Rejuvenating Rural Credit Delivery System in Maharashtra of India

This paper provides an overview of rural banking sector reforms and cooperative sector reforms in Maharashtra, India. The paper states that:

• Commercialization and diversification in agriculture has accentuated the need for the rapid development of rural infrastructure and larger flow of credit to the farming community;
• Commercial banks (CBs), ‘Regional Rural Banks (RRBs) credit cooperatives, and ‘Land Development Banks (LDBs) are the major providers of credit to the agricultural sector.
• There is a need to examine:
  • How far these credit institutions are effective in sustaining the reforms in the financial sector and in facing competition;
  • The sustainability, viability and operational efficiency of rural financial institutions (RFIs).
• RFIs in Maharashtra are plagued by mounting overdues and ‘Non Performing Assets (NPAs).

The paper examines:

• The rural credit scenario of Maharashtra;
• Rural banking sector reforms and the reform initiatives in the cooperative sector.

The paper concludes that:

• Credit cooperatives and commercial banks need to study the pattern of loan recovery and interest rate structure of Self-help-Groups (SHGs) that are successful.
• There is a need to:
  • Take stringent measures for recovery of loans;
  • Tackle high transaction costs and poor repayment performance with more fiscal jurisprudence;
  • Focus on strategies for sustainability and viability, operational efficiency, recovery performance, small farmer coverage, and balanced sectoral development.