Rural Financial Institutions and Agents in India: A Historical and Contemporary Comparative Analysis
Late 19th century concerns with rural unrest and indebtedness in India led to a policy approach involving moneylender regulation, and replacement of moneylender finance through institutional credit provision in various forms. The emergence, growth, interaction and comparative performance of these different institutional forms – co-operatives, public-sector banks, regional rural banks, microfinance institutions and private sector commercial banks, are reviewed in relation to the financial service needs of the rural poor. Even with this long history of institutional credit provision and the dramatic expansion of the Self Help Group-Bank linkage programme since the early 1990s, very substantial proportions of the rural population are still without access to formal finance. Moreover, nationally, the share of informal finance in rural household debt has actually increased at the start of the 21st century. Against this background, measures to improve performance, both within and between different kinds of formal financial institutions and informal financial agents, are assessed; the paper concludes with a discussion of policy options for the future.