead to a significant transfer of funds to the rural poor.
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reform process began, particularly after bank nationalization, was unparalleled in financial
history (Shetty 1997, 253). After bank nationalization, as Shetty points out, there was an
unprecedented growth of commercial banking in terms of both geographical spread and
functional reach
The third and current phase, which began in 1991, is that of
liberalization. The policy objectives of this phase are encapsulated in the Report of the
Committee on the Financial System, which was chaired, ironically, by the same person who
recommended the establishment of Regional Rural Banks, M. Narasimham (RBI, 1991). In
its very first paragraph, the report called for a vibrant and competitive financial systemto
sustain the ongoing reform in the structural aspects of the real economy. The Committee
said that redistributive objectives should use the instrumentality of the fiscal rather than the
credit system and, accordingly, that directed credit programmes should be phased out. It
also recommended that interest rates be deregulated, that capital adequacy norms be changed
(to compete with banks globally), that branch licensing policy be revoked, that a new
institutional structure that is market-driven and based on profitability be created, and that
the part played by private Indian and foreign banks be enlarged.
Let us make it clear that, before the 1990s, the banking system
was open to much criticism, particularly of its bureaucratic failures, its insensitivity to the
social and economic contexts in which it functioned, and class and regional inequalities in
lending patterns. The reforms proposed in 1991, however, were not attempts to bring rural
banking closer to the poor, but to cut it back altogether and throw the entire structure of social
and development banking overboard.
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Distribution Channel of Rural Banking - Multi-agency
Approach to Rural Lending
Rural credit has been a laboratory for various policies,
initiatives, investigations and improvements since 1955.The first major strategy adopted for
improving rural credit delivery was the institutionalization of the credit delivery system with
the cooperative as the primary channels. The multi-agency approach to the rural credit
delivery emerged with the induction of the commercial banks into the scene. In 1979,
specialized institutions called Regional Rural Banks and subsequently, another breed of
institutions called Local Area Banks, came on the scene. With the operationalisation of the
Lead Bank Scheme, the area approach to rural lending was formalized and attempts were
made to match infrastructure development with bank credit flows for ensuring development
of the rural areas. The Scheme sought to give a special supply-leading role to the banking
system in rural development and also to ensure access of the rural population to bank services
through rural branch expansion. A multi-agency credit delivery system is in place for
financing credit-based development activities, under the Lead Bank Scheme. In 1988, the
Service Area Approach was also introduced as a strategy for improving the quality of rural
lending. The Lead Bank Scheme Information System and Service Area Monitoring
Information System (SAMIS) have also been operationalised using monitoring arrangements.
The micro-finance and linkage of the banks to the self- helpgroups / NGOs and the issue of
Kisan Credit Cards are among the recent developments in the area of rural lending in India.
The latest policy initiatives are the enabling of the Non-bank Financial Companies and of the
correspondent banking for increasing delivery of rural credit.
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The experiment of having low cost institution for rural lending in
the form of Regional Rural Banks also has not been successful in as much as the RRB staff
expenses are required by law to be on par those of the commercial banks. Therefore, it is
clear that the rural credit delivery system is not performing efficiently and in a cost effective
manner. It is against this background that we position a technology based solution for
improving the speed efficiency and effectiveness of the credit delivery of the rural people
through the application of information technology tools and systems. We propose Model for
using
Information Technology for improving rural credit delivery system by reducing the cost,
increasing the speed of delivery and also increasing the value addition in the service delivery
and improving the accountability.
The National Agricultural Credit Review Committee Report
documents the history, development and the status of the various important issues involved in
rural credit delivery in India in great detail. It is interesting to know from this voluminous
report that solutions have been advised and implemented for almost all the real as well as
perceived problems in rural credit. Yet, this area remains a problem defying adequate
solution. For example, some of the key concerns like the end-use of credit, infrastructure
gaps, and the high costs of lending have been repeatedly attended to. Despite that, the
delivery of credit for agriculture and rural development still remains unsatisfactory.
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Marketing strategies of rural banking players in India
To echo the thoughts of C.K. Prahalad, the bottom of the pyramid segments will be the
growth drivers of the future this is certainly being borne out by the market revolution that is
taking place in Indias villages. The Narasimham committee on rural credit recommended
the establishment of Regional Rural Banks (RRBs) in meeting the needs of rural areas.
Indian mobile banking has two major segments: the urban segment and the rural segment.
Celent estimates that urban mobile banking subscribers will reach 65 million by 2012. The
rural mobile segment represents a huge opportunity to bank the unbanked population, thereby
adding a revenue stream.
In a new report, Mobile Banking in India; Dual Strategy for Rural and Urban Segments,
Celent explains the mobile banking ecosystem in India and looks at the trends driving the
growth in its urban and rural subsegments. The report looks at the prospects of mobile
banking from both a regulatory perspective and an industry perspective.
In Indias urban segment, mobile banking is an enabling fifth channel, and in the rural
segment, mobile banking is a primary mode of financial inclusion. In both segments, the two
fundamental factors affecting the growth of mobile banking are regulations and technology.
Nontransactional users will remain the majority in India because they will continue to use
online banking and other payment mechanisms. Government-to-person (G2P) payments will
be the major growth driver for rural mobile banking. Regulatory changes are also a big
driver. Celent believes that, by 2012, over 60 million rural users will be beneficiaries of
mobile banking through business correspondence.
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While the urban banking market is dominated by information services, the payment
transactions segment has not picked up mainly due to regulatory limitations, says Rajesh M
R, an analyst with Celent and coauthor of the report. However, recent relaxation of payment
norms by RBI has presented a huge opportunity for this segment.
The rural mobile banking segment is a high growth area, due to the adoption of the business
correspondent model and relaxed Know Your Customer norms, but financial literacy remains
a big issue for retaining the rural adopters, says Sreekrishna Sankar, Celent analyst and
coauthor of the report.
