Professional Documents
Culture Documents
MBA
In
FINANCIAL MANAGEMENT
Submitted By:
VARUN TRICHAL
511227243
DEPARTMENT OF MANAGEMENT
DECLARATION
I hereby declare that the project entitled Rural Banking in India which is being submitted
in partial fulfilment of the requirement for the award of the Degree of Master in Business
Administration to SIKKIM MANIPAL UNIVERSITY, SIKKIM is an authentic record of our
own work done under the guidance of Mr.Atul Dubey, Department of Management, SIKKIM
MANIPAL UNIVERSITY, SIKKIM.
The matter reported in this project has not been submitted earlier for the award of any other
degree.
Varun Trichal
STUDENT NAME
ACKNOWLEDGEMENT
I sincerely express indebtedness to esteemed and revered guide Ms. Deepti Tarani, for her
invaluable guidance, supervision and encouragement throughout the work. Without her kind
patronage and guidance, the project would not have taken shape.
I take this opportunity to express deep sense of gratitude to Mr. Atul Dubey, Head of
Management Studies, for his encouragement and kind approval. We would like to express
our sincere regards to him for advice and counseling from time to time.
I owe sincere thanks to all the lecturers in Rural Banking in India for their advice and
counseling time to time.
Varun Trichal
BONAFIDE CERTIFICATE
SIGNATURE:
SIGNATURE:
HEAD OF THE DEPARTMENT
IN CHARGE
FACULTY
ABSTRACT
Summary of Project
Rural banking in India has been the subject of study Survey Committee Report in
1954, literally thousands of reports have examined and investigated the
problems relating to the credit delivery for agriculture and rural area. Latest
magnum opus on the subject is the National Agricultural Credit Review report
2000. The Expert Committee on Rural Credit (Chairman: Professor V.S.Vyas)
submitted its report in 2002.One more High Power Committee headed by
Professor Vyas set up by the Reserve Bank of India recently to review and advice
on improving credit delivery to agriculture has also given its report.
Financial liberalization after 1991 decimated the
formal system of institutional credit in rural India. It represented a clear and
explicit reversal of the policy of social and development banking, such as it was,
and contributed in no small way to the extreme deprivation and distress of which
the rural poor in India have been victims over the last decade.
Rural credit has been a laboratory for
various policies, initiatives, investigations and improvements since 1955.The first
major
strategy
adopted
for
improving
rural
credit
delivery
was
the
borne out by the market revolution that is taking place in Indias villages.
The
Narasimham
committee
on
rural
credit
recommended
the
rural
credit
policy
of
the
United
Progressive
Alliance
government.
REFERENCE
Books:
Saxena,
Rajan.
(2003):Marketing
Management
Tata
Mcgraw-Hill
Magazines:
Business Today
Business Week.
Business World
Newspapers
Economic Times
The Hindu
Times of India
QUESTIONNAIRE
NAME
SEX -
AGE
DESIGNATION
Dear sir/madam,
1) Central Scheme to provide Interest Subsidy for the period of moratorium on
loans taken by farmer from economically weaker sections from schedule
banks under the loan scheme of the Indian Banks Association?
To great extent
To some extent
To very little extent
2) To what extent is Sales Promotions have been used by banker to increase
sales in the short term?
Completely
Partially
Nil
3) Does your marketing policy of bank have focus marketing on agro- sector?
strongly agree
Agree
Disagree
strongly disagree
cant say
Yes
No
Yes
No
Modern
Yes
No
10
INDEX
1. INTRODUCTION
2. BANKING POLICY IN RURAL INDIA
3. DISTRIBUTION CHANNEL OF RURAL BANKING
4. MARKETING STRATEGIES OF RURAL BANKING PLAYERS IN INDIA
5. AN ICT STRUCTURE FOR RURAL BANKING ENABLEMENT
6. OBJECTIVE OF THE STUDY
7. RESEARCH METHODOLOGY
8. DATA ANALYSIS AND INTERPRETATION
9. CONCLUSION
10. BIBLIOGRAPHY
11. ANNEXURE
11
INTRODUCTION
12
INTRODUCTION
Rural banking in India has been the subject of study Survey Committee Report in 1954,
literally thousands of reports have examined and investigated the problems relating to the
credit delivery for agriculture and rural area. Latest magnum opus on the subject is the
National Agricultural Credit Review report 2000. The Expert Committee on Rural Credit
(Chairman: Professor V.S.Vyas) submitted its report in 2002.One more High Power
Committee headed by Professor Vyas set up by the Reserve Bank of India recently to review
and advice on improving credit delivery to agriculture has also given its report.
As the majority of the Indian population lives in rural areas,
there is an urgent need to deliver citizen services to them in a cost effective way with assured
quality. This involves mainly the following:
1. Enabling the ready access at the place of the villagers.
2. Reducing transaction cost to make the services affordable.
3. Reduction in delays.
4. Improving the quality of services available.
The criticality of this need may be seen from the fact that
even with concerted and extensive attempts to meet the credit needs of the farmers for
agricultural operations etc., informal agencies including money lenders are currently
providing substantial portion of the total credit to this sector. Besides, the agricultural credit
flows themselves are inadequate and the gross capital formation can be improved only if
substantial amount of investment funds flow to the rural areas in the form of credit. Likewise,
there is also a need to provide market information, extension services, marketing support and
government and other public services to the people in a cost-effective manner. For achieving
financial inclusion and economic growth, the ICT can play an important role by increasing
effective access and improving delivery and governance in banking services. Against this
background, the key issue is how technology can be harnessed for improving the efficacy of
the credit delivery and for the minimization of the transaction costs involved, for ensuring
that bank credit actually increases and promotes productive
capital formation and investment in rural areas and helps address the critical problem of the
rural-urban service divide.
13
14
15
BANKING POLICY IN
RURAL INDIA
16
substantially, although they were, as was the green revolution itself, biased in respect of
regions, crops and classes.6 The two main crops that gained from the green revolution, as is
well recognized, were wheat and rice, and the application of the new technologies was
primarily in the irrigated areas of the north-west and south of India, with the benefits
concentrated among the richer classes of cultivators.
In 1975, the Government established by ordinance and
then legislation a new network of rural financial institutions called the Regional Rural Banks
(RRBs), which were promoted by the Government of India, State governments and
commercial banks. These were created on the basis of recommendations by a working group
on commercial credit, also called the Narasimham Committee, and were intended to
combine the cooperatives local feel and familiarity with the business acumen of commercial
banks (Jagan Mohan, 2004, p 22).7 The number of such banks expanded rapidly, and
covered 476 districts by 1987
The second phase, which began in the late 1970s and early
1980s, was a period when the rhetoric of land reform was finally discarded by the ruling
classes themselves, and a period when the major instruments of official anti-poverty policy
were programmes for the creation of employment. Two strategies for employment generation
were envisaged, namely wage-employment through state-sponsored rural employment
schemes and self-employment generation by means of loans-cum-subsidy schemes targeted at
the rural poor. Thus began a period of directed credit, during which credit was directed
towards the weaker sections. The most important new scheme of this phase was, of course,
the Integrated Rural Development Programme or IRDP, a scheme for the creation of
productive income-bearing assets among the poor through the allocation of subsidized credit.
