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1130 PDF
I
n the last few years, the In- reflected in the growth in ag- more or less confined to ensur-
dian economy has emerged gregate deposits and advances ing a bare minimum access to a
as one of the fastest grow- for scheduled commercial savings bank account without
ing economies in the world. banks, which stood at 15.4 frills to all. Having a current
However, the vulnerability of per cent and 27.9 per cent account/savings account on its
the Indian economy with re- during 2004-2005. However, own, cannot be regarded as an
spect to the performance of the access of banking services accurate indicator of financial
the agricultural sector despite to the rural, agriculture and inclusion.
other macroeconomic indi- the common man in general
cators and sectors gaining in is not as promising. Need For Banking in Rural
strength is well known. For As Mr. V. Leeladhar (Dep- and Agricultural Areas
example, the Indian economy uty Governor, RBI, on the oc- The rural population in In-
grew at an estimated 3.7 per casion of the Commemorative dia suffers from a great deal of
cent in 2002-03 against 5.6 lecture at the Fedbank Hor- indebtedness and is subject to
per cent during 2001-02. This mis Memorial Foundation, exploitation in the credit mar-
was largely because of the neg- Ernakulam) said “Despite ket due to high interest rates
and the lack of convenient
The banking sector has witnessed a huge growth in the access to credit. Rural house-
recent years. However, despite such a growth, the credit flow holds need credit for investing
by banks to the rural and agricultural sectors remains dismal, in agriculture and smoothen-
which, more or less, has resulted in financial exclusion of the ing out seasonal fluctuations
rural masses. The rural and agricultural sectors have to play in earnings. Since cash flows
a very important role if a target of 8% GDP growth per an- and savings in rural areas for
Dr. Gourav Vallabh* num as envisioned in the tenth plan is to be achieved. And the majority of households
the banks and the Chartered Accountants have a huge role are small, rural households
to play in boosting the rural and agriculture sector through typically tend to rely on credit
product innovation, broadening the reach, promotion of for other consumption needs
SHGs/Micro enterprises and providing know-how. This ar- like education, food, hous-
ticle provides an overview of the concept. ing, household functions, etc.
Rural households need access
to financial institutions that
Suraj Chatrath** ative growth of 4.4 per cent in making significant improve- can provide them with credit
* The author is Profes- the agriculture sector. Many ments in all the areas relating at lower rates and at reason-
sor (Finance), XLRI
Jamshedpur. **The economists and policy-makers to financial viability, profit- able terms than the traditional
author is a student of
Business Management
increasingly believe that the ability and competitiveness, money-lender and thereby
at XLRI Jamshedpur. future growth of the domestic there are concerns that banks help them avoid debt-traps
They can be reached at
gvallabh@xlri.ac.in and
economy, to a large extent, will have not been able to include that are common in rural
suraj_chatrath@yahoo. depend on the robust perfor- a vast segment of the popula- India.
com respectively.
mance of the agricultural and tion, especially the underprivi-
rural sector. The manufactur- leged sections of the society, Current Trends: A Pointer
ing and service sectors cannot into the fold of basic banking To Financial Exclusion
sustain the economy’s growth services.” Rural Credit: The 2001
if the rural sector underper- The focus of Indian banks census reveals the low level of
forms. on financial inclusion i.e. de- banking usage among Indian
The contribution of the livery of banking services at an households in general (35.5%)
banking and financial sec- affordable cost of the low-in- and rural households in par-
tor to the current economic come groups has been dismal. ticular (30.1%). This reflects
growth of the Indian econo- In India, the focus of the fi- on the latent demand for gen-
my is very significant. This is nancial inclusion at present is
Lamiya Lokhandwala