The Hindu Business Line : `Rural credit flow must be beefed up'

Core issues
Need to check inadequacies in defining indebtedness
Need to rework strategies for better delivery of credit facilities
No need to increase number of banks

Hyderabad , July 30

The Chairman, Economic Advisory Council to the Prime Minister, Dr C. Rangarajan, advocated strengthening of rural credit delivery mechanism to ensure that small and marginal farmers are better served.

As the Chairman of a Committee on Financial Inclusion, Dr Rangarajan, said that a close study of National Sample Survey, with reference to indebtedness, showed that there were inadequacies in terms of the way this had been defined. There is a need to revisit it. For instance, a farmer with a debt of Rs 300 is considered indebted, thereby significantly increasing the number of those indebted.

Speaking on Financial Inclusion and the Challenges and Sustainable Approaches, at the Centre for Economic and Social Studies (CESS), Dr Rangarajan said there was a need to rework some of the strategies for better delivery of credit facilities in the rural and semi urban areas of the country.

What we need to do is to assess the current credit delivery approach and examine how we it could bring about changes in implementation, thereby making credit accessible to larger population, he explained.

The Union Minister of State for Commerce, Mr Jairam Ramesh, said the committee on Financial Inclusion had been formed to ensure that credit reached excluded groups, cutting across barriers. Its mandate is to examine these barriers, reduce transaction costs, suggest institutional changes and provide banking and payment services, without discrimination.

The Director of CESS, Prof S. Mahendra Dev, said, "by financial inclusion, we mean delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income groups. Financial inclusion should be viewed as availability of banking and payment services to the entire population without discrimination of any type. Credit delivery is the most important financial inclusion."

Dr Dev suggested the need to discuss the areas of conflict among different institutions and the requirement to establish an interface between financial institutions and the most vulnerable groups. He advocated the need to smoothen the interface and work out ways to improve the reach of financial services to the poor and vulnerable.

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