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Rural poor still depend on moneylenders: RBI survey
By
IANS
Mumbai: A survey the Reserve Bank of India (RBI) conducted in 300 districts has revealed that people from the lowest strata of society continued to depend on local money lenders for small loans at exorbitant interest rates.
Disclosing this, RBI deputy governor Usha Thorat said that in order to check this trend, the apex bank has drafted a concept plan on which public opinion is being sought.
She was addressing a symposium on "Financial Inclusion - Sharing Indian and UK Experience," here Wednesday where Lord Mayor of London Alderman David Lewis was also present.
"Financial literacy and credit counselling are a must and that is one of the reasons why we are concentrating on banking penetration in the remotest rural parts of the country," she said.
Talking about the role of micro-finance and self-help groups (SHG), Thorat said that SHGs have a lot of penetration into hinterlands. However, since they lacked legal status, they were not allowed to open savings accounts in banks.
"Now we have allowed the leader of a SHG to open an account. This, in turn, has brought about a massive change in the rural banking sector," she pointed out.
In a break from the past, the RBI has simplified procedures for migrants, who have no identification papers, to open bank accounts.
"This step will help push banking presence in rural areas. Also, with the introduction of biometric smartcards, state governments have been compelled to address issues pertaining to banking in rural areas," Thorat said.
On the issues of local financial agencies like co-operative banks, regional rural banks, micro-finance institutions and others, she said that strengthening them would generate employment and setting up small and medium business enterprises in all remote corners of the country.
Concurring with Lord Mayor of London's view that the expansion of banking sector reach and financial inclusion are the key to a country's economic growth, Thorat said that the RBI's recent changes in certain banking norms have been carried out with the aim of allowing penetration of banking activities to the un-banked rural areas.
Disclosing this, RBI deputy governor Usha Thorat said that in order to check this trend, the apex bank has drafted a concept plan on which public opinion is being sought.
She was addressing a symposium on "Financial Inclusion - Sharing Indian and UK Experience," here Wednesday where Lord Mayor of London Alderman David Lewis was also present.
"Financial literacy and credit counselling are a must and that is one of the reasons why we are concentrating on banking penetration in the remotest rural parts of the country," she said.
Talking about the role of micro-finance and self-help groups (SHG), Thorat said that SHGs have a lot of penetration into hinterlands. However, since they lacked legal status, they were not allowed to open savings accounts in banks.
"Now we have allowed the leader of a SHG to open an account. This, in turn, has brought about a massive change in the rural banking sector," she pointed out.
In a break from the past, the RBI has simplified procedures for migrants, who have no identification papers, to open bank accounts.
"This step will help push banking presence in rural areas. Also, with the introduction of biometric smartcards, state governments have been compelled to address issues pertaining to banking in rural areas," Thorat said.
On the issues of local financial agencies like co-operative banks, regional rural banks, micro-finance institutions and others, she said that strengthening them would generate employment and setting up small and medium business enterprises in all remote corners of the country.
Concurring with Lord Mayor of London's view that the expansion of banking sector reach and financial inclusion are the key to a country's economic growth, Thorat said that the RBI's recent changes in certain banking norms have been carried out with the aim of allowing penetration of banking activities to the un-banked rural areas.
Reader's comments(7)
1: In the absence committed bankers any credit
simplification is meaningless to he rural
needy. The bank credit is advanced either to
the rural afluent or the person with
exceptional manuverability. The poor finds it
too cumbersome and beyond his reach. Though
Micro Credit through SHGs has been a solid
step in this direction yet the poor finds
stranded every where. The bankers need to
change their attitude other wise the rural
branches of Banks shall remain unsustainable
and hence continued to be discouraged. Will
there be a some beginning?
Posted by: Gopal Singh Thakur - 12:00 AM Apr 29, ' 08
2: Madhu's comments are lukewarm. The problems
faced by rural people should be brought to
limelight. I want to bring to the attention
of everybody a micro credit system that has
been working well in our area. A bank
advances loan unto Rs 12000 per woman to be
paid in installments every week with
interest. Women groups are identified who own
a house. Every week the representative of the
bank come to a specified place and collect
the money from women. If any woman or group
of women fails to turn up, it is bound on the
rest of the women present to pay the money.
This way everybody has a responsibility for
prompt payment. The system has been working
well. This needs to be expanded.
