<–2/”>a >68.84% of the Population in India is rural based and majority of them depends on agriculture for a living. Enhanced and stable Growth of the agriculture sector is important as it plays a vital role not only in generating purchasing power among the rural population by creating on-farm and off-farm EMPLOYMENT opportunities but also through its contribution to price stability and Food Security.The share of agriculture and allied sectors in Gross Bank Credit was about 13 per cent despite rise in credit flow to agriculture in absolute terms. The heavy dependency of farmers on moneylender is partly on account of denial or limited access to Bank Services.
The Rural Finance Market comprises of:
(i) Organized or formal system;
(ii) Unorganized or informal segment.
The Organized or formal segment consists of the Reserve Bank of India (RBI), National Bank for Agriculture and Rural Development (NABARD), Public and Private Sector Commercial Banks, Regional Rural Banks (RRB), Land Development Banks (LDB), State Cooperative banks (SCB), Central Cooperative Banks (CCB), Primary Agricultural Cooperative Banks (PACB), Central and States Governments, Life Insurance Corporations (LIC), Post Office Saving Banks, etc
Main sources of Unorganized or informal segment are as follows:-
Money Lenders: There are two Types of money lenders in rural areas. a) agricultural money lenders and b) professional money lender. Agricultural money lender’s main occupation is farming and money lending is secondary one. Professional money lender’s main profession is money lending. Although the reliance on money lender by rural poor declined over the years, the credit disbursed by money lenders still forms a major portion of the total credit obtained by the farmers.
Land Lords:Small farmers and tenants rely on land lords for finance to meet out their productive and unproductive expenses. This SOURCE OF FINANCE has all the defects associated with money lenders. Interest rates are exorbitant. Often small farmers are forced to sell out their lands to these land lords and they become land less labourers.
The enactment of the Cooperative Credit Societies Act 1904 was the first effort made by the Government in the country to institutionalize Agricultural credit by promoting the cooperatives in a corporate form.After India attained Independence in August, 1947, cooperatives assumed a great significance in POVERTY removal and faster socio-economic growth. With the advent of the planning process, cooperatives became an integral part of the Five Year Plans. As a result, they emerged as a distinct segment in our national economy.In the First Five Year Plan, it was specifically stated that the success of the Plan would be judged, among other things, by the extent it was implemented through cooperative organisations.
State Cooperative Bank at the apex level in each State, the Central Cooperative Bank at the District level and Primary Agricultural Credit Societies / Primary Agricultural Cooperative Banks / Large Sized Agricultural Multi-Purpose Societies / Farmers Service Societies at the base level serves the structural development of Cooperative Societies in India.
The cooperatives have been operating in various areas of the economy such as credit, production, processing, ,Marketing, input distribution, housing, dairying and textiles. In some of the areas of their activities like dairying, urban Banking and housing, sugar and handlooms, the cooperatives have achieved success to an extent but there are larger areas where they have not been so successful.
The failure of cooperatives in the country is mainly attributable to: dormant membership and lack of active participation of members in the management of cooperatives. Mounting overdues in cooperative credit institution, lack of mobilisation of internal Resources and over-dependence on Government assistance, lack of professional management. bureaucratic control and interference in the management, political interference and over-politisation have proved harmful to their growth. Predominance of vested interests resulting in non-percolation of benefits to a common member, particularly to the class of persons for whom such cooperatives were basically formed, has also retarded the development of cooperatives. These are the areas which need to be attended to by evolving suitable legislative and policy support.
National Bank for Agriculture and Rural Development (NABARD) was established through an Act of Parliament in 1982. NABARD was set up as an apex Development Bank with a mandate for facilitating credit flow for agriculture, rural industries and all other allied economic activities.
