Strategies to Resurrect Rural Credit Delivery System in India

Commercialization of agriculture coupled with increasing requirement of credit have put a lot of onus on various agricultural financial institutions to play a pivotal role in meeting the increasing capital needs of the farmers and in ensuring timely supply of various inputs besides providing other service facilities. The diversification of agriculture over the years has further accentuated the need for the rapid development of rural infrastructure and larger flow of credit to farming community (Shivamaggi, 2000). In view of increasing requirement of rural credit and sustainability of rural financial institutions (RFIs) operating in India in the era of financial sector reforms, the entire decade of 1990s was full of discussion on the positive and negative impacts of these reforms and their implications for the agricultural sector. In the era of financial sector reforms, sustainability, viability and operational efficiency of RFIs are the major issues that need to be taken cognizance of in ensuring effective rural credit delivery system. However, the major problems plaguing the efficiency of rural credit delivery system are the mounting overdue1 and Non Performing Assets (NPAs)2 of RFIs. The overdue problem of different entities of rural credit delivery structure is reported to be an all-pervasive phenomenon that cuts across these different agencies (Puhazhendi and Jayaraman, 1999). Among various states of India, the RFIs of Maharashtra are reported to show the highes