Essay on the role of banks in rural development

About eighty percent of India’s population is Gramvasini. If no attention will be paid to the development of the rural people of the country, then it is dishonest to dream of national progress on the strength of twenty percent urban people. The village resident has been suffering from hunger, disease, ignorance and exploitation for many centuries.

After independence, many efforts have been made to improve the condition of the villagers, but there are many shortcomings that we have to face. There is a need to accelerate the pace of improvement in the villages so that they too can touch the same dimensions of development as cities and we can be oriented towards the India of our dreams.

The nationalization of banks in 1969 is an important event in the history of the Indian economy. Earlier the rural sector was a completely neglected part of our economy. Agriculture is the main source of income in the villages. About fifty percent of our national income comes from rural and semi-rural areas.

Agriculture based industries also depend on the production of agriculture. This area is backward and exploited. The development of our entire economy depends on its development. The Indian economy is two-dimensional. Its two main areas are urban and rural. There is no relation between the two. There is no facility of cooperative loans in rural areas. The villagers take a loan from Mahajan, who exploits them by taking more interest from the innocent people.

They are not related to any financial institution. The monetary policy of the Reserve Bank of India has not affected the moneylenders. Thus, the characteristics of the two sectors of the Indian economy are different, which have little to no harmony.

Credit facilities are being provided to the villagers in easy and simple installments to spread the banking system within the country. This has given impetus to agriculture and rural industries. This has also encouraged the Green Revolution. The development of the nation has been supported by the increase in agricultural products. Constraints in agricultural production harm industrial development, while growth in agricultural production leads to an increase in national income.

In rural areas, bank service is useful for increasing savings, that savings can be used in productive works. In the present time, there is very little savings in villages, and that too is put into pressing or buying gold. Some people spend their expenses in observance of social customs.


Rural banks should facilitate the deposit of small savings. This should also be managed so that farmers can pay the loan in the form of agricultural products. Banks should provide loan facilities to the villagers for assistance during natural calamities.

In order to improve the condition of the villages, banks should assist the local institutions working in the village. They should provide financial assistance for construction of roads, walls, wells and establishment of educational institutions. Banks can also undertake the construction of houses in villages and can be repaid by installments. The insurance of crops should be provided so that farmers do not have to suffer due to natural calamities like floods, droughts, epidemics.

In addition, banks can set up small scale industries and cottage industries in villages with the help of local institutions. The farmer has to do agriculture only for six months or according to the weather, small scale industries can become his source of income in free time.

With the development of cottage industries, the problem of unemployment in the village can be solved to a great extent. Villagers will be able to get the goods produced by these industries at low prices and they will not have to go to the city to buy these items.

The possibilities of development of bank services in the village are wide. Rural areas will be developed through banks and eventually the country will develop. There will be economic development of the village which will solve the problem of uneven distribution of income.

People below the poverty line of banks will also get the facility. This will reduce the gap between rich farmers and poor farmers. In this way the country will not only progress, but there will be a spread of self-reliance among the rural masses.

by Abdullah Sam
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