NABARD was established with an aim of building an empowered and financially inclusive rural India through specific goal oriented departments which can be categorized broadly into three heads: Financial, Developmental and Supervision. Through these initiatives we touch almost every aspect of rural economy. From providing refinance support to building rural Infrastructure-2/”>INFRASTRUCTURE; from preparing district level credit plans to guiding and motivating the banking Industry in achieving these targets; from supervising Cooperative Banks and Regional Rural Banks (RRBs) to helping them develop Sound banking practices and onboarding them to the CBS platform; from designing new development schemes to the implementation of GoI’s development schemes; from training handicraft artisans to providing them a marketing platform for selling these articles.
The Regional Rural Banks (RRBs) were established in 1975 with the objective to create an alternative channel to ‘cooperative credit structure’ with a view to ensure sufficient institutional credit for rural and agriculture sector. The RRBs are integral segment of the Indian banking system with focus on serving the rural areas. As on date 82 RRBs are functioning in the country.
RRBs are jointly owned by Government of India, the State Government concerned and the Sponsor Banks. The issued capital of RRBs is subscribed by Central Government, State Government and sponsor banks in the proportion of 50%, 15% and 35%, respectively.
The functions of the RRB are as follows:
(1) Granting of loans and advances to small and marginal farmers and agricultural labourers, whether individually or in groups, and to co-operative societies, agricultural processing societies, co-operative farming societies, primarily for agricultural purposes or for agricultural operations and other related purposes;
(2) Granting of loans and advances to artisans, small entrepreneurs and persons of small means engaged in trade, commerce and industry or other productive activities within its area of co-operation; and
(3) Accepting deposits.,
Rural banking is a type of banking that provides financial services to people living in rural areas. Rural banks offer a variety of services, including checking and Savings accounts, loans, and credit cards. They also provide financial Education and counseling to help people manage their money.
The history of rural banking in India can be traced back to the early 1900s. The first rural bank was established in 1904 by the Imperial Bank of India. The bank was set up to provide financial services to farmers and other rural residents. In the 1950s, the government of India established the Reserve Bank of India (RBI) to regulate the banking sector. The RBI also set up a number of rural banks to provide financial services to rural areas.
There are two main types of rural banks in India: commercial banks and cooperative banks. Commercial banks are owned by private individuals or companies. Cooperative banks are owned by their members, who are usually farmers or other rural residents.
The functions of rural banks include:
- Providing financial services to rural residents, such as checking and savings accounts, loans, and credit cards.
- Providing financial education and counseling to help people manage their money.
- Promoting Economic Development in rural areas.
- Providing employment opportunities in rural areas.
The challenges faced by rural banks include:
- Low levels of Literacy and financial awareness among rural residents.
- Lack of collateral for loans.
- High levels of poverty in rural areas.
- Lack of Infrastructure in Rural Areas.
- Competition from non-bank financial institutions.
The government of India has taken a number of initiatives to promote rural banking. These initiatives include:
- Setting up rural banks.
- Providing subsidies to rural banks.
- Regulating the banking sector.
- Promoting financial education and counseling.
- Providing infrastructure in rural areas.
The future of rural banking in India is bright. The government of India is committed to promoting rural banking. The RBI is also taking steps to improve the regulation of the banking sector. With these initiatives, rural banking is expected to grow in the coming years.
One of the most important challenges facing rural banking is the lack of financial literacy among rural residents. Many rural residents do not have a basic understanding of financial concepts, such as interest rates and Compound Interest. This lack of financial literacy can make it difficult for rural residents to manage their money and make sound financial decisions.
Another challenge facing rural banking is the lack of collateral for loans. Many rural residents do not own property or other assets that can be used as collateral for loans. This makes it difficult for them to obtain loans from banks.
High levels of poverty in rural areas is another challenge facing rural banking. Many rural residents live below the Poverty Line and do not have enough money to save or invest. This makes it difficult for them to benefit from the services offered by rural banks.
Lack of infrastructure in rural areas is another challenge facing rural banking. Many rural areas do not have access to basic infrastructure, such as roads, electricity, and telecommunications. This makes it difficult for rural banks to operate in these areas.
