Except perhaps commercial banks, formal institutions failed to develop a culture of deposit mobilisation, lending to worthwhile borrowers and effective loan recovery, and agriculture loan default rates stayed high. What was the result?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rural banking took a backseat after reforms
Formal institutions other than commercial banks did poorly in deposits and recovery, and loan defaults stayed high. As a result, the expansion of rural banking took a backseat after the reforms.
Option (1) Self-Help Groups were closed down — Incorrect. SHGs grew; nearly 6 crore women are members.
Option (2) NABARD was set up to replace commercial banks — Incorrect. NABARD (1982) coordinates rural finance institutions. It did not replace banks.
Option (3) India adopted social banking for the first time — Incorrect. Social banking came after 1969, long before the reforms.
Option (4) Rural banking took a backseat after reforms — Correct. This is the result the appraisal gives.
NCERT (2026-27): “… However, all is not well with our banking system. With the possible exception of the commercial banks, other formal institutions have failed to develop a culture of deposit mobilisation — lending to worthwhile borrowers and effective loan recovery. Agriculture loan default rates have been chronically high. … Thus, the expansion and promotion of the rural banking sector has taken a backseat after reforms. …” |