The Reserve Bank of India has a mandate to be closely involved in matters relating to rural
credit and banking by virtue of the provisions of Section 54 of the RBI Act. The major
initiative in pursuance of this mandate was taken with sponsoring of All-India Rural Credit
Survey in 1951-52. This study made agency-wise estimates of rural indebtedness and
observed that cooperation has failed but it must succeed. The Report of the Committee on
Directions is still considered a classic on the subject, and two of the four members were,
incidentally, from Andhra Pradesh. This is the origin of the policy of extending formal credit
through institutions while viewing local, traditional and informal agencies as usurious. In the
first stage, therefore, efforts were concentrated on developing and strengthening cooperative
credit structures. The Reserve Bank of India has also been making financial contributions to
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the cooperative institutions through evolving institutional arrangements, especially for
refinancing of credit to agriculture.
While enacting the State Bank of India Act in 1955, the objective was stated to be the
extension of banking facilities on a large scale, more particularly, in rural and semi-urban
areas. SBI, therefore, became an important instrument of extending rural credit to supplement
the efforts of cooperative institutions. In 1969, 14 major commercial banks were nationalised
and the objective, inter alia, was "to control the heights of economy". The nationalised banks
thus became important instruments for advancement of rural banking in addition to
cooperatives and State Bank of India. The next step to supplement the efforts of cooperatives
and commercial banks was the establishment of Regional Rural Banks in 1975 in different
states with equity participation from commercial banks, Central and State Governments.
By 1982, to consolidate the various arrangements made by the RBI to promote/ supervise
institutions and channel credit to rural areas, NABARD was established. Though several
efforts were made to increase the flow of institutional credit for agricultural and rural lending,
there were mismatches in credit and production. Field studies conducted to determine the
reason revealed that it was due to absence of effective local level planning. It was felt that
with the establishment of large network of branches, a system could be adopted to assign
specific areas to each bank branch in which it can concentrate on focussed lending and
contribute to the development of the area. With a view to implementing this approach, RBI
introduced a scheme of "Service Area Approach" for commercial banks. To further
supplement the institutional mechanism, the concept of Local Area Banks was taken up in
1996-97 and in-principle approval has been given for 8 Local Area Banks.
As regards cost of credit, for most of the period, the administered interest rate regime was
applicable for bank lending and this included concessional terms for priority sector.
Currently, all interest rates on bank advances including in rural areas are deregulated and
there is no link between priority sector and interest rate, though there are some regulations on
interest rates by size of advance i.e. below Rs. 2 lakh in respect of commercial banks.
As regards policy measures to enhance flow of credit to rural areas, apart from availability of
credit lines from the Reserve Bank of India, the concept of priority sector was evolved to
ensure directed credit. Currently, the stipulation is that domestic commercial banks should
extend credit to the extent of 40 per cent of the total net bank credit to priority sector as a
whole, of which 18 per cent should be specifically for agriculture. Out of the target of 18 per
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cent for agriculture, at least 13.5 per cent should be by way of direct loans to agriculture and
remaining could be in the form of indirect loans.
Where a bank fails to fulfil its commitment towards priority sector lending, it is currently
required to contribute to Rural Infrastructure Development Fund set up by NABARD.
NABARD in turn provides these funds to State Governments and state owned corporations to
enable them to complete various types of rural infrastructure projects. It is pertinent to
recognise that there are a large number of credit linked programmes sponsored by the
Government for direct assault on poverty. In programmes relating to self-employment and
women welfare, the multiplicity of programmes has been reduced by having a comprehensive
and consolidated programme named Swaranjayanti Gram Swarojgar Yojna. The financial
sector reforms, which were introduced from 1991 onwards were aimed at transforming the
credit institutions into organisationally strong, financially viable and operationally efficient
units. The measures introduced include reduction in budgetary support and concessionality of
resources, preparation of Development Action Plans and signing of Memoranda of
Understanding with the major controllers, and introduction of prudential norms relating to
income recognition and asset classification for RRBs and cooperative banks. The lending
rates for these institutions have also been deregulated. Other measures of liberalisation
include allowing non-target group financing for RRBs, direct financing for SCBs and CCBs,
and liberalisation in investment policies and non-fund business.
These measures have contributed to many RRBs turning around and becoming more vibrant
institutions. In the case of cooperative banks, there is greater awareness of the problems of
officialisation and politicisation and initiatives in this regard include legislative actions on
cooperative banks in Andhra Pradesh.
Recently, several policy initiatives have been taken to advance rural banking. These includ
additional capital contribution to NABARD by the RBI and the Government of India,
recapitalisation and restructuring of RRBs, simplification of lending procedures as per the
Gupta Committee recommendations, preparation of a special credit plans by public sector
banks and launching of Kisan Credit Cards. Finally, a scheme linking self-help groups with
banks has been launched under the aegis of NABARD to augment the resources of micro
credit institutions. A Committee has gone into various measures for developing micro credit,
and has submitted its report, which is under the consideration of the RBI. In respect of
cooperatives, a Task Force
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under the chairmanship of my esteemed and affectionate colleague Shri Jagdish Capoor,
Deputy Governor has been constituted to review the status and make recommendations for
improvement.
Undeniably, these initiatives have enabled a very wide network of rural financial institutions,
development of banking culture, penetration of formal credit to rural areas and a counter to
the dominance of moneylenders. These initiatives have also financed modernisation of rural
economies and implementation of anti-poverty and self-employment programmes. However,
for the purpose of focussing on the future, generalisation on some concerns regarding the
current approach to rural credit and banking would be appropriate.
