Question 13GS3GS3

What are the primary causes of limited formal credit penetration among the rural and unbanked populations in India? Comment on the effectiveness of Small Finance Banks in addressing this gap and advancing inclusive financial growth. (Answer 250 words in Devanagari)

Main Body

In India, 257 age-population avails depends upon informal credit which shows credit debt vulnerability of farmers leading to realty distress [MGNREGA cases] Reasons for limited formal credit in rural/unbanked: (1) Financial Stability - commercial banks prefer their urban areas (2) Land amount of loans - not profitable for big banks (3) Poor as technical know-how - farmer-bank linkage weak [poor extension services]

4Financial non-inclusiveness - Bank except and PAN not linked (5) Dominance of mast based moneylenders - mast bank venture Effectiveness of Small Finance Banks in bridging the gap: Small Finance Banks were formed on recommendation of Narsimhan as more commendable to further small credit Success: - More than 50 crore Bank accounts in SFA [Recovery to the last mile] (2) Prom/otary [Mudra scheme] and Small credit - 1-10 lakh (3) Easing collateral demand with interest subvention (4) Bank correspondent model

to extend services in the remote corners (5) Expansion of branches in rural areas (WD Banks) Bureaucratic delays → Growing NPAM - Debt unsustainable Profitability hit - Lack of expansion SFB was used: (1) Need to integrate SFB with Payment Bank (2) Reported regulation [rules for digital financing] (3) Liquidity gap funding Inclusive growth requires farmers to turn into [agri-business] with credit accessibility as envisaged by [Pradhan Mantri]

— Deeksha Chourasiya · AIR 44

211 words1 paragraphs

Conclusion

Inclusive growth requires farmers to turn into agri-business with credit accessibility as envisaged by Pradhan Mantri.

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Topper

Deeksha Chourasiya

AIR 44

Subject & Paper

GS3GS3

Topic

Economic Development

Financial Inclusion

Credit penetration and Small Finance Banks

Writing Stats

227

Total words

Paragraphs

Analytical

Tone

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