Date:17/09/2008 URL: http://www.thehindu.com/2008/09/17/stories/2008091755620900.htm

National

Rangarajan draws a road map for rural credit delivery

Special Correspondent

NEW DELHI: Rajya Sabha member and former Chairman of the Prime Minister’s Economic Advisory Council C. Rangarajan on Monday drew a road map for strengthening the rural credit delivery system of commercial banks, regional rural banks (RRBs) and micro finance institutions (MFIs) for achieving financial inclusion which today “is no longer an option but a compulsion.”

Inaugurating a two-day Federation of Indian Chambers of Commerce and Industry (FICCI) conference on ‘Financial inclusion for sustainable development’ here, Dr. Rangarajan said: “Given the extent of financial inclusion in the rural sector – 51.4 per cent of farmer households do not access credit either from institutional or non-institutional sources – and its variation across regions, social groups and asset holdings, there is urgent need for putting in place a process of enabling access to timely and adequate credit and other financial services by vulnerable groups at an affordable cost.”

Dr. Rangarajan prescribed a seven-point strategy for making the rural bank branches more effective in delivering credit to the smallest of borrowers. Salient features of this strategy, he said, included empathy on the part of bank officers; going beyond the provision of credit to giving advice on a wide variety of matters relating to agriculture and allied activities along with opening more branches in the under-served rural areas.

He said there should also be simplification of procedures relating to grant of loans to small borrowers; strengthening of the linkage between self help group (SHGs) and banks to promote micro enterprises; setting up of joint liability groups for purveying credit to small, marginal and tenant farmers and effective implementation of the business facilitator and correspondent model. Underscoring the need for strengthening RRBs, he said their operations could be extended to the 80 hitherto uncovered districts by adopting the business facilitator and correspondent model.