A Study On Role and Effects of Microfinance Banks in Rural Areas in India 1

“A STUDY ON ROLES AND EFFECTS OF MICROFINANCE IN RURAL AREAS IN INDIA”
INTRODUCTION
Microfinance or micro credit is income individuals or groups who otherwise would have no other
access to financial services the goal of microfinance is to ultimately give impoverished people an
opportunity to become self-sufficient.
Microcredit: It is a small amount of money loaned to a client by a bank or other institution.
Microcredit can be offered, often without collateral, to an individual or through group Lending.
Micro savings: These are deposit services that allow one to save small amounts of money for
Future use. Often without minimum balance requirements, these savings accounts allow
Households to save in order to meet unexpected expenses and plan for future expenses.
Micro insurance: It is a system by which people, businesses and other organizations make a
Payment to share risk. Access to insurance enables entrepreneurs to concentrate more on
Developing their businesses while mitigating other risks affecting property, health or the Ability
to work.
Remittances: These are transfer of funds from people in one place to people in another, Usually
across borders to family and friends. Compared with other sources of capital that can Fluctuate
depending on the political or economic climate, remittances are a relatively steady Source of
funds.
Microfinance is a banking service provided to unemployed or low-income individuals or groups
who otherwise would have no other access to financial services. Microfinance allows people to
take on reasonable small business loans safely, and in a manner that is consistent with ethical
lending practices.
The term microenterprise, also known as a micro business, refers to a small business that
employs few people. A microenterprise usually operates with fewer than 10 people and is started
with a small amount of capital advanced from a bank or other organization. Most
microenterprises specialize in providing goods or services for their local areas.
Microfinance is a category of financial services targeting individuals and small businesses who
lack access to conventional banking and related services. Microfinance includes microcredit, the
provision of small loans to poor clients; savings and checking accounts; micro insurance; and
payment systems, among other services. Microfinance services are designed to reach excluded
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KRUPANIDHI DEGREE COLLEGE
customers, usually poorer population segments, possibly socially marginalized, or geographically

more isolated, and to help them become self-sufficient.
1.1 HISTORY OF MICROFINANCE
Over the past four decades, microfinance—the provision of loans, savings, and insurance to
small businesses and entrepreneurs shut out of traditional capital markets—has grown from a
niche service in Bangladesh and a few other countries to a significant global source of financing.
Some 200 million people globally now receive support from microfinance institutions, with most
of the recipients in the developing world. In the beginning, much of the microfinance industry
was managed by non-governmental organizations, but today the majority of these institutions are
commercial and regulated by governments, and they provide safe places for the poor to save, as
well as offering much-needed capital and other financial services.
Now out of infancy, the microfinance industry faces major challenges, including its ability to
deal with mobile banking and other technology and concerns that some markets are now over-
saturated with microfinance. How the industry deals with these and other challenges will
determine whether it will continue to grow or will be subsumed within the larger global financial
sector.
Microfinance provides financial assistance to poor people for starting their businesses without
collateral security. In 1992, SHG-Bank Linkage program was inaugurated by NABARD to give
monetary backing in form of microfinance to the underprivileged people. Microfinance has
emerged as a powerful tool for the economic development of developing countries like India.
This study is related to India because India is the fastest growing economies in the world but
India has a major problem of poverty. In India, 21.9 % population is below the poverty line in
2011-12. The government spends enormous resources on these microfinance programs to
alleviate poverty so that it became necessary to analyses the growth of the microfinance program
in India.
The early 21st century marked the international rise of microcredit. While the first microcredit
summit took place in Washington in 1997, the G8 outlined the principles of microfinance in
2004, tracing the contours of a new economic sector. The UN named 2005 the “International
Year of Microcredit”, and Muhammad Yunus won the Nobel Peace Prize in 2006.
New research in the area of microfinance call for better understanding of the microfinance
ecosystem so that the microfinance institutions and other facilitators can formulate sustainable
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strategies that will help create social benefits through better service delivery to the low-income
population.
1.2 OBJECTIVES
To know the growth of SHG-Bank Linkage Program during the last three in India. Research
Methodology: This is a quantitative study based on secondary data which is collected from
NABARD annual reports, websites, journals etc. In this paper suitable statistical techniques such
as tables, percentage and diagrams are used to analyses the data. Numbers of SHGs, savings,
bank loan disbursed, bank loans outstanding are the selected parameters of SHG-Bank linkage
program. Significances: This study will be fruitful for the government, microfinance institutions,
banks, and society. Conclusion: This is revealed from the analysis of SHG-Bank Linkage
Program that program is growth is very much satisfactory during the last seven years in India.
Microfinance implies giving exceptionally helpless families tiny advances (miniature credit) to
help them participate in useful exercises/independent companies. After some time, microfinance
has come to incorporate a more extensive scope of administrations (credit, investment funds,
protection, and so on) as we have come to understand that poor people and the extremely
helpless that need admittance to conventional formal monetary establishments require an
assortment of monetary items.
The 11th Long term Plan focuses on comprehensive development and quicker decrease of
neediness. Miniature Money can contribute massively to the monetary incorporation of the poor
without which it will be hard for them to emerge from the endless loop of destitution. There is a
need to reinforce every one of the accessible channels of giving credit to the poor like SHG-Bank
Linkage programs, Miniature Money Foundations, Agreeable Banks, State monetary companies,
Local Provincial Banks and Essential Agrarian Credit Social orders. The strength of the
miniature money industry lies in its familiarity and adaptability which ought to be ensured
furthermore empowered.
Property managers, nearby businesspeople, dealers, providers and expert cash loan specialists,
and family members are the casual wellsprings of miniature credit for poor people, both in
provincial and metropolitan region?
The area which is as yet in its outset faces lack of experienced specialists/labor/specialists. There
is a need to have great quality experts, prepared in best practices in administration for powerful
corporate administration. A portion of the significant regions where limit building is required are
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change, best practices, interest rate the executives, conveyance the board, overseeing
development, hazard relief, item planning, statistical surveying and so forth. Microfinance is
defined as any activity that includes the provision of financial services such as credit, savings,
and insurance to low income individuals which fall just above the nationally defined poverty
line, and poor individuals which fall below that poverty line, with the goal of creating social
value. The creation of social value includes poverty alleviation and the broader impact of
improving livelihood opportunities through the provision of capital for micro enterprise, and
insurance and savings for risk mitigation and consumption smoothing.
A large variety of actors provide microfinance in India, using a range of microfinance delivery
methods. Since the founding of the Grameen Bank in Bangladesh, various actors have
endeavored to provide access to financial services to the poor in creative ways.
Governments have piloted national programs; NGOs have undertaken the activity of rising donor
funds for on-lending, and some banks have partnered with public organizations or made small
inroads themselves in providing such services. This has resulted in a rather broad definition of
microfinance as any activity that targets poor and low-income individuals for the provision of
financial services. The range of activities undertaken in microfinance include group lending,
individual lending, the provision of savings and insurance, capacity building, and agricultural
business development services. Whatever the form of activity however, the overarching goal that
unifies all actors in the provision of microfinance is the creation of Social value.
The World Bank estimates that more than 500 million people have directly or indirectly
benefited from microfinance-related operations. The International Finance Corporation (IFC),
part of the larger World Bank Group, estimates that, as of 2014, more than 130 million people
have directly benefited from microfinance-related operations. However, these operations are only
available to approximately 20% of the three billion people who qualify as among the world’s
poor.
In addition to providing micro financing options, the IFC has helped establish or improve credit
reporting bureaus in 30 developing nations. It has also advocated for adding relevant laws in 33
countries that govern financial activities.
The benefits of microfinance extend beyond the direct effects of giving people a source for
capital. Entrepreneurs who create successful businesses, in turn, create jobs, trade, and overall
economic improvement within a community
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1.3 LEGAL REGULATIONS

Banks in India are regulated and supervised by the Reserve Bank of India (RBI) under the
RBI Act of 1934, Banking Regulation Act, Regional Rural Banks Act, and the Cooperative
Societies Acts of the respective state governments for cooperative banks.
NBFCs are registered under the Companies Act, 2013 and are governed under the RBI Act.
There is no specific law catering to NGOs although they can be registered under the Societies
Registration Act, 1860, the Indian Trust Act, 1882, or the relevant state acts. There has been a
strong reliance on self-regulation for NGO MFIs and as this applies to NGO MFIs mobilizing
Deposits from clients who also borrow. This tendency is a concern due to enforcement problems
that tend to arise with self-regulatory organizations. In January 2000, the RBI essentially created
a new legal form for providing microfinance services for NBFCs registered under the Companies
Act so that they are not subject to any capital or liquidity requirements if they do not go into the
deposit taking business. Absence of liquidity requirements is concern to the safety of the sector
1.4 SERVICES PROVIDED BY MICRO FINANCE BANK:

There are many services provide by MFI. Providing loans; car financing; home financing,
personnel loans, taleemi loans.
1. PROVIDING LOANS:
The important service is provided by Mf is given loan. These loans are provided from some
Productive activities like; starting new business, expansion of business; improving life etc.
2. CAR FINANCING:
MFI also assist those people who cannot pay total amount at once. So, these MFI gave them car
On installments like UBL car financing scheme is too popular and too many people taking
advantage from this scheme.
3. HOME FINANCING:
Pakistan is a poor country. Purchasing power of Pakistan is very low. So many people are living
on rent. They cannot have too many amounts to purchase homes. MFI‘s provide loans be
considering their job stability and take security for it.
4. PERSONNEL LOANS:
MFI also obtain personnel loans. Those people who have permanent employment and stable
jobs. This credit facility depends on the income of an individual.
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5. TALEEMI LOANS:
MFI also provide financial aid to the students who cannot bare educational expenses but want to
study. MFI assist them in return of some security and it would have to pay after completing the
education.
1.5 BENEFITS OF MICROFINANCE

1. Financial Inclusion
By bringing them into the folds of financial inclusion, Microfinance has ensured that the poor
partake in the development of the nation.
2. Self-Sufficiency
Innumerable stories illustrate how microfinance has made its customers self-sufficient through
entrepreneurial activities, making their lives and that of their families, better.
3. Stability
Access to steady and sustainable income as compared to one-time access to capital has helped
borrowers by bringing in stability in their lives as against their prior vulnerability to the vagaries
of life. Microfinance helped borrowers raise income, build assets and/or cushion themselves
against external shocks.
4. Women Entrepreneurship
Increase in the household incomes has improved self-esteem of woman, further motivating them,
evident in the rise of many rural entrepreneurs.
5 .Financial Literacy An understanding of financial matters is important before borrowers are
entrusted with credit. Microfinance providers have focused on financial literacy among
borrowers to increase awareness about accessing credit, managing it, and utilizing it wisely.
6.Digitization
Microfinance has taken technology to the remotest parts of India. Be it mobile phones, or Apps
or biometric devices, the rural woman is a happy digital customer, enjoying the ease of
‘connectivity.
7. Crisis Support
Behind the increased resilience of the borrower, is the solace provided by a microfinance
provider. Time and again, microfinance providers have supported stressed borrowers in times of
a calamity or crisis.
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According to the latest research done by the World Bank, India is home to almost one third of
the world’s poor (surviving on an equivalent of one dollar a day). Though many central
government and state government poverty alleviation programs are currently active in India,
microfinance plays a major contributor to financial inclusion. In the past few decades it has
helped out remarkably in eradicating poverty. Reports show that people who have taken
microfinance have been able to increase their income and hence the standard of living. About
half of the Indian population still doesn’t have a savings bank account and they are deprived of
all banking services. Poor also need financial services to fulfill their needs like consumption,
building of assets and protection against risk.
1.6 ROLE AND SIGNIFICANCE OF MICRO-FINANCE
Micro-finance contributes to social and economic development of the nation in the

following ways:
1. Poor people cannot access banking services due to their meager income and inability to handle
banking procedures and documentation. It is through micro-finance that a wide range of financial
services such as deposits, loans, payment services, money transfers and insurance can be
provided to the poor and low income households and their micro-enterprises.
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2. Micro-finance institutions, through their NGOs, develop saving habits among poor people. The
financial resources generated through savings and micro credit obtained from banks are utilized
to provide loans and advances to the members of the Self Help Groups (SHGs). Thus,
microfinance institutions help in mobilization of savings and using the same for the welfare of its
members.
3. Loans from the normal banking system require collateral or counter guarantee which poor people
cannot offer and therefore, cannot get loan. Again, high interest rates and procedural and
documentation formalities act as a deterrent to poor people accessing banks for loans.
Microfinance does away with all these obstacles and provides finance to rural and poor
population on easy terms.
4. Micro-finance allows the poorer sections of the society to get loans at cheaper rates which helps
them to start their businesses on a small scale grow their business and get out of poverty and be
independent and self-sufficient. It helps in creating long-term financial independence among the
poorer sections of the society and therefore, promotes self-sufficiency among them.
5. Micro-finance is provided through the intermediation of Self Help Groups (SHGs). More than
50% of the Self Help Groups (SHGs) are formed by women. Now, they have greater access to
financial and economic resources. It is a step towards greater security for women. Thus, micro-
finance empowers poor women economically and socially.
6. Usually, rural sector depends on non-institutional agencies for their financial requirements
whereby they are exploited in numerous ways. Micro-financing has been successful in taking
The borrower receives all these services at her/his door step and in most cases with a repayment
schedule of borrower’s convenience. But all this comes at a cost and the interest rates charged by
these institutions are higher than commercial banks and vary widely from 10 to 30 percent. Some
claim that the interest rates charged by some of these institutions are very high while others feel
that considering the cost of capital and the cost incurred in giving the service, the high interest
rates are justified.
Micro-finance is based upon the notion of moving away from traditional aid towards a
sustainable and viable industry; therefore interest charges are necessary to cover the costs of
administering the loans. The interest rates charged by micro-finance institutions are often
considerably higher than those offered by traditional financial institutions. This is because the
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cost of administering many small loans in rural areas is much higher than the cost of
administering fewer large loans in developed urban surroundings
1.7 EXISTENCE OF MICRO FINANCE IN INDIA