The IRDP was initiated in 1978-79 as a pilot project and extended to all rural blocks of the
country in 1980. There is much writing on the failure of IRDP to create long-term incomebearing assets in the hands of asset-poor rural households. 8 Among the many reasons for this
failure were the absence of agrarian reform and decentralized institutions of democratic
government, the inadequacy of public infrastructure and public provisioning of support
services and the persistence of employment-insecurity and poverty in rural society.
Nevertheless, the IRDP strategy did lead to a significant transfer of funds to the rural poor.
18
19
DISTRIBUTION
CHANNEL OF RURAL
BANKING
20
21
22
23
Marketing strategies of
rural banking players in
India
24
To echo the thoughts of C.K. Prahalad, the bottom of the pyramid segments will be the
growth drivers of the future this is certainly being borne out by the market revolution that is
taking place in Indias villages. The Narasimham committee on rural credit recommended
the establishment of Regional Rural Banks (RRBs) in meeting the needs of rural areas.
Indian mobile banking has two major segments: the urban segment and the rural segment.
Celent estimates that urban mobile banking subscribers will reach 65 million by 2012. The
rural mobile segment represents a huge opportunity to bank the unbanked population, thereby
adding a revenue stream.
In a new report, Mobile Banking in India; Dual Strategy for Rural and Urban Segments,
Celent explains the mobile banking ecosystem in India and looks at the trends driving the
growth in its urban and rural subsegments. The report looks at the prospects of mobile
banking from both a regulatory perspective and an industry perspective.
In Indias urban segment, mobile banking is an enabling fifth channel, and in the rural
segment, mobile banking is a primary mode of financial inclusion. In both segments, the two
fundamental factors affecting the growth of mobile banking are regulations and technology.
Nontransactional users will remain the majority in India because they will continue to use
online banking and other payment mechanisms. Government-to-person (G2P) payments will
be the major growth driver for rural mobile banking. Regulatory changes are also a big driver.
Celent believes that, by 2012, over 60 million rural users will be beneficiaries of mobile
banking through business correspondence.
25
While the urban banking market is dominated by information services, the payment
transactions segment has not picked up mainly due to regulatory limitations, says Rajesh M
R, an analyst with Celent and coauthor of the report. However, recent relaxation of payment
norms by RBI has presented a huge opportunity for this segment.
The rural mobile banking segment is a high growth area, due to the adoption of the business
correspondent model and relaxed Know Your Customer norms, but financial literacy remains
a big issue for retaining the rural adopters, says Sreekrishna Sankar, Celent analyst and
coauthor of the report.
Marketing strategy and
The Reserve Bank of India has a mandate to be closely involved in matters relating to rural
credit and banking by virtue of the provisions of Section 54 of the RBI Act. The major
initiative in pursuance of this mandate was taken with sponsoring of All-India Rural Credit
Survey in 1951-52. This study made agency-wise estimates of rural indebtedness and
observed that cooperation has failed but it must succeed. The Report of the Committee on
Directions is still considered a classic on the subject, and two of the four members were,
incidentally, from Andhra Pradesh. This is the origin of the policy of extending formal credit
through institutions while viewing local, traditional and informal agencies as usurious. In the
first stage, therefore, efforts were concentrated on developing and strengthening cooperative
credit structures. The Reserve Bank of India has also been making financial contributions to
the cooperative institutions through evolving institutional arrangements, especially for
refinancing of credit to agriculture.
While enacting the State Bank of India Act in 1955, the objective was stated to be the
extension of banking facilities on a large scale, more particularly, in rural and semi-urban
areas. SBI, therefore, became an important instrument of extending rural credit to supplement
the efforts of cooperative institutions. In 1969, 14 major commercial banks were nationalised
and the objective, inter alia, was "to control the heights of economy". The nationalised banks
thus became important instruments for advancement of rural banking in addition to
cooperatives and State Bank of India. The next step to supplement the efforts of cooperatives
and commercial banks was the establishment of Regional Rural Banks in 1975 in different
states with equity participation from commercial banks, Central and State Governments.
By 1982, to consolidate the various arrangements made by the RBI to promote/ supervise
26
institutions and channel credit to rural areas, NABARD was established. Though several
efforts were made to increase the flow of institutional credit for agricultural and rural lending,
there were mismatches in credit and production. Field studies conducted to determine the
reason revealed that it was due to absence of effective local level planning. It was felt that
with the establishment of large network of branches, a system could be adopted to assign
specific areas to each bank branch in which it can concentrate on focussed lending and
contribute to the development of the area. With a view to implementing this approach, RBI
introduced a scheme of "Service Area Approach" for commercial banks. To further
supplement the institutional mechanism, the concept of Local Area Banks was taken up in
1996-97 and in-principle approval has been given for 8 Local Area Banks.
As regards cost of credit, for most of the period, the administered interest rate regime was
applicable for bank lending and this included concessional terms for priority sector.
Currently, all interest rates on bank advances including in rural areas are deregulated and
there is no link between priority sector and interest rate, though there are some regulations on
interest rates by size of advance i.e. below Rs. 2 lakh in respect of commercial banks.
As regards policy measures to enhance flow of credit to rural areas, apart from availability of
credit lines from the Reserve Bank of India, the concept of priority sector was evolved to
ensure directed credit. Currently, the stipulation is that domestic commercial banks should
extend credit to the extent of 40 per cent of the total net bank credit to priority sector as a
whole, of which 18 per cent should be specifically for agriculture. Out of the target of 18 per
cent for agriculture, at least 13.5 per cent should be by way of direct loans to agriculture and
remaining could be in the form of indirect loans.
Where a bank fails to fulfil its commitment towards priority sector lending, it is currently
required to contribute to Rural Infrastructure Development Fund set up by NABARD.
NABARD in turn provides these funds to State Governments and state owned corporations to
enable them to complete various types of rural infrastructure projects. It is pertinent to
recognise that there are a large number of credit linked programmes sponsored by the
Government for direct assault on poverty. In programmes relating to self-employment and
women welfare, the multiplicity of programmes has been reduced by having a comprehensive
and consolidated programme named Swaranjayanti Gram Swarojgar Yojna. The financial
sector reforms, which were introduced from 1991 onwards were aimed at transforming the
credit institutions into organisationally strong, financially viable and operationally efficient
units. The measures introduced include reduction in budgetary support and concessionality of
resources, preparation of Development Action Plans and signing of Memoranda of
27
Understanding with the major controllers, and introduction of prudential norms relating to
income recognition and asset classification for RRBs and cooperative banks. The lending
rates for these institutions have also been deregulated. Other measures of liberalisation
include allowing non-target group financing for RRBs, direct financing for SCBs and CCBs,
and liberalisation in investment policies and non-fund business.
These measures have contributed to many RRBs turning around and becoming more vibrant
institutions. In the case of cooperative banks, there is greater awareness of the problems of
officialisation and politicisation and initiatives in this regard include legislative actions on
cooperative banks in Andhra Pradesh.
Recently, several policy initiatives have been taken to advance rural banking. These includ
additional capital contribution to NABARD by the RBI and the Government of India,
recapitalisation and restructuring of RRBs, simplification of lending procedures as per the
Gupta Committee recommendations, preparation of a special credit plans by public sector
banks and launching of Kisan Credit Cards. Finally, a scheme linking self-help groups with
banks has been launched under the aegis of NABARD to augment the resources of micro
credit institutions. A Committee has gone into various measures for developing micro credit,
and has submitted its report, which is under the consideration of the RBI. In respect of
cooperatives, a Task Force
under the chairmanship of my esteemed and affectionate colleague Shri Jagdish Capoor,
Deputy Governor has been constituted to review the status and make recommendations for
improvement.
