Rural Credit Delivery In Maharashtra: Experiences With Formal And Informal Lending Institutions

The rural lending institutions in Maharashtra not only encompass traditional formal sector credit but also new generation credit organizations. The present study specifically focuses on credit experiences of various categories of farmers, including landless households, with these lending institutions with the overall objective of suggesting policy measures relating to ensuring smooth flow of credit to them. The study provides two differing views insofar as the functioning of various lending institutions in Maharashtra is concerned. While new generation lending institutions such as SHGs have shown high rate of interest on loan advances, the traditional lending institutions such as cooperatives and commercial banks are seen to beset with other deficiencies, viz., absence of human capital investment and consumption loans, especially for illness, marriage, and other contingencies. These credit institutions have also shown high transaction cost and delay in delivery of credit, besides showing other deficiencies. The study has emphasized upon the need for both formal and informal credit agencies to have simplified loaning procedures with major focus on extension of credit facilities to poorer sections of the rural community, balanced sectoral development, sustainability and viability, operational efficiency and small farmer coverage. Other suggestions of this study encompass efficient use of ‘Kisan Credit Cards’, group lending through SHGs, etc. Further, as the credit delivery through commercial and cooperative banks invariably depended on ownership of land, the landless households are adversely affected in terms of access to credit and are noticed to be neglected section of rural community. It is, therefore, felt in this study that ownership of land as the criterion for the distribution of credit should be relaxed and group responsibility be introduced by formal credit institutions to safeguard the interest of overall rural community. Identification of poorer groups within the landholding categories is another suggestion of this study with a view to help them to rise above the poverty line by providing them access to credit.