The term microfinance came into existence in 1970s when organizations, such as Grameen Bank
of Bangladesh with the microfinance pioneer Muhammad Yunus, were starting and shaping the
modern industry of micro financing.
Even Microfinance in India can map out its origins back to the early 1970s when the Self
Employed Women’s Association (“SEWA”) of the state of Gujarat formed an urban cooperative
bank, called the Shri Mahila SEWA Sahakari Bank, with the objective of providing banking
services to poor women employed.
The microfinance sector went on to evolve in the 1980s around the concept of SHGs, informal
bodies that would provide their clients with much-needed savings and credit services. Due to
large size and population of around 1000 million, India's GDP ranks among the top 20
economies of the world. However, around 400 million people or about 60 million households,
are living under the poverty line. It is further predictable that of these households, only about 20
percent have access to credit from the formal sector. As well, the segment of the rural population
has no good access to the recognized financial intermediary services, including savings services.
Credit on rational terms to the poor can bring about a significant fall in poverty. Hence micro
credit assumes significance in the Indian context.
With about 60 million households below or just above the strictly defined poverty line and with
more than 80 percent unable to access credit at reasonable rates, it is obvious that there are
certain issues and problems, which have banned the reach of micro finance to the needy.
With globalization and liberalization of the economy, opportunities for the unskilled and the
illiterate people are not increasing fast enough, as compared to the rest of the economy. In this
context, the institutions involved in micro finance have a significant role in reducing inequality
and contribution in rural development for overall growth.
Microfinance institutions serve as a supplement to banks and in some sense a better one too.
These institutions not only offer micro credit but they also provide other financial services like
savings, insurance, remittance and non-financial services like individual counseling, training and
support to start own business and the most importantly in a convenient way.
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1.8 MICROFINANACE AND POVERTY REDUCTION FOR RURAL DEVELOPMENT

IN INDIA
India consists over a quarter of its population below to poverty line. The World Bank
reports that India is a home around some 260 to 290 million poor, numbers that rise to around
390 million if poverty is measured by the international standard of those living on less than 1US$
dollar a day. Almost half of India’s poor, more or less 133 million, are found in three states:
Uttar Pradesh, Bihar, and Madhya Pradesh. Rural area in India is the home of three quarters of
India’s poor which is supported by the increasing urban and rural disparities. The Indian
government’s poverty reduction strategy focuses on infrastructure, social development
(especially education and health), and rural livelihoods. The improvement of rural livelihoods is
the aspect of poverty reduction that Microfinance Institutions concentrate on. Most poor people
manage resources to develop their enterprises and their home over a time. Financial services
could enable the poor to force their initiative, accelerating the process of assembling incomes,
assets and economic safety. Traditional finance institutions rarely lend money to serve the needs
of low-income families and women-headed households. However, the income of many self-
employed households is not stable, regardless of its size. A large number of small loans are
needed to serve the poor, but lenders prefer dealing with large loans in small numbers to
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minimize administration costs. They also look for guarantee which many low-income households
do not have in hand. Over the last ten years, however, successful experiences in providing
finance to small entrepreneur and producers demonstrate that poor people, when given access to
responsive and timely financial services at market rates, pay back their loans and use the profits
to increase their income and assets. This is not shocking since the only realistic alternative for
them is to borrow the money from informal market. Community banks, NGOs and credit groups
around the world have shown that these microenterprise loans can be profitable for borrowers
and for the lenders, making microfinance one of the most effective poverty reducing strategies.
Microfinance provides financial assistance to poor people for starting their businesses without
collateral security. In 1992, SHG-Bank Linkage program was inaugurated by NABARD to give
monetary backing in form of microfinance to the underprivileged people. Microfinance has
emerged as a powerful tool for the economic development of developing countries like India.
This study is related to India because India is the fastest growing economies in the world but
India has a major problem of poverty. In India, 21.9 % population is below the poverty line in
2011-12. The government spends enormous resources on these microfinance programs to
alleviate poverty so that it became necessary to analyses the growth of the microfinance program
in India.
Now out of infancy, the microfinance industry faces major challenges, including its ability to
deal with mobile banking and other technology and concerns that some markets are now over-
saturated with microfinance. How the industry deals with these and other challenges will
determine whether it will continue to grow or will be subsumed within the larger global financial
sector.
Even Microfinance in India can map out its origins back to the early 1970s when the Self
Employed Women’s Association (“SEWA”) of the state of Gujarat formed an urban cooperative
bank, called the Shri Mahila SEWA Sahakari Bank, with the objective of providing banking
services to poor women employed.
Credit to non-food industries stood at Rs. 108.02 trillion (US$ 1.47 trillion), as of June 04, 2021.
Non-food industries grew at 5.7% in January 2021 as against an increase of 8.5% in January
2020
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1.9 MICROFINANCE AND SELF HELP GROUPS (SGHs) FOR RURAL

DEVELPOMENT
There are two common approaches of Micro Finance India - The Self-help groups’ method and
the Grameen system. An SHG is an unofficial group of approximately 10-20 members. The
members of the SHG are joined for the specific purpose of facilitating saving and credit services
for its members. This is made possible through members pooling their resources to create a
common fund.
The process and social involvement of SHGs are intended to be instruments of empowerment,
building the capacity of members to eventually conduct and manage SHGs for themselves, and
enabling them to have greater autonomy in financial decision making as well as wider social
participation. SHG meetings are set to take place at regular intervals and at a designated time.
Group members are drawn from the same social economic layer and work on the basis of equal
participation and contribution from all members.The groups are chaired by one lead member at a
time; this role is usually rotated to allow capacity building for all members. Meetings are
structured and accurate and up to date records of all financial transactions, group decisions and
actions are compiled.
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1.10 MICRO-FINANCE – CHANGING THE FACE OF POOR INDIA

Micro-finance is emerging as a powerful instrument for poverty alleviation in the new economy.
In India, micro-finance is dominated by Self-Help Groups (SHGs) – Banks Linkage Programme,
aimed at providing a cost effect mechanism for providing financial services to the „unreached
poor‟. In the Indian context, terms like „small and marginal farmers‟, „rural artisans‟, and
„economically weaker sections‟ have been used to broadly define micro-finance customers.
A more refined model of micro-credit delivery has been evolved lately, which emphasizes the
combined delivery of financial services along with technical assistance and agricultural business
development business. When compared to the wider SHG bank linkage movement in India,
private MFIs have had limited outreach. However, we have seen a recent trend of large micro-
finance institutions transforming into „Non-Bank Financial Institutions (NBFCs). This changing
face of microfinance in India appears to be positive in terms of the ability of micro-finance to
attract more funds and therefore increase the outreach. In terms of demand for micro-credit or
micro-finance, there are three segments, which demand funds. They are as follows:
 At the very bottom in terms of income and assets, are those who are landless and engaged in
agricultural work on a seasonal basis and manual laborers engaged in forestry, mining,
household industries, construction and transport. This segment requires, first and foremost,
consumption credit during those months when they do not get labor work and for
contingencies such as illness. They also need credit for acquiring small productive assets
such as livestock, using which they can generate additional income.
 The next segment is small and marginal farmers and rural artisans, weavers and those self-
employed in the urban informal sector as hawkers, vendors and workers in household
microenterprises. This segment mainly needs credit for working capital, a small part of which
also serves consumption needs. This segment also needs term credit for acquiring additional
productive assets, such as irrigation pump sets, bore wells and livestock in case of farmers
and equipment (looms, machinery) and work sheds in case of non-farm workers.
 The third market segment is of small and medium farmers who have gone in for
commercial crops such as surplus paddy and wheat, cotton, groundnuts and others engaged
in dairying, poultry, fishery, etc. Among non-farm activities, running provision stores,
repair workshops, tea shops and various service enterprises. These persons are not always
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poor, though they live barely above the poverty line and suffer from inadequate access to
formal credit.
Well these are the people who require money and with micro-finance it is possible. Right now,
the problem is that, it is SHG‟s which are doing this and efforts should be made so that the big
financial institutions also turn up and start supplying funds to these people. This will lead to a
better India and will definitely fulfill the dream of our late Prime Minister, Mrs. Indira of
reducing poverty. In the words of Adam Smith: “When you have got a little, it is often easy to
get more but the greatest difficulty is to get the little.” Today, India is facing a major problem in
reducing poverty. About 25 million people in India are under below poverty line. With low per
capita income, heavy population pressure, prevalence of massive unemployment and
underemployment, low rate of capital formation, misdistribution of wealth and assets, prevalence
of low technology and poor economic organization and instability of output of agriculture
production and related sectors have made India one of the poor countries of the world.
Strategic Policy Initiatives
Some of the most recent strategic policy initiatives in the area of Microfinance taken by the
Government and regulatory bodies in India are:
1. Working group on credit to the poor through SHGs, NGOs, NABARD, 1995
2. The National Microfinance Taskforce, 1999
3. Working Group on Financial Flows to the Informal Sector (set up by PMO), 2002
4. Microfinance Development and Equity Fund, NABARD, 2005
5. Working group on Financing NBFCs by Banks- RBI
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INDUSTRY PROFILE
2.1 INTRODUCTION TO THE BANKING INDUSTRY
As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and
well-regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are
generally resilient and have withstood the global downturn well. Indian banking industry has
recently witnessed the roll out of innovative banking models like payments and small finance
banks. RBI’s new measures may go a long way in helping the restructuring of the domestic
banking industry. The digital payments system in India has evolved the most among 25 countries
with India’s Immediate Payment Service (IMPS) being the only system at level five in the Faster
Payments Innovation Index (FPII).The Indian banking system consists of 12 public sector banks,
22 private sector banks, 46 foreign banks, 56 regional rural banks, 1485 urban cooperative banks
and 96,000 rural cooperative banks in addition to cooperative credit institutions As of November
2020, the total number of ATMs in India increased to 209,282. Asset of public sector banks
stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in FY20. During FY16-FY20, bank credit
grew at a CAGR of 3.57%. As of FY20, total credit extended surged to US$ 1,698.97 billion.
During FY16-FY20, deposits grew at a CAGR of 13.93% and reached US$ 1.93 trillion by
FY20. According to the RBI, bank credit and deposits stood at Rs. 108.34 trillion (US$ 1.48
trillion) and Rs. 151.67 trillion (US$ 2.08 trillion), respectively, as of June 04, 2021.
Credit to non-food industries stood at Rs. 108.02 trillion (US$ 1.47 trillion), as of June 04, 2021.
Non-food industries grew at 5.7% in January 2021 as against an increase of 8.5% in January
2020
The Indian banking sector has emerged as one of the strongest drivers of India’s economic
growth. The Indian banking industry (US$ 1.22 trillion) has made outstanding advancement in
last few years, even during the times when the rest of the world was struggling with financial
meltdown. India's economic development and financial sector liberalization have led to a
transformation of the Indian banking sector over the past two decades. Today Indian Banking is
at the crossroads of an invisible revolution. The sector has undergone significant developments
and investments in the recent past. Most of banks provide various services such as Mobile
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banking, SMS Banking, Net banking and ATMs to their clients. Indian banks, the dominant
financial intermediaries in India, have made high-quality progress over the last five years, as is
evident from several factors, including annual credit growth, profitability, and trend in gross non-
performing assets (NPAs). While annual rate of credit growth clocked 23% during the last five
years, profitability (average Return on Net Worth) was maintained at around 15% during the
same period, while gross NPAs fell from 3.3% as on March 31, 2006 to 2.3% as on March 31,
2011. The Indian banking sector is a mixture of public, private and foreign ownerships. The
below table highlights top 10 banks which contributed 58% share of the total credit as on March
31, 2011. The State bank of India has recorded highest market share. The Net Interest Margin of
HDFC Banks is 4.2% which is highest among others.
The Credit off-take has increased at a CAGR of 19.9 % over FY 06- 11. The Deposits have
grown at a CAGR of 18.2% over FY 06-11 on account of strong growth in saving account. The
net NPA has increased from 1% in FY 2008 to 1.12% in FY 10. The High interest rates and
lower economic growth has impacted the repayment capacities of borrowers and hence pushing
up the NPAs of banks. The net NPA decelerated from 1.12% in FY 10 to 0.97% in FY 11. Indian
banks enjoyed higher levels of money supply, credit and deposits as a percentage of GDP in
FY11 as compared to that in FY10 showing improved maturity in the financial sector. Credit
growth remained high in the first half of FY11 on account of increased demand from industry
and the service sector. Personal loans grew significantly by 17% during 2010-11 as compared
with 4.1% during the previous year.
2.2 HISTORY
Although some form of banking, mainly of the money-lending type, has been in existence in
India since ancient times, it was only over a century ago that proper banking began. The first
bank in India, though conservative, was established in 1786. From 1786 till today, the journey of
Indian Banking System can be segregated into three distinct phases. They are as mentioned
below: Source: RBI, Aranca Research RBI Scheduled Commercial Public Private Foreign RRB
Cooperative Rural Urban Unscheduled • Early phase from 1786 to 1969 of Indian Banks •
Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms • New
phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms
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after 1991 The banking industry has moved gradually from a regulated environment to a
deregulated market economy. The market developments kindled by liberalization and
globalization have resulted in changes in the intermediation role of banks. The pace of
transformation has been more significant in recent times with technology acting as a catalyst.
While the banking system has done fairly well in adjusting to the new market dynamics, greater
challenges lie ahead. STRUCTURE The Reserve Bank of India, the nation’s central bank, began
operations on April 01, 1935. It was established with the objective of ensuring monetary stability
and operating the currency and credit system of the country to its advantage.
In India, the banks are being segregated in different groups. Each group has their own benefits,
own dedicated target markets, limitations in operating in India. The commercial banking
structure in India consists of Scheduled Commercial Banks and Unscheduled Banks. Scheduled
commercial Banks constitute those banks which have been included in the Second Schedule of
Reserve Bank of India (RBI) Act, 1934. For the purpose of assessment of performance of banks,
the Reserve Bank of India categorise them as public sector banks, old private sector banks, new
private sector banks and foreign banks.
PERFORMANCE The empirical studies have found a strong relationship between economic
growth and financial development. Finance plays an important role in the economic growth. The
charts depict the performance of Bankex in last 10 year and Relative performance of BSE
Bankex & BSE Sensex in 2010-11. The performance of Bankex accelerated during the period
March 2002 to March 2008. The performance of bankex decelerated during March 2008 – March
2009 but thereafter it has shown increasing trend till March 2011. The four-month period
(November 2010-February 2011) was marked by a consistent decline in all the indices caused by
a number of global and domestic developments. The Sensex declined by 12.4%, while the
Bankex Index declined by 18.3%. Some of the global factors, such as increase in crude oil prices
and high commodity prices contributed to inflation in the domestic economy. High inflation
coupled with low growth rate in the Index of Industrial Production (IIP) and tightening interest
rates has caused some concerns over the short-term economic growth, hitting the stocks in all the
sectors, particularly those in the financial services sector.
GLOBAL BANKING TRENDS
The Global financial crisis makes significant changes in the operating framework of banks. The
performance of banks improves owing to strong lending growth and low credit losses. The
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present global macro-economic situation is differentiated by an unbalanced economic recovery

