Chapter 3

    Status of Microfinance
in India

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In this chapter we discussed progress of
microfinance in India. To analyze the status and progress of microfinance in India,
it is necessary to know its present situation. “Microfinance in India is
approaching a historic tipping that could lead to a massive poverty reduction
in the next five to ten year”. – Grameen Foundation US in 2005.

Infrastructure of rural finance in India: There was
a time when people say to India that “Sone Ki Chiriya”. But after British
dependency India financial and infrastructural situation had poor. The
financial services are providing to underprivileged and poor sections of the
society have been the top most priority on the agenda of various anti-poverty programmes
initiated by the government of India. It is also well know fact that the
government of India has initiated various number of subsidy programme (rural
development programme) and involves formal financial institutions in the
implementation of these programmes. Despite of the best efforts of these
financial institutions is reaching the deprived section of the society living
in the rural underprivileged poor section failed to get their due share from
the institutional finance. India has a long history of native banking and money
landing. In the literature of the Vedic time (2000 to 1400B.C.)  is found evidence of the existence of money
lending operation in India.  After
independence India feel need to enhance their infrastructure and financial
sector. India is a developing country so that in our country financial system
performs a vital role in economic development through saving and investment
process and its also know capital formation. It a basic reason of financial system
is some time called financial market and the main objective financial market is
to mobilize saving effectively its allocate the equal competently among the
ultimate users of funds, viz., investors. For rapid economic development, high
rate of capital formation is an essential condition and its depends upon
capital formation. So that saving of public should be mobilized by financial
and banking institution which will be made available to investors to make
capital goods. It is not necessary that those who save and those who invest in India
both are same person or institutions. The Indian financial system that is
refers to the lending and borrowing of funds which is consists to parts, viz. Indian
capital market and Indian money market. Generally we classified the Indian
money market into two parts, viz., unorganized sector and organized sector. In
organized sector of the money market we include commercial bank, private sector
bank, public sector bank and foreign Banks. Other side the unorganized sector
consists of indigenous banker and non banking financial companies.

In the history of Indian economy, 1991s year noticeable
a watershed because at the time economy faced with a Balance of Payment (BOP)
crisis. The Indian economy operating an extensive reform

 The financial
sector is a vast network in India and commercial banks, private banks, as well
as some other financial institution such as state-level financial cooperation,
development finance institution, non banking financial companies, NABARD,
SIDBI, insurance companies, mutual funds, provident funds. In our country
NABARD is engage as an apex development bank for promoting and sporting to
rural and agriculture development in an integrated manner. As such the RBI and
the Ministries of finance and rural development are suggesting banking and the
flow of credit for microfinance and rural development.

In beginning 20th century the British
Government of India was taken initiative for cooperative thrift and credit
moment, which was considered a historic landmark development in rural credit
market in India. The government of India enacted the cooperative societies act
in the year 1904, which followed by a more compensative cooperative societies
act in 1972. For promote financial self- help among artisans and farmers, these
acts provided a framework. (Das Kalyan 2011)

As per RBI’s report 151 commercial banks were
operating in India on March 31, 2015. Out of these 5 were non-scheduled
commercial Banks, 146 were scheduled commercial banks in which 56 Regional
rural Banks includes. This included——– public sector banks, ——–
private, —–foreign banks. As at the end of June 2014 there were 121535
commercial Banks Branches operating in India. Out of these 22043 were state
bank of India and associates 61164 were nationalized bank Branches, 19082 were
RRBs, 18859 were private sector banks branches, 321 were foreign banks
branches, 66 were local area bank branches.

Other side Bhartiya Mahila Bank established in
Mumbai on Nov. 19, 2013 on the former Prime Minister Indira Gandhi birth
anniversary. The prime objective of the bank is to focus on the banking need of
women and to promote their economic empowerment. This bank is also a public
sector bank of India. The aims of Bhartiya Mahila Bank are to support women’s
SHGs promote further financial inclusion and livelihoods for services women and
women run business. Bhartiya Mahila Bank has 60 Branches network as on may 1,
2015. This bank is an only for women and to be fully operated by women.

Government
intervention in rural credit market in India:

“In the village itself no form of credit organization
will be suitable except the co-operative society, co-operation has failed, but
co-operation must succeed”. – All India rural credit survey (1954) (DATT &
MAHAJAN, 2014 INDIAN ECONOMY)

In the history of government, interventions in rural
credit the cooperative thrift and credit progress were initiated by the British
government of India, which could be considered as the landmark development in
the beginning of the 20th century. The government of India enacted
the cooperative credit society act in year 1904. That was beneficial for
comprehensive cooperative society Act. in 1912.