Rural Banking has played a crucial role in the process of rural development in India.
1. The National Bank for Agricultural and Rural development (NABARD) has made significant progress in the field of rural credit.
2. It cannot be denied that institutional credit has freed the farmers from the trap of money lenders.
3. But on the other hand, institutional credit is not free from deficiencies. The rural or institutional credit has invariably been associated with securing or collateral. Consequently, a substantial number of farmers can’t avail of credit. Also, commercial banks failed to encourage the habit of thrift among farmers.
4. In addition to this, the leniency on the part of the Government to collect taxes was another set back in rural banking. This further led to the emergence of the feeling among the farmers of not repaying the borrowed amount. This increases the defaulter’s rate and led to financial unfeasibility for the rural banks.