ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Excluding the Poor from Credit

Andhra Pradesh and Telangana have become no-go areas for microfinance institutions due to the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Ordinance, 2010 and, later, the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Act, 2010. Contrary to their laudable objectives, these legislations have neither served public interest nor improved access to finance for the underprivileged sections. Instead, access to finance has contracted, and financial distress and fall in consumption levels of underprivileged households have increased. The law has hit the poor and the marginalised, by constricting their choices in accessing alternate modes of non-collateralised credit.

Microfinance Remains Relevant

Another response to David Hulme and Mathilde Maitrot's "Has Microfi nance Lost Its Moral Compass?" (EPW, 29 November 2014), which takes a closer look at the role and working of microfinance institutions in India

On Funds for NABARD

It is not the sterilisation operations of the Reserve Bank of India, but policy changes agreed to by the Government of India and the central bank in the early 1990s which have led to a smaller fl ow of funds to the National Bank for Agriculture and Rural Development.

Misplaced Critique of Microfinance Regulation Bill

The criticism of the draft Microfiance Bill (September 15, 2007) reveals an ignorance of facts and offers groundless criticism of the public sector institutions involved.

Agricultural Credit in the Post-Reform Era

The negative policy on credit for agriculture and other priority sectors, which has been prevalent since the beginning of the post-reform era, has manifested itself in three broad areas: the enervation of the institutional architecture for rural credit, disincentivisation of credit flow to agriculture through the mechanical application of Basel norms and the squeeze on resources available for agricultural credit operations. This paper discusses these areas and also the experience of a couple of advanced economies. It suggests a set of reforms which will reverse the policy coarctation for agricultural credit. It argues that the successful promotion of the deepening of rural financial markets, which would ensure uninterrupted flow of credit to agriculture will require systematic rather than isolated efforts, with related actions being undertaken on several fronts.

Agricultural Institutional Credit, Indebtedness and Suicides in Punjab

Since the nationalisation of banks and the green revolution, institutional credit for agriculture has grown in Punjab. But the growth had not been uniform and in line with the demand for such credit. Indebtedness has also increased in the state, but a large part of the debt has been for non-productive purposes. The incidence of suicides in Punjab has not been higher than the all India average and studies reveal that while indebtedness is indeed one of the major causes of suicides, it is neither the only cause nor the main one. There is thus no direct causal relationship between institutional credit, indebtedness and suicides in rural Punjab. The problems of indebtedness as well as suicides do not merit narrow interpretation or solution, as these are only symptoms of a larger malaise. They have to be contextualised in the light of stagnation of agriculture, rising levels of rural unemployment and dissipation of economic and social infrastructure.

Mainstreaming of Indian Microfinance

A significant feature of microfinance in India is that it has been built upon the existing banking infrastructure. In the process, it has obviated the need for the creation of a new institutional set up or introduction of a separate legal and regulatory framework. In the linkage model, the financial resources are being sourced from regular banking channels as well as members' savings. Thus the problems related to regulation and supervision of microfinance institutions (MFIs), the accessing of public deposits by MFIs and reliance on donor and grant funding are obviated. With the group acting as a collateral substitute, this model also overcomes the intractable problem of collateral provision by the poor. It has to be realised that microfinance is a means or an instrument for development, not an end in itself. To assess the extent to which Indian microfinance has been able to achieve the goal of poverty eradication and fulfil its role as a means for development, requires in-depth impact assessments on an ongoing basis.

Rural Finance: Role of State and State-owned Institutions

Governments have a critical role to play in development of agricultural and rural financial institutions. But state involvement in the management and implementation of rural financial system has proven expensive and inefficient. Subsidised credit programmes which are part of state intervention in rural financial markets undermine the institutional sustainability of financial institutions, distort rural finance markets and discourage savings mobilisation and fail to develop market-driven sources of funding. The revitalisation of the state-owned rural financial institutions is possible without a wholesale structural and ownership change.

Viability of Rural Banking

P Satish C K Gopalakrishna In the last two-and-a-half decades the rural banking structure has expanded spatially throughout the country. However, it has not been characterised by robust financial health and over the years the structure of rural banking itself has been viewed as an unviable one. This article reviews the framework regarding viability of banking and examines the macro-level components of the financial structure of rural banking institutions, to see whether non- viability is structurally in-built.
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