across advanced and emerging economies, high levels of unemployment, inflationary pressures,
and elevated levels of government debt. The Return on Assets (RoA), an indicator of banking
system’s profitability and soundness showed a moderate increase in the US and France in 2010.
The RoA of US banks turned positive by 2010 after staying in the negative zone in 2008 and
2009; it showed a further increase in 2011. The RoA of Indian banks showed a modest rise
between 2008 and 2010.
CONCERN Indian economy is one of the fastest growing economies of the world. The economy
with its varied geography and demography has specific requirements in order to traverse to the
next orbit and attain its full potential. Banks enable to cope with finance requirement for few
industries such as Infrastructure, Housing, Real Estate etc. India’s infrastructural financing needs
are not only huge but also vital. Traditionally banks have been the major source of infrastructure
financing and their exposure to infrastructure is already high at 17 per cent. There are several
major concerns which are noted below. Intensifying competition Indian banking industry has
undergone qualitative changes due to banking sector reforms. Indian banking sector, which is
dominated by state-controlled banks, has been facing formidable challenges. Due to this new
emerging competition, Indian banks, especially PSBs, are trying their best to improve their
performance and preparing to compete in the emerging global market. New private sector banks
and foreign banks have more customer-centric policies, high quality services, new attractive
schemes and computerized branches. All these services attracted more and more customers to
their banks. In this context, there is a need to examine the efficiency of public sector banks
operating in India. Mainly, competition can intensify and banks will become more efficient. The
transaction cost of customers could come down and a bank which is efficient, nimble and
customer focused would always be able to do better than others. As a result of globalization,
many new banks have entered the Indian banking industry, further intensifying the competition.
Increasing NPA The asset quality of banks is one of the most important indicators of their
financial health. It also reflects the efficacy of banks’ credit risk management and the recovery
environment. The Indian banks have shown very good performance as far as the financial
operations are concerned. But Non-performing Assets (NPA) has caused some concerns. Despite
write-offs, gross NPAs have continued to rise significantly. The new accretion to NPAs has been
much faster than the reduction in existing NPAs due to lower levels of upgradation and
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recoveries. To improve the banks’ ability to manage their non-performing assets (NPAs) and
restructured accounts in an effective manner and considering that almost all branches of banks
have been fully computerized, the Reserve bank of India in its Monetary Policy Statement 2012-
13 proposed the following measures:  To mandate banks to put in place a robust mechanism for
early detection of signs of distress, and measures, including prompt restructuring in the case of
all viable accounts wherever required, with a view to preserving the economic value of such
accounts; and  To mandate banks to have proper system generated segment–wise data on their
NPA accounts, write-offs, compromise settlements, recovery and restructured accounts. Despite
these concerns, it is projected that the Indian banking industry will grow through leaps and
bounds looking at the huge growth potential of Indian economy. High population base of India,
rising disposable income, etc. will drive the growth of Indian banking industry in the long-term.
2.3 PEST ANALYSIS
POLITICAL ANALYSIS MONETARY POLICY
Monetary policy becomes more restrictive over the past years. Inflation has remained a policy
headache for the government and the central bank for the past two years. Inflation was a primary
concern among the policy makers during 2010-11. Inflation, which remained at elevated levels
for a large part of FY11, was largely driven by food and fuel items and later on transmitted to
manufacturing products to become a general phenomenon. The average inflation rate in India
was 7.99% between 1969 and 2010. Political - Monetary Policy -Regulatory framework
Economic Social Technological -Internet banking -Mobile banking -ATM The Reserve Bank of
India (RBI) in its annual monetary policy for 2012-13 on March 17, 2012 slashed the policy rates
by 50 basis points. The repo rate at which banks borrow money from the RBI now stands at 8%
from 8.50% earlier. Similarly, the reverse repo rate at which RBI borrows money from banks is
now at 7% from 7.50% earlier. The cash reserve ratio (CRR) was left unchanged at 4.75%
The Reserve Bank of India reduced the Cash Reserve Ratio (CRR) by 75 basis points from 5.5%
to 4.75 % with effect from March 10, 2012. This reduction will inject around Rs.48,000 crore of
primary liquidity into the banking system to ensure smooth flow of credit to productive sectors
of the economy. Earlier, RBI in its third quarter review in January 2012 reduced the CRR by 50
basis points from 6% to 5.5% injecting a liquidity of Rs.31,500 crore into the banking system to
mitigate the tight liquidity conditions, which was the first move in the CRR since it was
increased to 6% in April 2010.
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ECONOMIC ANALYSIS
The Indian economy has recorded remarkable growth over the past decade. India's economic
growth is expected to robust in 2012 and 2013. The International Monetary Fund (IMF) has
pared India’s economic growth projection to 6.9% in 2012 from its January estimate of 7%, the
only emerging economy for which it has done so. Banks provide capital formation to various
sectors which directly help in the growth of Indian economy. SOCIAL ANALYSIS Indian
banking system has been progressing rapidly. There are ample opportunities for the banks to
cover untapped rural market. Yet, banking facilities are not available in many rural areas. Many
farmers are taking loan from moneylender at a very high rate of interest. Small-scale industries
would remain important for banks. Changes could be expected in near future for unorganised
sectors.
TECHNOLOGICAL ANALYSIS
In recent time, Indian banking industry has been consistently working towards the development
of technological changes and its usage in the banking operations for the improvement of their
efficiency. With the application of new and improved technologies banks expected to reduce
costs, time and give customer satisfaction. Core banking has changed the face of banking by
offering value added services. Core banking applications helps to provide complete front and
backend automation of banks. Technological developments would render flow of information
and data faster leading to faster appraisal and decision-making. This would enable banks to make
credit management more effective, besides leading to an appreciable reduction in transaction
cost. Internet banking or banking via the Internet can be considered a remarkable development in
the banking sector. The ability to carry out banking transactions through the Internet has
empowered customers to execute their financial transactions within the comfort of their homes
and offices. In todays busy world, when people do not have much time even for personal work,
Internet banking appears as a boon. Internet Banking helped give the customer's anytime access
to their banks. But for Internet banking there is a requirement of a PC / Laptop with an Internet
connection. Mobile usage has seen an explosive growth in economies like India. India has
reached 893.84 million mobile subscriber mark (Source: TRAI, Dec 2011) for a population of
1.21 billion. With Mobile Banking, customer can check their account balance, transfer funds 24
x 7, bills payments, booking of bus / flight tickets, recharge prepaid mobile and do a lot more
effortlessly and securely. Banking through cell phone benefits the banks too. It cuts down on the
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cost of tele-banking and is more economical. ATM (Automated Teller Machine) is electronic
machine, which is operated by a customer himself to deposit or to withdraw cash from bank.
ATMs reduce the work pressure on bank's staff and avoid queues in bank premises. ATMs are of
great help to travellers. They need not carry large amount of cash with them. They can withdraw
cash from any city or state, across the country and even from outside the country with the help of
ATM
The financial sector reforms have brought about significant improvements in the financial
strength and the competitiveness of the Indian banking system. The prudential norms, accounting
and disclosure standards, risk management practices, etc are keeping pace with global standards,
making the banking system resilient to global shocks. In the recent past, the Indian banking
sector has undergone significant developments and investments. In this sector, there are huge
opportunities and numerous challenges. Money laundering is a growing menace and it not only
poses serious threat to the stability and integrity of the financial system but also to the
sovereignty and safety of nations worldwide. In the coming days, challenges before banks would
primarily lie in saving themselves from the growing threat of money laundering.
2.4 FINANCIAL YEAR '20