Undeniably, these initiatives have enabled a very wide network of rural financial institutions,
development of banking culture, penetration of formal credit to rural areas and a counter to
the dominance of moneylenders. These initiatives have also financed modernisation of rural
economies and implementation of anti-poverty and self-employment programmes. However,
for the purpose of focussing on the future, generalisation on some concerns regarding the
current approach to rural credit and banking would be appropriate.
Firstly, the cooperative banks have different layers and many of them have significantly large
non-performing assets (NPAs). Many cooperatives are undercapitalised. The public sector
banking system also exhibits NPAs, and some of them have so far been provided with
recapitalised funds. The RRBs also exhibit NPAs and these have been recapitalised from the
Government of India so far, which would imply a total recapitalisation of double the amount
28
provided by Government of India. Secondly, according to the All-India Debt and Investment
Survey, 1991-92, the share of debt to institutional agencies in the case of rural households has
increased marginally from 61.2 per cent to 64 per cent between 1981 and 1991. However, it
must be noted that this figure relates to debt outstanding and the overall share of the
institutional credit in the total debt market is likely to be smaller than what this figure
indicates. Thirdly, the cost of financial intermediation by the various rural financial
institutions is considered to be on the high side. The difference between the cost of resources
made available to NABARD by Reserve Bank of India and the commercial rates of interest at
which the cooperative banks lend for agriculture in the deregulated interest rate regime is also
considered to be on the high side.
Fourthly, empirical studies indicate that institutional credit is more likely to be available for
well to do among the rural community.
Fifthly, empirical studies also indicate that relatively backward regions have less access to
institutional credit than others do. Sixthly, the non-availability of timely credit and the
cumbersome procedures for obtaining credit are also attributed to the functioning of the
financial institutions, though this is equally valid for rural and urban banking.
Finally in regard to Government sponsored schemes, there has been overlap in accountability
in as much as the beneficiaries are identified on a joint basis. Banks have been indicating that
NPAs are proportionately more due to this overlapping.
An important development in the formal segment of the rural financial markets is the growing
significance of non-banking financial companies, in particular, in hire purchase and leasing
operations. They also finance traders of agricultural inputs and output. The NBFCs have only
recently been brought under the regulatory regime of RBI. While their importance is
recognised in financing diversified rural agriculture, its extent and scope of operations has not
been adequately researched.
Marketing strategy and Dynamics of Rural Economy
Problems, prospects and solutions to many of the issues mentioned have been researched and
debated, primarily with a view to strengthening, revamping or re-orienting rural financial
institutions. However, there is merit in viewing the problems of rural credit and rural banking
in a wider context. In this regard, it will be useful to recognise some dynamics of rural
economy. First, services sector is getting increasing importance in the rural areas also -from
coffee shops to cable television operators. Assessing and meeting of credit needs of this
sector is important. Second, the integration between rural and urban areas has increased
29
significantly, with the result, mobility of labour, capital, products and even credit between the
two is increasing. Third, commercialisation of agriculture, particularly the increasing role of
cash crops like cotton has resulted in substantial role for suppliers' and buyers' credit. Thus,
fertiliser and pesticide are supplied to farmers on credit, often on deferred payment basis. In
such deferred payment arrangements, credit terms are built into price and hence it is difficult
to isolate terms. Similarly, the commission-agents advance money towards purchase of output
from farmers, which amounts to providing credit and includes an element of forward trading.
These arrangements are often entered into on a voluntary basis. The present banking system
does not generally encourage financing the transactions of this nature. However, a few nonbanking financial companies do provide indirect finance for such purpose.
Fourth, compared to cereal production, other food items, including poultry and fish are
growing at a faster pace. In other words, rural agriculture is getting increasingly diversified in
terms of products and processes.
Fifth, in areas where commercialisation of agriculture has reached significant levels, the
traditional landlord-based tenancy is replaced with commercial-based tenancy. Where
intensive cultivation of cash crops such as cotton is called for, this has become quite
common. However, the present credit and banking procedures do not cater to the working
capital needs of such commercial based tenancy relationship.
Sixth, given the diversified activities, and large work force in rural areas, there is increasing
recourse to multiple occupations to earn a decent livelihood. For example, a small farmer is
also a petty trader and may also be a satellite based cable television operator in the village.
The end use specification and monitoring of credit is more difficult in such circumstances.
Seventh, to the extent employment and indeed incomes could be seasonal, especially for
agricultural labour, there is reason to seek and obtain consumption loans. Such assurance is
possible with prosperity in rural employment. Present arrangements in formal credit markets
are inadequate to meet such requirements.
Eighth, while there is significant commercialisation and diversification of rural economies,
progress is very uneven in different parts of the country. So, there are still many areas, where
exploitation of tribals by money lenders or of agricultural labourers by landlord-money
lenders, still persists. Norms and procedures of credit, therefore, need to be different to meet
varying circumstances.
Ninth, from the data on credit deposit ratios, it is clear that the banking system is a conduit
for net transfer of financial savings from rural to non-rural sectors. On the other hand, a major
30
part of informal markets would be local and hence savings would be locally deployed, within
the rural areas.
Marketing strategy and Rural Credit Markets: New Realities
As mentioned earlier in the approach to rural banking, the basic thrust of our policy has been
to promote institutional credit and eliminate or ignore informal finance. However, in reality,
while formal credit has expanded its share, informal finance continues to be significant. The
idea of promotion of Self-Help Groups and micro financing is an indirect admission of
necessity of informal finance. The future of rural banking cannot be appreciated without fully
understanding both formal and informal rural credit markets, especially their linkages. Since
in the earlier sections, organisation and functioning of the formal credit system in the rural
areas has been explained, in this section nature of informal markets and the linkages will be
explored.
The informal financial market which is legal but officially unrecorded comprises unregulated
financial activities i.e., outside the orbit of officially regulated financial intermediaries. In the
informal financial transactions, one could treat borrowing and lending among friends and
relatives as occasional and not part of such an informal market. Consequently, there are three
broad
types
of
informal
financial
transactions,
viz.,
well-defined
group,
tied-
32
through the credit card route. Credit card business, so far, is an essentially urban
phenomenon. Hence, the financing of consumption by informal markets in rural areas cannot
be frowned upon when it is being done by banks through their credit card business.
Fifth, the real extent of informal markets is grossly understated in any survey that views data
on outstanding debt since the turnover of debt is admittedly much lower for public
institutions than for private lending. The turnover-differential is on account of several factors,
including preference for short term finance and better recovery-performance in informal
markets. Sixth, the social significance of informal credit is more than its proportion in
financial terms since the poorer sections draw far larger amounts from informal than formal
markets. Seventh, a significant part of informal market is through leasing, hire purchase,
deferred payment, etc. with finance often provided by NBFCs. The informal market is
providing a range of financial products, which the formal banking system is not able to.
