1 Development ol 26. No, pp 61-482 a RURAL CREDIT : ISSUES, CONTRADICTIONS AND PERSPECTIVES Mohinder Kumar* ABSTRACT. The contradictions of our rural credit system are jomehow camouflaged by the “achievements” of lisbursement targets and. of recent, by he success of programmes like doubling of agricultral credit. We handy ever questioned inthe past the compatibility oF adaptability of rural credit syetem with the mode of production of agriculture from he angle oftheory There has been anover-enphasis onthe “role” of istttional credit in agricultural produetion and private capita srmation, never realising that the growing fantasies of power ofredit and credit eishism are leading the sma farmers ton overdependence on rural credit while they intend to remain indiferen to borrowing. The increased presence of moneylenders/ raders’ money-capital ts Further accentuating the compulsions of instirtional credit to stayin the rural sector. The tine has come when ‘we need to seriously look inta the emerging possibility (of zero-redit based organization of production by the small farmers’ associations and thelr chances of joining with corponate-captal. In this paper we have attempred AGM (Economie Senize), NABARD Consatincy Seve, Pit No. C24, 0 Block. IF Hoe C Wing, Bands Kurla Complex, Mumba 400 051, ‘The views expeesedin that ate those o th author alone and ot neces the organisation to which ei relatedThe fact that rural rot system in India is at the erostoads is amply bore ont by current esearch inthe area of institutional eet, There ae a number of fundamental issues still unvesolved. An investigation ofthe exis functions and diverse pressures on our rural credit system visa-vis is historically determined tole enables us to pinpoint the fundamental ontaditions of out uralereitand banking system. In discussing these sss we have consciously stayed away from overwhelming complacency of achievements of one rural ret system, So far asa gigantic superstructure of banking neswork is concerned this isan achievement gragally on wane, The ‘nter form ofthese insttations has existed witha weak iner content, Ais he Form with the juncture, therfore, we have to be cautious in confusing content of the eur eredit system. This would help usin having «clear understanding ofthe isses involved in ral credit “The numberof rural branches of scheduled commercial banks decreased from 35,135 in 1991 to 32,640 in 2001{BT1G, 2002}, The decreasing fluctuating numberof rue branches of scheduled commercial banks in past fe years isa disquieting feature, even considering the demographic gradation ‘of ural centres into semi-arban cones, Therefore, theres ready atendency ‘ofthe banks o withdrawing from the Function of al crt by closing down ‘ural branches, Othe ater hand increase inthe number of urban metropolitan branches could not be explained simply by demographic transition of centres, {Urbanisation and industriisation go hand in hand; which mans tha with hs expansion of wbanisation and consequent incase in the numberof urban! vetopalitan branches, banks were inclined towards financing of capitalist large-scale industliston, This indicates the efforts ofthe banking systemRural Credit: lsues; Contractions and Perspectives 463 ‘3 uapting t0 the historical role of aligning with capitalistic production ‘recesses, This is a postive sign, but rural banking is getting jolts. The ‘ithdraval of stringency of Service Area Approach (SAA) in 2004-05 may be