Page 182 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 8: Financial Institutions

economic need of lending. RRBs had tried to build in equity without giving enough emphasis Notes
on asset build-ups. As a result, the NPA of RRBs have risen from 56% in 1996 to 86% in 2009.

RRBs and Microcredit

RRBs were influenced to get into the mode of microcredit in the line and length of the Bank
Rakyat Indonesia, the Grameen Bank-Bangladesh and Banco Solidario, S.A. (BancoSol). This was
largely due to the working paper published by Mr. Y.S.P. Thorat of the Rural Planning and
Credit Department in the RBI monograph, "A comprehensive study of micro enterprise finance
institutions".

Role of RRBs in Poverty Alleviation

Poverty alleviation has been the centre of discussion since independence. The question of
equitable growth and distribution of wealth in the nation has been the priority of all the plans
since then.
One way which the Government of India has thought of eliminating poverty was to create a
structure which would generate income for the poor. Instead of providing employment to the
poor, it was thought to empower them to become entrepreneurs and make then a part of the
production and output generation system. Livelihood programmes were adopted in order to
move in this direction. Skill-based training was imparted in order to generate even distribution
of labour, which in turn, would give scope for a entrepreneurial move for the poor.
It is essential to note that certain Western models of employment generation and stereotyped
work hours do not hold well in India. India is not wealthy enough to sustain a burden of salary
to be paid to 100 million people. Hence, the focus of the burden has to shift from the employment
generation to employment generator. Small and medium scale projects had been promoted in
this respect.

Notes Inclusiveness has become the keyword of the economy today. The country has
understood that unless the growth involves the smallest of the small in the country, the
growth which we seek cannot be achieved.
In order to lend a cohesive alignment to these objectives, the RRBs have played a very significant
role.
They have helped the country in making the reach of the employment and livelihood programmes
to the poor of the country. Besides, they have at least been able to create a capital buffer for the
poor entrepreneurs so that inclusive growth becomes a reality. The All India Debt and Investment
Survey of the RBI puts that the total investment achieved by RRBs have been about 30 per cent of
the total in the country. The Government has tried to integrate the RRBs with such schemes as
Jawaharlal Nehru Rojgar Yojana and Rural Renewal Mission. In sum, it could be said that RRBs
have helped in a limited way to lesson the gap between the saving and investment.

Self Assessment

Fill in the blanks:

10. The RBI (Amendment) Act 1997 defines ……………………as an institution or company
whose principle business is to accept deposit under any scheme or arrangement or in any
manner, and to lend in any manner.

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