1. The banking sector saw subdued credit growth during FY20. Bank credit growth fell from
about 14.5% of the GDP at the beginning of the year to 6.2% by March 2020. Credit growth
to industry decelerated to 0.7% in March 2020 from 6.9% in March 2019. Credit growth to
services saw a much sharper slowdown to 7.4% from 17.8% over the same period.
2. Deposit growth was higher compared to credit growth during FY20, though there was a drop
in growth at the end of March 2020. Growth in total deposits to GDP remained above 9%
through the year, but dropped to 7.9% in FY20.
3. In June 2019, the RBI announced the introduction of an electronic trading platform for
buying/selling foreign exchange by retail customers of banks. The platform can be accessed
by any customer of a bank who has a need to purchase or sell US dollar against the rupee for
delivery on cash basis, tom basis or spot basis subject to certain conditions
4. FY20 was an extremely challenging year for the Indian economy. Both monetary and fiscal
policy support was employed to counter the slowdown during the year. The RBI introduced a
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new liquidity management framework, under which it started long-term repo operations to
provide durable liquidity to banks.
5. The central bank also put in place a new external benchmark regime for loans to speed up
transmission of policy rate cuts to bank lending rates. The Repo rate was cut by 1.85% over
the year, with 0.75% reduction in March coming specifically to counter the pandemic related
activity disruption.
6. Prior to the onset of the Covid-19 pandemic, the RBI issued revised guidelines for resolution
of stressed assets, which allowed lenders to decide on referring an account for resolution
under the Insolvency and Bankruptcy Code. It also amended the Insolvency and Bankruptcy
Code to give priority to financial creditors ahead of operational creditors in case of
liquidation.
7. In March 2020, RBI imposed a moratorium restricting deposit withdrawals from Yes Bank,
followed by implementation of a scheme of reconstruction involving change in management
and equity capital infusion by several Indian banks. The bank also wrote down additional
tier-1 bonds.
8. The government also announced the amalgamation of 10 public sector banks into four big
banks. This merger was effective from April 1, 2020. As per the scheme, Oriental Bank of
Commerce and United Bank of India will be merged into Punjab National Bank; Syndicate
Bank into Canara Bank; Allahabad Bank into Indian Bank; and Andhra and Corporation
Bank into Union Bank of India. Including the past mergers, the total count of public sector
banks has come down from 27 banks (including SBI and its associates) to 12 banks.
9. In May 2020, the central government announced Rs 20 trillion economic package to provide
liquidity and credit support to businesses during the pandemic, especially MSMEs, develop
farm sector infrastructure and to ensure livelihoods for migrant workers. Alongside major
long term structural reforms were also initiated.
10. The central bank also announced a moratorium on all loans until August 2020, in order to
help borrowers' tide through their own cash flow problems. Furthermore, the RBI asked
banks to not pay dividends from their retained income for FY20 in order to help them
strengthen their capital position.
11. Following the national lockdown, asset quality (NPA) concerns increased with several
sectors witnessing a sudden stop in activity. According to the RBI's Financial Stability
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Report, the gross NPAs of the banking sector could rise to a two decade high of 14.7% of
total loans by March 2021. As of March 2020, the gross NPA ratio stood at 8.5% of total
advances. In order to avoid a liquidity crisis and ensure financial stability, the RBI reduced
the mandated cash reserve ratio (CRR) by 1% for the first time in 7 years, provided targeted
long-term liquidity facilities for banks to buy corporate bonds and on-lend to non-bank
financial institutions.
12. In November 2020, the RBI imposed a moratorium on Lakshmi Vilas Bank (LVB) for a
period of 1 month, effective November 17 as the financial position of the bank underwent a
steady decline, with continuous losses over the last three years eroding the bank's net-worth.
It also announced the amalgamation of Lakshmi Vilas Bank and DBS Bank after putting
LVB under moratorium.
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COMPANY PROFILE
National Bank for Agriculture and Rural Development (NABARD) National Bank for
Agriculture and Rural Development (NABARD) is an apex regulatory body for overall
regulation and licensing of regional rural banks and apex cooperative banks in India. It is under
the jurisdiction of Ministry of Finance, Government of India.
Predecessor Agricultural Refinance and Development Corporation
Formation July 12, 1982; 39 years ago
Type Regulatory Body
Purpose  Agriculture Development
 Rural Development
 Credit Planning
 Refinance
 Regulatory Body for Regional Rural Bank
 Regulatory Body for Apex Cooperative Banks
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Headquarters Mumbai,
India
Owner Ministry of Finance , Government of India
Chairman Govinda Rajulu Chintala
2.5 ROLE OF NABARD
NABARD has been instrumental in grounding rural, social innovations and social enterprises in
the rural hinterlands. As of May, 2020, NABARD operates at 32 Regional Offices in the country.
It has in the process partnered with about 4000 partner organisations in grounding many of the
interventions are it, SHG-Bank Linkage programme, and tree-based tribal communities’
livelihoods initiative, watershed approach in soil and water conservation, increasing crop
productivity initiatives through lead crop initiative or dissemination of information flow to
agrarian communities through Farmer clubs. Despite all this, it pays huge taxes too, to the
exchequer – figuring in the top 50 tax payers consistently. NABARD virtually ploughs back all
the profits for development spending, in their unending search for solutions and answers.
Thus the organization had developed a huge amount of trust capital in its 3 decades of work with
rural communities.
1. NABARD is the most important institution in the country which looks after the development
of the cottage industry, small scale industry and village industry, and other rural industries.
2. NABARD also reaches out to allied economies and supports and promotes integrated
development.
3. NABARD discharges its duty by undertaking the following roles:
1. Serves as an apex financing agency for the institutions providing investment and production
credit for promoting the various developmental activities in rural areas
2. Takes measures towards institution building for improving absorptive capacity of the credit
delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of
credit institutions, training of personnel, etc.
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3. Co-ordinates the rural financing activities of all institutions engaged in developmental work at
the field level and maintains liaison with Government of India, state governments, Reserve Bank
of India (RBI) and other national level institutions concerned with policy formulation
4. Undertakes monitoring and evaluation of projects refinanced by it.
5. NABARD refinances the financial institutions which finances the rural sector.
6. NABARD partakes in development of institutions which help the rural economy.
7. NABARD also keeps a check on its client institutes.
8. It regulates the institutions which provide financial help to the rural economy.
9. It provides training facilities to the institutions working in the field of rural upliftment.
10. It regulates and supervise the cooperative banks and the RRB's, throughout entire India.
NABARD has its head office at Mumbai, India and regional offices in all states and one special
cell at Srinagar J&K. The Regional Office [RO] is headed by a Chief General Manager [CGMs]
as Officer In charge, and the Head office has several top executives via the Directors, Deputy
Managing Directors [DMD], and the Chairperson. The Board of Directors is appointed by the
Government of India in consonance with NABARD Act. It has 336 District Offices across the
country which is staffed by District Development Managers (DDMs). It also has 6 training
establishments.
2.6 GENESIS & VISION
The importance of institutional credit in boosting rural economy has been clear to the
Government of India right from its early stages of planning. Therefore, the Reserve Bank of
India (RBI) at the insistence of the Government of India, constituted a Committee to Review the
Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) to
look into these very critical aspects. The Committee was formed on 30 March 1979, under the
Chairmanship of Shri B. Sivaraman, former member of Planning Commission, Government of
India.
The Committee’s interim report, submitted on 28 November 1979, outlined the need for a new
organizational device for providing undivided attention, forceful direction and pointed focus to
credit related issues linked with rural development. Its recommendation was formation of a
unique development financial institution which would address these aspirations and formation of
National Bank for Agriculture and Rural Development (NABARD) was approved by the
Parliament through Act 61 of 1981.
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NABARD came into existence on 12 July 1982 by transferring the agricultural credit functions
of RBI and refinance functions of the then Agricultural Refinance and Development Corporation
(ARDC). It was dedicated to the service of the nation by the late Prime Minister Smt. Indira
Gandhi on 05 November 1982. Set up with an initial capital of Rs.100 crore, its’ paid up capital
stood at Rs.14, 080 crore as on 31 March 2020. Consequent to the revision in the composition of
share capital between Government of India and RBI, NABARD today is fully owned by
Government of India.
VISION
Development Bank of the Nation for Fostering Rural Prosperity.
MISSION
Promote sustainable and equitable agriculture and rural development through participative
financial and non-financial interventions, innovations, technology and institutional development
for securing prosperity.
NABARD is also known for its 'SHG Bank Linkage Programme' which encourages India's banks
to lend to self-help groups (SHGs). Largely because SHGs are composed mainly of poor women,
this has evolved into an important Indian tool for microfinance. By March 2006, 22 lakh SHGs
representing 3.3 crore members had to be linked to credit through this programme.
NABARD also has a portfolio of Natural Resource Management Programmes involving diverse
fields like Watershed Development, Tribal Development and Farm Innovation through dedicated
funds set up for the purpose.
2.7 FEATURES OF THE NABARD SCHEME

The following are some of the features of the NABARD loan scheme.
1. Offering support for funding or refinancing.
2. Growing the infrastructure of rural communities in India.
3. Creating credit plans available at a district level for these communities.
4. Offering guidance and support to the banking sector so the latter can achieve their own credit
targets for the year.
5. Carrying out the supervision of cooperative banks and Regional Rural Banks (RRBs) in India.
6. Devising new projects that aid in rural development of the country.
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7. Putting into place any of the government’s developmental schemes aimed at helping the growth
of rural areas.
2.8 FUNCTIONS OF NABARD

When it comes to aiding rural communities financially, NABARD plays a few distinct roles.
They are as follows:
1. The NABARD scheme aims to provide funds for India’s rural infrastructure to enable long term
irrigation practices.
2. Generally offering financial services and aid for the development and improvement of rural
India.
3. Planning, implementing and managing any funding programs for farming and agricultural
activities.
4. Providing all kinds of funding services for the development and growth of food processing units
and food parks in designated areas.
5. Offers both long term refinance and short term refinance servicing to its customers.
Simultaneously, provides any direct refinance services to Indian cooperative banks.
6. Offering lending services, cold chain, and storage infrastructure to rural warehouses.
7. Marketing federations can receive credit facilities from the NABARD scheme.
8. Creating new policies for India’s rural financial institutions.
2.9 TYPES OF NABARD LOANS

The following loans are available under the NABARD scheme
1. Short Term Loans - These are crop-oriented NABARD loans offered by a variety of financial
institutions to farmers with the goal of refinancing crop production.
This loan offers farmers and their surrounding rural communities the assurance of food security.
When agro-operations are seasonal, as of FY17–18, the NABARD scheme has sanctioned
₹55,000 crores to a host of financial institutions as the short term credit loan amount.
2. Long Term Loans- These loans are offered by multiple financial institutions for either farm
or non-farm activities. Their tenure is much longer than short term loans and ranges from 18
months to a maximum of 5 years. As of FY17–18, NABARD refinanced close to ₹65,240 crores
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to financial institutions which also covers any concessional refinancing of ₹15,000 crores to
Indian Regional Rural Banks (RRBs) and Cooperative banks.
3. RIDF or ‘Rural Infrastructure Development Fund - RBI introduced the RIDF as part of
the NABARD scheme as they noticed a shortfall in lending to priority sectors that need support
for their rural development. with the main focus being the development of rural infrastructure, a
total loan amount of ₹24,993 crores was disbursed in FY17–18.
4. LTIF or ‘Long-Term Irrigation Fund - This was introduced as part of the NABARD loans
to provide funding for a total of 99 irrigation projects with the disbursal of a loan amount of
₹20,000 crores.
5. PMAY-G or ‘Pradhan Mantri Awaas Yojana – Grameen - Under this financial scheme,
NRIDA or the ‘National Rural Infrastructure Development Agency’ was given a loan amount of
₹9000 crores so it can carry out its project of building pukka houses with all essential amenities
to needy households by 2022.
6. NIDA or ‘NABARD Infrastructure Development Assistance- NIDA is a sub-program
under the NABARD scheme. It specializes in providing credit to any financially well-to-do
institutions or corporations that are state-owned. Hence, NABARD also refinances non-private
schemes with the help of this program.
7. Warehouse Infrastructure Fund - Warehouse Infrastructure Fund provides scientific
warehousing infrastructure for agricultural commodities. Initial loan of the amount Rs. 5000 was
provided by NABARD in the FY 2013–14. As on 31st March, 2018 the amount disbursed is Rs.
4778 cr.
Microfinance, also called microcredit, is a type of banking service provided to unemployed or
low-
8. Food Processing Fund - Under the food processing fund of NABARD, the Indian
government has a loan commitment of ₹541 crores which is to be disbursed to 11 large scale
food park projects, 1 integrated food park project, and 3 rural food processing units in India.
9. Direct Lending - With respect to cooperative banks, the NABARD scheme has specially
sanctioned a loan amount of ₹4849 crores which will provide assistance to 4 state-owned
cooperative banks and 58 Co-operative Commercial Banks (CCBs) spread across the country.
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10. CFF or ‘Credit Facility to Marketing Federations - This category of NABARD loans
promotes the marketing of farm activities by financially strengthening marketing federations.
The amount disbursed to such federations as of 2018 was ₹25,436 crores in total.
11. PACS or ‘Primary Agriculture Credit Societies - NABARD has also launched a unique
‘Producer Organizations Development Fund’ or PODF for short. The goal is to provide financial
support PACS that mainly operate as ‘Multi Service’. Taking out a loan for your agribusiness
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2.10 NABARD Schemes for Farming Sector
In a bid to support the farming sector, agricultural lender NABARD also provides specially
developed schemes such as the Dairy Entrepreneurship Development Scheme. This scheme aims
to support entrepreneurs who are a part of the dairy market. It helps them with business
assistance to set up dairy farms and boost further growth.
2.11 MAIN OBJECTIVES OF NABARD

