Commercial Banks Finance for Rural Development

Gurdev Singh and Asokan S R

IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: In 1969 fourteen commercial banks (six more in 1980) were nationalized to increasingly involve them in financing the developmental programmes in rural India. Subsequently Branch expansion policy was revised and reoriented in favor of rural areas. Regulatory controls for preferential allocations to identify priority sectors were enforced. Special activities and weaker sections were provided concessional finances under IRDP, 20 PEP, DRI scheme, etc. Backward areas were given special attention in this respect. The idea was to make the commercial banks an effective instrument of rural development. The performance of commercial banks between 1969-70 and 1984-85 showed big leaps forward in the number of rural branches and disbursement of loans. However, the performance was less than proportionate in rural deposit mobilization and recovery of loan dues. Further the performance was not identical across the states. Disparities were found in the coverage of population and cultivated area per branch, disbursements in different areas, for different purposes and to different groups of people on absolute and per hectare basis. Important observations on the performance of this segment of formal rural credit system are made.

Date: 1987-12-01
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