Explain different sources of credit in rural areas.

Question

Accepted Answer

NABARD is an apex institution entrusted with all matters concerning policy, planning and operations in the field of rural credit and related economic activities. It does not lend to the general public directly but serves as a funding agency for the institutions providing credit in rural areas.

Those who lend to the public directly can be categorised into:

1. **Institutional Sources of Credit:** These include Cooperative Credit Societies, Regional Rural Banks, Land Development Banks and Commercial Banks. Together they constituted only 7% of the credit needs of farmers in 1950-51; by 1981 their share increased to 63% and at present it is about 74%.

2. **Non-Institutional Sources of Credit:** Landlords, village traders and moneylenders are the major non-institutional sources of credit. At the time of independence, their share in total credit was 93%, but it has declined sharply over the years. Since these credits are not backed by written records, we cannot be sure of the available statistics.

Recently, Self-Help Groups (SHGs) have emerged as a major micro-finance programme to provide credit to the rural poor who lack access to the formal banking system.