Firstly, the cooperative banks have different layers and many of them have significantly large
non-performing assets (NPAs). Many cooperatives are undercapitalised. The public sector
banking system also exhibits NPAs, and some of them have so far been provided with
recapitalised funds. The RRBs also exhibit NPAs and these have been recapitalised from the
Government of India so far, which would imply a total recapitalisation of double the amount
provided by Government of India. Secondly, according to the All-India Debt and Investment
Survey, 1991-92, the share of debt to institutional agencies in the case of rural households has
increased marginally from 61.2 per cent to 64 per cent between 1981 and 1991. However, it
must be noted that this figure relates to debt outstanding and the overall share of the
institutional credit in the total debt market is likely to be smaller than what this figure
indicates. Thirdly, the cost of financial intermediation by the various rural financial
institutions is considered to be on the high side. The difference between the cost of resources
made available to NABARD by Reserve Bank of India and the commercial rates of interest at
which the cooperative banks lend for agriculture in the deregulated interest rate regime is also
considered to be on the high side.
Fourthly, empirical studies indicate that institutional credit is more likely to be available for
well to do among the rural community.
Fifthly, empirical studies also indicate that relatively backward regions have less access to
institutional credit than others do. Sixthly, the non-availability of timely credit and the
cumbersome procedures for obtaining credit are also attributed to the functioning of the
financial institutions, though this is equally valid for rural and urban banking.
Finally in regard to Government sponsored schemes, there has been overlap in accountability
in as much as the beneficiaries are identified on a joint basis. Banks have been indicating that
NPAs are proportionately more due to this overlapping.
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An important development in the formal segment of the rural financial markets is the growing
significance of non-banking financial companies, in particular, in hire purchase and leasing
operations. They also finance traders of agricultural inputs and output. The NBFCs have only
recently been brought under the regulatory regime of RBI. While their importance is
recognised in financing diversified rural agriculture, its extent and scope of operations has not
been adequately researched.
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recognise some emerging realities of both formal and informal markets. This would also help
a rethink on approaches to rural credit and rural banking. First, it is no longer the case that the
money lender and informal financing are always synonymous, in view of the dynamics of
rural economy already described involving suppliers credit, buyers credit and credit for
services sector. Second, informal markets are less significant now than before, and have to
face competition or at least accept benchmarking of formal credit. The concept of monopoly
of moneylender in rural areas is not true in many areas now.
Third, when informal financial market is linked to socially undesirable activities, there is
certainly a cause for concern though the available evidence shows that such a link is more a
metropolitan or urban phenomenon rather than a rural one.
Fourth, bank credit is really not severely restricted to what can be officially determined as
productive, since most of the credit-card financing by the banks is, in fact, financing of
consumption and at interest rates comparable to those prevailing in the rural informal debt
markets. In other words, it is no longer unethical for banks to finance consumption credit
through the credit card route. Credit card business, so far, is an essentially urban
phenomenon. Hence, the financing of consumption by informal markets in rural areas cannot
be frowned upon when it is being done by banks through their credit card business.
Fifth, the real extent of informal markets is grossly understated in any survey that views data
on outstanding debt since the turnover of debt is admittedly much lower for public
institutions than for private lending. The turnover-differential is on account of several factors,
including preference for short term finance and better recovery-performance in informal
markets. Sixth, the social significance of informal credit is more than its proportion in
financial terms since the poorer sections draw far larger amounts from informal than formal
markets. Seventh, a significant part of informal market is through leasing, hire purchase,
deferred payment, etc. with finance often provided by NBFCs. The informal market is
providing a range of financial products, which the formal banking system is not able to.
Eighth, studies have demonstrated that expansion of literacy and education tends to increase
the access of rural folk to formal credit, reduce the informal transaction costs in dealings with
formal credit institutions and improves their resistance to malpractices attributable to landlord
or moneylender. The exploitative nature of informal markets is more pronounced in tribal or
less developed areas while productive nature of informal markets is more pronounced in
prosperous villages. Indeed, one can argue that in many areas, the formal credit structure has
provided a positive institutional alternative to the moneylenders and thus marginalising his
role in providing credit to rural masses.
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Marketing strategy and Linkages in Rural Debt Markets
Having recognised that one cannot wish away informal markets, some tentative
generalisations on the relative roles of formal and informal markets and on the linkages
between them would also be necessary to capture the emerging but complex realities. Such
generalisations are possible on the basis of empirical studies.
First, the formal credit has a tendency to flow more easily to agriculturally developed regions
and to relatively larger farmers leaving the backward regions and small farmers to be largely
served by the informal market. This phenomenon is generally explained by four factors viz.,
poor-resource endowment features of the borrower, poor personal factors (education, social
contact etc), underdevelopment of a region and higher transaction costs.
Second, as per empirical studies, transaction costs associated with formal credit include fees
for procuring necessary certificates (open), travel and related expenses including loss of
wages etc., and informal or unofficial commissions (hidden). The transaction costs vary with
type of credit agency involved, the type of borrower and farm-size.
Third, uncertainties and delays usually associated with formal credit can also be treated as
additions to the transaction costs.
Fourth, the true cost of borrowing from the formal credit system is thus higher than nominal
cost if the above informal transaction costs are also included. To the extent some transaction
costs are fixed, the effective cost of borrowings for smaller loans tends to be relatively higher
than for a larger loan.
Fifth, there are usually hidden costs or concealed interest rates in respect of informal credit
also, which have to be added to the nominal costs to arrive at the true cost. These hidden
costs generally relate to tied lending, tied to land, labour, input or output. The tied advance in
respect of labour is particularly relevant for migratory labour. The hidden costs are usually in
the form of undervaluation of labour and output of borrowers and overvaluation of inputs
supplied by lender.
Sixth, the choice between formal and informal credit depends on both the access and relative
true costs. Thus, recourse to informal credit, admittedly at far higher nominal costs, is to be
explained partly in terms of effective costs and the extent of supply of formal credit. Seventh,
in assessing relative roles, both supply and demand side bottlenecks of formal credit need to
be appreciated. The former relate to asset-based lending policies and complex formalities
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and procedures, while the latter relate to poor endowment, lower education and social-
contact, usually caste-based in backward regions. Viewed differently, a larger role for
informal credit may arise due to low level of commercialisation and monopoly power of
moneylender; and it may also arise due to high level of commercialisation of agriculture
when supply from formal channel cannot match significant demand for credit.