1. Increasing the number of modern-day farms for milk production.
2. Technological upgrades to increase the production of milk and to promote it on commercial
scale.
3. Promoting self-employment and making infrastructural improvements.
4. Conserving breeding stock and encouraging heifer calf-rearing.
5. Other farming schemes introduced under NABARD
6. Agra-clinic and Agribusiness Centers Scheme
7. National Livestock Mission
8. GSS – Ensuring End-Use of Subsidy
9. Interest Subvention Scheme
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10. Credit-Linked Capital Subsidy Scheme (CLCSS) under NABARD

11. Capital Investment Subsidy Scheme for commercial production units for organic/biological
inputs.
12. The Credit-Linked Subsidy Scheme is yet another scheme that was launched in 2000 with an aim
to facilitate the up gradation of small-scale industries (SSIs) units. These units must be included
in the sub-sectors as defined under the scheme.
13. NABARD has majorly contributed in promoting agricultural and rural development in India
through consistent support. The support is extended through financial and non-financial systems,
and the schemes are typically provided by rural cooperative banks and regional rural banks.
Other business segments that can avail these benefits include agricultural farmers, fish farmers,
cattle farmers, and more.
14. NABARD Schemes for Farming Sector
15. In a bid to support the farming sector, agricultural lender NABARD also provides specially
developed schemes such as the Dairy Entrepreneurship Development Scheme. This scheme aims
to support entrepreneurs who are a part of the dairy market. It helps them with business
assistance to set up dairy farms and boost further growth.
As on 31 March 2021, 13 Banks hold the largest share of portfolio in micro-credit with total loan
outstanding of Rs 1, 13,271 Cr, which is 43.67% of total micro-credit universe. NBFC-MFIs are
second largest provider of micro-credit with a loan amount outstanding of Rs 80,549 Cr,
accounting for 31.05% to total industry portfolio. SFBs have a total loan amount outstanding of
Rs 41,170 Cr with total share of 15.87. NBFCs account for another 8.36% and Other MFIs
account for 1.05% of the universe.
Apart from MFI’s, NABARD SHG Bank Linkage Programme (SBLP) also contributes
significantly to the microfinance universe. As on 30 September 2020, around 61.9 lakhs SHG’s
had an outstanding portfolio of Rs 108,578 Cr with them.
Considering SBLP’s outreach and CAGR of around 15.3% since Mar’16, the overall size of the
universe in terms of GLP as on 31 March 2021 is roughly Rs 3, 84,615 Cr.
The definition of “small loans” varies between countries. In India, all loans that are below Rs.1
lakh can be considered as micro loans. In most cases the so-called interest rates are lower than
those charged by normal banks, certain rivals of this concept accuse microfinance entities of
creating gain by manipulating the poor people’s money. Microfinance sector has grown rapidly
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over the past few decades and currently it is serving around 102 million accounts (including
banks and small finance banks) of the poor population of India. Different types of financial
services providers for poor people have emerged non-government organizations (NGOs);
cooperatives; community-based development institutions like self-help groups and credit unions;
commercial and state banks; insurance and credit card companies; telecommunications and wire
services; post offices; and other points of sale - offering new possibilities. Non Banking Finance
Company (NBFC)-MFIs in India are regulated by The Non-Banking Financial Company -Micro
Finance Institution (Reserve Bank) Directions, 2011 of the Reserve Bank of India (RBI).
2.12 Major Business Models:
Joint Liability Group: This is usually an informal group that consists of 4-10 individuals who
seek loans against mutual guarantee. The loans are usually taken for agricultural purposes or
associated activities.
Self Help Group: It is a group of individuals with similar socio-economic backgrounds .These
small entrepreneurs come together for a short duration and create a common fund for their
business needs. These groups are classified as non-profit organizations.
Grameen Model Bank: It was the brainchild of Nobel Laureate Prof. Muhammad Yunus in
Bangladesh in the 1970s.It has inspired the creation of Regional Rural Banks (RRBs) in India.
The primary motive of this system is the end-to-end development of the rural economy.
Rural Cooperatives: They were established in India at the time of Indian independence.
However, this system had complex monitoring structures and was beneficial only to the
creditworthy borrowers in rural India. Hence, this system did not find the success that it sought
initially.
2.13 BENEFITS
1. They provide easy credit and offer small loans to customers, without any Collateral.
2. It makes more money available to the poor sections of the economy, leading to increased income
and employment of poor households.
3. Serving the under-financed for their children.
2.14 CHALLENGES FACED BY MFI

In section such as women unemployed people and those with disabilities.
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•It helps the poor and marginalized section of the society by making them aware of the financial
instruments available for their help and also helps in developing a culture of saving.
•Families benefiting from microloans are more likely to provide better and continued education
Although microfinance institutions have been profitable in India, there have been regulations and
populist politics that have proved to be unfavorable to them. The small size of these institutions
implies that they will be affected by small adverse developments resulting in fragile finances.
Banks usually have multiple products and an assured deposit structure. On the other hand, micro
lending institutions are highly dependent on the market for funding. This means that at the
smallest of events affecting business, MFIs could find it difficult to procure financing.
Additionally, banks today have a presence in the micro lending space and they are also
partnering with MFIs through strategic stakes. MFIs are also finding it difficult to grow
independently without any support from anchor investors.
As of 2017, there were 223 MFIs that included NGO-run units and societies. 47 non-banking
finance companies – microfinance institutions (NBFC-MFIs) had also been registered with the
Microfinance Institutions Network (MFIN). The top 10 MFIs always find it easy to get bank
loans or equities; the smaller entities are usually at a disadvantage here.
Several microfinance institutions have converted into small finance banks. This implies that they
can lend at higher interest rates. Moreover, they will have access to deposits that are low-cost.
Banks are now some of the largest providers of micro-finance as per MFIN reports. MFI-turned
banks are still the major providers of micro finance.
Since financial inclusion is on the rise, MFIs have many more years of opportunity remaining.
The key to their survival is the constant backing from investors
. Over borrowing Threat to the Microfinance Industry
The biggest risk looming over the microfinance industry today is the tendency to over borrow on
the part of loan seekers. As per CRIF High Mark data, there was a hike in the average
microfinance loan size within the last 2 years. Several borrowers have also attempted borrowing
from multiple lenders.
Borrowers who sought loans from more than 4 lenders formed a major part of this threat. It was
found that these loans increased from Rs.60, 000 to Rs.81, 000 between March 2017 and March
2019. During the same period, there were loan seekers approaching more than five banks as well.
The rise in loan amount in this scenario was from Rs.73, 000 to Rs.1, 02,000.
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The fact that 20% to 30% of loan applications are now being rejected by MFIs is attributed to the
excess borrowing witnessed in the industry.
As per RBI regulations, the total microloan amount that a single loan seeker can avail should not
exceed Rs.60, 000 in the initial cycle. In the subsequent cycles, the amount should not be above
Rs.1 lakh. The borrower is also not allowed to approach more than two microfinance institutions
for the same. As part of self-regulation, MFIN increased the lending bar to Rs.80, 000 as there
was a huge demand for loans.
Fragmented Data: While overall loan accounts have been increasing, the actual impact of these
loans on the poverty-level of clients is not clear as data on the relative poverty-level
improvement of MFI clients is fragmented.
2.15 Impact of Covid-19 ON MICRO FINANCE:

1. It has impacted the MFI sector, with collections having taken an initial hit and disbursals yet to
observe any meaningful thrust.
2. Social Objective Overlooked: In their quest for growth and profitability, the social objective of
MFIs—to bring in improvement in the lives of the marginalized sections of the society—seems
to have been gradually eroding.
3. Loans for Non-income Generating Purposes: The proportion of loans utilized for non-income
generating purposes could be much higher than what is stipulated by the RBI which is 30% of
the total loans of the MFI. These loans are short-tenured and given the economic profile of the
customers, it is likely that they soon find themselves in the vicious debt trap of having to take
another loan to pay off the first.
a. Way Forward
4. MFIs need to focus on creating a sustainable and scalable microfinance model with a mandate
that is unequivocal about both economic and social good.
5. MFIs should ensure that the ‘stated purpose of the loan’ that is often asked from customers at the
loan-application stage is verified at the end of the tenure of the loan.
6. RBI should encourage all institutions to monitor their impact on society by means of a ‘social
impact scorecard’.
The different types of institutions that offer microfinance are:
1. Credit unions
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2. Non-governmental organization
3. Commercial banks
Some government banks also offer microfinance to the eligible categories of borrowers.
Although most microfinance institutions target the eradication of poverty as their primary
motive, some of the new entrants are focused on the sale of more products to consumers.
2.16GOALS OF MICROFINANCE INSTITUTIONS
Microfinance institutions have been gaining popularity in the recent years and are now
considered as effective tools for alleviating poverty. Most MFIs are well-run with great track
records, while others are quite self-sufficient. The primary goals of microfinance institutions are
the following:
Transform into a financial institution that assists in the development of communities that are
sustainable.
Help in the provision of resources that offer support to the lower sections of the society. There is
special focus on women in this regard, as they have emerged successful in setting up income
generation enterprises.
Evaluate the options available to help eradicate poverty at a faster rate.
Mobilize self-employment opportunities for the underprivileged.
Empowering rural people by training them in simple skills so that they are capable of setting up
income generation businesses.
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2.17 KEY BENENFITS

The part that microfinance plays in economic development is noteworthy. Some of the key
benefits of MFIs include the following:
It enables people expand their present opportunities – The income accumulation of poor
households has improved due to the presence of microfinance institutions that offer funds for
their businesses.
It provides easy access to credit – Microfinance opportunities provide people credit when it is
needed the most. Banks do not usually offer small loans to customers; MFIs providing
microloans bridge this gap.
It makes future investments possible– Microfinance makes more money available to the poor
sections of the economy. So, apart from financing the basic needs of these families, MFIs also
provide them with credit for constructing better houses, improving their healthcare facilities, and
exploring better business opportunities.
It serves the under-financed section of the society – Majority of the microfinance loans provided
by MFIs are offered to women. Unemployed people and those with disabilities are also
beneficiaries of microfinance. These financing options help people take control of their lives
through the betterment of their living conditions.
It helps in the generation of employment opportunities – Microfinance institutions help create
jobs in the impoverished communities.
It inculcates the discipline of saving – When the basic needs of people are met, they are more
inclined to start saving for the future. It is good for people living in backward areas to inculcate
the habit of saving.
It brings about significant economic gains – When people participate in microfinance activities,
they are more likely to receive better levels of consumption and improved nutrition. This
eventually leads to the growth of the community in terms of economic value.
It results in better credit management practices – Microloans are mostly taken by women
borrowers. Statistics prove that female borrowers are less likely to default on loans. Apart from
providing empowerment, microloans also have better repayment rates as women pose lesser risk
to borrowers. This improves the credit management practices of the community.
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It results in better education – It has been noted that families benefiting from microloans are
more likely to provide better and continued education for their children. Improvement in the
family finances implies that children may not be pulled out of school for monetary reasons.
2.18 COMPETITOR OF NABARD IN MICROFINANCE IN INDIA
1. Equities Small Finance
The lender offers small loans between Rs.2, 000 and Rs.35, 000 to the Economically Weaker
Section (EWS) and Low Income Group categories in the country.
Loan Details:
Loan Amount Interest Rate
Up to Rs.25,000 24% p.a.
More than Rs.25,000 23% p.a.
2. ESAF Microfinance and Investments (P) Ltd

ESAF Microfinance is a leading MFI in India that has empowered more than 4 lakh members
through its 150 branches. It offers an extensive range of business development and financial
services to the economically and socially challenged members of the society. The institution
offers a bouquet of loan products to suit the varied needs of customers:
Loan Details:
Loan Amount Rs.1,000 - Rs.1 lakh
Interest Rate 22% - 26% p.a. on diminishing basis
Processing Fee 1% - 2% of loan amount + GST
Loan Tenure 3 months – 60 months
3. Fusion Microfinance Put Ltd

Fusion Microfinance is an RBI registered NBFC-MFI that works on a JLG lending model of
Grameen. The institution offers loans to women in the rural and semi-urban regions. Apart from
offering financial support and insurance protection, the company also imparts financial literacy
to its customers.
Loan Details:
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Loan Amount Rs.3,000 – Rs.60,000

Loan Tenure 8 months – 2 years
Interest Rate 21% - 21.50% p.a. on reducing balance method
Processing Fee 0 – 1% of loan amount + GST
4. Annapurna Microfinance Put Ltd

