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VOL. 6, ISSUE 3 (2024)
Reforming rural finance and economic development in India: Enhancing sustainability and equity
Authors
Narbda Rana
Abstract
This study critically examines the current state of rural finance in
India, highlighting the systemic issues and proposing comprehensive reforms to
enhance both sustainability and equity. The traditional monitoring of rural
loans has shifted from lenders to borrowers, with borrowers being more
concerned about losing collateral than lenders are. This dynamic has led to the
imposition of usurious interest rates, where default often results in the
seizure of collateral rather than a genuine concern for loan recovery. This
study advocates for a multi-faceted approach to address these issues,
emphasizing the need for substantial public investment in ecologically
sustainable agriculture and rural infrastructure. It also calls for targeted
market support for vulnerable crops and a significant overhaul in the rural financing
system. This includes professionalizing staff, simplifying processes, and
regulating interest rates to ensure fairness. Drawing on global public sector
reform experiences, the study argues for a shift from mere efficiency to
effective outcomes. The proposed reforms include enhancing the democratic and
professional nature of Primary Agricultural Credit Societies (PACS),
reinforcing the Self-Help Group (SHG)-bank linkage program, and ensuring strict
public scrutiny of Microfinance Institutions (MFIs). These measures aim to
create a more equitable and sustainable rural finance system, better supporting
the socio-economic development of India’s rural areas.
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Pages:40-43
How to cite this article:
Narbda Rana "Reforming rural finance and economic development in India: Enhancing sustainability and equity". International Journal of Commerce and Economics, Vol 6, Issue 3, 2024, Pages 40-43
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