NATIONALIZATION OF BANKS

A major objective of the nationalization of commercial banks (CBs) in 1969 was to improve the access of the rural households, particularly the rural poor, to institutional credit and to reduce their dependence on informal sources of credit. To ensure that the relatively weaker section have access to credit, the Reserve Bank of India (RBI) stipulated that at least 40 per cent of the advances of the CBs should be earmarked for the priority sectors as defined by it (18 per cent as "direct" loans for agriculture and 10 per cent as advances to weaker sections). A multi-agency approach for rural credit delivery was also adopted involving CBs co-operative banks and regional rural banks (RRBs). The RRBs were, by deliberate policy, to confine their lending to the target groups of weaker sections. A vigorous rural branch expansion programme was also launched to increase the rural credit delivery outlets for facilitating easy access to credit.

A number of special programmes aimed at meeting the credit needs of the small and marginal farmers and agricultural labourers were launched and implemented through agencies, such as Small Farmers Development Agency (SFDA) and Marginal Farmers and Agricultural Labourers (MFAL). The experience of the implementation of these programmes led to the introduction of the Integrated Rural (IRDP) with the specific objective of raising the poor rural families above the poverty line, Credit support from banks was considered as an important input in taking up economic and gainful activities by such families.

Notwithstanding these impressive achievements in the expansion of the credit delivery system and the special programmes, nearly half the indebted rural households are still outside the ambit of the institutional credit system. They approach the moneylenders for meeting their consumption and production needs in the absence of institutional support. Some of the poor who have not been reached, even by the vast network of the institutional credit delivery system have, however, organized themselves in to SHGs and many such groups have come in to existence either spontaneously or with the active involvement of the Voluntary Agencies (VAs) which motivated the rural poor to pool their meager financial resources for meeting their small and frequent consumption and production credit needs. The role which Vas can play in poverty alleviation was recognized by the Planning Commission which highlighted in the Seventh Plan document the need for associating the Vas in such programmes.