Financial Inclusion
Note
Reaching excluded populations requires layered institutions because no single channel covers rural credit, insurance, and remittance together. Jan Dhan Yojana accounts, Pradhan Mantri Mudra Yojana for collateral-free lending under the MUDRA Act, Business Correspondent networks authorised by RBI, and Payment Banks licensed under Section 22 of the Banking Regulation Act, 1949 each address a different gap. SHGs linked to banks through NABARD's annual credit policy, microfinance institutions regulated under the RBI Microfinance Directions 2022, NGOs, and donor-backed programmes interact with state institutions to deliver services to rural and low-income households. Reducing dependence on informal moneylenders and advancing SDG Goal 8 are the stated development objectives. NABARD's SHG-Bank Linkage programme is the longest-running institutional channel in this architecture.
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Questions on this topic
Consider the following statements regarding agricultural credit access and financial inclusion for women farmers in India:
- The SHG–bank linkage model, promoted by NABARD, primarily works through savings linkages that automatically confer eligibility for agricultural term credit on member women.
- Business Correspondents (BCs) extend banking services to underserved rural communities but are not authorised to independently conduct credit assessment and sanction agricultural loans on behalf of banks.
- A structural barrier to institutional agricultural credit for women cultivators arises from lending norms that rely on land records and documented ownership, even when women manage or cultivate the land.
Which of the statements given above is/are correct?
Explanation
Statement 1 is incorrect. Under the SHG–bank linkage programme promoted by NABARD, SHGs are linked to banks primarily through savings accounts, which form the foundation for eventual credit access. However, savings linkage alone does not automatically make a member eligible for agricultural credit — creditworthiness, group repayment history, and bank assessment still apply. The statement wrongly implies automatic credit eligibility flows from savings linkage. Statement 2 is correct. Business Correspondents (BCs) are agents appointed by banks to extend basic banking services — deposits, withdrawals, remittances, and assisted digital transactions — to remote or underserved areas. Under the BC model as designed by RBI, credit assessment, underwriting, and loan sanction remain the bank's responsibility. BCs serve as intermediaries that improve access and financial awareness, not as independent lenders. Statement 3 is correct. Institutional agricultural credit in India has traditionally been collateral-based, heavily relying on land ownership documents (such as khataunis, patta records, or tenancy agreements). Women who cultivate family-owned or leased land but lack recorded ownership or formal tenancy documentation face an inherent eligibility barrier — their actual farming activity is not recognised as sufficient for loan appraisal. This is a well-documented structural gap in India's agricultural finance architecture.
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