Competition from non-bank financial institutions is another challenge facing rural banking. Non-bank financial institutions, such as microfinance institutions and moneylenders, are increasingly offering financial services to rural residents. These institutions often charge higher interest rates than banks, but they may be more accessible to rural residents.
Despite these challenges, the future of rural banking in India is bright. The government of India is committed to promoting rural banking. The RBI is also taking steps to improve the regulation of the banking sector. With these initiatives, rural banking is expected to grow in the coming years.
What is a bank?
A bank is a financial institution that provides a variety of financial services to its customers, including checking and savings accounts, loans, and investments.
What is rural banking?
Rural banking is the provision of banking services to people living in rural areas. Rural banks often offer different products and services than urban banks, such as loans for agriculture and small businesses.
What is a regional rural bank?
A regional rural bank (RRB) is a type of rural bank that is owned by the government and operated by the Reserve Bank of India. RRBs were established in 1975 to provide banking services to people living in rural areas.
What are the benefits of rural banking?
There are many benefits of rural banking, including:
- Increased access to financial services: Rural banks provide banking services to people who live in rural areas, where there may not be any other banks. This can help people to save money, get loans, and invest in their businesses.
- Increased economic development: Rural banks can help to stimulate economic development in rural areas by providing loans to businesses and farmers.
- Reduced poverty: Rural banks can help to reduce poverty by providing access to financial services to people who would not otherwise have access to them.
What are the challenges of rural banking?
There are also some challenges associated with rural banking, including:
- High costs: It can be expensive to operate a bank in a rural area, due to factors such as low population density and long distances between branches.
- Low profitability: Rural banks are often less profitable than urban banks, due to factors such as lower interest rates and higher loan defaults.
- Lack of competition: Rural banks often face less competition than urban banks, which can lead to higher prices and lower quality of service.
What is the future of rural banking?
The future of rural banking is uncertain. The challenges facing rural banks are significant, but there are also some opportunities for growth. Rural banks may be able to expand their services to new customers, such as small businesses and farmers. They may also be able to increase their profitability by reducing costs and improving efficiency.
Sure, here are some MCQs on the topics of rural banking and regional rural banks:
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Which of the following is not a function of rural banks?
(a) Providing credit to farmers
(b) Providing financial services to rural households
(c) Providing insurance to rural households
(d) Providing remittance services to rural households -
Which of the following is not a feature of regional rural banks?
(a) They are sponsored by commercial banks
(b) They are owned by the government
(c) They are regulated by the Reserve Bank of India
(d) They are located in rural areas -
Which of the following is not a benefit of rural banking?
(a) It helps to increase agricultural production
(b) It helps to reduce poverty
(c) It helps to improve the Quality Of Life in rural areas
(d) It helps to promote economic development -
Which of the following is not a challenge faced by rural banks?
(a) Lack of access to capital
(b) Lack of skilled staff
(c) Lack of infrastructure
(d) Lack of government support -
Which of the following is not a goal of rural banking?
(a) To increase access to financial services for rural households
(b) To promote economic development in rural areas
(c) To reduce poverty in rural areas
(d) To improve the quality of life in rural areas -
Which of the following is not a type of rural bank?
(a) Commercial bank
(b) Cooperative bank
(c) Regional rural bank
(d) Microfinance institution -
Which of the following is not a source of funding for rural banks?
(a) Deposits from rural households
(b) Loans from commercial banks
(c) Loans from the government
(d) Loans from international organizations -
Which of the following is not a product offered by rural banks?
(a) Savings accounts
(b) Loans
(c) Insurance
(d) Remittance services -
Which of the following is not a service offered by rural banks?
(a) Cash withdrawal
(b) Cash deposit
(c) Account opening
(d) Loan application -
Which of the following is not a regulation imposed on rural banks?
(a) Capital Adequacy Ratio
(b) Liquidity ratio
(c) Non-performing asset ratio
(d) Interest rate ceiling