Rural Lending Institutions in Maharashtra: Experiences of Farmers and Some Policy Implications

Abstract

The study provided two differing views in terms of functioning of various lending institutions operating in Maharashtra. While new generation lending institutions such as Self-Help Groups (SHGs) showed high rate of interest on loan advances, the traditional lending institutions, viz., cooperatives and commercial banks were beset with other deficiencies like high transaction cost, delay in credit delivery and absence of human capital investment and consumption loans, especially for illness, marriage, and other contingencies. The study emphasized upon the need for formal credit agencies to have simplified loaning procedures to improve overall operational efficiency with a focus on extension of sufficient and low-cost credit facilities at the right time to the poorer sections of the rural society. Other suggestions of this study encompassed efficient use of Kisan Credit Cards and group lending through SHGs. Further, as the credit delivery through commercial and cooperative banks invariably depended on ownership of land, the landless households were adversely affected in terms of access to credit. It was, therefore, suggested that ownership of land as the criterion for distribution of credit should be relaxed and group responsibility be introduced by formal credit institutions to safeguard the interest of the most neglected section of the rural society.