Consider the following statements about rural credit in India:
(A) Because some collateral is required, a vast proportion of poor rural households were out of the formal credit network.
(B) A major change occurred after 1969 when India adopted social banking and a multi-agency approach.
(C) The multi-agency institutions of rural banking are expected to dispense adequate credit at cheaper rates.
(D) The Green Revolution shifted rural credit towards consumption-oriented lending.
(E) The formal credit delivery mechanism has proved adequate for the rural poor.
Which of the statements given above are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B) and (C) only
(A) Because some collateral is required, a vast proportion of poor rural households were out of the formal credit network. — Correct. Poor households had no collateral to offer.
(B) A major change occurred after 1969 when India adopted social banking and a multi-agency approach. — Correct. This is the change of 1969.
(C) The multi-agency institutions of rural banking are expected to dispense adequate credit at cheaper rates. — Correct. This is what they are expected to do.
(D) The Green Revolution shifted rural credit towards consumption-oriented lending. — Incorrect. It shifted credit towards production-oriented lending.
(E) The formal credit delivery mechanism has proved adequate for the rural poor. — Incorrect. It has proven inadequate, which is why SHGs came up.
NCERT (2026-27): “5.3 Credit and Marketing in Rural Areas … At the time of independence, moneylenders and traders exploited small and marginal farmers and landless labourers by lending to them on high interest rates and by manipulating the accounts to keep them in a debt-trap. A major change occurred after 1969 when India adopted social banking and multi-agency approach to adequately meet the needs of rural credit. Later, the National Bank for Agriculture and Rural Development (NABARD) was set up in 1982 as an apex body to coordinate the activities of all institutions involved in the rural financing system. The Green Revolution was a harbinger of major changes in the credit system as it led to the diversification of the portfolio of rural credit towards production-oriented lending. The institutional structure of rural banking today consists of a set of multi-agency institutions, namely, commercial banks, regional rural banks (RRBs), cooperatives and land development banks. They are expected to dispense adequate credit at cheaper rates. Recently, Self-Help Groups (henceforth SHGs) have emerged to fill the gap in the formal credit system because the formal credit delivery mechanism has not only proven inadequate but has also not been fully integrated into the overall rural social and community development. Since some kind of collateral is required, vast proportion of poor rural households were automatically out of the credit network. The SHGs promote thrift in small proportions by a minimum contribution from each member. From the pooled money, credit is given to the needy members to be repayable in small instalments at reasonable interest rates. By May 2019, nearly 6 crore women in India have become member in 54 lakh women SHGs. In recent years, about ₹ 10-15,000 per SHG and another ₹2.5 lakhs per SHG as a Community Investment Support Fund (CISF) are provided as part of renovating fund to take up self employement for income generation. Such credit provisions are generally referred to as micro-credit programmes. SHGs have helped in the empowerment of women. It is alleged that the borrowings are mainly confined to consumption purposes. …” |