The purpose of Annapurna Microfinance is to provide loans to the financially underserved
population. Technical and financial education is also imparted to beneficiaries to strengthen their
entrepreneurial skills. It is one of the top ten NBFC-MFIs in India today.
Loan Details:
Loan Amount Rs.1,500 – Rs.25 lakh
Loan Tenure 12 months – 240 months
Interest Rate 18% - 26% p.a. (reducing)
Processing Fee 1% - 2% + GST
5. Aroma Financial Services Limited

Eastern India’s largest NBFC MFI, Aroma Financial Services Limited offers financial inclusion
products to 1.9 million customers throughout India. The local partners of the company help in
improving its reach to remote locations. Non-financial products are also offered by the company
at affordable costs. Aroma also has an MSME lending business in its portfolio.
Loan Details:
Loan Amount Rs.1,100 - Rs.50,000
Loan Tenure 3 months - 24 months
Interest Rate 20.70% - 21.25% p.a.
6. BSS Microfinance Limited

The company offers microloans to poor women so that they can be part of income generating
activities that bring them out of poverty. The institution offers loans in the states of Maharashtra,
Karnataka, Tamil Nadu, and Madhya Pradesh.
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Loan Details:

Interest Rate 25% p.a.
Processing Fee 1% + GST (for loans above Rs.25,000)
7. Asirvad Microfinance Limited

This microfinance institution has an extensive network of branches throughout 22 states in India.
It offers microloans to women entrepreneurs from low-income households for income generation
activities. Currently, three types of loans are offered to borrowers, i.e., Product Loan, Income
Generation Program (IGP) Loan, and Small and Medium Enterprise (SME) Loan.
Loan Details:
Loan Tenure 12 months - 24 months
Interest Rate 21.70% p.a.
8. Cashpor Micro Credit

Cashpor is a microfinance institution that works towards bringing the economically backward
sections of the society out of poverty. The products offered by the company include credit
facilities, savings services, insurance coverage, and pension services.
A credit facility offered by Cashpor is predominantly for undertaking income generation
activities. Loans are also provided for non-income generation activities and acquisition of assets
that improve the health and social status of the beneficiaries. For instance, loans for the
construction of toilets, women empowerment, and the procurement of gas connections are
commonly offered by the company.
2.19 HIGHLIGHTS
1. MFIs have registered a 24% YoY growth recently. They also have a market share of 38% in Q3
FY19 and have maintained their dominance in the lending market. (As per SIDBI-Equifax
newsletter).
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2. The total number of active loans of MFIs stand at 8.22 crore at the end of Q3 FY19. The GLP
(Gross Loan Portfolio) was at Rs.1, 57,644 crore at the same time. This indicates a Q-o-Q growth
of 7%.
3. Microfinance institutions have a presence in 615 districts in India. The regional distribution is as
follows:
1. North-East and East – 37%
2. South – 25%
3. North – 14%
4. West – 15%
5. Central India – 9%
2.20 REGULATIONS FOR MFI’S
The regulations pertaining to MFIs are usually based on their statuses. A microfinance bank will
be required to adhere to all banking regulations like traditional banks. Cooperatives and NGOs
will not be expected to comply with the same regulations. However, they may be regulated by
similar oversight authorities.
Traditional Banks versus Microfinance Institutions
MFIs, more often than not, function on a unique operating model when compared to traditional
lending institutions.
1. Evaluation of eligibility - When loans are provided by microfinance institutions, the eligibility of
a borrower is not scrutinized on the bases of strong financial guarantees like traditional loans.
Mainstream banks assess the salary and assets of a loan applicant before granting the loan.
Microfinance banks rely more on the “human” criteria instead.
a. If the loan helps in the setup of a new activity that brings income to the borrower, the chances of
it being sanctioned are high. The viability evaluation of the loan will include talks with the
borrower, and not just the review of the loan application form.
2. Group solidarity as guarantee - While traditional banks consider hypothecation as guarantee for
some loans, MFIs replaces this practice with a group solidarity mechanism. For instance, when
investing in mutual funds, each borrower serves as a guarantor for each of the other members in
the group. Self-help groups are examples of the same.
3. Training programmes – Unlike traditional banks, MFIs are liable to building bonds with the
beneficiaries of microloans. They also offer strong support to the borrowers. Since the motive is
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to help borrowers succeed in their projects, MFIs also undertake training programmes that focus
primarily on educating beneficiaries on the budgeting of projects.
4. Flexible repayment schedules – MFIs usually configure the repayment method for microloans in
such a way that is suits the financial capabilities of the target customer base. Thus, there are
MFIs that are likely to provide loans with weekly repayment dates, unlike traditional banks.
5. Flexible credit schemes – Micro lending has products that are usually adapted to suit the
repayment capabilities of borrowers. This is one of the main differences between a traditional
lender and an MFI.
This difference is highly conspicuous in the case of group loans. An MFI requests borrowers to
constitute a group and then grants a single loan to the group. These are usually offered to the
poorest of borrowers. These microloans do not require any guarantee; it relies on the solidarity of
the members of the group, i.e., a kind of social guarantee. Each member in the group, hence,
becomes responsible to the MFI and the co-borrowers.
Process of Granting Microloans
Through the group solidarity mechanism, MFIs instill a sense of mutual confidence within the
borrowers.
Before the microloan is sanctioned, a committee examines the requests and evaluates the
borrower’s capability to repay. As indicated above, this is primarily based on social and human
criteria such as experience in the field, competence, and motivation. The viability of the project
is also considered.
2.21 HOW IS MFIs FUNDED ?

Microfinance Institutions get funding from several sources, such as:
1. Member and customer deposits – This is applicable to MFIs that are organized as mutual funds,
cooperatives, and microfinance banks offering savings products.
2. Subsidies and grants – Grants are more prominent when the MFI is just being set up.
3. Own capital – The microfinance institution’s own finance/capital accounts for a part of the
funding extended to borrowers.
4. Loans from partner banks – This is the primary source of funding for an MFI.
5. Funding received from public investors – Bilateral or multilateral organizations offer funds to
MFIs. This is a source of long-term funding for the MFI.
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6. Funding received from private investors – These funds are supplied directly to the MFI or
through investment funds that specialize in microfinance. This is also a source of long-term
funding for the MFI.
2.22 DOCUMENTS REQUIRED FOR A MICROFINANCE LOAN

1. Although the documentation required for getting a microfinance loan varies between lenders, the
following are the documents that are usually needed:
2. Updated application form
3. PAN card, ration card
4. Proof of office address
5. Passport-size photos of the applicants and co-applicants
6. Certified copies of AOA/MOA/Partnership deed
7. Track record of repayment
8. Audited financials of the previous 2 years
9. ITR of partners/directors for the previous 2 years
10. Bank account statements for the past 6 months
11. Performa invoice to the equipment that is to be financed
12. For lawyers, CAs, architects, and doctors - Professional qualification certificates
2.23 CRITICISM OF MICROFINANCE

Microfinance has been lauded by many, as it is a clear passage to end the cycle of poverty, aid
the marginalized sections, decrease unemployment, and improve their earning power. However,
it has also received criticism from certain corners, as it was argued that microfinance actually
makes poverty worse. The fact that some borrowers of microfinance use these loans to pay off
their existing debts or fund their basic necessities reinforces these arguments.
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RESEARCH DESIGN
TITLE OF THE STUDY: - A STUDY ON ROLES AND EFFECTS OF

MICROFINANCE IN RURAL AREAS IN INDIA
3.1 NEED OF THE STUDY

1. Problems faced by Micro finance banks in rural areas.
2. Problems faced by women SHG
3.2 OBJECTIVES OF THE STUDY

1. To find out the Roles of Microfinance Banks in rural areas in India.
2. To find out the Effects of Microfinance Banks in rural areas in India.
3. To Provide Corrective Suggestions and Strategies in Solving the Problems Faced by the
Microfinance Banks.
3.3 Scope of Study

This Study will provide me with an opportunity to explore and find corrective measures about
the Microfinance banks & Institutions. It also helps me to identify role and effects of
Microfinance Banks in rural areas of India and get a deeper perspective in banking and finance.
3.4 OPERATIONAL DEFINATION OF CONCEPTS

Microfinance is a form of financial service which provides small loans and other financial
services to poor and low-income households. It is an economic tool designed to promote
financial inclusion which enables the poor and low-income households to come out of poverty,
increase their income levels and improve overall living standards. It can facilitate achievement of
national policies that target poverty reduction, women empowerment, assistance to vulnerable
groups, and improvement in the standards of living. Indian microfinance sector has witnessed
phenomenal growth over past two decades in terms of increase in both the number of institutions
providing microfinance as also the quantum of credit made available to the microfinance
customers. Microcredit is delivered through a variety of institutional channels viz., (i) scheduled
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commercial banks (SCBs) (including small finance banks (SFBs) and regional rural banks
(RRBs)) lending both directly as well as through business correspondents (BCs) and self-help
groups (SHGs), (ii) cooperative banks, (iii) non-banking financial companies (NBFCs), and (iv)
microfinance institutions (MFIs) registered as NBFCs as well as in other forms.
4. By –Reserve Bank of India (2020)
5. Microfinance, also called microcredit, is a type of banking service provided to unemployed or
low-income individuals or groups who otherwise would have no other access to financial
services
3.5 RESEARCH METHODOLOGY

Research methodology is purely and simply the framework or a plan for study that guides the
collection and analysis of data. Research is the specific way to solve the problems and is
necessarily used to improve the market potential. This involves exploring the possible methods
one by one and arrive the best solutions considering the availability of resources.
Research design: Descriptive Analysis.
3.6 SOURCES OF DATA COLLECTION

The data can be collected from source, they are
Secondary data - Secondary data is a data that already exist and which has been collected by
some other person or organization for their use. The sources of secondary data are:
1. Books
2. Journals
3. Websites
4. Reports of organization
3.7 LIMITATIONS OF THE STUDY

1. The time allotted to gather the information was not sufficient
2. As the study was based on sampling a full proof info was not provided
3. No in depth info was provided by employees
4. Not many people participated in questionnaires filling
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5. No exact information was given
3.8 CHAPTER SCHEME

CHAPTER 1: INTRODUCTION
CHAPTER 2: INDUSTRY PROFILE AND COMPANY
CHAPTER 3: RESEARCH METHODOLGY
CHAPTER 4: DATA ANALYSIS AND INTERPREATION
CHAPTER 5: FINDINGS, SUGGESTIONS AND CONCLUSION
3.8 REVIEW OF LITERATURE

