Rural banking in India aims to provide financial services to customers in rural areas. The objectives include saving rural people from money lenders, accelerating economic growth, and encouraging entrepreneurship. Currently, rural populations have limited access to services, with many relying on informal sources. Regional Rural Banks were established to increase credit flow, but commercial bank branches still only cover 7% of rural sectors. Microfinance is an important approach, with self-help groups being a major model. Issues include regional imbalances, poor management, lack of support, and ensuring sustainability. Expanding reach through partnerships and technology, as well as financial literacy, are keys to further progress.

1. By
Abhishek Acharya
ReemaPasari
Subhajit Sar
ASIAN SCHOOL OF BUSINESS
MANAGEMENT Bhubaneswar
India’s Rural Banking - ” The Fortune Lies At The Bottom Of
The Pyramid.”
By
Subhajit sar

2. What Is Rural Banking?
• It is the form of services that provide solution
to the financial needs of the customer in rural
areas.
• 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.

3. Objectives Of Banking Services In Rural
Areas
• To save the rural poor from the money lenders.
• To act as a catalyst element and thereby accelerate the
economic growth in the particular region.
• To cultivate the banking habits among the rural people and
mobilize savings for the economic development of rural
areas.
• To encourage entrepreneurship in rural areas.
• To develop underdeveloped regions and thereby strive to
remove economic disparity between regions.

4. Rural Banking “current Status”
• Rural population of about 780 million with limited access to financial
services.
• A high of rural lending in form of informal sources.
• 500-600 million people in India do not have bank accounts.
• Rural economy ( Agriculture non- agriculture) constitutes about 50%
of the India’s GDP.
• SBI and NABARD
• Commercial bank branches cover only 7 % of rural sector
and large market is still untapped.

5. SWOT ANALYSIS
Strength
•Competitive Environment,
•Mobile banking or E banking.
Weaknesses
• Monetary & Credit Policy,
•Lack of customer Care Services,
•Recovery of loans.
Opportunities
•Undeveloped rural Area.
• More people are getting
familiarize with the banking,
•Potentiality of Market .
Threats
•Traditional Mentality of
employees,
• Macro Economic Policy. Non
Performing Assets,
• Foreign investment Policy

6. Problem faced by RRB’S
• Running into losses.
• Slow progress.
• Limited scope of investment.
• Delay in decision making.
• Lack of co-ordination.
• Lack of training facilities.
• Poor recovery rate.

7. Way forward……How to win Customer
Expand reach:
Tie up with India post,
Partner with NGO/ MFI.
Kiosk banking:
Offer convenience:
Banking services at mini
branch, making kiosk, The
bio metric authentication
Improved business.
Educate customers
Be cost effective:
Low cost ATM, Costs just
1/ 10th that of the
traditional ATM,
Transfer of funds from
NREGA.
Innovate and adopt
technology:
Smart cards, biometrics
scanning, improve the
service delivery.
Focus on
microfinance: 40% in
priority sector
lending, MFI lending
provides 10-14% return
as against 6-7 % in
government instruments.

8. RESPONSIBLITIES FROM BANK &GOVT
WHAT IS NEEDED FROM THE
BANKS?
WHAT IS NEEDED FROM THE
GOVERNMENT?
• More financial inclusion
• Micro credit / SHG’s
• Use of technology
• Alternate Distribution channels
• Improvement in service levels
in rural area.
• An authority for Rural Banking.
• Establish open standard for
technology to be used Financial
literacy and credit counselling.
• Strategic action plan for
remittance facility for both inter
banking/ intra bank and post
office.

9. Welcome to Micro Finance

10. CONCEPT OF MICRO-FINANCE
“Microfinance is an economic development
approach that involves providing financial
services through institutions to low income
clients”.-International Labour Organization
(ILO), 2000

11. Need of micro-finance in India
• In India around 27 per cent population living
below the poverty line.
• About 60 percent of the poorest households do
not have access to credit.
• Only 20% access loan from the formal sources
• Annual credit demand by the poor is estimated
to be about Rs. 60,000/- crores and only
Rs.12,000/- crores are disbursed.

12. Microfinance Models in India
• Self Help Group- Bank linkage model
• Micro-finance Institution Model (MFI)
• Grameen Model
• Individual Lending
> 97
per
cent of
Microfi
nance
busines
s

13. • 1) Regional Imbalance :-
• 2) Poor Management :-
• 3) Problem Of Micro Enterprises :-
• 4) Dropouts :-
• 5) Lack Of Business Attitude :-
• 6) Regulations :-
• 7) Lack of Political Support :-
• 8) Sustainability :-
PROBLEMS IN MICROFINANCE
11/05/2013 13

14. CURRENT STATUS
• The Indian rural market generates about 50%
GDP.
• Growing income levels and greater
ambitions are progressively driving demand
there.
• 19 % Increase in rural consumption per
person.
(NSSO).

15. Road ahead
• Honda Motorcycle and Scooter India Pvt Ltd is focusing
on rural India with plans to sell more of its entry-level
motorcycle.
• The logistics sector is planning to invest at least Rs 500
crore USD.
• Havells India Ltd forecasts the housing sector to
experience a boom in rural areas.
• Rural customers were the primary targets for two-
thirds of social venture funds and impact investments
in India in the last 13 years, according to the fifth
Annual Report on Indian Venture Capital and Private
Equity released by IIT-Madras.

16. DATA COLLECTION

17. Loans disbursed to MFIs by banks
Year No of MFIs Amount
(crore)
2008-09 581 3732.33
2009-10 779 10728.50
2010-11 471 8448.96
2011-12 465 5206.29
Source: Status of Micro-finance in India- 2012, NABARD

18. State-wise position of MFIs
(2010)
S No State No of MFIs Share %
1 Andhra Pradesh 484 62
2 Bihar 44 6
3 Gujarat 8 1
4 Jharkhand 1 0
5 Karnataka 20 3
6 Kerala 18 2
7 Madhya Pradesh 14 2
8 Maharashtra 15 2
9 Orissa 28 4
10 Rajasthan 18 2
11 Tamil Nadu 101 13
12 Uttar Pradesh 5 1
13 West Bengal 30 4
Total 786 100
18

19. Conclusion
Conclusion
Microfinance provides a good avenue for extending financial services to India’s
poor. Despite the recent success in scaling up microfinance, a number of issues need
to be addressed to ensure that the poor receive high-quality services at a reasonable
cost and that microfinance extends its reach to the poorest. Given the amount of
Indian demand for microfinance, the private sector will have to play a much larger
role in providing services, and drawing in private-sector players will require the
commercial viability of microfinance. Microfinance providers must provide a wide
range of financial services including savings and insurance.
Capacity-building efforts are needed to develop a steady stream of skilled
workers and managers for this industry. Periodic impact evaluations are required
to provide insights into the ability of microfinance to alleviate poverty. Finally,
measures must be taken to complement poor people’s access to finance with access
to markets, which would help them build their businesses.

20. Reference
• Ian Smith. (2008).Meeting needs , New Delhi: Elsevier Nogd
• ShrivastavaM P, Singh S R, “Indian Banking in the New
Millennium”
• Handbook of Statistics on the Indian Economy, RBI 2011-12
• Sultan Singh, “Banking Sector Reforms”, Kanishka
Publications, Delhi
• C Gomez(2008)– Financial Markets Institutions And Financial
Services Prentice-Hall Retrieved 2012-07-11
http://en.wikipedia.org/