Eighth, studies have demonstrated that expansion of literacy and education tends to increase
the access of rural folk to formal credit, reduce the informal transaction costs in dealings with
formal credit institutions and improves their resistance to malpractices attributable to landlord
or moneylender. The exploitative nature of informal markets is more pronounced in tribal or
less developed areas while productive nature of informal markets is more pronounced in
prosperous villages. Indeed, one can argue that in many areas, the formal credit structure has
provided a positive institutional alternative to the moneylenders and thus marginalising his
role in providing credit to rural masses.
Marketing strategy and Linkages in Rural Debt Markets
Having recognised that one cannot wish away informal markets, some tentative
generalisations on the relative roles of formal and informal markets and on the linkages
between them would also be necessary to capture the emerging but complex realities. Such
generalisations are possible on the basis of empirical studies.
First, the formal credit has a tendency to flow more easily to agriculturally developed regions
and to relatively larger farmers leaving the backward regions and small farmers to be largely
served by the informal market. This phenomenon is generally explained by four factors viz.,
poor-resource endowment features of the borrower, poor personal factors (education, social
contact etc), underdevelopment of a region and higher transaction costs.
Second, as per empirical studies, transaction costs associated with formal credit include fees
for procuring necessary certificates (open), travel and related expenses including loss of
33
wages etc., and informal or unofficial commissions (hidden). The transaction costs vary with
type of credit agency involved, the type of borrower and farm-size.
Third, uncertainties and delays usually associated with formal credit can also be treated as
additions to the transaction costs.
Fourth, the true cost of borrowing from the formal credit system is thus higher than nominal
cost if the above informal transaction costs are also included. To the extent some transaction
costs are fixed, the effective cost of borrowings for smaller loans tends to be relatively higher
than for a larger loan.
Fifth, there are usually hidden costs or concealed interest rates in respect of informal credit
also, which have to be added to the nominal costs to arrive at the true cost. These hidden
costs generally relate to tied lending, tied to land, labour, input or output. The tied advance in
respect of labour is particularly relevant for migratory labour. The hidden costs are usually in
the form of undervaluation of labour and output of borrowers and overvaluation of inputs
supplied by lender.
Sixth, the choice between formal and informal credit depends on both the access and relative
true costs. Thus, recourse to informal credit, admittedly at far higher nominal costs, is to be
explained partly in terms of effective costs and the extent of supply of formal credit. Seventh,
in assessing relative roles, both supply and demand side bottlenecks of formal credit need to
be appreciated. The former relate to asset-based lending policies and complex formalities
and procedures, while the latter relate to poor endowment, lower education and socialcontact, usually caste-based in backward regions. Viewed differently, a larger role for
informal credit may arise due to low level of commercialisation and monopoly power of
moneylender; and it may also arise due to high level of commercialisation of agriculture
when supply from formal channel cannot match significant demand for credit.
Eighth, it is also necessary to recognise that, to the extent informal markets tend to lend to
borrowers who are relatively less creditworthy, risk-premium is bound to be higher. This
would also get reflected in higher nominal interest rates in informal markets and indeed
higher true cost, though it may not be so high if it is net of risk premium.
It is clear that the critical issue in respect of informal credit is the manner in which the
linkages among the participants in the market operate and result in varying degrees of hidden
costs. It is possible to make some exploratory postulates here. First, trader-lenders are likely
to provide most of production - credit, while farmer-lender or moneylender is likely to
provide most of consumption - credit. It is, of course, possible that some individuals combine
the functions of farmer, trader and moneylender. Second, informal markets are unlikely to
34
finance credit for investment purposes, given the time preference. Third, the levels of
education are likely to reduce the scope for gross overvaluation or undervaluation in linkedtransactions. Fourth, the inter-linked transactions among parties with equal bargaining power
are likely to minimise the hidden costs. Fifth, from the supply side, farmer-lenders may tend
to be associated with land and labour market linkages while trader-lender is likely to be
associated with input-output markets. On the demand side, agricultural labour may be
associated with land and labour markets while the farmer-cultivator with input-output
linkages. In the process, it is likely that a farmer would be a borrower from a trader and a
lender to agricultural labour, a common phenomenon in villages. It will, therefore, be over
simplification to divide the rural population into lenders and borrowers or exploiters and
exploited. Sixth, similarly it is necessary to appreciate the role of linkages in credit-riskmitigation. In fact, the risk reducing element of linkages are not built into formal creditchannels. Incidentally to the extent the transaction costs are front loaded in respect of formal
credit, there is no incentive to repay while the true costs of informal credit are spread out.
Seventh, in terms of bargaining power among the class of borrowers, the agricultural labour
and migratory labour appear to be weakest except in agriculturally prosperous areas where
labour-shortage is acute to cater to agricultural and other operations. Similarly, the differential
in bargaining power between large and small borrowers is similar to that between large
corporate and small-industrialists in urban areas.
In brief, the linkages between formal and informal markets are complex, contextual and
dynamic. The two markets appear to compete with and also supplement each other.
Technology and marketing strategy
We should recognise that the role of banks, which is central to formal credit in rural areas, is
fast changing. Many non-banks are providing avenues for savers and funds for investment
purposes. Banks themselves are undertaking non-traditional activities. Banks are also
becoming what are called universal banks and are already providing a range of financial
services such as investments, merchant banking and even insurance products. Similarly, non
banks are also undertaking bank like activities. At present in India, these are mostly confined
to urban areas, but they will sooner than later spread to rural areas.
Another development relates to the gradual undermining of the importance of branches of
banks. The emergence of new technology allows access to banking and banking services
without physical direct recourse to the bank premise by the customer. The concept of
35
Automated Teller Machines (ATMs) is the best example. At present, ATMs are city oriented
in our country. It is inevitable that ATMs will be widely used, in semi-urban and rural areas.
The technology-led process is leading us to what has been described as virtual banking. The
benefits of such virtual banking services are manifold. Firstly, it confers the advantage of
lower cost of handling a transaction. Secondly, the increased speed of response to customer
requirements under virtual banking vis--vis branch banking can enhance customer
satisfaction.
Thirdly, the lower cost of operating branch network along with reduced staff costs leads to
cost efficiency. Fourthly, it allows the possibility of improved quality and an enlarged range
of services being available to the customer more rapidly and accurately at his convenience. It
may not be possible to deny these facilities to rural areas in our country since, if banks do not
provide them, some non-banks will do it.
Another development relates to the increasing popularity of credit cards, which are bound to
reach rural areas. Many Public Sector Banks are already in credit card business. In fact,
multipurpose cards could be a facility that IT could usher in for rural population. The
potential can be illustrated with SMART cards. SMART cards which are basically cards
using computer circuits in them thereby making them intelligent' would serve as
multipurpose cards. SMART cards are essentially a technologically improved version of
credit and debit cards and could be used also as ATM cards. They could be used for credit
facilities at different locations by the holders. SMART cards could also be used for personal
identification and incidentally for monitoring credit usage.
For the spread of virtual-banking and SMART cards to rural areas, it is essential that electric
power and telecom connectivity are continuous and supplies do not drop especially during the
hours when a bank's transactional activity is at relatively high levels. The banks could, under
such assured supply conditions acquire the required banking software and also put in place
the necessary networking for providing anywhere banking facilities in rural and semi-urban
areas also.