Eighth, it is also necessary to recognise that, to the extent informal markets tend to lend to
borrowers who are relatively less creditworthy, risk-premium is bound to be higher. This
would also get reflected in higher nominal interest rates in informal markets and indeed
higher true cost, though it may not be so high if it is net of risk premium.
It is clear that the critical issue in respect of informal credit is the manner in which the
linkages among the participants in the market operate and result in varying degrees of hidden
costs. It is possible to make some exploratory postulates here. First, trader-lenders are likely
to provide most of production - credit, while farmer-lender or moneylender is likely to
provide most of consumption - credit. It is, of course, possible that some individuals combine
the functions of farmer, trader and moneylender. Second, informal markets are unlikely to
finance credit for investment purposes, given the time preference. Third, the levels of
education are likely to reduce the scope for gross overvaluation or undervaluation in linked-
transactions. Fourth, the inter-linked transactions among parties with equal bargaining power
are likely to minimise the hidden costs. Fifth, from the supply side, farmer-lenders may tend
to be associated with land and labour market linkages while trader-lender is likely to be
associated with input-output markets. On the demand side, agricultural labour may be
associated with land and labour markets while the farmer-cultivator with input-output
linkages. In the process, it is likely that a farmer would be a borrower from a trader and a
lender to agricultural labour, a common phenomenon in villages. It will, therefore, be over
simplification to divide the rural population into lenders and borrowers or exploiters and
exploited. Sixth, similarly it is necessary to appreciate the role of linkages in credit-risk-
mitigation. In fact, the risk reducing element of linkages are not built into formal credit-
channels. Incidentally to the extent the transaction costs are front loaded in respect of formal
credit, there is no incentive to repay while the true costs of informal credit are spread out.
Seventh, in terms of bargaining power among the class of borrowers, the agricultural labour
and migratory labour appear to be weakest except in agriculturally prosperous areas where
labour-shortage is acute to cater to agricultural and other operations. Similarly, the
differential in bargaining power between large and small borrowers is similar to that between
large corporate and small-industrialists in urban areas.
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In brief, the linkages between formal and informal markets are complex, contextual and
dynamic. The two markets appear to compete with and also supplement each other.
We should recognise that the role of banks, which is central to formal credit in rural areas, is
fast changing. Many non-banks are providing avenues for savers and funds for investment
purposes. Banks themselves are undertaking non-traditional activities. Banks are also
becoming what are called universal banks and are already providing a range of financial
services such as investments, merchant banking and even insurance products. Similarly, non
banks are also undertaking bank like activities. At present in India, these are mostly confined
to urban areas, but they will sooner than later spread to rural areas.
Another development relates to the gradual undermining of the importance of branches of
banks. The emergence of new technology allows access to banking and banking services
without physical direct recourse to the bank premise by the customer. The concept of
Automated Teller Machines (ATMs) is the best example. At present, ATMs are city oriented
in our country. It is inevitable that ATMs will be widely used, in semi-urban and rural areas.
The technology-led process is leading us to what has been described as virtual banking. The
benefits of such virtual banking services are manifold. Firstly, it confers the advantage of
lower cost of handling a transaction. Secondly, the increased speed of response to customer
requirements under virtual banking vis--vis branch banking can enhance customer
satisfaction.
Thirdly, the lower cost of operating branch network along with reduced staff costs leads to
cost efficiency. Fourthly, it allows the possibility of improved quality and an enlarged range
of services being available to the customer more rapidly and accurately at his convenience. It
may not be possible to deny these facilities to rural areas in our country since, if banks do not
provide them, some non-banks will do it.
Another development relates to the increasing popularity of credit cards, which are bound to
reach rural areas. Many Public Sector Banks are already in credit card business. In fact,
multipurpose cards could be a facility that IT could usher in for rural population. The
potential can be illustrated with SMART cards. SMART cards which are basically cards
using computer circuits in them thereby making them intelligent' would serve as
multipurpose cards. SMART cards are essentially a technologically improved version of
credit and debit cards and could be used also as ATM cards. They could be used for credit
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facilities at different locations by the holders. SMART cards could also be used for personal
identification and incidentally for monitoring credit usage.
For the spread of virtual-banking and SMART cards to rural areas, it is essential that electric
power and telecom connectivity are continuous and supplies do not drop especially during the
hours when a bank's transactional activity is at relatively high levels. The banks could, under
such assured supply conditions acquire the required banking software and also put in place
the necessary networking for providing anywhere banking facilities in rural and semi-urban
areas also.
Like banks in other parts of the world, Indian banks will have to get interested in providing
diversified range of financial products and services along with those that they are already
providing, by using technological advances. As the level of education in rural areas rises and
affluence spreads, customers will start seeking efficient, quicker and low cost services. As the
financial system diversifies and other types of financial intermediaries become active, in rural
areas, savers would turn towards mutual funds or the savers themselves decide to deploy part
of their financial surpluses into equities and debentures as also other fixed income securities.
The bulk of bank deposits in the rural areas are currently longer term deposits and as these
come down, there would be a distinct shortening of the average maturity structure of bank
deposits with an increase in asset liability mismatches. The spreads that the banks now enjoy
will progressively shrink making it more difficult for them to survive. As more and more
intermediaries enter rural areas with greater level of technology, traditional banking business
will come under pressure. In order to face the competitive pressures being exerted by the
recently set up market savvy banks, banks which have extensive branch network in most of
the existing and potential rich rural and semi-urban areas may have to provide such services.
Issues
It is clear that significant progress has been made, since independence, in expanding bank
branches and banking habits in the rural areas, through a variety of institutional innovations.
An impressive segment of rural economy has been brought into the ambit of formal financial
intermediation, mainly through the public sector banking system, and to some extent, through
cooperatives and RRBs. The future of banking in rural areas would, however, depend on
several factors that have been described, namely, how the current concerns are addressed
taking into account the dynamics of transformation in rural economies, the new realities in
25
credit markets, the linkages between formal and informal markets, and the impact of financial
as well as technological progress on the systems of financial intermediation.
