bharatbook
Well-Known Member
The rural credit market appears to be confronted with a paradox. The informal sources of finance, be they local money lenders, landlords, traders, etc. charge more than 20% rate of interest, often keep land as collateral against loan, and still have a very high recovery rate. On the other hand, rural financial institutions (RFIs) charge almost half of this interest rate, do not take land as collateral for most of the crop loans, and still face high defaults. Therefore, it is queer to find out what stands in the way of fast mobilization of formal credit in the rural areas. Several Committees and Task Forces have identified major inhibiting factors to be increasing incidence of overdues or non-performing assets (NPAs) in the rural credit system, high transaction costs, regulated interest rates, inability of the financial institutions to cater to the changing demands of the agricultural sector, inherent limitations of the RFIs in inequitable distribution of loans and limited reach. The net outcome is that while informal finance still holds a prominent place in rural finance, the RFIs, especially, cooperatives are heading towards a state of financial unsustainability.
Market Research Information
Market Research Information