Like banks in other parts of the world, Indian banks will have to get interested in providing
diversified range of financial products and services along with those that they are already
providing, by using technological advances. As the level of education in rural areas rises and
affluence spreads, customers will start seeking efficient, quicker and low cost services. As the
financial system diversifies and other types of financial intermediaries become active, in rural
areas, savers would turn towards mutual funds or the savers themselves decide to deploy part
of their financial surpluses into equities and debentures as also other fixed income securities.
36
The bulk of bank deposits in the rural areas are currently longer term deposits and as these
come down, there would be a distinct shortening of the average maturity structure of bank
deposits with an increase in asset liability mismatches. The spreads that the banks now enjoy
will progressively shrink making it more difficult for them to survive. As more and more
intermediaries enter rural areas with greater level of technology, traditional banking business
will come under pressure. In order to face the competitive pressures being exerted by the
recently set up market savvy banks, banks which have extensive branch network in most of
the existing and potential rich rural and semi-urban areas may have to provide such services.
Issues
It is clear that significant progress has been made, since independence, in expanding bank
branches and banking habits in the rural areas, through a variety of institutional innovations.
An impressive segment of rural economy has been brought into the ambit of formal financial
intermediation, mainly through the public sector banking system, and to some extent, through
cooperatives and RRBs. The future of banking in rural areas would, however, depend on
several factors that have been described, namely, how the current concerns are addressed
taking into account the dynamics of transformation in rural economies, the new realities in
credit markets, the linkages between formal and informal markets, and the impact of financial
as well as technological progress on the systems of financial intermediation.
Consequently, public policy will have to address several issues to ensure a sound and efficient
banking system in the service of rural areas. The more important of such issues relate to the
approach, institutions, supply, cost, and related policies
Marketing strategy and Approach
In the past, the major instruments of public policy were cooperatives and public-sector
banking system. However, with the diversification of ownership of public sector banks and
the overall thrust of financial-sector reform, a review of institutional arrangements, mainly in
the incentive framework for credit-delivery appears necessary. Similarly, in the area of
cooperatives also, a reduced role for Government including in providing refinance is being
advocated. This desirable approach would also need a review of institutional arrangements, in
particular in delayering and debureaucratising the cooperatives.
Further, there are new institutions and new forms of financial intermediation that are
emerging be it mutual funds or more important for rural areas, non-banking financial
37
Finally, the approach may expand from delivery of credit to rural areas to making available
financial services and products to savers, investors and consumers in the rural areas. In other
words, it should be recognised that rural financial markets comprise both depositors or savers
38
amount to availability of supply. Similarly, mere prescriptions of priority lending would not
ensure supply.
For example, prescription of priority-sector lending relates to percentage of credit outstanding
rather than advances. Further, there is no reward for overshooting the target and
undershooting is not really penalised since amounts of shortfall need to be placed in a fund
administered by NABARD with a totally risk-free return of 11.5 percent for a five-year
advance. These funds are actually lent to State Governments, thus to an extent replacing rural
credit to agriculture with credit to State Government for rural development. While as a
transient measure during a period conspicuous for incomplete projects, such an arrangement
was justifiable, this should not become a permanent feature as it would have obviously
perverse effects. The coverage of definition of priority sector also leads to some difference
between apparent supply and effective supply. Thus, the base for calculating priority sector
excludes commercial banks' investments, which are expanding rapidly. The procedural
bottlenecks resulting in delayed supply also, in some ways, amount to erosion of effective
supply.
At the same time, there may be some effective supplies which are not reckoned for supply
under priority-sector. There may be funds channelled by banks to rural area through urbanbranches or through other intermediaries such as NBFCs.
There is perhaps a case for some research and studies on policy of directed lending so that we
could improve on the incentive and policy framework to enhance effective supply. For
example, the definition and coverage of priority sector for agriculture could be revisited and
lending to agriculture by banks through NBFC's could be considered for inclusion in prioritysector, as has been done to ensure flow of credit to truck operators.
Yet another area in effective supply relates to lending by banks under government sponsored
programmes, which has significant non-commercial considerations. Several issues relating to
both supply and accountability arise due to involvement of both Government and banks. A
more transparent approach, for example, by separately accounting for them as policy-induced
lending would help isolate and monitor this supply, apart from isolating the non-performing
assets on this account in the balance sheets of banks.
An important bottleneck in the delivery of credit has been the negligible use of billdiscounting for services sector. Current policies and procedures restrict this instrument to
goods. It has been decided by the RBI to constitute a Committee to explore ways by which
bank finance can be made available to service sector. The Committee, with representation
from public, private sector and foreign banks also is expected to study international
40
experience, our policies and procedures and make recommendations in two months. This
important step recognises that about half of our Gross Domestic Product is in services sector
and would also help flow of bank finance to the growing services sector in rural areas.
Reducing True Cost
The major reasons for the true cost of credit from rural financial institutions being higher than
nominal costs are mainly scarcity of supply and transaction costs. Enhancing effective supply
would be an important strategy of reducing the true cost. Encouraging competition would be
yet another strategy. A review of procedural requirements, such as eliminating mandatory
forms and replacing them with locally determined procedures, could also be considered. All
non-verified documentation could, for instance, be replaced with self-declaration by the
borrower. Repeated visits and consequent transaction costs can be avoided by several
procedural simplifications - going beyond Gupta Committee recommendation. In particular,
growth of information
technology and its application in banking would warrant a thorough review of products,
procedures and linkages among rural financial institutions.
Arbitrage in financial markets is inevitable and prevalence of such operations cannot be
ignored. Arbitrage between formal and informal markets and between production loans and
consumption needs is also common. Thus, keeping the true cost artificially low in formal
markets, the rural financial institutions would encourage arbitrage and erode the clear
potential for profit. Indeed, an appropriate strategy may be to reduce the difference between
nominal and true cost and ensure that true cost reflects market conditions, including premium
for credit risk. As already mentioned, provision of diverse financial products and services in
the rural areas would enhance income to banks and help reduce the admittedly large spreads
in interest rates. Thus, among the efforts to reduce nominal and true costs of credit in rural
areas would be provision of multiplicity of financial services by rural financial institutions,
taking advantage of developments in technology and financial markets.
Related Policies
There is increasing recognition that, the spread of literacy and generation of growth impulses
in the rural sector would be very significant factors in enhancing effective supply and
reducing true cost of rural credit. More specifically, the desired spread of technology and
41
trickledown of urban financial products to rural areas would require concerted action in four
areas. First and foremost, insurance, especially of crops, should penetrate the rural areas to
mitigate the risks to both farmer and lender. The lack of penetration of insurance is perhaps
an important reason for lenders seeking tied and other risk-mitigation arrangements through
informal markets. Second, there should be assured supply of electric power so that
functioning of systems is not disrupted. Third, telecommunication network needs to be
dependable and financial sector needs to ensure a network. We, in the RBI, have already
launched INFINET. Fourth, the institutional and regulatory framework should enable rural
financial institutions to operate in diverse financial products and services. We, in the RBI are
currently engaged in a number of initiatives and studies. We hope to continue the process, and
focus on rural credit, as mandated by the RBI Act. We would seek advice and guidance in this
endeavour.