Consequently, public policy will have to address several issues to ensure a sound and
efficient banking system in the service of rural areas. The more important of such issues
relate to the approach, institutions, supply, cost, and related policies
26
In any case, research and micro studies encompassing both formal and informal segments
would help the policy makers appreciate relative roles and linkages in rural financial markets
as a whole. In other words, policy analysis should perhaps consider expanding its attention
from rural banking to rural financial markets.
Enhancing effective supply of credit in such rural financial markets would be a logical
objective of policy, thus enlarging the current attention to include both directly disbursed
credit by the banking or cooperative sectors and indirect supply. Similarly, reducing the true
cost of credit availability to rural areas would be yet another objective, expanding the
attention of policy to include both nominal cost of credit from banking or cooperative sector
and true cost in formal and informal markets. In an increasingly deregulated environment,
this objective would imply attention to competitive efficiency involving procedural-
simplification also, in respect of banks and cooperatives.
Finally, the approach may expand from delivery of credit to rural areas to making available
financial services and products to savers, investors and consumers in the rural areas. In other
words, it should be recognised that rural financial markets comprise both depositors or savers
and borrowers or investors.
Institutions
Among the institutions involved in rural credit, cooperatives have a special place in the RBI.
There is full appreciation of the problems and efforts are underway to workout a package for
revival and may be, rebirth of rural cooperative banks by a Committee headed by Deputy
Governor Shri Jagdish Capoor. The Committee would naturally address issues relating to
legal framework, and incurring costs of addressing problems related to overhang of the past.
In addition, the Committee, I trust, would consider desirability of cooperative banks' foray
into non-fund-based activities, such as fee-based financial services on behalf of mutual funds
or insurance-products. The cooperatives could, in fact help, retail Treasury Bills and
Government Securities in rural areas. Diversified financial products will be increasingly
demanded and supplied in the rural areas, and co-operatives should not be left out of this
trend of providing multiple-products through a single window. This would also imply, going
beyond the somewhat closed loop of preferred financial relations within cooperative system
27
into a multiple contacts between cooperative banks and other financial intermediaries, largely
utilising technological improvement.
Commercial banks are being reformed in accordance with recommendations of the
Narasimham Committee. The RRBs are being recapitalised. These efforts in regard to banks
would presumably recognise the trends in providing financial services to enable them to
exercise necessary flexibility and dynamism that is warranted by fast changing world.
Similarly, the future role of NABARD could be addressed because the organisational setup,
funding and activities will have to reflect the basic logic of financial sector reform viz.
changing roles of owner, regulator, refinancing, subsidised credit, government-funding and
cooperatives.
Some analysts argue that supply-led strategy in regard to rural credit has not been successful,
since institutional spread and directed-lending have not had the desired impact. While
accepting that demand has to play its role, and real-demand also implies negotiating strength
of the borrower in respect of financial institutions, it will be inappropriate to conclude that
supply should necessarily follow demand. Mere presence of rural credit institutions, does not
amount to availability of supply. Similarly, mere prescriptions of priority lending would not
ensure supply.
For example, prescription of priority-sector lending relates to percentage of credit outstanding
rather than advances. Further, there is no reward for overshooting the target and
undershooting is not really penalised since amounts of shortfall need to be placed in a fund
administered by NABARD with a totally risk-free return of 11.5 percent for a five-year
advance. These funds are actually lent to State Governments, thus to an extent replacing rural
credit to agriculture with credit to State Government for rural development. While as a
transient measure during a period conspicuous for incomplete projects, such an arrangement
was justifiable, this should not become a permanent feature as it would have obviously
perverse effects. The coverage of definition of priority sector also leads to some difference
between apparent supply and effective supply. Thus, the base for calculating priority sector
excludes commercial banks' investments, which are expanding rapidly. The procedural
bottlenecks resulting in delayed supply also, in some ways, amount to erosion of effective
supply.
28
At the same time, there may be some effective supplies which are not reckoned for supply
under priority-sector. There may be funds channelled by banks to rural area through urban-
branches or through other intermediaries such as NBFCs.
There is perhaps a case for some research and studies on policy of directed lending so that we
could improve on the incentive and policy framework to enhance effective supply. For
example, the definition and coverage of priority sector for agriculture could be revisited and
lending to agriculture by banks through NBFC's could be considered for inclusion in priority-
sector, as has been done to ensure flow of credit to truck operators.
Yet another area in effective supply relates to lending by banks under government sponsored
programmes, which has significant non-commercial considerations. Several issues relating to
both supply and accountability arise due to involvement of both Government and banks. A
more transparent approach, for example, by separately accounting for them as policy-induced
lending would help isolate and monitor this supply, apart from isolating the non-performing
assets on this account in the balance sheets of banks.
An important bottleneck in the delivery of credit has been the negligible use of bill-
discounting for services sector. Current policies and procedures restrict this instrument to
goods. It has been decided by the RBI to constitute a Committee to explore ways by which
bank finance can be made available to service sector. The Committee, with representation
from public, private sector and foreign banks also is expected to study international
experience, our policies and procedures and make recommendations in two months. This
important step recognises that about half of our Gross Domestic Product is in services sector
and would also help flow of bank finance to the growing services sector in rural areas.
The major reasons for the true cost of credit from rural financial institutions being higher than
nominal costs are mainly scarcity of supply and transaction costs. Enhancing effective supply
would be an important strategy of reducing the true cost. Encouraging competition would be
yet another strategy. A review of procedural requirements, such as eliminating mandatory
forms and replacing them with locally determined procedures, could also be considered. All
non-verified documentation could, for instance, be replaced with self-declaration by the
borrower. Repeated visits and consequent transaction costs can be avoided by several
procedural simplifications - going beyond Gupta Committee recommendation. In particular,
growth of information
29
technology and its application in banking would warrant a thorough review of products,
procedures and linkages among rural financial institutions.
