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This book is the outcome of a study undertaken to examine the performance of formal rural credit in India. The author had generated the information on history of public intervention in rural credit, changes made in rural credit planning and efforts made to make access to formal credit easier and effective for enhanced use of credit by all sections of rural population. He has considered different facets of access and studied the performance on different fronts. Similarly different performance variables have been examined with respect to use of credit. The analysis is extended to district level as a case study of a selected district. The exercise leads to identification of deficiencies in the existing system and provides suggestions to make it more responsive and useful to users and efficient for the lending agencies. The book is another addition to his earlier publications on agricultural finance and would be useful to students of agricultural finance and policy makers and researchers interested in the rural credit.
Annotation This book examines the current level and pattern of access to finance for India's rural households, evaluates various approaches for delivering financial services, analyzes what lies behind the lack of adequate financial access, and identifies what it would take to improve access to finance.
Against the backdrop of consistent and continuous failure of the formal rural financial system to fulfill the goals and aspirations of government policy and poor masses, on the one hand, and the resilience of the traditional rural informal credit system, on the other, this study has applied the tools of institutional economics—especially those pertaining to information asymmetry and transaction costs to develop a conceptual framework to capture the broad features of the current rural credit scenario in India. Using a fairly large size data from 700 borrower households and 94 lending organizations across the country and over a period of three years, supplemented by case studies of several new generation credit organizations, it has evolved both demand and supply side perspective and action points to resolve the observed problems of rural credit—especially those pertaining to small farmers and other vulnerable (mostly landless) groups.
A goal of agricultural policy in India has been to reduce farmers’ dependence on informal credit. To that end, recent initiatives have been focused explicitly on rural areas and have had a positive impact on the flow of agricultural credit. But despite the significance of these initiatives in enhancing the flow of institutional credit to agriculture, the links between institutional credit and net farm income and consumption expenditures in India are not very well documented. Using a large national farm household–level dataset and instrumental variables two-stage least squares estimation methods, we investigate the impact of institutional farm credit on farm income and farm household consumption expenditures. Our findings show that in India, formal credit is indeed playing a critical role in increasing both the net farm income and per capita monthly household expenditures of Indian farm families. We also find that, in the presence of formal credit, social safety net programs such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) may have unintended consequences. In particular, MGNREGA reduces both net farm income and per capita monthly household consumption expenditures. In contrast, in the presence of formal credit, the Public Distribution System may increase both net farm income and per capita monthly household consumption expenditures.
The key problem of Indian agriculture is finance. Several weaknesses of the rural financial delivery system, have not been corrected even after almost 40 years of bank nationalization of 1969 which focused on enhancing the outreach and access to rural credit in India. In addition to reviewing agricultural credit policies followed in India and assessing the trends and progress in the credit flow and access, this paper aims at examining the suitability of government-directed microfinance activities as an alternate tool to the formal credit delivery mechanism in rural areas. Drawing upon the field surveys conducted in four districts of two federal states in India, the paper not only indicates the wide recognition the program has gained within the rural community but also reflects the inequitable impact of microfinance initiative, and highlights a few prominent flaws in program implementation and administrative mismanagement which reduce the effectiveness of the program. While the survey findings reveal the main problem areas like unfriendly attitude of bank officials, inaccessible bank branches, non-availability of timely and adequate credit, sub-optimal selection of key economic activities and market related problems, the regression result points out that land-based activities are not remunerative for the microfinance beneficiaries. This analysis also indicates that literacy, interest rate on loanable funds, ownership of productive assets and savings are the major determinants of the income function. The paper concludes with some policy implications for improving the design for implementing the program. The paper adds to the extant knowledge about microfinance programs by comparing the performance of formal banking with the informal banking through microfinance initiatives in a developing country like India.