43
Provision of a data base tool for capturing of the rural data and the technical
specifications of such rural data base and its architecture
Figure 1
DIAGRAMMATIC REPRESENTATION OF THE MODEL
45
46
Methodology
Information System
We developed a model for rural information infrastructure. A
reputed market research agency was employed for collection of
data and documents in proof thereof in respect of adults in all the households of the five
selected villages viz., Idagunji, Apsarakonda, Kelaginoor, Malkod and Manki located in the
backward Honavar block of Uttara Kannada District in Karnataka. The data collected was
validated by a control set of 500 cases collected by the project coordinator and further by the
members of the Project Monitoring Group. Pre-programmed PDAs were used for collection
of data/information, the documentary evidence and uploading of this data into Server. The
information was collected as per the requirement developed in consultation with the banks for
providing banking services and the authentication requirements.
PDA Software
Company and the software was integrated with the RCDS System at the backend to facilitate
seamless data transmission from the PDAs to the RCDS Server using web services.
ATM Feasibility
The technological feasibility of deploying the ATMs
in the Project villages was tested and was found to be adequate.
delivery like kiosks. ATMs for pursuing cost-efficiency through extensive outsourcing and
lean processes to suit the local realities.
services delivery as a core function. The utility service provision which partly use banking as
the payment system infrastructure could be the second layer. The delivery of the rest of the
services like governance, information, education, health, extension and occasional
requirements like investment, trade and documentation might form the third dimension.
51
Our RII model involves the use of ICT for building and
operating this information infrastructure involving collection, storage updation, consolidation
and processing of the data and making customized offering; Entrepreneurial model with
provision for assurance review by public authorities or users or both; Pay- for- use business
model.
The technology model involves the use of personal digital
assistants (PDAs) with specially made applications for data (Voice, Picture and Data) capture,
verification and validation and updating; Data Center with storage, processing and
management; Delivery Nodes at the user-ends and Three-way connectivity between the PDA,
Data Center and Delivery Node.
We have developed customized information offerings to
banks and financing agencies for exemplifying our model and exploring the usefulness and
implement ability of our RII model for enabling the customer acquisitions and follow-up by
the banks, both on the liability and asset sides. It may be pointed out that the need for
automated digitized rural information infrastructural support is needed for rural financing, not
only in India but in other parts of the world as well. According to The Economist
Microfinance Survey The cost of micro-finance will have to come down. At present, it is far
too manpower intensiveCredit evaluation relies on character or cash flow valuation rather
than the statistical techniques it will not be sustainable. More competition will help
reduce costs, but the biggest hope comes from new technology and further, In the past,
the two main obstacles to providing Financial services to poor people have been lack of
information and costs. Ultimately lower costs and better information are good not just for
the poor, but for everyone.
52
53
54
Figure 2.
Rural Credit Delivery Solution using Digital Rural Information Infrastructure
55
56
in fact, the target was over-achieved, that is, more than 40 per cent of total credit outstanding
went to priority sectors. From 1991 to 1996, the share of priority sector credit fell, in line
with the recommendations of the Narasimham Committee. At first glance, the direction in
priority sector lending appears to have been reversed over the last five years. This is,
however, a reversal by redefinition: priority sector lending now includes advances to
newly-created infrastructure funds, to non-banking finance companies for on-lending to very
small units, and to the food processing industry. Loans to multinationals like Pepsi, Kelloggs,
Hindustan Lever and ConAgra now count as priority sector advances. More recently, loans to
cold storage units, irrespective of location, have been included in the priority sector.
Chandrasekhar and Ray (2004) point to the growing presence of foreign banks in India, their
direct presence and their indirect presence through the purchase of shares in existing private
banks. This expansion is not good news for the priority sector. When data for scheduled
commercial banks are disaggregated by type of bank (public sector banks, regional rural
banks, private banks and foreign banks), we find that foreign banks did not lend to rural areas
or agriculture.
holdings of less than 2.5 acres or marginal cultivators, were the worst affected by the post1991 decline in credit to agriculture. Agricultural credit outstanding to marginal cultivators
accounted for 30 per cent of total agricultural credit outstanding from commercial banks in
1990-91; its share fell to 23.8 per cent in 1999-2000 (Chavan, 2004, Table 10). At the same
time, the share of credit outstanding to small cultivators (with between 2.5 and 5 acres)
stagnated while that to large cultivators rose. Another indicator of the decline in credit to
relatively poor rural households is the fact that the number of small borrowal accounts (or
accounts with a credit limit of Rs 25,000) fell in the 1990s (Chandrasekhar and Ray, 2004)
The IRDP was a major component of the credit-led poverty
alleviation strategy of the 1980s. The number of families assisted annually with IRDP loans
rose from 2.7 million in 1980-81 to 4 million in 1984 and 4.2 million in 1987 (Ramachandran
and Swaminathan 2002). Although the programme slackened after that, the number of
beneficiaries in 1990-91 remained above the level of the early 1980s. After 1991, there was a
steep decline in the number of IRDP beneficiaries: only 1.3 million families were assisted in
1998. If we index the number of families assisted in 1982 at 100, the number assisted in 1998
was a mere 37. The term credit disbursed by banks under IRDP followed a similar trajectory.
With 1982 indexed at 100, total term credit mobilized for IRDP peaked at 113 in 1987 and
went down to 52 in 1998.
VILLAGE STUDIES
Case studies based on primary data help identify the
impact of changes in financial policy and banking structure on patterns of indebtedness
among rural households. We shall attempt to review the major results from five papers, each
reporting the findings of detailed village surveys on rural credit in the contemporary period.
The studies cover Baghra and Udaipur villages of Giridih district in Jharkhand, Panahar and
Muidara villages of Bankura district in West Bengal, Morazha village of Kannur district in
Kerala, Gokilapuram of Theni district in Tamil Nadu and Dhamar of Rohtak district and
Birdhana of Fatehabad district in Haryana.
59
60
61
62
63
64
INSTITUTIONAL CREDIT
FOR RURAL INDIA
65
government is seriously to address the crisis in rural banking, it must reaffirm the
commitment of the state to the policy of social and development banking, and reaffirm the
part played by the credit system in redistribution and poverty alleviation. Commercial banks,
Regional Rural Banks and cooperatives must lead rural credit revival, which is too serious
and large-scale a task to be left merely to self help groups or NGO-controlled private-sector
micro-credit organisations. The geographical and functional reach of public sector banking
must be restored and extended, differential interest policies reinstated, and special loans-cumsubsidy schemes reintroduced on a large scale for all landless and poor and middle peasant
households, scheduled caste and tribe households and other vulnerable sections of the rural
population. Priority sector norms must be enforced, and, instead of an alternative such as
investment in RIDF bonds, penalties must be imposed on any failure of banks to meet these
public-interest targets.
of usury requires agrarian reform, a decisive change in banking policy is essential for the very
survival of the working people in rural India.
67
68
69
Objective
Functions
The main objectives of setting up the RRB are to provide credit and other
facilities especially to the small and marginal farmers agricultural labourers artisans and
small entrepreneurs in rural areas.
70
Each RRB will operate within the local limits specified by notification.
If necessary a RRB will also establish branches or agencies at places notified by the
Government.
Each RRB is sponsored by a public sector bank which provides assistance in several
ways viz., subscription to its share capital provision of such managerial and financial
assistance as may be mutually agreed upon and help the recruitment and training of personnel
during the initial period of its functioning.