Arbitrage in financial markets is inevitable and prevalence of such operations cannot be
ignored. Arbitrage between formal and informal markets and between production loans and
consumption needs is also common. Thus, keeping the true cost artificially low in formal
markets, the rural financial institutions would encourage arbitrage and erode the clear
potential for profit. Indeed, an appropriate strategy may be to reduce the difference between
nominal and true cost and ensure that true cost reflects market conditions, including premium
for credit risk. As already mentioned, provision of diverse financial products and services in
the rural areas would enhance income to banks and help reduce the admittedly large spreads
in interest rates. Thus, among the efforts to reduce nominal and true costs of credit in rural
areas would be provision of multiplicity of financial services by rural financial institutions,
taking advantage of developments in technology and financial markets.
Related Policies
There is increasing recognition that, the spread of literacy and generation of growth impulses
in the rural sector would be very significant factors in enhancing effective supply and
reducing true cost of rural credit. More specifically, the desired spread of technology and
trickledown of urban financial products to rural areas would require concerted action in four
areas. First and foremost, insurance, especially of crops, should penetrate the rural areas to
mitigate the risks to both farmer and lender. The lack of penetration of insurance is perhaps
an important reason for lenders seeking tied and other risk-mitigation arrangements through
informal markets. Second, there should be assured supply of electric power so that
functioning of systems is not disrupted. Third, telecommunication network needs to be
dependable and financial sector needs to ensure a network. We, in the RBI, have already
launched INFINET. Fourth, the institutional and regulatory framework should enable rural
financial institutions to operate in diverse financial products and services. We, in the RBI are
currently engaged in a number of initiatives and studies. We hope to continue the process,
and focus on rural credit, as mandated by the RBI Act. We would seek advice and guidance
in this endeavour.
30
An ICT Structure for Rural Banking Enablement
31
Its components are Digital Rural Information Infrastructure,
Customer Data Integration and Credit rating, a shared electronic platform for various
services, Provision of technology support to banking services including ATM Services.
Benefits include financial inclusion of rural population,
providing the banking services in a pro-active manner, enabling the banks to offer highly
individualized bundle of services, and reduction of costs through shared infrastructure for
data collection and updation and shared mobile service-delivery mechanism and generally
enabling the innovation and spread of banking and other services by providing an efficient
electronic platform and promote commerce and development.
Figure 1
DIAGRAMMATIC REPRESENTATION OF THE MODEL
33
34
GANASEVA Model for Rural Banking:
Implementation Experience
The project was implemented in five villages in the Honavar
block of the Uttara Kannada district of Karnataka, India having approximately 4000 families,
involved in essentially agricultural activity. The banks which participated in this project are
State bank of India, Syndicate Bank, who had agreed to use the data / documents available
through the system. Besides the rural information service and credit rating, there is support in
the system for the crop loan and Kisan Credit Card and Savings Bank Account Operations.
The Project also wanted to link the Primary Agricultural Co-operative Societies (PACS) to
the system for providing banking services through their automation. The project was
expected to demonstrate the feasibility of the model on the ground.
Methodology
Information System
We developed a model for rural information infrastructure. A
reputed market research agency was employed for collection of
data and documents in proof thereof in respect of adults in all the households of the five
selected villages viz., Idagunji, Apsarakonda, Kelaginoor, Malkod and Manki located in the
backward Honavar block of Uttara Kannada District in Karnataka. The data collected was
validated by a control set of 500 cases collected by the project coordinator and further by the
members of the Project Monitoring Group. Pre-programmed PDAs were used for collection
of data/information, the documentary evidence and uploading of this data into Server. The
information was collected as per the requirement developed in consultation with the banks for
providing banking services and the authentication requirements.
PDA Software
ATM Feasibility
36
For testing and demonstrating the implementability of the
above solution with respect to essentials, we undertook, and completed, a pilot project during
October 2004 and January 2006 with funding from Microsoft and technology support from a
Microsoft-HP led coalition of ISVs. The Government and the local NGOs also actively
participated. Banks like State Bank of India, Honavar and Primary Agricultural Co-operative
Credit Societies have started using the systems. The project objectives were
-> Establishing ICT-based Rural Information Infrastructure for providing banking
services on a shared basis
-> Managing and processing this data and for making it available to the various
banks for acquiring customers both on the liability and assets sides.
-> Shared delivery system through mobile ATMs for increasing access to rural people.
37
delivery like kiosks. ATMs for pursuing cost-efficiency through extensive outsourcing and
lean processes to suit the local realities.
38
services delivery as a core function. The utility service provision which partly use banking as
the payment system infrastructure could be the second layer. The delivery of the rest of the
services like governance, information, education, health, extension and occasional
requirements like investment, trade and documentation might form the third dimension.
39
Our RII model involves the use of ICT for building and
operating this information infrastructure involving collection, storage updation, consolidation
and processing of the data and making customized offering; Entrepreneurial model with
provision for assurance review by public authorities or users or both; Pay- for- use business
model.
The technology model involves the use of personal digital
assistants (PDAs) with specially made applications for data (Voice, Picture and Data)
capture, verification and validation and updating; Data Center with storage, processing and
management; Delivery Nodes at the user-ends and Three-way connectivity between the PDA,
Data Center and Delivery Node.
40
Digital Rural Information Infrastructure Model
41
As a specific instance of the application, the RII information
services together with credit rating of the rural individuals to the banks and financing
agencies has been worked out. The RII information in digital form will be stored and
processed in the backend system at the data center for affording support to the banking
functionalities of the Rural Credit Delivery System. The banking services supported by the
RII are the registration of the customer, credit rating and the opening of the bank accounts
and provision of loans for agricultural operations. The information stored in the server is
classified and grouped and
made available to the banks and the customers to perform their activities in a context -
sensitive way. The RII data will be used for deriving a credit rating and making it
available to the people and the banks. The digital RII facilitates the following in the
banks:
Access to self- validated data / information with documentary proof in the digital
form to the service- providers at low costs.