The Present Study Is A Collection Of Several Fact-Finding, On-The-Spot Surveys On The Functioning Of Three Tier Institutional Structure. It Is Divided Into Two Parts. Part I Reveals The General Picture I E The Prospects And Constrains Of Cooperative Credit Movement In India. Part Ii Comprises Of 13 Case Studies. First Two Chapters Deal With The Performance Of District Cooperative Central Banks. As Cooperatives Are Still Harping On Security In Their Lending Marginal Farmers/Small Farmers Are Denies Their Due Share In The Total Credit. Morever, Large Farmers Claim Lion S Share In Cooperative Credit By Masking Themselves As Small Farmers. Though On Quantitative Count Cooperative Institutions Particularly Pacs Have Done A Commendable Job But Their Performance Qualitatively Speaking, Is Uneven Between Regions And Membership Groups, Which Is Established In Chapters From 13 Through 18. Consumption Credit To Farmer-Members Is Neglected Aspect Of Cooperative Functioning. Its Availability From Pacs In Villages Will Be Free Them From The Strangulations Of Village Moneylenders (19 Chapter). Therefore, There Is Utmost Need To Supply The Essential Consumer Commodities Through Pacs Under Public Distribution System (20Th Chapter). Finally, A Frontal Attack Is Made On The Problem Of Overdues Of Cooperative Institutions. Contents Chapter 1: Co-Operative Development In India With Focus On Seventh Plan Strategy; Chapter 2: Sound Agricultural Credit System In India: An Analysis; Chapter 3: Rrbs: How Far They Are Filling The Credit Gap In Rural India; Chapter 4: Co-Operative Credit For Agricultural Development; Chapter 5: Short-Term Co-Operative Credit: A Case Of A P State Co-Operative Bank Ltd; Chapter 6: Long-Term Financing Of Agriculture: A Study Of Apld Bank; Chapter 7: The Flow Of Co-Operative Credit To Small Farmers; Chapter 8: Whither Co-Operative Credit Movement? Chapter 9: Gandhiji And Co-Operative Credit Movement; Chapter 10: Co-Operatives Failed In A P But Will Succeed; Chapter 11: Co-Operative Central Banks: Their Operation And Performance: A Case Study Of Two Dccbs In A P; Chapter 12: Co-Operative Credit: The Role Of Co-Operative Central Bank In Prakasam District Of A P; Chapter 13: Progress Of Pacs In Prakasam District In The Era Of Planning; Chapter 14: A Study Of The Structure, Conduct And Performance Of Pacs In Prakasam District; Chapter 15: Regional Variations In The Performance Of Pacs: A Case Study; Chapter 16: Credit Performance Of Pacs: A Case Study; Chapter 17: Inter-Society Variation In The Loaning Operations: A Case Study; Chapter 18: Co-Operative Finance For Weaker Sections: A Case Study Of Prakasam Distt.; Chapter 19: The Role Of Pacs In Providing Consumption Credit To The Weaker Sections; Chapter 20: Role Of Co-Operatives In Pds For Essential Commodities: A Case Study; Chapter 21: Sfda In Prakasam District; Chapter 22: Joint Co-Operative Farming Society In An Agrarian Village: A Case Study In An Agrarian Village; Chapter 23: Recovery Performance Of Pacs And Its Strategy: A Case Study.
Credit cooperatives in India make up one of the largest rural financial systems in the world. Playing a vital role in dispensing credit in largely agricultural areas, they are also the weakest link in the formal credit delivery system. This book provides a valuable case study of the traditional banking system in this developing economy, exploring the reasons for the poor performance of credit cooperatives in India and suggesting measures to revitalise them. Although this sector has grown along with the micro-credit sector to provide finance for the poor and the less creditworthy borrowers, financing development still remains a major problem in the developing world. However, the financial health of credit cooperatives in India has been a matter of perennial concern. The author argues that cooperatives hold great promise for financial inclusion if the financial position of the cooperatives can be consolidated. Providing a detailed analysis of the historical evolution of cooperatives in India, the book establishes the link between different segments of this institutional system and their performance in a commercial sense to show that cooperatives occupy an important place in India’s financial edifice as they play a key role in the multi-agency framework for rural credit delivery. As such, the analysis provides a valuable reference for scholars of economics, Asian economics and finance.
Looking to examples in Thailand and Bangladesh, this book enumerates the various factors which have been instrumental in weakening the rural credit agencies set up to relieve rural poverty in developing countries.