Functions
Every RRB is authorized to carry on to transact the business of banking as defined in the
Banking Regulation Act and may also engage in other business specified in Section 6 (1) of
the said Act. In particular a RRB is required to undertake the business of
(a) granting loans and advances to small and marginal farmers and agricultural
laborers whether individually or in groups, and to cooperative societies including
agricultural marketing societies agricultural processing societies cooperative farming
societies primary agricultural credit societies or farmers service societies primary
agricultural purposes or agricultural operations or other related purposes, and
(b) Granting loans and advances to artisans small entrepreneurs and persons of small means
engaged in trade commerce industry or other productive activities within its area of
operation.
The Reserve Bank of India has brought RRBs under the ambit of priority sector lending on
par with the commercial banks. They have to ensure that forty percent of their advances are
accounted for the priority sector. Within the 40% priority target, 25% should go to weaker
section or 10% of their total advances to go to weaker section.
Regional Rural Banks in India
The State Bank of India is one of the major commercial banks having regional rural banks.
There are 30 Regional Rural Banks in India, under the State Bank of India and it is spread in
13 states across India. The number of branches the SBI Regional Rural Banks is more than
71
2000.
Several other banks, apart from the State Bank of India also functions as the promoter of rural
development in India.
List of Regional Rural Banks in India
There are a number of regional rural banks in India. Following are the state-wise list of
Indian regional rural banks.
Andhra Pradesh
Arunachal Pradesh
Assam
Bihar
Chhattisgarh
Gujarat
Haryana
Himachal Pradesh
73
Jharkhand
Karnataka
Kerala
Madhya Pradesh
Maharashtra
Manipur
Meghalaya
Mizoram
Nagaland
Orissa
Punjab
Rajasthan
76
Tamil Nadu
Tripura
Uttar Pradesh
Prathama Bank
Uttaranchal
West Bengal
deposit facilities. The HARCOBANK have been functioning as an investor for more than
three decades.
79
Erode,
Nilgiris,
Vellore,
Tiruvannamalai,
Kancheepuram
and
Tiruvallur.
The third RRB sponsored by Indian Bank is Puduvai Bharathiar Grama Bank at Union
Territory of Puducherry with its head quarters at Puducherry.
80
Parameter
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Growth(%)
No. Of
RRBs
196
196
196
196
196
196
196
96
86
86
83
Capital
1380
1959
2049
2143
2141
2221
25354
48488
58990
67855
76392
5435.65
Deposit
27059
32226
39294
44539
49582
56295
69719
83143
99093
120184
124296
359.35
6680
7760
8800
9471
17138
21286
33486
45666
48559
62629
96699
1347.5
10559
12427
15050
17710
20934
25038
32692
40345
43456
46678
51283
385.62
35820
42236
49596
56802
62500
70195
436805
803416
844982
898760
984364
2648.3
3281
3938
4619
5191
5391
5535
6041
6547
7729
7586
8786
165.94
151
207
240
370
430
697
743
790
873
853
1023
577.4
3432
4145
4859
5561
5821
6231
6784
7337
7602
8421
9809
185.8
Investment
Advance
Total Assets
Interest
Earned
Other
Income
Total
Income
81
Interest
expanded
2131
2565
2966
3329
3340
3363
5902
8441
8860
8362
9260
334.5
982
1056
1165
1459
1667
1825
1958
2092
22134
2345
2598
164.6
99
96
128
163
132
289
329
369
434
590
699
606.3
3113
3621
4130
4787
5107
5187
7860
10533
10994
10707
11758
277.7
319
319
729
774
714
1044
985
926
1383
1859
1987
522.8
Operating
Expanses
Provision
And
Contigencies
Total
Expenses
Operating
Profit
82
83
OBJECTIVE OF THE
STUDY
84
85
RESEARCH
METHODOLOGY
86
RESEARCH METHODOLOGY
Research in common parlance refers to a search for knowledge. The advanced learners
dictionary of current English lays down the meaning of research as a careful investigation of
enquiry especially through search for new facts in any branch of knowledge.
The systematic approach concerning generalization and the formulation of a theory is also
research. The purpose of research is to discover answers to questions through the application
of scientific procedures.
A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.
- JOHN.W.BEST
Research may be defined as any organized inquiry designed and carried out to provide
information for solving a problem.
- EMORY
Research is essentially an investigation, a recording and an analysis of evidence for the
purpose of gaining knowledge.
- ROBERT ROSS
87
DATA COLLECTION
The study was based on questionnaire method. There are two types of data collection:
Primary data
Secondary data
Primary data
The primary data are those, which are collected a fresh and for the first time happen to
be original in character. It has been collected through a Questionnaire and personal interview.
Only the primary data is not the sufficient to get information about the complete topic so both
primary and secondary data is collected.
Secondary data
Secondary data are those which have already been collected by someone else and
which have already been passed through the stratified process. It has collected through the
books, journals & Internet.
RESEARCH INSTRUMENT
Questionnaire
A questionnaire is simply a set of questions designed to generate the data necessary for
accomplishing a research projects objectives (Parasuraman, 1991, p.363).
SAMPLE DESIGN:
POPULATION
It covers the 100 unit of population.
SAMPLE PROCEDURES
In this study convenient sampling method was adopted. First each
organization was divided into different departments like Operations, Customer
Services, Human Resources, Internet Marketing and under writing
88
departments. From this department, the respondents were selected on the basis
of convenience.
INTERVEIW SCHEDULE
The interview schedule has been used to collect the data. Information can be
gathered even when the respondents happen to be literate or illiterate.
TABULATION
Formula:
Simple percentage =
No of Respondents
x 100
89
90
DATA ANALYSIS
AND INTERPRETATION
91
Urban Bank
To great extent
64
To some extent
26
72
10
28
total
100
100%
72
80
70
64
60
50
40
28
26
30
20
10
10
0
To great extent
0
To some extent
Rural Bank
Urban Bank
92
Interpretation:
From the above data it is evident that among the respondent,
44% of the respondent of rural bank says that Central Scheme to provide Interest
Subsidy for the period of moratorium on loans taken by farmer from economically
weaker sections from schedule banks under the loan scheme of the Indian Banks
Association to great extend where as none of the respondent of Urban Bank says that
Central Scheme to provide Interest Subsidy for the period of moratorium on loans
taken by farmer from economically weaker sections from schedule banks under the
loan scheme of the Indian Banks Association to great extend.
26% of the respondent of rural bank says that Central Scheme to provide Interest
Subsidy for the period of moratorium on loans taken by farmer from economically
weaker sections from schedule banks under the loan scheme of the Indian Banks
Association to great extend where as 72% of the respondent of Urban Bank says that
Central Scheme to provide Interest Subsidy for the period of moratorium on loans
taken by farmer from economically weaker sections from schedule banks under the
loan scheme of the Indian Banks Association to some extend.
10% of the respondent of rural bank says that Central Scheme to provide Interest
Subsidy for the period of moratorium on loans taken by farmer from economically
weaker sections from schedule banks under the loan scheme of the Indian Banks
Association to great extend to very little great extend where as 28% of the respondent
of Urban Bank says that Central Scheme to provide Interest Subsidy for the period of
moratorium on loans taken by farmer from economically weaker sections from
schedule banks under the loan scheme of the Indian Banks Association to very little
extend.
93
2) To what extent is Sales Promotions have been used by banker to increase sales in the short
term?
