Rural Credit: A New Model of Credit Delivery for ‘Inclusive Growth’

The long-term neglect of agriculture as reflected in the falling real investment, rising input costs and inadequately remunerative prices lead to fall in agricultural production vis-à-vis requirements. Despite spectacular expansion of bank branch network since 1969, a substantial proportion of rural households still remain outside the coverage of the formal banking system. Cumulatively, the sharply declining farm income is leading to suicides by farmers. Amidst the crisis, what remained as eternal is farming community’s desperate search for fresh credit for the ensuing season. The current agrarian crisis thus, calls for radical policy alternatives. Against this backdrop, this article examines the need for effective delivery of credit at an affordable cost to the vast sections of disadvantaged and low-income groups who tend to be excluded from the formal banking channel and argues for constituting a new pan India bank for rural credit by transferring the existing rural branches of Public Sector Banks (PSBs) and Regional Rural Banks (RRBs) to it to serve the needs of rural population with a totally new culture. For, such State intervention in the form of ‘capitalist guided market economy’ alone can ensure ‘inclusive growth’.