Towards Growth with Equity

Growth with equity – the larger mandate of Social Banking – continues to be our goal. Banks can leverage their financial strength to extend credit and their network of branches can reach out to micro-finance clients.

Increasingly, micro-credit institutions are being considered as an alternative to government intervention in rural credit. The substitution of the existing rural credit system with a microcredit-based system is being recommended. In India, two-thirds of the population is still engaged in agriculture or related activities. As the distribution of land is skewed due to adverse land-person ratios, the majority of farmers have an inadequate resource base for production. Hence, small, marginal, landless or near-landless rural population depend on credit for their livelihood. Keeping the importance of credit for agricultural development and alleviation of poverty in view, Social Banking was adopted in 1969. Social Banking has been described as “the reservation of entitlements for previously disadvantaged groups”. As per the philosophy of Social Banking, the initiation and direct involvement of the banks is central to the strengthening of the credit delivery system for agriculture and poverty alleviation. These policies to some extent led to an improvement in the access of bank credit to the rural poor on concessional rates. On the whole, the impact was not as great as envisaged. Firstly, efforts aimed at improving the distribution of formal credit and increasing access to the poorest of the poor and the landless to credit were defeated as credit remained concentrated in the hands of the mid-level cultivator and the landed population.