Rural banking has become integral to the Indian financial markets with a majority of Indian population still living in rural or semi-urban areas. Government of India and the Reserve Bank of India have been continuously working to achieve complete financial inclusion i.e. timely and sufficient access to financial services and credit at an affordable cost, in the vast expanse of our country. Pradhan Mantri Jan Dhan Yojana is one of the recent initiatives by the new government which has definitely contributed to bring banking to every household. This scheme with time will significantly reduce the gap between rural and urban areas in terms of financial inclusion but the fact that about 70% of population of India is still rural and the penetration of banking facilities is as low as only 24% i.e. only this percentage of people in these areas have formal bank accounts, cannot be ignored. Various Regional Rural Banks, have been set up under the Regional Rural Bank Act, 1976 to provide a continuous source of credit for agriculture and other activities. These banks were set up with the aim of reaching every corner of the country and cater to financial needs of rural society comprising– small and marginal farmers, agricultural labourers, Self Help Groups, Artisans, etc. The credit to weaker sections was made hassle-free and given at cheap or concessional rates. RBI has also encouraged the spread of these banks by undertaking the following:
- Allowing non-target group financing for RRBs.
- Recapitalisation and restructuring of RRBs.
- Simplification of lending procedures as per Gupta Committee recommendations
- Special credit plans
- Kisan Credit Cards
- Deregulation of lending rates
- Direct financing for SCBs
- Various relaxations in investment policies and non-fund business
- Allowing direct access to refinance assistance at concessional rates for RRBs.
These initiatives have promoted the banking culture by making formal credit available to rural households. These facilities have helped to steer the agriculture dominated economy towards modernisation. The banks have to keep in mind the subtleties of the rural culture and understand that the rules of rural economy are different from urban dynamics. However, with increased mobility and connectivity, the urban and rural integration has increased and many factors which made the urban landscape have come to mark rural settings as well. This has led to diversification in activities and people have started to look at other factors of employment too. Agricultural activities have also been significantly commercialised with increased role of cash crops. Thus, banks are getting a strong demand for credit for both agricultural and non-agricultural uses. Bankers however, have to pay attention to these little cultural cues and customer profiles and accordingly carry their services. The staff has to identify with the rural customers who are not used to banking procedures and need extra assistance at every step. This will help customers to avail full benefit of banking without any hesitation.