RURAL BANKING

By NISHANTH H

WHAT IS RURAL BANKING ?

•It is a form of services that provide solution to the financial needs of the consumers in Rural areas.

OBJECTIVES OF BANKING SERVICES IN RURAL AREAS

Poverty Alleviation Objectives:

The objectives is to uplift the mass of population residing in the rural areas who are currently below

the poverty line by extending credit to the smallest-scale economic activity.

Financial Intermediation Objectives:

The approach involves increasing the

accessibility of banking services to the poor in a commercially sustainable manner.

EVOLUTION OF THE RURAL BANKING AFTER INDEPENDENCE

Pre-Nationalisation periodThe presence of banking sector was very limited.

In 1951 informal credit accounted 70% of rural lending and less than 1% of rural household debt came from commercial bank.

Nationalisation of banks 14 Largest Indian commercial banks were nationalized

in 1969.

The central aim was to provide the banking services to all sections of society.

RURAL BRANCH EXPANSION PROGRAM

In 1977 the 1:4 licence rule was implemented.

The contribution of this policy was:

Increased the flow of bank credit & saving to rural areas.

A total of 30,000 rural branches were opened.

Rural sector accounted for 12.5 lakhs saving A/C’s & 2.5 crores borrowing A/C’s.

The share of bank credit & savings, for rural branches , rose from 1.5 % and 3% respectively to 15% each.

ESTABLISHMENT OF NABARD

National Bank for Agricultural and Rural Development was established in July 1982.

The main aim was to provide credit facilities to the farmers through co-operatives & regional rural banks.

They were responsible for all matters concerning policy , planning & operations in the field of credit for agricultural & other economic activities in the rural areas.

POST-LIBERISATION PERIOD

The 1:4 rule & licence procedure was frozen in 1990.

There was a heavy toll on the balance of the commercial bank on account of this policy decision.

In 2000 the Indian banking sector accounted for the rupee equivalent of $26,768 million as deposit & $10,834 million as loan outstanding.

CHALLENGES IN MARKETING OF BANKING SERVICES IN RURAL MARKET

Lack of adequate financial market.

Low value of loans for poor sections.

Lack of collateral.

Low density of population.

Underdevelopment of rural infrastructure.

Lack of financial discipline.

Rural interest subsidy.

OPPORTUNITIES

Sourcing of agricultural produce from India for global markets.

Govt. thrust.

Increasing corporate interest in agri-business.

Strengthening loan recovery.

Development of AEZs.

Lower level of NPA in rural areas.

Lower cost of labour , infrastructure & cost of living.

Large untapped market.

MARKETING STRATEGIES

•Developmental marketing.

•Variable lending rate.

•New product lines & delivery models.

•Development of low priced customized ATMs.

•ATM enabled kisan credit card.

•Co-operative promotion.

•Developing franchise model.

•Partnership with NGOs for financing.

•Simple and accessible loan procedure.

CONCLUSION

All the statistics indicates there is a huge market for financial services in the rural areas.

The only thing that the banks have to do is to develop a rural specific marketing mix.