Business Daily from THE HINDU group of publications
Thursday, Aug 16, 2007
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Business Daily from THE HINDU group of publications Thursday, Aug 16, 2007 ePaper |
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Rural Development Money & Banking - Credit Market Flexibility needed in ‘linkage model’: Survey
L.N. Revathy Coimbatore, Aug. 15 While the banking sector is trying to bridge the gap in lending to rural households by roping in banking correspondent/facilitator (BC/BF) for expanding its outreach, the Technical Group constituted by the RBI to review legislations on money lending notes that only a few banks adopted these innovations and that there have been reservations in widely expanding/implementing the models. The scheme has not taken off in the perceived manner probably because of the restriction on the BC/BF to recover charges directly from the ultimate borrower. The survey findings relating to linkages were mixed. While many saw advantage in forging formal links either as agent or for on-lending, their concerns were on the adequacy of the remuneration. Such informal credit providers to rural households were invariably big farmers. They expressed their unwillingness to work as agents/correspondents of the banks. Bank managers, while welcoming such linkage from the point of view of better outreach, credit appraisal, supervision and recovery and considering the staff constraint, perceive the downside as one of reputation risk, possible diversion of funds for furtherance of moneylenders’ own business and a deterioration of direct relationship between the bank and the customer. Linkages not only help in bridging the persistent dualism, but also exploit the advantages of each sector. “However, any attempt in the linkage model to put too many onerous oversight obligations on banks in terms of processes and procedures could prove counter-productive,” the survey notes with caution. It emphasises the need for considerable flexibility and flow of adequate timely credit at lower cost.
Related Stories: PSBs urged to tap rural markets Financial inclusion panel may pitch for microfinance NBFCs ‘Accredited loan providers’ mooted Accredited Loan Providers — A placebo for Rural India? RBI gives nod for appointment of `Business Correspondents' — Banks can now offer loans, accept deposits thru agents More Stories on : Rural Development | Credit Market | Marketing Research
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