INSTITUTE OF FINANCE AND

INTERNATIONAL
MANAGEMENT

RURAL
BANKING

Debendra sahoo
Sandeep Panda
 WHAT IS RURAL BANKING ?

• It is a form of services that provide solution

to the financial needs of the consumers in
Rural areas.
 OBJECTIVES OF BANKING
SERVICES IN RURAL AREAS

 Poverty Alleviation Objectives:

The objectives is to uplift the mass of population residing in the
rural areas who are currently below the poverty line by
extending credit to the smallest-scale economic activity.
 Financial Intermediation Objectives:
The approach involves increasing the
accessibility of banking services to the poor in a commercially
sustainable manner.
 EVALUATION OF THE RURAL
BANKING AFTER INDEPENDENCE

 Pre-Nationalisation period
 The presence of banking sector was very limited.
 In 1951 informal credit accounted 70% of rural
lending and less than 1% of rural household debt
came from commercial bank.
 Nationalisation of banks
 14 Largest Indian commercial banks were
nationalized in 1969.
 The central aim was to provide the banking services
to all sections of society.
 RURAL BRANCH
EXPANSION PROGRAM

 In 1977 the 1:4 licence rule was implemented.

 The contribution of this policy was:
 Increased the flow of bank credit & saving to rural
areas.
 A total of 30,000 rural branches were opened.
 Rural sector accounted for 12.5 lakhs saving A/C’s &
2.5 crores borrowing A/C’s.
 The share of bank credit & savings, for rural branches ,
rose from 1.5 % and 3% respectively to 15% each.
 ESTABLISHMENT OF NABARD

 National Bank for Agricultural and Rural

Development was established in July 1982.
 The main aim was to provide credit facilities to the
farmers through co-operatives & regional rural banks.
 They were responsible for all matters concerning
policy , planning & operations in the field of credit
for agricultural & other economic activities in the
rural areas.
 POST-LIBERISATION PERIOD

 The 1:4 rule & licence procedure was frozen in

1990.
 There was a heavy toll on the balance of the
commercial bank on account of this policy decision.
 In 2000 the Indian banking sector accounted for the
rupee equivalent of $26,768 million as deposit &
$10,834 million as loan outstanding.
 CHALLENGES IN MARKETING OF
BANKING SERVICES IN RURAL MARKET

 Lack of adequate financial market.

 Low value of loans for poor sections.
 Lack of collateral.
 Low density of population.
 Underdevelopment of rural infrastructure.
 Lack of financial discipline.
 Rural interest subsidy.
 OPPORTUNITIES

 Sourcing of agricultural produce from India for global

markets.
 Govt. thrust.
 Increasing corporate interest in agri-business.
 Strengthening loan recovery.
 Development of AEZs.
 Lower level of NPA in rural areas.
 Lower cost of labour , infrastructure & cost of living.
 Large untapped market.
 MARKETING STRATEGIES

• Developmental marketing.
• Variable lending rate.
• New product lines & delivery models.
• Development of low priced customized
ATMs.
• ATM enabled kisan credit card.
 MARKETING STRATEGIES contd….

 Co-operative promotion.
 Developing franchise model.
 Partnership with NGOs for financing.
 Simple and accessible loan procedure.
 CONCLUSION

 All the statistics indicates there is a huge

market for financial services in the rural
areas.
 The only thing that the banks have to do is to
develop a rural specific marketing mix.