Robinson (2021), defines Microfinance as “small-scale financial services for both credits and
deposits– that are provided to people who farm or fish or herd; operate small or micro enterprises
where goods are produced, recycled, repaired or traded; provide services; work for wages or
commissions; gain income from renting out small amounts of land, vehicles, draft animals, or
machinery and tools; and to other individuals and local groups in developing countries, in both
rural and urban areas”.
Asian Development Bank (ADB) defines microfinance as “the provision of a broad range of
financial services such as deposits, loans, money transfers, and insurance to small enterprise and
households.”
CGAP (2021) defines microfinance as “a credit methodology that employs effective collateral
substitutes to deliver and recover short-term working capital loans to micro entrepreneurs.”
NABARD (2021) defined micro finance as the “provision of thrift, credit and other financial
services and products of very small amounts to the poor in rural semi – urban or urban areas
enabling them to raise their income levels and improve living standards”. The reserve bank of
India (RBI) uses Hossain conducted a study to measure impact of Grameen Bank’s microfinance
programme in Bangladesh. The study found that the programme had a positive impact of clients
and helped in alleviation of poverty. It is recorded that the clients had a 28 percent higher
average household income as compared to others non clients of Grameen Bank. The members
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spent 8 percent more per capita on food and 13 percent more than non client households in the
comparison village.
Coleman (2020) investigated the impact of microfinance lending of village banking programme
in Thailand. His study was conducted on two microfinance institutions, the rural friends
Association and the Foundation for Integrated Agricultural Management, which included a
household sample of 455 (participants and non participants). The study found no evidence of
poverty alleviation as usually the small loans taken from these two institutions by clients might
have been used for consumption purpose rather than for investing in business or starting up
something come out of poverty.
World Bank 2020) conducted a survey on 675 microcredit borrowers of Bangladesh which
showed that microfinance has brought in a positive change in the economic and social status of
the borrowers. The results showed that for 98 percent of the borrowers, their income had
increased; 29 percent of them have been able to purchase new land either for agriculture or for
building a house in the village, the results were also seen in the improvement of child education
in 75 percent of the borrowers and sanitation conditions improved for 69 percent. The credit of
improvement was due to self-employment of women participants.
Todd (2020) undertook to explore the impact of SHARE Microfinance Ltd. on clients of
Andhra Pradesh, India. The study was a comparison of 125 clients of SHARE with 104 who
were yet to experience the programme. All the SHARE clients had participated in the
programme for at least three years. He proposed a poverty index to measure the extent to which
clients had moved out of poverty. The index covered four variables- sources of income,
productive assets, housing quality, and household dependency burden (the number of household
members divided by the number of income earners). The study concluded that 76.8 percent of
the total clients had experienced in reduction in poverty; 38.4 percent shifted from extremely
poor condition to moderate poor category and 17.6 percent had moved out of poverty.
Mayoux (2020) states that the main effects of microfinance on poverty have been- significant
increase in the income of poor including women and contributing 130 Sandhya Prakash and
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Amarjeet Kaur Malhotra to smoothing out peaks and troughs in income and expenditure thereby
enabling the poor to cope with volatile situations like drought, death etc.
Kabeer (2020) states that apart from economic impact, microfinance has a wide social impact
and MFI should be aware of the “full range of changes associated with its efforts and uses these
to improve its performance”. She considers social impact to relate to human capital such as
nutrition, health and education, as well as social networks. Impact must be assessed on each of
these issues if a true picture of the impact of microfinance is to be obtained.
Zohir and Matin (2020) in their study state that MFIs not only help in poverty alleviation but
the groups created for availing the microfinance facility also contribute beyond finance, such as,
it brings in a sense of community, reliance and trust among the members. These networks can lay
the foundations for other social capital developments in the community. They state that examples
of cultural impacts of social intermediation that affect the greater community such as standing
against dowry, domestic violence and respect to women.
Chawla (2020) reviews Indian MFIs literature to see the impact of regulations on MFIs in India.
This study is done post the Andhra crisis where many farmers in the state of Andhra Pradesh had
committed suicide due to inability to pay the high interest rate charged by unregulated MFIs.
Author feels that due to trajectory growth of the microfinance in India, it is time for regulations
to be imposed on MFIs as it will be beneficial for all the stakeholders. The study further
highlights the importance of Microfinance bill 2012 and the role it played in streamlining many
processes including fixing of interest rates that can be charged by the MFIs. The author
recommends that MFIs should bring transparency in the interest rates charged, introduction of
technology to reduce the operating costs and lastly access to alternate sources of fund to reduce
cost of capital. The same definition (RBI 2020).
Mohammed Anisur Rahaman (2019) has examined that about microfinance and to investigate
the impact of microfinance on the poor people of the society with the main focus on Bangladesh.
We mainly concise our thesis through clients (the poor people, who borrowed loan from
microfinance institutions) perspective and build up our research based on it. Therefore, the
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objective of this study is to show how microfinance works, by using group lending methodology
for reducing poverty and how it affects the living standard (income, saving etc.) of the poor
people in Bangladesh. Microfinance has the positive impact on the standard of living of the poor
people and on their life style. It has not only helped the poor people to come over the poverty
line, but has also helped them to empower themselves.
Susy Cheston (2019) has examined that Microfinance has the potential to have a powerful
impact on women's empowerment. Although microfinance is not always empowering for all
women, most women do experience some degree of empowerment as a result.
Empowerment is a complex process of change that is experienced by all individuals somewhat
differently. Women need, want, and profit from credit and other financial services. Strengthening
women's financial base and economic contribution to their families and communities plays a role
in empowering them. Product design and program planning should take women's needs and
assets into account. By building an awareness of the potential impacts of their programs, MFIs
can design products, services, and service delivery mechanisms that mitigate negative impacts
and enhance positive ones.
Linda Mayoux ( 2019)Has examined that Micro-finance programmes not only give women and
men access to savings and credit, but reach millions of people worldwide bringing them together
regularly in organized groups. Through their contribution to women's ability to earn an income,
micro-finance programmes can potentially initiate a series of „virtuous spirals‟ of economic
empowerment, increased well-being for women and their families and wider social and political
empowerment Banks generally use individual rather than group-based lending and may not have
scope for introducing non-financial services. This means that they cannot be expected to have the
type of the focused empowerment strategies which NGOs have Eoin Wrenn Has examined that
microfinance creates access to productive capital for the poor, which together with human
capital, addressed through education and training, and social capital, achieved through local
organization building, enables people to move out of poverty . By providing material capital to a
poor person, their sense of dignity is strengthened and this can help to empower the person to
participate in the economy and society. The impact of microfinance on poverty alleviation is a
keenly debated issue as we have seen and it is generally accepted that it is not a silver bullet, it
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has not lived up in general to its expectation However, when implemented and managed
carefully, and when services are designed to meet the needs of clients, microfinance has had
positive impacts, not just on clients, but on their families and on the wider community.
Cheston & Kuhn (2019)has examined that in their study concluded that micro-finance
programmes have been very successful in reaching women. This gives micro-finance institutions
an extraordinary opportunity to act intentionally to empower poor women and to minimize the
potentially negative impacts some women experiences. We also found increased respect from
and better relationships with extended family and in-laws. While there have been some reports of
increased domestic violence, Hashemi and Schuler found a reduced incidence of violence among
women who were members of credit organizations than among the general population.
Dr. Jyotish Prakash Basu (2018) has examined that the two basic research questions. First, the
paper tries to attempt to study how a woman tendency to invest in safer investment projects can
be linked to her desire to raise her bargaining position in the households. Second, in addition to
the project choice, women empowerment is examined with respect to control of savings, control
of income, control over loans, control over purchasing capacity and family planning in some
sample household in Hooghly district of West Bengal. The empowerment depends on the choice
of investment of project. The choice of safe project leads to more empower of women than the
choice of uncertain projects. The Commercial Banks and Regional Rural banks played a crucial
role in the formation of groups in the SHGs -Bank Linkage Program in Andhra Pradesh whiles
the Cooperative Banks in West Bengal.
Chintamani Prasad Patnaik (2018) has examined that microfinance seems to have generated a
view that microfinance development could provide an answer to the problems of rural financial
market development. While the development of microfinance is undoubtedly critical in
improving access to finance for the unserved and underserved poor and low-income households
and their enterprises, it is inadequate to address issues of rural financial market development. It
is envisaged that self-help groups will play a vital role in such strategy. But there is a need for
structural orientation of the groups to suit the requirements of new business. Microcredit
movement has to be viewed from a long-term perspective under SHG 11 framework, which
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underlines the need for a deliberate policy implication in favor of assurance interims of
technology back-up, product market and human resource development.
Hunt, J &Kasynathan (2018)has examined that poor women and men in the developing world
need access to microfinance and donors should continue to facilitate this. Research suggests that
equity and efficiency arguments for targeting credit to women remain powerful: the whole
family is more likely to benefit from credit targeted to women, where they control income, than
when it is targeted to men. Microfinance must also be re-assessed in the light of evidence that the
poorest families and the poorest women are not able to access credit. A range of microfinance
packages is required to meet the needs of the poorest both women and men. Donors need to
revisit arguments about the sustainability of microfinance programmes. Financial sustainability
must be balanced against the need to ensure that some credit packages are accessible to the
poorest.
R. Prabhavathy (2018)has examined that collective strategies beyond micro-credit to increase

the endowments of the poor/women enhance their exchange outcomes the family, markets, state
and community, and socio-cultural and political spaces are required for both poverty reduction
and women empowerment. Even though there were many benefits due to micro-finance towards
women empowerment and poverty alleviation, there are some concerns. First, these are
dependent on the programmatic and institutional strategies adopted by the intermediaries,
second, there are limits to how far micro-credit interventions can alone reach the ultra-poor, third
the extent of positive results varies across household headship, caste and religion and fourth the
regulation of both public and private infrastructure in the context of LPG to sustain the benefits
of social service providers.
Reginald In don (2018) has examined that informal businesses represent a very large cross-
section of economic enterprises operating in the country. Informal businesses may be classified
as the livelihood/ survival type or the entrepreneurial/ growth-oriented type. Livelihood
enterprises are those which show very limited potential for growth in both income and
employment generation. There are existing policies, program and services that directly/
indirectly cover informal. Variety of support programs, services and information are currently
Page | 50
being offered by different institutions. These programs and support services fail to reach or
remain inaccessible to informal business operators and owners. This is borne out of and
perpetuated by lopsided economic policies and poor governance that inadvertently encumber
informal businesses from accessing mainstream resources and services.
Study conducted by UNCDF (2018) states that Microfinance plays three important roles in
development of society.
• It helps very poor households meet basic needs and protect against risks,
• It is associated with improvement in household economic welfare,
• It helps to empower women by supporting them economically and hence promote gender
equity.
Mallory A. Owen (2018) has examined that microfinance has signaled a paradigm shift in
development ideology. Using my experiences with microfinance in a fishing village in Senegal,
this study will address the claims driving the microfinance movement, debate its pros and cons
and pose further questions about its validity and widespread implementation. Instead of lifting
people out of poverty and empowering women, microfinance may have regressive long term
potential for borrowers. How loans get used is a central theme of this essay. How microfinance
and the notion of the “entrepreneur” fit into the rural, Senegalese cultural context is also
addressed. Microfinance programs should be implemented with complementary measures that
challenge the systematic causes of inequality examined in this article. The microfinance model
(group lending based on joint liability) uses the social capital generated by group membership to
ensure that loans get re-financed. If one woman fails to pay back her loan, she puts her entire
loan group at jeopardy. As a result, “Women's participation in microenterprise does not show
any signs of creating the new forms of solidarity among women that the advocates of
empowerment desire. Instead, women are placed under enormous pressure to maintain existing
modes of social relationships, on which depends not only the high rates of loan repayments but
also the survival of families.”
Jennifer Meehan (2018) has examined that it will need to do three things simultaneously. First,
it will need to rapidly scale up, in key markets, like India, home to high numbers of the world ‟s
poor. Second, in this process, clear priority is needed for philanthropic, quasi-commercial and
Page | 51
commercial financing for the business plans of MFIs targeting the poorest segments of the
population, especially women. Third, microfinance will need to realize its possibility as a broad
platform and movement, more than simply an intervention and industry. The pioneering
financings completed by leading, poverty-focused MFIs have shown the industry what is
possible – large amounts of financing that allows for rapid expansion of financial services to new
poor customers. The MFIs offer a model to others that are interested in tapping the financial
markets. If leading MFIs continue on their present course and adopt some or all of the
suggestions offered, financial market interest – or more specifically, debt capital market interest
– in leading, poverty-focused MFIs is expected to grow.
Jacob Levitsky and Leny van Oyen (2018) has examined that micro-businesses to large
corporations, located in large urban centers, in rural area sand in the formal and informal sectors.
Financing needs are therefore of varying nature. In describing experiences, a link is made
between size of enterprises, financing schemes/instruments and typical delivery channels. When
referring to enterprises in this paper, focus is predominantly on businesses, both existing and
potential, in the manufacturing sector and related services. It is clear from this paper that
increasing the volume of finance available and the delivery of such funds in various appropriate
forms, to support enterprises in Africa, is a difficult challenge. Central banks have to be given
more independence, strengthened with qualified, experienced personnel, able to fulfill
adequately the role of supervising and monitoring the performance of commercial banks in the
provision of loans to those enterprises able to make effective use of them.
Page | 52
DATA ANALYSIS AND INTREPRATION
4.1 THE TABLE SHOWING LOAN TO SHG (IN CRORE)
2018-19 100.14 23.32 26.98 58.32 50.77 87.01

2019-20 102.43 26.16 31.46 77.66 56.77 108.08
2020-21 112.23 37.48 28.87 58.07 57.08 103.29
4.1 THE GRAPH SHOWING LOAN TO SHG (IN CRORE)
INTERPRETATION
The table shows no. of SHGs which are linked over the time has showing on increasing trend
over 2018-19 - 100.14 cr. 2019-20- 102.43 & 2020-21 – 112 .23 are being increased and amount
of savings outstanding by the banks has being outstanding over time.
Loan disbursed during the year 2020-21- 58.07cr in the year 2019-20 it increased to 77.66cr.No.
of Loan outstanding has being increased in the following year 2018-19 – 50.77cr 2019-20 –
56.77 and 2020-21 – 57.8cr Amount of loan outstanding the amount of loan outstanding the
amount of loan outstanding with SHG are being showing a increasing rise in the recent year.
Page | 53
4.2 THE TABLE SHOWING TOTAL NUMBER OF SHG AND NUMBER

OF SHG OWNED BY WOMEN AND SAVINGS WITH BANKS
Source – NABARD ANNUAL REPORT
Page | 54
4.2 GRAPH SHOWING SAVING OF WOMEN IN BANKS AND SHG OWNED BY