Providing techniques and tools for evaluation of the credit on an individual basis
rather than in a standardized manner.
Applying of the information and communication technologies appropriately for
reducing costs, delays, increasing accuracy, objectivity and reducing governance
problems in the credit assessment.
Enabling more efficient capital allocation and improvements in quality of lending.
42
Figure 2.
Rural Credit Delivery Solution using Digital Rural Information Infrastructure
43
Rural Information Infrastructure-Technology Solution
The technology solution involves the use of PDAs or
Laptops with specially made applications for capturing data [voice, picture and data] with
provision for clarification and validation and updating. It also envisages a data center wherein
all these collected data are stored, processed and managed with suitable control procedure
and provision for the audit by the users and / or public authorities. The third element is
CDMA connectivity between the users of the data and the data center. There is provision for
separation of the users transactional data from the general information infrastructure in order
to make the data center viable and also enable the provision of information services on an
application service provider model by keeping such operations distinctly separate from the
management of the rural information infrastructure. The fourth element of the model is
hubbing all these data centers in order to create an information grid for the country as a
whole, in due course.
44
Official banking statistics do not, unfortunately, give us
information on the volume of advances in a specific year. The basic source of data on
banking is the Reserve Bank of Indias annual Banking Statistics. Data in this document are
provided on credit outstanding, which is the total amount advanced, including all
outstanding loans and non-performing assets, on March 31 of the reference year. Data under
the head credit sanctioned do not represent the volume of advanced in a single year either;
in fact, at the all-India level, the figures for credit outstanding, credit sanctioned, and
credit utilised are equal. The consequence of this method of collection and presentation of
data is that there are no data at all on loan advances by banks each year, that is, on the flow of
credit The data on the stock of credit show a marked deceleration in credit provision to the
countryside since 1991; had we data on the actual amount disbursed each year, we would
have had a clearer picture of the collapse in rural banking in the period of liberalization.
45
in fact, the target was over-achieved, that is, more than 40 per cent of total credit outstanding
went to priority sectors. From 1991 to 1996, the share of priority sector credit fell, in line
with the recommendations of the Narasimham Committee. At first glance, the direction in
priority sector lending appears to have been reversed over the last five years. This is,
however, a reversal by redefinition: priority sector lending now includes advances to
newly-created infrastructure funds, to non-banking finance companies for on-lending to very
small units, and to the food processing industry. Loans to multinationals like Pepsi, Kelloggs,
Hindustan Lever and ConAgra now count as priority sector advances. More recently, loans to
cold storage units, irrespective of location, have been included in the priority sector.
Chandrasekhar and Ray (2004) point to the growing presence of foreign banks in India, their
direct presence and their indirect presence through the purchase of shares in existing private
banks. This expansion is not good news for the priority sector. When data for scheduled
commercial banks are disaggregated by type of bank (public sector banks, regional rural
banks, private banks and foreign banks), we find that foreign banks did not lend to rural areas
or agriculture.
46
holdings of less than 2.5 acres or marginal cultivators, were the worst affected by the post-
1991 decline in credit to agriculture. Agricultural credit outstanding to marginal cultivators
accounted for 30 per cent of total agricultural credit outstanding from commercial banks in
1990-91; its share fell to 23.8 per cent in 1999-2000 (Chavan, 2004, Table 10). At the same
time, the share of credit outstanding to small cultivators (with between 2.5 and 5 acres)
stagnated while that to large cultivators rose. Another indicator of the decline in credit to
relatively poor rural households is the fact that the number of small borrowal accounts (or
accounts with a credit limit of Rs 25,000) fell in the 1990s (Chandrasekhar and Ray, 2004)
47
INSTITUTIONAL CREDIT FOR RURAL INDIA
In April-May 2004, the Indian electorate delivered a
dramatic judgement on economic policy. Thirteen years of neoliberal economic policy
(further intensified in the last five to six years) had taken their toll, and there is general
agreement among serious political observers that the election results represented widespread
protest, rural and urban, against the collapse of livelihoods among the mass of the people. If
policy is to repair the damage done to the rural economy, India needs large-scale public
investment in the countryside. The links between rural distress and the near-collapse of the
formal sector of bank is well recognised, and it is no surprise that one of the promises of the
new Government was that it would double the flow of rural credit in three years.
48
of usury requires agrarian reform, a decisive change in banking policy is essential for the very
survival of the working people in rural India.
49
50
MAJOR RURAL BANKING PLAYERS IN INDIA
REGIONAL RURAL BANKS
The RRBs were established with a view to developing the rural economy by providing, for
the purpose of development of agriculture, trade, commerce, industry and other productive
activities in the rural areas, credit and other facilities, particularly to small and marginal
farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected
therewith and incidental thereto .
Objective
Functions
Regional Rural Banks in India
Regional Rural Banks in Tamil Nadu
51
The main objectives of setting up the RRB are to provide credit and other facilities
especially to the small and marginal farmers agricultural labourers artisans and small
entrepreneurs in rural areas.
Each RRB will operate within the local limits specified by notification.
If necessary a RRB will also establish branches or agencies at places notified by the
Government.
Each RRB is sponsored by a public sector bank which provides assistance in several ways
viz., subscription to its share capital provision of such managerial and financial assistance as
may be mutually agreed upon and help the recruitment and training of personnel during the
initial period of its functioning.
Functions
Every RRB is authorized to carry on to transact the business of banking as defined in the
Banking Regulation Act and may also engage in other business specified in Section 6 (1) of
the said Act. In particular a RRB is required to undertake the business of
(a) granting loans and advances to small and marginal farmers and agricultural laborers
whether individually or in groups, and to cooperative societies including agricultural
marketing societies agricultural processing societies cooperative farming societies primary
agricultural credit societies or farmers service societies primary agricultural purposes or
agricultural operations or other related purposes, and
(b) Granting loans and advances to artisans small entrepreneurs and persons of small means
engaged in trade commerce industry or other productive activities within its area of
operation.
