Give a critical appraisal of Rural Banking in India. Write down the solutions to the problems of agricultural credit in India.

Positive role of rural banking:

1. Rural banking has helped in raising farm and non-farm out by providing services and credit facilities to farmers.

2. It has helped in achieving food security which is reflected in the abundant stocks of grains.

3. It provides long-term loans with better repayment options. It, thus helps in eliminating moneylenders from the scene.

4. It had a positive effect on income and employment especially after the green revolution.

Negative aspect of rural banking:

1. The formal institutions (except commercial banks) of rural credit have failed to develop a culture of deposit mobilisation.

2. The sources of institutional finance are inadequate to meet the requirements of agricultural credit.

3. Vast proportion of rural households are out of the credit network as some kind of collateral security is required for taking loan.

4. Small and marginal farmers receive only a very small portion of the institutional credit as a large portion of institutional credit is taken away by the rich farmers.

5. Recovery of agricultural loans has become a serious problem.

Solutions to problems:

1. The banks should change their approach from just being lenders to building up relationship banking with the borrowers.

2. The habit of thrift should be inculcated among the farmers.

3. The farmers should be guided how to make efficient utilisation of financial resources.

4. An effective mechanism for the recovery of agricultural loans should be evolved at the earliest.

5. Cooperative credit societies in rural areas should be strengthened and their working should be made transparent and efficient.