Viability of Rural Banking by The Nationalized Commercial Banks in India

Bhattacharjee Sourindra, Desai B M and Naik Gopal

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

Abstract: This paper examines the viability of rural banking by the Nationalized Commercial Banks and the factors influencing it. The viability was examined using both cost and profitability analyses. Theory of costs is used for the former, while multi-variate econometric model is formulated for the latter. Factors influencing viability in both the analysis are classified into innovative and non-innovative based on unique characteristics of rural banking in India. The results show that rural banking is viable and it could be further improved by reaping scale economies rather than raising interest rate. But this would require more decentralized, autonomous and accountable form of rural banking.

Date: 1997-07-01
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Persistent link: https://EconPapers.repec.org/RePEc:iim:iimawp:wp01456

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