Rural banking in India has been the subject of study Survey Committee Report in 1954, literally thousand 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.
As the majority of the Indian population lives in rural areas, there is an urgent need to deliver citizen services to them in a cost effective way with assured quality. This involves mainly the following:
−> Enabling the ready access at the place of the villagers.
−> Reducing transaction cost to make the services affordable.
−> Reduction in delays.
−> Improving the quality of services available.
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.
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....