Agriculture and rural sectors play an important role in IndiaÕs overall development strategy in terms of income and employment generation and poverty alleviation. Great significance has, therefore, been accorded to developing appropriate institutions and mechanisms for catering to the credit requirements of these sectoRs.
Government of India promoted Regional Rural Banks (RRBs) through the RRBs Act of 1976 to bridge the gap in the flow of credit to the rural poor. The RRBs have a special place in the multi-agency approach adopted to provide agricultural and rural credit in India. These banks are state-sponsored, regionally-based and rural-oriented. Besides the RRBs, commercial and co-operative banks have been catering to the credit requirements of the rural sector.
The renewed emphasis on agricultural and rural development by the Government of India would lead to a growing demand for different types of financial services in the rural areas. The present structure of rural credit may not be able to cater to the same. RRBs would be called upon to play a greater role in providing such services due to their rural character and feel. RRBs have to take over a larger share of credit disbursements calling for much larger resource mobilization, as also greater efforts for their institutional strengthening.
It was announced in the Union Budget for 2008-09 that the Central Government and the State Governments had reached an agreement on the content of the package for revival of the long-term cooperative credit structure. The cost of the package was estimated at Rs.3,074 crore, of which the Central GovernmentÕs share would be Rs.2,642 crore.