RETAIL LENDING IN RURAL AREA: NEED A HOLISTIC INNOVATIVE APPROACH

Most of the Indian population is living in the villages and the agriculturists are playing a vital role in the economic development.

- Sujit Kumar Suman

Agriculture credit is helping them and it provides livelihood to the country's population. But only agriculture credit is not sufficient for them. Other credit requirements are also there for them. One of the most important is the retail credit because they also require house, vehicle and other essentials to change their life style.

So far we are thinking about economic development in the Urban/ Metro areas and this rural segment is left behind, even though the income level has increased substantially; because the lower income groups are moved to middle income group in rural areas. It has been observed that, due to increase in literacy rate and unemployment in the agriculture sector, rural people are forced to go for non-agriculture activities to get the other income. The presence of increased middle income group in Rural Area demands credit facilities at par with the urban people and providing ample opportunities to the banks to extend credit to nonfarm sector. Retail Credit is also an important instrument for rural development. Retail lending in India is not new for banking but it needs a reform, considering the difference in livelihoods of Urban and Rural People.

There are several efforts witnessed from banks to catch the agriculture loans in rural areas but there is no evidence for tapping retail loans in rural area. Banks are seeing the Retail Credit growth in Urban/Metro areas but they are not putting required efforts for the growth in rural areas. In rural lending the growth is found in agriculture and small business loans but still not finding growth in retail lending.