The Reserve Bank of India has brought RRBs under the ambit of priority sector lending on
par with the commercial banks. They have to ensure that forty percent of their advances are
accounted for the priority sector. Within the 40% priority target, 25% should go to weaker
section or 10% of their total advances to go to weaker section.
52
Parameter 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Growth(%)
No. Of
RRBs
196 196 196 196 196 196 196 96 86 86 83
Capital 1380 1959 2049 2143 2141 2221 25354 48488 58990 67855 76392 5435.65
Deposit 27059 32226 39294 44539 49582 56295 69719 83143 99093 120184 124296 359.35
Investment
6680 7760 8800 9471 17138 21286 33486 45666 48559 62629 96699 1347.5
Advance 10559 12427 15050 17710 20934 25038 32692 40345 43456 46678 51283 385.62
Total Assets
35820 42236 49596 56802 62500 70195 436805 803416 844982 898760 984364 2648.3
Interest
Earned
3281 3938 4619 5191 5391 5535 6041 6547 7729 7586 8786 165.94
Other
Income
151 207 240 370 430 697 743 790 873 853 1023 577.4
Total
Income
3432 4145 4859 5561 5821 6231 6784 7337 7602 8421 9809 185.8
53
Interest
expanded
2131 2565 2966 3329 3340 3363 5902 8441 8860 8362 9260 334.5
Operating
Expanses
982 1056 1165 1459 1667 1825 1958 2092 22134 2345 2598 164.6
Provision
And
Contigencies
99 96 128 163 132 289 329 369 434 590 699 606.3
Total
Expenses
3113 3621 4130 4787 5107 5187 7860 10533 10994 10707 11758 277.7
Operating
Profit
319 319 729 774 714 1044 985 926 1383 1859 1987 522.8
54
RRBS IMPORTANT BANKING INDICATORS
55
OBJECTIVE OF THE STUDY
1. To study marketing of rural banking in India.
2. To study comparative marketing of rural and urban banking in India.
3. To study about Institutional sources consist of the co-operative and commercial banks
including Regional Rural Banks (RRBS)
4. To study about Non institutional or private sources including money lender traders
commission agents and landlords
56
RESEARCH METHODOLOGY
Research in common parlance refers to a search for knowledge. The advanced learners
dictionary of current English lays down the meaning of research as a careful investigation of
enquiry especially through search for new facts in any branch of knowledge.
The systematic approach concerning generalization and the formulation of a theory is also
research. The purpose of research is to discover answers to questions through the application
of scientific procedures.
A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.
- JOHN.W.BEST
Research may be defined as any organized inquiry designed and carried out to provide
information for solving a problem.
- EMORY
Research is essentially an investigation, a recording and an analysis of evidence for the
purpose of gaining knowledge.
- ROBERT ROSS
57
DATA COLLECTION
The study was based on questionnaire method. There are two types of data collection:
Primary data
Secondary data
Primary data
The primary data are those, which are collected a fresh and for the first time happen to
be original in character. It has been collected through a Questionnaire and personal interview.
Only the primary data is not the sufficient to get information about the complete topic so both
primary and secondary data is collected.
Secondary data
Secondary data are those which have already been collected by someone else and
which have already been passed through the stratified process. It has collected through the
books, journals & Internet.
RESEARCH INSTRUMENT
Questionnaire
A questionnaire is simply a set of questions designed to generate the data necessary for
accomplishing a research projects objectives (Parasuraman, 1991, p.363).
SAMPLE DESIGN:
POPULATION
It covers the 100 unit of population.
SAMPLE PROCEDURES
In this study convenient sampling method was adopted. First each
organization was divided into different departments like Operations, Customer
Services, Human Resources, Internet Marketing and under writing
58
departments. From this department, the respondents were selected on the basis
of convenience.
INTERVEIW SCHEDULE
The interview schedule has been used to collect the data. Information can be
gathered even when the respondents happen to be literate or illiterate.
TABULATION
Formula:
Simple percentage = No of Respondents x 100
Total No of Sample Size
59
LIMITATIONS OF THE STUDY
The study is focused only in Bajaj Allianz Life Insurance Company.
Thus the respondents are not come forward to provide their feedback regarding their
organization than the result is bias.
In this study the sample size is 70. The result might vary when the sample size values
changes it.
Researcher fined the difficulty in searching the appropriate advisor and respondent
throughout the city.
The research was limited to the Bhopal city.
60
CONCLUSION
RRBs' performance in respect of some important indicators was certainly better than that of
commercial banks or even cooperatives. RRBs have also performed better in terms of
providing loans to small and retail traders and petty non-farm rural activities. In recent years,
they have taken a leading role in financing Self-Help Groups (SHGs) and other micro-credit
institutions and linking such groups with the formal credit sector.
RRBs should really be strengthened and provided with more resources with which they can
undertake more of these important activities. And most certainly they should be kept apart
from a profit-oriented corporate motivation that would reduce their capacity to provide much
needed financial services to the rural areas, including to agriculture. Ideally, the best use of
the resources raised by RRBs through deposits would be through extensive cross-
subsidisation. This, in turn, really requires an apex body that would cover and oversee all the
RRBs, something like a National Rural Bank of India (NRBI).
The number of rural branches should be increased rather than reduced; they should be
encouraged to develop more sophisticated methods of credit delivery to meet the changing
needs of farming; and most of all, there should be greater coordination between district
planning authorities, Panchayati raj institutions and the banks operating in rural areas. Only
then will the RRBs fulfill the promise that is so essential for rural development.
61
BIBLIOGRAPHY
Books:
Magazines:
Business Today
Business Week.
Business World
Newspapers
Economic Times
The Hindu
Times of India
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63