Posted by: Dr.A.Jagadeesh - 12:00 AM Apr 26, ' 08
3: We all know the VERY facts mentioned by all
the readers. So finally what is the
solutions to that? Do you think that
mentioning such knows facts like this wil
solve the problem of this poor villagers or
change their lifes. I think we all shld
discuss/brain storm to find the ways through
which we can STOP this completely and help
the farmers to get access to the banks
easily. - Madhu
Posted by: Madhu - 12:00 AM Apr 18, ' 08
4: Financial literacy and credit counselling are
good things, if you know how to get villagers
to listen. When in need they go to a
pawnbroker rather than a bank, knowing very
well they are exploited financially. Credit
counselling ? Rural credit seekers care more
for ready access to cash than for low
interest rate; they want prompt service, not
paper-work; village money-lender gives them
cash for the asking, and do not ask them for
colateral. The only surity on which a
money-lender advances money is his belief in
borrowerÂ’s capacity to pay, and his ablility
to collect.
Do look up this post, if you have time - http://gvk2.wordpress.com/2008/04/18/where-pa wn-brokers-score-over-banks/
Do look up this post, if you have time - http://gvk2.wordpress.com/2008/04/18/where-pa wn-brokers-score-over-banks/
Posted by: G V Krishnan - 12:00 AM Apr 18, ' 08
5: Yes. It is true. In my town,Nellore ,Andhra
Pradesh the unscrupulous money lenders suck
the blood of poor and needy. They collect
upto Rs 30 per 100 per month. There is daily
collection of money given with interest
polpularly known as "Thandal" in Telugu.
Another worst part of the story is CHITS by
priovate people. Here women run the show.
When once a person takes loan from these
rascals, they have to pay it through out
their life or commit suicide.These money
suckers go scot free because they have
political patronage and support of ROWDIES.
Filthy language is the weap[on of these money
lenders. Unless the Government gives very
severe punishment,these money lenderscontinue
to destabilise rural economy.
Posted by: Dr.A.Jagadeesh - 12:00 AM Apr 17, ' 08
6: 1. The concept "access to credit not the
cost" prevails in rural arena. So poor's
dependence on money lender traditionaly
exists. Even some of the Micro financial
Institutions and SelfHelpGroups(SHG) charge
interest equal to that of money lenders
2. The loan waiver may not help the poor much.as the poor depend more on informal credit system. and MFI/SHG system which are not covered for loan waiver
3.SHG should focus more on social empowerment than economic empowerment through microfinance . Unfortunately many SHGs are formed oflate only for micro purpose wich will not serve the purpose. In the context of financial inclusion policy , the drop outs in SHG/MFI system which is commonly prevailing in rurla fromt point out inclusion of non poor on one hand and exclusion of very poor on the other
4.Mere credit suppy without provison of required non credit inputs such as training raw metetrials( seed, fertilizer,pesticied ) ,. marketing ,price etc would not lead to income generation and ends up with debt trap. Farmers' suicides in Maharastra teach some lessons
2. The loan waiver may not help the poor much.as the poor depend more on informal credit system. and MFI/SHG system which are not covered for loan waiver
3.SHG should focus more on social empowerment than economic empowerment through microfinance . Unfortunately many SHGs are formed oflate only for micro purpose wich will not serve the purpose. In the context of financial inclusion policy , the drop outs in SHG/MFI system which is commonly prevailing in rurla fromt point out inclusion of non poor on one hand and exclusion of very poor on the other
4.Mere credit suppy without provison of required non credit inputs such as training raw metetrials( seed, fertilizer,pesticied ) ,. marketing ,price etc would not lead to income generation and ends up with debt trap. Farmers' suicides in Maharastra teach some lessons
Posted by: Dr.V.Rengarajan - 12:00 AM Apr 17, ' 08
7: "Harashi" is one of the medium where in local
money landers swize poor farmers. In harshi
funds are auctioned. I was in Ajanta area of
Maharastra in the year 1998. Banak of Baroda
was the branch under which as all near by
vilages were under or "Dattak" a Marathi term
used.
I was in vasai village where in Sarpanch and three other money landers of the village had absolute power. All the loan financed to poor farmers, I mean in the name of poor farmers went directly to these people through direct understanding with Branch Manager and Sarpanch. I had lodged a complaint with police patil result I was thrown out of Village. I was doing social work for "Pani Adawa Pani Jirawa" scheme.
I have a strong beleife that all these loan waiver will serve no purpose unless poor farmers are removed from the shakcles of moneylanders....
I was in vasai village where in Sarpanch and three other money landers of the village had absolute power. All the loan financed to poor farmers, I mean in the name of poor farmers went directly to these people through direct understanding with Branch Manager and Sarpanch. I had lodged a complaint with police patil result I was thrown out of Village. I was doing social work for "Pani Adawa Pani Jirawa" scheme.
I have a strong beleife that all these loan waiver will serve no purpose unless poor farmers are removed from the shakcles of moneylanders....
Posted by: Shrikant Barve - 12:00 AM Apr 17, ' 08
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