Rural banking in India - its performance and problems

Abstract

This paper discusses in aggregate terms the performance of the formal rural financial market (RFM) in India. Considering three different aspects of this market several criteria are applied for this purpose. Thee three aspects are: (1) Sectoral mobilization of deposits and sector's contribution to national income, (2) rural loan-term structure, extent of financial independence, default rate and the distribution of rural credit and (3) purchasing power of rural credit and the distribution of benefits from the concessional lending rates among different sized farms. Considering the criteria related to the first aspect the recent performance of the RFM is impressive. However, growth in the factors associated with these criteria seems to have now stagnated. There also appear insignificant relationship of these factors with the real rate of interest.