Rural Credit Co-operatives: Significance, Challenges and the Road Ahead

Abstract

Rural co-operatives form an integral part of the rural credit system in India. They are the main source of institutional credit to the farmers, and are chiefly responsible for breaking the monopoly of moneylenders in providing credit to the agriculturists. Despite the phenomenal outreach and volume of operations, the financial health of a very large proportion of rural credit co-operatives has deteriorated significantly. The institutions are beset with problems like low resource base, high dependence on external sources of funding, excessive governmental control, dual control, huge accumulated losses, imbalances, poor business diversification, low recovery etc. These institutions do not, therefore, inspire confidence among their existing and potential members, depositors, borrowers and lenders. Thus, there is a need to find ways for strengthening the co-operative movement and making it a well-managed and vibrant medium to serve the credit needs of rural India, especially the small and marginal farmers.