Rural Credit In India

Some believe that rural India is what real India is

. This is where more than half of the Indian population thrives, and their livelihood depends on agriculture. Rural India was seen as a potential market for indulging in rural credit options for agricultural and non-agricultural sectors, insurance, savings, and money transfers. Rural credit came as a revolution in the rural sector as it helped farmers purchase farming equipment, seeds, live stock and other necessary elements to help them in their business. When rural credit initially began, it was meant to provide timely credit to farmers and other rural population at reasonable rates of interest. This was to be initiated by setting up rural bank and this task was handed over to regional banks, commercial banks and regional rural banks. This is how the rural sector was encouraged into saving their earnings and probably even investing for better returns.

There are several advantages to rural credit and rural banking such as, an increase in the countrys GDP, an attempt to rope out rural families from debt, creating self-employment and income-generating activities, inculcating saving and investing habits and building a general capital for the rural sector. The concerns regarding rural credit are high interest rates which most farmers are unable to pay, inadequacy of credit, and small and marginally well to do farmers who are ultimately neglected.

Urban methods of investing and saving differ from that of the rural sector. The most common ways of urban investments are fixed deposits and mutual funds. A fixed deposit (FD) is an arrangement where a certain amount of money is kept in deposit for a specified amount of time under the name of an account holder. The money kept on deposit earns a fixed rate of interest depending on the terms and conditions of the account. Fixed deposits are limited to your interest rate. That means it is a safe investment with a guaranteed return on investment (ROI). However, if one invests in mutual funds through a mutual fund broker, he does so because even though the risk is higher he can avail a higher return on investment. There are several mutual fund brokers in the market today who offer good packages and different offers. While investing in mutual funds, you must carefully weigh out your options based on your equity, your capital, and your saving/spending ratio. Thus indulging in mutual funds and fixed deposits is a good way to plan ones investments.

Note: One must carefully decide what percentage of savings one wants to invest in a fixed deposit and how much one can afford to invest in mutual funds.

by: James Kapoor

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