Importance to Increase Lending Activities in Rural Areas
- The main reason for increasing lending activities in rural areas is to help rural people by providing loans at reasonable rates rather than from informal sources.
- In rural areas, agriculture is the main source of income. To increase the production of crops, farmers need better tools and resources(seeds, fertilizers, pesticides, water supply, equipment etc) and for this purpose they require money and this requirement will be fulfilled by the credit.
- People in rural areas need loans for small-scale startups and shops.
- The wedding of a daughter is considered to be one of the holiest responsibilities of the parents. They spend extravagantly on their daughter’s marriage. So they need loans for this purpose.
- By providing loans, banks help rural people to start small-scale businesses which helps create new job opportunities which is necessary for the development of an economy.
- Rural people have access to money, they will spend it on improving their lifestyle.
- The rate of poverty is high in rural areas, thus credit helps rural people their upliftment by providing money for income-generating activities.
- Banks provide exposure to other banking activities such as insurance, saving accounts, fixed deposits, and investments in equity and bonds.
- Technological Advancement is necessary in the modern world. So credit helps rural people to acquire new technology which helps them to connect with new opportunities.
- Higher education is still costly in this country and many rural people can’t afford that and for this purpose, they require credit facilities.
- Diseases don’t discriminate between poor and rich people. There are certain diseases which require a lot of money for their treatment. Here banks help them by providing credits for healthy living.
Why is it necessary that banks and cooperatives increase their lending particularly in rural areas?
Cheap loans and credit schemes are the primary sources to improve the credit situation in India. Banks should open more and more branches in rural areas as well as make rural people aware of banking, credit facilities, and cooperatives. Banks should provide loans at lower interest rates so that rural people don’t depend on informal sectors. This will protect them from scams and fraud and prevent them from getting exploited by informal sources. Cheaper loans can help rural people in many ways such as growing their businesses, trading in a variety of goods, and improving their living standards. Banks and Cooperatives can also help farmers to expand and diversify their production. Overall cheaper loans are one of the main factors in rural growth and development.