WOMEN
Saving of women in Banks SHG owned by Women

Female Male
14%
86%
INTERPRETATION
Total no. of Amount given to SHG are being increased over the time 100.14 cr. – 2018-19, 2019
-20 – 102.43 and 2020 -21 – 112.25cr and loan amount being increased over the time 23324.48cr
and in 2019 -20 – 26152.06cr and 2020-21 – 37477.6cr.
All women SHGs no. of SHG are increased in 2018 -19 – 85.31cr and 88.32cr& 97cr. In 2020 -
21. Percentage of women groups is being increased in the table and more focus was given to the
women and loan as being disbursed and extended for women.
Page | 55
4.3 The TABLE SHOWING NABARD REFINANCE TO BANKS FOR SHG

LENDING OVER THE LAST 3 YEARS.
2018-19 12,885,68
2019-20 15,434
2020-21 12,227.16
4.3 THE GRAPH SHOWING NABARD REFINANCE TO BANK FOR SHG

LENDING OVER THE LAST 3 YEARS.
Source – NABARD ANNUAL REPORT

INTERPRETATION
NABARD refinance to banks for SHGs Lending the loan has being increased from 2018-19 to
2019 -20 -15434 and decreased to 12227 to 2020 -21.
It has increased and there is a downfall in 2020-21 due to the crisis for and increasing demand
and defaults in payments has reduced the lending capacity.
Page | 56
4.4 THE TABLE SHOWING THE PERCEPTIONS OF AREAS OF

DIFFICULTIES IN BUSINESS AS WOMEN.
CHALLENGES AS WOMEN
PERCEPTIONS Difficulties (0-60 )
Theft/ Non – Seriousness/Growth/ 2
Personal Safety 17
Networking, building Business Partnerships 17
Balancing Work and Family Life 57
Dealing with Corruption , Bureaucracy 34
Taken Seriously as a Businesswoman 16
Working with Clients/Customers 17
Managing Female Employees 17
Managing Male Employees 17
Joining Business Association 13
Access to credit 34
EASIER AS WOMEN
PERCEPTIONS Difficulties (0-60 )
Theft/ Non – Seriousness/Growth/ 3
Personal Safety 22
Networking, building Business Partnerships 22
Balancing Work and Family Life 18
Dealing with Corruption , Bureaucracy 12
Taken Seriously as a Businesswoman 32
Working with Clients/Customers 43
Managing Female Employees 32
Managing Male Employees 16
Joining Business Association 25
Access to credit 17
Page | 57
4.4 THE GRAPH SHOWING THE PERCEPTIONS OF AREAS OF

DIFFICULTIES IN BUSINESS AS WOMEN.
INTERPRETATION
The table showing the percentage of areas of difficulties in the in business as women. As due to
work life balance work and family life, due to dealing with corruption and bureaucracy the
women faced more problems taking the loans and doing business, access to credit women faced
more challenging for women. Personal safety, networking building business partnerships are
some problems faced by women.
Things easier as women are working with clients / customers, managing female employees for
women and managing male employees and joining the business associations is easy as well.
Page | 58
FINDINGS
1. In focusing on microfinance, emphasis has been laid on the need that poor people have for a
wide range of financial services.
2. Providing microfinance can give poor people the means to protect their livelihoods against
shocks as well as to build up and diversify-also a means of protecting-their livelihood activities
by investing loan capital.
3. The role of credit in promoting incomes has been the rationale for NGO programmes in this
sector in the past.
4. In any place at any time, the needs of poor people for financial services are many and varied
depending on individual circumstances..
5. The key reasons that emerge are instrumental ones – women are sincere, disciplined and
interested in small transactions or benefits reach families through women. Group based
microfinance may be seen as a “women’s movement” in terms of targeting women as clients.
6. MFIs that focus on financial services – especially those based on the Grameen model – tend to
be “gender-neutral”:
7. They provide basic finance related training (group norms, procedures, signing one’s name)
whilst MFI staff conducts all transactions.
8. Some SHG-model MFIs are gender-supportive: the approach provides for the involvement of
members in group-based activities and decisions, with a greater role for group leaders.
9. None in our sample (though there are a few such MFIs in the country) have a ‘gender
transformative’ approach that incorporates a policy of gender equity.
10. MFIs that primarily target men believe that overall economic development takes care of the
gender imbalances and so, specific targeting of women may not be required.
Page | 59
SUGGESTIONS
1. Although the microfinance sector is plagued by a number of problems but there is a way out for
the problems faced by this sector. Improvements are required from the side of government,
Microfinance institutions and individual clients.
2. The concept of Micro Finance is still new in India. Not many people are aware the Micro
Finance Industry. So apart from Government programmers, we the people should stand and
create the awareness about the Micro Finance.
3. Microfinance programmes and group formation should be handled by trained personnel in a
professional manner.
4. Leading banks and industry developments must be taken into consideration for district-wise and
block-wise economic opportunities and resource mapping.
5. There are many people who are still below the poverty line, so there is a huge demand for MFIs
in India with proper rules and regulations.
6. There is huge demand and supply gap, in money demand by the poor and supply by the MFIs. So
there need to be an activate participation by the Pvt. Sector in this Industry.
7. One strict recommendation is that there should not over involvement of the Government in
MFIs, because it will stymie the growth and prevent the others MFIs to enter.
8. Traditional microcredit hasn’t lived up to expectations, but we are learning how to improve it.
Digital financial services let people help each other. Digital payments—for instance, by mobile
phone or app
9. Maximum number of respondents accepted that microfinance has brought economic
development directly and indirectly and thus happiness and peace in the family.
10. Women are getting economically and socially empowered after getting micro finance as88
percent of the respondents reported that poverty level has reduced by participating in micro
finance program.
11. More than 96 % respondents said that they play an important role in decision making and they
were consulted for making important decisions of the family. This is an important factor of
economic empowerment.
12. There is a significant improvement in the income of the respondents after joining SHG.
Page | 60
CONCLUSION
This study concludes that microfinance is very necessary in India to achieve financial inclusion
of the poor in the rural and urban areas. Lending to the poor population if handled in an effective
manner it can be a miracle for the development of the country and alleviation of Poverty. If
government and MFIs act together then microcredit can play a great role in poverty alleviation.
The challenging issue in microfinance helps to reduce the financial problems faced by poor
people. Inability of MFIs in getting sufficient funds is a major challenge in the microfinance
growth and so these institutions should look for alternative source of funds. The impact of
microfinance is appreciable in bringing confidence, courage skill development among poor
people. Thus external factors such as microfinance institutions are needed to help fix these
problems.
Page | 61
BIBLIOGRAPHY
References
1. CGAP (2021) defines microfinance as “a credit methodology that employs effective collateral
substitutes to deliver and recover short-term working capital loans to micro entrepreneurs
2. NABARD (2021) defined micro finance as the “provision of thrift, credit and other financial
services and products of very small amounts to the poor in rural semi – urban or urban areas
enabling them to raise their income levels and improve living standards”.
3. World Bank (2020) conducted a survey on 675 microcredit borrowers of Bangladesh which
showed that microfinance has brought in a positive change in the economic and social status of
the borrowers
4. Kabeer (2020) states that apart from economic impact, microfinance has a wide social impact
and MFI should be aware of the “full range of changes associated with its efforts and uses these
to improve its performance”.
5. Susy Cheston (2019) has examined that Microfinance has the potential to have a powerful impact
on women's empowerment. Although microfinance is not always empowering for all women,
most women do experience some degree of empowerment as a result.
6. Zohir and Matin (2020) in their study state that MFIs not only help in poverty alleviation but the
groups created for availing the microfinance facility also contribute beyond finance, such as, it
brings in a sense of community, reliance and trust among the members.
7. Mohammed Anisur Rahaman (2019) has examined that about microfinance and to investigate the
impact of microfinance on the poor people of the society with the main focus on Bangladesh.
8. Dr. Jyotish Prakash Basu (2018) has examined that the two basic research questions. First, the
paper tries to attempt to study how a woman tendency to invest in safer investment projects can
be linked to her desire to raise her bargaining position in the households.
9. Reginald In don (2018) has examined that informal businesses represent a very large cross-
section of economic enterprises operating in the country.
10. Jacob Levitsky and Leny van Oyen (2018) has examined that micro-businesses to large
corporations, located in large urban centers, in rural area sand in the formal and informal sectors.
Page | 62
Books
1. The Economics of Microfinance by Jonathan Morduch and Beatriz Armendáriz
2. Mainstreaming Microfinance: How Lending Began, Grew, and Came of Age in Bolivia by
Elisabeth Rhyne
3. Women at the Centre: Grameen Bank Borrowers After One Decade by Helen Todd
Websites
https://www.bajajfinservmarkets.in/loans/business-loan/nabard-scheme.html
https://www.nabard.org/Publication.aspx?cid=50&id=24
https://www.researchgate.net
https://en.wikipedia.org/wiki/Microfinance
https://www.bankbazaar.com/personal-loan/microfinance.html
https://en.wikipedia.org/wiki/Microfinance
https://scholar.google.com
JOURNALS
1. Bhandari, Amit K., & Kundu, A.(2021). Microfinance, Risk-taking Behaviour and Rural
Livelihood
2. Microfinance and the challenge of financial inclusion for development Jayati Ghosh Cambridge J
Econ (2020 )
3. M S Sriram and Rajesh Upadhyayula the Transformation of Microfinance in India: Experiences,
Options and Future
4. Robinson, Marguerite S, „Microfinance: the Paradigm Shift From credit Delivery to Sustainable
Financial Intermediation‟, Strategic Issues in Microfinance, Ashgate Publishing: Aldershot.
5. Microfinance in India (A. K. Chauhan, S. M. Feroze, New Century Publications, 2020)
Page | 63

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“A STUDY ON ROLES AND EFFECTS OF MICROFINANCE IN RURAL AREAS IN INDIA”

customers, usually poorer population segments, possibly socially marginalized, or geographically

1.3 LEGAL REGULATIONS

1.4 SERVICES PROVIDED BY MICRO FINANCE BANK:

1.5 BENEFITS OF MICROFINANCE

1.6 ROLE AND SIGNIFICANCE OF MICRO-FINANCE

Micro-finance contributes to social and economic development of the nation in the

1.7 EXISTENCE OF MICRO FINANCE IN INDIA

1.8 MICROFINANACE AND POVERTY REDUCTION FOR RURAL DEVELOPMENT

1.9 MICROFINANCE AND SELF HELP GROUPS (SGHs) FOR RURAL

1.10 MICRO-FINANCE – CHANGING THE FACE OF POOR INDIA

2.1 INTRODUCTION TO THE BANKING INDUSTRY

present global macro-economic situation is differentiated by an unbalanced economic recovery

2.4 FINANCIAL YEAR '20

Predecessor Agricultural Refinance and Development Corporation

Formation July 12, 1982; 39 years ago

Type Regulatory Body

Purpose  Agriculture Development

 Regulatory Body for Regional Rural Bank

 Regulatory Body for Apex Cooperative Banks

Owner Ministry of Finance , Government of India

Chairman Govinda Rajulu Chintala

2.5 ROLE OF NABARD

2.7 FEATURES OF THE NABARD SCHEME

2.8 FUNCTIONS OF NABARD

2.9 TYPES OF NABARD LOANS

2.10 NABARD Schemes for Farming Sector

2.11 MAIN OBJECTIVES OF NABARD

10. Credit-Linked Capital Subsidy Scheme (CLCSS) under NABARD

2.14 CHALLENGES FACED BY MFI

2.15 Impact of Covid-19 ON MICRO FINANCE:

2.16GOALS OF MICROFINANCE INSTITUTIONS

2.17 KEY BENENFITS

2. ESAF Microfinance and Investments (P) Ltd

3. Fusion Microfinance Put Ltd

Loan Amount Rs.3,000 – Rs.60,000

4. Annapurna Microfinance Put Ltd

5. Aroma Financial Services Limited

6. BSS Microfinance Limited

Loan Amount Rs.8,000 - Rs.60,000

7. Asirvad Microfinance Limited

8. Cashpor Micro Credit

2.21 HOW IS MFIs FUNDED ?

2.22 DOCUMENTS REQUIRED FOR A MICROFINANCE LOAN

2.23 CRITICISM OF MICROFINANCE

TITLE OF THE STUDY: - A STUDY ON ROLES AND EFFECTS OF

3.1 NEED OF THE STUDY

3.2 OBJECTIVES OF THE STUDY

3.3 Scope of Study

3.4 OPERATIONAL DEFINATION OF CONCEPTS

3.5 RESEARCH METHODOLOGY

3.6 SOURCES OF DATA COLLECTION

3.7 LIMITATIONS OF THE STUDY

5. No exact information was given

3.8 CHAPTER SCHEME

3.8 REVIEW OF LITERATURE

R. Prabhavathy (2018)has examined that collective strategies beyond micro-credit to increase

DATA ANALYSIS AND INTREPRATION