Rural Credit, Market Reform and Interventionist Institutions: A Micro study of West Bengal

This paper analyzes some policy issues on rural credit against the backdrop of the International Monetary Fund (IMF)-World Bank directed market economic reform that the Indian agriculture witnessed during the 1990s. Two Committees appointed by the Government of India recommended for liberalization of the rural credit market. Following the recommendations, the share of priority sector and agriculture were slashed down. The main empirical part of this paper is based on a primary field survey conducted in two agro-ecological regions of West Bengal. The central hypothesis of the market reformers that there must be a negative association between default of credit and the ascending status of households, has not been approved by the survey findings. A big section of households are denied credit while the other sections of households voluntarily avoid banking habits. A greater proportion of the households are involved in the Integrated Rural Development Program (IRDP) loan that they think as a kind of dole, while comparatively a lower proportion of households are involved in crop loan. This is due to the dismal state of cooperative movement in West Bengal as well as at the all India level. Panchayat or local self-government is also partially responsible as they failed to inculcate banking habits among the poor people. This study reveals that poor people have themselves formed credit cooperatives, but this initiative is not integrated with any formal network.