Completely
Partially
Nil
Table: 02% of the respondent
Rural Bank
Urban Bank
Completely
90
59
Partially
10
30
Nil
11
total
100
100%
90
90
80
70
60
50
40
30
20
10
0
59
30
11
10
Completely
Partially
Rural Bank
0 Nill
Urban Bank
94
Interpretation:
From the above data it is evident that among the respondent,
90% of the respondent of Rural Bank says that Sales Promotions have been used by
banker to increase sales in the short term where as 59% of the respondent of Urban
Bank says that Sales Promotions have been used by banker to increase sales in the
short term.
10% of the respondent of rural bank says that Sales Promotions have been used by
banker to increase sales in the short term where as 30% of the respondent of Urban
Bank says that Sales Promotions have been used by banker to increase sales in the
short term.
No respondent of rural bank says that Sales Promotions have been used by banker to
increase sales in the short term is nill where as 11% of the respondent of Urban Bank
says that Sales Promotions have been used by banker to increase sales in the short
term is nill.
95
3) Does your marketing policy of bank have a focus marketing on agro- sector?
Strongly agree
Agree
Disagree
Strongly disagree
Cant say
Table: 3% of the respondent
Rural Bank
Urban Bank
Strongly Agree
83
61
Agree
17
23
Disagree
16
strongly disagree
Can't say
100
100%
total
90
80
70
60
50
40
30
20
10
0
83
61
17
23
16
0
Rural Bank
Urban Bank
96
Interpretation:
From the above data it is evident that among the respondent,
83% of the respondent of Rural Bank strongly agree that Marketing policy of bank
have a focus marketing on agro- sector where as 61% of the respondent of Urban
Bank also strongly agrees that Marketing policy of bank have a focus marketing on
agro- sector.
17% of the respondent of Rural Bank agree that Marketing policy of bank have a
focus marketing on agro- sector where as 23% of the respondent of Urban Bank also
agrees that Marketing policy of bank have a focus marketing on agro- sector.
None of the respondent of Rural Bank disagree that Marketing policy of bank have a
focus marketing on agro- sector where as 16% of the respondent of Urban Bank also
disagree that Marketing policy of bank have a focus marketing on agro- sector.
None of the respondent of Rural Bank & Urban Bank also strongly disagree that
Marketing policy of bank have a focus marketing on agro- sector.
None of the respondent of Rural Bank & Urban Bank cant says that Marketing
policy of bank have a focus marketing on agro- sector.
97
4) Multiple basic financial services and loan gateway is product marketing of the bank?
Yes
No
Urban Bank
Yes
87
62
No
13
38
total
100
100%
100
87
62
80
60
38
40
13
20
0
Yes
No
Rural Bank
Urban Bank
Interpretation:
From the above data it is evident that among the respondent,
87% of the respondent of Rural Bank
and loan gateway is product marketing of the bank where as 62% of the respondent of
Urban Bank also says that Multiple basic financial services and loan gateway is
product marketing of the bank.
13% of the respondent of Rural Bank sasys that Multiple basic financial services
and loan gateway is product marketing of the bank where as 38% of the respondent of
Urban Bank also says that Multiple basic financial services and loan gateway is
product marketing of the bank.
98
5) Devised to ensure usage as well as profitability Quantity discounts, and ease in payment
modes is pricing marketing of the bank.
Yes
No
Urban Bank
Yes
11
13
No
89
87
total
100
100%
89
100
87
80
60
40
13
11
20
0
Yes
No
Rural Bank
Urban Bank
Interpretation:
From the above data it is evident that among the respondent,
11% of the respondent of rural bank says that Devised to ensure usage as well as
profitability Quantity discounts, and ease in payment modes is pricing marketing of
the bank. whereas 13% of the respondent of Urban Bank also says that Devised to
ensure usage as well as profitability Quantity discounts, and ease in payment modes is
pricing marketing of the bank..
89% of the respondent of rural bank says that Devised to ensure usage as well as
profitability Quantity discounts, and ease in payment modes is pricing marketing of
the bank. whereas 87% of the respondent of Urban Bank also says that Devised to
ensure usage as well as profitability Quantity discounts, and ease in payment modes is
pricing marketing of the bank..
99
Modern
Rural Bank
Urban Bank
Traditional
98
91
modern
100
100%
total
98
91
100
80
60
40
2
20
0
Traditional
Rural Bank
modern
Urban Bank
Interpretation:
From the above data it is evident that among the respondent,
98% of the respondent of rural bank says that Comprehensive offering of different
services is placement marketing of the bank where as 91% of the respondent of
Urban Bank says that Comprehensive offering of different services is placement
marketing of the bank.
2 % of the respondent of rural bank says that Comprehensive offering of different
services is placement marketing of the bank where as 9% of the respondent of Urban
Bank says that Comprehensive offering of different services is placement marketing
of the bank.
100
No
Rural Bank
Urban Bank
Yes
33
81
No
67
19
total
100
100%
81
90
80
67
70
60
50
33
40
19
30
20
10
0
Rural Bank
Urban Bank
Yes
No
Interpretation:
From the above data it is evident that among the respondent,
33% of the respondent of RURAL BANK
101
102
CONCLUSION
103
CONCLUSION
RRBs' performance in respect of some important indicators was certainly better than that of
commercial banks or even cooperatives. RRBs have also performed better in terms of
providing loans to small and retail traders and petty non-farm rural activities. In recent years,
they have taken a leading role in financing Self-Help Groups (SHGs) and other micro-credit
institutions and linking such groups with the formal credit sector.
RRBs should really be strengthened and provided with more resources with which they can
undertake more of these important activities. And most certainly they should be kept apart
from a profit-oriented corporate motivation that would reduce their capacity to provide much
needed financial services to the rural areas, including to agriculture. Ideally, the best use of
the resources raised by RRBs through deposits would be through extensive crosssubsidisation. This, in turn, really requires an apex body that would cover and oversee all the
RRBs, something like a National Rural Bank of India (NRBI).
The number of rural branches should be increased rather than reduced; they should be
encouraged to develop more sophisticated methods of credit delivery to meet the changing
needs of farming; and most of all, there should be greater coordination between district
planning authorities, Panchayati raj institutions and the banks operating in rural areas. Only
then will the RRBs fulfill the promise that is so essential for rural development.
104
BIBLIOGRAPHY
Books:
Chatterjee, Jauchius, Kaas and Satpathy no. 1, (2002): 'Revving up auto branding',
McKinsey Quarterly.
David. A. Aaker, V.Kumar & George S. Day, (2001) Descriptive Research: Marketing
Research, Seventh Edition, pp 17
Magazines:
Business Today
Business Week.
Business World
Newspapers
Economic Times
The Hindu
Times of India
105
Annexure
QUESTIONNAIRE
1) Central Scheme to provide Interest Subsidy for the period of moratorium on loans taken by
farmer from economically weaker sections from schedule banks under the loan scheme
of the Indian Banks Association?
To great extent
To some extent
To very little extent
2) To what extent is Sales Promotions have been used by banker to increase sales in the short
term?
Completely
Partially
Nil
3) Does your marketing policy of bank have focus marketing on agro- sector?
Strongly agree
Agree
Disagree
Strongly disagree
Cant say
4) Multiple basic financial services and loan gateway is product marketing of the bank?
Yes
No
5) Devised to ensure usage as well as profitability Quantity discounts, and ease in payment
modes is pricing marketing of the bank.?
106
Yes
No
Modern
Yes
No
107