Why is it necessary for the banks and cooperative societies to increase their lending facilities in rural areas?

It is found that due to some factors such as inadequate banking system, cumbersome paperwork, lack of credit worthiness and lack of awareness, a large number of rural households still depend on the informal sources of credit such as moneylenders and landlords.However, credit from informal sources can sometimes have serious repercussions such as exorbitant rate of interest and high mortgage obligations. In such condition, it is important for the banks and cooperative societies to expand the formal sources of credit. More banks in rural areas should be opened so that credit can be provided for various development activities at reasonable rates without any undue exploitation. read less

Credit plays an important part in the development of a country. A country's development depends on lack of regional disparities. It is quite evident that one of the prime reasons of the rapid growth of urban areas is easy availability of credit to invest in productive activities. But in rural areas, where banks have limited reach, credit is hardly available they these people depend on the moneylenders who charge huge interest. This, in turn, hinders the growth of such areas and either the rural people move to urban areas or get trapped by these moneylenders. So to ensure finishing regional disparities and encourage growth of agriculture and other industries and generate employment in rural areas, banks must pierce this rural boundary and increase lending in such areas. read less